falls apart. reto "or everyone. "remember the sign fell on someone? >> this is right before she got handed the pink slip essentially. >> well, thanks for being with us today >> you're welcome. join us tomorrow "squawk on the street" is coming up right now good morning welcome to "squawk on the street." i'm scott wapner with jim cramer david faber is on assignment see how we are setting up for this day on wall street. s&p with an implied open, and so would the nasdaq this morning.

look across the pond it's a mixed pictures over there. the ten-year note yield. we have some employment data, there is the 232 our road map starts with wall street's record run. u.s. stock futures pointing to a higher open, the s&p at its longe streak of records now in 20 years. plus delivery wars u.p.s. and fedex shares are following on reports that amazon is testing its own delivery service. and bill ackman rumphing up his push for changes at adp, we'll hear why he thinking that company could be more productive making history after the three indices closed at record highs.

jobs fell by 12,000. earlier president trump treated stock market hits a record high, business and manufacturing enthusiasm at the highest level in decades a reason for him to be optimistic so too for the gulls industrials, transports, small caps, mid caps, almost everywhere you look. >> i think it will be interests to see what happens with the transcripts after this news for amazon that's been gravy. we are in an absence of news flow i have a theory with you, my theory is this, on downgrades head funds country in short, so on down days for the market, they have s&p buy, and they have etf buy. if you look at a classic example. let's use the example of a downgrade, like in

garden-variety downgrade 3m, a terrific company gets downgraded by jpmorgan, you go to the fabulous ceo, there is no reason why they do it. that downgrade is the failed downgrade, and that's been why we've been hits new highs. >> sentiments sort of changed since the end of september people thiol we might have a meltdown now we're poised for a meltup in historically the most volatile month of the year. >> texas and florida are hue stages there's not enough of a discussion about them. the numbers phil lebeau reported are starkly different -- look, two weeks ago the narrative on gm, less ate use that, that they were cutting back on the sports-utility vehicle shift in tennessee. then the narrative becomes they

are the rival to tesla so you have short-term considerations which may actually be blowing up, versus we decided to look at 2018, '19 and '20 when it comes to industrials. europe is very strong, asia is strong we have this axis of negative. we focus a lot off president that doesn't get us anywhere what does the president have to do with the ratio of bristol-mye bristol-myers? the answer is very little, but -- >> so you have earnings coming down. >> i am concerned about earnings. >> are you really? >> we need to seea strong number on friday to be sure there isn't a ratio. we need a rate hike so badly one of the things -- >> harker told liesman that he's tess penciling in november, and he's a voting member. >> we definitely need that.

>> there's news that randy quarles replaced -- he's a green light to actual banking. i'm taking jamie dimon's rap for a monday if the government would let us lend more, we would. the government is going to look the other way. immediately you get a backlash no, there's something between 207 and what we've been having, so the banks price to earnings multiple can expand if we get that fed rate hike. >> so 232 on the ten-year, the banks having their worst day in a monday yesterday, are back in an up trend, because banks -- >> the rate hike is going to happen economy is good. look, i'm getting off the i hate wells bandwagon, as my friend wilf said yesterday, they have taken the premium of multiple

out. so -- i mean out of the wells. wells is -- i can't hate wells as much as i hated it. it hasn't moved. all the other bank stocks have moved. so the haters of wells have to deal with the fact that the price to earnings multiple has been shrunk, was the cross-sale told outing to bog-s onity to make up my own word. there's still questions about these large-growth technology stocks. >> in the absence of news we have analysts say -- occasionally an analyst lime jamie ruben --, grubhub, i don't like, because i fear amazon. legg mason it's up to which. coach, celgene, a hold to sell, of course you sell off the whole rally, why it's up too much, up too much downgrade does not work that is not working. if the entire market is moving

up, why do you pick on the stock in your group. >> hello nvidia. people were negative just because it had run up so much. >> now another push on nvidia. nvidia has become a boring rally stock, crypt occurrence sit, we should talk about it every day, that's a small part of their business, but that was one of the reasons in the prompt, a company you follow, loop, loop capital. >> that's right, it's well reasoned to buy nvidia but mostly because of the artificial intelligence. when you see the google news, you have to -- the most damning downgrade is deutsche bank saying, be careful nan flash -- >> you're going to western dig, that's what you're talking about. we'll get to that in a minute.

we were talking about large-cap growth tech, you mentioned it, jim, at the top of the program, the transports are in question, at least somewhat today. >> this is big. >> amazon said to be testing its own delivery service to rival fedex and u.p.s. the new service intended to make more products available for fry two-day delivery it could also relieve overcrowding at amazon's warehouses, so those stocks, fedex, u.p.s. >> red-hot. >> lower on this news. >> i talked to a u.p.s. guy the other day, can you believe it stock? now, i guess it goes down, too here's the problem with this call we get someone from u.p.s., fedex on, listen, they've been trying this for -- we'll wait for a second day, see if anyone joins or downgrades these, and then your shot the rails are very overextended. >> see, anytime any news has

come out that there's a thought that amazon will take over this particular thought of the universe, whether it's -- the cvss of the world, they go down immediately, but only for a day or two. >> wait a second, i disagree i sold for nigh charitable trust walgreens. it's not come back a bit the front of the store they put a lot of food in, that's whole foods really crushing them the back of the store, if amazon does prescriptions, walgreens, that stock has done nothing but go down, and the rite aid deal took too long, but costco's stock has run up the last two times, it sold off, but you had to buy it. >> are you then saying that we need to be it concerned if you're an investor in fedex or u.p.s., the decline you're seeing today could have staying

pow power? >> yes, because u.p.s. is up in a straight line and not managed as well as fedex let's watch the transports classic dow theory says as long as they go up we're fine watch jb hunt, but those having extraordinary. >> xpo does a lot of the third party moving up large things. >> transports crossed 10k for the first time ever. after sitting out for a while, they have definitely joined the party. >> after delta came out, okay, delta says things aren't that good and the stock rallied what are you going to do what happens if it's good? >> well, things have been pretty good, and the airline stocks laid an egg. >> warren buffett stopped talking about them, but continental is down substantially from even the incident, but watch the

airlines, i think -- watch fedex. >> let me askingthis, then, without the buff at the time stamp of approval in the ae airlines, would there be as great a story to talk? >> no, the halo of buffett just moved those stocks up big and a higher price to earnings multiple and there was price cutting which wasn't in sync with, and i think it's okay. it's neither here nor there. they have moved up so much i can't get behind them. that's what a lot of older people look at. >> they have confirmation of the rally. >> and the rails have been the big confirmation give me a break. you know, what are you going to think? the cold will have a up rev aeismt nce, and my wife

saying -- >> maybe the transports, though, don't immediate what they used to to the rally. if i say, okay small caps great, mid caps great. >> they have been fabulous. the chip stocks have been great, so you need the transports to tell me the rally is good. >> there's a guy who raised -- i haven't look at anthenle in -- the rally is a no-name money they steal that from "mad money. i can in a name you ten stocks -- if andrew -- shop i fit wify if -- can you imagine 20 andrew leffs? >> that's a lot of airtime when we come back, hear what bill ackman told jim last night

on "mad money" about the approximate,fight with adp also ahead, jim grant of jim grant's interesting rate observer with eye-opening comments, and taking another look at futures, will we extend these record gains on wall street sure looks like it off the open dow. more "squawk on the street" live from post 9 at the nyse, when we return throughout my career, i've been fortunate enough to travel to many interesting places. i've always wanted to create those experiences for others. with my advisor's help along the way, it's finally my turn to be the host. when you have the right financial advisor, life can be brilliant. ameriprise at ally, we're doing digital financial services right.

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we're in a bye week, so i'm not allowed to talk about football. >> there's a heavy overlap between what we do and people who watch football, including tired night football. >> maybe better tonight. >> pershing square's bill ackman pushing changes. here's jim with ackman last night on "mad money." >> i know what you try to do is make things be as substantive as possible you've been issues a question a week to adp.

i would ask you to start the new one on "mad money." >> our new question is -- why is it that adp has lower revenue productivity than all of their competitors? so adp generates about $1640 for you very straightforward question when you think did adp, it has enormous scale, so if anything they should have more efficiency it's all about the opportunity for improvement. we think it's a great company, but it has massively underachieved its potential. >> so you couldn't get him to take the coat off? >> no, kinder, gentler, no ad hominum stuff he didn't want to talk about the august one, the tennis match, but he raised interesting

questions about productivity versus paychecks marty mussey had been on "mad money" the night before. bill was references that interview and why he has such he two the my favorite companies are service now and workday. they are chipping away at where i thought automatic data should be if it wasn't complacent they should have been automating a lot of the back office functions, hr, automating the on-boarding, how to check in new people workday and service are remarkable cloud-based companies. >> are you saying they're too complacent >> i agree with him, but in a different way. i would have gone harder with bill he's looking a the some white tricks that are true they're high touch and they need that. >> that's why their margins are

lower. >> but one point -- there's a difference between the tsr, they did a spin-off of automatic data, if you decide just to sell the spin-off, the rate of return isn't that good, ackman is talking about the rate of return the day before rodriguez, you know got need automatic data is a good stock. >> it makes the case harder to make. >> thank you. >> if you look 5, 10, 20 years versus the s&p, it's beaten not only the s&p and pay chex isself. >> there was the valuian problem, but the man is rigorous, i think he argues a good point you this that automatic data has been complacent. i think it's lit a fire underneath them, but many of the points he makes in this new just totally devoid of any sort of

fire ackman are right. i think he deserves a board seat, i think he could help the company. >> interesting >> i like what he had to say. >> shareholders are saying yes very heavily retail-owned stock. >> what i'm saying is it should have been cloud based and never have let the service takes over the portion they should have neil came in and took a portion. if they decided they wanted to go payroll, automatic data is vulnerable that's not bill's view that's my view. it is cramer's mad dash, as we count down to the opening bell let's look at futures once more. it looks like a positive open on wall street yet again. there it is, all poised to open higher, more "squawk on the street" from the nyse is straight ahead what powers the digital world. communication.

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seven minutes away from the opening bell we are talking about -- >> constellation brands, he did it again >> by a mag any nude we haven't seen next quarter will be 247, modelo, corona and pacifico, i

believe -- >> i like pacifico. >> it's the beer of choice of our san miguel, and the wine margins are going up his theory is all about the strategy, and he's got the three fastest grow ing it's this goes amazing wines -- >> he didn't even go into it go into tequila and mezcal high west is one of my favorite. >> double rye, yes. >> so he keeps -- the reason i put this out is the big issue, whether it by proctor, pepsico, making these additions and then pumping them he's taking this is brands and blowing them out. someone should ask that conference call.

they seem clue less they were come to bar san miguel, every category is owned. he's an amazing manager, cannot wait to see him tonight. ra fino. >> that's another good one. >> super tuscan they were at at one point petrified about nafta, and he said should i make mexican beer in america? do people want mexico -- no, they want mexico beer from -- >> mexico. >> bingo. >> not that hard. >> but the analysts know they were thinking mexican beer should be made in the chesapeake bay. >> like natty bough. opening bell is just minutes

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welcome back you are watching cnbc live from the financial capital of the world. the opening bell will ring in a little more than one minute. jimmy we'll see how things open today. we'll be watching -- u.p.s. out with a staismt, they saw the stock decline, we support all of our customers with interesting leading e-commerce solutions u.f.s. continues to experience top-line growth driven, and strong international expansion, end quote. >> i think what you can say there is i want to see how the analysts interpret it. it seems like why do i have to wait for them. this seems like not to be something new, yet everyone is taking action, but we'll see maybe there's some sort of initiative to cut them out of the third party because of the warehouse issue. that would be bad for their

business pretty simple. we'll have to see what it does to the transports trade today. but there you go, the bells are ringing, you're watching them at the s&p 500, real-time exchange. they're celebrating the eighth installment of the "saw" series, and at the nasdaq, dressbarn. with the breast cancer research organization marking breast cancer awareness month. this is a day to watch fang, believe it or not. netflix is going higher facebook not going to they really are,

and might be about tv, but sheryl sandberg is not going but google/alphabet has these new phones my probably with all these stocks is you need to see numbers go up i thought -- are we talking bitcoin now >> that's the probably with the 15th upgrade of nvidia you can't just come in and say you didn't buy yesterday, well, i have more opportunities for you to buy today that said, the technicals are ruling. that's why i like the in a jairance i don't like the pick of the vikings defense, but --

>> that's a total homer call, but you know -- >> yeah, homer simpson. >> sorry, pete. >> just a lot of benign behavior it's not like there's some regulator that comes out tomorrow and says i don't like how much modern the banks are making you could wake up instantly and find out, wait a second, he doesn't look stocks today. i'm sorry, only under president trump. he likes the stock market. it's his barometer it's his nielsens, and he only cares about his nielsens when he was doing "the apprentice" and by the way, let's clarify once again it's only third party. when they do the fulfill -- >> is the stocks overdone then

>> yes >> remember what i said at the top of the show. hedge funds takes action recently, and then overrun. >> ups is down about is.5%. >> look at the run that u.p.s. has had. it's magnificent run. >> i want to get back to facebook for a moment. did you see what your guy benioff feeded because of all this noise, i've never seen anything quite like this, he says, and shows all these headlines in papers around the country, where facebook is the top of the fold story in many cases we dismiss the regulatory emphasis against mike roe soft

ste balance mer started attacking janet reno they don't go to the headlines and blast washington you know, you can't they all learned the lesson, because behind the seen facebook has really good lawyers. >> what's the lesson >> yes, pay up and shut up jason, with you know him as big -- yesterday on squawk alley, you can't trust zuckerberg or facebook, because you don't know what they're doing with your data they know everything about you what happens if they have to do some sort of settlement around privacy? people talk about reg --

>> the first amendment -- the penumbra of privacy? look at the first amendment it's an inaccurate read of your constitutional rights. you don't have them. that's an old-fashioned inaccurate read. the supreme court has not backed it at all. it's important off some knowledge of the way the law works. you go down and say, listen, what do you want i talk about gross margins maybe you need more people at the helm examining the news. i'm trying to figure out what the russian initiative with puppies, how that swayed us. i post puppies, i don't sway anyone i mean maybe that has more persuasion honestly these are good headlines. >> is your puppy managing any money yet? >> he's outperformed almost every hedge fund manager he doesn't taye 29%, and he

doesn't take the 20. he says feed me. >> throe him a bone now and then >> yeah. he's on a fitness diet like i'm going to fit this whole piece in my month. >> the small caps and mid caps do we need fang -- >> if you have the retailers and they're down, if they can't break through 50, they're going to go down, and then you have a consolation brand let me give you exhibit a. united technologies goes from 115 down to 109. a bunch of us talk about how that's ridiculous, and the stock goes back up and it adds nine points nothing happened other than we said i didn't like that acquisition, but it turned out i liked that acquisition wait a second, i did like the 3m

quarter. look as pepsico in the first 19 minutes of trading, stock opens, trading down 1, down 2, and then he comes in appeared talks about brilliant disruption this was a clinic. they put on a clinic about what you have to do with small brands and big brands, how difficult it is to balance. you finish and say, what are we talking about? frito-lay is the greatest engine of alps time. >> i thought you were good yesterday. >> i was lucent. i came to play i wasn't going to roll officer and say i like the taste of your new water. a lot of water tastes like water. i don't know if you've noticed the variations of water. i have clorox on tonight, the britta, that also tastes like water, six drops of clorox into contaminated water, just six -- other than nuclear water t.

becomes clean? it may not taste as good, but that's what i'm saying innovation of old products, innovation of new products, it's hard to, peltz is saying -- you and in a brilliant conference call, i even listen to these conference calls, it was a brilliant conference call, and the stock ended up making up all the gain by the time she was finished talking. >> peltz is on quake seo squawk tomorrow. >> he is >> p & g had a letter -- >> that letter, there is nothing in it that i didn't know this is just like, okay, let's just send letters. >> now it's gotten straight-up nasty. >> too many letters in this. i mean, i crave mail, because no

one sends me anything, but the answer would be like, you know, you're getting as many things from them as you get from bed bath and beyond. >> you think the activist is -- you think the activist is right on this case >> i think frankly procter & gamble has flat earnings forever, and maybe they too need this -- a push i am coming around the idea that they need a push this measurement of how trying is done, it's done very subjectively, i think these firms need pushes you need outsiders. i'm really coming an to that flu. it suggests other way toss do it it's not so toxic. you're not talking about some schmo either. >> we have to find out that the heinz -- at one point they said, you know, we talked to the heinz

board, too, and there's two wom women. >> the hall of famer receiver? >> i love lynn, sad next to him at the super bowl new orleans, he's involved in housing, a very smart guy, but you know, i mean that's not going to sway me that i should vote for proctor that lynn swann didn't saying in good about nelson peltz then i started thinking why didn't i draftantonio brown instead of odell beckham, and then it's like a fantasy letter. >> throwing coolers around on the sidelines. >> and doing some sort of dog thing that was really ugly let's back up.

let's back up the rhetoric >> back up the rhetoric? the train has left the station so many stops ago. >> you know, i used a dollar shave club the other day, and cut myself he came on the -- tell me why? pisani is on the floor of the stokes >> he has a clean shave today. i don't know what brand he's using. >> just worth pointing out >> every day we've got some problems over in transports but materials are holding up banks are okay, but down this week transports are lagging obviously with the problems with u.p.s. and fedex today. risk to the market not clear if they're going to materialize or not obviously north korea is a major concern, but there's issues the new fed chair could be on the more hawkish side, and that, of

course, is tax reform might fall apart. the market has pushing investors into very strange areas of the market, but their etf rappers, and this is the russell microcap this is the bottom of the russell 2000, and the thousand or so stocks this is the reflation trade started. big outperformance, that's a historic high for that etf, why? why is this happening? well, this reflation trade really matters for these small caps as well as the microcaps. tax cuts are a big thing, and finally you've got more exposure to these on the etf platforms.

these are the things that etfs allow you to do. so let's move on here. this is switch, this is a big data center, co-location, connectivity centers, the second biggest i want po you have the year and they have some big clients emay pixar, jpmorgan mgn, amazon could even be a competitor with amazon weapon services, but data centers have been a hot space this is one of the biggest performers out there, driven by the cloud computing, and the demand for wireless data and streaming. they're running it through the data centers here. all the stocks, four, five, six of them out there, with double-digit increases this year here's a few of them most of

these are reits. switch is not a reit various reasons they would have chose not to have that platform, but you get the idea there's very difficult times trying to price the ipos, remember roku, we had a lot of talk, they priced at $14, the trading range has been about $15 to $30 that's tells you they're having a hard time figuring out the valuation the angry birds game maker, they are trading on the nasdaq in helsinki, they priced at 1150, this is in euros, and they've trailing between 10 euros and almost 13, that's a 30% range, but you get the idea.

you can say, well, there's a problem, right now s&p is up five, 25.42. back to you, scott. let's head up to chicago on rick santelli at the cme group. >> good morning, judge one week of 10s tells you a lot of information what i said to draw your attention to is the range. the range for these five trading days, 231 to 234 if you open it up towards 926, so september 26, basically seven trading days you'll see that was the intraday before this would be the seventh session in a row. you know, it seems as though a lot of markets go into these long stretches of very trite

trading, whether it's treasuries or in many cases tens minus bund, there was a time three, four, fiveiers where the draw was lower yields it looks like it's very slowly coming to an end now, let's look at something big. we know what the fed is going to do, we know what the economy has done we see how the equity markets have performed, so we're all trying to draw conclusions here's something interesting let's overlay that on the top of the dollar/yuan. remember how it make the u-turn? look at how it turned at the same time, right around the 8. this is something to monitor of course there's a relationship between rates and the dollar, but this exemplifies how neck twisting it was. it trailly moved fast. finally one week of the dollar

index in an isolated fashion that's a whisker shy of 94 even. it's about 93.75 eep the chart up to early july,en traders watching this 94 area, and calling it significant resistance right around 10:30 i'll be talking too the most famous bough-tie personality, jim grant. don't moise it back to jim and judge. >> look forward to that later this morning. tomorrow, by the way, we'll be speaking with christine la garde, the future of bitcoin and so much more we'll have more back here on the new york stock exchange.

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one of the reasons you could say for the continued gains -- microsoft. upgraded to a buy. >> this is a really important upgrade. the reason i say that is because it's called beyond the obvious -- the case for long-term growth they've been waiting to make this upgrade i think -- >> did they wait too long? >> why not we had hope for random correction in microsoft shares, or correction shun in the overall -- many analysts are throwing in the towel waiting for that decline and recommending stocks. that's what this is. there's nothing really new here. that's a big theme i think azure is doing fantastic, i think the changes are good i begged aspi to come on the show he systematically refusing to do

so, but that's okay he -- >> not that it's affect youing you. >> no, i think about it constantly, that and whether cooks will go off tonight where is the beef here theenes is there's none, but they want to be recommending it when it reports. it's going to be -- >> you gave new words to the throw in the towel rally that's what we have now. >> are you going to steal it at halftime >> if i use it it is half, i'll credit you. >> there's a person in my ear saying we have to go i'm tired of people thinking that it's me itis just a marionette. >> we had take them out and continue to talk. >> you know what that's called "mad money." they said wrap anyway. he power. when we return it's stock trading with jim on the street we'll be right back.

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we're back time for stock trading with jim cramer. >> morgan stanley goes from hold to sell celgene, and they upgrade bioagain let me tell you what the problem with this is this is really important

sat out on one of the great runs we have seen the teening to 140 celgene, missed it, so no choice now but to sell. the most important caveat here is we acknowledge we may be early with this thesis, because they're talking about generic pricing, but not anytime soon. this is the kind of downgrade we see. harrell lynch did the opposite towel throw, towel throw the only towel i want to throw is the terrible towel, because i did not get le'veon bell when i drafted he was worth every penny. >> the -- >> that's an index of hope an index of hope is what is also behind in market hope and towel throw

>> effort corr lace at the brands, and mark siegle, a guy who is making money in the oil patch. you'll have to watch the show tonight. >> there's a compelling case to own the staples? >> not really pepsico, yes -- >> walmart >> rising rates. who do you have on >> we're still figuring that out. >> i don't know that why don't you have josh -- >> how could i be paying attention to "halftime report" when i'm dialed in n. ow coming up, more on a record-setting day for stocks. keep it right here

welcome back, we're expecting them around 1% we have an extra helping, up 1.2. no revision. let's trip out transportation and see how the number holds up. pretty good. we lost a tenth. if you look at durable good orders, the headline number is

more than expected, up 2% versus expectations, following a 1.7. x transportation, that's three tenths better than the unrevised 0.2, let's get to the moneyball. capital goods number, and it's starting to do better. last look it was up -- it's up more, we're putting out decent numbers there. do keep in mind this series is well watched by many, including the fed and the recent trends have been improving. michelle, back to you. >> we'll watch the effect on the markets. thanks so much good morning welcome back to "squawk box. i'm michelle caruso-cabrera along with scott wapner and carl let's look at the markets today. the dow industrials trading, flat almost concerns the gains,

the nasdaq at of 551 wti trading at $50.46, if you want it delivered in november. that's where our road ma'am begins this morning with those record-breaking markets urges s&p 500 going for the longest streak in more than four years we'll discuss ahead of tomorrow's big jobs report. amazon reportedly testing its own delivery service we'll discuss what it all means for the shipping war, straight ahead. and if weathero rico's governor has a message for bondholder, after the president says the island's debt should be completely wiped out the dow, s&p 500 set report intraday highs, for more we are joined by bank of america's chief economist michelle meyer, as well as fidelity director of global macro, po michelle, first to you, yesterday services was good, claims good this morning, rick had pretty good data in its

own right, and stocking seem to continue to like the story. >> yeah, the growth has been reply rho business the ism surveys have been strong one of the challenges is to be able to isolate where there's distortions to the data related to the hurricanes versus an underlying trend we're looking for a soft number because we do they that particularly hurricane irma will weigh on the figures there's a big range of estimates, if you look at the consensus expectations some people looking for anything testify numbers, some looking for strong figures, which means there's a lot of uncertainly going into the report. look past it, focus on the broader data, which generally shows an improving underlying economy. >> yeah, yurtian we're looking

at new record highs. it's very broke based it, call the it what you want, multiup, or throw in the town as jim and i were talking earlier. >> i apologize for my darth vader voice today, i have a bit of a cold. the economy has good momentum now. europe has good momentum china has very good momentum, even though we are six quarters after their big credit impulse, so we remain in a globally synchronized expansion or reflation. at the same time, even though the fed is tightening and the ecb signals it's going to be less accommodative in the future, financial conditions have been easing for the past six quarters, so when you add up strong earnings growth and it's been growing at about 9% or 10% year over year, and add to that easing conditions, that drives

valuations higher. when you have valuations higher, you get a significant bull market, which is what we've got over the past six quarters we've had about 30-plus gains against the s&p. so the question is, as the fed keeps removing accommodation, and now that it's announced the balance sheet plan, to what extent is that going to tighten financial conditions assuming the fed goes slow, and we get a new fed chair that sort of stays the course on that front. what we have are strong fundamentals amid st. a very -- the stock market has seen outflow since 2009 that's a pretty significant thing. >> so, michelle, the fed chair was on with steve liesman this morning, and said you can still pencil in a fed hike does the market get worried

ought all about where the fed is going from here? >> i think the market is expecting it that's my expectation as we. it does seem to have a bias to tighten. the data at least on the growth side is generally supportive financial conditions are certainly supportive the inflation data hasn't been, but the language is suggesting that they're willing to look past some of the weak inflation data we just heard from fed president williams that talks about reasons for lower inflation, still reiterating, giving that backdrop it means the gradual normalization process should persist, at least in the near term, the market is okay with in a. >> the stock market is okay with that for now, but we're looking at the ten-year year old, i think jurrien outlined what we

heard from warren buffett. that when do long-term interest rates start to rise and offer competition to stocks and therefore hurt the stock market? just because the fed raises rates doesn't mean long-term rates rise, right? do you have any prediction about that which could actually undo people's beliefs in what valuations are justified michelle >> yeah, from my point of view i would say the long end very much depends on what happens to inflation and estimates for long-term growth or trend growth right now what you see is exactly what i said. is it hasn't been shown through throughout the curve so if we see some sort of concern or actual data that suggests inflation is spiking higher, or people are really starting to rethink productivity growth or trend growth in the u.s. more globally, then yes, maybe you see a takeoff in

rates, but absent that, it seems like it will continue to be a slow process, which the fed is very much cognizant of as well when you this i about financial conditions and how the fed is influencing them, they're looking at rates, corporate spreads, and all these things are coming together. if that stops, if you get a significant tightening in financial conditions, i think the fed also responds. jurrien, you mentioned this is still an unsloughed market can you make the case in terms of the trading dynamics, a lot of talk of meltup? we're struggling to find reasons not to be in, and are those the moments when you have to sort of say maybe we have gotten enough in the price right now >> i think over the short term, that may very well be the case, and a lot of this has to do with how much of the fiscal agenda either is being priced in or priced out, and at the beginning

of the year a lot was priced in, so then it got priced out, now it's being priced in again when i look at the past eight years, according to epfr, which is one of the fund flow shops that measures that, both active and passive, u.s. equity funds have seen redemptions of almost $300 billion. how can a market be up fourfold? that's because companies have bought like 3.6 trillion of their own shares over the past of the late eight years, the ample investor i don't think has participated so that may be changing now, but it's not enough for me to say, okay, ring the bell, it's over, by any means if i could just follow up on the previous question. when you look at interest rates and valuations, it all has to do with whether growth can support

a rise in the discount rate or the interest rate. it's basically your standard dcf model. the reason they could not raise rates is because there was no growth now earnings are growing almost double digit, so the fed can raise rates, so the effect of the ten-year yield or interest rates in general is all relative to what's happening on the earnings or growth side. right now that picture is pretty strong. >> jurrien, thank you. michelle, enjoy the day to you as well. julia has a quick market flash. >> netflix shares are trading over 2% highers on news it's raising prices for two out of its three different subscription plans, the most popular plan will right to 10.99, the price for the higher-tier plan, the ultrahigh-definite streaming that will go up from $11.99 to

$13.99, starting for new members on october 5th and they'll begin notifying existing members as they roll out the price changes. the lowest tier plan will stay at that left net flex issues a statements that the plans are as we add more exclusive shows, and improve the overall netflix experience to help find members something great to watch even faster they note that since the last price increase they have add add downloading feature and interactive content as well as new films, the stock up 2.6% as investors see this as a positive for the company. back over to you. >> thanks very much, julia people aren't worried that means they'll lose subscriber growth, they have pricing pressure power here. >> it's been a key point for the bull case. it was underpriced, once you become indispensable, you get a

little more pricing power. steve liesman is in dallas and joins us after just speak to patrick harker he, steve. >> yeah, philly fed president harker talking about -- he's looking for the third rate hike. he said he pencilled it in for november, and kind of puts him directly in the middle of the median fed fomc member we talked about this big issue that the fed is talking about. the inability to forecast inflation. he said, you know what right now it's not that big of a deal here's what he said. >> if we step back from being a central banker or commentator on cnbc or banker, the rest of the economy thinking it's pretty good low inflation, low unemployment. so while there are issues here, particularly with respect to low

inflation, because it doesn't give us the legroom that we need, it's not a horrible situation. >> not too bad a deal. he said he looks at about a 2% economy not changing the forecast yet until he sees more detail, as michelle said i'm here at the conference investing in the work force, where there's four fed presidents here, so this is obviously an important issue for the federal reserve. i asked harker why is the fed so involved in this sure of work force development. >> i would say the limiting factor in growth is the inable to get the skilled workers, this mismatch between what companies need and what workers know is real and growing >> so what the fed wants to know is are there people on the sidelines that they can put people back to work and does

that mean they can let the economy run hotter, not be so concerned, because there are more people on the sidelines trying to get this worker mismatch harker may be emerging as my ne lockhart i mean that guy in the middle who is best to follow, doesn't real slit have an ideological dog in the fight here, and the way he's leaning is a pretty good way to look at it. >> a good tell thanks, steve. which we get back, the house gop eyeing a plan that's key to the debate, we'll discuss with jim stewart. he's next. don't move

welcome back meg tirrell has a market flash. >> a big patent battle on their big cholesterol drugs. it looks like a win today for regen ron and sanofi essentially a federal appeals court throwing out a ban on the drug and remanding the case for a new trial. amgen is down there. we don't know when it will reopen we've reached out to both companies, and will bring you any extra news on this >> thank you, meg. it's budget day on capitol hill. the house is bringing forward the resolution to the floor and will begin debate.

ylan mui ask in washington with more. >> reporter: the vote is expected to begin about 11:00 am speaking ryan was on the floor making it clear this vote is all about getting to the special rules that republicans want to use to pass tax reform >> it paves the way for historic tax reform it unlox the reconciliation process. we need to pass this budget so to that we can deliver real relief for middle-income families across this country we need to pass this budget for the people who are living paycheck to paycheck in america, who are trying to juggle it all. >> reporter: the u.s. chamber of commerce as well as conservative groups, they're all flagging this as a key vote, meaning they'll be tracking which lawmakers support this budget resolution, and it is expected to sail through the house, but it still will have to go through the senate where the budget

committee will begin debating on this bhugt resolution as well today. the wild card in the senate will be bob corker of tennessee he has called this whole process a meaningless waste of time, because he wants to get to the nitty-gritty of the tax reform debate he set out two new guidelines that he wants to see for his support to be found. one, he wants a tax bill to reduce the deficit he also juans to make sure that any tax reform is permanent. remember, with his will not see any legislative text of a tax reform bill until a budget passes both of house and the senate and both chaim bers agree on a final version back over to you ylan, thank you very much. you'll be tracking every step of that process the growing budget deficit proving an obs tal to the tax

plan our next guest says to create a new top bracket of 40% with adjusted incomes joining us now here jim stewart with that suggestion. >> hi. >> you have a forth coming column in addition to that suggestion, unfortunate other difficult tradeoffs, so either you're providing a real public service or really out of touch with how this process is going. >> i'm trying to provide a public service i personally am not for creating a new top bracket. i have argued you can lower the top rates, but it's clear the political will to get rid of deductions didn't there. president trump explicitly said we may have to create a new top bracket. >> so i said okay, let -- >> 091%, but 0.1. >> there are only 140,000 of these people would that have swung the last

election in i'm not sure, but nonetheless it's not a huge group politically. they pay now 20%, one tenth of 1% paid 120% of all the individual federal tax, if you bump them up to 44%, bear in mind steve bannon said he wanted to see some with a 4 in front of it, you can raise about $300 billion over ten years now, again there's about a 2.6 trillion hole in the current proposal the budget is building in an additional 1.5 trillion. whether growth can pick that up, or whether corker will sign off on that, that remains to be seen on take that down -- and there's a lot more of those, then you

get eat $300 billion, so you're over halfway to the goal by the way, this is also assuming that the state and individual tax deduction bites the dust you don't have to be this drastic if you can keep that one in there, but i don't see how you do the math -- >> when you say bites the dust -- >> give it up, they decide to leave it. >> so people can keep deducketting their state taxes. >> i heard from people who said they are adamant they do not want to restore the state and -- but i don't know how you get the -- from places like upstate new york, and you need them to pass this. -- but that political calculus is really tricky i don't see how you get curb how you can do -- maybe some of it, there would be some tankering with it, but that's 1.3 trillion right there they would lose. the other suggestion i make, trump also proposes in the

campaign tax capital gains at death, with an exemption of $10 million, so $10 million in gains doesn't get taxed. anything above that is a reduced capital gains rate that also could get you another $300, $600 billion that pretty much gets you there. i'm not saying personally i favor these, but if you eliminate all the other options, there's not much left. >> especially when corker is demanding what he's demanding, and he's not running for reelection, so his psychology as changed. >> the white house will say growth will make up this massive deficit. i think 1.5 trillion, you can say that with kind of a straight face, it's debatable, but if you're starting to talk about $3.5 or 3 trillion -- >> then you need to cut spending, then there's the spending you know, again, where do you go

with that? that seems to be a dead-end every time they try to do it strict will you in the context the tax reform, they are running out of the options, i don't find raising rates very palatable, but it affects a relatively few people, and you request raise a lot of money with is it. when you're talking the higher end, the battle about the lower end is what seems to be the real issue in trying to sell this plan, even kevin brady and paul ryan recently have come out and setibility -- it's oughts in individual story, so the narrative has changed a bit. >> well, here's the basic problem, if you don't want to blow up the bucket, if you're going to get more money out of individuals, you're talking the quote/unquote rich i know they're selling this as a

tax cut, but you can't cut their taxes much, because they don't play that much. >> that's a great data point pew people makes less than 50,000, 62% of the filers paid 5.7% of the tax bill there's not much more -- the effective tax rate was 4.3%. >> there's not that much to cut there. when you're talking tax reform and talking about raising revenue, you're talking about the quote/unquote rich it does seem to be fair. the corporate tax will disproportionately affect the affluent they're the owners of these assets >> lime ronald reagan said, of course the rich gets the tax cuts, they're the ones that pay the most taxes. >> but the roerch every one of these elements is so hard down to 20%, is that in aggregate, this is not a very over-taxed country. if you look at the numbers,

taxes for gdp, and therefore everyone wants germany's corporate tax rate, nobody wants the person income tax rate sanchts there's a political problem here, there's a big tax cut for people, who want more hiring and all of that, but that's kind of indirect. corporations themselves don't vote >> but what we have learned if the just doesn't show repatriate that, the eu smells it and taxes it, right? there's untaxed money in the world and somebody wants a piece of it. by our tax structure, we let the bureaucrats seize it instead of us. >> and look how europe is going after the tax giants. >> that's my point. >> i've gotten a barrage from people all over the country. i've been trying to get totally

objective, fair-minded, what's best for the country, not what's best for me, not what's best for donald trump everybody i hear from is talking about what's best for them suddenly people all for broadening the base if they takes that deduction away, i'm never voting for them again. >> i guess that's how democracy works. >> and no wonder it's been 30 years since we tried this. jim, thank you very much, sir. when we come back, puerto rican femme shares plunging, and now the governor of puerto rico is sending his own message. a quick look at stocks, gains are mostly mode, nasdaq outpacing others at this point "squawk on the street" back right after this

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with day one target date funds from prudential. look forward to your 401k plan. on. i'm kate rogers. here's your cnbc news update iraq's military says the forces have captured the town of

hawija saudi arabia's king salman meeting with russian president putin in moscow. it's the first visit of a saudi official to moss do you. houston is reaches out to victims of hurricane maria, sending pallets of much-needed supplies to puerto rico. while they are still in need in houston, it is rerewarding. and they may haves discovered the remains of st. nick las that's your cnbc update for this hour over to jackie deangelis >> did department of energy reporting natural gas inventories built in those inventory of 42 billion cubic feet compared to the five-year

average 93, it's substantially less that's why natural gas prices are trading higher, but trading higher most of the morning, really unchanged since we got this number out. interesting to note in the last week we're down just a little more than 1%, flat for about the month level, but still up 5% in the last three months. remember, we were trading well over $3 not long ago, two weeks ago. people are expecting these prices to kind of flatline and bounce aroundhere, at least while we're in that in-between -- where they're not necessarily using heat, either now back to you guys at "squawk on the street. >> puerto rico's governor is looking to reassure bondholder after president trump set the debt should be wiped out of the following the devastation of hurricane maria.

marcus le mon marcus le mo neismt e gave him a chance dinchts our message is we're all one, and what we need to go is go to congress, asked for a real aid package for puerto rico and make sure we have the initial conditions to get out of the emergency phase, but start rebuilding better than ever that's better for all of the stakeholder and all of the people in puerto rico. >> why wouldn't the governor wholeheartedly endorse what president trump said about wiping out all their debt. wouldn't you want debt forgives in you'll probably wasn't $100 billion to rebuild they're going to need to borrow. right now they cannot borrow if they really hose the bondholders in this negotiation, the chances to get the money they need to rebuild in the future means they would be locked out. >> so it's a tough decision.

>> the whole president's suggestion in the first place was almost instantaneously brushed aside by mulvaney of omb, it was like, no, i don't think so >> these are contracts, right? >> it's not as easy to say we're wiping it out. >> the contracts are constitutionally protected the president just can't do that they did move ten cents, which would suggest his moral sways -- >> the record move -- >> he can draw a bigger haircut out of that by giving spine to the control board to say that the president backs us up, i think. the the puerto rico bond situation is so crazy. i spoke with a woman who runs the clearinghouse, can you send me the list of q slips, please, the numbers that equate for each and every bond she said, you don't want that

list i said, what do you mean she said, it's too long. there are thousands and thousands and thousands and thousands. because puerto rico collateralize i had like every rock sitting there, they have borrowed so much money in so many different forms, that's why. >> the other thing that people don't realize, and i know you have made this point as well like more than half of muni investors have expos why are, they don't even realize it, if you buy muni,s which a lot of people do, you probably have exposure here. they're triple tax free. that number used to be 93%, then there was the "barron's" cover story and that slowly wound down. reports of amazon may be getting into the shipping game what it could mean for the transports, and a quick programming note -- do not miss

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. amazon is set to test its own delivery service next year, in a statement u.p.s. sailing we support all our customers with industry leading solutions and expect to expand these relationships in the future. we're joined by don bratton. is it overdone or justified? >> oh, it's overdone amazon is doing what large retailers do they build out their own infrastructure look at walmart. walmart has almost 8,000 trucks, 30,000 trailers, dozens and dozens of distribution centers, yet they're still the largest customer for every major trucker out there.

well, here's the problem, the problem is they don't have density. there's no way to gain the density of route that feddics, that u.p.s., even the post office has there's a reason they use the post office. you know, if you're dropping a package everyfew feet or every quarter mile, the cost is much less to send that truck out than if you're driving ever two our four miles so the challenge they're going to have is figuring out how to make that happen if you look at what they have done so far, they have gone to where they had problems with capacity in the surge, so the leasing is all about dealing with surge, and what happens as a result is they have come to grips with what the costs actually are, so actually in the

end that would make them a more rational customer. for the xpos of the world who cater to these markets. >> sort of the last-mile transportation is what you're talking about with xpo. >> exactly u.p.s is falling a little more sharply even the ceo has said the majority of our business is business to business 85% has nothing to do with e-commerce. >> absolutely. >> given everything you said, is there more risk from the story on u.p.s.? >> absolutely. we've been big fans of fedex we favored feddics -- to be honest i've favored fedex over u.p.s. for my entire career. it's entrepreneurial, it's not u.n.ized except for the pilots, a much more dynamic flexible operating model, but more importantly, fred, one of the quint essentially entrepreneurs

is exactly right if you look at what amazon has done extraordinary, they've had exteriorly exceptional at disrupting b to c marketplaces, but not b to b that's what transportation is, it's a b to b marketplace. you just haven't studied the business model and what it's about -- >> everybody said that about apple and the iphone [ laughter ] >> the iphone was just for consumers, but businesses like the security of the blackberry i could barely remember the name bottom line this you're telling some that u.p.s. and fedex will not see less revenue because of this move by amazon >> well, u.p.s. may, because they have a larger percentage of their revenue, still less than 3% committed to amazon, though their amazon revenue may be 3%, but it's also a low margin of business, so they may not see a

pinch to their operating income. you're right, michelle, that's what everybody said about the iphone, but the buyers are sophisticated buyers, and you have sophisticated sellers, the opportunity is when there's an inefficiency in the marketplace that's not what you have there's a possibility that amazon becomes a more rational customer for these businesses. why would it not -- getting fast delivery to their customers. why are they not going to lean eyen mohr heavily and be more demanding of these transportation companies >> let's say you do it on your own and discover on your own it costs you four, five times cost. that may maybe you less demanding at the negotiation table about what your price is going to be, it may change your decision about exactly how much of that volume you funnel into

your own system es. >> john, thank you very much we'll see you soon, donald broughton. >> my pleasure. constellation jumping. the company also raising the full-year guidance, good for another nearly 5%. a quick programming note mick mcgwire will be or guest coming up on "power lunch.

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>> i'd like to welcome my special guest. all of you bond people recognize jim grant. thanks for taking the time jim? >> all right let's get his mike fixed. >> we're going to go back to michelle and we're going to correct this. we're going to get his mike fixed, we'll work on that ridung this commercial break. don't move i know you all want to here what jim grant has to say

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o. welcome back. jim grant, my special guest. thanks for taking the time. conventional wisdom is ecb, ast program going to expire. is it going to cut back when mario draghi makes announcement? what is your thoughts in the area, jim? >> my basic thought is that the radical policy begets more radical policy and it will be less easy to remove it or to

reverse it than people expect. prices are information and interest rates are prices. distorted interest rates deliver distorted information. so what we see in the ecb i think is kind of the center of mispricing world over. ireland just raised 2 billion euros at interest cost of 0. these distortions are communicable just like disease. if you arb trag it is kind of the sneeze thatcommunicates misinformation. >> since everybody has made this mistake, since all central banks have gone down this road even though we are starting to reverse it a bit, given your statement what do you think is

in store for bond traders globally what humps in the future do you foresee because there is no normal to go back to >> at the moment central banks are creating or materializing from nothing $114 billion worth of credit a month. that's the bank of japan, european central bank and swiss national bank together without the fed. what has this done it has created terrific distortions in pricing of assets. it seems to me that if, as and when central banks decide to reverse it we are in for something we can't foresee. we have never had the provocation and never had the degree of distortion we have now and i think it's pretty glib to say it is going to be fine. central banks were not reluctant

to tell us how great it was going to be on the upside. qe was going to lift asset markets. another saying through the fed is saying that the absence of qe or withdrawal of it is not going to be noticeable. how is that possible >> i agree. i don't think it is possible. let's look at something real time. the president made a comment yesterday that he wanted to wipe out the puerto ricoen debt. whenever we have a crisis no matter where it is it seems the financial leaders always make the wrong decisions. forgiving debt in bailouts don't work. >> and the impulse to speak within some of our leaders is unchecked. so i think leaders when they

attempted to say something might reconsider. how about saying nothing >> i like that idea. >> janet yellen's term is going to run out. i guess my question to you is knowing the way you think and how cloudy the future may be with all the distortions does it matter who the chairman is if the answer is yes do you have a favorite that you think would do the jajob the best? >> i think it does matter. if the very dovish fed governor is appointed fed chairman that is outside the box call. i think it is a provocative one. i think donald trump is on record saying he is low interest rate guy. he wants the factory chimneys to smoke. he wants a great big booming

economy. i think that what he therefore wants is a very easy fed. there was talk in the campaign that he was flirting with the gold standard. he wants the trump standard which would feature great amounts of cheap credit and low interest rates. >> excellent. always interesting to talk to you. everybody loves to read what you have to say about the fixed income markets. thank you for joining us today. back to the crosswalk squawk ont gang. >> you guys were just having the conversation. we have mike mayo coming up on the halftime report. he has for a guy bullish on citi, he has a provocative some say controversial suggestion for what citi needs to do. he is always outspoken as both of you know. >> he has been long citi group

for sometime. it has been a very good call. that stock is up 25% year to date whereas banking index is up nine percent. >> after being without question probably the most vocal critic for years of citi group. >> most global and cheapest play. >> we'll look forward to catching up in a bit. let's have a look at what is coming up on "squawk alley." >> the mayor of san jose in the middle of silicon valley is going to join us. he says he is not going to offer tax incentives to amazon for hq 2 and your city shouldn't either. and the white house securities czar marked a bisht tg ifinhe fed's attitude towards encryption on new devices and whether they want a new back door.

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other leaders include walgreens, all up by around a percent. staples up five percent. that does it for this hour. let's send it to the start of "squawk alley." back over to you. >> good morning. it is 8:00 a.m. at amazon headquarters in seattle. 11:00 here on wall street and "squawk alley" is live. ♪ ♪ >>