thanks for joining us today, everybody. make sure you join us again tomorrow. right now it is time for "squawk on the street." don't forget we have the treasury secretary joining us tomorrow morning. ♪ good wednesday morning. welcome to "squawk on the street." i'm carl quintanilla with jim cramer, david faber back at the new york stock exchange. little softness in the premarket as the dow shoots for its longest consecutive win streak since july. s&p now a full 10% higher than it was on election day. some political jitters in europe, the gap between the u.s. and the german two-year with a record high. oil on the year a seven-week high, inventories are on deck. our roadmap begins with a pause in the record run for the

stocks, the dow with the eight-day win streak but futures point to a lower open as investors await fed minutes. >> plus carl icahn stepping up bristol-myers, the activist takes a stake in that company. is it headed for the auction block? >> and the new face of the s.e.c. promising deregulation and increased competition, fcc chairman ajit pai is going to join us live in just a few moments. first up though, the watch is onto see if there are more historic moves ahead for stocks today. the dow's coming off an eight straight record close after hitting their own all-time highs. the s&p and nasdaq each hosting gains in nine of the past ten sessions. as we said earlier the s&p up more than 10.5% since the election. a lot of discussion about shillers p/e ratio, jim, investors paying more for a dollar of earnings now than they did at any point leading up to the crisis. >> i struggle on that. i was on the walmart call and home depot call, there are some dow stocks and these quarters are so much better than expected

that you may find out you're not paying as much. i think that's key. yesterday was a retail led rally. shocking. shocking that the fourth quarter was so great for these companies. remember, walmart and home depot, these are huge. macy's wasn't even that bad. so when i hear that we're paying too much, i always say are we paying too much for forward earnings or paying too much for current earnings? because if you listen to the commentary of these companies, you would say, you know what, it's a different game. and whatever's been going on is over. and the numbers are going to be much better. go listen to that home depot conference call and you're going to say here's a gigantic company doing much better than expected and not going away. could accelerate. important. >> this debate that we've already had that's going to continue in terms of the market's multiple is is it already taking into account some of the benefits expected from tax reform, either later this year or next year for so many of these companies given their tax rates conceivably will come down and therefore profits will increase, or is it not? is this purely based on your reference to earnings being

better than might have been anticipated? >> look, i think 2018 is in play for that. there's no one i know who believes that something won't come up with this. and a lot of the companies we're seeing do have lower -- would have much lower tax rates. but look, let's just take the case of what we just saw this morning. we have a series of -- another series of retail companies that are just reporting better than expected. we have a lot of -- if you look underneath the tape, the crawl, you will see a lot of semiconductors ticking up. these are not high p/e stocks. so, yes, the drug stocks are high p/e, but what happens? your high p/e, what's the highest drug stock p/e? what's the highest of the major pharmas? bristol-myers. >> that's what i thought you were going to say, that you're going to talk about in a minute. >> yeah. everybody wants to buy bristol-myers. they cut numbers, cut numbers, cut numbers and then we find out a noted activist is in there. so i struggled -- last week, what's the highest valued

consumer products goods company? which one? >> p&g. >> boom! and then we had a great investor in there. every time i say to myself i say wait a second we have housing too expensive, toll brothers -- you need to be a peltz -- it just keeps coming back to if your stock is even expensive, you get someone like icahn. you get someone like peltz. and then by the way, unilever, you think it's overvalued? poll comes out this morning says wait a second. we're not performing. so whatever they may think about what's past, i say i'm going prologue. >> yeah, unilever out this morning with a comment saying they're doing a comprehensive review of their options, seeks to accelerate delivery of value for the benefit of shareholders. >> five days ago they thought they were doing great. now it turns out they weren't doing that great. so, i mean, i struggle with the

overvaluation. and every time i say, listen, you got to leave, what do you sell? well, how about we sell proctor? how about we sell bristol-myers? wrong. >> well, jim mentions bmy, icahn said to overtake, icahn seen as a valuable drug portfolio that could attract a takeover. paper says it's not clear how large a stake icahn has bought. one thing's for sure, he knows how to maneuver this particular situation. >> you got to go over the january 26 conference call, which is one of the most disappointing conference calls of the year where jamie rubin at one point, a great goldman sachs analyst, says what are you guys doing? you've gone from having the best oncology io franchise in the industry with significant lead over competitors to handing that lead over to merck and in my view squandering what was an extraordinary view of the market position. and then i come back and say who's going to buy this $91 billion company given the fact

it's lost its lead? maybe they can come back. but merck has got the momentum. >> it's got the mojo right now. >> mojo, yeah. >> it does. in particular for i believe they also have the nonsmall cell lung cancer treatment that did better -- >> far better. far better. opdivo numbers still too high. still bristol-myers. >> still too high. you raise the point, jim, of course who's going to buy this thing. at $91 billion right now, throw a real premium on there, you're talking about a very, very large acquisition. which could only be done by very small group of companies. >> yes. >> but it's not to say that it couldn't be done. i mean, few days ago we were talking about kraft heinz a smaller company pulling off potentially $143 billion, would be even more had they actually moved ahead and tried to really get something done. unilever was like no way and that was it. but the point is that was going to be $150 billion, let's say. so it's not inconceivable. >> no. >> and i will tell you when i talk to the bankers and lawyers who focus of course on

transactions as their profession, they are expecting that we will see significant consolidation within the pharmaceutical sector, including what may be some block buster deals. don't know if it's going to be bmy. >> right. >> at least you could see a number above $100 billion. >> possible. when pfizer had its conference call i didn't hear anything like that. pfizer said they wanted to do it the other way. they have a great cancer doubling down, i don't see johnson & johnson, which is to the gigantic deal coming in here. >> they just did actilion. any of your european drugmakers you could imagine? >> well, sanofi always seems to want to play. >> sanofi wants to do something. glax smith klein klein pretty big, guys in switzerland are all pretty big. >> that's who you have to hope for. but remember, the numbers are too high. this is one that is a challenged company. and they didn't kitchen sink it, i think. that's what some analysts it was a quarter to end all bad

quarters. give me something to write home about besides one drug that is involved with defibrillation. >> when we come back we're going to talk deregulation and net neutrality and a lot more with the new chairman of the fcc ajit pai. we'll talk about snap's roadshow, toll's quarter, mobileye, a lot to get to more from "squawk on the street" live from post nine in a moment. with e*trade you see things your way. you have access to the right information at the right moment. and when you filter out the noise, it's easy to turn your vision into action. it's your trade. e*trade. it's your tv, take it with you. with directv and at&t, stream live tv anywhere data-free. join directv today

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nearly one month into his role as fcc chairman and he's already calling for sweeping change at the agency including increased transparency, a deregulation of media companies and the activation of fm radio technology in smartphones. joining us now the new chairman of the fcc and an old friend of the show, ajit pai. nice to have you, as chairman for the first time, mr. pai. >> hey, good morning. great to be with you. >> let's start off on net neutrality, because of course as it should it's attracted a good amount of attention. you were an outspoken opponent couple years back when your commission decided to classify broadband under title 2 and you have said outright i favor a free and open internet and oppose hitting ii. how quickly are you going to be able to re-regulate broadband as certainly no longer a title 2? >> that's one of the things we are discussing, but i think the end goal is to preserve the free and open internet we had for two

decades starting in the clinton administration that's a framework that served the american public very well. and that's a framework i hope we'll be able to return to on a bipartisan basis in the future. >> okay. but what about actually getting this done? can you give us some sense here in terms of a timeline? or how quickly your agency wants to move to be able to abandon what was undertaken by chairman wheeler a few years back when it came to regulating broadband? >> well, i can't give you a specific timeframe, but what i can tell you is we're studying the issue very carefully. we're speaking to members of congress who might have an interest in this as well. and at the end of the day i think we want to deliver positive results for the american online consumer. and as i said, for two decades the proof was in the pudding that the consumer was best served with light touch regulation. i think that's the end result that we're hoping to achieve. >> do you think there's any chance that we actually could get broadband legislation that

we could see the legislative bodies actually act in this area? >> i think that both houses of congress are actively considering that issue. i certainly stand ready to assist them in the efforts. the other thing they're considering, which is important i think, is including broadband as part of an infrastructure package. and i very vigorously propose that because i think what americans really want is better, faster, cheaper internet access. and for congress to be able to give the fcc, to give the private sector more tools to deploy broadband development throughout the country i think that's something that would really address a need american consumers have addressed? >> how would you go about doing that as the fcc chair? >> so last september i put on the table a lot of different proposals for doing that creating what i call gigabit opportunity zones to give the private sector to maximum employ in low income, rural and urban areas and also talked about things the fcc can and should do to remove some of the regulatory

barriers to infrastructure investment. those are some of the things that have kept the private sector from building out in a lot of cases. wireless infrastructure making sure our rules are streamlined so that the networks of tomorrow can be built with relative ease. those are some of the tools in the tool box that we have. and some of the tools i hope congress will give us in the time to come. >> as we move deeper into this year, mr. chairman, there is a belief at least certainly amongst many of the bankers and lawyers, and ceos that i speak to in the telecommunications industry, that we will see more consolidation. there's been a lot of talk already about the possibility of going from four to three wireless providers. i know you're not going to talk specifically about any names, but i am curious if you could give us at least your view. do you think that the wireless industry as it currently stands is benefitting from having four competitors and conceivably would be hurt should there be further consolidation? >> well, i can't forecast how i would view market structure in

the context of a proposed transaction, but what i can say is the marketplace right now is extremely competitive as delivers unparalleled value to american consumers. and if you just look at the last couple of weeks, you know, some of the national carriers are vigorously competing against each other to give new or expanded unlimited data plans. that's something that's good for consumers. the s.e.c. for its part has allowed these companies to offer data for free to consumers, which is something that they like. and so, you know, i think the marketplace is very healthy. and how a potential transaction would affect that market is something that i can't obviously hypothesize about. we'd have to look at a particular transaction and the particular facts in order to make a determination. but at the end of the day our goal is to meet the public interests. >> mr. pai, jim cramer, good to have you on the show. thank you so much. >> appreciate it. >> try to get a sense of this new administration versus the old. you started by saying light touch regulation. i think a lot of people are

buying stocks basically thinking that the government's going to get out of the way of business. is that your sense? and how does it play out on a daily basis? how do companies benefit if you take a lighter touch? >> that's a good question. so some people think that the government should preemptively regulate every marketplace regardless of whether there's a market failure. others might say the government has no role whatsoever. my own view is that light touch regulation means that we create broad regulatory frameworks to protect consumers to ensure an overall competitive marketplace. but we shouldn't micromanage how these companies operate their businesses in the absence of evidence of market failure. and so light touch regulation in this context means that we let this dynamic industry, arguably the most dynamic the free market has ever known, develop. and if there are targeted cases where action might be necessary and the s.e.c. has authority to act, then we take action. but otherwise we don't sit in judgment from washington, d.c. my own view is that the internet

should be run by technologyists and engineers and business people and not by bureaucrats here in the nation's capital. >> you know, chairman pai, of course jim mentions the new administration. they come in with a deregulatory approach, but interestingly there is a view at least amongst many investors that the president will have potentially a role to play in some of the deals that could come before your agency and/or of course the department of justice. he has spoken openly for example about cnn and potentially at least seemingly paved the way for opposition to a time warner-at&t deal because of that. masa son paid a visit to trump tower. many people therefore somehow think that softbank will be able to receive beneficial treatment should it try to put sprint and t-mobile together. as the head of an independent agency that's not supposed to be controlled by the president, what will you do if president trump tries to dictate merger outcomes?

>> well, at the end of the day the test that we are statutorily required to apply is the public interest standard. and we have to make our own independent judgment as to whether the consummation of a particular deal would benefit consumers and competition or not. and that's historically a judgment that has been made by the industry -- by the agency by looking soberly at the facts and the law. and that's the approach that i would take if any transaction were presented to me for consideration. >> in your biography that was published upon your taking this office, along the lines of selective issues, one of them was the first amendment. you were said to be an outspoken defender of the first amendment, they even pointed to the fact that you canceled a study by the fcc into answering the question as to why reporters cover some stories and not others. thank you for doing that. >> i appreciate that. >> we have a president though who called the media the enemy of the american people. do you think that he risks undermining the first amendment?

>> well, you know, afraid that's a political debate that is above my pay grade, but what i can say and i said in the context of the study that you mentioned is that we don't want the government to be in a position where we're sending, you know, monitors or researchers into newsrooms and asking them to document for the government why they're choosing to cover some stories and not others. that's one of the classic editorial judgment that i think properly belongs with you and to your counterparts at other news organizations. and that's the kind of first amendment freedom that i've consistently stood up for. >> and finally, mr. chairman, why are you against allowing people to buy their set top boxes? >> my own view is that american consumers have moved beyond the traditional 1990s set top box technology. what they want is to get rid of the box and embrace newer technologies like apps. and that's consistently what i said last fall when the former chairman's proposal was on the table is let's move away from

this clun ki technology and enable people to take charge of their own video experience. and the way to do that would be allowing them to access this information on their smartphones, tablets, using apps that are in most cases free of charge. i think that's ultimately where the consumer interest lies. >> well, mr. chairman, we appreciate your spending a little time with us and certainly look forward to future appearances as well. thank you. >> i'm looking forward to it. thanks. >> all right, ajit pai, the fcc chairman. carl. >> when we come back, we'll get cramer's mad dash, count down to the opening bell and take another look at the premarket on this wednesday morning. more "squawk on the street" from the nyse is straight ahead. here. we neeyour password so we . here. my password? we neeyour password so we . yes, sir, we need your passwd. the ssword that i e? ye sir, your psword. there's been another breach! sir! right. okay. i-h-a... ...t-e-m-y-j-o-b-1.

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♪ we got about seven minutes before the opening bell. talked a little regulation or lack thereof with the fcc chair. where do you want to head on the mad dash? >> i want to talk about t-mobile and sprint. i think there's ample reason to be long t-mobile because of the fabulous quarter and the growth they have. but if you're in it for the takeout, david, i think we just heard that's going to be ill advised if sprint decides to contact t-mobile and buy them. there's a lot of hot money in this thing. i think we just heard from the new fcc chairman saying that's not what they want. >> he certainly said he thinks there's good competition in the wireless industry. >> yeah. >> obviously he also said you have to take each case as it comes at you. we'll see where we end up on this. and the department of justice

certainly would have a very significant role to play if they were presented with this merger possibility, jim. they'll argue the scale of t-mobile and sprint will be beneficial for consumers. >> right. >> i don't know. >> but how about this, do you think there's someone else out there? i mean, when you sit there and look at alphabet with hundreds of thousands of miles of fiber, when you look at the company we work for, comcast, lawsuit right now versus sprint in philadelphia i think is kind of interesting on messaging. it's been going on for a while. i keep thinking, you know what, we're being too parochial if we think about nothing but sprint versus t-mobile. a lot of players want to be in. >> absolutely right. citi out with a note today where they talk about t-mobile and sprint, but they also talk about charter and t-mobile. they also talk about comcast and verizon. >> what? >> oh, yeah. oh, yeah, that's not a stranger to anybody who's been thinking about these kinds of things. >> well, interesting. >> the point is and i've said this many times, dish, t-mobile, sprint, charter, verizon, forgetting another, comcast, and shake it all up.

you may end up with some combinations at the end, but i don't know which one it will be. >> and dish this morning had a decent quarter. so you've got a lot of players. we shouldn't just be thinking, don't -- i'm saying don't sell t-mobile because of what you heard. own t-mobile because of the fundamentals and there could be many players that want in. that's really important. >> yeah. all right. we got a lot of other stocks to get to this morning given of course we spent a good amount of time with the fcc chairman. opening bell in about five minutes.

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ifnly the signs were as obvious when yotrade. fidelity's active trader pro can help you find smter entry and exitoints and n help protect yo potenal profits. fidelity -- where smarte investors willlways be. you're watching cnbc's "squawk on the street" live from the financial capital of the world. the opening bell in a couple minutes' time. s&p with a double digit gain now since election day. busy day today. the retail earnings are still coming in pretty good. some of the action, jim, this morning is being blamed on the minutes, which we'll get this afternoon. >> right. >> even though this last meeting obviously rates didn't change and really the statement didn't change. >> you're looking at the ten-year going those of us who think there's going to be a march rate hike, the ten-year's saying no. the bank stocks are saying yes. i do think that you got to watch wells fargo. my travel trust owns it. it looks like they fired people from many different regions. so it was not one region that

caused this cross sell. i thought that was rather dramatic. i mean, talking against my book here. i know warren buffett's going to spend a lot of time with becky. love to hear whether he still feels strong about it. but watch the banks. the banks need that hawkish statement. they need real hawks. they need real hawks. i mean like hawks, hawks. >> the actual kind that fly. >> yeah, not the -- but like the -- they don't go -- what do they do? they swoop down. >> i can't do a hawk for you right now. >> that was in mexico i can to do a pelican. >> what does a pelican sound like? >> they stick their head in water. >> yeah, they do. >> expect minutes to maybe give us insight into fiscal stimulus, discussion of balance sheet as opposed to outright rate direction. >> i expect them to read the toll brothers quarter where backlog there's $4.3 billion. go read the home depot quarter,

excellent cfo, says bring on the rate hikes. not going to hurt us. plenty of reason to go. >> tjx with a beat. >> i like that quarter. >> revenue a beat, guides above, raises buyback. pretty nice on the heels of yesterday. >> these retailers are very hot. very hot. >> let's get to the opening bell. s&p at the bottom of your screen at the big board sachem celebrating recent ipo on february 10. at the nasdaq, mobileiron. i guess we should look at mobileye, jim. >> mobileye is an interesting company. one of the things i have focused on mostly at david's urging is this autonomous driver, autonomous car. anything that's involved in that they are the advanced driver assistance ship, they have a bmw contract, and tesla which reports now -- today, had kind of a falling out. but the eyeq chip they have average selling price went to

$45.05, i think that's what's key. if you're able to raise the price of your chip in this environment, you're going to have good gross margins. i like the situation. but i have to tell you, this is a fluid group. because everybody wants into autonomous. everybody. >> everybody? >> well, people recognize -- i mean, look, i spent a lot of time at alphabet. waymo making their own chips. they really cut the price. fiat is who they are partnered with. this is something i think if we were to start cars right now, start the industry, we would never have us driving. rates going up big 1.2 million fatalities each year. >> everybody's on their phones. >> cars got safer and humans got more dangerous. >> yep. >> and i remember dan hess who used to run sprint. >> yes. >> came up with a strategy to cut off texting. no one embraced it. >> i know. it is shocking and frightening how often your drive down the

highway and see somebody driving next to you looking down in their lap constantly. forget this. i'm talking this. >> right. >> as far as automation goes, axios has a nice discussion this morning about trucking and the degree to if automation takes over that industry, it's going to cut right across the middle of the country which has already been hollowed out to system degree by manufacturing. those are longer term issues. bill gates had a nice interview in "wired" in which he suggests taxing robots to slow the pags e pace of automation. >> i saw a robot whose arm could machine learn what it touched. now, of course i speculate isn't that terminator? but to know it's coffee that's hot and therefore, you know, too hot perhaps. just think about what it would do for veterans who've lost limbs. there are pluses and minuses. >> through broadband connections there's going to be the ability to control a robot far, far away. so you could conceivably have somebody in another country who

could control a home health aid here in our country, robot. >> wow. >> start thinking about that and implications for that. that's not that far away. where you can be -- and you can -- do all those kinds of functions. >> well, look, everybody's doing them. this is what when you're out west coast, people are not just talking about snapping pictures. >> speaking of which, more notes today on snap. susquehanna says it's not a long term play, but goldman apparently according to some reports sees 2018 revenue 5x last year over a two-year period revenue 5x and user growth up 40%. >> i think people have to recognize, i know it doesn't have the momentum. i know facebook stories came in, but it is advertiser friendly. and that's what people keep talking about. the notion that twitter is not as advertiser friendly because advertisers break up the train of thought, there's no real train of thought on snap. so the advertisers kind of like

it. particularly of the younger demo. if they price this thing with just a few shares and it goes up, we're going to have to say sell. but i do like the fact that advertisers it's one of the things they'll consider instead of just facebook and alphabet, which really have been game, set, match. >> right. isn't there a sense these guys are not focused as much as they should be on simply monetizing, monetizing, monetizing? >> absolutely. >> facebook never said, oh, we're going to somehow limit our user base. not that they're saying they want to limit it. but they seem to be focused as you guys well know on the quality of engagement. >> yes. >> as opposed to the number of people who are engaging with the service. >> yeah, look, i think that we can keep coming up with reasons to buy the snap ipo. but i think in the end revenues that are not accelerating is what matters. the street cares about that. i mean, why is twitter at 16? the revenues are decelerating. >> yes. >> that's kind of it. >> i mean, even with users actually trending the right way

in a way, the advertisers are not. >> no. >> monetization's not working. >> the linkage between more eyeballs and more advertising's been broken. i don't think people recognize exactly how devastating that can be for companies that are in internet advertising. used to be able to get more on eyeballs, boom, more money. no. no. now you just get more trouble. more eyeballs, more trouble. >> switching gears to restaurants, jim, texas roadhouse today is a miss and comps were disappointing. dine equities chief left. >> geez, holy cow. >> buffalo wild got some activism going. >> yeah, the stock turned around a lot, buffalo wild wings i got to tell you i thought the last quarter you could understand they're not doing the old comp numbers. popeye's had a not so great previous quarter.

this quarter was a comeback quarter. stock didn't go up enough and, boom, they sweep in. i think that was absolutely a smart acquisition by the burger king guys. run a great chain and stock didn't value schgs it should. >> so you don't think the broad restaurant weakness is comment on the consumer the way retail is? >> i think there's a lot of price competition. sheryl's been on the show many times, "mad money," in which she said over and over again the competition, burgers wars has made it tough. when i go to texas roadhouse, they had disastrous december. quizzical quarter. just really don't get it at all. like what happened in december? we don't know. i'd like to know. let's find out. >> is that an enduring mystery for you, what happened at the texas roadhouse in december? >> yeah, kind of like the, you know, some of these hbo programs and netflix programs, i'd like to know. >> got to wait to get to the end. >> yeah, the oa. this is about the oa. >> speaking of netflix, they

pick up "the irishmen," a scorcese project that was at paramount now will be picked up by netflix from paramount. it's going to reunite de niro, pesci and paccino. >> lord knows they spend plenty and seem to know what works and what doesn't. >> that's what they do. they have human learning, not machine learning, but they can match. but they have actually humans thinking about programming. i know that's old fashioned strange thing to rely on humans. >> well, they do also have a pretty big data set to rely on. >> yeah, but reed still looks and says, you know what, people want this kind of program. david, the paramount of -- >> brad gray. >> yeah, what do you think? >> not a surprise, right? not a surprise. >> well, you're the paramount guy. >> the revenue numbers at paramount have done nothing but gone down. >> that matters in that business. >> it does. listen, paramount as a part of

viacom could become a viable part of the company overall again if they even manage to turn it around a bit. >> well, a long history of paramount was nothing but positive. >> and bob bakish, new ceo, is certainly putting in his team. >> well, i am shocked netflix, i just hesitate to think about anything they do wrong. i find that is the channel. on a treadmill yesterday, really fancy hotel, well, it's like tv, netflix. it was right there. right there on the bar of things you can watch. cnbc versus netflix. that was not easy. it was not easy. because while you were here, you weren't there. >> i was not there. >> but i watch you and then i switch to netflix, on the treadmill. couple hour workout. needed it. margaritas. actually margarita day. >> it is. got to get it done before the price of tequila goes up. >> oh, yeah, definitely. >> really quick, jim, toll is going to have its highest level since december of '15 looks

like. >> good. so deserving. >> they raised their delivery forecast for the year. they beat on virtually every metric. >> oh, boy, the net sign contracts were sensational, again, i come back to how can you have a backlog of $4.3 billion? i mean, i do the dividend, they're going to get respect at last. and they even talked about how new york isn't that strong, which is good because new york's been a little -- prices in new york got a little insane. but i do think this was the quarter that finally people say you know what, we're done with selling toll brothers every quarter when they come out with numbers. this is a beautiful quarter. congratulations to doug, congratulations to bob. this is the quarter that we've all been waiting for. sellers go home, please. >> let's get to bob pisani. dow's down 48 largely on weakness out of intel and mcdonald's. hey, bob. >> good morning, guys. happy wednesday everyone. we got a little bit of strength in the dollar. dollar index had a two-month high, ten-year yields have been trending down the last couple days. pressure on bank stocks. not too bad overall. let's look at the major sectors.

the big problem is energy stocks. we've been talking about this for a week and a half. energy going -- energy stocks going straight down even as energy's holding up. and that's been a drag on the market. but banks, tech, industrials, these have been so strong powering the market, a little to the downside but not dramatically overall. about the oil stock divergence we've been talking about for a week and a half, here it is, s&p energy group down almost 4%. year-to-date the s&p 500 is up almost 6%. that's statistically very significant. the rest of the market isn't and crude is flat so far year-to-date hovering around $53 or $54. exxon straight down for a while, not far from a 52-week low. markets are saying here, stock markets are saying they don't believe the idea oil will be in the $60 to $70 which is where a lot of these oil stocks are expected to be trading, at least

in the oil price later this year. markets right now saying they don't think that's necessarily going to happen. let's move on talk about where the markets are other than oil the markets are in great shape. yes, a lot of people were saying the markets are overbought and it's true. normal technical indicators, relative strength or how far you are from a 200-day moving average. yesterday was a big topic of conversation. the s&p is about 9% away, 9% above it's 200-day moving average. that is very unusual and normally people say that's associated with the market slowing down, that's true. but there's no signs of it happening. look at the internals for the mashl market what's going on. new highs are broadening out. they're not deteriorating. advance/decline line every day hit new highs and credit conditions are favorable. i don't see imminent signs of market demise here. it's not just a trump rally. we've talked about the global reflation trade where rising rates and better economic news is lifting boats around the world. look at stock markets in other countries around the world, not just the u.s. but in germany,

switzerland, brazil, toronto and canada, the hang seng had an 18-month high today. these are all new highs here. this is what they call the global reflation trade happening overall. let's move on and talk about toll. jim mentioned toll, great numbers here. not only good guidance but started paying a dividend by the way, 8 cents first time ever. toll increased nonbinding reservation deposits up 16% for the first three weeks of february. stock's at a new 52-week high as you can see here and they're going to have a fabulous year. look at the earnings estimates for toll for 2017. 2015 was a good year, 2016, but 305 is almost a 40% increase in the earnings estimates. they did nothing to dispel the idea they can't hit that fairly easily. robert toll was talking about how the housing demographics are changing on the report this morning that they gave out. pent up demand is starting to release, mr. toll says, bringing more buyers into the market. millennials are forming families

and having children and buying homes and baby boomers are seeing strong demand for the active adult community. what this says is they're hitting on all cylinders basically. starting to finally see pent up demand after many, many years where kids basically stayed at home. again, new high for toll brothers. dow's down 43 points right now. david, back to you. >> thank you very much, bob pisani. well, did want to revisit of course that very brief but intense exchange between unilever and kraft heinz that ended with kraft heinz saying so long only a couple of days after we learned that they were interested in acquiring the giant unilever for $143 billion in both cash and stock. carl mentioned this at the top of the show. unilever out this morning out with a statement about reviewing its own options saying it's conducting a comprehensive review of options available to accelerate delivery of value for the benefit of our shareholders. the events of last week, they say, have highlighted the need to capture more quickly the value we see in unilever and

they do expect that review to be completed by early april after which they're going to tell us more. what will that mean? well, it's unclear. there's certainly been no shortage of speculation that unilever itself wants to be an acquirer. that is one reason why and i reported on this possibility on friday shares of colgate were a strong performer. there's also continued belief, well, with colgate potentially at least seen as potential prey for a 3g fund. i know it gets complicated here because we talk about 3g so often. there's kraft heinz which of course has 3g money in it, there's 3g which just raceised new fund which i reported may, may go after a new vertical and not food related but something else, perhaps in consumer products. there's anheuser-busch of course, abi which also has 3g money and management and the like in it. and the deal from yesterday, qsr buying popeye's, that was also a 3g related company. so they're in a lot of different things, but don't be confused it

may very well be that 3g, the new fund they've raised goes after an entirely different company than whatever kraft heinz chooses to do. but what kraft heinz chooses to do will be interesting here because remember on friday we saw the food companies go down, general mills, mondelez. we saw rebound in part yesterday. but most importantly this did not go well for kraft heinz. this is not the way you write it up. now, was it a miscommunication? did they misread signals? i'm not sure that was the case. certainly they knew the defenses at unilever were significant if they chose to employ them. they probably understood that the company's ceo was committed to a culture there somewhat different than what they might pursue at kraft heinz. there were a lot of places for them to go. maybe they just didn't expect they would. i'm told in the meetings that took place they didn't necessarily expect that they were going to get a significant takeover defense here. but they got it. and so the next time around if

you're kraft heinz, you probably need this to be friendly from the very beginning to the very end. abi-s.a.b., that was not particularly friendly. remember there was a lot of pressure put there. wasn't hostile as we sort of use that determine, but it certainly wasn't friendly. unilever might not have been necessarily friendly would they have pursued it. next time they go, they're going to need a company to say we're interested. that may make it more difficult for them. that may make it a bit more difficult for them to find a prey that they're looking for. >> sold half of it for the trust because i thought it was amateur hour. >> wow. >> just amateur hour. yeah, the quarter was okay. stock went down to 86, suddenly pick up nine points. i was watching this thing i say are they kidding me? i mean, over the weekend? david, come on. i mean, don't they have bankers and lawyers? >> they do. listen, i'm told that the meetings that took place there were no signals sent nor received that this would be a scorched earth kind of approach from unilever. >> it's paul pullman and unilever, it's a real company.

the guy's done a good job. maybe the stock hasn't been that hot, but honest to god, i mean, i thought this was -- i thought it was crazy. i mean, a real company, kraft heinz, boom, the bid. let's make a bid. why don't we like sit around? it's not a show with mickey rooney? >> it isn't. but these guys certainly think a great deal about what they're going to do. they've had great success in executing on previous deals so we give them the benefit of the doubt. >> right. >> in this case it didn't go well. >> no. >> no. it didn't. >> no. over before it started. >> yeah. doesn't mean we're not going to be continued to focus on what kraft heinz and 3g perhaps separately will choose to do. using my hand signals. >> okay. >> let's head to the bond pits now. rick santelli's at the cme group in chicago. rick. >> good morning, david. you know, everybody likes to look at the economical dar every morning. smart thing to do. along with tuning in to cnbc. today we see the fed minutes to

the last meeting. i know that they're probably going to be somewhat important, but i'll tell you, you want to know important, here's the next chart. look at a two-day of the euro two-year. yes, you're not reading it wrong. minus 90 basis points. maybe a little bit of a repost squeeze going on. let's look at a broader chart. let's look at a one-year maturity. wow, it's like falling off a cliff. no matter how you slice it, we all remember there was a relative value trade when the bunds were doing their beeline, the ten-year maturity down towards zero and we saw how it affected our market. now, maybe it's not affecting it as much. you can look at a one-week of bunds there. it's definitely dropped from 35, 36, 37 over a week down to 25. but really the trade you want to pay most attention to may be euro tens minus euro twos now hovering and getting close to 120 basis points. that's a three-year chart. why is it important?

because it's definitely having an effect here. we're down three, four basis points in the ten. we keep hovering at the pivot for the year, which was the close of last year, which is 2.44. we're a bit below it. but maybe the best way to understand this is look at tens minus bunds on a month-to-date chart. we can see it's widening a bit. now this is interesting. it's having an effect on our curve, but our curve is still fighting it to a lesser extent the drop in the european maturities is still not taking away all of our thunder. that is a chart you want to pay attention to. and finally, all of this is pushing the dollar index a bit higher. but it's still down two-thirds of a cent for the year. jim, carl, david, back to you. >> all right, rick, thanks so much. when we come back, the head of the world trade organization. you're going to want to hear his take on the trump administration's approach to trade. dow down 14 after eight straight wins. we're back in a moment.

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tomorrow 7:00 a.m. eastern time right here on cnbc, treasury secretary steven mnuchin sits down with our becky quick. that is a big interview you do not want to miss. we'll get stop trading with jim after a break.

time for cramer and stop trading. >> there's a piece i can't avoid. morgan stanley comes out exploring what buffett is up to, good thing for becky when she speaks with him next week, saying he would maybe buy southwest air. buy it. yeah, he bought burlington northern, but southwest, gary kelly loving working at the business but i said, you know what, geez, maybe so. we got to find this out. i thought the stock would definitely be up today on this piece. it's a very compelling piece. >> really? people are surprised he's even taking -- dabbling in this industry after u.s. air. >> exploring what buffett's up to, this was maybe the most provocative piece that hit my desk in a while. like it. very funny. >> what's on mad tonight, jim? >> okay. we've got a couple of things. one is six flags, one of my favorites because it pays a great dividend, but then charif souki is back, remember

he was sha near and got fired by them and now maybe he's got something to say about where he's going. >> very nice. nice to have you back in the saddle. >> yeah, that was fun last week though. >> yeah, very nice week. >> thank you. >> "mad money" tonight at 6:00 p.m. when we come back, the president and trade. we'll talk with the head of the wto. dow's down 15. this car is traveling over 200 miles per hour. 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.

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the global investment management businesses of prudential ♪ good wednesday morning. welcome back to "squawk on the street." aisle carl quintanilla with sara eisen, david faber at the new york stock exchange. markets in a bit of a range here, down 16, got fed minutes coming up this afternoon. perhaps investors are waiting for that. the ten-year did dip below 2.4 for the first time since february 9. >> our roadmap starts with stocks taking a pause as carl mentioned from the week rally this morning. the s&p still on track for its best month since march. we'll discuss it. >> plus, what a possible trade data overall would look like and why that matters. the director general of the world trade organization is with

us. >> and strategy review at unilever just days after rejecting that takeover bid from kraft heinz. we've got all the latest details. big day for real estate and housing. we've gotten toll numbers. let's get to existing homes with diana olick. diana. >> existing home sales in january up 3.3% to a seasonally adjusted annualized rate of 5.69 million units. that's a surprise to the upside. the street was looking for a drop. that's month over month. and december was revised up slightly. we're seeing the strongest annualized home sales since february of 2007. so in a decade. back then it was 5.79 million. it's up 3.8% year over year. interestingly sales were up the most in the west where homes are most expensive. biggest price gains though were in the south. overall the national median existing home price for a home sold in january was $228,900. that is up 7.1% year over year.

and of course way ahead of income growth. why? because of inventory. 1.69 million units for sale, that is down 7.1% year over year. and that's just a 3.6 month supply of home for sale. that's why you're seeing such high prices. days on market just 50 days. a year ago it was 64 days. now, remember, these are closings in january. so they're based on people out shopping in november and december right after the election, right when mortgage rates spiked. and there is a theory out there that when people initially see that spike in mortgage rates that they jump in if they were on the fence because they are afraid that they would see mortgage rates go higher. we have not seen that. they've been pretty stable. so, again, single family up 2.6%. condo sales up 8.3%. first time buyers came back a little bit, 33% of the market. still on the low side though. but again, inventory continues to be the story. we're not getting more in. and we're heading into that all important spring market. so nice surprise to the upside

on sales though. back to you guys. >> yeah, very strong numberover all, diana, thank you. meantime, looking at the broader market, stocks hitting new highs this week as the trump rally continues hitting a bit of a pause though this morning. already off the lows. amazingly resilient. dow's down about nine points. joining us bmo private bank c oir io. big market event today will be the fed minutes out later today, jack. the question continues to be, will the federal reserve ruin this party in the market if it starts raising rates faster or gives some mixed signals it's behind the curve. >> yeah. i think this market is definitely putting the fed in a bind. you know, they're aggressively easy. in fact, a lot of people don't realize but our real rates if you subtract inflation from our interest rates, we're actually lower than they are in japan. so i think that the fed wants to get this economy off to a running start, wants to see some inflation knowing that it's got a 40-year track record of keeping it under control. but of course the side effect is

you see this froth turning into speculation. in fact, the most recent purchase -- the most popular etf purchase is the dow, which is really a retail product sparked by dow 20,000. >> let's just talk about what's happening in fx and fixed income. ten-year yield at 2.40 right now. dollar index is near a two-month high. yes, some international news, specifically political risks in france influenced these markets more than the u.s. equity market. but are you getting any kind of warning signals from either of those markets about this equity rally? >> no, actually. remarkably we're seeing fundamentals start to come through on the positive side. if you look at for example a lot of the economic surprise indices, you're seeing surprises to the upside in europe and in asia. so i think that, you know, perhaps a lot of this enthusiasm, a lot of this sentiment that it's come around

si since the election is now starting to filter through into some economic activity. you know, that's a good sign, especially in markets like europe and japan where those markets are trading at a tw20% 30% discount to the u.s. >> let's bring in diane swank, economist into this conversation, diane, always nice to see you. >> good to be here. >> perfect timing. we're talking about the economic surprise index moving higher around the world post election. why then is the ten-year yield stuck at 2.40? and what does the fed do about the improved outlook? >> you know, i think this is one of the interesting things is that we really did start 2017 on a much firmer footing than we started a year ago. and we had a tailwind going into the year. the question is on timing of fed rate hikes. i think we will realize the fed's finally multiple rate hikes i think we are going to get three this year, but i think there's a bit of a pause. i think the market realizes that as the fed wants to see the full effects of the rate hike that's already gone on and deal with

some of the uncertainties on both the upside and the downside withegard to what kind of policies may come out. so that leaves them in a bit of a holding pattern for the moment, but i do think we are going to see rates move higher as we get into the year along with inflation. >> if the fed raises rates, diane, in march, does that mean janet yellen can no longer fly under the political radar of donald trump as she's been doing, i think, pretty successfully so far? >> she has successfully been doing that. i think they still would be able to do that. my preference would be that they hold off even though i think the stars are coming into alignment for the month of march. i think they should wait a little bit because of some of the political uncertainties most notably already mentioned things like france. that said, you know, right now it would be nice for the fed to be able to stay under that radar a little bit especially as they're marking up the budget. the higher rates they have to put into the budget going forward the more that costs them as they're trying to deal with revenue neutral kinds of tax

plans and things like that. >> so, jack, add it all up for what it means for this stock market, which continues to reach new highs. what are you seeing out there in terms of the technicals? any signs it's overbought? or is it a green light ahead? >> it's near term remarkably seems like a green light ahead. one of the things i noticed a few weeks ago was the smart money index, which is sort of a read of what the institutional players are doing. started to roll over. that has since turned around and that's making new highs. so from a pure technical standpoint, market still seems to want to go higher. i think to reiterate the fed is in a bind. if they raise rates too quickly as diane mentioned, you know, that runs the risk of creating political issues, could raise the value of the dollar which undermines what the fed wants to do. if they keep rates lower for longer, it could keep this froth turning into a bubble. so what i would expect is probably a lot of hawkish talk

from the central banks. you know, we may see that this afternoon in the minutes. but, you know, my suggestion is maybe yellen needs a twitter account to start commenting on the market to keep it in line. >> no, no, no. >> that's crazy there. >> i would add on the minutes today one thing to watch for is both those upside and downside risks. we have seen many people coming out mostly presidents that are further away from the washington board of governors on the federal reserve talk about both the downside and upside risks. the downside risk to protectionism and things that have not been priced into the market so far. so i would really watch closely for that discussion in those fomc minutes later today. >> jack, sam stovalue has done nice work since up in january and february the average total return for the year is like 24%. i just wonder if you think some of these historical analogs are

worthwhile now or not. >> you know, first of all, i have a lot of respect for sam. he's a great guy and i love his insights on baseball. you know, the problem is i don't know what the sample size is. i mean, you know, if you go back and you're looking for these periods, it's interesting i'm not going to take too much stock in that particular stat. i think there are a lot of other stats that we can look at. but that one, you know, i just think where we are with the price-to-sales ratio of above 2, first time since the tech bubble, just seems to be, you know, unless we can get a huge boost in sales growth, seems to be we're on somewhat shaky ground. >> finally, jack, i wanted to ask you about retail stocks. i thought it was interesting cramer last hour mentioned it in the context of a valuations conversation that there's still value there especially what we heard from the calls of home depot and walmart. you dip your toe back into retail. have you heard what you needed to hear for a bullish argument?

>> i think there are really two elements there. actually one certainly economic as you described and perhaps a lot of these retailers are attracting traffic more than perhaps investors had originally feared. the other one though is policy. if you look at for example the possibility of a border adjustment tax, i mean, this is really been a huge cloud hanging over that whole industry which essentially imports everything and sells it here. so if you believe some of the talk we're hearing on capitol hill that perhaps this border adjustment tax is dead, then that could mean smooth sailing for some of these retailers that have been, you know, under that cloud over the last couple months. >> we'll see what happens in that debate and in the minutes this afternoon. good to see you both. thank you, jack ablin and diane swonk. when we return this morning, trade and immigration taking center stage. we're going to discuss with former u.s. trade rep. later on we'll be joined by the general director of the world

trade organization. dow's still down 13. more "squawk on the street" continues in just a moment. the future of business in new york state is already in motion. companies across the state are growing the economy, with the help of the lowest taxes in decades, a talented workforce, and world-class innovations. like in plattsburgh, where the most advanced transportation is already en route. and in corning, where the future is materializing. let us help grow your company's tomorrow - today at esd.ny.gov

trade and immigration continue to be top focus. top officials headed to mexico today. reports the white house considering making the change to the way the trade deficit is calculated and some new guidelines from dhs on immigration enforcement. for more on the corporate and economic impact, we're joined now by former acting u.s. trade rep ambassador miriam sapiro and

gary huffbaur. good to have you both with us again. mr. ambassador, this story about changing the way the trade deficit is calculated. how important is that? >> well, this just doesn't make sense. i mean, we should not be politicizing statistics. people worry enough about fake news and they should not have to worry about fake numbers. most economists agree the way we measure the trade deficit now makes sense and we should continue to do it that way and focus instead on the real challenges that we're facing. >> mr. ambassador, is it possible we get that number but along with it the number we're used to and people start choosing which they like better? >> i think it gets dicey there. again, we need to focus on the real challenge we're facing which is how do we create more u.s. jobs. >> ambassador huffbauer.

>> hi. >> can you hear me? >> are you asking for my views on this? >> yes, your thoughts on this. >> yeah, well, it's nuts. there's no reason to change the definition. i mean, what they want to do is take goods which come into the united states and then are re-exported. maybe they break up a package of 1,000 iphones and we export 500 of them. and they want to not count the re-exports as part of our exports. but they're not talking about eliminating the imports from our imports. i mean this just doesn't make any sense whatsoever. i know the administration is quite focused on trade deficits. there's another debate there whether their focus is excessive and misplaced. but then to try to, you know, enlarge the number that they're attacking by this kind of pokery, hopefully this will be

abandoned. >> madame ambassador, we have seen xi jinping give a speech at davos. we've now seen a summit in europe and brussels that looks at global trade. a game that ostensibly the u.s. is less and less a part of. do you see that slipping away from us? or is that all part of the plan here? >> well, i share your concern that we might be inadvertently seeding global leadership of very important trade issues. we've been a leader for many years in terms of setting high standards. and i think it's very important we continue to do that. because, again, the domestic issue is how do we create more jobs. and the best way to do that is to boost our exports. because speaking of statistics, the department of commerce measures that for every $1 billion in new exports we can generate, we can create another 6,000 jobs. so how do we do that? we've got to be open to import because we use imports to then produce exports. whether it's aircraft engines for airplanes or transmissions

for cars. we need to be able to continue to import so that our companies and our workers can export. we also need trade agreements because that's the only way we can get other countries to lower the tariff and the nontariff barriers that otherwise keep our goods and services out. >> specifically one trade agreement that's already in place is nafta, which the president has gone after. ambassador hufbauer, $1.4 billion worth of goods cross the u.s./mexico border every single day with the secretary of state and secretary of homeland security both in mexico today, what can they tell the mexican authorities that have clearly been rattled by some of the rhetoric from president trump as it relates to closing the u.s. deficit, potentially reopening nafta, but also trying to keep good relations with one of our strongest allies? >> well, to be constructive about this, there are certainly issues in mexico where the

mexicans could relax their barriers. and as ambassador sapiro said, we would have more exports, natural gas is one, there are some agricultural products as well. mexico doesn't allow small value shipments to come in the way we do. you know, retail stuff that people buy over e-bay and so forth. so there are things mexico can do. but the notion that we're going to somehow drastically slash the trade surplus that mexico has with the united states, i don't know, by putting on some kind of import barriers this would be very harmful. the fact of the matter, which i'm not sure the administration realizes, but they will be told this by mexicans, is that 40%, 40% of every mexican product which comes to the united states represents u.s. products which went to mexico.

i mean, you know, it's a very integrated relationship. >> one last question here -- >> can't call off one side without turning the other -- >> ambassador, about border adjustment. everyone's trying to figure out where that's headed. b of a has a note out this morning saying the potential has arguably become less clear. but they add that they're looking to the president's speech at the joint session of congress on tuesday for potential clarity whach. what kind of odds you give we learn a lot more that night? >> well, i hope we do because this issue is really one of great concern. again, we need to be open to imports. and we need to be able to boost how we export. because keep in mind 95% of the world's customers live outside the u.s. so we cannot prosper by just trading with ourselves. we need to continue to be able to have strong and enforceable trade agreements including nafta, which is due for an update. but it's not an agreement that we should think about abandoning given how integrated the three

economies are and how much it would hurt the u.s. company if we were not able to keep that agreement in place. >> there's a lot to take stock of these days. miriam sapiro. gary hufbauer, thanks for your time. >> as the peso continues to climb back. trump pushing buy american, hire american, making it clear to retailers they're going to have to ramp up manufacturing here in the u.s. but with apparel production accounting for only 2.7% of the market, is that even a possibility? our courtney reagan is at an apparel manufacturing company in new bedford, massachusetts, with more, courtney, on the question du jour. >> exactly. good morning to you, sara. i'm here at the joseph aboud now owned by tailor brands. when you look around here makes u.s. garment manufacturing alive and well. yes, this is a 400,000 square foot facility. there are 740 employees make

about 1,100 suits every day. but this is actually quite a rare example of consistent made in the usa garment operations. when it comes to u.s. manufactured clothing and shoes, shoppers are hard pressed to find an abundance of made in the usa apparel in stores. it's because nearly 98% of it is made abroad, according to the american apparel and footwear association. it hasn't always been that high, but there are a lot fewer u.s. textile mills and factories than in years past. plus, skilled sewing labor at low cost is basically nonexistent here. >> there's a near record of open job positions in the manufacturing base because we don't have the workers with the skills necessary to do it. >> couple the supply constraints with years of deflationary apparel prices and you've got a difficult setup for american manufacturers to make the economics work in order to produce garments and shoes in the good old u.s. of a. but if you can make it work, like joseph abood has for 30

years, the proximity can help your company react more quickly to changing consumers tastes and might get some credit from the consumer for that somewhat rare made in the usa label. now, five years ago walmart announced a goal to buy $250 billion more in product that is made, sourced or grown in the united states by the year 2023. as well as to help foreign manufacturers reshore operations here in the u.s. however, walmart hasn't given us any updates on the progress towards that lofty goal, carl. >> all right. courtney reagan, thank you so much for that. when we return, an inside look at lockheed martin's production plant, assembling that highly contested f-35 fighter jet. take a look at stocks. we got a little bump here as we got those existing home sales. ten-year yield nudges a bit higher. dow's gone positive. we're back in a minute.

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our morgan brennan is inside the production plant of the f-35 and she has more for us. morgan. >> reporter: hey, david, that's right. this is actually as you can see behind me this is where these f-35 joint strike fighter jets are assembled for final delivery. but let's talk a little bit more about those contracts because after years of cost overruns and including as you mentioned most recently from president trump, the price of lockheed martin's self-fighter jet is falling and falling faster than before. the most recent contract priced the a-model at $94.6 million. that's more than 7% drop from the previous deal. but if you exclude the united tech pratt and whitney engine, which is negotiated separately with the pentagon, also fees lockheed's airframe price actually fell 8%. that's a full percentage point more than expectations. now, according to lockheed, president trump's intervention sped up contract negotiations which materialized in a matter of weeks. the previous deal just to put some perspective on this took 18 months to hash out.

so what does this mean for lockheed's profits and thus the stock? well, the program's general manager says margins will, quote, absolutely grow even as these plane prices continue to come down. >> the development aspects are winding down. so some of the unknown challenges are kind of going away. and i think it's going to make it easier to come to these agreements in the future. so i'm very encouraged by the progress. >> reporter: and he would know having just returned from washington, d.c. last night. now, as production jumps fourfold over the next five years, the learning curve is coming down. automation and cost cutting programs that add more tech to the entire supply chain are also helping. and so too would bigger contracts including a proposed hybrid block buy that would commit to a big order of fighter jets for allies, also a big order of supplies and raw materials for the u.s. that's a move that would enable lockheed mart into negotiate even better deals with its more than 1,300 suppliers.

guys, back over to you. >> morgan, how's the trump criticism going down inside lockheed? and i just wonder how competitive they're feeling as he also meets with the ceo of boeing and has sort of pitted them against each other when it comes to cutting costs and negotiating for some of these defense deals. >> reporter: it's a great question. certainly everybody we've spoken to, a number of people here in the last more than 24 hours now, and this is a topic that comes up. i think the general feeling is that at least publicly everybody's pretty upbeat about this process, especially in light of the fact that these negotiations for this last lot 10 came together as quickly as they did. that being said, when you talk about when you compare or ask to compare say f-35 sea variants to the fa-18, boeing's superhornet basically pitted against each other, at least publicly on twitter by the president, everybody you speak to including pilots of the f-35 say there's

absolutely no comparison. in fact, a lot of discussion is actually geared around the fact these are planes that actually compliment each other. for example, the test pilot for lockheed martin that goes out in the f-35s flies out with super hornets accompanying it for safety purposes as they test this plane and capabilities. >> morgan, thank you for that inside look at the f-35 program. it's been front and center in politics lately. morgan brennan. as we head to break, check out shares here of tjx, it's the parent company of t.j. maxx and marshall's. retail reporting better than expected earnings this morning. also announcing a 20% dividend hike. we have an earnings forecast just shy though of wall street estimates. the stock is looking a little flattish. and overall stocks at this hour have staged a bit of a turnarounds. the dow's gone positive just barely being lifted by chemical makers and nike. s&p 500 comes back. it's down a tenth of a percent

as well as the nasdaq. much more "squawk on the street" straight ahead.

i'm contessa brewer. here's your cnbc news update. some 14,000 residents evacuated from homes in san jose because of rising flood waters. crews worked to help people trapped in homes and cars overnight. a stretch of highway 101 is closed in both directions south of san francisco. i'm sure a messy commute there. american airlines says computers are working again at philadelphia national airport. it has lifted a ground stop. its system failed to reboot correctly after a scheduled power outage overnight. we're seeing new video showing the moment actor harrison ford landed in the wrong place at a southern california airport last week. he was coming in for a landing when he accidentally landed on the taxi way, not the runway. while landing he flew over an american airlines jet that was in a holding position.

a close call. sodastream is recalling about 51,000 bottles because they could burst under pressure. the recall involves one-liter blue-tinted plastic carbonated bottles sold from february 2016 through january of this year. and that's our cnbc news update for this hour. carl, back to you. >> contessa, thank you very much. shares of bristol-myers climbing after reports that billionaire activist investor carl icahn has taken a stake in the company. our meg tirrell joins us to talk about that. >> good morning, carl. bristol-myers shares jumped late yesterday after it was reported carl icahn had taken a stake in the company. carl icahn's interest reported yesterday by "the wall street journal" comes after a tough time for bristol-myers. over the last year we saw their shares really sink in august after some disappointing clinical trial results led to a lot of speculation about potential vulnerabilities. and of course another activist has entered the stock as well. just yesterday news that janna partners which had taken a stake in the fourth quarter had discussions with bristol-myers and as a result bristol added three new directors and started

a $2 billion share of purchase program. so multiple activists in the stock here. icahn apparently telling "the wall street journal" that he thinks bristol-myers or someone telling "the wall street journal" they think bristol-myers could be a good takeover target. icahn is no stranger to biopharma m&a, however he hasn't been in the space quite as actively recently. a few years ago he was instrumental in deals including sanofi, imclone and eli lilly, also agitated agitated biogen. he had denner running fvsme investments and he has since left so wondering how he's going to do without insiders here. we've reached out to companies unsurprisingly they are not commenting on speculation yet to be seen whether any of these folks will be interested particularly as tax reform is up in the air right now, guys.

>> okay. yeah, always interesting, you're right, tax reform of course a key component of any merger discussion potentially, meg. not to mention this is more than $100 billion deal if you were to throw any sort of preem upon what is already a $90 billion plus market value. the number of potential acquirers as you say very small. thanks, meg. >> thanks, david. before we get to unilever this morning, which had some news out, i did want to mention dow and dupont. both stocks moving higher. reuters reporting that european antitrust regulators are set to approve the merger of these two companies. they're citing people familiar with the matter, i can't confirm it, but you can see both companies are moving up one reason why sara mentioned earlier that the dow was up in part, i guess. >> yeah, dupont adding 50 points to the dow itself, best performer. >> of course this has been out there for quite some time this potential deal. an eu approval has been something they had been waiting

for for some time. did also want to mention unilever this only a few days after unilever and kraft heinz declared peace after there appeared to be the likelihood of war between those two companies with kraft heinz bid being unveiled. not by it necessarily last friday, only to more or less go away less than 48 hours after we first learned about it. but unilever this morning also puts out an announcement about its own plans saying in a statement that it's conducting a comprehensive review of options available to accelerate what it calls the delivery of value for the benefit of its shareholders. and citing the events of last week as one reason for it highlighting the need to capture more quickly the value they see in unilever. they expect to complete that review quickly, it would seem, by april, sara. >> yeah. >> of course no shortage of speculation about what unilever will choose to do if they become

-- and of course unilever attempt. as i reported earlier, highly unlikely that they will undertake anything that would have even the scent of being unfriendly for their next deal. which may make it a bit more difficult for them. they're not under a time pressure although they do like to sort of get something moving again once they've kind of completed and digested the last acquisition. kraft heinz is, what, couple of years old at this point. >> yeah, closed in 2015, so this is around the time when they started to look for more growth. they've already boosted margins tremendously. and they're clearly hungry for new acquisition. i was at the consumer analysts of new york group meeting in florida yet where this dominated all conversations. >> i'm sure. >> who's going to be next. clearly mondelez was a big beneficiary of that speculation yesterday, although i have to say after speaking with irene rosenfeld, they're not standing still. and she's tuning out the deal news. they're announcing a new brand of snacks for healthier eating. they're continuing with their

margin targets. and it's interesting to hear investors now talking about colgate, kimberly-clark, household products makers as potential acquisition targets. difference with unilever is there's a sizable food business. >> it does. >> also colgate has 26% ebitda margin. >> yes. >> that's something kraft and 3g usually like to go after. that's already pretty high. >> i heard the plan from the kraft heinz side was to maintain both parts of the business. some have speculated perhaps it would have sold or spun off the non-food businesses. but that was not part of the plan. of course all of it quickly came to an end, sara. you and i were on tv late on friday where i talked about warren buffett's presence here and would he really want to see anything that got hostile. my understanding is -- >> no. >> -- one of unilever's bankers, michael klein, sort of an uber banker, operates on his own, knew buffett well and reached out to him and said this is

going to look bad. and buffett said, yeah, you may be right. and that may have been one of the key reasons why they stopped. >> well, there were all sorts of political considerations. also, this is a european company. not to mention the british company it was a strong currency play using that strong value of the u.s. dollar. but with prime minister theresa may making some noise over the weekend about looking at potential job losses, that is one of the strategies for cutting costs here. that was going to be a difficult pill to swallow. will they go after genone? another way to get at this international currency differential. >> with the french government now? >> exactly. they're all in election year too. so is the dutch government. and unilever has dutch headquarters as well. >> they certainly do. >> when we come back this morning, the director general of the world trade organization is with us, a timely interview this morning. dow's gone to its session highs up 16. and then, remember this from november? >> any reductions we have in upper income taxes will be

offset by less deductions so that there will be no tax -- absolute tax cut for the upper class. there will be a big tax cut for the middle class, but any tax cuts we have for the upper class would be offset by less deductions that pay for it. >> treasury secretary steven mnuchin on our air in november the day he was named to the post. he is back tomorrow right here on cnbc 7:00 a.m. eastern time. "squawk on the street" continues after a break. always obvious.pportunities are sometimes ey just drop in. cme group can help you navigate risks and capture portunities. wenable you to reach global markets and drivforward with broader ibilities. cme group: how e wod vances. hey!cole. i just wanted to think your support team for walking me through my first options trade.

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bulls be ware, according to one technical analyst the market is becoming more and more overbought. he'll show you what he's looking at on tradingnation.cnbc.com. more "squawk on the street" coming up.

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this small rut it would be the tenth positive session in the last 11. carrying the gains right now groups like utilities, materials, health care and telecom, they're all in the green. energy is the biggest laggard. we'll be right back on "squawk on the street" with the director general of the world trade organization.

amid what seems to be a growing political push around the globe against open trade, the world trade organization is ratifying its trade facilitation agreement, the first multilateral trade agreement since its establishment 20 years ago. joining us now is roberto azevedo, world trade organization director general in geneva. good morning to you. tell us a little bit about what this is and how on earth you're going to get members like the u.s. to ratify it. feels like the mood is completely shifting the other way here. >> well, the united states has actually been the third country to ratify, so it has ratified a while back. and i think there is a general perception here that this is a win-win agreement. it reduces costs, it creates opportunities, so there is no reason why we should be negative at all. it's a perfect agreement for the

times that we live in. >> what does it do exactly? and how does it fit within president trump's view of america first? >> well, i don't think anybody in the united states or anywhere else in the world believe that increasing trade costs are the costs of commercial transactions is good for anyone. and this is precisely bawhat th agreement does. it reduces the cost of doing business across borders. and if we have the numbers correctly, and i'm pretty sure we are in the ballpark, this agreement would reduce trade costs by around 14.5% globally. that means increasing exports and global trade by $1 trillion every year once the agreement is fully implemented. so this is huge. it would also add a half of a percentage point to global gdp growth. so it's a win for everyone. and i don't think that anybody

feels otherwise. >> i get that it comes at the cost side of things. what about some of the policies that are being discussed here in the united states under the gop's border adjustment tax plan, the president has threatened tariffs, import taxes on things like cars, are you preparing for an influx of complaints and new cases from countries around the world for what we're about to see out of the u.s.? >> i think we have to wait and see what actually comes out as trade policy. the trade policy team in the united states being set up, the new usdr would be my chief -- not in place yet. i think we still have to have a conversation and that would happen once the confirmation is done. there is a lot to -- a lot of uncertainties, a lot of talk about what may or may not be. and i cannot act on the basis of that. we have to know what it is and

then we'll decide how to handle that. >> but can you characterize any change in u.s. policy that would be considered illegal or that would run afoul of wto treaties? >> it's difficult to tell. you have to see -- in the wto, most things are examined on the basis of the text -- what is the law, what is the regulation. every comma has a meaning. every word can be interpreted in different ways or can mean different things. and i think that we have to wait and see how legislation is put in place, what actually becomes law. at that point in time, then members will scrutinize it, so it is not the wto that is going to be out there finger-pointing, saying you did this right, you did this wrong. it's members that are going to be doing that, and other countries are going to say this is fair, this is legal, this is not. and then they will have that conversation. we have to wait and see how that devolves.

>> but specifically on the rules question that carl asked, i mean, the border adjustment tax as it's being laid out now in the republican agenda taxes u.s. imports. u.s. exports are exempt, and that includes income. doesn't that break with wto rules? >> there are certain types of taxes which are allowed to deduct in your calculations, for example on exports. other types of taxes that are not. there are taxes in between. there are a lot of gray areas here, so i don't know and i don't want to speculate before we see a natural law or bill, legislation in place. at this point in time, it will be speculating. >> candidate trump has called wto a disaster. do you see any possibility of the u.s. actually withdrawing? and what would that mean for the organization? >> i haven't had any indication

that this kind of action is even being considered. so, i really have nothing to say about that -- >> on the campaign trail -- >> i clearly think that the wto -- yeah, well, a lot is said on the campaign. i want to know what the actual administration's policy's going to be, how the wto can help and deal with some of those problems. a lot of the things that i heard also during the campaign and afterwards are things that the wto handles on a day-to-day basis. maybe that's something that we need to talk about. >> finally, what about brexit and the negotiations from the uk leaving the eu? how messy do you think that's going to look like when it comes to some trade agreements or disagreements? >> well, it depends a lot on the terms of the divorce, i think. the first step here is what will be the commitments of the uk under the wto with the other

members? how will the uk and the eu agree on the terms of separation? that first step between the uk and the eu is going to be fundamental for the subsequent steps. so, there is still quite some way to go. it's difficult to predict now what the outcome will be. what i sense is that as far as i have been able to see, i don't think that people are looking for turbulence. i don't think turbulence is good for the global economy at this point in time. so, if we can help to have a smooth transition, we will do our best to achieve that. >> we hope you'll join us as some of these issues come to life and get adjudicated. but for now, thank you so much, roberto azevedo, director general of the wto. now jon fortt has a look at what's coming up on "squawk alley." good morning, sara. apple's trading near all-time highs this week, but it's also getting ready to move into new digs in silicon valley, so is

the new headquarters going to distract them or actually move them higher? we will dig in. also, uber, the ceo's given an apology, but is that enough? and some snap judgments, not all analysts happy with snap inc., the snapchat parent's upcoming ipo. we'll dig into all that and more coming up on "squawk alley." ♪ some things are simply impossible to ignore. the strikingly designed lexus nx turbo and hybrid. the suv that dares to go beyond utility. experience amazing.

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let's get out to the cme group in chicago. rick santelli with "the santelli exchange," as the dow goes positive, up seven. rick. >> yeah, wow! and big existing home sales. listen, i'd like to welcome robert kelchin as my guest today. robert, thanks for taking the time. >> thanks for having me on. i appreciate it. >> i'm really excited because i'll tell you what, before the election, i was paying very close attention to the rate of repayment with student loans, especially considering that students, young people are a big block with regard to outcomes of elections. and what i've found is that you were quoted in a "wall street journal" article after the election in january titled "student debt payback far worse than believed." robert, what i want to know is, how did the department of education screw this one up so

large and want to put a face on exactly what occurred for our viewing audience? >> sure. so, what the department of education said was is there was a coding error in how they calculated loan repayment rates, which is the percentage of students paying down at least $1 in loan principal. and what happened was when they corrected the error, loan repayment rates went down about 20 percentage points. so, now three years after a student enters loan repayment after college, a majority of students are not repaying $1 of their principal. >> you know, robert, i guess when i stand back and consider this, i can't help but think of another issue that bothers me. if this was a private entity or a bank, i think the federal government regulators would have come down on them extremely hard. has there been any recourse? you know, we're talking over $1 trillion. student debt here. this is a big deal! >> to this point, there hasn't been any recourse, and part of it is the department of education released the data

friday afternoon before martin luther king day weekend, which was the last weekend in the obama administration. so, some of the people who made the decisions have already left, and others may have been acting in good faith and just made an error that wasn't corrected for months. >> how can we prevent this from occurring in the future, considering the metrics on this and the potential for a taxpayer bailout seem to have risen dramatically from september to january? >> the easiest way to fix this is to audit the data. have policymakers, have researchers come in and look at the numbers, and can they calculate the same numbers that the department of education is? >> you know, when it comes to the final answer here, what i want you to tell me is, is there any defense for the board of education not outsourcing some of these statistical issues to a third private party, "a," that

may be more accurate, and "b," if they're not, we can get rid of them. your final thought. >> at the least, other people should be able to check the data and access the code. others make theirs public to check for errors. the department of education can as well. >> robert, thank you for your thoughts. >> thank you. >> this is an issue i want you to come back and visit us again if there's any update. >> i'd love to. >> now back to carl and the beginning of "squawk alley." >> rick, thank you very much. rick santelli. good morning. it is 8:00 a.m. at apple park in cupertino. it's 11:00 a.m. on wall street, and "squawk alley" is live. ♪ here comes the general, ladies and gentlemen ♪ ♪ here comes the general, the moment you've been waiting for ♪ ♪ here comes the general, the pride of mt. vernon ♪ ♪ here comes the general, to washington ♪ ♪ we're out-gunned, out-manned, out-numbered, out-planned ♪ we've got to make an all-out stand, and yo ♪ ♪ i'm gonna need a right-hand man ♪ ♪