want to thank kevin o'leary for being here. >> great to be here. >> come back and join us again soon. >> i will. >> bring the jarred muffins. >> i'm going to fatten you up. >> he has an empty leg we'll see you on monday. it's time for "squawk on the street." ♪ good friday morning, welcome to "squawk on the street." i'm carl quintanilla, good revisions and futures are study as we watch starbucks earnings and apple's results and launch iphone x and ism on the way at 10:00 eastern time a road map begins with the much

anticipated jobs number. what it means for the economy and markets. >> shares of apple are up after they reported earnings after the bell of the we'll dig through the report and hear why tim cook is calling for a huge quarter on deck we'll go live to the long long lines of customers waiting for new iphones. >> and shares of starbucks under pressure after a less than stellar quarter. we'll talk to kevin johnson and cnbc exclusive along with the 261,000 nonfarm jobs in october, significant upward revisions including september payrolls up 18 k after the initial readings showed a decline. it now means a record 85 straight months of job gains and unemployment goes to 4.3, the lowest in nearly 17 years and average hourly earnings up 2.4 we were looking for something closer to 2.7 and interesting downtick in labor force, jim. >> i'm going to stick with what we need on this and say you're going to get a rate hike on this

if you can do this there's less slack it's certainly not based on average hourly earnings, which really it's incredible how you can be this tight at 4.1 and people not getting 40 cents -- 30 cents more. it's growth without inflation, which is unbelievable for the stock market and i -- look, i'm cool with it. it didn't move interest rates, i think j. powell would agree with me and janet yellen moves up and bank stock rally is verified by this it's all systems go. it's all systems go. >> what are the systems? that you refer to? >> mr. zulu, you know what i mean what are you trying to be -- >> trying to be granular here. >> i like that i'm saying this is in sync with the rally. it doesn't deviate with the rally, even with that little tweak, it's growth without inflation is still the single best thing you can have for stocks and that's what this

number gave. >> reflect sort of maybe we overestimated the impact the hurricanes would have, august and september, 39 and 51, pretty good revisions up. >> i agree funny -- >> three-month average at 1.62 is about what we were running before the hurricanes. >> speaking of starbucks, they had issues involving the hurricane and knocked the growth rate down a little it makes me want to go back and see who used the hurricane as an excuse though. maybe the hurricane wasn't as bad. i know that when you listen to michael jackson and talk to ford, i think you clearly have a boost from it. people are hurt by hurricanes and killed by hurricanes, you don't want to put it in dollars and cents, it is a net positive for the u.s. economy. >> we'll talk to starbucks what we they said about the storms and apple will be a big story today, poised to open at the record high. looking close to a $900 billion

market cap and dow component has strongest than expected iphone sales and guidance for the current quarter as the iphone x hits stores today. after the release last night, he told tim cook, if we could do anything to do, we would have shipped on the same day but the most important thing was to announce on the same day, then they buy an 8 and the 10 and think you hosed me >> katie uberty, we have a little more informal but i think that was really just the takeaway service revenue unbelievable whatever they put out, people want to own. on the conference call they talked about how starbucks basically, a day is more expensive than the x if you buy the package. >> if you buy the package.

>> we can see that's going to be a new high for the stock it's going to eclipse $900 billion in market value soon. >> so yes, at this price, yeah. >> the quarter, we like to come back to the service revenue, it becomes such an important growth component overall and for the future but up 24% that's excluding the 60 million gain they had. that's a big number, $8.5 billion total services revenue. >> $8 billion ahead. >> they've gone past the fortune 100 company which was northwest mutual 28 billion, they are north of that. talking about fortune 75 the gross margins on that business were unbelievable. >> they are. >> that's the business you pay every month and don't think about it. >> right, gross margins of 37.9% are not bad overall for the entire company. >> and guiding to 38 to 38.5, which is more than we were expecting. >> remember when the stock was at 92 and people fell china was

finished and chinese numbers were extraordinary that's important. >> cash flow from operations, $15.7 billion. we know it's the largest market and sometimes the numbers when you look at them are astonishing. >> they are. >> where's cash now? >> 200 -- it's just like better than the u.s. treasury for certain. they take in what the irs takes in, honestly, when you think about the reconciliation they are trying to do in the house and senate, they should get the cfo, pretty brilliant. >> cash at 2.69 is about 13% of all cash held by nonfinancial s&p companies, 13%. >> one of the things, the mac was grade and ipad, think of the knit picking we had. there was a moment on the call when tim refers to the doubting thomases which by the way almost everybody other than katie uberty, she was the one quickest to say don't believe the stories about how there's a problem that

they are saying cut the components in half don't believe it everybody else was like -- they are just piranhas on the call if they want to know what it's like to have 1 to 2% growth and recommend the stock. >> stocks with multiple -- higher than apple. >> for what? what do they make that's so spectacular. i brush my teeth with colgate dental cream -- i took the train today. >> from where? >> subway. >> from summit what are you doing on the subway >> i didn't have an answer one of the great things about this is the trade-in value, tim talked about the trade-in value, if you have the 7 or 7 plus, you might want to trade it in and get 300 or $400 back.

>> went on sale in australia as the call was going on. reuters is reporting that people are selling their -- they went in and sell teenager for 3,000 australian -- the transaction price is about 1400 australian. >> are you serious >> and turning around and selling it essentially to i don't know if you call the black market but selling it privately for double the value. >> let's get task rabbit on that and get them in line the williamsburg store will be a mob scene. >> there are questions about production and their production ramp and how quickly they can meet demand. is it a problem? does it become a problem >> i think it's a problem because as much as they knew demand would be fabulous, they thought the 8 would save some demand and 7 and the problem is, no -- >> tim pointed out with us a number of times, didn't launch this many, didn't know what to expect. >> asked about the 8, people

don't want to feel they got bagged he used the term hosed, i like that it's a more cloak queeal than i'm used to -- >> it's a term of art. >> we're going to monitor the lines around the country as the phone starts to go on sale in this country john ford is at the flagship in new york city. good morning, john >> reporter: good morning, carl, demand is not the issue here the question is how quickly apple can get these turned out we were here when the very first people were coming into the store and coming out take a listen to what one of the first customers had to say >> waiting in line was great, the apple store people are so friendly, wanted to talk to me i talked to apple store family and we all walked in and everyone gave a high five and i'm a big winner today >> reporter: any time you can take $1,000 from somebody for a

phone and they say they are the big winner, you're probably doing something right. if you look at apple's guide last night, which you guys have been talking about, the midpoint of the guide for the holiday quarter is $85.5 million, the street had been at closer to 85 even that suggests that apple believes they can actually make a lot of these xs and the gross margin guide probably higher than you would expect for a newly designed phone like the x when they are ramming up production on something like that it takes gross margins down but of course, this is $1,000 or $1149, depending which model of the x you get. take a look at the stock over six months you can see there were a couple of big moments of doubt from investors after the worldwide developer conference when we got our first look at ios 11, will that be enough then first look at the x, will people pay $1,000 for a phone? well, some people certainly seem to want to do that given the demand numbers we've seen. what's next?

tim cook says that the production of these iphone xs is going well, they are able to produce more and more every week he feels good about that and production supply chain, that's tim cook's specialty, the main thing he was focused on before he's ceo investors should of course keep that in mind but as for now, a question why the lines? they could have done this through online preorder, right but they are going to get people in the stores and going to be watches in there there are going to be ipads in there, certainly plenty of marketing opportunities for apple as they get people to come to the stores even if they didn't preorder. you have to factor all that in as well. back to you. >> john, we'll talk to you later this morning your point about asps is king, for every $10 increase in asp, it's 14 cents to eps -- >> that's big. on the conference call, a lot of people doubted tim, say you leap frogged over the competition with augmented reality

the fun is phone, there's a component of phone and it's funny, isn't it, that you had home depot down and lowe's down big because of rumors that amazon was going to move in. i found a company that can't be amazoned >> who, tell me? >> apple lining up to a brick and mortar. think they are lining up to get into sears, pal. i palled you. >> you did pal me, right back at you, buddy. >> all right, chief. >> hey, sparky >> already jefe, kevin johnson will join us on his company's growth policy following the earnings last night. we'll pay attention to other restaurants, pot belly, for instance the jobs number 261 with good revisions, we're back in a moment ♪

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starbucks posting quarterly results in line, revenues did miss due to slow are than expected sales growth in asia and hurricanes in the united

states it trims its profit forecast we'll talk to kevin johnson later on this hour between the target cut, u.s. comps, mobile order, the t, there's a lot of news in starbucks. >> a lot of the news was discounted when they reported last the stock was trading between 60 and 64 and people said they are going to have to reset their long term plan to a lower level. there were a lot of analysts who let the stock drift down then it was very interesting the afterhours trading was kind of like people did you not realize the stock went from 6 4 to 54 was the guide down it wasn't as bad as some people felt the stock was trading at 51 ht 50, uninformed people trading on it before they got the guidance on call. i know it sounds like it's a slowdown and you can argue it was a slowdown but the question it was a slowdown and no the question becomes, can they really do the new numbers? you have to have a little bit of faith that he they can

it's not a super growth company, it's a senior growth company but you're hearing the type of things like when intel went from being a super growth to being a senior growth company, started returning a lot of capital. >> right. >> and gave you a better dividend. >> you need to change the shareholder base to a certain extent and that can result in the stock price -- >> that's what's going on. nike experienced this. these are these right at the moment of transition where you all have to recognize, the company is so big that it's still growing faster than most companies in size but it no longer has the -- let's call it pizazz, let's contrast it with mcdonald's. >> while the president is leaving joint base andrews on his way to asia, longest trip so far for the president where you'll go to hawaii, japan, south korea, china, vietnam and

philippines, tweeting up a storm this morning in advance of that trip we don't expect him to tweet quite so much in china but we'll be talking more about the goals for the trip and being accompanied by a slew of ceos including loyal blankfein, executives from honeywell, ge. >> a lot of companies that -- it almost seems it's a sales call do business with us and we will be a little bit more -- let's say we're not going to exercise 2 232. >> starbucks was up 7% comp growth in china in fiscal 2017 and reacceleration of growth for apple in china that's a big revenue number for china for apple, 9.5 billion. >> the china numbers, it's the whole eco system, it was a problem and now it's not the chinese love the phone and taking a lot of share. we should go. >> let's get a break in and

we'll get the mad dash after a short break and opening bell after that keta in another look at the futures, we're back in a moment. k rise higher than ever. as the world leader in unmanned aerial systems, we're attracting the world's best talent to central new york. and turning the airport into a first-class transportation hub. all while growing urban areas into vibrant places to live and work. across new york state, we're building the new new york. to grow your business with us in new york state, visit esd.ny.gov. to grow your business with us in new york state, of emerging markets obsolete? at pgim, we see alpa in the trends, driving specific sectors of out performance. where a rising middle class powers a booming auto industry. a leap into the digital era draws youthful populations to mobile banking and e-commerce. trade and travel surge between emerging markets. everyday our 1,100 investment professionals around the world search out opportunities for alpha. partner with pgim,

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♪ it's the mad dash and it is friday let's get to it. you want to talk a little activision. >> here's a stock, again, like starbucks, traded down huge after the bell, went down to 61 of which i'm looking at the release and trying to figure, could we please wait to hear the call because it's bobby code da

talking and he's brilliant his strategy at candy crush coming back, acquisition was good and call of duty, all games doing better than expected my charitable trust owns, the overwatch league, they are talking about who owns these teams and we're talking about the misfits game, and partners with miami heat. comcast, our parent owns the philadelphia team. you've got the krafts owning the boston team. you've got sterling equities owning a new york team david, the roster of people who own teams are people who are very smart, almost as if they think they are going to own an nba team. >> esports is still in the early stage but bobby codic has been focused on it. >> it's going to happen. maryland has a good team by the

way. the conference call was a tour de force monthly average users are big. electronic arts was not as strong as activision, these game companies have iterations but what's happening is whether it be grand theft auto, the gift that keeps on giving or some of the games they keep doing iterations and as the nvidia trips come out, they become more exciting i'm not saying the sky is the limit but this continues to be a very intact story with the east port not built into it i think you get a higher price. >> not the case in media we'll follow some of those, cbs not too bad this morning and number of other stocks we have opening bell a few minutes ayaw stay with us here on "squawk on the street."

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looking at apple and starbucks earnings and iphone x goes on sale in the united states today. dow and s&p are up 1215 and we're trying for eight weeks of gains. it's going to be a little bit of a close call on the s&p. >> this is extraordinary what's happened is there are only a couple of sectors not participating, retail still remains somewhat lame. i see that the oils have actually started to perk late a little you've got the restaurants, we can hit, they are not that strong and then everything else is pretty much all systems go on a daily basis, health care is a bit of a comeback the actual big phar maxt has not done well. food, restaurant, those are the ones under pressure. the restaurant numbers in the employment number, did you see how much hiring there is in restaurants? we're over restauranted -- >> who did we talk to about national retail federation,

overstored and restauranted and they cut the full year guide they blame the hurricane again pot belly traffic went down almost nine. >> yeah. >> comps down five. >> i always found it unattractive -- why don't we call it get fat restaurant, pot belly. >> i suppose. >> one my father was in hospital university of pennsylvania, isn't there a pot belly store. why don't they have a cigarette sfor they have healthy things but there's too many restaurants federal realty has done a fantastic job, stock up six points, restaurants are not in the mall, not doing that well, but he was talking about was that in general you have to diversify from any given retailer they are putting a lot of technology and putting apartments in shopping center rets. >> cloud storage. >> was not something broad soft, amazon and small footprint

targets are the guys coming into the malls, amazon. >> where are we on fixed income this morning just with the jobs report coming in they were kind of flat, right, ten-year. >> how can this stuff be n nonevent, used to trade treasuries, put me up on ten mill and that is nothing, pathetic in the hedge fund world. i know that raj once made fun of me, spending some time in a different kind of place -- >> yes, he is. >> but you're so small >> is that what he said about you? >> yeah. >> i don't know what he would be saying today. >> that dish stays cold and tastes good. when you whip around you see the numbers and expect, wow -- >> amazing, catalonia didn't move us much and venezuela talking about renegotiating a

bunch of foreign owned debt. >> it is amazing, bullet proof, bullet proof >> let's get the opening bell and s&p at the bottom of the screen at the big board, it is celebrating its ipo today at the nasdaq also celebrating ipo, a consumer lending marketplace in china. where else >> yum brands reported a good number this is the nonchina yum brands, kind of interesting formulation there. a lot of people talking about pap pa johns and whether that was motivated against the commissioner, some good articles in the paper today how maybe there's too much football. that's very much in the news, how much is papa johns hurt by the nfl? papa johns seems to be the only one. star spangled banner, cancel my papa johns. >> i took a poll on twitter, is

it because the nfl or pizza? 77% pizza, 20-some odd% nfl. >> maybe pizza going out of fashion or their pizza because pizza hut did pretty well for yum brands. i haven't had pizza hot in a long time. -- beyonce was in front of me once. >> david nuness had comments. >> and speaking of the nfl, we should look at cbs, stock price, down about 3%. the company reporting after the bell yesterday as is often the case on the conference call and overall, trying to emphasize their place in the emerging media system of eco right now. let me say it again, it's very important, not only were we not affected by cord cutting it has real measurable upside for us. that's what set cbs apart from the rest of the pack when consumer switches to a traditional -- skinny bundle to

traditional bundle, they get double the fees and move to cbs all access, revenue sometimes triples and they've done well and showtime closing to nearly 4 million. but ad revenues were a little light. revenues overall were a little light and that's what's impacting the stock this morning. >> one fewer thursday night game than in the year ago quarter >> there's games every minute. >> that was tired night football last night. >> speak for yourself, man. >> bills were tired. >> jets were not tired. >> no, bill were more tire than jets. >> they were inhe vig rated. >> anderson is good. >> not bad. >> i love this moment we're less and less, like beyonce, he goes -- where others worry about cord cutters we don't. we are ready for them. we welcome that. welcomes cord cutters then goes this is significant. >> he wants people to focus on

it it's what we talk about so often when we do an interview -- >> you should do that, t-mobile, sprint, you should say jim, this is significant. >> thankfully i have you to do that for you. >> i'm your housman. >> which i appreciate. >> worrying about advertising overall has been pressuring the stocks we watched discovery and i was a little behind because i hadn't focused on the call, they lowered guidance for the european business but it was also -- our parent company, did you see what happened to comcast shares >> i couldn't look at it. >> because of this report about doj and time warner? is no it's nbc, there's worries about nbc given again concerns about advertising. did you see amc yesterday? >> i did. >> that didn't look pretty either on the call

also lowered guidance. >> just not participating. rising tide is not lifting that garbage filled -- there. >> there's two companies that seem to be getting all of it >> facebook -- >> and google. >> i'm going to reiterate as much as my charitable trust owns this, these companies zuckerberg was try to do what he did. i think the government will focus on whether there's too much of a con trags of power i do >> in digital marketing and advertising? >> too much power, kind of like -- >> the market share in digital -- >> they have a million channels. >> what is their combined of the digital ad market? >> taking everything. >> cbs does 4 billion and very consistent 4 billion a year in network advertising that doesn't even include the super bowl, that's 4 billion a year in advertising, only 40% of cbs's overall revenue. >> you can see a senate call the

hearing on market power. teddy roosevelt, are these trusts, should instagram be broken off from facebook >> should youtube be broken out from alphabet? >> i'm telling you they are going to face this our country does not like these concentrations of power historically. >> amazon, do they get involved in part of that conversation >> yes, they are not going to go after fang. >> -- we're still a tiny portion of the overall retail marketplace in this country. >> yes, it's not the standard oil company and i don't even agree with the idea they should be investigated. i'm just saying that it's been a time honored tradition to go after concentrations of power like these companies have. i don't want them to do it because they are great innovators but people could say they are stifling innovation because they are so powerful i disagree. >> that's where consumer harm, lack of innovation out of

facebook and google? >> the greatest innovators in the world. >> how much are they preventing others from being able to enter the marketplace -- >> they have so much capital who can compete against them i just think it's a natural. if i were in the senate and elizabeth warren, she watches the show, hey, you know what, let's be like -- let's bust a trust here sorry, nice suit, i shouldn't have done that >> let's bring in mr. johnson, what do you say? >> bring him in. >> geez, absolutely. okay, starbucks shares, doing a lot better than last night after the company guided down its long-term projections of what it can do joining us no is starbucks ceo kevin johnson. kevin, interesting description between what happened when you reported the number and then when you talked during the call which basically said look, we've got fabulous businesses and great growth, we're going to have a u.s. pickup soon. the numbers are going to be

fine do you think people have just kind of underestimated starbucks and we were overestimating maybe how much it could grow at one point. maybe we felt you were going to guide down more and ended up with a company with pretty good numbers for a senior growth company. >> well, jim, you know, just to put it in context, it was 2010 we last revised our long term guidance and since then we've more than doubled revenues and tripled earnings and quadrupled market cap and adding 10,000 new stores we revised our long-term guidance yesterday high single digits revenue, 12% plus growth on earnings. and at our size and scale, you know, maintaining a growth posture at that size and scale and investing in the future and at the same time returning over $15 billion of cash to shareholders over the next three years in the form of dividends and buybacks, we think is a very, very strong growth

company, postured to deliver >> let's talk about the so-called moshe pit, which was a term that was introduced by panera, i saw and spent time in charge of trying to fix the problem. wouldn't that mean that you could conceivably have that accelerati acceleration if you get mobile pay to where it's working, you will get that acceleration >> that's right, jim the progress that's been made on increasing through put at peak, the morning peak is the most important day part for starbucks. with the work that's gone on to increase through put at peak, we're in the strongest position we've been as a company, which is why we committed now to start to open up mobile order and pay to all customers, we're going to start doing that in a phased approach throughout the year those things give me confidence in the u.s. numbers we've guided for. >> it's funny, there was a time,

kevin, where young was a company that had very good growth core and then growth slowed a bit in every country but china and people wanted a play on china. i know that would destroy the flywheel but china is growing at a level that makes me feel like i want to own starbucks china. what do you do about the blended average that makes it so that china's pulled down by the rest of the world >> well, look, you point out, we just posted an 8% same store comparable growth in china and announced last quarter we acquired 100% of the joint venture in east china. we'll unify as a company operated market which allows us to lean into the growth opportunity. in addition we're opening a flagship starbucks reserve next month. they presents decades of growth for us we think having two powerful growth engines for the company, the u.s. and china, is what's

going to fuel consistent long term profitable growth for shareholders and we think both of those growth engines are important. >> kevin, you told reuters in an interview last night i guess, we're not going to get caught in the middle of the market and i just wonder for viewers, how should they think of the brand on the spectrum from mccafe to blue bottle? >> look, carl we've had a lot of competition and certainly we're serving over 90 million customer occasions a week part of that is addressing both the needs state of convenience and need state of connection we will not seed the high ground of the ultimate premium coffee experience to anyone, which is why we're investing in the starbucks reserve brand. i'm sitting here today in the starbucks reserve roastry in seattle. next month we're opening an iconic roastery in shanghai

china followed by milan, morning, tokyo, chicago. all of that is fueling an ultrapremium coffee experience around the starbucks reserve brand that is complimentary to the 27,000 stores that we now have around the world. so we're going to remain a premium coffee experience and we're investing in the starbucks reserve brand to elevate that experience on a global basis >> let me ask you, kevin, there's a report by credit suisse which says that you are even after the reset, looking too optimistically, you have better visible than the street but they are questioning whether the margins will improve and any sort of acceleration in the u.s. what do you say to a doubting thomas like credit suisse that really didn't believe the growth can reignite >> well, look, we study all of the data, certainly industry studies and credit card data and

certainly over this last year if you look in the u.s., it's fair to say that the overall u.s. retail restaurant industry has been very flat on sales and actually negative on transactions the fact that we were able to build over 2,000 starbucks stores globally that are performing at higher annual unit volumes than pryer generations in an era where retailers are closing stores at the record pace gives us confidence that there's affinity for the brand we look at what we've done to increase throughput at peak and digital flywheel and we have confidence, look, over the last two years, we've been delivering u.s. comps kind of in that range of what we guided but we do know that over time, away from home food and beverage is going to increase and so we've set a guidance set to -- accepting the fact that this is current -- the current environment that we're operating in and with the work

we're doing on throughput, innovation and we're optimistic we can exceed that this quarter alone, we have a strong holiday planned and we're already off to a good start. we're confident in our fy-18 guidance and long-term guidance we've given. >> what do you -- just want to go over the membership, this is the membership starbucks reward and q4 fiscal 2017 you said 13.3 million actives and q313.3 million actives and q2, 13.3 million and q1, 12.9 is there something wrong with the numbers? what is the actual number of the active members in the starbucks rewards? >> we grew active members in starbucks rewards 11% year on year, jim. and what you see is seasonality in that. think about this, when we get into holiday and we sell you know, billions of dollars worth of starbucks gift cards, many of

those gift cards trans late into rewards members. you have seasonality coming out of holiday where gift cards translate into rewards members you have an uptick early in the year and then you hang on flat as you're engaging customers and do it again next year. 11% growth in active rewards members we think is a good number and the fact that now we're opening up mobile order and pay to all customers, creates now widening apertour of a digital mobile relationship and feeder pool for us to convert those customers into rewards customers. we're very bullish on the work we've done and work we're -- we've gotten to plan for rewards program. >> kevin johnson, ceo of starbucks, thank you so much really appreciate it >> thanks, guys. >> as we head into the weekend, want to do an update on sprint and t-mobile this is going to be an important

weekend/let's call it into monday for both of the companies as they try to figure out whether they can in fact agree on a deal under which t mo and sprint would get together. and they would both move on then to what will be most likely very long regulatory review this weekend, people familiar with the companies indicate that a team from deutsch tell is going to find -- whether he's in japan or san francisco or wherever he may be and talk to him and sort of try to communicate with him what it is they've been thinking about when it comes to these two companies and of course also communicate their vision on price. price has become an issue here you recall earlier this week, when others were reporting that these talks were off and that sprint was walking away, i report, no, that's not the case but it is the case that they are no longer on a glide path in

part because while softbank sprint's owner believed that there was a range for an exchange ratio that had been determined early on in the talks when they thought they were going to get to an announcement of a deal as soon as october 23rd that range may have changed as t-mobile continued to do its so-called confirm tri due diligence. if they are able to get this back on track and get a deal done, it will be this potential weekend and let's call it maybe into monday where they communicate from the t-mobile/deutsche tell side their vision on price and two companies together there's been pushback on governmentance from softbank, perhaps they were not getting the price they originally thought they would they were wondering, maybe we're not willing to give up as much on governance as we originally had. we want our voice to be heard more clearly so certainly plenty of issues that the two companies are going

to be dealing with there's a hope they can revi attal vitalize if they can get to the price that both sides agree to and again, there had been a sense they had an exchange ratio range and perhaps now t-mobile going to be outside that raenk, at least the thoughts on sprint side and therefore you heard a lot from their camp about governance and giving up and whether they wanted to do that hopefully next week, one way or the other we'll bring this thing to an end. >> not to be obtuse like the warden in shawshank, there's a not less reason to block time warner how come this isn't baker hughes -- >> there's a feeling that given the potential synergies there, jim, there was ever a time to get a deal done where you put

together four and three, this is it my sense is the antitrust arguments they'll be making have to do with 5g, and wireless providers moving into a better competitive position versus broadband provided by cable companies over the next few years as being a viable competitive option i think the technology is yet to prove itself but that's one argument they'll make. you're right, time warner, wall street journal reporting may have been been overblown department of justice always has a settlement talk and they are preparing for litigation but doesn't mean they'll go down the litigation path. there are so few that believe they have a true case to be made as to why at&t, time warner would be anti-competitive ats least on the typical findings and law that doj relies on >> dow did open at the record high, we're settling back down ten. let's get to rick santelli this morning. >> you would think with the

record highs you would see interest rate movement to the upside, naynay fives are down four. tens are down eight. 30s almost a done basis point. look at the one week of twos and tens, you see the dynamic and everyone is worried about a flattening maybe inverted curve but after pondering that, what people think matters more than the reality of the situation and the feds will have to consider that at some point look at a one month of twos and tens, it jumps out at you. tens minus twos, a 10-year flat. closer to closer to 70 same is true and finally the dollar index down on the week a lot of drift there but at least it's still above a key level, pay attention to 94 even at least with respect to the dollar index, carol, jim, david, back to you. >> when we return, a lot to talk

about this morning with new england patriots rob gronkowski and dow is down 26 points on this busy jobs friday. back in a minute accused of obstructing justice to theat the fbinuclear war, and of violating the constitution by taking money from foreign governments and threatening to shut down news organizations that report the truth. if that isn't a case for impeaching and removing a dangerous president, then what has our government become? i'm tom steyer, and like you, i'm a citizen who knows it's up to us to do something. it's why i'm funding this effort to raise our voices together and demand that elected officials take a stand on impeachment. a republican congress once impeached a president for far less. yet today people in congress and his own administration know

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jim, what's on "mad" tonight? >> part of the internet of things which is on fire today, even today, despite the fact we have a subprogram. greg is going to be good, a good interview. >> busy week a lot done >> do you want to take a bet, a friendly bet between the broncos and eagles >> if i do, i'm betting for the eagles good luck this weekend, jim. >> thank you, everybody. >> when we come back, more reaction to apple's earnings plus, goldman's jan hatzius on the dow number and the changing of the guard at the fed. dow down 28. ♪

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si sarahizen and david faber. dow is down, led by apple, though watching the iphone x release along with the jobs number the president heads to asia. >> our road map for the hour begins with the jobs number. the u.s. economy adding 261,000 jobs in the month of october, seeing the unemployment rate fall to its lowest level since back in 2000 >> then apple surging on earnings as long lines form outside of storms for the x. why tim cook says the next quarter might be even better >> finally, the president announcing jay powell as his nominee for the next fed chair jan hatzius is going to join us in a few minutes >> let's get to rick and some ism numbers. >> we have lots of numbers still left, especially on the ism. we want to make sure we pay

attention, nonmanufacturing. that's the biggest sector in the economy. we're expecting a number at 58.5 another one of these oh, my god numbers. 60.1 this is only the fourth number in the 20 years of this series which started in '97, that is over 60. so it indeed is powerful let's look at the trade balance. 43.5 billion that's down close to expectations factory orders, final look, 1.4. not much different than the last look at 1.2. durable goods up 2%. that's pretty much as expected, a little light based on history at 2.2 so as we look at all these data points, it's hard not to think that any of these feel-good indices, whether it's ism, consumer confidence, michigan, they're lofty. if that's animal spirits, that's good the number this morning on labor wages this morning were a bit disappointing. yields are down big in the long end. the curve had a big flattening

week a big failure to get over some key levels, especially in tens carl and the gang, back to you >> all right, rick, thank you very much. what a number. meanwhile, shares of apple are up this morning after delivering the best quarterly growth in two years as the iphone x debuts in stores today tim cook shared his excitement for the new product on yesterday's call take a listen. >> incredibly enthusiastic about what our teams have accomplished this year and all the amazing products in our lineup as we approach the holiday season, we expect it to be our biggest quarter ever >> for more on apple today, we're joined by brian white, global head of technology at drexel hamilton. jim struva, good morning to you both happy friday what strikes you about the quarter most something in the margins, service revenue, asps? >> there's a lot a blockbuster quarter. the outlook is much stronger than expected given the delays

with the iphone x. china returned to growth, up 10% after six consecutive quarters of decline, and services showed big upside i look at this, this was an excellent quarter. probably the best we have seen in a long, long time >> jim, it took some investors some time to get used to this cycle being an 18 story instead oa fourth quarter '17 story. is that now firmly in everyone's head >> it is i mean, the september results were so good, and that was based upon the iphone 8 only when we look ahead or look forward, we're all still seeing the manufacturing yield issues with the iphone x, which is going to make it so it continues to be sold out, and lead times are being pushed out three to six weeks. we're now setting up actually for a very healthy and better than expected both december quarter but more importantly, 2018 is going to be a very big year for apple

>> so brian, you're one of the most bullish analysts on the street what takes apple to the trillion dollar mark? >> well, i think there's a few things number one, iphone x as it leads to iphone 11 it will be a strong cycle in our view, but it will lead to iphone 11 what does this mean? the company has raised prices on consumers. that's good for asps, good for margins, and a great cycle i think the other thing is just repatriation opportunity is a big positive for apple and i think a revaluation at 12 times x cash, i think the market is going to revalue this company and say, hey, they haven't gone the wayside of some of these other smartphone consumer electronic players >> we have hurt thad in the past quarter after quarter being strong, doesn't seem to happen this thing seems to trade consistently right around 13 times. >> 12 times. >> why now suddenly for this revaluation. it doesn't seem to happen despite what has been incredible

success? >> it's a process. we're working through this process. remember, this stock was at $90 in 2016. so it's gone up a lot. >> also 2016, to be fair, was not the best year. >> it wasn't the best year the valuation, at that sometime, the mantra was they're losing market share in china. lais their mojo, they're not innovating like 2013, 2014. and i think what we have seen now is that valuation has expanded already from seven times x cash to 12, 13 i think that will continue there's absolutely no reason this company should trade at a discount to the market absolutely no reason in my view. >> jim, does this quarter silence or quell the calls for more aggressive use of cash, more m & a, more aggressive disclosure about would-be product categories >> absolutely not. in fact, it actually causes more and more of a focus of should appleby even more and more

aggressive with its cash but importantly, the company continues to favor tax reform, as do most companies we expect this could result in not only m & a, but stock byeback. they bought back 5% of the diluted shares from a year ago 5% off apple's biggest market cap stock in the world, 5% reduction of that is such a big impact, it's a good thing. but apple can do much, much more with its cash. priority number one, continues to be innovation and bring out products such as the iphone x, virtual reality, augmented reality, and more services if the trump administration gets through tax reform, we expect that they will put more and more cash to use that will help the stock go even higher >> you're talking about m & a, if they get that repatriation rate lowers, smaller technology type acquisitions like we have

seen from apple or something bigger >> we actually did an entire full report. and we listed out, you know, a handful of companies both large, mid, and small sized cap companies from a whole range of different industries i think apple is going to have eyes wide open everywhere. sure, everyone thinks about private and small, but when they open up tax repatriation, we think that other public companies could be on the screen that's beyond the scope of our discussion today, but we have a detailed record on it and we think that's a potential follow-up discussion we could have on the show at a later date >> is that on your radar, too? something transformative >> i still look at smaller tuck-in acquisitions from apple. it repatriation did occur, i could see a one-time dividend from the company, not to mention more buy' back, but a one-time dividend >> 269 billion in cash, and

about $12 billion in commercial paper, just to put that in perspective in terms of what we're talking about. >> thanks, guys. appreciate the guidance today. meanwhile, looking at the overall marking this morning, we're seeing a mixed picture the dow hitting another record high earlier before losing some of its gains after a solid jobs report the best month under president trump. unemployment also dropping to 4.1% lowest level in 17 years, this as the president tapped jay powell to be his pick for the next fed chair for more on all of this, we're joined by allen blinder, former federal reserve vice chair, and david kelly, chief global strategist at jp morgan. david, you think the market is focused on the lack of wage growth we got in the number? >> yes, and well, the lack of worker growth, too the real problem we've got is the labor force is only up .5% per year, and we have all these dreams of getting to 3% real gdp growth but i don't see how you get

there unless you can kindfind ay of increasing the work force >> we got an ism nonmanufacturing number of 60. another blowout. consumer confidence is rising. put this jobs report in the perspective of what kind of growth we're seeing and the higher confidence numbers. >> i think david is right. there's kind of a dissonance between the amount the population and the labor force is growing, and the gdp and jobs are growing. it continues to be amazing if you average through the last two months, which you need to do because of the hurricane, and that in effect may not quite be over, but it's substantially over you get about 150,000 new jobs per month for the last two months that's a quite good pace given where we are with such low unemployment and such modest growth of the labor force. >> yeah, what's with the lower labor force participation,

david? you see that as permanent or are there policy maneuvers that the trump administration can pull, like apprenticeships and better training to bring working age and eligible people back in looking for jobs >> i don't think there's very much we can do domestically about low labor force participation because remember, the labor force participation rate is a percentage of the population age 16 to 120 that is working or actively looking for a job. the problem is millions of baby boomers are hitting 65 and retiring we can't fix that. we could do things about people with felony convictions on their record, make it easier to give them a second chance we need to really think about immigration reform to bring workers we need into this company. if you want businesses to invest here, you have to give them a good workforce to hire a lot of businesses are saying we just can't find the workers >> so alan, do you think jay powell if he gets confirmed by the senate as expected to be the next fed chairman will have a tougher or easier job than janet

yellen >> in the near term, exactly the same it's business as usual the economy seems to be on a pretty steady track. not what the trumpies would like it to be, but a good pace of growth, including a good pace of job groethd, and no signs of an accelerated inflation. it's steady. janet yellen already and before she leaves has set the course, both for interest rates and for the dimonition of the sheets jay powell, unless he's crazy, and he's not, is going to continue going down that path. >> david, i wonder what your take is on some of the things people are writing about powell today, namely he's not a, quote, war time fed chair that he lacks some kind of policy creativity that we got out of bernanke. because of his, i guess what the journal calls low-key status >> yes, he's a lawyer.

i think he understands regulation very well and that's a big positive. think we need to see careful, more efficient regulation of the banking industry in order to help the economy grow. i think that's a big positive. so long as he listens carefully to the advice that he gets within the fed and outside on how to handle whatever crisis we have ahead, i think that would be okay. what you want more than anything else is somebody who listens, who is thoughtful, who has balanced judgment. i think he has all of that based on what i have read. >> as we jump around, it's been such a busy week for markets and the economy. i wanted to get your take on the tax reform proposal that we got from republicans how pro-growth it is, how friendly toward the economy is it, if at all? >> well, i think it's probably a little pro-growth. i do buy, although i'm a democrat, i do buy into the notion that our corporate tax was on the high side and at least the statutory rate should come down you know, the right way to have done this, which is not what they have done at all, is to

bring the statutory rate down maybe around the oecd average or something like that. but not lose revenue because of tightening up many loopholes and exceptions and special provisions and so on there wasn't much of that. instead, it's basically a corporate tax cut, and where revenue is coming in, it's coming in on the individual side by cutting out or reducing various tax deductions so, you know, it could have been a lot worse, but it also could have been a lot better >> i don't know, david it doesn't look to me that the market is banking on this happening. if they are, then why wouldn't they be buying hand or fist consumer discretionary stocks whose earnings are set to rise to 27% next year versus the 9% they're at now, on a 20% corporate tax rate that has not been a popular sector >> first of all, if you look at next year, the s&p companies are

expected to earn about $1.2 trillion $1.5 trillion over ten years, call it $150 billion per year, but a lot goes to households, private individuals. so maybe s&p companies get $60 billion per year in a tax cut. but on a $1.2 trillion basis, only 5%, we should curb our thurm because the market is up a lot on this expectation anyway but there is one thing i have to say here look, there is no excuse in a 4.1% unemployment economy to do massive fiscal stimulus. with would like to see a corporate tax cut, but we ought to pay for it now and not add $1.5 trillion to the deficit to get there. that's taking out a credit card we should not do at this time. >> the question is how many other republicans are on board with that idea as well and won't be for the plan. we'll leave it there thank you. we covered a lot from jobs to the fed to taxes. this was our kind of week.

alan and david, thank you. >> when we return, a corporate jet with no passengers pulitzer prize winning columnist jim ewt llstarwi join us with his best metaphor for ge and in his latest column. stay with us

it's not an insignificant baus it's clearly a message we're not performing for investors. that's our task. so we don't fly around planes and company cars to me, it's pretty

straightforward thing that we have to tighten the belt, lead by example and we have to run the company like we own it for the benefit of our owners. >> that was john flannery, of course, chairman and ceo of ge a couple weeks ago when we went to boston for their earnings release that day following controversial reports that the company's practice of flying a spare business jet for former ceo jim immelt when he visited various places around the globe. our next guest says until ge comes clean, fully clean about its use of these jets and spare jets, its new ceo is going to have to continue answering questions. joining us here at post nine to explain, ppw, jim stewart, that stands for pulitzer prize winner, we kid about it, but i want to get to your column in just a second. you have also written a lot of tax reform why don't we start there give nee your quick take it's still early people are still working through the bill >> very early. admittedly, i haven't read all the fine print i have soosay, having criticized

manialments of their plans up to now, this is their best plan yet. i look adit in four ways, does it raise revenue it's in line with the $1.5 million additional deficit they built into this. i think that's probably the upper limit, but i think, okay, the economy can absorb this. we'll see some years down the road does the growth come and make adjustments it's way better on the revenue front. it's somewhat better on that, too. it still is a very progressive tax. they did not lower the rate on the million plus earners i think it's good they really tried to broaden the base. this is a classic approach to tax reform, which is to lower rates, which they did for many taxpayers, and broaden the base. they're getting rid of the real estate mortgage thing almost completely and the state and local tax deduction. i have shown in previous

columns, those deductions overwhelmingly benefit the wealthy and don't yield anything of great benefit to the public or economy take the mortgage deduction. that just brazenly favors existing property owners over renters and people who would like to buy. i mean, i see the real estate industry screaming, oh, maybe property values will go down that's good for everybody who is saving up money and wants to buy. why should we favor the already more affluent existing owners over people who aspire the government, i feel, has no business putting its hand on the economy this way >> what about the sunsetting of credits for adoption and college and medical expenses is there a squeeze on the lower end of the income stratus? >> we have to see how that works out and whether it's offset by the doubling of the standard deduction. again, i haven't looked in great detail on some of these, and exactly who benefits or what the effect is, but the principle is the less the government tries to

manipulate individual behavior, one place they're still doing it is increasing the child credit now, my own view is unless we had a real birth rate crisis going on in this country, and there are a few industrialized countries who do, i don't understand why the government feels it needs to incentivize having children. >> having kids >> but let's face it - >> isn't that good for the economy? >> to incentivize having children >> yes >> it's good up to some point. countries like italy are struggling with, you know, trying to get the birth rate up. growth and population. whether it's immigration or -- >> i think we're in that basket, the united states, with our demographics >> immigration helps us a lot. immigration helps us a lot >> economically, it doesn't matter whether we're having our own children or bringing in children from elsewhere, but politically, it does >> before we get to ge, do you think that's going to present a difficult case, how they sort of decide what is and isn't really eligible for 25% rate in a pass-through

>> that's always been the problem with lowering the pass-through rate. how do you distinguish a real small business from somebody just providing services. i have to read the fine print. a lot of small businesses say it's cutting too narrowly. i have a personal interest in this because a lot of my income does pass through, and i would like to think i produce books, but that's a product, isn't it i wouldn't call it a service i'm going to read the fine print very carefully >> let's get to ge, interesting column a lot of people have been very fascinated and appalled by the story that none of us really knew about until the journal talked about it, that there was a trail plane that followed immelt around to various places empty. >> which is staggering i mean, every security expert i talk to was scratching their heads saying this makes no sense whatsoever the question is why were they doing it what was the thinking? ge is just for reasons i don't understand, not willing to delve into this and give the answers i know they're genuinely perplexed about why does anybody care about this.

it wasn't a material expense now it's ended, but the fact is you have a lot of angry ge shareholders out there this was like tinder, and this thing just put the match to it i can't go anywhere without getting questions about this and outrage. again, mostly from ge shareholders, but other people, too, who say this is crazy they would spend money like that with no apparent return to shareholders now, flannery, as we saw just a few minutes ago, he's definitely saying the right things. he's taking a new attitude here. but the question is, why don't they just, like, tell us what the committee found. why did it keep going after that why did they keep changing their story? just get this over with so they can move on. >> you heard from immelt as well, though, and the more he explained himself, and you know, in a more significant way than has been the case -- >> well, i got to see the letter he sent to the lead director of ge offering his explanation for

this, which is mostly that he didn't know until the audit committee brought it to his attention, and then he thought it had stopped and it didn't that raises questions, who is running this company, why didn't he know, and especially why didn't he know after he and the audit committee said it should be stopped and it kept going is this some rogue operation what does that say about management also, he said, well, and i agree with this. he was a very hard-working ceo i don't think anybody would criticize him for not working enough he did 100-plus hours, 60% of the time on the road my question is given ge's performance, was that a wise allocation of his time and resources? i can't answer that question, but that was immediately what i thought, maybe he should have spent more time at ge headquarters >> also, i think you suggested if he was really going to such dangerous places, maybe that wasn't a good idea anyway. >> every expert said don't go if it's so dangerous. but secondly, i looked at the various routes he was on, singapore, south korea, china. i know plenty of people who go on regular commercial flights

and don't feel in the least bit of jeopardy. so that's, again, the mystery keeps deepening. i hope ge will just come clean, appoint somebody to look into this, give a report to the directorers, share it with the public, and move on. it's a great american company. i don't want to see it suffer particularly it should do well. it may need some restructuring they have a lot of problems to confront the corporate jets are now grounded let's get this over and move on. >> november 13th is an important day for the company. that will be the analyst meeting. we'll hear a lot more from john flannery than we did a couple weeks back when we first heard frahm hip. maybe they'll even deal with this, jim. thank you. >> by the way, the birth rate last year, 3.94 million, fewest since 1995 and expected to decline. >> maybe we do need a little - >> i'm trying to do my part. >> be know that. when we come back, more from our exclusive interview with starbucks ceo kevin johnson as the company rebounds from the disappointing results last night. stock has gone green, but first a check on where we stand.

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nice reversal for starbucks, matching forecasts on upperings after the bell last night, but posti posting slightly lower revenue kevin johnson joins us earlier, talked about his outlook ahead of the holidays. >> we revised our long-term guidance yesterday 12% plus growth on earnings. and at our size and scale, you know, maintaining a growth posture at that size and scale, investing in the future, and at the same time, returning over $15 billion of cash to shareholders over the next three years in the form of dividends and buybacks we think is a very strong growth company. >> stock went into the pre-market in the red but has turned around, now up almost 3%, as jim said, guys earlier in the show this morning, stock is graduating company is graduating from a hypergrowth company to what he called a senior growth company and investors are coming around

to that idea >> looking for comp growth of 3% to 5%. revenue growth in the high single digits. those are their new targets. >> schwhich analysts like. conservative, achievable targets. meantime, venezuela announcing plans to restructure and refinance its debts. michelle caruso cabrero joins us on that. >> the decision to restructure its debt is a dramatic turnaround for venezuela who long insisted it prioritized its debt that's why their bonds, almost $50 billion of which are governed by new york law, are selling off today. for example, a venezuelan government bond trailed yesterday at 48 cents. today, it's 37 cents on the dollar, yielding more than 30% right now the announcement came from

nicolas maduro yesterday the renotionation for venezuela will be next to impossible for two reasons. first, he announced the country's vice president will be in charge of the negotiation the u.s. justice department has designated him a drug kingpin. he's on the sanctions list, not to mention he has alleged tied to the terrorist group hezbollah, so it's illegal for an american to do business with him. the other reason it will be difficult, first, is new u.s. sanctions means u.s. citizens aren't allowed to buy new venezuelan bonds if an american would september a new bond in exchange for a old bond, any u.s. citizen would be in violation of the sanctions upon accepting them. venezuela owes not only to bond holders, but to many others. this debt negotiation could be even more complicated than greece or argentina. in fact, likely to be. back to you. >> yeah, and normally deep in

that recession that's been going on there, thank you very much. >> let's get over to sue for a quick news update. >> good morning, sara. good morning, everybody. here's your cnbc news update at this hour. the syrian government declaring victory over isis. their last stronghold in that country. the military says it is now in full control of that city after a weeks-long campaign. china is disputing president trump's claim that the deadly opioid fentanyl flooding the u.s. is mostly produced in china. while admitting some of the drug has reached the u.s., a chinese official said there isn't enough evidence to support trump's assertion. >> nearly 600 migrants were rescued from the sea earlier this week as they attempted to cross the mediterranean on rubber boats from libya. rescue organizations say an unknown number are missing after one of those boats capsized. >> and nasa says the ozone hole over antarctica shrank to its smallest peak since 1988 it says stormy conditions in the upper atmosphere warmed the air

and kept harmful chemicals from eating the ozone maybe a little bit of good news there. that's the news update this hour i will send it back to you carl, see you next hour. >> sounds good, sue. thanks when we come back, the economy adding 261,000 jobs in the month of october the unemployment rate falls to its lowest level since the turn of the century goldman's chief economist jan hatzius will join ttauso lk about that and the president's nomination of jay powell as fed chair in a moment. 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.

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under expectations 261,000 in october after rebounding, and unemployment dropping slightly to 4.1%. joining us here is jan hatzius, who at the last minute up sets numbers to 340 what did you see happening yesterday that didn't happen >> the adp report was stronger than expected.

and therefore, we thought it was going to be firmer and i would say that if you include the upward revisions, and i think especially in this case, you need to look at this as a package deal, this was not a bad report on payroll. 90,000 cumulative upward revision, but on the front month, it was less than we expected >> does it connote a turn in any way in the economy >> the payroll numbers, i don't think so i think we're still in this 150 to 200,000 range for payroll growth, and that's been pretty stable for most of this year and i think if you look at the other indicators, you know, there's a lot of up and down in a bunch of them for obvious reasons in most cases, namely the hurricane distortions, but i don't think there's a major change in the track. >> were wages a disappointment >> yes, they were a disappointment month to month, again, very distorted, if you look at the year to year rate, 2.4% is quite weak having said that, if you look at other wage indicators recently,

including the employment cost index earlier in the week, we're still on a very gradual upward trend in ages. i wouldn't make too much of this one disappointment >> why is it so slow the conventional wisdom is the lighter the labor market gets, the more businesses should be paying their workers a 4.1% unemployment rate, why isn't that happening >> it is happening to some degree if you take an average of the different indicators, we were in the sort of 1.5, 1.75% range, now we're in the 2.75% range there's been an acceleration we're not going to get to the wage growth rates we had in past recoveries because productivity growth is a lot weaker than it was in the 1990s and in the 1990s, 4% was a sustainable wage growth rate for the longer term. now, 3% or maybe a little over 3% is a sustainable wage growth.

we're not that far away. >> 2.4%, we're a little far away from that. the republicans are arguing their tax proposal, one of the key consequences will be more jobs and higher wages. if businesses pay 20% rate, all that money they're saving is going to go into the american worker is that going to happen? >> yeah, i mean, so, again, i would look at averages as opposed to the individual, but i don't think we're that far away from 3%. again, if you take a broader view i think in terms of the impact of tax reform, you know, of course, we don't know whether it's going to go through we don't know what changes are going to be made our base case is that we do get a tax bill it does go through we have a about atwo thirds probability that that happens. and we do think incrementally, it is going to boost economic growth in 2018, 2019, and of course, that also means somewhat stronger employment, and at the

margin, somewhat stronger wage growth we don't think the impact is going to be huge, but there will be an impact at a time when the labor market is already strong it does add to that basic case for the economy. >> when you look at productivity, the isms this week, durables, gdp, confidence, when you put them together, does it feel like an acceleration to you? >> yes, i think on growth, that is what we have seen we have seen an acceleration that started some time in the middle of 2016 and it's continued through 2017 so far we see it in the gdp numbers you see it tin our higher frequency measures of activity, ism is a very good example, an important component of that. and right now, we are growing at 3% or maybe even slightly more than 3% pace if i take it all together that's pretty fast relative to the potential growth rate that's probably under 2%. >> so do you see any hiccups in

'18 or beyond, potential hiccups? >> i think there could be hiccups, you know, of course, there are always some risks. you know, global risks are still out there. you look auto china, debt growt is rapid there's issues in the euro area. in the near term in the united states, the economy looks very solid. and i think we'll see further expansion. in fact, what i am monitoring is how much more the unemployment rate can fall without really more of a worry about an overheating. i don't think that's a significant recession risk for 2018, but if we get a substantial further decline in the unemployment rate and other measures of labor market slack, you would be more concerned about that >> what number would that be >> i wouldn't just pick one number necessarily, but we're already looking for a decline in unemployment under 4%, the

lowest we have had it in the last four or five decades was 3.8% in april 2000 and you know, we're not that far away from that >> take that risk of overheating and add to it a completely different federal reserve makeup jay powell got a thumbs up from the market, but there's still the vice chairman role that needs to be added along with several other vacancies. are investors underestimated the fact this could be a more hawkish fed with a republican in charge >> i wouldn't expect a major change i think jay powell as chairman is not going to be dramatically different. i think incrementally, of course, every chairman is going to have -- >> what about a john taylor joining as vice chairman, for instance >> at the margin, that would be a little more hawkish, but again, at the margin this is a large committee. decisions are made on a committee basis. the qe runoff in particular is something that the committee has voted on

it's pretty much locked down, and i really wouldn't expect any changes to that. the funds rate path is a little more up in the air and the rotation is going to turn a little more hawkish, in most people's estimation, but again, these are the things that happen at the margin and i think the more important question for 2018 in terms of what the funds rate does is still the economy. the economy is going to drive a lot more of that, i think, than the exact makeup of the voting committee. >> good stuff today, jan thank you. jan hatzius of goldman >> scott cohn and the america's top states for business team are deep in the rust belt to tell us which state has at least three potential candidates more "squawk on the street" right after this

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signs of exuberance creeping into the market? we'll talk about it at tradingnation.cnbc.com

let's get over to rick santelli at the cme and get the santelli exchange. rick >> thanks, david good morning what a week it's been. i mean, really, think about it bank of england raised rates kind of shocking new fed chairman, pending, of course, approval by the senate rates didn't really change with regard to our statement, but look at the data points we've had. a nice jump in productivity, we had very strong consumer confidence numbers we have had very strong super strong, the fourth best read, actually, not the best fourth. the fourth read over 60 for ism n nonmanufacturing best since '05 when the high was made those numbers have only been around 20 years. it's rather amazing.

there's other things as well going on we talked about events and fundamentals affecting the market all the data points, you have big events it brings markets to big points. big turning points this is no different we saw last week that we had one close, one close last thursday above 244.5. and that was it, we haven't had a weekly close yes, we took out 94 in the dollar index, big event, but we can't go to the neck level when we're in a tightening cycle with a flattening curve, you would think the dollar would do better, now let's get to the crux of the matter, the yield curve. our central bank in particular, mr. carney and the bank of england, also, the normalization, although that isn't a good word, removing some historic crisis stimulus in my opinion is a good thing. other central banks are slowing to move. it doesn't dimension the distortions we left in our wake. a lot of the signals, you know,

when you dial a phone in the old days, you get a busy signal. that meant something now the signals sent out are distorted because we don't know where the yield curve would be and the long rates would be if it wasn't for the securities on balance sheets across the globe. other strange things, you look at the ten-year in italy and how low its yields are or even in spain, it doesn't make sense, but it makes sense in a perverse sort of way, maybe why the traction of the long end is tough to get yields up there's two charts i want you to see, tens mining twos and 30s minus 5s both are the flattest they have been in years. historically, central bankers do not like flat yield curves if you don't believe me, look at the behavior at the european bank and mario draghi after they short end started to sky rocket in rates the problem is it doesn't matter if the signal is distorted or not. it only matters what all of these folks think it matters if it's still engrained in investors' psyche and all the

big fund managers that a flatter curve is bad, then they're going to behave as if it is bad. and that is something the new fed chairman or even the outgoing chairman because we don't know when these issues might metastasize, are going to have to deal with. "squawk on the street" gang, back to you. >> all right i will take it on behalf of the entire gang. thank you, rick santelli let's send it over to another member of our gang, john fort has a look at what's coming up on "squawk alley." >> david faber, we're just a couple bucks away on apple stock from $900 billion in market cap. this comes on the same day after blowout earnings that apple is rolling out the iphone x what's next for the stock? is this peak gdns?ooes what's to come we'll find out coming up on "squawk alley.

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amazon is sifting through more than 200 proposals for its coveted hq2 project and so are we one of the cities bidding on the $500 billion project is cleveland, but does it make the grade for amazon our scott cohn is there this morning with a cold hard look. hey, scott >> emphasis on cold today, carl. you know, all you have to do is spend a little bit of time here, and i've spent a lot, and you

know that the whole mistake on the lake thing in cleveland is ancient history, and the city does know a thing or two about winning. whether it's the rock and roll hall of fame 20 years ago, or the republican national convention last year, or the nba title. landing amazon could be the biggest prize of all >> it's fun. you should come. ♪ >> as the chairman of the chamber of commerce, cleveland wants amazon to be here. >> that's the video that clevelandsubmitted to amazon a part of its bid. it's one of the only parts of the bid that the city has made public also submitting bids, columbus and cincinnati so how does ohio as a whole stack up it has the population. remember amazon wants a million plus in the metro area cleveland, cincinnati, and columbus all have more than 2 million people so that's an a-plus, but in a state we ranked 37th for

business, ohio -- business friendliness, i should say, 16th overall, 37th for business friendliness, ohio gets an "f" for stability. it's a close call, though, because they have been cutting regulations and state finances are strong ohio is among the tops in the nation for higher education, but with the 31st ranked work force and the 30th quality of life when we come to stop states, another "f" for attracting and retaining talent with limited air travel options, c-plus for locations put it all together, gpa of about 1.67, or a c-minus naturally, economic development officials here see it differently. >> we hear from companies that are in ohio that this state has undergone a 180-degree turn from where it was, so we feel that our momentum, we feel that what's been done in terms of the business climate is moving in the right direction. >> he says amazon really does have a shot, ohio has a shot at

amazon, which already has a lot of operations in the state, and they hope that that will grow, but the competition doesn't get a whole lot tougher than this. guys, sara, i hope you'll still be my friend >> i was going to say, what are you doing in cleveland why wouldn't you be in cincinnati for this? >> well, it's a big state. we spent some time in columbus, spent some time here we've been to cincinnati, and we're also looking at the numbers. and the numbers statewide are making it a tough climb. i think everybody recognizes that >> i'll dispute the "f" in talent, carl >> i like this, scott. like the best states for business, only through an amazon prism. we've had some people like jim store at the times make predictions, he picked pittsburgh do you have a city in mind, even if you're not willing to say it? >> well, you know, we're going to be going from city to city. remember we were in chicago a couple weeks ago, we're going to keep on doing this for as long as we can do it while amazon

makes its decision i think you have to look at their criteria and look at it from really a cold hard standpoint when it comes to data, and that means infrastructure, transportation, population, workforce, and so look at the states that do well with workforce look at georgia, look at texas, look at colorado they already have a headquarters in washington, so that's out but workforce is the big battle among the states for business, and that's going to be the case that probably will decide it for amazon >> it's going to be a fascinating thing to watch, scott. thanks again, scott cohn in cleveland today. when we return, new england patriots tight end and super bowl champion rob gronkowski is going to join us on set with his latest app venture bsro, w'relatively new on this jo fntdos down 13. i think it's terrific.

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installed, for just $49.00. welcome back to "squawk alley. you're taking a look at a live shot at palo alto, the apple store where tim cook has just arrived on this friday where the

iphone x goes on sale. i'm carl quintanilla, sara eisen, john fortt. coming off the heels of the earnings last night, and the pictures of all the lines at many apple flagships we're cnbc, so let's start with earnings this could be investors outside with all this cheering, because there have been so much doubt, so much fear leading into this quarter. the iphone 8 demand doesn't seem to be there, will they manage with the x, the 8 was strong enough to carry the fiscal fourth quarter into really strong numbers, above what analysts expected, and the x supply appears to be good enough that the guide on revenue is higher than expectations the mid point of the guide >> cfo saying they are quite happy with the production schedule of the x, which has been, of course, a source of much debate over the past few days our josh