. good morning. stocks slide. the major averages lose their grip on record highs as financials lag. replacement revealed. the long-awaited republican plan to repeal obamacare has been released. what the proposal means for the economy, insurers and consumers coming up. and soda tax spillover. two months later, we're seeing the economic feblgt effects on philadelphia's tax on sweetened drinks, and it's not a pretty picture. it's tuesday, march 7, 2017, "worldwide exchange" begins right now. ♪

good morning. welcome to "worldwide exchange" on cnbc. i'm sara eisen. >> i'm wilfred frost. good morning to you from me as well. welcome back. >> thank you. >> let's get straight to the market action. should we pause and discuss vegas? was vegas good? >> breaking even is always a success. >> you can't be a cnbc commentator and breaking even is all that you need to do. >> you need not to lose. shout out to some of the great dealers who say they watch "worldwide exchange" when they get home in the morning. >> at 2:00 their time? i like that. good for them. they go from gambling in one sense to educated investing. >> exactly. not always, but we try to make it educated and give you an edge. but your trip to vegas has made me want to book. i'm going soon. back to the markets. u.s. futures are mixed. you can see the dow fractionally

higher. s&p and nasdaq lower. yesterday all three declined. 10 out of 11 sectors, the s&p was lower. that sounds bad but overall declines were a third of a percent. the only sector in positive territory was energy. slightly surprising because we did see oil prices down. materials were the most negative sector overall. a bit of a split between those two commodity sectors. we did get a bill on the table. we'll discuss that in terms of obamacare, encouraging how quickly it is coming, encouraging that speaker ryan suggested it could be passed by easter. in reality we expect it to take longer. what does that mean for the more financial impacting reforms like tax reform and financial deregulation. let's look at the ten-year treasury note which was flirting with going above 2.5% yesterday. it has broken through this morning, 2.509%. iing economic data to share with you.

australia left its cash interest rate unchanged. in asia, china's foreign exchange reserves rose, the first increase in eight months. let's show you what happened overnight in asia. fractional declines for the nikkei in japan following that sethat selloff yesterday. new data out of europe, german industrial orders falling 7.4% in january. the biggest drop in three years. the figure was almost three times the consensus of 2.5% decline. also just getting reviewed q4 eurozone gdp. 1.7% year over year. european shares mixed this morning. the ftse 100 up slightly. slightly softer uk house price and retail inflation data. all in all, a mixed picture. want to pause on that german data.

yesterday was framing the fact that deutsche bank is going to tackle capital issues coming two weeks after unicredit has done the same. as a positive, if they can draw a line under the sector and some banks analysts have been framing it that way, potentially a turning point with them. had a back and forth with jim cramer on twitter yesterday saying i love germany right now, yes, it's encouraged, but in a relative sense. in the way they're seeing their reflation trade, the way the u.s. saw earlier. where evaluations are, things are looking more attractive. still a long way below u.s. valuations, particularly if you look at bank sectors. it is all relative. we still have big, big problems if europe. it's more of a short-term cyclical pick up and there are still big political hurdles to get over. wanted to offset that resounding positivity off the back of what could be positive for the banking sector. >> we have a thursday ecb meeting. >> we do.

they are reaching their 2% target. so far the quantitative easing has been working. the question is will some of these political shocks, especially in bigger countries like france have to bring the ecb -- the ecb always steps in as the lender of last resort when political problems are so great, that it impacts the bond market and leads to questions about a euro breakup, will draghi have to come back. >> it is still reliant on loose policy, lots of political hurdles. the one thing i agree with is that the euro is artificially weak because of politics. if we didn't have the politics, you could see a meaningful bounce. >> also central bank policy divergen divergence. >> politics certainly a big factor affecting the you'euro currency.

>> wti hovering just above $53 a barrel. 53.29. brent just above $56 a barrel. up a little less than 0.2%. as for the u.s. dollar, let's show you what's happening in currencies now. speaking of the euro, it is weaker again this morning. 1.0564. dollar strength against the yen, not such pronounced moves this morning. but that is a trend worth watching, as we see whether u.s. equities can bounce back. u.s. dollar crossing above 114 again versus the yen. still in a tight range. and kind of flattish for the year. despite the fact that u.s. stocks is broken out. as for the pound, it's weaker, just below 1.22. 1 tnt 1.2183. >> that's on the back of weaker house pricing data this morning. when we drop below 1.22, we get to 1.20 quickly. we need to watch that. but the decline from 1.25 to 1.22 this morning has happened

quickly already. all eyes tomorrow on chancellor phillip hammond's budget. >> quickly gold. five days of declines in a row. longest losing streak since november as the dollar reasserts itself. the top political story, republican leaders on capitol hill releasing their much anticipated bill that would replace obamacare. here are some headlines. it ebol lishs the mandate that people are required to have insurance or pay a tax penalty. it also gives states flexibility to set up their own programs. among other changes likely to receive political attention, medicaid enrollment will be frozen at current levels. tax credits used to pay for insurance based on age and income. some parts will stay. the gop plan still requires insurers to cover pre-existing conditions. and the other big one is that

children can stay under their parents insurance plan until they are 26 years of age. those are two provisions president obama asked president trump to keep. democrats argue the proposal will raise costs, cut benefits and limit coverage. house speaker paul ryan says he wants this bill passed by easter, just more than a month away. house committees will vote on the 123-page legislation tomorrow. let's check out some stocks that could be impacted. very little impact. starting with insurers here. we should say many of these stocks popped after president trump's address to congress last week. they have had a strong run up since the election. analysts say insurers could benefit from having more flexibility to offer plans, more of a market based driven system. the hospital stocks have been big movers since the election. obamacare as a whole helped hospitals take off by cutting

the number of insured patients who could otherwise not pay their bills. they sold off after the election on this idea of repeal and replace. they have come back strong in 2017 on the idea that the replacement will be elusive and hard to change versus the current system. i'll watch hospitals. one big mover there is tenent health care. a few etfs to watch as we go through the day. xlv is the healthcare etf. and xhs focuses on healthcare services. this is the blueprint. it is out. it is a major step for republicans it also raises questions. two key questions from republicans and as this gets digested, how much it will cost. >> no estimates on that yet. >> and will the tax credits, those credits to pay for healthcare, which is the big replacement, will those be enough to help low income people get healthcare so they don't

have to deal with people losing out as a result of the replacement. >> that's the key thing for those various healthcare stocks. this is encouraging for all of those other items on the agenda, whether it's tax reform, financial deregulation, et cetera. we have a bill. we have an ambitious timeline from the speaker in terms of when this gets passed. we need to speak to john harwood and the rest at 5:30 to see if that's realistic. this is the first big item on the agenda we got. and we can start moving forward, rather than have these executive orders and rhetoric going back and forth. we need these to get through congress before the tax reforms. >> that's the caveat, will it get through congress? a few republican senators yesterday flagged the idea coming from states like ohio where medicaid expansion has been key, that they will not vote for something if it puts an end to that. so will that be a question that

everyone is asking about. >> 12 pag3 pages you said it wa? >> yes. >> we will speak to mr. harwood at 5:30 a.m. a pair of economic reports to watch t. the january trade deficit at 8:30, followed by consumer credit. jack daniels and corbell's sparkling wine report before the open. a couple whiskeys in vegas? just focused on the gambling? don't want to lose your luck. >> it's nice they offer free drinks. >> only to the big high rollers. moving on, still some more earnings, dick's sporting goods and h & r block. i now want to go. >> i can tell.

the stocks to watch, snap, shares of snapchat's parent company falling 12% yesterday and closing the regular session below the first opening day price of 24. some analysts weighing in yesterday, not too positive. the question was how long would this pipeline debut last? i thought it was interesting on friday that shares rose 10%. we'll see where this shakes out. >> huge volume as well throughout. friday was by far the biggest, almost double the next biggest bank of america. yesterday it was the biggest in volume. still to come, savit savita subramanian, we'll get her take on global markets as a march rate hike becomes increasingly likely.

welcome back. u.s. equity futures are mixed to little changed after a selloff yesterday on wall street. dow futures up two. s&p futures down two. nasdaq futures down five. watching the healthcare stocks today, joining us is the head of u.s. equity and quantitative strategy from bank of america merrill lynch. good to see you. >> thanks. great to see you. >> before we get to some of your calls on the markets, in terms of this replacement of obamacare that the republicans have laid out, what are the market

implications if any for some of these healthcare stocks? >> sure. it depends on what the obamacare is replaced with. you know, what i fine interesting about healthcare, everything in the sector has traded down as though it's the end of the world. and, you know, there's a lot of risk around healthcare. we don't know what the new -- the new kind of replacement will look like. we don't know what implications are for drug companies which are being scrutinized for pricing. but what i find interesting is healthcare is trading at the lowest of our data, which goes back 30 years. the sector is discounting risk. where we will probably see the biggest impact is managed care companies, which analysts have written about. a fraction of the sector and has sold off aggressively. we are overweight healthcare,

because i think the risks within the sector are overly discounted. and, you know, it's actually been posting pretty strong growth. it's, like i said, cheaper than it's ever been. so it looks to me like a buy at this point from an overall basis. >> talking more broadly about your view on markets, i see one headline in your note, we expect the market to overshoot fair value what is fair value? how much further can we go past it and for how long? >> yeah. interesting. we have five different ways of calling the market that we look at on a regular basis. our fair model is at close to 2,200 for the market. our official target is 2,450 for year-end predicated on the idea that in the late stages of a bull market fundamentals take a backseat and sentiment and flow

s and technicals drive more performance than valuation and earnings growth or these factors that we as fundamental analysts care about. so what you typically see at the end of a bull market is a market where fundamental investors don't feel good about buying, yet it still keeps going up. that's what we're looking for this year. the idea that there's a big wall of money still sitting in bonds and cash that has the potential to move into equities and drive the market significantly higher. >> it is a good point because the wall street bull market turns 8 years old this week. >> that's right. >> so it's always a good time to trache stock take stock market of where we are. what about valuations, especially post the election. where does that leave stocks? how expensive are they? where do you come down on this debate about where veil wag eva

can trigger -- >> that's a great question. we look at about 20 different ways to value the equity market. basically the only way the market looks cheap now is relative to bonds. that's been the case for the last eight years now. but here's the thing, valuation is a terrible near-term market signal. in fact, i'm a quaunt, i look at r squareds a lot, and that's basically zero when you think about what happens to the market over the next year or two. what does matter is the next ten years. we think at this entry point, returns over the next ten years could be below average. for the next 12 months, the most important signal to look at is sentiment. while it has grown more optimistic post-election, we see

a lot of asset allocators sitting in overweight positions in bonds and cash. that's where i think the catalyst for stocks could reside. >> so you see more room for upside just based on the fact that more money will shift around from bonds to stocks? you don't see signs of exuberance or hope and optimism running high on some of these policies? >> absolutely. not yet. that keeps us calling for upside rather than down side. one moddinmodel, we track how b or bearish wall street strategists are on stocks. right now wall street is recommending a 53% allocation to stocks in a balanced portfolio. and that's pretty light if you think about the run rate allocation which has been more like 60%, 65%. so, our view is with, you know, with skepticism last year turning into optimism, we are

not at that point of complete exuberance, equities are the only asset class in town, you have to buy, buy, buy. that's the point at which we would be sellers. we don't think we're there yet. >> thank you very much for joining us this morning from london. we're hearing that so much. evaluations are stretched, they're high, they're long, no matter what, above average no matter which indicator you look at. but they're not indications of market timing. >> on top of that, people like jim would tell you that earnings season is playing catch up to that. and if that continues at that pace, they'll be justified. >> i'm not on that side of the view. still to come, philadelphia slaps a tax on sugary drinks and beverage companies are seeing sales declines, job losses and consumer cost hikes. sara is the only person that knows all the facts on this story. she will be telling us what we need to watch out for after this break. and we'll ask what other

cities could soon follow philadelphia. you won't see these folks at the post office. they have businesses to run. they have passions to pursue. how do they avoid trips to the post office? stamps.com mail letters, ship packages, all the services of the post office right on your computer. get a 4 week trial, plus $100 in extras including postage and a digital scale. go to stamps.com/tv and never go to the post office again.

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. welcome back. an epic battle brewing in the city of brotherly love and it started with a new sugary drinks tax. the stakes are high for the beverage industry as other cities are looking to follow in philadelphia's footsteps. sara has been digging into the story and has some new numbers for us. >> it's a big deal, philadelphia is the first major city to tax

sweetened drinks. for context, the cost of a 2 liter bottle of soda, a little over $2. two months in, started in january, an according to the industry, there's been a 40% drop in sales for pepsi. a 10% to 15% bump on sales outside the city. not an offset there. so pepsi says they're in the process of cutting 80 to 100 of its 423 jobs in the philadelphia metro area. we can report fresh numbers out of coca-cola. supermarkets have seen a fall of 30% to 50% in volumes of beverages sold. many are cutting shelf space for beverages as result. for soft drinks, teas, juices by as much as 50%. coke is also finding that traffic is falling in supermarkets around the border.

no job impact yet at coke. they have not announced layoffs. they have more than 700 people in the metro area. here's the interesting thing. if you talk to the mayor's office, you will hear a completely different story. the city raised 5$5.7 million i january from the tax, more than double what was projectsed. it is expected to bring in 91 million for the year, it's funding libraries, parks, pre-k programs which the city says has created 240 jobs, most of them full time. the city says it is a big success even with falling sales and is skeptical of the job losses announced at pepsico. it is working to fact check those claims. this is important, because other major cities are watching. cook county in chicago, they passed a similar tax which will go into effect in july. boulder and san francisco also pass the similar measures. one to watch is santa fe which has a hearing on the issue this week. the bottom line is not so

material yet for some of the companies we cover, coca-cola and pepsi, we're talking at the city level, but if we start getting to the state level on this, that's when it could really be a problem for north american beverage sales. keep in mind, consumption of soda has already been declining for ten years. this does not help if the prices are raised. >> the mayor's office not concerned. is their original to boost tax revenue or encourage people to drink other things? seems like it's the latter they're driving more than the former? the way they campaigned on this issue is that to raise tax revenue for programs like pre-k, which they say are already working. you might say the drop in sales in consumption is a good thing ultimately for the city and the municipality because it could get diabetes rates down. they have a higher than average diabetes rate because of the disproportionate large low-income community in philadelphia. but they did not sell it that

way. others are. it's heating up. it's a popular way to plug budget holes, but the question is are the jobs losses we are seeing now get into the politics and make it less appealing. >> still to come on "worldwide exchange," the top stories and a round up of the global markets. and meet the world's most expensive suv. will tell you what makes the mercedes g class 650 so special and how much it will cost you after this short break. i wouldn't get it in white, otherwise i'm looking forward to hearing how much it costs.

what's critical thinking like? a basketball costs $14. what's team spirit worth? (cheers) what's it worth to talk to your mom? what's the value of a walk in the woods? the value of capital is to create, not just wealth, but things that matter. morgan stanley

good morning. markets now, global investors weigh the impact of an expected fed rate hike. republicans reveal their highly anticipated obamacare replacement plan. a live report straight ahead. and backed by jay z, the hip-hop mogul just dropped something new and it's not a song. details of that coming up. it's tuesday, march 7, 2017, you're watching "worldwide exchange" on cnbc. ♪ good morning. welcome back to "worldwide exchange." i'm sara eisen. >> i'm wilfred frost. good morning to you from me as well. let's get straight to the global market action this morning. a mixed futures board. a half hour ago, the dow was

slightly higher, we're now red across the screen. as you can see, a point or so for the dow. a couple points for the s&p. all three were in the red yesterday. not huge declines. 0.3%. it was a broad decline, 1 out of 11 sectors were negative. materials was the most negative, and energy the best performing sector despite oil prices being fractionally lower. let's look at stocks around the world. out of asia, the china fx reserves rose for the first time in eight months. good news, taking the total back above the $3 trillion level. the question will be is this the start of a trend or a one-off month. if it's the start of a trend, it gives them more monetary flexible to do other things. we'll keep an eye on that. broadly, as you can see, gains for hong kong and china by a third of a percent. japan slightly lower. in europe, some early signs of a slow dodown in germany.

we were forecasting a slight drop, but 7.4% month on month drop bigger than expected. something to keep in mind to offset the otherwise positive data coming out of the region. performance in the equity markets has been mixed this morning. as for the broader market picture, saw minor decline in oil prices yesterday. down a quarter of a percent. that looks like it's reversing a bit this morning. wti crude up more than a tenth of a percent. 53.27. brent, 56.05. nat gas down a percent. as for the ten-year treasury note yield, we were sitting below 2.50 on the ten year yesterday. we crossed that level this morning. yields inching back up again. the big test is the jobs report

on friday. it's the last jobs report before the next fed meeting, where all indications point to an interest rate increase. the estimate is 200,000 to be added during february. the ten-year yield above 2.50. the u.s. dollar, higher yields on the short end of the curve has helped keep the dollar higher. it is just a bit firmer against the yen. lost a little steam in the last half hour or so. trading just below 114. the euro, dollar is stronger against that by a tenth of a percent. most notably stronger against the pound by 0.3%. you mentioned british data there. gold prices, weaker, sixth session in a row here. gold is on a long losing streak. five straight days of decline. longest since november. yields higher, fed rising interest rates. that all changed last week in terms of the probability going into the fed meeting.

>> let's focus on washington. house republicans unveiling long-awaited plan to dismantle obamacare what is in the proposal? john harwood has all the details from washington. good morning. >> both good questions what we've seen is president obama -- excuse me, president trump lamented a couple weeks ago, healthcare is extremely complicated and the process of producing legislation is complicated. the house, energy, commerce, weighs and means committees last night rolled out their versions of plans that they'll start legislative action on this week. they tweaked earlier versions of the plan to make it more like obamacare to try to smooth the way to passage. let's look at the ways it's similar. this republican healthcare plan provides subsidies, tax credits for the purchase of health insurance. secondly, those subsidies vary by income. third, it preserves the obamacare protections for people with pre-existing conditions. they can buy into plans.

the premiums will be higher. you have got also adults up to age 26 that can stay on their parents plans. and you have also got preserving the cadillac tax, very controversial part of obamacare. here's how the house republican plan is different. you have burdens shifted. the burden of healthcare premiums from younger, healthier patients on to older, sicker patients. fewer protections for people who are older and have health problems than there were before. second of all, you have reduced taxes on the wealthy. those are rolled back under this bill. though there's a year delay. finally a reduction in the amount that go to states for medicaid. that's going to be controversial with republican governors. now, what does it all add up to? there's question marks over this plan. one, what is the effect on the federal budget? two, what is the effect on the number of people who have health insurance? the reason we don't know the

answers to those questions are that the congressional budget office and the joint tax committee have not yet scored these plans. actions will begin without those analysis, though they will have to have those analyses before they go to the house floor, which leads to the final question which is can they get 218 votes in the house for this? it will be very difficult for them to do. you had immediate reaction from the conservatives, the house freedom caucus condemning this plan as obamacare light. obamacare 3.0. on the other hand, democrats, who because it is from their point of view and the point of view of constituents somewhat worse than obamacare, they won't support it either. can they thread that sweet spot? we don't know the answer. remember the prediction that john boehner made a couple weeks ago, they won't really get rid of obamacare, they'll put a conservative box around it. this plan suggests john boehner may have been on to something. >> let's talk about the political potential sticking

points. especially among senate republicans. that medicaid piece seems to be one with senators like rob portman coming outgoing against it. does this appease them? i think it will be phased out. the other big sticking point, i would think, is about de-funding planned parenthood, not allocating money to that, and how much of a stir that will cause in washington. >> that always causes a stir. though i don't think that's make or break on this bill. until we get the scores from the cbo, we won't know what the reaction is, because it will preserve the obamacare expansion of medicaid, first of all, undisturbed for three years, through 2020, so states that have expanded can keep adding more people to the roles. states that have expanded, can't

expand. as of january 1st, 2020 there's a freeze on the expanded and they hope the expansion will whittle away as some people on medicaid, their income changes and they cycle off due to natural economic changes. but what is the net effect going to be on coverage for people like rob portman of ohio, shelly moore capito of west virginia who have people who have benefited from this expansion, we don't know yet until we get the scores. >> bottom line, speaker ryan's ambitions of getting this passed by easter, is that realistic, and until that's done and dusted, do we have to wait for tax reform? >> yes, we have to wait for tax reform, and no, it will not be on the pltresident's desk by

easter. paul ryan is mindful of the pressure from the republican base to do something that they promised to do for seven years. he will try to get this done. but getting those 218 votes, as john boehner discovered when he was speaker, not easy at all for a piece of legislation like this. >> we'll wait to see the scoring. the biggest question are the tax credits jgenerous enough to covr the low income population? >> that depends on what's enough. they will be less generous than the obamacare subsidies but more people than people like the freedom caucus want. that's the complaint, among people like rand paul and the house of representatives, they say this is just a brand-new entitlement like obamacare, and on that basis they oppose it. >> john, thank you very much for joining us. back to corporate news. two tech giants are joining forces in the market for ai. landon dowdy has more.

>> good morning. salesforce announced it is partnering with ibm and artificial intelligence. the goal is to help companies better target companies with products and services by offering an intergraded ai platform that can combine watson with the salesforce einstein technology. they will not share revenue and they will continue to sell services independently, but the deal could make the system available to any company with a sales team. marc benioff said he is optimistic about the new opportunity. >> it's very exciting. we just released our spring release of salesforce. all of the customers around the world have einstein built into their salesforce implementations. because salesforce einstein is built into our declarative platform. now we will augment that. >> the new ai services will be

available in the second half of 2017. sa shares of salesforce is up 2%. >> einstein and watson, a powerful combination. landon, thank you. top trending stories. jay z's new venture capital firm has arrived. rock nation set to begin funding early stage start-ups through the platform called arrive. the new firm is focusing on investing in start-ups that have a social impact. we knew he was an entrepreneur. >> i love this helps with marketing, branding, something he has an influence on. >> probably not his first go, either. he funded tidal. mercedes is making the world's most expensive suv. the new mabach g sport, a price tag of half a billion. the luxury suv will have

designer leather chairs and thermal cup holders among other features. i hope it has other features, i wouldn't pay half a billion -- half a million. i did read that incorrectly? >> half a million. >> still expensive. coming up a look at where european equities are trading at this hour. stay tuned, you're watching "worldwide exchange."

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welcome back to "worldwide exchange." time for our must read stories. my pick is from project syndicate, by jim o'neill, trade truths from trumpians and brexiteers. as chinese household income continues to rise, demand for some of the u.s.'s most competitive goods and services will only increase. trump, rather than spewing nonsense about china manipulating currency, should be encouraging market forces to rebalance bilateral trade. the same can be said for the u.s.'s external deficit. unless it can boost the savings rate it will continue to need foreign capital inflows, this will require it to maintain a trade and current account imbalance. his point in this, he makes it using germany, the latest bit of trade data out of germany says total ek ports and imports for 2016 indicate germany's largest trading partner is china. it's not the u.s. or france, not

the uk, and he's saying you can try to force the hand of which way the trade balance works now, that might impinge it later. and as china gets richer, as the gdp per capita goes up t changes from being a net exporter to the u.s. to the net importer. you will only impact that in the future. it's normal that an emerging nation will have -- be a net export toer to a developed nati. the u.s. could be hurting itself down the line. this offsets what peter navarro is writing about. >> this is the opposite of what we hear from the white house. >> i would say read the two next to each other, it's the strong arguments from the people making them in terms of pro trade and anti-trade. >> a big debate, are deficits bad or good or meaningless from an economics perspective? clearly navarro in the white house is arguing that they put us at a disadvantage. we heard that from president

trump as well. >> net, you want the u.s. to come to a position to have a trade surplus, but you won't have that with each and every individual company. and it's normal toll have a deficit with an emerging nation. the rhetoric is that a deficit with a country is bad, that's wrong. navarro's argument was compelling when you read it. jim o'neill takes the other side, it's good to read both. >> ywe're approaching the top o the hour, that means the team is getting ready for "squawk box." becky quick joins us from new york with a look at what's coming up. >> good morning. >> i get apprehensive when i get

a new barber. >> you have a new hair cut from yesterday, don't you? >> interesting you point that out. it's washed. >> less hair spray. >> we'll take that. coming up today, continuing on your conversation, trade deficits an such, we'll meet with michael froman, he will talk to us about what he sees with trade going on around the world and both of those articles that you mentioned, we will talk to him about that. we'll also talk to him about the new healthcare plan that's been proposed by the gop. those on the right are calling it obamacare light. those on the left are saying it will leave too many people who are not covered still not covered. we will be joined by larry

bucshon. we will also be talking venture capital with alan patricof and what he thinks about snap. and our guest host from 7:00 to 9:00 is barry sternlicht of starwood capital, involved with everything from real estate to homeownership to oil and gas. even some other energy types out there. solar energy. wind energy. we'll talk to him about a lot of issues coming up. and we have bob dahl, who will be our guest host from 6:00 to 7:00. >> sounds good. coming up, a rally taking a pause. we'll get you up to speed on the trading day ahead. as we head to break, don't miss wilfred's exclusive interview with the ceo of barclays,

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welcome back. u.s. equity futures fractionally lower at this hour. down five points on the dow, coming off a third of a percent of a decline yesterday. joining us now is james lu. thank you very much for joining us. probability of a march rate hike has increased significantly but markets resilient in the face of that. >> i think there's been some volatility recently. i think the markets are remembering that monetary policy still matters. you went through the last year with people writing off central banks in favor of fiscal policy and regulatory policy. maybe this particular rate hike in and of itself is not a big deal, but it's more about what it says where we are in the business cycle. you look at the jobs report, adding 180,000 jobs a month. initial jobless claims to the lowest-point they've been since

1973. you have the fed watch at 1.9%. we're not early or in the middle part of the cycle, probably towards the later stages. i understand investors have a fear of missing out. from a long-term asset allocation standpoint, we're late in the cycle, which might take advantage of prices and reduce risk slowly. >> investors have fomo. >> it's the fomo rally, that's what we keep hearing about. you're saying the dow is up 15% since the election. where are the opportunities in the market? nks from a broad mark . >> valuations are the highest since the tech bubble. you have earnings which would have to accelerate further off already lofty expectations in order to justify valuations. we think that that's pretty much fully baked into the market. if you are trying to deploy new

cash into the market, you probably have to look at individual sectors and stocks. from a sector perspective, there are more attract tef areive are others? >> like what? >> financials are priced in. they have come quite a long way. a lot of that was already on the back of news about deregulation. we think that the consumer sector will probably benefit the most from any surge in economic growth that we might see later this year. >> what about around the rest of the world? the german data this morning, which is disappointing, a slight reminder that things are not off to the races. have u.s. investors become overoptimistic about the state of the rest of the world? >> we think the markets are not pricing in the amount of risk out there now. the vix is around 11. one of the lowest levels we've seen since 2014 on the sustained basis. you still have, like you said, poor economic data that's coming out of germany. poor economic germany out of greece. french elections coming up.

a lot of event risk and a debt ceiling potential crisis that may be coming next week. you take in all of these factors, the level of volatility in the market probably is not justified. >> quickly on healthcare, you have read the replacement that republicans are putting out? what are the implications for the sector? >> so the problem with healthcare is that it's run so far this year. it's the best performing sector at this point. until we get the actual details, just like with tax reform which may not be -- which may take another four to six months, it's hard to say what will be priced into the sector. the other problem with healthcare is the amount of backlash and downward pressure on pricing that we've seen for a lot of the pharmaceuticals. that's been the issue over the last year and a half so we think the consumer sectors will benefit. healthcare probably has run far. on the financial side, a lot is baked in from a deregulation standpoint. >> james, thank you very much.

>> james liu of clearnomics. you have a little vegas reference in there. chips off the table. >> by accident. >> "squawk box" is next. your path to retirement may not always be clear. but at t. rowe price, we can help guide your retirement savings. so wherever your retirement journey takes you, we can help you reach your goals. call us or your advisor t. rowe price. invest with confidence.

good morning. now we know, healthcare overhaul, republicans rolling out their plan to replace obamacare. we'll tell you what it means for insurers, customers and investors. stocks slip a bit yesterday. major indexes retreat from record highs. financial stocks were the laggards. jobs in america. the latest read on small business hiring. the big jobs number coming this friday. it is tuesday, march 7, 2017. "squawk box" begins right now.

♪ live from new york where business never sleeps, this is "squawk box." >> good morning. welcome to "squawk box" here on cnbc. live from the nasdaq market site in times square. i'm becky quick along with joe kernen. andrew is off today. our guest host is bob doll, chief equity strategist from nuveen. you ready to go? >> ready to roll. >> are you picking things out as we're going through this morning? >> i'm trying. >> we'll talk to him about some stock picks in a moment. a look at u.s. equity futures. markets were slightly weaker yesterday. you can see red arrows again this morning. modest declines at this-poin po. the dow would open down by 13 points, the s&p down by 3 1/2 points. nasdaq down about 9.5