good morning. u.s. equity futures staging a comeback after the dow and s&p suffer their worst days since september. a developing story. a new special counsel appointed to oversee the investigation into russian interference in the presidential election. and breaking overnight, facebook fined by the european union. why regulators say the firm misled regulators while acquiring whatsapp. it's thursday, may 18, 2017. "worldwide exchange" begins right now. ♪

good morning. welcome to "worldwide exchange" on cnbc. i'm sara eisen. >> i'm wilfred frost. it's throwback thursday. throwing it back with this 1999 hit, "blue." >> did this make it to the uk? >> it did. >> not sure how many other songs by the group did. >> this sounds very europe. >> it does sound like german te techno music. >> let's check in on the global markets. dow futures are up 14. s&p is up 4. nasdaq up 1.5. this after the worst day for the s&p and dow since september, worst day for the nasdaq since june 24th of last year. that was the brexit day we action. broad based. financials took it the hardest.

the ten-year treasury note yield yesterday slipping to a one-month low. that was why financials were some of the hardest hit names yesterday. there we sit at 2.21 on the ten-year. little changed this morning. >> a big move yesterday. equities a focal point. we sat here yesterday and said so far it's only been the dollar that's reacted to the prior ten days of political movement. yesterday clear reaction in equities and the bond market. let's look at what's happening around the rest of the world in reaction to this. asian trade is soft off the back of that weak day in wall street. big move down for the japanese nikkei. that is more in reaction to such a strong move in the yen yesterday than anything else. we have had strong q1 gdp from japan topping expectations. despite the strong gdp print the

nikkei is moving south because of a stroke move higher in the yen yesterday. let's look at european trade. also soft in reaction to that wall street softness yesterday. you would say not too sharp the move south. the ftse 100 down a percent. germany and france only down a half percent. that contagion around the rest of the world exists, but not too pronounced. >> also got sold off hard yesterday. >> we also had uk retail sales this morning for april, 4% the growth year-on-year, much better than the forecast. >> the weak pound. >> it is the weak pound, except it pushed the pound back above 130 for the first time since october. so weak in the long-term perspectives, but strong in the case of the last couple of weeks because the dollar has been so weak. >> as for the broader market picture. let's show you what's happening with oil prices which turned up yesterday on the back of a draw down in crude supplies that we

got from the government number. crude prices down a bit this morning. a quarter percent. just below $49 wti brent is off by 0.2%. nat gas is positive. as for the dollar, the big forecast of global markets, it is weaker against the yen, but just barely. fractional move there. that's reversed from yesterday where there was a lot of selling of dollar and buying of the safe h haven yen. the dollar is stronger against the euro today. euro made it up to 1.1134. a six-month high against the dollar. the dollar is reversing this morning. could be a better sign for stocks. even though cramer said the weak dollar is such a positive for stocks, certainly multinationals, they've been hoping to see that in earnings, right now the correlation has been strong dollar, strong stocks. whether it's the trump trade, the u.s. growth trade, the fed

hiking rates trade, whatever it is, the economy is on firm ground so you buy u.s. assets. >> more to the point, that had been the correlation until about six weeks ago. then the dollar moved south but not equities follow. yesterday was an important day for the bulls to realize, look, maybe this negative move could be correlated as well. those people that hold on to that point that it's good for earnings, earnings have been good, this is a buying opportunity, fair point for most things, but this was a big single day move down. you saw volatility pick up and volumes pick up. i think in the short-term today, those people can wake up with a sense of reassurance because of futures markets, europe and asia is not too soft and the dollar has stabilized a bit. >> you never want to see two sharp moves in foreign exchange. that's always disruptive to economies and earnings down the road. this should be a tailwind for earnings down the road.

also wanted to mention gold. it's coming off five straight days of gains. safe haven assets like gold have been in demand. it was down a bit earlier. it's now flattish. less of a move in gold this morning. we'll keep an eye on that. >> come back to a point, you made earlier in terms of the sector point, financials slammed. that's related to the trump trade and what yields are doing. that's taken financials year to date into negative territory. three sectors in negative territory, and to put financials into negative territory shows how quickly things have unravelled with that massive 3% slide. the other big loser yesterday, tech. >> best performing group for the year. >> but also hit. for those points in terms of the people who point to the bullish arguments of what a weaker dollar can do. apple was hit hard yesterday. clearly stocks that have no real

threat to their earnings based on these political developments can be hit based on correlation arguments. >> the context is important. they have run up so far. we talked to so many strategists and analysts yesterday, the idea is this is not enough to have a constitutional crisis right now, something grave in the markets that would keep you on the sidelines or off selling for a long period of time. people were waiting for this opportunity to get back into names, into some winners. because it had been a long time since the markets had a pullback. that's also the question. are the politics turbulent enough that this will be prolonged. it gets us to the top political story. the justice department appointed a former fbi director, robert mueller as special counsel to oversee the investigation into possible ties between president trump's campaign and russia. mueller led the fbi for 12 years under president bush and obama. in a statement president trump repeating there was no collusion

between his campaign and foreign entities saying he looks forward to this matter concluding quickly. a lot more on this story from washington in just a few minutes. a lot of people who have been critical of the president's firing of james comey and the republicans breathing a sigh of relief last night. it's a political story more than a market story. >> it's a political story but also nice because we can step back, not focus on the rumors, sources, just -- >> let mueller deal with it. >> this will happen, step back and let's give some reprieve for the president to focus on his agenda in the meantime. >> treasury secretary steve mnuchin will testify before the senate banking committee. mnuchin will tell the committee the economy can grow 3% or more if regulatory and tax reforms are enacted. but the remarks do not give

exact timing for the government's economic reform agenda. wilbur ross will hold a hearing today on how the united states can reduce its 7$750 billion trade deficit. first he joins "squawk box" live at 7:00 a.m. eastern time. now back to the markets and the connection between what's coming out of washington and the reaction from investors. here's what was said on closing bell yesterday. if donald trump resigned tomorrow, i think the dow would go up 1,000 points. president michael pence, for the republicans, that's what you want. many people told me i'm not voting for donald trump, i'm voting for michael pence. i'm voting for the republicans. it's the republican agenda. >> joining sus is art hogan. good to have you. is the bounce overnight convincing enough for you to tell you anything about where we

go from here? >> i don't think so. it's interesting we are getting a bounce. you brought up the important point. now we have a special investigator. let's let them figure this out and see if there's another shoe to drop or another bomb to go off. it's better to put this in the hands of a special investigator who was an fbi director for 12 years, then tried out by the "new york times," the "washington post" and you and i. i think there's more bombs to go off, but to your point, at least for today, we know that this is in good hands. we will learn more. right now we just don't know what we don't know. i think currently the market is trying to price in the fact that the agenda gets pushed out certainly into 2018 because when the oxygen comes out of congress and they have to focus on things like this versus tax reform, repeal and replace and deregulation, things we would like to see in the marketplace done and washington doesn't get

it done. the quicker we can get to the bottom of this the quicker we can get to the republican age a agenda. do you disagree that if things get worse and it does lead to some kind of really major issue for president trump, that markets would rally off the back of that? you think markets would move south if things got worse for mr. trump? >>. >> i don't necessarily disagree with the professor, but the math doesn't work for something to happen as quickly as he may think. his statement was if president trump was to resign tomorrow, the dow would go up 1,000 points. we have a republican agenda, things are back on track. things don't work that quickly. in the interim we don't know how much damage is done and how many republicans move away from the administration. we certainly don't know, as we get closer to the midterms, how many republicans move away from

this administration if it's still in turmoil. that lslows down getting anythig done. in the case where we can't get anything done, nothing major will happen, i think both investors and americans will start to get disappointed. the whole concept of green shoots and things getting better turn into tumble weeds when this gets dragged out. nothing happens that quickly in washington. >> what sort of window are we in? are you a buyer on some of the weakness? do you want to wait it out, see what happens with the politics? are you swooping in and bidding up positions again? tell us what you do with a day like yesterday, not knowing whether this volatility is over. >> that's great question. i will tell you this in reverse order, when you look at the financials, that's the classic trump sector. they benefit from everything that the trump trade wanted to do. they benefit from interest rates

going higher because everything he does is inflationary. yield spreads broughten oubroad out, deregulation is there. if we push this agenda out, financials are the last place you want to be. especially since they're up 10% since the election. i think you settle back in. this is something we're not used to volatility. selloffs usually don't happen in a day and go away. at some point let's call it next week you may well say, okay, enough carnage has been done. let's pick through the wreckage. i think that wreckage will look like cyclical companies with good cash flows paying good dividends. i don't think today's stabilization is the time to be jumping in. i will tell you that we'll probably create bargains over the next several days as this moves forward and more bombs go off in terms of news flows. the best place to be are some of the diversified mid cycle industrials that are heavy --

steady cash flow and dividend payers. >> thank you very much for joining us from nashville, art hogan from wonderlic securities. dennis gartman dropping us an e-mail saying the stabilization, the bounce overnight has been tepid at best. the reason i bring that up, yesterday of course when we sat here, futures were down about 80 points. it accelerated the selling through the morning. again, looking at stabilization of futures at this hour. >> that is sort of what art said. come back next week, see what damage has been done. moving on to corporate stories. shares of cisco down sharply. they beat forecasts, but revenue fell for the sixth straight quarter on continued weak demand. cisco plans to cut 1,100 more

jobs on top of the 5,500 it cut last sug. the cfo says a slowdown in u.s. government spending was a big factor in the guidance. we saw some new kind of macro issues in areas like public sector and the u.s. fed space and things like that i'm assuming that that will continue on in q4. finally we are seeing an impact, because overseeing it go to the balance sheet of this transition that we are accelerating through to the tune of 1.5 to 2 points. the combination of those three things are driving the guidance in the minus 4 to 6 range. >> cisco shares down almost 8%. there's a pair of economic reports out before the opening bell. and that would be weekly jobless claims and the may philly fed survey. cleveland fed president, loretta mester speaking about the economy this afternoon. as for earnings, alibaba and walmart before the opening bell. applied materials, gap and

salesforce.com after the close. walmart the big one. on this question of which retail kers stand out in what ma been a has been a retail wreck, there's high hopes around walmart. >> we'll watch for that one. coming up, the top stocks to watch, including a huge mover to the down side. we'll round up the big movers. as we look back at this day in history, the fifth anniversary of facebook's ipo. that was marred by delays and trading glitches at the nasdaq. look at the share price then and n now. we're back in a couple minutes. i

sinci added fures, have access tohe oil markets and gold markets. okay. i'm plugged to equitie ani have global acce 24/7. meaning i can do what id to do, athen i can focususn 24/7. at i want o. vit nfutestoday.com to see what t dingtures n f yo. *ade you thgs youwa ve aesto r rht moment.on and en y filterut the noise, it'ea tturn ur visn into actio it's your tra. e*ad

but we've got the get tdigital tools to help. now with xfinity's my account, you can figure things out easily, so you won't even have to call us. change your wifi password to something you can actually remember, instantly. add that premium channel, and watch the show everyone's talking about, tonight. and the bill you need to pay? do it in seconds. because we should fit into your life, not the other way around. go to xfinity.com/myaccount welcome back to "worldwide exchange." over the prior ten days, the only real marked reaction to the political stories out of washington was a softer dollar. yesterday we saw equities and bond markets react intotinotice. we saw markets sell off as well. around 2% of declines for the

dow and s&p. more than that for the nasdaq. they had been outperforming recently. financials the worst performing sector down over 3%. significant declines there. taking sector into negative territory year to date. the selling has stemmed in the premarket. down 0.2%, or nearly 50 points for the dow. 20,0 20,559. the question is as we near the open will things get worse. that's what happened yesterday. at the moment a little calmer than yesterday. >> though they were positive 20 minutes ago. the eu has slapped facebook with a 1$120 million fine today for providing misleading information over its buy outof whatsapp back in 2014. regulators say when facebook informed them of the deal they couldn't match accounts on both platforms, but the company launched a service last year which does exactly that.

facebook says the errors in the 2014 filing were not intentional and it doesn't reverse the decision to approve the takeover. this is the second fine for facebook in europe this week. those regulators, tough on the u.s. tech companies in europe. >> but legitimate. the point is that it turned out that facebook had a stronger market share position across all of its types of services than they previously thought, and that's why they're pushing back, the regulators. clearly must be agreeing that facebook didn't do that intentionally or they would be reversing the deal. this is a small fine in the grand scheme of things. >> they have gone after alphabet on a number of counts, much more on the whole monopolistic idea of the u.s. tech companies than u.s. regulators. still ahead, a special counsel has been appointed to lead that controversial russian investigation. we'll take you to washington for the latest. >> as we head to break, here's the national weather forecast from nbc's bill karins.

>> good thursday morning to you. big story today is the potential for severe weather and tornado outbreak in the middle of the country. we also still have the heat wave from washington, d.c. up through boston. about as hot as it gets for this time of year. the issue is in the middle of theiation. the nation. 27 million people are at risk. the real story is what will happen this afternoon and eve fringe from central kansas to oklahoma. a tornado outbreak possible, even long-track strong tornadoes, those are typically the most destructive and deadly. going towards friday. dealing with warm air on the east coast. we start to cool off from new york city back up through new england. more "worldwide exchange" when we come back. [vo] when it comes to investing, looking from a fresh perspective can make all the difference. it can provide what we call an unlock: a realization that often reveals a better path forward.

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retiring on june 1st. he will be replaced by current president jeff miller. some more stocks to watch. burberry shares rising in european trade. full-year underlying profits fell 21% due in part to weak demand in the u.s., but the fashion firm told investors its pretax profit is set to rise by the end of the year. up 1.7% in london trade. sirius xm is in active talks about making a bid for pan dorya. the "new york post" says the bid could range from $12 to $13 a share. and data showing an immunotherapy combination was effective in leng cancer stulun cancer studies. brazil's president denies

bribing payments to silence former house speaker kunia who led the impeachment fight. this could escalate and become another political crisis in brazil. when we come back, the top stories and a round up of global markets, plus the internet is melting for uncle joe. we'll tell you why after the break. "worldwide exchange" will be right back. so you miss the big city? i don't miss much... definitely not the traffic. excuse me, doctor... the genomic data came in. thank you. you can do that kind of analysis? yeah, watson. i can quickly analyze millions of clinical and scientific reports to help you tailor treatment options for the patient's genomic profile. you can do that? even way out here? yes. even way out here.

good morning. global stocks under pressure after the dow and s&p suffer the worst day since september. volatility creeping back into the markets with the vix hitting the highest level in a month. we're live in washington with the latest on the decision to appoint a special council to oversee the probe into russian interference in the presidential campaign. plus jay, joe and james, why all three men are trending today. it's thursday, may 18, 2017. you're watching "worldwide exchange" on cnbc. ♪ >> good morning. welcome back to "worldwide exchange." i'm sara eisen. >> i'm wilfred frost. good to be here with you as well. throwback thursday, throwing it back with a little bit of queen right now. like this.

not my favorite queen track. >> i love throwback thursday. >> do you like queen? >> not as much as you probably. >> another great british rock band. >> i like r. kelly's ignition better which we played last hou hour. >> let's get to the global market action. which has softened a little bit in the last hour. futures certainly looking better than the market performance yesterday. they are looking worse than an hour or two ago. the dow lower by 50 points. the s&p by 2.8. nasdaq by 18 points this comes off the back of a day of significant declines.clines for and the dow. the last ten days or so, mainly the dollar had been the asset class reacting to political developments. yesterday we saw equities and bonds react sharply to the down

side. financials underperforming, tech also underperforming. volatility and volume picked up. let's look at the picture around the rest of the world, which is soft but not as bad as it could have been. the nikkei down sharply, 1.3%, that's because of such a strong move upwards in the yen wed. al yesterday. hong kong and shanghai a half percent lower. europe also looking at a half percent decline as opposed to the 2% we saw in the u.s. yesterday. softened quite markedly in the last half hour or so. we have the ftse 100 down 1.3%. and germany and france down the best part of a percent. germany and france had been down a half percent an hour and a half ago. >> that warning by dennis gartman saying he wasn't

convinced of a bound looking like it's sglooifrnlgtsd bounce looking like it's happening. wti, 48.70. brent, 51.83. as for the ten-year treasury note yield. this was the story yesterday. buying of safe haven government bonds sent yields to one-month lows. we broke below 2.20 on the ten-year. the low for the year to watch is 2.17. we'll be watching those low yields. watching the financials which tend to get slammed on the back of lower treasury yields. as for the u.s. dollar, had been firmer against the euro a half hour ago. still is to the tune of 0.3%. it has weakened substantially against the japanese yen. some buying of yen here in the early morning hours. as for gold prices, show you what's going on.

gold moving in the opposite direction of that dollar/yen pair. higher again, sixth day in a row, a quarter of a percent. to politics, the justice department appointed a new special council to oversee the investigation into ties between president trump's campaign and russian officials. eamon javers joins us now from washington weith the latest. >> deputy attorney general rod rosenstein made the decision yesterday. he announced it at 6:00 p.m. last night. the white house getting only about a half hour's notice that he would place robert mueller, the former fbi director as special counsel here to take over the investigation into the russian connections into the 2016 campaign and any other matters that may flow from that. that could include any attempt at obstruction of justice or blocking this by the trump administration or the president himself. that's important because we learned of the effort by mr. trump to tell mr. comey that he hopes that comey could drop the

mike flynn investigation into his former national security adviser. the white house having only about a half hour's notice did put out a statement last night. here's the measured response from the president of the united states. saying as i have stated many times, a thorough investigation will confirm what we already know. there was no collusion between my campaign and any foreign entity. i look forward to this matter concluding quickly. mr. mueller for his part issued his own statement saying i accept this responsibility and will discharge it to the best of my ability. there's some new "new york times" reporting this morning. they are suggesting that, in fact, the trump campaign knew that mike flynn was under investigation during the transition and before he was selected as national security adviser, which raises questions why mr. trump would hire him

after knowing he with you under investigation. rod rosenstein will be briefing all members of the senate today on what transpired in the comey firing and why he's made this decision to appoint a special counsel. >> lots of reports today, you know, describing mr. mueller as credible, respected individual. is he credible enough such that whatever his decision on this, which ever way it goes, that both side also respect that decision? >> this is such a bitterly divided country. everything is seen through such a partisan lens at this point. you know, democrats and republicans almost don't see the world in the same way at all. yesterday i did syou did see de and republicans praising mr.

mueller, even those who said we didn't need a special counsel, said he is a person that they trusted to get to the bottom of this in a fair and even handed way. so that gives you an indication that the decision will be respected by both sides whether that exists out in the country where people don't know mueller as well is another guess because these are partisan times. >> thinking from an investor point of view, it feels like this buys some time for republicans who would otherwise come out and criticize, that cole whole question of obstruction of justice and whether the president fired james comey for not handling -- for not saying he's going to abandon the russian investigation. this buys them time. they don't have to do that now. they can focus on the agenda. so this gets us back on track? >> absolutely. it also lengthens out the len of time that the investigation will take. mueller will need to get in there, hire up some staff, get himself up to speed, figure out

where things are. all of that takes time and energy that wouldn't otherwise be applied. this will now take longer than whatever it was going to take before. so that in a sense is bad news for the trump administration, but you're right, for republicans on capitol hill, they can kind of punch their comments now and say, well, let's wait for what the special counsel finds. it doesn't mean the senate investigation and the house investigation are going to stop. congressman chaffetz in the house says he will ask for documents. the senate intelligence committee requested that comey testify. you now will have two tracks. one, totally secret and lock box type effort by the special counsel and this more public effort up on capitol hill with the congressional and senate committies holding hearings and investigations. we'll continue to get news flow out of those. >> just to be clear, you don't think this allows the administration to push this issue aside for at least the time being until the result

comes and get on with things like tax reform? >> no. it will be ongoing for the administration. we might not see it, but folks in the administration will see it. they'll be called to come in and give interviews, testimony. a lot of them will have to hire personal lawyers. that's expensive and distracting. so a lot of brain energy in this administration will be focused on this problem. at some point the peoples loyalties to the president or themselves may start to fracture. >> eamon, thank you very much. some stocks to watch today. cisco's third quarter earnings beat forecasts, revenue fell for a sixth straight quarter on continued weak demand. the company forecasting a bigger than expected decline in fourth quarter revenue and plans to cut 1,100 jobs. last night l brands broke the recent retail trend posting

upbeat numbers. landon dowdy has the details. >> shares of l brands jumping on better than expected earnings and upbeat guidance. the company posted earnings of 33 cents a share, surpassing the 29 cents that analysts were expe expecting. q1 comparable sales fell 9%. the firm noting the exit of swim and apparel categories at victoria secret brands is having a negative impact on sales. the company will hold its earnings call later this morning. look at the stock. shares of l brands have had a tough ride. down about 21% year to date. the stock this morning up 7% in early trading. back over to you. >> thank you very much for that. now time for top trending stories. ice cream enthusiast joe biden getting his very own flavor. the former vice president's love for ice cream is no secret.

the graduating class at cornell university took notice. ahead of biden's address at the university later this month, cornell university dairy is naming a batch of chocolate chip ice cream after him. students submitted 150 name ideas for the flavor that have been narrowed down to five options including biden's chocolate bites, bits and biden, big red, white and biden, not your average joe's chocolate chip, and uncle joe's chocolate chip. >> i like not your average joe. >> i like uncle joe's. >> ben&jerry named one after bernie sanders. i think you have to be ultra liberal to have that happen. i'm an ice cream enthusiast. >> so am i. just slightly dwarfed by your adoration for the delicious desert. it's a sport for you.

>> it's a support, instagram moment. it's a delicacy. >> your favorite is the place in your hometown. >> cincinnati. grater's. beyonce and j ay z crossed the billion dollar mark. their combined wealth is a whopping $1.16 billion. jay z's fortune is 10 million, and beyonce 300 milt on. i was surprised by this. i thought she would garner more. >> i think both of them together -- >> power couple. >> doesn't matter who made it supposedly. starbucks is rolling out new product to keep your iced cough f coffee from getting watered down. coffee ice cubes.

it will cost 80 cents extra per drink. >> i think it's a good idea. people hate watered down coffee. >> i like an iced coffee. >> you like it watered down? >> not watered down, but i don't mind it diluting a bit. depends on how long you take to drink it. any way. iced coffee cubes coming up. still to come, the must reads. will this new appointment of a special counsel to investigate ties into the election pay off? and this afternoon, don't miss brian moynihan on "closing bell." 3:00 p.m. eastern time sitting down with kelly evans. one not to miss.

welcome back to "worldwide exchange." time for our must reads. my pick is in the "wall street journal" titled the special counsel mistake. most people celebrating the decision to move on to a special counsel appointment to investigate the election -- possible election ties to russia. here's a potential opposing view. while the decision will provide some short-term political relief, not least for mr. rosenstein, it also opens up years of political risk to the trump administration with no guarantee that the public will end up with a better understanding of what really happened. the problem with special counsels is that they are by definition all but politically

unaccountable. to say this is not the view of most people, but an opposing opinion. the nicest thing about this is that hopefully it leads to a definitive decision either way, backed up by evidence. the question, which i think this article points to, is how long that takes and how drawn out it is. >> i thought the whole idea is that it was not supposed to be political. >> they're suggesting that hurts accountability and he can take forever on it and that can hurt the administration, even aside from a decision. the fair point is how quickly a decision is reached which is the key thing. otherwise not many of the opinion pieces agree with this point of view. >> most of them out there all sort of applauding this decision. my pick is on a different topic. "usa today," strict regulations t stifle competition.

this is in regard to the new rule by ajit pai, about isps getting loser regulation when it comes to controlling the internet. he says he wants to clear something up. everyone agrees we must keep the internet open for innovation and free expression. there's been a long consensus that any rules must preserve strong incentives to invest in next generation networks. it's his ethos. this is what he will do. this is how he will push back against people who are saying you're deregulating. you are letting the isps get away with murder and control the internet. it will be a wild west. that's the debate right now when it comes to the internet and john oliver weighed in on this. everybody is passionate about it it looks like mr. pai is going the route of res rless regulati don't worry it won't be a free-for-all, but it will create

innovation. >> we're approaching the top of the hour. kelly evans has a look at what's coming up on "squawk box." >> coming up, we will pick up on where you guys left off with the markets and how they're reacting to the selloff. we're also going to be talking about walmart earnings which come out. i'm look forward to those. target beat nicely yesterday a ton of competition and pressure across that industry. lidel making -- >> little. >> why would they want to call it little? >> we already talked about aldi. lidel is coming after walmart's turf. we have kevin brady coming on. we will talk to him and all that. this is one of these spam calls. do you get these all the time? >> not at 5:40 in the morning. >> i get these every 15 minutes.

it's crazy time. we will talk to wilbur ross, i might ask him about these spam calls. >> kelly, we look forward to that. i look forward to seeing you on closing bell later today. >> thank you. long day for everybody here. >> but a great day. busy day. great to be involved with the markets, lots of volatility yesterday. still ahead on "worldwide exchange." the vix hitting a one-month high. we'll talk markets and the economy with paul donovan from ubs wealth.

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managing director and global economist at ubs wealth management. it looks like this correction will be with us for a little bit. do you see it being driven by fundamentals or is this just political noise? >> well, it's sort of a bit of both. now, look, in the short-term politicians simply don't matter. they're not nearly as important as they think they are. in the short-term what matters is do i have a job? can i afford to buy what i want to buy? the answer in the states is yes, i do have a job. yes, i can afford to buy what i want to buy. that's supporting the economy. where politicians have an influence is over the medium term. over the trend rate of growth. that's where a lot of questions are coming in. we're looking at the soap opera going on in washington, d.c., investors are saying hold on. if congress is going to be spending time on investigation, the white house will be bogged down in investigation, they're not going to have time to do the

trump healthcare proposals, won't have time to do the tax reform. that agenda is then pushed further out. >> the u.s. dollar has bif give all of its post election gains. clearly equity markets despite a pullback yesterday higher since the election. what do you make about that correlation? the back end of last year very strong correlation, dollar moved up, so did equities. the correlation has broken down. dollar is moving south. will we see equities play catch up to the down side? >> well, i think this is an excellent point. what we have got with the dollar is an asset, if you want to call it that, which is entirely driven by foreigners. foreigners decide the fate of the dollar. if foreigners don't want to lend america the 2$2.7 billion a day that it needs to finance the current account position, then the dollar goes down.

that's as simple as it gets. so the thing here is that foreigners in any country will tend to understand domestic politics less well than domestic investors do. they are more prone to overreact to political risk than domestic investors are. foreigners are basically saying we want to wait and see what happens with all of there before we go in and buy the dollar again. wait and see is not the capital inflow of 2$2.7 billion a day. wait and see is nothing. the dollar goes down in that scenario. >> whether it was the stock market volatility, political drama or big misses on recent economic reports, like retail sales and inflation in the u.s., the odds for a fed rate hike for june went down yesterday. now they're sitting at 60%. how much lower are they those odds in your view? what's the probability for june? >> i think june is very likely to be honest what we've got to remember is that bond traders, equity traders do not decide interest rates. a fact we can all be thankful

for. interest rates are decided by economists. and economists look through the noise. and they're not going to be thrown by one month's slightly june use cpi call reading which has more to do with technical changes than it has to do with prices changing. most of the dis appoiappointmen cpi was due to mobile phone prices not falling, but being recalculated through the dollar adjustment. the fed i think will take a sensible view. hair yell chair yellen is a good economist, will look through the noise and say inflation is above the long-run average in the states. now is not the time for us to be running an ultra accommodative monetary policy. >> paul, great to see you as always. paul donovan of ubs wealth management.

>> and the u.s. market is the center and is dictating the global moves. futures down at the moment. that's it for "worldwide exchange." "squawk box" is next. the new guy? what new guy? i hired some help. he really knows his wine. this is the new guy? hello, my name is watson. you know wine, huh? i know that you should check vineyard block 12. block 12? my analysis of satellite imagery shows it would benefit from decreased irrigation. i was wondering about that. easy boy. nice doggy. what do you think? not bad.

good morning. the markets woke up yesterday. now this morning it's global. u.s. equity futures as well under pressure right now after the dow and s&p suffered their worst day since september. new this morning -- late yesterday, former fbi director robert mueller named as a special counsel to oversee the investigation into possible ties between president trump's campaign and russia. plus the future of the trump economic agenda. everything else notwithstanding, how does it affect tax reform

and trade? steve mnuchin and wilbur ross both holding major events today. the latest from washington straight ahead. it's thursday, may 18th, god knows what will happen today, 2017, "squawk" begins right now. ♪ >> live from new york where business never sleeps, this is "squawk box." good morning. welcome to "squawk box" here on cnbc. we're live from the nasdaq market site in times square. i'm kelly evans along with joe kernen and scott wapner this morning. if you don't answer -- there was a time limit. >> put him on the clock. >> like the nfl draft, you have ten minutes to come up with something good. if not, you're out of here. >> let's check in on the futures. we are seeing continued weakness this morning. yesterday the dow had