flagship restaurant. package includes a taco bell garter belt and a bowtie, a wedding bouquet made of sauce packets. just married t-shirts and taco bell branded champagne flutes. cover the cost of the couple's meal, 12 pack of tacos and cinna-bun cake. i'm going to do this to renew vows. >> there you go. make sure you join us tomorrow. "squawk on the street" begins right now. ♪ good wednesday morning, welcome to "squawk on the street." i'm carl quintanilla with david faber at the new york stock exchange. jim's at one market in san francisco. the news flow at full blast this morning. yellen on the hill, strong consumer inflation, retail sales, futures are steady but the dollar it's best day in a month as markets look past the political turmoil at the white

house. europe is mostly green. the ten-year cracks 2.51, oil inventories are headed our way. our roadmap begins with retailers meeting president trump. well-known retail executives headed to the white house this hour expected to make their case against a proposed border tax plan. >> plus, the s&p eyeing its longest winning streak in three and a half years with fed chair janet yellen back on capitol hill today, can the broader markets continue to hit these multisession highs? >> and pepsi beats on strong demand for healthy snacks and drinks. hue johnson, the cfo will join us on cnbc. first up, retail executives set to meet at the white house this morning amid industry concerns about a border tax on imports. including ceos of target, gap, best buy, jc penney. later on the president will hold a joint news conference with israeli prime minister benjamin netanyahu before their white house meeting in the middle of the day. jim, so many directions to turn today. our coverage is going to sound a little bit different from what

other cable networks are going with this morning. what's important to you right now? >> well, look, i think that the hot consumer price index, stronger retail sales dovetailing with what i think these people will have to say with the president makes it so we're more than likely to continue the leadership of this rally, which are the banks. i know it's very hard for people at home to grasp the idea that j.p. morgan could be the leader of a rally, but remember if people want to go back to old days 1992 playbook, this is what led. and you got a multi-year rally from it. so i have to believe that as long as that leadership stays intact, i know it sounds almost prosaic, but we can continue to rally. >> all right. of course goldman yesterday taking out that 22007 high. we mentioned going to talk to brady at house ways and means and then hatch, interestingly a list of winners and losers on this adjustment. losers are obviously, under armour, ralph lauren, macy's, but some of the winners, boston

scientific, ingersoll rand, striker, coke, we'll talk about pepsi later. >> well, look, i think the important thing is to look at the makeup of who's going there. so you have target and you have gap stores. let's use those as examples. those are companies that actually deal with the masses. who voted for donald trump? the masses so to speak to use that great rubric that i think is going to play a role when he speaks with these companies. i think they can make a strong case. i think when the president leaves this meeting he's going to say i've spoken to the people who actually clothe and feed this country and they're concerned about the border tax. it's a great narrative. jc penney, what a great narrative to have. these are -- he's not meeting with neiman marcus or tiffany. >> yeah, you know, i think important to step back and take a look at tax reform in its broader context because without a border tax adjustment there is a lot of consternation among folks who put this together in terms of whether it can be certainly revenue neutral or whether it really in any way can

pass muster in terms of not being a deficit busting kind of a bill. and that border tax adjustment is the key revenue raise. remember, you no longer can count your imports as a cost of goods sold, but if you're an exporter to carl's point about some of those names he mentioned, exports are not taxed at all. this is key. this is key to brady's plan slash ryan of course coming out of house ways and means. if the president says something today along the lines of, yeah, we're not really thinking about that as he did in the past where he said it's too complicated in an interview with "the wall street journal," although then came back and sort of indicates, well -- or the administration at least indicated maybe it would still be part of the plan. if he says anything, guys, that indicates no, you've got to continue to sort of figure out your odds for getting a full tax reform package done and whether they come down and what we end up with if you don't have a border tax adjustment. a tariff is not going to cut it

at least in terms of the deficit hawks as far as they're concerned. >> yeah, house freedom caucus remains resolute they would rather have something cleaner. the cfo of apple, which we'll get to later having set new highs yesterday, talked about this last night at a goldman tech conference. take a listen to this. >> it is very hard for us to imagine that a border tax would be good for the u.s. economy. because it is a tax that would burden the end consumer. and the fact that the dollar would have to appreciate very significantly versus where it is today, which is already too strong. >> so, jim, how much of this that the market is betting on is productive? and how much is counterproductive? >> well, look, i think we have to go back to the queue in addition to what david saying, it was ironic to see john mccain

saying we got to bet back to tax reform and repeal of aca because of what's happening with possible investigation of the flynn situation. you push things back, make things more complicated. i have to tell you when i see the president meet with these executives, he tends to come back and like what the executives have to say. it's kind of like feedback loop that is very positive for whoever's in the room in that case. and i think you're absolutely right that the deficit hawks are going to say, you know what, we got so many other things to look into before we get to tax reform. pushing back the 2018 scenario, apple, does it need it? we prefer warren buffett buying more apple, which he did, than we care about the border tax. at least for now. >> yeah, although, again, i continue to believe tax reform is the major issue for businesses in this country. it's certainly one of the key reasons why so many investors have taken a bullish stance since the election in terms of the market because it would have ramifications for so many different companies. and to the point that maestri

made, the dollar adjustment is key to the proponents to the border tax adjustment. the dollar they say will adjust but it will in fact increase in value so that will make goods less expensive therefore not hurting the consumer here at home. but of course will conceivably hurt a lot of export industries including, well, who knows, so many, carl, that could be hit by a rising dollar if in fact it does adjust the way they say it would. >> yeah. dollar riding an 11-day win streak. that is the longest in an awfully long time. speaking of deficit hawks, fed chair yellen back on capitol hill for a second day of testimony on the economy. this time before the house financial services committee as stocks aim for another fresh day of record highs. apple as we mentioned poised to set another all-time high. and jim mentions berkshire hathaway nearly doubled its stake according to a regulatory filing along with this you'll talk some nelson peltz, united,

jim, some of the biggest positions in airlines he's had in years. >> remember of course the u.s. air position talked about do want to be in this group. this group is not a benign -- the stocks did drop in this period with the exception of southwest. but i think buffett once again got in on another wave of when the street was believing that perhaps the airlines are no good again. you know what, just to go back to the dollar for one moment. i think when you look at the dollar appreciation and what it would mean, there's a lot of companies that the president's meeting today at gap stores, jc penney, that dollar could go through the roof and it wouldn't matter. the cost to the actual working person is far higher as a percentage of their net income than it is to -- it's just a giant tax on the people who frankly are struggling to meet ends. so let's keep that in mind. and warren buffett's not covered by that. by the way just in terms of

warren buffett, a billionaire battle we don't talk about enough. carl icahn when he sold the stock, he really made it clear that apple's best days were behind it and they had problems with china. buffett clearly did not believe that scenario. >> you throw in some shade carl's way, jim? >> well, look, he's with the president. but i do have to say that when you say that china was the problem, you got mainland china, mainland china is very strong for apple. hong kong not that strong. but when i look at the mosaic of what apple's doing, apple does not need -- apple needs a dollar that is stable. a strong dollar would amount to a terrible translation both for apple and for the company we're about to talk about, proctor, which spends the most time of any major company i know talking about how a strong dollar absolutely hurts them. >> yeah, that was interesting yesterday when apple set the intraday high, of course the dollar followed suit very closely. by the way, one coda on apple, to set record market cap we need to get to 147.41 at the current

share count. >> right. >> there has been a change in that. >> they have bought back a lot of shares of course with all that cash. though as we pointed out so many times back to tax reform $230 billion in overseas cash and marketable securities for that company. certainly could imagine how much they would be buying back if it came back. did want to talk, jim and carl, about proctor & gamble which you briefly mentioned there, jim. yesterday of course we told people when that 13f filing came out showed they have about half a billion dollars at trian, that wasn't the store they own 3.5 billion of proctor & gamble stock. the stock did move up after reporting yesterday after the bell. the question at this point is what happens from here when it comes to trian. this is the largest single position they've had. they are both investing from the flagship fund. they also raise special purpose money for this particular position. and as you might imagine as we know well from having worked with them through the years they are very well prepared. so there's certainly a white

paper associated with this position. but what has yet to happen is any sort of conversation between trian and proctor & gamble. it was back in december, early december if you recall, when nelson peltz first introduced the idea of a new position. take a listen. >> we do have a new position, david. we've started buying about two weeks ago. we of course can't announce it now. we bought quite a bit of stock. and we've got quite a bit more to buy. and i hope that we will be able to talk in confidence with management and the board. >> and those talks still haven't happened. why? because it took them a long time to get to the size position they wanted to. and they wanted to conclude their buying before actually beginning a dialogue with p&g. so, jim, we don't know what is to come here. of course trian will go to proxy fights occasionally, hines being an example, dupont being another example. but they also just focus on costs. mondelez being an example of that where mr. peltz is on the

board. unclear where it goes from here. curious to hear your thoughts given, you know, you've known this company very well through the years. >> well, pr taylor's done a remarkable job taken product from 17 to 10. got ridden of the empty calories of proctor. divisions that weren't making as much money in a very aggressive fashion. i don't think it's about disposal of profit lines. i don't know if it's about breakup. i would suggest it's no doubt about the unallocated costs because progrector does have a in cincinnati. but mr. taylor's done a great job. this is a tougher one. i don't see this company as an underperforming company. i see this company as a company that can make even a lot more money, but boy it's one of the best in the group. so i can't -- i await the trian proposal because proctor's best in show. >> on the other side of this break we'll get industrial production. later on this morning pepsi's cfo. back in a minute.

busy day for data. let's get to rick santelli with industrial production. rick. >> yes, here we go. january read on industrial production down 0.3 capacity utilization 75.3. utilization rates are close, industrial production's definitely a miss. and historically if we look at industrial production, this number really is interesting because we've had a lot more negatives than positives with regard to movement in this.

and when i look at minus 0.3, it isn't that big. in november we had minus 0.66 rounded off to minus 0.7. bit of a miss there. but rates are up and dollar's up. inflation running a bit hotter than some of the retail sales numbers looked promising. carl, jim, david, back to you. >> rick, thanks so much. see you in a bit. as we said earlier pepsico out with results earlier this morning. sara eisen joins us at post nine with more on that. >> good morning, guys. pepsico beating estimates on top and bottom line. guidance coming in a little light. want to welcome hugh johnston, cfo and vice chairman of pepsico, welcome back, hugh. nice to see you. >> nice to see you, sara. good morning. >> good morning. i know you've got to be feeling good, especially about that organic revenue number. can you talk a little bit about some of the moves you're making not just cost cuts but the investments you're making to outgrow the categories both of slower soda consumption and

slower sales of packaged foods. >> absolutely. yeah, we do feel good about the quarter. we delivered 3.7% revenue growth and 15% eps growth. so certainly feel like we delivered a good solid quarter. as you mentioned more broadly, i think the year was a good year for pepsico and sets us up well for 2017. you know, in a lot of ways it starts with productivity initiatives that we've put in place. we've been relentless in driving productivity over the last four or five years. whether it's out of our manufacturing operations, our distribution operations or management structures. and all of that productivity has yielded a sum of money part of which has been delivered to the bottom line which is why we've been able to perform so well on the bottom line. and part of which has been reinvested back in the business to drive growth. our r & d spending over the last five years is up 45%. our m&a spending is up 100 basis

points and innovation in 2017 alone was 17% of the total innovation in u.s. retail. you know, for that reason we're base kri the top grower in food and beverage, little less than 10% of food and beverage sales in the u.s. and we're almost 20% of the growth in food and beverage sales. frankly that's one of the reasons why our customers ranked us in the canter rankings number one. we feel like we have terrific momentum going into the year. >> i know a big part of that is the innovation specifically around healthier eating, guilt free, better for you, something your ceo indra nooyi has put in place years and years ago, hugh. so why conservative on the guidance? you do tend to under promise and over deliver, but what do you see ahead in terms of macros, currency and the business for 2017? >> yeah, you're absolutely right. i mine, indra has led the charge for pepsico for a number of years on moving the portfolio to where the consumer is going towards consuming healthier

products. one fun fact for you in that regard, at pepsi cola, the name on the door, is actually about 12% of sales for the company. meanwhile what we call everyday nutrition, which is healthy grains and proteins and fruit and vegetable, that's actually 25%. so everyday nutrition is twice the size of the pepsi cola business at this point in terms of revenue for the company. and that is what's enabling us to grow. as you think about going forward, there's really no concern about the business itself. we certainly feel good about the way the business is performing, but i think it's fairly undeniable that the world has gotten -- gone from a volatile place to an even more volatile place over the last six to nine months. so when we give guidance, we certainly look to give cautious guidance to ensure investors understand that we are committed to delivering our guidance and we'll see how the year progresses. but given the volatility that we see right now we felt like the -- at least 3% of revenue and 8% on eps was prudent

guidance for investors. >> hugh, jim cramer, good to see you as always. >> hi, jim. >> wondering about -- good to see you. when we say pepsico as a company with 45% of the company let's sa good for you, a huge percent just kind of everyday daily good for you, when do we start thinking of the company less of as a carbonated company and more of a company that is a future way to be able to play what millennials eat? and then i'm going to throw in just for a moment, yesterday i had john legere on for t-mobile, he said the return on investment on the super bowl was unbelievable. you obviously had the biggest name brand person during the halftime, lady gaga, how much again is this the idea of a food company down the road that looks quite different from all the other consumer packaged good companies? >> you know, jim, you make an absolutely fantastic point. we already think of ourself as a future food and beverage company. we don't think of ourselves as just a carbonated company at this point. i'm glad you call that out because, you know, as we talk to

you all in the media, as we talk to investors, we really do like to talk about ourselves as a unique food and beverage company that's much more innovative than most, much more productive than most and frankly is creating great results for consumers, customers and shareholders. we're already there as a management team. we just need to keep talking to everyone else about it. specifically on the super bowl, i saw your interview last night and i thought it was fantastic. and you're right, what john said is exactly the way we felt about the super bowl. he mentioned they were number two on social media after the super bowl. we were in fact number one. and we'll get a great return on that investment. just the number of mentions and impressions of retweets that we saw off of it. and then in addition to that i think the real power of it is for us to be able to integrate traditional media in the form of a tv show like the super bowl, social media with all of the dialogue that goes on back and forth with consumers and then point of sale at the shelf, the

power of our system allows us to translate a consistent message to consumers all the way through that chain and to drive sales and it makes a difference. it's a great investment for everyone. >> just in terms of emblematic of where you're going, i saw that you intend to have organic gatorade. can you tell us about the chemistry of that? in other words, how do we make it so something tastes that good and yet at the same time does the job? >> well, the truth is nature creates great tasting stuff for us. we have a terrific r & d team. i won't dare to try to get into the chemistry of it. you're getting a bit far afeel for me. but our r & d team searches far and wide for great tasting natural ingredients we can put into our products. some of them cost more without a doubt but there are lots of consumers willing to pay more to get something like an organic gatorade. it tastes great, just as efficacious and enables us to meet that consumer need. and through social media we can talk to those consumers so much more directly than in the past

and create awareness and create distribution to them. so it's part of this dynamic cycle of enabling pepsico to achieve more and more growth and satisfy more and more of our consumers. >> hugh, i also wanted to ask you about nafta. our new president, president trump has called it a disaster. he met earlier this week with prime minister trudeau. i know a lot of food goes back and forth over the borders from mexico to the u.s. to canada, and it's hard to quantify the impact for you without knowing exactly what he has planned, but how big of a concern is this for you? and what do we need to know as this administration goes back to the drawing board on some trade agreements? >> yeah, i think it's a little bit early for me to be commenting on what potential policy outcomes are in washington. i think we need to start to see more specifics on it. generally speaking we're a local company that's in a lot of countries around the world. we don't move a lot of things around the world because of the nature of our products. i will tell you i was in mexico last week with our team. we've got a great business down

there. they're doing a terrific job. and it is very much a mexican business just like the frito-lay and north american businesses are very much u.s. business. in terms of policy too much for me but i can tell you our businesses are doing quite well. >> very quickly, hugh, any advice for your friends at proctor & gamble and dealing with trian and nelson peltz? >> no. i don't comment on individual investors. and i wouldn't claim to know enough about p&g to make any comments on that. what i'm more focused on making sure that we perform and we make all of our investors happy. to date seems like we've done that pretty well. >> got it. hugh johnston, thank you very much as always, cfo of pepsico, carl. >> sara, thanks so much. when we come back, cramer's mad dash and countdown to the opening bell. whher it's bringing cuttg-edge wifi to 35,00 fans...

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all right. little late, but better late than never. let's get to a mad dash as we count you down to the opening bell about three minutes from now we'll get started with trading. jim, where are we headed? >> you know, i'm out here, david, talking to everybody including twitter. while i'm talking jack dorsey buys $7 million worth of twitter, he has 15 million shares. david, i want to tell you what's incredible about this. the geist around this company's stock is so negative, you got three guys saying you got to short twitter because you know there can't be a takeover because dorsey would have known, he is buying stock which takes it off the table. >> that's a good point. and that's true, unless it's under prearranged previous plan

when you see insider buying like that you can assume there's nothing going on. >> this is a revenue challenged company. i want everyone to understand when you say that there's something wrong on twitter, your twitter feed lights up. but i got to stick with the four walls. they are basically, i think, not in a good quarter. but maybe they are in a longer term let's crater the quarter, let's take a look at what can happen in 2018 mode because remember when you buy stock you can't flip it either sf. >> yeah. you know, i wonder, we had hugh johnston on, he's a twitter board member, he never says anything when it comes to that but you have to wonder as board members what they're thinking in terms of performance of the company and management at the top. >> i think that if i had to guess on what the board's thinking, i think the board's thinking 2016 was an investment year. the pay off to the investments haven't been seen yet. let's take a longer term view. we do have the president. the president counts. it's like the president has a lot more divisions than the

actual shareholders. as long as they stay on course to be able to introduce new products in 2018 and people take a longer term perspective, which obviously dorsey's doing, i think the board's going to give them some leeway. i honestly do. i don't think it's going to be throw the bums out operation. >> we got a few minutes to the opening bell, but i find you being more positive on twitter this morning than i feel like you've been even a couple of days ago. >> well, i just feel like that when a guy buys a lot of stock, i just can't hate it as much as i did the day before because even it's not a token amount. i heard some people say he's only buying $7 million worth. i don't know, where i'm from $7 million's still -- it's a couple of nice houses. out here it's like a good apartment. >> yeah. you can get a living room. carl, so cramer doesn't hate it as much. >> no, clearly not. jack buying in the range between 1550 or 16.50, somewhere in there as per that filing

yesterday. let's get the s&p at the bottom of your screen and the opening bell here at the big board. down here at the exchange it's going to be olin corporation celebrating itsz 100th listing anniversary of the nasdaq. there it is. a biotech focused on therapies for hemophilia patients. jim, we really didn't go over cpi. core up 2.3 year on year, to get a better number than that you got to go back to 2008, as we said the dollar at a five-week high. some surprised it's not up even more than that. is the fed's long awaited inflation finally here for good? >> well, you know, i had felt that a march rate hike is on the table. i keep hearing from various people that it's not built in. are they clueless? i mean, this kind of number just shows we don't need any sort of emergency means like we have right now at lower rates. i think there's ample opportunity to do four if not

certainly three rate hikes this year or else bank of america wouldn't be where it is. j.p. morgan, these stocks are telling you more about fed rate hikes than what these guys who chatter about fed rate hikes are giving you. the stocks are saying it's coming and it's coming fast. >> so the hopes for rate hikes intact, you argue, does that supersede anything regarding thin reg or tax reform that might get gummed up by what we're seeing out of the white house this week? >> i think we could be in a nirvana situation where interest rates go up so they do better absolutely when they do mortgages, when they do loans, you have the fed raising rates, which is terrific. then you have the possibility of deregulation so that they can buy back as much stock as they want. no longer beholden to the government. give much bigger dividends. be like the old days where if you bought a bank stock hard to remember 2006 but if you bought a bank stock you got terrific income. and that's what i think could happen with a lot of these banks. i look at a stock like wells fargo. obviously wells is a challenged company, but they're not challenged in terms of cash flow

or what they make. they could give back a lot more money to shareholders. and the government will just say, hey, you know what, that's their business. we're not in the business anymore of regulating these kinds of levels of the company. that's what i think trump brings to the equation. >> amazing, man, some of the levels. morgan stanley above $46 a share. oh, man, they must be partying like it's 1999 over there. speaking of -- >> but remember, gorman's price target is $70, david. >> yeah, right. i don't think so. speaking of financial services, guys, yesterday softbank's announcement it was buying fortress investment group for $8.08 a share, about 3.3 billion, say it raised some eyebrows at the very least, or more. people wondering what? did i read that why? huh? how? bizarre. all those things. but that's masa son.

you never know the directions he's going in. this is softbank buying it, not the yet-to-be-closed vision fund which maybe we haven't talked about its potential size as much as $100 billion. that vision fund will be helped perhaps by some of the expertise that softbank is buying when they buy f.i.g. remember. f.i.g. was the first of all of these companies which a turn of asset managers to come public, long before blackstone or kkr or apollo you had the guys at fortress come public. it hasn't done well as a public equity to say the least. but it's doing well here in terms of getting that premium, jim. and this vision fund, i mean, you're going to have apple in there and qualcomm. by the way feuding with each other but investors potentially in the vision fund together. larry ellison, foxconn, saudis for huge equity there, not all equity, some may be debt. we don't have a close on it, but

it's going to come to play and i guess they're going to be helped to a certain extent by the manpower of their hiring here at f.i.g. and some of the financial enginee engineers expertise that will go along with it, i guess. >> well, yes, february 2007 this was the beginning the company opened up very big, people didn't know what they owned. david, will the real estate portfolio go with it? because believe it or not they are gigantic holder of japanese real estate. >> i think so. i think it all goes along with it. everything. so obviously the assets under management this is not a hedge fund product. so the money's not leaving overnight. they've still got their basic businesses. as you know well they haven't done particularly well in a lot of those businesses over time. at least as the market would. but in this case they took the bid from softbank, quite a bid it is, and people still scratching their heads, carl, to a certain extent trying to really understand.

softbank buys a.r.m. holdings, we kind of get it, it's a huge number, 32 billion, but we get it, internet of things, machine learning, all those chips. f.i.g.? okay. okay. >> guys, dow all-time high led by proctor this morning followed by apple. jim, as we look at some of these highs that we set day after day, i'm reminded of a note out of btig yesterday. and i'm quoting here from one of their technicians, we are inclined to ignore overbought conditions for now. they argue the s&p can go to 2,400 before what they're calling a significant pullback. is that sort of how you're feeling? you feel it's overbought but hold your nose anyway? >> no. i don't. look, i'm still a believer. i follow the s&p's proprietary oscillator and we're in the four range. if we were up at five, then we traditionally that would be the level where i would tell people you have to scale back. but what i like about this market is it takes up different things on different days. i mean here you've got the banks

up, but remember i think that the banks are not overvalued. you're going to bring down the consumer packaged goods stocks despite the proctor & gamble buy. we rotate, rotate, rotate. technology can have a little bit of a rest here. you know what, by the way, i want to go back to apple. how about the idea that apple's beginning to be valued as a consumer product company? in that case when you take it up against proctor and clorox, when you take it up against coca-cola, you would have a much higher market multiple. i don't think it's wrong to start thinking about the price-to-earnings ratio of apple being wrong versus other companies that sell to consumers. and that may be the revaluation of apple that we're seeing right now. >> interesting. guys, worth mentioning or getting to in a faber report actually kind of a new playbook in activism. i'm talking here at csx, something jim and i have spent a good amount of time talking about. but an extraordinary letter or i

should say announcement from csx late yesterday involving the continued conversations that they had had with the activist investor from mantle ridge and his nominee to become the ceo of the company, hunter harrison, a very well-known railroad executive who gets high marks from many in the industry. why is this interesting? because yesterday csx said we actually were in agreement with mr. hilal on virtually everything when it came to what he was asking for. we were willing to appoint mr. harrison as our ceo. harrison by the way 72 years old, has had some health issues. we were willing to say let's bring on five new board members, one of which would be mr. hilal and one would be mr. harrison and retire four of our existing board members. but what we were willing to do is what we found out a bit

later, which is that mantle ridge wants us to pay the $88 million and then actually adjust it up for his taxes to let's call it $100 million that harrison left on the table at canadian pacific. we're not going to do that. and we're also not going to give him 1% of the common stock at the company because we don't feel that that's appropriate. what i have heard is they were willing to pay harrison let's call it $15 million to $20 million a year give him perhaps as much as a third of a percent of company stock, so certainly a robust pay package but not what mantle ridge was asking for. here's where it gets interesting. csx called for its own special meeting of its shareholders saying, you know what, and this apparently came from one board member. i don't know which one, who offered it up at a meeting and said why don't we just take it to share sholders? why don't we be as transparent as possible? we're not sure what we want to

do here, we don't think in any way our shareholders would want us to pay $3 million to mr. harrison to step into this role. but who knows, maybe they do. so let's ask them and let them decide. that's what they're doing. they're going to have a special meeting for shareholders to consider the pay package and everything else out there. and say whether or not they want mr. harrison to join under these circumstances or not. now, could there be some sort of settlement where mantle ridge backs away from some of the asks they have and mr. harrison does? it's possible. could it get rejected by shareholders and then be put back on the table to mr. harrison in a different way saying we're not going to pay it but you can still join us, possible. this is unique. certainly something i have not seen in a very long time where the company under attack by the activist chooses on its own to go to a special meeting with shareholders and simply ask them. by the way, you got to put the proxy out. it's not like it happens tomorrow, but let's call it mid may, guys, that we'll have this special meeting if they get to

it on this pretty lucrative pay package that mr. harrison wanted. not to mention, again jim, his health still remains something of a question. he was confined to his home in florida for some time. given concerns about pneumonia. that's a while back. but they were willing to go there. but just not all the way there, jim, when it came to compensation. >> david, what i find kind of interesting is there was a guy who ran the railroad, he still does, his name's michael ward. it looks like everybody was willing to throw him under the train very easily. his board, the challengers. yes, his operating ratio was sub 70 and i know harrison's had been better being able to get operation ratio down, but csx is uniquely challenged by a lot of coal. do you not find it interesting that michael ward comes on our network every single quarter that business was every bit as good as norfolk southern, union pacific, all fine railroads, that michael ward didn't play a

role, what's going on here? >> yeah. well, the board sort of took over and has moved in a direction certainly that this activist wanted. they just weren't willing to go. and you can imagine, i mean, what would i assess and all these proxy advisory firms did that and/or how will they weigh in is an interesting question. but mr. ward's voice is seemingly missing to a certain extent, jim, from a lot of this. of course he's been running the railroad for a very long time. as we pointed out earlier had already been through his share of activism way back with the children's fund quite a few years ago. carl. >> it's just amazing to me -- >> guys -- >> -- he's run the railroad. he's gone. see you later. here, take your hat. don't let the door hit you on the way out. >> dow record high, nasdaq record high. the two-year yield now at the highs for the year. let's get to bob pisani on the floor. bob. >> good morning, carl. good morning everybody. markets moved on the cpi and retail sales data. initially stocks down but

changed around a bit. certainly bond yields moved up. reflation trade very much in evidence today. let's take a look at the sectors. banks of course with bond yields moouing up, banks which have been the underpinning of the entire rally so far, one of the few cyclicals on the upside. airlines are flying on the buffett news. tech's up a bit and interest rate sensitive utilities would be down on the higher yields. the big debate here is with all the political turmoil in washington right now, will the trump agenda come into question here. ed hyman and others pointed out there's a lot more going on besides u.s. and trump. opec production cut is successful and central banks are still accommodative. banks have been the underpinning of the rally, they still are. year-to-date double digit increases in many of the major names but as i pointed out yesterday the global market has expanded. global banks rhave been huge. no matter where you look double digit gains from many of the global banks and global markets

have outperformed the u.s. markets overall. s&p is up 4%, but latin america, canada, japan, all doing well in general. meanwhile, the retail ceos are meeting with mr. trump today. the important thing is the trump meeting with the ceos there gives him a chance to address the tax cuts and the b.a.t., the border adjustment tax directly. remember last week he met with airline ceos on thursday in the middle of a snowstorm here in new york that's when he made the comment of phenomenal tax plan coming. this could be market moving. i asked people yesterday and this morning about tax cuts, a lot of people feel the coming congressional address he's giving to congress that is on february 28th and there's potential where you could see details leaking out ahead of the address about the tax plan. that seems to be the most logical place to have the next news on that issue. dow up by 24 points right now, carl, record territory once again. back to you. >> about 15 minutes away from yellen, too. bob, thanks a lot.

let's get to rick santelli check in on the bond pits in chicago. good morning again, rick. >> good morning. so whether you're looking at the dollar index, treasury rates, pretty much all rates, equity markets, inflation, it's zoom, zoom, zoom, zoom. look at an intraday of tens. you could clearly see what happened at 8:30 when we had the data hit, especially the cpi hotter than expected. if you look at a two-day, you know, yesterday we had ppi, but that wasn't that spike. that spike was at 10:00 eastern on janet yellen. let's look at november 1 st for all the charts. ten minus bunds. i told you this chart tells you the direction of the curve. it started moving up and so did tens you see on the next chart and the dollar index. tens are now up five sessions in a row. as david pointed out the 11th session up for the dollar index. one week of the dollar index clearly shows you it is ramping up. to put it in perspective, we've gone from just under 100 to 101.5 in 11 days, basically a

penny and a half in 11 days. one other thing to point out you want to pay attention to the steepness of the curve as well. we are reversing on some of the flatness. carl, jim, david, back to you. >> rick, thank you very much. when we come back, we'll talk all things president trump with ambassador john negroponte. s&p 2336, apple another all-time high. we're back after a break.

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proctor & gamble helping the dow put together 31 points at the open. of course we're not far away from yellen on the house side this time. netanyahu at noon at the white house. retail ceos meeting with capitol hill leaders. we'll get to all of that after a short break.

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so we can share our amazing trading knowledge. that's a great idea, but why don't you just go to thinkorswim's chat rooms where you can share strategies, ideas, even actual trades with market professionals and thousands of other traders? i know. your brain told my brain before you told my face. mmm, blueberry? tap into the knowledge of other traders on thinkorswim. only at td ameritrade. keeping our eye on the white house this morning where we are expecting the arrival of some retail ceos. i think we're not far away from seeing art peck of gap make his way to the white house meeting with the president along with some congressional leaders later on today. jim cramer, some of the headlines this morning i like this one, proposed border adjustment tax has divided corporate america. not to put too fine a point on it. >> well, i think that corporate

america that trump cares about the most, the people who voted for him, and i think they are the people that get hurt by what i regard as being a regressive tax. i think that's the point they're going to make, which is that this is the most regressive. remember, they don't have the dollar tree, dollar general guys but talk about stuff that is not made here and yet is bought increasingly by here. we also talk about walmart. i know david's going to chime in and say, yeah, but you need this tax. i think they're going to have to find another way. i think these people are going to make a very, very strong statement that this hurts the people who voted for you, president trump. >> see what those senators from walmart choose to do if and when they get a chance to vote on any tax reform. >> they're from arkansas, david? what do you mean by that? >> yeah, we'll see. it's going to be so fascinating to see how it all plays out. >> meanwhile, markets looking past it. dow's up 25. we'll get stop trading in a moment.

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time for cramer and stop trading. >> well, you know, for a moment there i was going to mention aig down 8.7%, only financial in a terrible quarter, but i have to focus on something david knows i care tremendously about. ever since i had the ceo of

groupon on which is about 50% ago, i have been focused on this company they reported last night $891 million in cash, david, we got a 2 billion and change company, 2.4 billion, this company is operating cash flow positive in a very fine way. you know what, groupon is back, bigger than ever. it is not too early to buy groupon. >> oh, my god, i never thought i'd hear that. i was saying it's not too early any longer, huh? >> it's a monster. it's a beast. groupon's a beast. >> groupon is a beast. up 19%. four bucks. all right. all right. >> jim, what's on mad tonight? >> okay, we have adobe, company's on fire, probably the fastest growing of the large cap tech companies i follow other than maybe let's say facebook. and then i have ge, the tech part of ge, which i think is doing remarkable things. we'll talk about predix with jeff immelt talk about what the company is doing to write a lot of code. >> jim, we will see you tonight

and tomorrow as your week out west at one market continues. thanks so much, jim. when we come back, the president getting ready for his meeting with retail ceos. we're going to cover all the bases for you. dow in a pretty moderate range up 35. s&p pretty flat. back in a minute. whetheit's coecting one of the world's most innovative campes. or bnging wifi to 65,000 fans. businesses count on communication, and communication counts on centylink.

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busy day in washington. the president meeting with retail ceos at the white house. later on israeli prime minister benjamin netanyahu. day two of testimony on capitol hill for fed chair janet yellen. good wednesday morning. welcome back to "squawk on the street." i'm carl quintanilla with sara eisen and david faber at post nine of the stock exchange. dollar near a five-week high on some of this economic data. >> yeah, it has been a big morning. so far so good. let's get straight to rick santelli who has business inventories, rick, how do those look? >> yeah. last litany of data points december, this is an old read, last quarter on business inventories up 0.4, exactly as expected following a 0.1 increase from 0.7 to 0.8. next, february read on nationalization of home builders price index and for that we go

east to diana olick. diana. >> rick, it's actually sentiment index and the sentiment was down two points to 65 on the national association of home builders monthly survey. that's the second month of declines after a sharp spike in builder confidence following the presidential election. anything above 50 is considered positive, so still well in that range. the survey stood at 58 one year ago. nahb said builders are optimistic but settling back to a, quote, normal range. of the index's three components current sales conditions fell one point to 71, sales expectations in the next six months three points to 73, buyer traffic down five to 46. carl. >> diana, thank you very much. as we said the president meeting with some ceos of large retailers. eamon javers is there. eamon? >> reporter: are you expecting ivanka trump to be in the meeting, sir? i'm sorry, carl, as you can see the ceos are walking in here at

the west entrance of the white house. just talked to the ceo of target who said he expected a productive meeting. that's all they had to say. we saw the ceo of gap and couple other major retailers walking in here this morning. but they were asked a number of questions about cyber security, about whether ivanka trump is going to be at this meeting as well. no indication from the white house that she will be. i'm told that the expectation is she will not be. but wait and see. we also still don't have a full list of the ceos who are going to be attending this meeting here at the white house today, carl. so a very busy morning this morning. and obviously you've got a white house here where the president has been tweeting about particular retailers, his criticism of them, the nordstrom's issue with his daughter ivanka, all of that swirling around this meeting. we'll try to get a readout once they come out of here about what exactly happened today, carl. back to you. >> eamon, there's going to be a lot to watch as we said earlier not just at the white house but also on capitol hill. those ceos have a very busy day, as you do, demonstrating day after day, eamon, thanks a lot for that.

the president meeting with the retailers, matthew shay is the ceo of national retailers. >> good morning, carl, thanks for having me. >> what is the infrastructure of this gathering and the confrontation some say with the president in congress? >> well, i think it's a conversation. and it's a conversation that's been ongoing for quite a while. there's a big broad very diverse coalition that includes the nrf and a number of other trade groups, industry groups, companies from a variety of industries, all of whom have been expressing concern consistently really since last summer since the tax plan got sort of floated initially about the border adjustment tax and what that would mean for the economy, what that would mean for consumers, for american taxpayers and most importantly for jobs. and this is really continuation of that conversation. so i think the characterization that eamon just referenced about this being a productive meeting

and a series of productive meetings is a very accurate one. we want to be engaged in the conversation and try to shape a solution that works for everyone. >> matt, is there a proposal from the retailers that would have the same impact? in other words, people say that you have to have this border adjustment tax $1.2 trillion in tax savings that's what's going to fund the tax cuts, corporate tax reform can't get done without it. is there something else the retailers are proposing, an alternative? >> sara, i think that's a little bit of a red herring there. i mean, there have been multiple proposals for tax reform over the years. and the most recent one of those was proposed by former ways and means commit ttee chairman dave camp. it didn't include anything nearly as radical or farfetched as this. this is a really new scheme that's never been considered before. and so there are other ways to both lower the rate, simplify the code and broaden the base. and we think really what needs to happen here is that, you

know, while this is hard work, you know, we should really go back to the drawing board, back to the table, sit down and roll up our sleeves and find another way that doesn't, you know, propose a new law that's going to pick winners and losers among industries and is going to add a new frankly a new national sales tax on the price of everything that consumers buy. not just retail goods, not just the hats and the shoes and the clothes that you wear, but the gasoline you put in your car, the car itself, your electronics, the food you put at the grocery store on your table, all of those prices are going to get increased. and i don't think that as jim cramer said a couple minutes ago, i don't think that's what the voting population voted for last november was a big new national sales tax increase. i think that's why this is, you know, a design flaw in the proposal. it shouldn't kill tax reform. we should be clear on that. there are other ways to get tax reform done. we support other ways to get tax reform done. we just don't think this is the way. >> all right. sara asked you, you didn't answer, what are some of those

other ways? i mean, the fact is, mr. shay, that the architects of the house ways and means plan, kevin brady and speaker ryan seem committed to the idea of a border adjustment tax. to the point sara made, it seems to be the key revenue producing item right now. so is there something you guys are going to be able to propose? is it based on the camp bill you referenced from some time back that went absolutely nowhere? or is it something we don't know about that will do the same thing in terms of a mechanism to raise revenue to make sure this is revenue neutral? >> well, david, we all know that tax reform is not easy. if it were, it would have been done a long time ago. speaker ryan was on earlier this morning saying last time we had tax reform done in a meaningful way was the year he got his driver's license. so it's been a long time because it is hard. but we don't think this proposal because it picks winners and losers so dramatically and it's going to create serious job losses in the retail industry, it's going to raise prices on

consumers, it's not the only way. so there are other ways and the camp plan certainly identified some of those. you've heard members of the senate who've expressed concern about this proposal are talking about that. i don't think anyone is ready to negotiate or discuss any of those things right now. but i think there are other ways to get it done. we've certainly seen those proposals before. and we're hopeful that as a result of this conversation and other dialogues that go on that we'll get back to sort of a more measured approach to this and something not quite as dramatic and radical as the border adjustment plan. >> you'd rather have nothing then than this, is that a fair point? >> no, absolutely not. i think that's a mischaracterization of everything we stand for. we've been proposing tax reform for many years. remember, retailers pay the highest rates in the country. we don't benefit from any of the loopholes, the tax expenditures, deductions, credits that other industries benefit from who frankly are already paying pretty low rates by world standards. so we'd be satisfied if we could

get something that was competitive with the oecd countries. there are other industries that want something that's approximating zero. we don't think that's fair. we don't think that makes sense. and we're sure it's not going to be good for the american consumer and for taxpayers. we're really going to be the ones that foot the bill for the tax cuts that these other industries are going to receive. so there are other ways to do it. wed need to explore those other ways and i think that requires everyone to sit down together at the table and have that conversation. >> hey, matt, eamon referenced the nordstrom issue. do any of the ceos who do business with ivanka trump or any members of the trump family, will they seek assurances that they won't be called out if they recalibrate their purchasing decisions? >> carl, i can't speak for the ceos, either those that are here in town today or others that you mentioned that have gone through this experience. i think what we know is that we've got a new kind of chief executive in the white house, very passionate.

willing to communicate, directly in ways we haven't seen previous occupants at the white house make, he's obviously very loyal, a family man, but he's a businessman, he's a retailer. we're optimistic that overall the policies he's going to propose and the policies we're going to pursue on capitol hill are going to be good for the economy. but we're living in a new world. and i think we're going to have to see how this unfolds as we go forward. everyone recognizing that they're trying to do business in a way that matches the needs and the desires of their consumers. and, you know, it's not personal. it's business. i think that's something that the president probably understands very, very well. sometimes you have to make business decisions. >> but do the business owners understand it? just to underscore carl's point, under armour is also facing a similar problem right now. had to take out a page in a local baltimore paper to defend its comments that kevin plank made here on cnbc just saying that it's good to have a pro growth, pro business president,

now they're facing backlash from some of their athletes and potentially some of their customers. so have ceos, retail in particular which needs a consumer to be onboard figured out how to engage with this president and this white house and this new agenda? >> yeah, sara, it's clear that retailers are on the front lines in many ways because we interact with consumers every day, millions of transactions a day in ways that maybe other industries don't. and so we do have to be thoughtful about that. i think all of us can agree on some things. i mean, we want an economy that's growing, all americans agree with that. we want to create more better higher paying jobs. we all agree with that. we want a level playing field for businesses. and we'd like to see open markets for the competition of ideas as well as for goods and services. so we've got a president that obviously is the product of a very contentious election. and we've got a polarized electorate. and that means we've got people with strong feelings on both sides of the issue. and as retailers we're in the

middle of that because we serve consumers, you know, republicans, democrats, liberals, socialist, communist, green parties, tea parties, we don't care, we want to sell to everybody. that's our job. we don't want to offend anyone. but we've got to make decisions that meet consumers where they need. and you all know and see and talk about every day the disruption, the volatility, the pace of change in retail. retailers have to get out in front of that change and meet their consumers where they want to be met. and you know that makes this an interesting time and creates an enormous amount of opportunities for new businesses to evolve and grow and serve those consumers. >> one last question, matt. back to border adjustment before we let you go. what about members who are net exporters? are they -- obviously, i mean, are they not going to this meeting? are they contesting the view that you're expressing here with us today? >> well, i think what we've seen from among the members of our coalition is that on balance the view is that this is long term not good for the economy.

and short term would be very bad for consumers because it's going to raise taxes and going to have increased prices there. so as yet we haven't had any conversations with members of our coalition about folks that have a different viewpoint. the retail industry's very unified on this. you've seen the other industries, auto industry, electronics industry and the petroleum refiners also i think very unified on this. so i think at the moment our folk who is are in town to express their concern about this and it's been characterized for many companies as an extistentil threat for the company in addition to being a major increase several hundred dollars tax increase on the consumers they serve, it's a big number. i'll go back to what jim cramer said earlier, the politics of this are not particularly good. >> matt, we appreciate you taking some time to talk to us about it on an important day for your industry. good to see you again. >> thank you. thanks, carl. >> matt shay of the nrf. congressman brady by the way

will be on "closing bell" today after the meeting with retail leaders at 4:00 earvstern. as we've been talking, janet yellen testifying for the second time today before the house financials committee. she'll be giving the same testimony but also taking questions. we'll monitor that for you. joining us at post nine and this to discuss the markets ubs director of floor operations art cashin, welcome. >> thank you. >> we've had some really solid economic data this morning, inflation, retail sales, is that why this market continues to melt up despite what is a cacophony coming out of washington and this administration? >> yeah, i think the politics to a small degree is a digression. it gives the partisans a chance to take a whack at one another. her testimony under federal law has to be word for word just what it was in the written presentation yesterday. so any surprises will come when the q & a starts. the house is not thought of as a

place for exceptionally sharp edged q & a, so we'll wait and see whether that is. the market's at an interesting point here. there is theoretical resistance, s&p 2337 to 2341. so they're engaged in that battle now. if they punch through there, they could possibly get a tailwind and, you know, kind of another minor breakout. another thing that the viewers will have to look to is at 10:30 we'll get the d.o.e. crude inventory numbers. api data was little larger than expected last night, but hasn't put a big dent in oil. if wti were to trade down sharply, that would affect the market also. so watch the resistance. watch the oil inventories and watch the q & a. >> and we'll take the q & a live as soon as it happens. especially after those inflation numbers which came in a little hot. we're finally starting to see inflation and therefore the

question for the fed becomes are they going to be behind the curve when it comes to raising rates and fighting. >> well, i'm sure she'll be asked that. on the other hand as they always say in economics, the wage data was not particularly strong. and so that's a bit of a trade-off there. >> when you look at triple q volume, equity put call ratios, things until recently the russell's failure to confirm and join the all-time high party, are those worrisome signs to you or not? >> they're not as worrisome as they might be. for now they are concerns. for example, yesterday all three key indices went to brand new record highs yet advances and declines were almost high score. and the volume was nothing to write home to mother about, so you look at those things and say how much of this is an illusion and how much of it's real. it is a very -- as of now, this part of the rally has been very narrow. you've got goldman sachs obviously a key factor.

apple, everybody's back at the apple party. so it's not a very broad rally as it had been couple weeks ago. so when it begins to narrow, you do worry about that. >> it's funny you look at the papers and of course we know what's on the front page of all the papers, it's about drama and turmoil in the white house and people ask why is the market looking past it. the bull argument is that the secular case of improving earnings and even to some degree rate hikes are separate from whoever is at the top of the white house. is that fair? >> it is to a degree, but, you know, people say, well, it's not all trump. you're beginning to see retail sales moving up. some of that also is in effect. if you ask around, i think you had maybe it was on "squawk box" they had a gentleman in, manager from merrill lynch talking about how their clients were responding. and he said that there was not yet universal but growing belief

among the clients that things are going to begin to work much better for business and much better for the economy. so people therefore are ready to buy more and do more things. so that translated into some of the numbers we're see thag are rather helpful. >> for now the bear argument that investors that this makes it less likely we'll see the pro growth reform with all this distraction and noise from flynn's resignation and more. it's not filtering through. for now, art, thank you. >> my pleasure. >> art cashin of ubs. >> when we come back, israeli prime minister netanyahu getting ready to meet with president trump at the white house. we're going to discuss what is at stake with former deputy seg te secretary of state. we've got a lot more including yellen's second day on the hill. we'll monitor that and take you there live when necessary.

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president trump will be meeting with israeli prime minister netanyahu later today in hopes to strengthen their relationship amid rising tensions in the middle east. let's bring in ambassador john negroponte, vice chairman at mclarty. ambassador, good to see you. thanks for joining us. >> good morning. >> so, president trump campaigned on a reset of relations many of them including this one, what do you conclude from today's meeting with netanyahu? >> tii think it's an important

strong affirmation the united states has with israel. israel is the lynch pin if you will of our policies towards the middle east, and i think it's important to have those in good order. i think president obama left a bit of a bad taste by vetoing a resolution -- not vetoing rather a resolution at the u.n. security council towards the end of his term which condemned israel. i think that was a mistake. when i was ambassador to the united nations, we always avoided criticizing israel publicly. i think the best way to work with israel when one has some kind of action of theirs to criticize is to do it through quiet diplomacy. so i hope -- my main hope is in addition to reaffirming the relationship that mr. trump and mr. netanyahu establish a good personal relationship. i hope the chemistry is going to be good between them. i don't expect -- >> i was just going to bring up iran, mr. ambassador. >> yeah, sure. >> if i may.

that's an important one for global investors and businesses, do you think there's going to be news made there? and i wonder what the white house position is going to be with now general flynn out. he was one of the big iran hawks. >> right. i think we'll have to wait and see on that. i notice that general mattis at the pentagon and even mr. tillerson have indicated that we're going to proceed cautiously with regard to possibly voiding that agreement that we have with iran. if we do do that we're going to have to have something to replace it with. so i have a feeling the president's going to move cautiously. but i'm sure that we're going to insist on rigorous enforcement of the agreement. and i'm sure the two leaders can agree on that. the one other thing i wanted to say earlier was that i don't expect any particular progress on the middle east peace process, that is between israel and the palestinians. although there may be some general language that the two

leaders use in regard to that question. >> mr. ambassador, you were director of national intelligence under george w. bush from '05 to '07. curious to get your reaction to the resignation of national security advisor flynn and this continuing investigation involving the contacts between then-candidate trump and his staff, i should say, and russian -- potentially russian intelligence? >> yeah, i don't think i can add much to what's been said publicly. i think we're in an investigative faze here and we've got to see where all of that leads. there have been a lot of leading questions being asked this morning by the media, but i think people can only go so far in their answers and we're going to have to see how this thing turns out. certainly the investigation should be undertaken. meanwhile, i think it's important for the sake of the govern na governance of national security

that the president name a new national security advisor as soon as possible. i don't think we can afford to have a void in that position for a prolonged period of time. >> well, i guess one question that investors have on that front is how much of a distraction is all of this? a few weeks in what looks like a very ambitious agenda from the white house and from congress on key issues that are meant to support our economy. how much time is going to be taken away from that on this problem? >> i think that's a great question. i think interestingly we are moving forward on some fronts. general mattis is going to a nato meeting, mr. tillerson is going to a meeting of the group of 20 foreign ministers. so you can say in a way that the diplomatic train has left the station. and so there is a fair amount of diplomatic business and national security business being conducted by the country. but it's clearly a distraction inside of the white house. ronald reagan had six different national security advisors in an

eight-year period. and in the early days of the reagan administration there was also a fair amount of turmoil. it behooves the white house, the president to try to calm this situation down as quickly as possible. and as far as reacting to the investigation, i think he just needs to let that go forth and let the chips fall where they may because there's nothing he can do about the fact that the congress and/or the fbi are conducting these investigations. >> we'll leave it there, mr. ambassador, nice to see you. >> thank you very much. >> former deputy secretary of state ambassador negroponte. >> keeping an eye on house financial services as well as fed chair yellen is about to begin speaking. steve liesman's going to watch that as he helped us on the senate side yesterday. good morning, steve. >> hey, carl. you know, those hotter inflation numbers this morning and better retail sales are combining with yellen's comments essentially to give the market a -- price in a higher chance of that rate hike in march. if you take a look right now

with the fed funds probabilities, what you see is we're up near 27%. and we've been as low as 7% or 8% when it comes to the probabilities for march. now it's up near 27. in fact, when i look down the road at december, i see them beginning the process of possibly pricing in the third rate hike. then you look at the data that we had. there's the probabilities right there. right now 17.7 but actually it's 22 down from 26 a little bit ago. but that's gone along with a higher two-year note as well as rick has been telling us all morning. take a look at the data we have. headline cpi 0.6, 0.3 both hotter than expected. that's negative upside there. and retail sales stronger than expected as well. 0.4 and 30.8. headline numbers 2.5 year over year on the headline, 2.3 on the quarter. so today look for what i think you might call a possibly more contentious hearing today. on the one hand you have the house republicans are more critical of the federal reserve, they're more critical of dodd/frank than the senators. back to you guys.

>> all right. let's listen in. fed chair janet yellen about to take some questions. thanks, steve. >> section one of paragraph c says foster economic growth and vibrant financial markets through more rigorous regulatory impact analysis. you were quoted yesterday in your senate testimony saying that you agree with these core principles, were you quoted accurately? >> yes, i agree with the core principles that the president enunciated. >> well, as you probably know to date dodd/frank has promulgated at least 22,000 pages of regulations as part of its 400 rules. i think only roughly three quarters of which have been finalized, and certainly the weight and the volume, the complexity and the cost is one of the headwinds that we're facing now. i know that as an independent agency you're not necessarily subject to the jurisdiction of the executive order, but we have had testimony in this committee

for years about the challenges of the volcker rule and its dell tor yous impact on market ill liquidity. on december 22nd of last year, just weeks ago, the federal reserve released a staff paper, an abstract of which says, quote, we document that the ill liquidity of stress bonds has increased after the volcker rule, since volcker effected dealers have been the main liquidity providers, the net effect is that bonds are less liquid during times of stress due to the volcker rule. goes onto say that the volcker rule may have serious consequences for corporate bonds market functioning in stress times. do you agree with the staff paper of the federal reserve? >> so this was the work of a particular staff member and not a finding of the board as a whole. >> no, i understand. i'm just trying to figure out do you agree or disagree with these

conclusions? >> i think the evidence on this matter is conflicting. and i think this paper did find evidence of an impact in one particular area. you know, this is an important question. it's one we continue to look at. >> you've been looking at it for years though, haven't you, madame chair? haven't you been looking at it for years now? >> yes. >> still no conclusion? >> it's difficult to come to a conclusion because by most metrics liquidity in corporate bond markets still remains healthy. >> so after a couple years -- not drawing a conclusion yet, then i guess i assume that there is no particular action the board intends to take based upon the evidence of this paper, is that correct? >> oh, there's no action that we intend to take based on that. >> madame chair, in the january 25th edition of "the wall street journal," ms. nelly lang, i

assume you're acquainted with, stepped down from your financial stability division. in this article she said that, quote, congress should provide clarity for regulators on how to balance the safety of the financial system with economic growth. please know that congress does not believe that you have found the proper balance and that the volcker rule as an incredibly important channel to fund jobs in america. again, i don't know how much stronger the evidence has to be for the fed to take action, but please know the proper balance has not been struck. on january 12th of 2017, the financial stability board released its policy recommendations to address structural vulnerabilities from asset management activities. governor tarullo was quoted as saying the si -- funds for future stress events. many cannot see association

whatsoever with the terms systemic risk and asset management. so my first question is, are you aware of anybody in the administration directing either you or governor tarullo to negotiate with the financial stability board on asset management regulation? >> it's done in negotiation with the financial stability board. anything -- any regulation that is put into effect in the united states has to go through -- >> i understand that -- >> the rule making process -- >> but the question was has there been any contact with the new administration with the fed to carry on negotiations with respect to the asset management question with the financial stability board? >> well, we participate regularly as part of our established responsibilities in discussions congress -- >> as you know governor tarullo was never confirmed by the senate. are you aware of any specific statutory authority he has to negotiate on behalf of the united states on the matter of

asset management and systemic risk? >> i don't think it's a negotiation. the s.e.c. is involved, treasury takes part in those discussions. there are a number of -- >> do you believe that the new administration should have the ability to nominate a vice chair for supervision skpr, and if confirmed they would be the ones officially tasked with these duties? >> we look forward to a nomination to the position of vice chair for supervision. >> don't we all, madame chair. don't we all. my time is expired. i now recognize ranking member for five minutes. >> thank you very much. madame chair, we frequently heard from members on the opposite side of the aisle that dodd/frank has had a significant adverse impact on our economy. to fact check some of this gloomy rhetoric, i ask that you provide some brief responses to

some of the following questions. since passage of the wall street reform law, has business lending by commercial banks expanded or contracted? >> expanded. >> roughly how many private sector jobs have been added to our economy? >> roughly 16 million since the trough in employment in early 2010. >> have wages increased or decreased in the past year? >> they have increased by most measures. >> has the trend in aggregate household net worth been positive or negative? >> positive. >> has the trend in federal budget deficits risen or fallen over the past few years? >> deficits have declined since the financial crisis and its aftermath. >> after the economy hit bottom, had the number of foreclosures

increased or decreased in recent years? >> they're, i believe, decreasing now. >> what, in your view, are the key factors and policys that have contributed to these positive trends in the economy? >> the economy is recovering from a very severe crisis. we've put in place stronger financial regulation that has forced our banks to build up their capital buffers to deal with problem loans and to strengthen themselves to the point where they have been able to support economic growth and recovery in our economy. the u.s. economy has recovered more quickly, for example, than the euro area or europe, eu economies have in the aftermath

of the crisis. and the federal reserve has put in place highly accommodative monetary policies meant to spur spending in the economy and restore low unemployment or to achieve the goal of maximum employment and price stability that have been assigned to us by congress as i indicated in my remarks. i believe we're coming very close to achieving those objectives and that monetary policy still remains accommodative. >> thank you, chair yellen. as the nation's leading economist, can you discuss how unraveling the fabric of our social safety net such as through cuts to food assistance programs for families in poverty, eliminating access to affordable health care, eliminating the earned income tax credit and the child tax credit, cutting unemployment insurance benefits and cutting

funding for housing assistance programs could impact the short-term and long term health of our workforce and our economy, could these types of cuts do permanent damage to our economy's ability to fulfill its potential? how would cuts to these programs impact inequality and the chance that families have to escape poverty? >> well, i don't want to give detailed guidance to congress on these particular programs, but i would say that the trend of rising inequality and the fact that although low income households have done well over the last couple of years as the economy has improved relative to before the crisis and even looking back a number of decades that clearly faced very severe problems that have left many american households struggling.

and these kinds of programs are helpful, i think, in dealing with such distress. >> could you just give me a few more minutes on the earned income tax credit? do you think that is important? >> it's -- i think it does serve to support the incomes of many lower income families. >> and what about the child tax credit in particular? >> that works in the same direction. >> so as you said you don't wish to tell congress what to do, but these programs are important. and would you include in that cutting the unemployment insurance benefits as being beneficial to helping lift families out of poverty? >> well, i think unemployment insurance benefits are important for families that face real distress in the labor market and they also serve as automatic stabilizers that support

spending in a downturn and make our economy less subject to the fluctuations of the business cycle. >> thank you very much. i yield back. >> time of the gentle lady has expired. the chair now recognizes gentleman from kentucky, mr. barr -- >> that is maxine waters questioning the fed chair who says some things that you probably already heard before, namely that the -- she believes the fed is very close to their policy objectives but monetary policy is still accommodative. senior economics reporter steve liesman watching this with us. steve. >> so here's what i'm interested in. yesterday maxine waters just had an interesting line of questioning that mirrored something in the senate yesterday making the case through data and statistics that dodd/frank has not had a big effect. i know the republicans think otherwise, but they have not taken the opportunity, not yesterday in the senate and i don't know if they're going to do it today to sort of rebut that claim, the idea that dodd/frank has not had a profound effect either on

banking or on the economy. you saw that rapid fire from maxine waters and yellen playing right along with it because i'm pretty sure that's what she thinks is that ultimately it creates a better less risky banking system and hasn't had a big effect on the economy. i'll be listening today to see if the house republicans feel they need to, by the way, they don't really need yellen to do this for her because they're going to do what they're going to do anyway, but it will be interesting for public debate if republicans make the case of why dodd/frank needs to be reformed as much as the president has said it does need to be. he's called for drastic cuts in dodd/frank, carl. >> all right, steve, we'll go back to that in a bitd. we'll keep our eye on the hill and white house as well where retail ceos are meeting with the president. we'll monitor that and bring you any headlines. dow's up 47. several new 52-week highs today, nearly half of which are financials. we're back after a break. hery oh. wh'sthe g-d hoe? m azsted tryg fifire out thicor

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more "squawk on the street" coming up.

watching the white house this morning. those retail ceos meeting with the president before meeting with some congressional leaders later on today. let's talk to courtney reagan with more about this. we just talked to the nrf chief who sort of walked us through their thinking today, court. >> i would love to be a fly on that wall, carl. the gop border adjustment piece of tax reform is a scary idea for a number of retail ceos and i expect they're doing all they can to make that very clear as they meet with president trump and then with lawmakers later this afternoon in washington. so the ceos of jc penney, target, gap inc., best buy, jo-ann fabric are in this camp thinking border adjustment tax will erode their profitability forcing them to raise prices for consumers potentially up to 20%. now, some economists do say the dollar will strengthen enough to offset the tax, but more than 120 companies for the americans for affordable products coalition are not buying that economic theory.

not all american companies feel this way certainly, especially those that export more, like boeing and merck which are part of the american made coalition. but when it comes to apparel and shoes, 95% or more of what consumers buy here in the u.s. are imports. so a border adjustment tax feels one-sided to a number of u.s. retailers. now, many are starting to think that the reality of a border adjustment tax passing is becoming less likely. but if it doesn't pass, a lower corporate tax rate might not either. and retailers do want that. remember, president trump is big on u.s. manufacturing, but the border adjustment tax comes as part of the gop plan for tax reform as a tax revenue razor to offset a lower corporate tax rate. more are saying you can't have one without the other. so it would be really interesting to know what's going on in there today. hopefully we'll get more when the meeting is over or once they've met with representative brady. >> and you know, courtney, this president is a deal maker.

>> yes. >> "art of the deal." i'm just trying to think of what the retailers could offer in exchange. this is a group that employs the most americans in terms of private sector employment, consumption is the biggest driver of our economy, they're mostly domestic. things that line up with what president trump wants to do when it comes to growing jobs in this economy. >> exactly. so those are points i would imagine they will hammer home as well as saying if we do this we'll be forced to raise prices on consumers. one idea i've heard floated, sara, is perhaps exclude items under a certain price. so under $100 or under $50. and if that's the case, that may help some retailers. it may not be enough, but that's just one idea that i've heard floated as a possibility. i'm not sure if that's going to be brought up in the room, but there's something at least. >> yeah. remember, it's important to remember it would be phased in over time, it wouldn't just happen in one fell swoop. it's unclear how many years it would be, but the whole idea is to move the supply chain for the

retailers back to the united states to help create jobs, courtney. i guess that's part of a central part of it. it might be a lot to ask. >> we know that's something president trump is big on. but republicans say they want to cut corporate tax rates, this is the plan that came out in june but in order to do it they have to raise revenue somewhere else. so they actually probably don't want all of the manufacturing to come back into the u.s. because then they're not paying the border adjustment tax which then helps to offset that lower rate. the problem is the capacity just quite frankly doesn't exist in the united states to produce things like apparel and shoes. we don't have the factories, the textile mills or the skilled labor to do that even if that's what some of these american companies would want. and if we could get there, it's going to cost us a lot of money. remember, we're in this period of deflationary pricing for apparel. the american consumers don't want to pay what we're asking now. so i can't imagine what's going to happen if we see prices increase as a result of the border adjustment tax or to help

offset what it would cost to produce those goods here in the united states. >> all right. courtney, thank you. courtney reagan back at hq. let's send it over to jon fortt give us a look at what's coming up on "squawk alley." >> good morning, david, we're going to track fed chair jeanet yellen's testimony. and taking a look at apple. warren buffett taking a look snapping up several shares the stock tradesing above $135 a share, new record highs. and then finally of course the israeli prime minister meeting with president trump today. what are the impacts on the markets and global trade? all that and more coming up on "squawk alley." or kng ael's gstcoected.wifi s

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president trump meeting with some retail ceos at the white house. we are now getting headlines, one of them out of reuters. the tack reform, he says, is one of the best opportunities to influence the economy. you'll hear the statement in a few moments, but you'll hear him say there's a lot of confidence in the economy. that's being reflected in the stock market and business, it references the jobs numbers, says his administration is very focused on issues like moving jobs back to the united states,

regulation cutting big league, he will say. as he says, we want jobs back in the country and will lower rates for everybody. we'll wait for the playback on this. no telling how sigh that will happen. in the meantime, stocks up to session highs, largely on the back of financials, s&p managing to put together three points. >> that puts us into triple record territory, some of the reasons is what we here on cnbc for why the market continue toss climb what's been a wall of worry. the deregulation they're is one that's starting to play out. but on dereg lakes for financials, we've all right started to see executive orders on that front. we'll wait to see more policy like that. the big question is going to be, can the tax reform get done something that matt shea says

they want to happen, just don't pay for it with a border tax statement. a bit of news to change subject to yahoo and verizon. of course our viewers know there's been an ongoing negotiation between verizon andia hoo, verizon, of course having agreed to pay $4.8 billion for yahoo's core business. ia hoo's stock is up, bloomberg ran a quick headline we've been waiting for the fruition of negotiations having to do with what would occur to the deal with regards to the breaches that occurred, large breaches, of course. it does appear, according to people familiar with the situation that the two sides are very close to announcing a revised deal that will cut the price by a fairly small amount, again to recollect, 4.8 billion. what i'm hearing is it could be cut by a few hundred million. they would also waive the material adverse change claw and

some risk-sharing liability -- or the risk sharing on the liability that came from that breach, and anything that came as a result of it, but of course all of this would pave the way for verizon to complete its acquisition of yahoo's core business by, let's call it april. again what i'm hearing is a reduction in the price perhaps by a few hundred million dollars, and a risk-sharing on the liability that if one does arise from that breach of data from yahoo users, verizon would then move ahead with the acquisition, closing it in april, leaving behind aia hoo that would rename itself altaba, that its ownership in alibaba,ia he in japan and a good amount of cash. >> was it less than expected, is that why we're see yahoo take off a bit?

>> certainly there had been some concern, or would verizon choose to walk away entirely in some way claiming it was a material adverse change. that never seemed to be a high likelihood, but there was an expectation of perhaps a price cut, and it appears that this may not be a large one. >> additional comments being provided by the pool in the meeting of retail ceos, apparently a shoutout to h & r block which has seen some mild volatility intraday, jokes about the french pronunciation of target. brian cornel, the tack includes gentlewoman cc, greg stanford from tractor supply, autozone jolley from best buy, karen katz at naeemen, gap, and -- >> and from walgreens, right? here is the president.

>> one of my favorite subjects, retail. how are you? >> good morning. >> nice to see you. so it's nice to have we have some great retailers today. we're going to go around the room and all introduce ourselves. some of you i have read about on the covers of business magazines, and it's great to have you here. thank you very much. i'm pleased to host all of you at the white house. the ceos, some of the great ceos of our country and biggest in the retail industry, which is very important to the country. it's supporting millions and millions of jobs, really one of the great job producers, probably, would you say, almost number one? pretty close. >> it is number one. >> there's a lot of confidence in our economy right now, a great confidence level. i've been seeing that in the stock market, seeing that in

businesses seeing that as evidenced also by the jobs report that just came out for january, 227,000 jobs added. my administration remains very focused on the issues that will you have a lot of companies moving back in, bringing the jobs with them. we're cutting regulations big league. we are really cutting them by massive amounts. the auto industry just left. a week ago they were in the same room. and very happy and everyone is. we're cutting regulation in about every industry.

if i do -- we have a major story, okay? because i think just every industry cutting some more than others. you have a big regulatory problem, becauseivity more jobs. as you know it's an estimated $2 trillion, and can costs your businesses a lot of money, tremendous amounts of money. i've taken executive amounts to create a permanent structure. so we knock on the two, but to put in one, you have to nothing out two. that is the least of it. we'll also -- and american bigs grow and thrive.

it's one of the best opportunities to really impact, so it's a massive tack plans coming along really well. not only good and simpler, but talking about big number of savings, talking about middle income, very much for business. the business is for middle income, so you'll ploy a lot of people. we're going to simplify the tax coat. it's too complicated. i think it would be a much, much simpler tax code. in fact h & r block might not be happy with what we're doing. other than that, i think people will love it. we're going to lower the rates

very, very substantially for virtually everybody in every category. i just want to go around the room. i'd like you to introduce yo yourself and tell you a bit more. we have jobs back to the country. we want you to expand your scores, and you'll tell me why you will and why you won't. so go ahead. >> aisle jill salto, with joann fabric and craft stores. >> art peck with the gap. >> very good. >> i'm bill rhodes with auto zone. >> brian cornel at target. >> tar-jay, right? >> for alliance. >> greg sanford with tractor

supply. >> marvin -- with j.c. penney. >> good report on you, good job. >> thank you. so maybe we go around the room. i guess we can let the press go, right? thank you all very much. >> that is the president flanked by retail ceo, a big -- from talking about this border tax plan, which they art will welcome. you heard the president talk about what he called a massive tax plan coming along really well. we'll see in the