the futures if there's any confusion they are up. and obviously the nasdaq strong on apple. the dow strong on apple as well up 69 points out of the s&p up 6.5. nasdaq up 32. quick look at the -- well, see, they panicked because we only have five seconds. >> it's for us to go. we'll see you tomorrow. time for "squawk on the street." good-bye. ♪ good wednesday morning. welcome to "squawk on the street." i'm carl quintanilla, jim cramer and david faber at the new york stock exchange. dow stronger after three days down. stock's going to open at a 15-month high, of course it is fed day, europe's up about a percent. adp crushes expectations, biggest jump since june and yields in the dollar creeping up on that. roadmap will begin with the apple rally and earnings beat. shares up more than 4% premarket

driving early gains, for other tech stocks as well. >> plus, ceo pushback. apple's tim cook challenging the president. and bridgewater's ray dalio expressing concerns about the administration's global impact. >> amazon impacting u.p.s. but first up, apple's better than expected quarterly results driven by a record 78.3 million iphones sold. ceo tim cook said it was the company's best quarter for services with almost $7.2 billion in revenue. journal this morning, jim, says if it's an eight cylinder engine it's running on just about seven or eight cylinders. >> this is one of the quarters where you change the narrative of what apple is. you went from a company that's a device company and that's a shame. they'll never get a real multiple. may one day it's like blackberry to being a company with 150 million subscribers that is a company generating a gigantic amount of money through a revenue stream, a service

revenue stream that's finally happening because they do have such an installed base. talk about $7 billion. that's by the way the same amount that facebook made in terms of revenues. it's a very lucrative revenue stream. it's going to double over four years. most importantly this is why you get a price-to-earnings multiple that is better than what apple gets. because this is gillette. this is razor, razor blade and boy is that razor expensive. the average per unit went up which is unusual in a ten-year cycle. china if you x out the currency good, hong kong no. and the united states we found out what people spent on this quarter. they spent on a new iphone. >> sometimes i think it's worth with apple obviously we get in the weeds because we should. >> right. >> and you do because it's an important investment case, but every so often i think it's worth looking back and marveling at the overall financial prowess of this company. >> thank you.

thank you. >> they made $17.9 billion. by the way that was down from a year ago, but when they talk about record earnings per share why is that? they bought back $144 billion worth of their shares. and that's why your earnings per share number obviously is higher than it's ever been $17.9 billion in net income not bad either with $78 billion in revenues. tax rate was 26%. i think that is worth noting because when we talk about tax reform if there are 26%, how are you going to get all those changes you want with people moving back or moving intellectual property back. maybe you do need to focus on 20. and it will be interesting to see where we end up. and finally $246 billion in cash, guys, $230 billion is outside the u.s. again, back to tax reform and what that will mean. >> i'm so glad you brought that up. if you add up what the company's given back to you and what the company has, it's equivalent to the value of the stock a month and a half ago. i think one of the things i like to do is look at a conference call because conference calls are things of beauty.

now, the last few conference calls have been very unruly. they had what are you doing in the car, best days preceded you. then you have ka tee saying let's talk about the cash hort, next analyst says can i talk about service -- barely mentioned in the last call despite the fact they tried to. then the next question, what was it about? service revenue. so here you finally have a conference call that is fitting of it and maybe they stacked those questions in a nice way. but you listened and you said, you know what, this is not a cell phone company. this is a company that may have the most powerful group of subscribers in the world 150 million strong. maybe we don't need to buy netflix. >> well, an answer to what peter thiel said about innovation in the iphone space a few weeks ago, cook not only talked to the journal about potentially looking into legal options regarding the immigration order.

>> right. >> but also said he was optimistic on tax reform. here's tim cook. >> i am optimistic given what i'm hearing that there would likely be some sort of tax reform this year. and it does seem like there is people in both parties that would favor a repatriation as a part of that. so i think that's very good for the country and good for apple. what we would do with it let's wait and see exactly what it is. but as i said before, we are always looking at acquisitions. >> tim cook does tell the journal that apple is considering legal action against the administration's executive order on immigration. he said he's had heart wrenching stories from employees affected by that order. he adds, quote, more than any country in the world this country is strong because of our

immigrant background and our capacity and ability as people to welcome people from all kinds of backgrounds. that's what makes us special. we ought to pause and really think deeply through that. echoes what sheryl sandberg says today in the post that the order defies the heart and values that define us -- define the best of our nation. >> well, when you have the founder of one of the greatest -- maybe the greatest of all time with a syrian heritage, it's kind of difficult. >> steve jobs' birth father was a syrian immigrant i believe. >> exactly. >> interesting, guys, he went on in that very, quote we were listening to from tim cook. people are always focused as jim was mentioning netflix and are they going to consider doing something of size. he did go onto say we acquired 15 to 20 companies per year for the last four years and we look for companies of all sizes. and there's not a size that we would not do based on just the

size of it. this is his quote, it's more about the strategic value of it. every quarter everybody looks at his comments on acquisitions and compares it to the quarter previous and what he said. hasn't really changed it very much saying we'll consider all sizes, it's really about whether it's strategic or not, jim. i still think you can't rule out the possibility that they do something. he keeps getting the question because of course they haven't done anything. and it doesn't mean they are going to. >> well, i'm doing a volcan mind melt. i cued up the question which includes the idea what's going on in the media industry. this was the most media centric discussion. the first question started with apple tv a year ago. you're absolutely right. if you have 150 million paid subscribers hungry, music has been good, hungry for content. you can make the content, you can buy the content, i mean who the heck knows. they could buy anybody they want. >> they could buy anybody. repatriation, you bring back

$230 billion i don't know what the tax rate will be on that. very low i would assume. >> right. >> you've got an awful lot of money. not that they can't borrow endlessly, of course they can. but they can do anything they want. >> you mentioned china down 12 once you account for currency. other people wonder about gross margins going down to 38.5 from 40 and change. >> yeah, i felt when katie asked that question about gross margins and it's true they widened the gross margin, a lot of that can be related to the dollar. the basket, they've had a 25% hit on currency. any about what the really would be. it's remarkable. by the way snapchat's coming public. it's really interesting about what peter thiel is saying. one of the things tim cook has emphasized is we have what you want. we have thought it through. snapchat is uniquely beautiful when it comes to what people do with the camera. and this camera is fabulous. i can show you pictures of my daughter where she snapchated where she makes herself look like a squirrel. okay. maybe that's not the best

example, but she does it. but the camera on the apple is so perfect for that. by the way, how about sirius logic on sound? let's go back to skyworks on "mad money" recently, told you guys these guys were good but nobody listened. we had barclays downgrade it. well, he's scrambling. he's now saying, wait a second, the emperor's guy is partially clothed. >> and cook on the call did sort of speak at least to some production issues in terms of not having enough plus sizes. >> plus -- >> not having enough for the ear -- >> they did not have enough plus sizes. they were constrained on what is the biggest gross margin business, although of course the service stream is incredibly great. >> the service stream is a great business. talking about $30 billion in annualized revenues going up 18% whatever it is. >> what's amazing about that is people if you go back two quarters ago the disrespect people had for the service. they brought it up and no

analyst would ask about it. they wondered about the car. october quarter, if you go back and look at the questions of the october quarter, it was like a rebellion against these guys. it was like, can i ask you a question, tim, you're so washed up. well, what's the question? i just wanted to make that statement. and then the next guy like, hey, guys, your best days are so far behind you. do you have any plan at all? do you have a plan? and then this time consigned to the back of the cue. melanovic is like do you mind i have a buy on your stock but i should have a sell on it. that's like the context underneath. those guys, the didn'ts, let me tell you something, the dissidents they have to eat crow grey pupon and crow. >> by the way 604 phones sold per minute in the quarter. 604. their cash is more than 10% of all cash in the s&p ex financial

real estate more than 10%. >> unbelievable. what? >> nothing. the cash number's amazing. but $246 billion that's still you're talking about $2.5 trillion outside -- >> this barclays fella who downgraded last week, samsung, it was the exploding -- they really had the edge because of the samsung fire. >> right. >> remember that? called it the fire. >> the fire phone, yes. >> the fire phone. and tim cook talking about the at-home. tim cook does what i've always wanted to do, basically has the coffee brewing and the lights go on because of apple. i mean, i got a wife. >> that's great. >> she does that. >> we're very happy that you have a wife too. >> she does. she has the coffee brewing and lights go on and she doesn't cost $700. and i don't have a verizon contract with her. >> phone's a lot more than that? >> we got to keep our eye on washington today too. of course last night the president nominated federal appeals court judge kneel gorsuch to the supreme court as

a successor to the late antonin scalia. he's seen as similar to scalia. democrats promised to battle over the confirmation although a lot of the consensus last night and today is that it will be relatively easy passage. we'll talk more about that. >> yeah. this is the guy who makes it so for a few days you don't have to worry about the agenda. going over his record it's rather extraordinary. by the way, he wrote a fantastic piece about shareholder strength suits really every single executive in the country should read. it was done 2005, but it's about we've got to stop these strike suits. by the way, second amendment, i mean this guy is a literalist about the second amendment. literalist. he just says, listen, everybody has a right to bear arms. i went to law school at harvard where he went. we used to think that only applied to the militia, no this guy is the nra's man on the committee sfwl when we come back, we're going to get auto sales number this morning from ford. amazon bringing good news to one part of the country which we mentioned. we'll fill you in on that. futures look okay. cabinet day's going to be busy.

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ford's out with auto sales for january. our phil lebeau is in chicago. hey, phil. >> low volume month in january, but still important numbers. ford numbers for january down 0.6%, a little better than the

edmo edmond's dot com. listen to numbers within the number, strong demand for trucks and suvs. f series sales up 12.5%. guys, this speaks to why we're seeing average transaction price for the industry basically $35,000 for the month of january. we get gm numbers in about 15 minutes. oh, by the way, just a few minutes ago nissan reported better than expected january sales up 6%, better than the expectation of up 2.4%. gm in 15, guys, back to you. >> all right. phil, talk to you in a few minutes. interesting numbers, jim, on a day where bmw says we're going to stick by our investment plans regarding production in mexico and the united states. >> well, i think peter navarro threw actually a -- i was going to say a net -- a german artillery during world war ii, but he threw some german artillery at the germans of course two days after the very good call with putin and trump. so you've got what i regard as

being a real gauntlet. bmw's building a plant near my place in mexico, which i've written off, don't worry, to zero. and they just build, build, build in mexico. and they have been the -- they've been the company that uses that ksu union pacific line send it right up. >> right. >> this is not exactly -- i mean, trump has spent a lot of time jawboning ford and gm, but i thought it was bmw he was going to come after. that was a suboptimal kal for bmw. >> i know we want to get to amazon, but when it comes to mexico and increasing tensions and possibility of a trade impasse, natural gas apparently a lot of it goes the other way to fuel all of those plants in mexico. my understanding, jim, that is if in fact things were to get bad between our two countries and that flow were to stop -- >> oh, my god, gas pro -- >> natural gas prices in our country would dramatically drop. >> well, they've been high. and the weather's not been that

cold. a lot is mexican demand, mexico has stopped exploring the way they used to putting up lots, pena nieto they've been very challenged. we are a big supplier of natural gas. big supplier of gasoline. >> to mexico. >> to mexico. now, remember we're starting to export a lot of nat gas. there's a giant facility exporting big. >> yes. and they'll be another one behind that, freeport is another one. >> and freeport, so there are great export markets, but you're right. there's a new pipeline open thank you russia and brazil sending natural gas and for the first time the pipelines are not as filled. now, this is not one oak by the way which did a terrific deal with one oak partners good for everybody because they are -- >> my point is when we discuss trade there are just so many different things that people are not aware of. >> you're not saying cut off the natural gas. >> no, i'm saying these thing ks go in so many different directions when hostilities rise. somebody said we're the gorilla, they're simply the toy in the

gorilla's hand that the u.s. is playing with. but there are still things that can be done. >> as everybody's reading the dalio letter we're increasingly concerned about emerging policies out of the trump white house. significant risk, his populist policies could hurt the world economy or worse. >> well, tim cook yesterday was telling people that, look, china, everybody has to win in china. we can't be shut out of china. china can't be shut out of here. there's some middle ground, some middle ground between these countries, but obviously i think we're going to hear when you do the -- yes, i think dalio is right, whole risk factor went up big, the supreme court nomination is bringing it down. >> navarro has said one of the key advisors if you read his book -- books, he sees it as a zero sum game with china. >> right. >> he does not see the way tim cook has described as beneficial to both sides.

>> absolutely. you're so right. one of the things they say over and over again to you is like trade war. trade war, we've been in a trade war forever. we just sit there and they just go down there and give us the business. we're down on the turf and they're down there giving us the business. that's the view of trump. >> when we come back, we'll get cramer's mad dash, count down to the opening bell. later on klaus kleinfeld. >> what do you say to those who challenge your leadership after you split the company up and the company's done well since the split? >> if you look at core shareholder they have gained since the separation roughly 21%. ar connick shareholder compared to first day of trading to today it's more than 19% increase. so i think nobody argues that this was the right move for everybody. >> we'll talk to klaus in a minute. futures are stronger. we'll talk more adp, more fed,

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♪ well, we got about six and a half minutes before we get started with trading here. you want to talk a little amd in the mad dash. >> you know i like flash, you know i like drams, they're tight. you know i like disk drives, they're fantastic. advanced micro, no analyst will come out and say it but i will, this company is back and better than ever. citi reiterates its sell. oh, please, analysts like, oh, yeah, they still can't make money.

let me tell you they had top line growth that was fantastic. this is a company that i think can take it out. why? they've got the right gaming chips. they've got new cpus coming out that is on schedule. this is not your old advanced micro. this is not the jerry sanders advanced micro second rate company that intel kept in business. why? because they didn't want the justice department to investigate them because they had 100% monopoly if they did just pressed a little bit toward advanced. no, advanced micro, david, cpu, great management, buy, buy, buy. >> easy. listen, the stock is up 410%. >> because they fixed the balance sheet right here. >> but if i've owned it for any of that run, am i really not smart to take some money off the table? >> if you owned it from the run, god love you. what i'm saying is a lot of people -- i've been waiting for that balance sheet to be fixed. once the balance sheet was fixed, i was all in. the balance sheet was the balance sheet from hell, david. there was no reason to get long advanced micro and marvel tech

going up sell to big, buy, buy, these are the next here. there you go. now they've gotten some respect. >> there you heard it. all right. we got the opening bell coming up. a lot more stocks to keep an eye on this morning. we're back right after this.

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get to the closing bell in a couple of minutes. first day of the new month, a busy one as we await the fed decision at 2:00 eastern time. a ton of cabinet hearings and potentially committee votes, maybe a full vote on tillerson who we're told will have lunch with the president midday, closed press. adp continues to astound people, jim. 246 well above the 168. people wonder if a trump effect is already in place. >> well, i mean, this is a very big controversial number because there are a lot of people look at retail and say wait a second, december wasn't so hot, ex apple. so maybe the consumer's not spending. i'm looking at employment and thinking that employment is

very, very strong. and that's enough to trigger the three rate hikes that you need to go buy j.p. morgan to take that stock to 100. they need three rate hikes to make the 3 billion, well, four, i guess. this is a j.p. morgan moment that data. because yesterday the bonds -- interest rates were headed down and that was a consumer packaged good call to buy proctor. if you like the banks, you need that adp number and a strong statement. >> right. but if we get a lot of inflation, what are we looking at in terms of a ten-year yield, could we go to 4? >> yeah, if gdp grows at 4%, which i believe will happen if you got the tripod of deregulation -- >> what? >> if it goes to 4. >> 4%? >> if they get -- >> there's a big difference. buffett says 2%. >> no, i'm saying if they get their way with corporate tax reform. if they get their way --

>> i'll take -- i think you got two people here who will take the other side of that bet. >> okay. so it wasn't a mandate. but i'm just saying if you got all that you'd have a strong economy. but you need wages higher. you need them higher now. >> that was good. there's the opening bell. s&p at the bottom of your screen. at the big board this morning it is invitation homes sell braici its ipo. we'll talk to the ceo when the stock opens at the knanasdaq, laureate celebrating its ipo today. gm numbers coming out. we'll go to phil lebeau on that. >> general motor sales in january lower than expected decline of 3.9%. estimate was for increase of 1.2%. keep in mind january is one of the lowest volume months of the year if not the lowest for the automakers. couple of interesting notes, the

chevy bolt i know it's only being sold in oregon and california, and it's early deliveries, but the seven days that's how long to turn those vehicles. basically means as soon as they're delivered out to a dealer the person's taking delivery of them. so that's a very quick days to turn. also average transaction price up $1,200 to $34,500. the industry sales rate according to general motors they're estimating it will come in at 17.6 million, little higher than people are estimating. back to you. >> phil, talk to you in a bit. >> still on track. when we speak to klaus kleinfeld, they have a very big business auto, very big business truck. you can understand why klaus was a little muted about that particular end market. these are not numbers that are on fire but still at a very high rate. >> you're still resisting the peak auto school? >> no, i'm not buying peak auto because employment is -- i think employment's going higher. i generally think small business

is hiring. i'm using numbers from american electric power which is the largest transmission company saying they see activity literally across all of their areas, which is strong. i think that's a great measure. as i used to use chinese electricity before the communist party seems to have gotten rid of those numbers. the u.s. electricity market is more strong, means more building, more business, more hiring. remember housing, we got the housing numbers. d.r. horton had a lot of things to say. >> invitation homes bought up 48,400 homes largest single owner d. >> whoever thought that was a business? >> i know. this is a reits going to open behind us $20 a share where it was priced. we'll see where it opens. >> right. what do you think? >> higher. >> jonathan -- >> little bit higher. jonathan gray at blackstone oversaw the company. >> i fortunately met him through

you but smartest real estate guy i've met. >> and a very nice guy. >> nice guy. still matters. >> yes. >> you know? nice nice guys. >> nice to be nice to the nice. >> right. >> don't forget that. >> to your point about growth, jim, ten-year kissing 2.5 once again for the first time in about a week. >> that's important. look, i believe -- i know i'm in the minority here that i think the economy's going to get stronger, but i just look at employment. employment is the magic elixir because lots of things go right when people get jobs. they buy new cars, they buy homes, they furnish them. they want to have another business. if you do get to small business deregulation that trump is promising, just go back for a second to the dakota access. remember army corps of engineers they were like, hey, no, how about the army corps of engineers saying, hey, yes. etp going up. etp. >> people looking for explanations about adp point to just the rig count alone. >> rig count is all the way

back. you're going to see another strong number. why? because of outfits like sanchez reliquefying again today with another equity offering. exxon did speak very highly of their permian assets. and i think that we are at a moment where if you can get permian down to 20, 25, which is some of these guys are saying they're making double. so it's time for permian and for stack and scoop in oklahoma not so much everybody else. >> i did want to mention dish. this is a name that has come up oftentimes in all this recent talk about the potential for consolidation among some of the large telecom slash video providers in the country, dish certainly is part of that talk given dish offering satellite tv and broadband, but also its ownership of lots of spectrum. did a deal yesterday where they essentially swapped different assets with their ecostar sister company. and i'm not going to go into the details of it.

it's somewhat involved. but what a number of analysts this morning are focused on is the timing of it. for example, this morning over at barclays they're saying dish is likely one of the companies that can feel greatest degree of you aurgency in trying to combi with wireless network owner post auction we've talked number of times call it mid march when these companies can talk to each other again, with this asset swap appears to be concentrating wireless assets into one entity in case dish does contemplate a transaction with a wireless operator. at wells fargo they say the same thing. we're not sure why they did this, but the timing is interesting from their perspective. our gut tells us charlie, as in the man who runs these companies, is cleaning these two companies up for a reason, perhaps it could be related to something transformative post the broadcast incentive auction. so you can see dish shares actually up a bit more since i

started talking about it, but it did get people's attention. >> well, you've been saying that there are deals brewing at a certain point. they can't be brewing yet. explain that. >> they're prevented from talking to each other if you participated in the auction. even if you didn't it's very much unclear that you can talk to another company that did. and so the idea that there's no talks between sprint, they didn't participate but t-mobile get anything until the ban is lifted because they're worried about coercion or i should say them operating together -- collusion, excuse me, no coercion, amongst the parties. once that is no longer the case, this auction is over and done with and collusion ban is lifted, we'll see who's talking to whom and whether or not we quickly get a deal. i will note, guys, a lot of conversations right now with bankers they're saying the same

thing, which is everybody's waiting on tax reform to really get a better sense as to what's going to be there are not before you contemplate a significant transaction. it's just too important on too many different issues. if you are a company with overseas cash, how does that figure into it? if you're going to borrow money and interest no longer would be deductible, how does that figure into it? just too many question marks. you could see a waiting period here. >> david, i was speaking to someone who does a lot of international overseas work feels it's the opposite over in europe. they're itching. itching to do deals before article 50, before brexit. that there's a let's get it done motive. now you've got deutschete and masa son for sprint, sprint's numbers, ebitda, i wish he'd come on yesterday, the ebitda numbers -- >> marcelo, yeah, he had some sort of problem. >> conflict. >> had a conflict. >> john legere has some conflicts he's broken up his

whole day to come on, stop at nothing. but t-mobile strong, sprint strong, verizon, david -- >> not strong. >> not strong. what's going on there? >> there are issues in terms of the ability for some of their competitors to price these plans very aggressively unlimited data although their network can handle all of it. >> how about the idea -- >> it's a burden -- >> i was going to say as soon as they got to within 1%, you can make 1% claims on air. >> yes. >> seems like things have gotten very aggressive. >> they have. >> and by the way t-mobile obviously fabulously aggressive in trashing verizon and att, but sprint when they picked up that verizon salesperson, i know ads shouldn't matter, that ad mattered. >> yeah. >> that ad hurt. >> you raise interesting points with the doj ever allow four to go to three. >> right.

>> given this competition you're talking about. >> i don't know. i think we have to go there. >> okay. >> let's take a look at dow's up 98. apple's adding about 42 of that. let's get to the bond pits in chicago. good morning, rick santelli. >> good morning, carl. you know, i know there's a lot of debate that the current president everything he says moves the markets. but i think we also should notice that today we had pretty decent earnings as cnbc and the gang's been talking about. and you see a move in the market that seems commensurate whether it's equity, dollar or rates. rates it's a two-for because of course second day of a fed meeting. look at two-year note yields intraday. popped pretty nicely at 8:15 eastern. open to a one-week chart went to top of range to find basically by 1.25. open to the last fed meeting, you can see we're kind of right back where we were then. one-week of tens, it had the same pop up, but the complexion of the market is much different. so even though we neutralized

any major curve effect, at least today with the pop, there is definitely a little less rhyming going on with the curve as tens continually back away from kind of getting to what ultimately traders think is the biggest level for '17 right around 2.60. dollar index, we closed before par for the first time at 100 since second week in november. usually technically significant. as you look at one-week chart you can see it looks a lot like tens which makes a lot of sense. now, italy, europe, they seem to be doing better. draghi's going to have an issue here. i pick up italian tens to demonstrate. this chart goes all the way back to october of '14. we're getting to some critical levels as we get closer and closer to testing some of these long-term levels. carl, david, jim, back to you. >> all right, rick, thank you very much. let's get to bob pisani see what's moving on the floor. hey, bob. >> important thing here is we had a nice open. let's take a look at the

sectors, carl. when you get tech and banks opening strong, the markets are going to open strong because they're the two biggest sectors here. apple's at a new high, skyworks at a new high, micron's at a new high, banks, u.s. bankcorp, energy been a laggard all year doing well, lagging a bit this morning consumer staples and health care, defensive names. show you what a big price move is for apple, apple is half the gains in the dow. almost 45 points $6 move in apple. that's why you get the dow outperforming. and it's a $640 billion market cap, remember that, on its better earnings report. february traditionally a weak month, worth bearing in mind where we're at, record highs on the index remember that. breadth has been bullish, sentiment is mixed, was bullish but gotten better. and reflation everyone's worried about, halfway through earnings here, revenue's up 4%, good news

is recession in 2016, the earnings recession, it's over. here's the problem, very high expectations for 2017. if you look at these numbers 10% for q-1, technologies expected to be up 14, financials 16, this is a lot to ask for the market. the question is whether or not it can actually pull off that kind of gains that we're seeing here. so here's the problems right now. so far we've seen a number of revenue misses in the fourth quarter. just today johnson controls t tupperware came in light. forget tax cuts, nobody saying guidance is going to get better because of potential tax cuts and a lot of debate about how much oomph there's actually going to be from lower taxes. here's the big question right now, can you pass this baton from easing monetary policy to overall tax cuts and fiscal stimulus? if you can do that earnings can rise and we can put to rest this issue about whether we're having a self-sustaining economic recovery. just let me know we're still waiting for invitation homes to open here at $20. that was the mid range of the

price talk. overall pretty good numbers here. we'll get an eye on that and get you numbers. we'll have the ceo in just a few minutes. carl, back to you. >> thank you very much, bob pisani. when we come back, arconic's klaus kleinfeld defending his leadership. dow up 94 points, best day for apple shares since july 27th. back in a moment. ♪ ♪ ♪

what are you doing? getting your quarter back. fountains don't earn interest, david. you know i work at ally. i was being romantic. you know what i find romantic? a robust annual percentage yield that's what i find romantic. this is literally throwing your money away. i think it's over there. that way? yeah, a little further up. what year was that quarter? what year is that one? '98

that's the one. you got it! nothing stops us from doing right by our customers. ally. do it right. let's get out of that water. couple of votes out of the senate finance committee voting to confirm price and mnuchin at health and treasury, respectively, after gop suspended the rules requiring democrats to be present for votes in the committee. see as that moves on to the full floor, but news for now. >> yep. i remember a time when mnuchin was questionable. we thought maybe he'd be blocked. remember that whole brouhaha? no. his father, by the way, coach mnuchin was my boss. all right.

let's go right to it. arconic's largest shareholder activist elliot management seeking to remove its current ceo klaus kleinfeld from the position. we've got klaus here. klaus, while we were interviewing you and right after your conference call, elliot, which has three board members chose that incident to be a i regard highly embarrassing compilation of things against you, dossier, basically, how can you ever work with these people after they did this at a moment when you simply couldn't respond? >> well, at the time when we were on yesterday, this was not out, jim. so i'm glad that we have a chance here to talk this morning. these assertions were not new. i mean, the board as well as management have had intense dialogue with elliot and has spent countless hours to go through each one of those assertions and has looked at them. and as you've seen yesterday the board came out with a very clear statement that they've looked at everything and they stand behind

the strategy and they stand fwhiend me. >> they have a candidate, very successf fuful candidate, larry lawson, they've hired as a consultant who they think would do a better job than you, they're putting mr. lawson up. do you have the votes to stop mr. lawson? >> look, the most important thing is to look at the track record here what we've done. you've followed us very, very intensely. you've seen what we've done. we've created arconic, we've created our core corporation, in the crisis in 2009 the company had almost near-death experience, we saved it. at that point in time i restructured, we closed 43%, introduced new measures, met capital efficiency measures, changed the course of the company, built the value add business, all of this has allowed us to do the separation. separation that has been super successful, right? so the track record stands there, you've seen results yelt show improvement on margins in each one of the segments.

i'm at one point in full agreement from elliot, there's a lot more of value to get and we'll get it as we've done in the past. >> they released a note maybe 30 seconds ago. dr. kleinfeld became ceo may 2008 through our split. company's market cap declined from 28 billion to 13 billion, shares lost 69% of their value. they say you are 465 of the current s&p indexes have been in the index since may of 2008, of those companies alcoa ranks 456th. they believe this is evidence that you should not be the ceo of arconic. >> well, they ignore that we had a world economic crisis that hit the commodity markets particularly heavy. commodity prices sank to one-third from mid 2008 to early 2009. we came to almost not having the company anymore. the stock price came down to $5. $5 in the early 2009. to choose a point in time when

the metal prices were at the absolute high, when the world was believing in in the global commodity boom, you know, that's a very convenient and totally unfair point. and since then -- >> the coal cycle was up, those were up a great deal. >> it's crazy to ignore that. not credible to do it. if you look at that point in time when after the crisis look at the tsi, the tsi almost 90%. that's the right point. they know it by the way. >> they are putting up five people. four of them tremendous aerospace experience. one of your people that's up mart iin southerly is in advertising. frankly, i would like a good tool in aerospace than someone in advertisement? >> martin has many capabilities. if you look at the total board, the quality of the board is outstanding. you have a lot of people in there that have very, very good experience on the operation side, very good standing and good experience also in the management side. looked into it intensely and

they have concluded to go ahead with this and to back me. so that's my point on this. >> mr. kleinfeld, the sound is building here as they get ready to open invitation homes, an ipo, i apologize for that. elliott seems focused on cost and taking overhead costs out of your business. and in support of their contention you haven't done enough. they cite comments, for example, from the new ceo at alcoa who at a conference late last year talked about we're going to be very, very focused on not only cutting costs at the plant level but also in the overhead structure, talking about things like that's different at the new alcoa is we did not take any of the corporate jets with us. we skimmed down the corporate office to only 15 people. all of this being said to paint you with a different brush saying you haven't done the things they're doing. >> well -- >> let's open the bell for invitation homes. [ bell ringing ] sorry, please respond. apologize for the interruption

there as we watch that stock open this morning. >> truth of the matter, i mean, alcoa corporation would not exist if it hadn't been for me basically creating it. after the crisis we basically cut down capacity by 43%. we introduced pricing index every year we had cost savings of about a billion. and on the corporate overhead side, if you look at the corporate overhead structure, i'm a fanatic in benchmarking. we benchmark our corporate overhead cost now is a little bit -- arconic is a little bit burdened through the separation because alcoa balance sheet could just carry a little bit less, right? so we build our core corporation to be successful. i'm very happy and we had many conversations about the skepticism, i'm very happy it's doing so well. shareholder of alcoa has had 22% of the gain since the separation. shareholder of arconic having

come in on the first day of trading has made 19%, right? so let the facts speak. >> well, okay, facts. i've got the transcript from united technologies, transcript of boeing, transcript of honeywell, transcript of ge. they all say that the aerospace cycle is a 2017 moment. you are saying that 2017 may not be that good. there are issues involving destocking. there are issues that you're saying maybe not be as bullish as these which are the great american aerospace companies. is this because you have the wrong materials? >> no. no. jim, we are on every platform as well as every jet engine, right? so what is happening here on the aeroframe side is the aeroframe side for the suppliers, we are a supplier to boeing, airbus and pretty much everybody else, right? they have reduced their inventories so it's basically coming back to us. and you hear the same thing if

you talk to fastenal companies or talk to a metals rolling companies in the aerospace, you would hear exactly the same thing. on the jet engine side it's a different story. on the jet engine side it's absolutely spectacular what's happening there. spectacular. at the same time the new jet engines are highly technically demanding. this is why they are so successful in the marketplace and have been so successful. the supply chain is currently ramping up. and the expectations are very, very high. we are supporting pretty much everybody in the industry. so we have taken a more cautious view on 2017 after we have been surprised by what happened in 2016. >> right. >> in 2016 these kind of teething pains were much larger than what we had expected and i think also what everybody else had expected. so our view in 2017 has been more cautious. also based on the feedback that we get from the investors saying take it a little bit more cautiously.

>> okay. under promise, hopefully over deliver. klaus kleinfeld, thank you so much. upcoming election, let's see how it goes. >> thank you, jim. thank you. >> sure. >> as we've been talking you saw the ipo david mentioned. we'll get to that later on. dow's up about 84. banks up for the first day in four. a lot more "squawk on the street" back in a minute.

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jim, what's oon mad tonight? >> great take two acquisition they did last night make them better than electronic art a $250 million deal. we have h & r block and it's tax season but that stock has underperformed. this is not going to be a free pass. and nextstar media, you don't hear about the little guys, but a fun show. feng shui. >> we packed a lot into this one as we do every day, jim. >> absolutely. >> see you tonight. >> thank you. more on the post earnings jump and apple shares when we return. this is where i trade andrs. manage my portfolio. since i added futures,

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♪ good wednesday morning. welcome back to "squawk on the street." i'm carl quintanilla with sara eisen, david faber at post nine of the new york stock exchange. dow's up 89. we're about a minute behind schedule trying to get ism numbers. rick santelli's got that. rick. >> yes, let's start with the older data first. december on construction spending was down 0.2. mirror image of the up 0.2 we

were expecting. we had minus 0.2 in september last year, you have to go to april to find a worse number. of course january is the read on ism. and it's a good one. we were looking for 55, we ended up with 56. 56, the best level since november of 2014. going a ways back. let's look through the internals, shall we? prices paid jumped up to 69 to 65.5. new orders 64.4 to 60.3, subtle change but to the upside. and 60.1 on the employment index following a slightly revised 50.8. and in light of today's adp that somewhat makes sense. sara, back to you. rick, thank you. stocks this morning are higher holding gains here. dow's up 84. just a few hours left until the fed's first policy announcement since president trump took office. let's bring in steve liesman, cnbc senior economics reporter and brian jacobsen.

steve, first to you on the manufacturing numbers, very strong and corresponds with what we saw in the adp report, an addition of manufacturing jobs. >> yeah, that's the point. it looked like there's a little rebound in the economy from january. i think you also got a pop by the way in the two-year which popped again this morning. the yield did anyway at 8:15 when the adp number came out. and so what you see here is it's nice to have that confirmation because there's a little bit of concern that maybe there was some weather inside the adp or maybe there were seasonal adjustments. but when you get the manufacturing index increasing along with it, especially the employment component inside that also going up production numbers going up, new orders numbers going up, it suggests you may have a little awakening in the manufacturing sector of the economy. >> i wonder, brian, if this is a direct result of a boost in confidence from the election. one thing that president trump has been consistent on is his message that he's going to bring american manufacturing back and

prioritize policies that would do that. do you see this sort of bump in confidence reading through to the broader economy? >> i do think that this is partially attributable to a boost in confidence, however i think some of it is just a natural reaction to the improved economic data we've seen since the summer. keep in mind during the summertime people were wondering whether or not we were going to go through another sluggish patch, whether or not we'd ever emerge from that. so i think it's a combination of a boost of confidence of expectations of lower regulations, better tax environment. but some of it -- most of it perhaps is just simply attributable to an economy that looks pretty robust here. so i think that this is a very good number. it's very impressive. but -- and i don't have the report in front of me. i'm kind of curious how it looks as far as new export orders because the strengthening of the u.s. dollar is probably a bit of a concern for a lot of manufacturers, especially on the export side. >> steve, looking at some of the ism internals, prices paid goes

to 69. highest since summer of 2011. given that it is a fed day, does this change that conversation more quickly than we thought it might? >> you know, there's a little bit of dissidents in the market right here, carl, that we have to watch. both the fed and the respondents to our cnbc survey are looking for three rate hikes this year. the market looks to be priced to two when i look at fed fund futures when i look at two-year i see two prices hiked in. if i look at the way data is going there has to be that third hike and the question is where do you fit it in the calendar? yesterday we saw in the survey was a bunch of guys kind of saying, you know what, it may be earlier than june. june is the main month everybody says the next hike comes. i think you got to start thinking about march. and then the question becomes does the fed begin to telegraph that and nudge the market along into thinking about a march hike?

last i looked, guys, i saw about a 30% of probability of that hike coming in march where it's over 50% beginning in june for that time. >> brian, how would these various scenarios steve just laid out impact the broader equity market. if there's hints today about improvement in the economy and confidence that march may be sooner than investors are banking on, what will that do to the rally? >> yeah, i think that you have to be aware of optimistic central bankers and also be aware of the ides of march. the next fomc meeting, especially the one with press conference afterwards is march 15th. perhaps that's a somewhat ominous sign. chair yellen if the data keeps rolling in the way it has been will likely signal that more rate hikes are coming rather than fewer. so maybe this is going to be slightly different than what we've seen over the past few years where the fed has had to ratchet down the rate hike expectations and instead we'll have to see the market ratchet up the path of rate hikes. and the equity market i think will be able to absorb that, but not without volatility.

i would expect that we would probably see some of those interest rate sensitive sectors like reits, telecoms and utilities perhaps get hit hard if we suddenly see a ratcheting up of rate hike expectations here. >> steve, we've been taking stock for weeks and days now of the level of optimism and pessimism surrounding president trump's policies. so much is changing. the republican congress feels like investors really looking hopeful for tax reform and infrastructure spending and stimulus. and economists are more wary of the trade policies and immigration policies. how do you add it all up? what's your take at where we are in this sort of pendulum that keeps swinging? >> so i think overall they expect more growth. but what i'm seeing is they're not expecting as much growth as the policy proposers, either from the white house or congress are putting on it. the numbers i see are like a quarter point extra growth this year, 40 basis points next year. whereas it looks like the people

putting the policies together are looking for a full percentage point or even two percentage points from their new policies. the market is very cautious. they're cautious about trade. they think these things could potentially even offset if we start trade wars with some of our closest trading partners. i think the market is waiting a lot like tim cook who said, you know what, when you show me what the policies are, i can price those in. right now at least the economists are not going as far as the market. and the economists look at the market and say, you know what, you guys are out over your skis just a little bit. by the way, i think when you're skiing it's where you want to be anyway. >> steve, thank you. good metaphor. apple's a perfect example of the paradox. we'll leigh ave it there are fow and talk more apple. brian jacobsen and steve liesman, thank you very much. >> a lot due to apple of course shares at a one and a half year high on the back of that strong earnings number. profits and revenues did top estimates. the tech giant also reporting

the best ever growth in services. joining us this morning here at post nine is morris mark, president of mark asset management, jim suba, senior tech analyst at citi. good to have you with us. it's a metaphor for the overall market, what do you mean by that? >> it's sort of simple, apple's doing well but has potential to do so much better. the economy's doing well, but it obviously has the potential to do so much better. we ran numbers in doing our broad investment strategy for 55 years from 1945 to 2000 the economy grew to 3.5% growth rate. since then it's been a little less than 2%. if you had the same growth rate i would add $15 trillion to national wealth. so that's apple. apple's doing fine, but it can do a lot better. >> tim, are you as bullish? >> we are. and taking it to the next level. we see short term apple's return to growth. that's short term.

and that's even before the new iphone 8 super cycle. then longer term we really look at its growth and services. and its push into india and other markets where they're unpenetrated. people are paying up for these premium devices. we see earnings growth continuing as well as sales. a lot of good things ahead for apple. and we like the stock. >> are you worried at all, morris, that the promise or the expectations for the 8 are getting elevated? >> honestly, no. because everything i've read indicates they're doing a lot of work on it. we can look forward to some things that are reasonably predictable, wireless charging, totally waterproof phone and there's a great deal of discussion about organic light omitting diode technology being applied. so the answer to that question is no. to me the real questions with regard to apple is how they strengthen their ecosystem. you know, when you got the first

iphone, if you had itunes, that was the only place you could listen to it on a mobile device. now i think you want broader content that's proprietary the same way. and i think that's where apple should be pointing. and i thought that tim cook alluded to that yesterday in the call. >> one place they could be pointing to is what to do with all that cash, jim. which always comes up in these conversations. we learned that there's a record pile of $246 billion and it always fuels m&a speculation. but this time repatriation at a lower tax rate is actually in the cards. so how are you thinking about what gets done with it? >> that's a great observation. and it's a fantastic problem that apple has of too much cash. when we look at them unlocking it and bringing that cash from overseas back to the u.s., we actually quantify that. and we quantify and believe it could be a 10% boost to earnings from a lower tax rate. and an additional 6% if they buy

back about using about 20% of that for stock buybacks. so we got another 16% upside to earnings if the trump administration makes its way with lower taxes and repatriation. more and more upside as we've been talking about in this entire segment. >> morris, apple's certainly one of the beneficiaries of tax reform, at least in a number of ways although the border tax adjustment may actually not be. >> absolutely. >> but i'm curious, do you think the market in general is getting ahead of itself? and steve liesman referred to this in his report in terms of what we may see and when we may see it, because the people i speak to say it's still going to be a while, quite a while until we see the specifics on tax reform. >> yeah, we feel good about the investment environment, but we look at it exactly the way you do. we look at the action of the last couple days. i think it reflects the uncertainty. i think it reflects the fact that the parties, meaning democrats and republicans, don't seem to be able to work with

each other. but i was very heartened by tim cook's comment yesterday. he said two things. he thought there was a high probability of reform some time this year. and he thought there was bipartisan support. if we get intelligent reform and the economy's pace will pick up, that's a win-win for everybody. >> at the same time he said he was calling senior people in the white house on immigration trying to figure out legal options. is that material to the stock at least? >> i think everything's material to everything. i think the way you'd put it is, you know, that's why you have uncertainty. but i think when you have an economy that's been growing at 2% and we're nine or ten years past the crisis, there's a lot of pressure on both political leaderships to do better. so i think our bet is we will see tax reform. >> is there anything that you could see, jim, out of the trump administration that would make you wary being such a strong bull on apple's stock? it's great to get tax reform and repatriation, trade wars not so

much. >> absolutely. here's the way i look at it, we want and we believe we're invested in things that will do well if the economy doesn't do much better. but we also want to own things that will really do well if and when things pick up to 3% or 4%. i think apple is one of those names. i think alphabet is one of those names, facebook is one of those names. great companies, great cash flow, no debt and powerful business models. >> we're going to learn a lot more about facebook. that's a story for tomorrow morning. >> maybe i shouldn't have said it too soon. we'll find out. >> morris, jim, thank you guys. good to see you both. >> thank you. >> thank you. >> when we come back, the president making his supreme court pick. we'll break down the implications for the business world. plus, the largest u.s. home rental company, invitation homes, makes its debut at the nyse. we'll talk to the ceo. dow's up 55.

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president trump announcing his pick for the supreme court. neil gorsuch. our eamon javers outside the would you say with more on this potential new jurist, eamon. >> yeah, hi, david. dramatic night here at the white house. staffers here doing everything they could to keep the secret and build the suspense right up to the 8:00 p.m. reveal of neil gorsuch as the president's pick for the supreme court. here's the moment the president announced the name last night. >> today i'm keeping another promise to the american people by nominating judge neil gorsuch

of the united states supreme court to be of the united states supreme court. and i would like to ask judge gorsuch and his wonderful wife louise to please step forward. so was that a surprise? was it? >> it was a surprise to most of us anyway. the white house as we say had brought those two candidates in to d.c. to keep everyone guessing until the last moment. here's what we know about judge gorsuch. he's 49 years old, clerked for justices byron white and anthony kennedy. he's a harvard law school grad, class of '92. served on the court of appeals for the tenth circuit now. often compared to justice scalia in his judicial style and his sort of lively style of writing, although not necessarily in terms of his personal style. scalia could be a little more prickly. and he's a proponent of originalism, which means he's a judge who looks at the text of the law to really understand what the people who wrote that law intended for it to say. and he's a skeptic of federal regulators, bureaucrats he views

those bureaucrats as almost a second circuit court of appeals at this point. he would like that power sort of brought back to the senate and to lawmakers on capitol hill. so a lot going on here with this pick. this is going to touch off a very bitter partisan fight here over the next couple of months here in washington, d.c., david. >> eamon, thank you. eamon javers outside the white house. as we head to break here, take a look at shares of invitation homes. blackstone's reit just started trading here at the new york stock exchange. it's up little more than 1%. we're speaking with the ceo next.

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told you not to swat 'em. blackstone group's invitation homes opening for trade here at the exchange. the world's largest u.s. home rental company raised over $1.5 billion in its ipo making it the largest u.s. listed public offering in over a year. joining us this morning is the ceo of invitation homes john bartling with us at post nine. congratulations. good to see you. >> thank you very much. good to be here. >> for those who aren't familiar it's really a play on whether or not home ownership sort of remains a barrier for some in this country, right? and then they rent as a result. >> i think it's less about a barrier as a lifestyle choice

today. what you're actually seeing is people are choosing to rent their lifestyles. millennials very much are seeing choice to be more asset lined. it's not against housing. people will buy homes, it's just a choice of time when you want to move into it. what we're doing is bringing a professional experience into housing when you rent a home and move into the suburbs. >> i was talking to diana olick, our real estate guru here at cnbc. she said this is a market that is absolutely on fire thanks in part to this trend you're talking about. what about the economics of renting a home versus buying a home right now? >> i think it's a little bit about lifestyle choice. the average age of our renter is -- and we like to say those who lease with us, are about 39 years old. they tend to be both working family, so both of them are working. they want to live near where they work and typically are looking for a good school. so they have children and, you know, they're just at that stage where they're moved from apartments to over into the suburbs.

>> i guess what i'm wondering we just got another read on home prices for november, up another 5%, they've been steadily climbing to near prerecession levels, have you seen the same with rental prices? >> rental prices do tend to follow home price appreciation. and there is a shortage of housing in the united states right now. >> well, you had rent increase of i think 6.5% in the last quarter. that was above your peer group. and there are those who wonder is it sustainable. >> well, there is clearly a shortage of housing in most of our markets and in particular the markets we tend to invest in. so it is sustainable in the sense that they're very tight markets. but i would say also that, you know, they're just great fundamental markets. >> how do you view the portfolio? you're now a reit obviously going to distribute at least 90% of your income to your holders. are you continuing to grow? obviously there was a period of great growth where you guys were buying a lot of homes. >> right. >> do you ever sell them? or is it going to sort of remain stable at 48,000, 49,000 homes? >> we did sell about 2,600 homes

over the last few years, we do actively invest in our markets, we do sell homes in our market. but i think the main thing for us, david, is really just focusing on executing. there are times when your inquisitive and there are times to do best practices. we're still early stage in terms of how we're driving not just services but driving best practices to our residents. for us that's really exciting because this industry is professionalizing and really providing a real choice. >> that was always the question in part if you have all these homes all over the place, can you really get the efficiencies of a person who's going to fix the plumbing or mow the lawn. but you've concentrated. i think you're in maybe 13 markets, you have at least 3,000 homes. are you at the point there where you have those scale advantages? or do you need to get even bigger to start to seie those efficiency sns. >> you're correct. 95% of our portfolio is over 2,000 homes per market. that is a very efficient level for us. but even in those markets you

have to be dense in the sub market. so we like exactly your fingerprint and at the right density. to go into a new market you'd need at least 1,000 homes and scale up to 2,000 or 3,000. >> is it by definition a domestic play? are there international ambitions at all? >> clearly i think the international market is one that lends itself to renting as well, but for invitation homes we have a great footprint, like where we are and there's an enormous opportunity doing just what we're doing in our markets today. >> there are a number of other peers you have that publicly trade, although you're the largest. do you think there's an opportunity to consolidate some of this industry? you now have of course a currency that you can use. >> i'm also the chairman of the national rental housing council, so i would say generally speaking with 15.8 million homes that are for lease in the united states, it's larger than multifamily, there's no reason why this industry shouldn't consolidate to 2 million or 3 million homes that are institutionally owned and try best practices for the sector whether we'll be a consolidator,

i think not. i think we're one of the best executers in our markets. i think you'll see us grow more organically. where we do focus it will be on those markets where we're providing already scale and execution. >> how do rising rates affect your business? >> well, you know, it's a two-edge sword. rising rates you clearly want to see home ownership continue. and you want to be -- you want to see the market, the transaction market continue to be as fluid as possible. the reality is though every time interest rates increase, there are fewer people who qualify for a mortgage. so from a renters standpoint it's actually probably a very favorable market. but that doesn't mean that that's necessarily the right outcome. it just means we need more supply coming into the market at affordable purchase price. >> one of your competitors david mentions, american homes for rent up 48% in the last 12 months. another is up 44%. why the timing? i mean, we talk about how sleepy the ipo market was last year. why did blackstone decide to pull the trigger now? is it because of the competition

doing so well in the market? >> i think we have a great product. the industry is finally getting recognized for what it's doing. and we're driving the right margins. you see in our core margins are about 62% right now. very competitive with multifamily. our top line growth is competitive with multifamily. and quite frankly when you look at our fundamentals it's a very attractive time for investors. i think that's why you see us come to the public market. >> when we think about the long-term rental growth rate that you can expect, what should we be, the we being investors frankly, expect? >> without getting into forecasting -- >> why not? give us a forecast. >> i would say the fundamentals are very strong in the industry. and we have accelerating fundamentals where many of our other relative classes in real estate are actually trailing off. i think the most exciting part for our industry is millennials have not yet entered our space. at an average age of 39 years old, we're still a little bit older than millennials.

the apartment industry is really enjoyed that uplift for some period of time. >> a lot of discussion at least in our area of -- or certainly rental prices and condominiums in urban area rent's not having much pricing power this year. are you taking share from millennials who live in high-rises essentially? >> well, the apartment industry generally three bedrooms are about 6% of the stock. so when you go from an apartment or a condo, you're usually making a decision about space. for the most people when you move into a rental house, you're making a decision about your second kid. you're looking for space, you're looking for yard. you generally have a pet and you're generally older and looking for school district. so work/life balance. >> finally, carl mentioned how much you've raised is going to go towards repaying debt, is that correct? >> that's correct. 100% proceeds are going to pay down debt. >> john, good to have you. >> it's been fun to be here. thank you guys. >> fun to watch. invitation homes joining us here at post nine. let's send it to sue herera for a cnbc news update at this

hour. sue. >> hi, good morning sara and everybody. i'm sue herera. here's the news update at this hour. iran's defense minister confirming that his country did conduct a missile test recently. he did not elaborate saying only that the test was not in violation of either u.n. resolutions or iran's nuclear deal. the white house said on monday that it is studying the details of that test. newly appointed defense secretary james mattis beginning his first overseas trip. he left joint base andrews this morning for a trip to south korea and japan. the trip is meant to assure both countries of the longstanding alliances with the united states. quebec authorities allowing cameras into the mosque where a gunman opened fire and killed six people on sunday. alexandre, a 27-year-old university student has been charged with the killings. and two plug-in hybrids have earned the insurance institute's top safety award. yikes, look at that. both the 2017 chevrolet volt and toyota prius prime earning award

for having good ratings in five crash test evaluations. that's the news update this hour. sara, back downtown to you. >> sue, thank you. when we come back, what under armour's freefall yesterday means for the rest of the sneaker and athletic apparel industry. we're going to talk to the ceo of foot locker. they're opening a brand new big store in new york and are here to talk about it. the dow's up 53 being led by apple. much more "squawk on the street" when we come right back. why pause a spontaneous moment? cialis for daily use treats ed and the urinary symptoms of bph. tell your doctor about your medicines, and ask if your heart is healthy enough for sex. do not take cialis if you take nitrates for chest pain, or adempas® for pulmonary hypertension, as this may cause an unsafe drop in blood pressure. do not drink alcohol in excess. to avoid long-term injury, get medical help right away for an erection lasting more than four hours.

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foot locker unveiling today for the very first time a state-of-the-art new store in new york city's times square. 17,000 square foot property opens to the public next thursday. and joining us exclusively here at post nine is dick johnson, he's the chairman and ceo of foot locker. welcome, dick, good to see you. >> thanks for having me. >> 17,000 square feet at a time when so many other retailers are closing stores and facing declining traffic. why are you opening such a big

one? >> we firmly believe that stores are part of an om any channel experience. our consumer -- 90% of our customers interact with us digitally during their buy process, but the vast majority of them still come into our stores to touch product, feel product, all of the excitement that gets generated. you know, we talk about the grand opening next thursday we'll have lines out the door, we'll have bans, we'll have celebrities. i mean, it's really exciting. and the store proposition is just part of the equation for our customers. >> well, part of that product is under armour merchandise, and that is top of mind after yesterday's awful quarter and outlook. the question investors want to know, is this a sign of the broader problems in the category, or is there something specific going on with under armour that makes it particul particularly vulnerable? >> i know you spoke with kevin yesterday, so he has the best insight to their business. but what we really sell is sneaker culture, right? and under armour's one of the players in sneaker culture. they're one of our key partners. and they'll have some very special space in the new times

square store. so, you know, again, their business model is different. we're a house of brands. we have multiple brands, multiple excitement around product. and product is king in our book. >> what about pro mos? they cited that as a reason for the miss last quarter. how deep are discounting right now coming off the holiday season? >> for us it's not about discounting. we sell the premium end of sneakers. our consumer is driven by price is one of the things way down on their list of considerations when they talk about their sneakers, right? from $100 to $200 and beyond. if the consumer sees the right price value relationship it's no issue for us. we don't really talk about discounts in our business because we want to focus on the premium end of the product assortments. >> times square, i mean, a times square location you're going to get some new yorkers, but you're going to get a lot of tourists. is the hope they go back to wherever they're from and visit a foot locker there in terms of traffic -- foot traffic, or go back online and order something? >> it's both. i mean, we don't really believe

in channels. we try to be channel agnostic. we want them to have a relationship with the brand. we want to engage with the consumer however they want to engage with us. and of course we've got 3,400 total stores in our fleet. you know, 23 countries, so it really for us is about driving sneaker culture. >> do you worry more about ones that are mall based than ones that are not mall based? >> you know, as we reported at the end of our third quarter, our traffic in the u.s. malls was actually up. so we've become a destination inside the mall. there's a lot written about the anchor stores, there's a lot written about malls having to redefine themselves. but our core consumer really finds us as that destination, whether it's a mall in the mayfair mall in milwaukee, wisconsin, or times square, they see our stores as an exciting place to touch, feel and experience the product. >> your mall traffic is actually up? >> that's what we reported through the third quarter. mall traffic in footd locker stores through the third quarter was positive. >> what about the sports

authority bankruptcy last year? were you able to take some of that market share especially at champ's, which i think is your subsidiary. >> the sporting groups operates a little differently, right? i'm sure where sports authority stores closed and people were buying sneakers we were able to grab some of that. but they operate a little different end of the price spectrum from us. we're really focused on the premium. we try to really connect with that consumer that's around sneaker culture. >> we spend a lot of time talking about the prospects of tax reform which includes pon possibility of border tax adjustment which would seem to make a lot of things for sale in your store more expensive. would that be the case? and are you concerned about it? >> clearly we're paying close attention to what's going on in d.c. d.c., right? there've been a couple proposals surfaced, we stay aware of what's going on, once we know what's going to happen we'll take a better look and figure out with our partners what the answer is to take care of everybody in the process. >> you're going to be against a

border tax, i would assume, right? >> specifically, we would be. >> are there any sneakers made in this country? >> very few. new balance has some factories that are u.s. made sneakers. there's certainly some speed factories that are going to come online in the u.s. over the coming years, but today a very small percentage of the sneakers we sell certainly are manufactured in the u.s. >> sports to dominate in your view basketball still? >> basketball's important, right? but again, our consumers' influenced by sport, influenced by culture, music, it's all of these different assets that add vitality to the sneaker industry. >> so on that note, is the trend setter right now still adidas of the big three? >> adidas is on a great run right now. they've got great assets they're using. they've got great technologies, but certainly nike continues to drive innovation and excitement across their brand as well. the jordan brand. puma, the rihanna shoe the creeper was the number one shoe,

footwear news' shoe of the year last year. there are a lot of energies that drive brands. >> it's no kanye west, which is still the big one. >> yeah. >> finally, your stock has gone nowhere in the last year, underperforming, consumer discretionary and the broader s&p 500, are you getting grouped into retail and some of the mall traffic? >> i think that's part of it, right, that there's this overhang of retail in general. again, when you think about us, again, our retail is not a fad. the sports influence, the culture influence is not a fad. sport culture, sneaker culture is here to stay. i think that's what really separates us from some of the other people in our space. >> dick johnson, thank you for being here. >> thanks for having me. >> ceo of foot locker. we'll be sure to visit that megastore at times square. >> yes, we will. >> enjoy yourselves, thank you. >> my son certainly will. >> when we come back, it is decision day at the fed. investors awaiting the first policy statement since the president's inauguration. former fed reserve government

robert heller joining us with rick don't go away.

small caps suffering through a soft start to the year, but could they be your best bet going forward? good question. find the answer at tradingnation.cnbc.com. more "squawk on the street" coming up. there's a denture adhesive that holds strong until evening.

fixodent plus adhesives. just one application gives you superior hold even at the end of the day fixodent. strong more like natural teeth. well, you say you want santelli and you want an exchange. so we've got "the santelli exchange." rick, take it away. >> thanks, david. always an interesting guest especially on the wednesday of a two-day fed meeting. bob heller, welcome. bob? bob, are you there? >> guys, i got no sound here. >> well, okay. listen, we have an issue here, hopefully you'll come back when bob's hearing and mike is working. back to carl. >> and that was such a good

introduction, david. >> thank you. well, he deserves it, rick, we're going to get that fixed. i have a feeling we'll get that fixed quickly, rick. >> we can tap dance for a little bit here. we cou we should point out markets up 103 on the dow. now up 20 talking a little bit about what's happened over the last hour or so. rick, let's try this again. >> all right, hey, bob, can you hear me? are you there, sir? >> good morning. >> good morning. see, best things in life are worth waiting for. bob, we currently have 50 to 75 basis points the overnight rate, let's call it 62.5, where do you think it should be, and is it going to change as dramatically as you think it should given that's your strategy if you were on the fed? >> well, at the moment, you know, we have about 2% inflation at 1%, 1.5% in real terms that the fed funds should have. and you should be at around 3, 3.5% overall for the fed funds rate. and that's a long way from where

we are right now. the economy's doing well. the economy can take it. >> wow, that is. all right. with respect to the balance sheet, you know, you were one of the first quite a while ago to come on the exchange and say they should be selling off the balance sheet, it should be a tool they use more, many more are starting to say it. your thoughts on an update on that part of the story. >> i fully agree. it hasn't improved at all. we still are at $4.5 trillion, the federal reserve should at least let run off the assets off the balance sheets as they mature. that won't disturb markets right now at all. you know, the markets are healthy and the long-term rates also could be a bit higher. and now we have a new administration coming with new vigor and, you know, the economy looks very good. unemployment, everything. >> all right. uncertainty's been the word du jour since the inauguration,

uncertainty about whether trump will get many of his policies through, democratic strategy seems to be, listen, let's stall this out a bit. it is what it is. do you think that donald trump and the fed and janet yellen all these stimulus that are supposedly going to be put forth, how do you trade that? and how do you look at that if you were sitting at the big table today? >> well, you don't really need anymore stimulus as such. what we need is greater productivity. and as we take off regulations, that means productivity will improve, you can pay higher wages, all those desirable things will start to happen, hopefully. and i hope it just doesn't get caught up in a new gridlock in washington, d.c., because, you know, republicans want to do one thing and democrats want to do something else or nothing at all. so let's hope the two sides really come together and do some good for the american economy

and american people. >> you know, i noticed a big similarity between some of the things you and i talk about, mr. warsh's op-ed in the journal where he said the fed's too short-term number-to-number, should be more medium term. you've said as much. does this mean that janet yellen's future may be uncertain with regard to donald trump and her tenure ending in february of 2018 in your opinion? >> well, that's when her term ends. the question is should he reappoint her or will he reappoint her. and, you know, yellen has done a good job in keeping the ship afloat, if you want to say so. but we've sailed in the wrong direction. we have this huge balance sheet where the federal reserve holds 20% of all federal reserve debt. that's an enormous amount of money. and you can't run a central bank that way with that great of dependence -- interdependence between the treasury and federal

reserve. >> bob, always interesting to hear your thoughts. thank you for being our guest today. david faber, back to you. >> okay. thank you very much, mr. santelli. let's send it over now to phil lebeau with toyota sales number. >> david, not good numbers for toyota last month, decline in sales of 11.3%, compare that with the estimate from edmonds.com of increase of 1.1%. what's the problem for toyota? same problem all the automakers are seeing right now, very little demand for cars. we're not talking about overall, but we're talking about cars vur versus suvs and trucks, toyota car sales down 17.2%. back to you. >> thanks, phil. here's neil gorsuch with mcconnell and the vice president. >> -- we're all thrilled and looking forward to getting confirmation process started. >> thank you all for being here. it's my honor to escort judge

gorsuch to capitol hill for his first meeting. we look forward to members of the united states senate discharging their constitutional duty and getting an opportunity to know this judge. come to understand the enthusiasm the president the united states has for his appointment to the supreme court of the united states. make him available to members of the senate and it's, again, grateful for the warm hospitality of leader mcconnell today. >> some democrats are already saying gorsuch is out -- any response? >> okay, thanks everybody. appreciate your time. >> thanks everybody. thank you everyone. >> neil gorsuch making the rounds in washington. of course you probably know by now 49 years old from the tenth circuit court of appeals, bush appointee who was confirmed

unanimously at the time and mcconnell today expressing views, guys, this will again be an easy confirmation. we will see. >> it's going -- we're going to have to see what the democrats do. i mean some of them are still upset about merrick garland, president obama's pick of course for the supreme court. butgarland, president obama's pick for the supreme court, but they've got a lot of fights on their hand and it's something investors are watching carefully to see every single time they say no, what does that do to the likelihood and the chances of tax reform and infrastructure spending? i mean, they sat out of the confirmation hearing of mnuchin. will we continue to see this sort of divisiveness amongst the parti parties? >> it's a key question, and will they go this time or save the fight for kennedy or ginsburg, when either one of them potentially steps down in years to come? let's send it over to jon fortt now for a look at what's coming up on "squawk alley." >> david, to say apple is leading the dow is an underestimate, up better than 5%. second place is jpmorgan, up barely more than 1%.

so, can apple's run continue after this big earnings beat? also, taxes versus trade. we're going to continue to talk about the impact of this new trump administration on tech and beyond. and aamazon's got a new flight plan, but it's got nothing to do with drones. all that and more coming up. this is a mobile trading desk,

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amazon plans to spend nearly $1.5 billion to build an air cargo hub in northern kentucky. we're talking about the cincinnati airport. the company hasn't announced a start date for the facility but says it expects to create more than 2,000 jobs when it opens. location actually not far from u.p.s.'s major hub. last year amazon said it would lease 40 boeing 767s, 16 of which are currently in service. amazon is handling more shipping in house so it can deliver packages faster, cut costs, alleviate uncertainty from relying on third parties. i was just checking out u.p.s. and fedex shares. they're down, but dow transports have been down and lagging over the past few days. we want to know about the move for amazon, but for cincinnati, if you talk to any cincinnatian, tbg's such a talking point. it's been a ghostton when delta

moved flights to detroit. this is a big boost. >> baird had a note out last night, basically speculating on the possibility they want to build essentially their own u.p.s. or fedex that they would then hire out for third party. they say "we understand the skepticism surrounding the potential of third-party logistics, but precedence suggests amazon has larger ambitions," as they once did in web services long ago. >> and they have proved, of course, they also have that commitment to 100,000 jobs, i guess over the next 18 months, that is. at least that was part of the plan that amazon has had. all right, let's go to dom chu with a quick "market flash." david, transportation stocks may be down, but apple is hitting at least a move higher today. take a look at bank stocks as well. those shares moving higher. if you look at regional banks in particular, you've got u.s. bank, m&t bank, pnc financial all hitting record highs in early trading. regional banks and the entire sector will be a huge focus heading into this afternoon's

fed interest rate decision. back to you, david. >> thank you, dom. as we head to a quick break right now, let's look at shares of health insurer anthem. they are higher after the company reported better-than-expected quarterly earnings, that thanks to larger-than-anticipated jumps in enrollment. of course, anthem has yet to have its deal to acquire cigna rejected by a judge, as is expected, given, of course, what happened with etna and humana, which by the way, went to court after that did. we'll see what that news, is but of course, some positive news for the bottom line there. much more ahead. stay with us. to win, every millisecond matters. both on the track and thousands of miles away. with the help of at&t, red bull racing can share critical information about every inch of the car from virtually anywhere. brakes are getting warm. confirmed, daniel you need to cool your brakes. understood, brake bias back 2 clicks. giving them the agility to have speed & precision. because no one knows & like at&t.

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let's just show you what's happening with stocks. they had lost a bit of steam in the past hour or so after the dow was up more than 100 points. it is now only up 16 points. a lot of that is apple, which continues to outperform after a better earnings report. as far as the s&p 500, it has tipped into negative territory. you've still got strong groups like financials and technology. apple part of that story. higher treasury yields and a stronger dollar did get much better numbers on the adp private sector jobs report, which bodes well for friday's big government jobs report. you also saw a better manufacturing number, ism, at the top of the hour.

so the stronger u.s. economy continues to be a theme. we'll see what kind of clarity we get from more earnings. facebook is out after the bell. and with that, i'll send it to you, carl, for "squawk alley." >> sara, thank you. 8:00 a.m. at apple headquarters in cupertino, 11:00 a.m. on wall street, and "squawk alley" is live. ♪ good wednesday morning. welcome to "squawk alley." jon fortt, kayla tausche and myself here at post 9 this morning watching these markets, about a 100-point gain on the dow essentially has been lost.