welcome back to "squawk on the street." i'm dominic chu. energy is the best performing sector in the s&p so far today standout names, range resources, as well as apache, so certainly a sector to watch. that does it for this hour of "squawk on the street. let's send it back downtown for the start of "squawk alley." guys, back over to you >> all right, thank you, dom good morning, it's 11:00 a.m. on

the senate floor republicans making last-minute changes to the tax bill before voting begins, and it's 11:00 a.m. here on wall street "squawk alley" is live ♪ ♪ good morning, welcome to "squawk alley. david faber, morgan brennan joining me here this morning carl and sara have the morning off. >> all right, let's get to the markets this morning kind of a mixed morning for the major averages, following yesterday's record-setting session which saw the dow break through 24,000 for the first time ever on its first daily performance since early march.

the nasdaq the only one of the major averages that is in the red right now. the s&p had been down most of the session, but recently went into the green beneficiaries of tax reform, certainly, a part of that. joined right now by brian beltski, as well as portfolio manager tony crisenzi. first, a lot of what's been driving the markets is, what i said, expectations we will get a vote on tax reform and it may be one that passes the senate let's get to you monitoring the developments we do see things are in, right now at least, not in session, but should be again soon, right? >> that's right. several key senators, including holdout bob corker, are now saying that republicans do have the votes to pass this tax bill. the holdouts appear to be corker himself, along with jeff flake of arizona, both of whom have been concerned about the impact on the deficit cnbc has confirmed that senator

james langford of oklahoma is a yes on the bill, but the status of another undecided voter, susan collins, is still undetermined one senator who did flip to yes this morning is senator gaines of montana he was able to negotiate, along with ron johnson, an increase in the production of pass through businesses from 17.4% to 23%, and that's what got him onboard. >> we're able to get a significant tax cut for small businesses 55% of the private sector jobs in this country come through these small businesses, not the large corporations, and that's the progress that we made last night. we're glad to see that, and that is why i'm supporting this tax bill tonight >> sources telling me that the offset for that will come from the corporate side and include potentially higher rates for repatriated assets senate republicans were having a caucus meeting just about half an hour ago, could be wrapped up by now, to discuss all of these

changes to the tax bill. the first vote is expected to begin any moment now on amendments and we'll see if they get to a final vote later on this evening or perhaps even early tomorrow morning back over to you guys. >> ylan, real quick on the amendments, that could go on for a long period of time. anybody can offer an amendment, is that correct? >> that's right. they are not to that vote rama process, they are still getting to that process, so it could be a very long day here in the senate >> all right, ylan, we'll be coming back to you many times to keep following things. back to brian and tony on the markets. brian, i'll start with you we've been seeing a reaction in the markets. many of us thought was it already baked in or not, i guess the answer the last few days is the expectations risen, so have the stocks >> that's exactly right, and part of our premise this year is we've talked to our greatest clients around the world, nobody

believed that tax cuts were going to get done because there was such a negativity surrounding politics and president trump and washington and all of the stuff and people were overweighting rhetoric and not looking at the analysis, so what we've seen from that is kind of a rush wednesday was really a telling day, a really telling day, because you saw that rotation out of tech and into really value strategies, which value, by the way, is the most intrinsic fundamental discipline of all, because it means more and more companies are growing, so growth is not scarce. doesn't mean tech stocks are over, just we believe investors are putting more of a bottoms up active investing to their portfolio management that's good for stocks in particular >> going up from potentially more profits to fewer taxes. tony, earlier we had guests we were talking about the stimulative effect of the tax cuts and what the fed's reaction will be. what do you think on both those

fronts >> well, this is something they'll discuss next week at its quarterly cyclical forum, but the early picture is a modest stimulant, and i look back to a note we wrote in january, i posted a blog, why dow 20,000 fails to excite the bond market. here 4,000 points later, nine basis points lower than it has been back then there has been a collective yawn in terms of what it means for the longer term trajectory for u.s. growth, so bottom line answer, until there's a view there's a permanent increase in the trajectory on u.s. growth, and there isn't, the outlook won't change meaninglfully. all that said, a view perhaps there is a change in the longer term picture on growth and something the bond market will have to grapple with and the so-called philips curve, the relationship between growth and inflation now that the jobless rate is at 4.1% and likely

headed below 4%, so one of the big picture issues for 2018. >> brian, it's easy to get caught up in the day-to-day gyrations, but is this tax reform, or is it tax cuts? and is something that we're going to end up paying for later if it's just cuts? >> well, it's a combination of that, i would say, but i think what people are probably missing, john, is that we're going to grow as a result more of this, and i think it's more right now a result of confidence u.s. needs confidence. we haven't had confidence in our economy for several years. remember at the start of this new plen ya, we had the tech crash, we had growth everywhere else in the world, and every asset in the world regarding commodities, bonds, all these defensive bunker-type mentality, so the first part is going to be confidence if we start to believe in each other again, we're going to have growth rates stronger than everybody thinks, so i think the likelihood of a growth scare in terms of gdp and earnings is increasing, especially considering that the fixed

income world and the economic macro world is so consensus and so negative, so basing things on what's happening now instead of what's going to happen going forward in terms of earnings growth we're heading into an environment like the '80s and '90s and the majority of investors have not been around to see that. >> if you're talking about a growth scare, how do you play that, and is that part of a reason why you've seen a selloff in tech this week? >> part of the reason, just because of how much dominance and investors have really forced to be buying those stocks because of the momentum, but again, value measures, as denoted by the financial sector, which we continue to believe most investors are massively underweight, that's where the growth is going to come from and the majority of the companies are giving you double digit growth, so we're going to see a move into high quality u.s. north american development market stocks over the next few years. this is just beginning >> wow i remember the '80s and '90s >> so do i >> yeah.

i think perspective is going to matter again, david. >> you do? >> active investing, perspective, bottoms-up portfolio analysis, that's where we're going to live. >> what i'm hearing from you and in terms of the bond market grappling with the increases we're seeing in the stock market is that maybe the bond market is wrong so far >> bond market's got all the money and the momentum, so they are right until proven otherwise, but i think you need to see an unwind there >> tony, last word to you quick on the bond market does it have it wrong? >> does it have it wrong no both have it right there is a profit story, of course, listing equities as a deregulation story, et cetera, et cetera. the bond market has it right in terms of the inflation market and permanent view on economic growth which is, of course, lower simply because of other factors. >> all right, guys, we have to leave it there thank you both >> thanks, david >> tony and brian. and when we come back, the bull case for apple in china,

where prospects for the iphone maker might be a lot better than you think. morgan stanley is next not just bitcoin a number of other crypto currencies riding a wild roller coaster this week. we'll speak to the cofounder of ethereum and later, the cofounder of vmware gaining this morning after earnings "squawk alley" is back in a moment at fidelity, trades are now just $4.95. we cut the price of trades to give investors even more value. and at $4.95, you can trade with a clear advantage. fidelity, where smarter investors will always be.

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there's a look at the dow. you can see having passed 24,000 yesterday. do have a quick turn in the s&p in the last two minutes. we'll fill you in on why that may be the case when we have a little more information, but you can see we're down now a half a percent. meanwhile, apple hitting iphone shipment headwinds in china, but analysts at morgan stanley remain bullish, saying iphone demand growth is set to accelerate in the coming quarters for more, let's bring in katie from morgan stanley. great to have you, good morning. >> thanks for having me, good morning.

>> so, explain this thesis that you've laid out, that just because the iphone doesn't appear to have the unit share that people might want to see, the usage share is actually a lot bigger, because people are cycling through in china these chinese-made handsets faster than iphones >> sure. we think investors are looking at the wrong data. they typically look at shipment data from ibc and we've partnered here at morgan stanley to get insight into that active installed base share in china. what that shows is even before the iphone x launched this year, apple has taken more market share than all of the four big chinese-branded smartphone vendors this year. so there are really two elements to our thesis. first, the base of old iphones that need to be upgraded is up 60% coming into this year. secondly, we're seeing switchers

from the chinese brands over to apple. the combination of the two means that we could see as much as 80% iphone use growth this year and that's not in consensus numbers. >> katie, hold on, we have to take a quick segue away from this the dow has absolutely tanked just in the past few minutes on this abc news report about robert mueller >> it's a tweet. it basically says special report from brian ross at abc news. again, as john just said, market turned around on this. we want to make sure you understand it. it says simply flynn promised full cooperation to the mueller team is prepared to testify that candidate trump, quote, directed him to make contact with the russians >> let's get to eamon javers >> you're probably reading what we are, but it certainly had an impact on the market, which was higher prior to this tweet

>> yeah, david i think the thing that the market should bear in mind here is that we need a lot more reporting on this before we're confident in this report i think we're going to need some more sourcing, some more information from the special counsel, and i think what we're waiting for now is a copy of the plea agreement from michael flynn, the former national security adviser to the white house, who is in court as we speak right now pleading guilty to a single count of lying to the fbi about his contact with the russian ambassador so, we may see some more detail in that report about what exactly the status is of flynn's cooperation and that would begin to unravel the mystery of what it is, if anything, that flynn has to offer the special counsel in terms of that cooperation does he have information on higher level officials here at the white house? there are a number of officials who have been speculated that flynn might have some information on up to and including the president of the united states, but i think before we go out too far on this particular report, we're going to need to check it, make sure

it's solid and make sure we have some solid facts to bring in as soon as we have those, we'll get them to you. >> sorry, go ahead >> eamon, i have a question. what would make flynn a credible source now >> that's always one of the things you hear in the counterargument. once the person admitted he's a liar, the opposite attorneys will attack him and say this guy is a liar, he's admitted he's lying and you can't trust anything he has to say, but what the government will argue if he is cooperating, and we don't know that yet, yes, he admitted he lied, but he has other information stacked up by evidence and they are going to look for evidence to corroborate whatever it is michael flynn is going to give to them, if he is cooperating. so one of the things that a former fbi official told me this morning about all this is the fact he's pleading guilty to a single charge here of lying to the fbi, what they call 1001,

that's a very low level charge and can be used often to lock in a cooperating witness and plead guilty and what they have in reserve sort of in their hip pocket are other charges that they are confident they can bring against him. so he signs a cooperation agreement, begins to talk. if that talk is not fulsome and forthcoming as the government wants it to be, they can threaten that person with further charges in terms of potential sentencing on the other hand, if he cooperates fully, they could go to court and say this person has given us everything he had, helped the government enormously, and we recommend a much lighter sentence on this single charge, so they have the leverage they need to make sure that person provides full cooperation, but you're right. once they admit they have lied, that's something a defense attorney on the other side can use to attack the credibility of that witness >> yeah, we should direct our viewers' attention not just to the s&p, which you're seeing right there, which did a reverse course had been up a tenth of 1%.

as you see now, down three-quarters of a percent. the ten-year note yield, the u.s. dollar fell, as well. eamon, the reporting from brian ross, people know him fairly well, he's known as an investigative reporter, but to your point, these are the kinds of things, certainly, you'd want to see other news organizations confirm, as well >> yeah, look, it is a dramatic piece of news, and we need to make sure that we know what it is, know what the sourcing is on it, and are confident we can also report that we are not reporting that right now. nonetheless, the report is out there and affecting the markets, but we have to be very careful to establish what we can establish and bring it to you. that's the deal with our viewers every day, as you know >> eamon, give us a sense of what the table stakes are here, because i think people at this point when it comes to the trump campaign and russia might be getting a bit confused we do know there had been some contact with people associated

with the campaign and people who are russian, but what is at stake, depending on how level -- how high a level those contacts got to and if the president had any knowledge or specific intent in contacting people associated with russia? >> well, john, you have to start with what the special counsel's charge initially was he is investigating whether or not there was collusion between the trump campaign and the russian government in terms of the 2016 election. in order to establish that, he would have to establish not only the russians played in the 2016 election, which the intelligence community has already determined that they did, but that they somehow received help or cooperation from people on the trump campaign who those people are to date entirely unestablished, no evidence there was any conclusion that's been publicly released yet, but that is what mueller is going after here. what he's charging flynn, the former national security adviser with today is lying to the fbi in a january interview about his

interactions with the russian ambassador you remember the obama administration, which was then outgoing in december of '16 had put on new sanctions against the russians once they put on the new sanctions against the russians, the fbi is telling us here today through this agreement, through this document, that flynn went to the russian ambassador to have discussions about those, and what the russian response to the sanctions should be. none of that on its face would necessarily be illegal, but the question is whether he lied to the fbi about it the fbi, john, said he did >> all right, eamon javers, stick around this is the story not just for the hour, but the rest of the day. for more on the markets reaction, let's get to bob pisani on the floor. bob? >> john, we have discussed for weeks now what kind of premium there is in the market for tax cuts, what would happen if it didn't occur, but what we haven't discussed in a long, long time is what kind of risk there might be in the market for the president's legal troubles

if there are any legal troubles and here we see an example of this coming out of nowhere frankly, it hasn't been a market mover in a long time, because we haven't had anything substantiative at all to talk about or trade on. now we saw very, very quickly almost a 15-point drop in the s&p 500 you see there, as you can see, it bounced back a little bit, but now the market is going to have to shift its focus at least for the time being from the tax cuts to discussing what kind of risk there is in the market for the president's legal troubles we just don't have our hands around it enough these headlines are certainly enough to get your attention trump -- flynn said trump directed him to contact the russians that was the first headline we saw here on the floor. flynn prepared to testify against trump is the abc report right now, so that caught a lot of attention people were grabbing me saying what's this mean, what are the implications, and i think the bottom line is, right now we don't know we know it's worth 15 points on

s&p. that's enough to get people's attention and we'll see if it bounces back, but the entire market just moved straight down. we had what you call a straight sell program, the big etfs like the spiders, the russell 2000, the iwm, just dropped straight across the board, so everybody down here is trying to figure out more about what the implications are for the market. right now, down about 15 points in the s&p from where we were before guys, back to you. >> just to dig into that idea what the implications are for the market, what is the implied sense here that these potential -- this could be potential legal troubles for the president nd, thus, lead to impeachment? is that what's moving the market as much as it is >> this goes back to the old discussion, phrases we haven't used in a while, what we call the trump trade. when president trump won the election, we saw many different sectors of the market move up.

some of it was on deregulation hopes like banks some of it was on infrastructure on hopes that a bill would go through. some of it was on generic tax cuts hopes, and to the extent that still exists to a certain amount, there is that trump trade that still exists that you can see being affected by his potential trouble. i don't want to go as far as talking about impeachment, but there's still clearly some kind of influence the president has on the market. back to you. >> all right, thank you, bob pisani we want to bring in john harwood in washington as we continue to get headlines. the question here is, as robert mueller continues to dig into possible contacts of the trump campaign regarding russia, exactly how high up does this go, john harwood, what do we know at this point >> well, we don't know much more beyond the fact that michael flynn has offered information, this is a conclusion that we can draw, has offered information

that was valuable enough to prosecutors to make a deal with him. i think one can only assume that that means members of donald trump's family or donald trump personally, and the bottom line is, there is substantial reason to expect that the donald trump presidency, the survival of his presidency itself, is in jeopardy don't know what the chances are of that, but they are significant, because we now have, if, in fact, michael flynn is prepared to tell prosecutors donald trump directed him as a candidate to talk to the russians, the whole picture of interaction between candidate trump and the russians is coming into clearer focus with the meetings we discussed previously, the russian interference with the election, the flynn conversation with kislyak about sanctions and trying to work that situation out. this is a moment of grave

jeopardy for the president >> in terms of this idea that the president would direct flynn to speak with the russians, not actually anything illegal about that, and we've seen presidential candidates speak to or initiate conversations with officials from other countries before, right? so what about this is it the fact there's this idea of tampering with the election and fake news? where exactly does this sort of cross the line what do investors need to be looking at in terms of that line being crossed? >> well, if the donald trump campaign was cooperating with the russian government and russian intelligence to steal secrets from -- that president trump would adopt policies more

favorable to the russian government as president. that's a crime and it's the kind of thing that i think if made claim by robert mueller is significant enough that even a republican congress might move on president trump. >> all right, john, john harwood, thank you let's bring in art cashin, as well, to get sense in terms of the market reaction. that was violent >> it was. it was a combination of two things there was some protective selling that rushed in, but there was also massive cancellation of bids, you know, i don't want to buy them here, i want to step back and think clearer, so you had selling going into a vacuum and that's what made it so dramatic in this area the other thing to remember while we don't know exactly what the relationship of the president is, this comes at a very, very delicate moment we're just about to vote on the tax bill you have a couple of senators

not necessarily heavily persuaded and may say wait a minute, you know, if trump was okay and everything was all right, yeah, here's what i'll do >> we want to bring you some new headlines. actually, eamon, we'll go to eamon for them eamon javers again joining us with new headlines, as well, from other news services regarding this >> that's right, david to recap, mike flynn, former national security adviser, is appearing in court right now at 3rd and constitution here at washington, d.c. we're getting headlines from reuters about what's transpiring in the courtroom federal prosecutors are saying flynn spoke with senior members of trump's transition team regarding u.s. sanctions

another headline here from reuters crossing the prosecutors say flynn spoke with a, quote, senior official of trump transition team who was at mar-a-lago resort in december of 2016 to discuss what to communicate to the russian ambassador and a third headline crossing, also potentially significant, prosecutors say flynn was directed by, quote, a very senior member of trump's transition team to pull countries ahead of the u.n. vote back in december so one of the questions that will immediately ride from all of this, who was that very senior member, what does that language refer to of the trump transition team? also that flynn here is said to have spoken with senior members of trump's transition team about his conversations with the russian ambassador that would indicate presumably that flynn may not have been freelancing on his own, that he may have been coordinating with other people inside the trump transition team. remember, this was before the president was sworn in back in december of 2016, about their

strategy of communicating with the russians what would be illegal in all of that is, as john harwood was just saying, any collusion with the russians about how to affect the election and then, of course, in a quid pro quo situation you need to offer something to get something, so what would the trump team have been offering? those would be the questions here that mueller would be exploring. we may get some more detail on those as we see some of these documents come out from the court hearing we're expecting momentarily. >> eamon, as we watch the market accelerate its decline, we're down 1.25% on the s&p. eamon, take me back to the obstruction of justice potential charge, the firing of comey. that figures into this, as well, doesn't it >> well, absolutely. it could be that mueller investigates collusion, doesn't find that the trump transition or the trump campaign colluded with the russians, but that once the investigation began, and remember the fbi was investigating some of these officials well before mueller was appointed special counsel,

if the trump administration once in power after january 20th of 2017 took steps to obstruct that investigation that met the legal standard for obstruction of justice. mueller could bring a case in that direction, as well. short of overall collusion remember, he's investigating collusion, but if he finds other crimes, he can bring charges on the other crimes, as we're seeing today, this single charge of lying to the fbi here against mike flynn so, there are a number of ways this could go at this point. there's not one single trajectory here and we're going to have to follow it all very, very closely >> all right eamon at the white house ylan mui at the senate and art cashin right here. so give me your reaction now down 1.3%, art haven't seen a move like that on the s&p, by the way, down in a long time. >> absolutely not, but that's the vacuum that i'm talking about. if people are uncertain enough they pull back all their bids, so even the selling going on is falling into a hole, basically,

and that's why you're down 300 points on the dow, or close to it >> art, i mean, the vix above 14 historically, that's still almost comatose, but the move that we've seen this morning in the vix, how significant is that based on what we've seen over the past several months? >> i think it's significant of the sudden shift, the anxiety popping up as heavily as it did. again i hark back to it is not just trump and his fate, it is what's going to happen with this tax bill, what's going to happen with some of these other things, so everything is virtually up in the air now, and that's why people are pulling away. >> although that's saying a lot. they are about to start voting in the senate. >> they are. in the meantime, they are debating and watching you guys and trying to figure out what the real story is here and i think that can have an influence on people, at least others trading in the market apparently think that. that's why you're seeing a pull back >> and certainly seeing gold at

session highs right now. does this -- are investors are going to start moving back into safe haven assets in light of this until we get more answers to questions >> you're seeing the safe haven play here in treasuries and in gold, as you noted so people are looking for something that they can hold on to and these are uncertain times. we still don't know what specific charges are and who's involved, so with all that being wide open, they are wrapping their arms around the safe havens >> worse fall for the dow in more than six months >> back below 24,000 >> perhaps to be 350 points, around 348 points at this point. bitcoin, speaking of safe havens, morgan, also above 10,500 per bitcoin, so perhaps people rushing into that, as well >> bitcoin -- >> rushing into bitcoin. >> in times of stress.

>> welcome to 2017 >> that's pretty scary in and of itself clearly, we don't know, mike santoli joins us at the desk, as well we have to hear more reporting out of the courtroom we're starting to get some of that and, i guess, you have to wonder how long a period of uncertainty will be. these are not the kinds of things that are going to necessarily resolve themselves in a day or two in terms of what is certainly an intensifying investigation of russian collusion in the u.s. election >> and going into a weekend. >> yes, you are. >> so you're not going to have the usual on-duty performers that you might expect, so that's going to add to how much will you find out and how much won't you find out >> as art has been suggesting, this air pocket opened up, it's not the market's way of saying it's methodically caming out exactly how this is going to go and place specific probabilities on some kind of, you know, jeopardy to the president or anything like that it's a market that was kind of

out on a perch after a very unusual rally yesterday with the dow up more than 300 points, the average stock not up nearly that much very much like march 1st of this year, one of the best days since march 1st. march 1st was the one day stretch of a rally, art, when you had the president the night before give a decently received speech in congress all this stuff files like we were sure of a lot of stuff yesterday, we're a lot less sure today and have to see how it plays out. >> absolutely. >> and we are seeing a lot of movement quite a comeback in the dow. now down just about 200 points it had been close to 350 points just a couple of minutes ago let's get to bob pisani on the floor to give us insight into these movements. bob? >> we were down 340 points in the dow a few minutes ago. we've made quite a comeback. at one point we were only down a little less than 200 points. so we turned around more than

130 points in the last ten minutes or so it looks like. i don't see any particular headlines. people have come up and asked me about it, but art was talking about the bids being cancelled and there's certainly a lot, but the volume has picked up there's some real trading going on looking at the s&p 500 etf, the main one, that's almost on a full day's trading volume. normally does about 65 million shares it's already approaching 60 million shares just at 11:30, so we've seen a bit of a turnaround here in the last few minutes other big indexes, the iwm, which is the russell 2000 etf, that's also coming a bit off of the bottom here, so now we're moving down a little bit more. i think there's just a lot of confusion about how exactly the market should interpret these events right now remember, we haven't had to deal with this in a long time, to address the risk factor of the president's potential legal

troubles for a long, long time we've been entirely focused on tax reform and the global economy, and so now this is just another factor to be thrown into the market, and you can see by people moving around, morgan, 100-point move in the dow in a few minutes, the market really trying to figure out where it should be right now. >> just to get to some of the mechanics on this, the news broke just before the european markets closed it just seems as if it happened at a time where you have that quick reflex that saysback away, europe not enjoying it necessarily this news right before a weekend, as well. >> yeah. certainly, a lot of volatility here probably some money to be made if you're moving quickly so we're going to go back over to d.c. to eamon javers. he's got a statement from mike flynn. >> former international security adviser mike flynn is cooperating with the special counsel's office he just confirmed in a statement released to the media. we have the entire statement, i'll read it to you. mike flynn saying.

"after 33 years of military service to our country, including nearly five years in combat away from my family and then my decision to continue to serve the united states, it has been extraordinarily painful to endure these many months of false accusations of treason and other outrageous acts. such false accusations are contrary to everything i have ever done and stood for, but i recognize that the actions i acknowledged in court today were wrong, and through my faith in god i am working to set things right. my guilty plea and agreement to cooperate with the special counsel's office reflect a decision i made in the best interest of my family and our country. i accept full responsibility for my actions." so a couple of significant takeaways from that. one is, that flynn acknowledges that he is cooperating with the special counsel. that is specially significant. the question will be, what information does mike flynn have to offer the special counsel that would have motivated the counsel to offer him a deal for lesser charges and potentially lower sentence the other significant point here in this statement is flynn said

this decision is in the best interests of his family. there had been reporting that there were concerns that mike flynn's son might be implicated in some of his wrong doing over the past several years, particularly in regards to the turkey lobbying matter it may be the case and we'll need more reporting to find out, that mike flynn was motivated to cooperate with the special counsel here because of the potential legal situation facing his son. so one of the things to watch for here is the father-son dilemma and dynamic here of whether or not the son faces any legal fallout in the months to come we'll watch for that we won't know that maybe today, but we will get more details when the plea agreement itself is released. that should be coming shortly and we might see more detail on what exactly mike flynn has to offer here to the special counsel. guys, back over to you >> okay, thank you, eamon, as we take a look. markets well off their lows, just to quickly recap. we were up on the day on the dow and s&p before some news from abc indicating possibility that

flynn would implicate those higher up the chain, so to speak, perhaps even all the way to the president that remains unclear at this point. we do have some testimony from the courtroom itself in terms of flynn being told by senior members of trump's transition team to reach out to other countries to influence the u.n. vote on sanctions or delay or defeat that vote on sanctions. the impact, by the way, also felt by the dollar and the bond markets. so let's check in with rick santelli and see what's going on there when it comes to bonds rick >> you know, on this trading floor, my perception is pretty much different than everything i've heard i heard art cashin do something interesting. he tried to team up the notion of the vote that didn't occur at 11:00 eastern and the headlines regarding flynn. maybe there's something to that, but here's what i saw. i saw a bunch of traders running around saying the vote isn't going to occur and they were running to make trades and everybody with their keyboards, keyboards were smoking, okay

now, whatever it is, i think everybody needs to take a step back first of all, it's a friday. second of all, let's go to the whiteboard these are one-week charts. monday, tuesday, wednesday, thursday, friday, boom all the way down to where we have been trading forever, 232, now we're at 234 dollar index fell to the 92.80 where it started out the week. stocks couldn't get anywhere near where they started out the week and have already cut their losses basically by half i note these are exciting stories. no sources that i could see. you're trading the market. i think you just missed a great opportunity to jump onboard, personally, but if we see a sudden intent under 227, if we see the dollar index under 92.25, if we see the dow jones industrial average actually close down lower than yesterday, meaning take all of yesterday away and close below where we were the previous day, now you're talking but tell you what, my money

wouldn't be on that set of circumstances. back to you. >> all right, rick santelli, thank you very much. and, you know, as we continue to report on these headlines coming out, prosecutors and mike flynn himself, let's get back to eamon javers with more eamon? >> john, we now have a statement from ty cobb, the president's attorney handling the special counsel matter for him i want to read you a statement saying, "today michael flynn, former national security adviser at the white house for 25 days during the trump administration and former obama administration official offered a guilty plea of making a false statement to the fbi. the false statement involved mirrored false statements to white house officials, which resulted in his resignation in february of this year. nothing about the guilty plea or the charge implicates anyone other than mr. flynn the conclusion of this phase of the special counsel's work demonstrates again that the special counsel is moving with all deliberate speed and clears the way for a prompt and

reasonable conclusion. couple of takeaways now from the president's lawyer's statement here one, minimizing the significance of michael flynn in the trump administration, pointing out he only served for 25 days before he was fired for his lies. also suggesting that he formerly worked for the obama administration, trying to spread some of the political collateral damage here, and also pointing out this is a conclusion of a phase of the special counsel's work here. ty cobb seeming to suggest that they expect this could be wrapped up in a prompt and reasonable way some time soon. that mirrors reports that ty cobb has suggested to the president this could all be over with by the end of the year. white house suggested they expect the special counsel's office could be heading towards a conclusion of their investigation relatively soon, something they'd welcome here at the white house, but i can also tell you experts i'm talking to see all of this as an indication mueller is going deeper, not getting ready to wrap up so that's the statement here from the president's lawyer. john, back over to you

>> okay. i'll take it, eamon, thank you joining us now on the phone, former federal prosecutor, assistant watergate special prosecutor at the doj. that does take us back a bit thank you for joining us give us your sense here in terms of the investigation itself, the special prosecutor, what we've learned today and what the significance of what we learned today it >> i think it's something that we've known is coming for a long time, the silence that we've heard about and from flynn for the last several weeks sort of indicated that he was cooperating. and then, of course, there was the withdrawal from talking to the white house lawyers, which meant for sure he was cooperating. and whether he's protecting himself from more serious crimes or protecting his son, either way he must have offered a good deal of information higher up. when you enter into a plea agreement as a prosecutor, it's

because you hope to have information about someone higher than the person you're giving a deal to. and so that leaves either the president, his son, or his son-in-law as the likely target and likely subject of the testimony of michael flynn this is a great step that would indicate that the -- >> apologize for cutting you off. just watched general flynn, former national security adviser for 24 days or so, get into a car at d.c let's replay that for a live shot of him. leaving the courtroom, where he has provided, again, further testimony. i'm curious about that, ms. wine-banks what is it we can garner from what was said in the courtroom today, or at least what prosecutors say flynn has told them what now is on the public record >> well, i don't expect that the

prosecutors told everything, because when you start questioning witnesses who you have leads about because of flynn's testimony, you don't want them to know exactly what he told them, because you want to get their version and see whether it corroborates his or conflicts with his and then you have to decide which is the more likely to be true i think the fact that he served for 24 days is completely ridiculous and irrelevant. he was part of the campaign for the entire time, and so the hope is that he has a lot of information about all the things that were happening during the campaign, during the transition, and then during the first phase of the administration. and he was the one that trump went out of his way to protect that suggested trump knows that he knows a lot that flynn is a key component of telling the information that will show the actual conduct of the president. >> so, ms. wine-banks, what do

you make of the white house's statement, not just about the number of days that flynn was serving, but also about what his testimony implies, you know, the white house suggesting that he's not implicating anyone higher than himself does that give any hint into the white house's legal strategy moving forward, or how they are going to cast this in the court of public opinion? >> in the court of public opinion, yes, it is consistent with the donald trump line, i didn't do anything, i haven't done anything, everybody else is responsible. he blames everyone, takes no responsibility himself, and his base believes this that's where we're at. and so i don't make anything of it in terms of actual reality, in terms of real facts i think the facts are going to come out in terms of evidence that will be put together in a nice package where even his base is going to have to say, much like they did during watergate, when they heard the smoking gun

tape, it was suddenly, well, the president really is a crook. and i think eventually there will be enough evidence to show the same about president trump >> and why do you believe that to be the case, and by the way, given your experience in the early '70s investigating a different president, how long do you think this will go on for? my sense is this process is still got a long way to play out. does it? >> it probably does. it's a very complicated case and it involves a lot more crime than were involved originally in watergate. in watergate we had a perfect combination of john dean, who had an impeccable memory and knew everything, and then we had butterfield announcing that there were tapes which would corroborate john dean, and, indeed, did corroborate him and show that everything he said was true so here we have to take one step

at a time, we have to put the pieces of the puzzle together and build a case no one thing that i have heard is the equivalent of the smoking gun tape, but when you put them all together, it starts to sound like the equivalent of the smoking gun, because circumstantial evidence can be just as persuasive as hearing the voice of the president saying, well, let's use the cia to stop the fbi. let's claim this national security and we have heard the president's voice before we heard him saying the obscene things about women, which he's now sort of re-remembering as not being his voice. we heard his voice we know it's him his base doesn't care. >> yeah. we appreciate your taking the time, jill wine-banks, former watergate assistant special prosecutor of course, takes me back >> i don't think she voted for trump in the election. >> i think that's a fair assumption i think that's a fair assumption we seem to have a good ways to

go, but we want to get back to these guys, i guess. >> art cashin, mike santoli. the indexes have been on kiquit ride the entire hour down as muchdow. made back more than that now let's see, we're down 250 points again, art cashin, director of floor operations for ubs when is the last time we saw this kind of volatility? what do i mayou make of it >> we haven't seen this kind of volatility recently. anybody's fond memory. but i will tell you this, to me, is indicative of what i was talking about before, with the books being canceled this is a sign of a very thin market, where you can whipsaw back and forth you not only drop into a vacuum, when they turn and come back to buy them, the sellers have not filled in. there's a vacuum on the upside

and down side. whenever anybody goes in, you get this whipsaw action. that's what's going on the market is trying to settle its case in here >> it's been months and months and months since we have seen any kind of meaningful pullback. i can't even count how many guests we've had on cnbc over that time who have said buy on the dip. buy when there's a pullback. at what point does the buying start happening again now with the dow down 260 points and whipping around like this? >> we're down more than 1% from an all-time high >> it's still small. >> but what you saw, you talk about machine learning and ai, the machines this year, any time there's a pullback, sharp one on news headlines, you buy it that's why we're getting the yo-yo here it's a test of the market muscle memory it's been the calmest market in 50 years, with the lack of

pullbacks and even intraday moves. with the vix above 14, breaking above the recent range, to see if the character of the market changed or if we're back into that self repair mode where it will rotate and gradually just gravitate back up to the highs we'll see how it plays out >> we brought it up there. any lessons in terms of the market and how it reacted back then one reason it's whichipping arod is the unknown you don't get swept away by the flynn talks, so a lot of people are saying wait a minute, this

is not yesterday this is a new day. and a new day knowing a lot less yesterday and early this morning they were moving closer to that vote it looked like things would go well. this thing seems to have -- >> though, that also -- the vote itself, unclear if there's news events of this morning, art. it's not clear at all that -- there's not been a delay it appears that they got 50 votes. collins was saying don't count my vote so quickly they're awfully close. >> they were extremely close then the news broke here that changed the topic you have to think that if anybody was looking for an excuse to vote no or walk away, this could provide it for somebody somebody who is not going to run for election next year they want to kind of walk away from it. so we'll wait for more news and see if we buy the dip. >> okay. all right.

stay right there let's bring in paul christopher, global market strategist at wells fargo. give me your take on this dip that we've seen over the last hour >> the dip is certainly on the news, the unexpected news of the implication of the president's involvement. obviously that's a serious event. it comes at a time, as you pointed out, when we're waiting for the senate to pass a bill. we think that it is just going to be difficult to sort it out without more information on the president and the legal matters, that will take a long time we've seen special prosecutors before that doesn't necessarily have any lasting impact on the markets. we've even seen a president impeached before that hasn't had lasting impact on the markets we remain focused here on the fundamentals, and we expect the senate to pass its bill and it will go to conference after that >> mike santoli, the senate is one thing. but as those of us who took class know the senate alone

doesn't make a bill become law how gummed up does washington get if, indeed, the smaller probe and the cooperation of michael flynn turns into something and there's more here. >> that's what the market is trying to figure out it was a fairly sloppy process in terms of getting the details of this bill written and voted for in the senate and getting reconciled does the white house's bright line mean less i don't know the market has been an instance where it paid attention to d.c. in a negative way, it didn't last long. you basically had sort of a diversion for a while. it was an excuse to sell in some instances. but it's not been the whole story of this year i do think it's hit at a moment when so much was piling up in the positive file. you had, you know -- >> sounded like something would

have to come >> revised gdp up. consumers doing great. potentially you had the boost of taxes. it interrupts the narrative. >> at a time when we've seen these negative headlines coming out of d.c., i believe you just said that you expect tax reform to move through regard leless >> if you do get the senate bill passing? >> yes >> if you get the senate bill passing, that's quite an offset. it's an immediate positive wh e whereas the implications regarding the president and mr. flynn, it will take a long time to work those out. you have a positive in hand, you go to conference committee next, leadership is motivated. perhaps more motivated knowing that the president is under increasing political pressure.

they're motivated to get this done quickly >> do we see the dow move back into positive territory into the close if that happens? >> would it be this afternoon? maybe, maybe not i remember some korean, north korean ballistic missile launches earlier this summer that left the market down a percent, percent and a half at the end of the day, it was back the next day you have that potential. >> yeah. >> all right thank you. eamon javers, let's get back out to washington. he can tie a bow around this news that we have gotten out of washington what do we know about the mueller probe, michael flynn and

all that that is moving the market >> life at the white house goes on you can see the west wing, the marine and the christmas decorations. we have in the past seen the president himself come out and greet some foreign leaders who come in. not clear that's the case today. we are on alert to see the president here in and among this other stuff. the senate bill you're talking about moving forward which white house officials tell me they feel confident they have the 50 votes they need they say they're feeling good. that's happening the flynn plea is happening. we saw michael flynn leaving the courthouse, yet the president continuing to go forward with this meeting with the officials from libya also, of course, this afternoon, the president is hosting much of the white house press corps for the traditional yearly christmas party. that happens at 2:00 p.m. this afternoon. the white house is mandating that be off the record so you won't be getting reports of what the president says to the press at 2:00 today. we'll wait and see how things

unfold for the rest of the afternoon. >> we should add, guys, that we are now saying mitch mcconnell walked on to the floor of the senate saying the republicans have the votes for the fax refor tax reform bill. >> we need a neck brace. >> as we look at the floor that's the quote have the votes >> the white house says they have the votes also. they're confident here at 1600 pennsylvania avenue. you can see the libyan prime minister moving into position behind me here so you might see the arrival at the west wing within a few seconds. >> the vote obviously, you have to have a conference we'll see what we end up with. revote the house will not just adopt a senate bill. they're getting closer and closer to tax reform >> i talk to a high ranking official here a few moments ago at the white house who said traditional traditionally -- there is the president coming out, flashing a thumbs up at the west wing open

there for the libyan prime minister the handshake. the president seems to be in good spirits, welcoming his visitor here to the white house. he is continuing on with his daily schedule he had not been in the west wing earlier today. the president remained in the residence for an extended period of time this morning at the time the news broke of michael flynn, the president was in the residence, not in the office could be that he was making phone calls to his advisers, to attorneys, we don't no what his movements were before he arrived here, this is the first official thing we've seen him do on camera today he remained in the residence for several hours this morning, even after the flynn news had broken. the president has been monitoring this, as have we all. >> all right as we see the president at the white house, we also see the dow making up quite a bit of ground. down about 155 points. ad