president trump arriving at the world economic forum just a short time ago tomorrow on "squawk box", don't miss my conversation with him. you can see the full interview starting at 6:00 a.m. eastern. we'll be back for our fourth day of coverage tomorrow make sure you join us on that day. "squawk on street" coming up next ♪ good thursday morning, welcome to "squawk on the street." i'm quintanilla and david faber at the new york stock change cramer has the morning off 90 points of this is caterpillar and 3m alone a lot to watch with the president now in davos, mnuchin not backing down on dollar

comments and europe is mostly green and oil continues its run above 66 our road map begins with industrial earnings from cat and 3m and numbers from ford we'll dig in. >> the president is switzerland, we'll hear from him this morning and then an interview with our own joe kernan. >> and futures are up in the premarket on the rally this morning. earnings news, lifting a pair of do you components, caterpillar with its fourth quarter results and issuing up beat guidance due to growth in the construction business 3m with q 4 results, increasing the dividend by 15%. cat is the story this will be an all time high. they are talking about strong order rates, lean inventories and increasing backlog and this is all before we see the framework of the infrastructure, bill. >> talk about two stocks that are kind of encapsulated, all of the themes for a long time it's the kind of global reflation growth spot and also the theme of analysts not just

being able to catch up to exactly how much earnings are going to come in, at least in the short term the thing about cat, 3m to a lesser degree is the market is now putting a very fat multiple on top of something approaching peak earnings. i know this is a stock that's been taken out, the skeptics left and right but it's interesti interesting. it's not usually the way it goes but it's in the raight place and tough to fight. >> any benefit they have identified in terms of tax reform as well is some of that multiple expansion part of -- >> certainly they have identified it. i don't think they are necessarily among the greatest beneficiaries. they did have some expensesin the fourth quarter they had the forced repatriation charge and deferred tax asset, i believe. almost 2.5 billion. >> the accounting stuff flows through and from here on out it's going to be better. but i think it's kind of a demand story right now is what gets people interested and why

you're going to tack on a little bit more to the stock at the opening. >> 3m, for decades now considered an economic bellweather with the skus and revenue up 9 as we said, the div hike another charge, 700 million but they raised the guide 1020 to 1070 prior 960 to 10 -- >> they did cite the lower tax rate they are going to get a few percentage points, down to the low 20s from 26% if you look what they raised 2018 guidance, they raise guidance -- midpoint up 6.5% that's the add on for a lower tax rate that's the scope you're looking at what the market has done is taken that kind of marketwide improvement in the bottom line and added more than that they are kind of extrapolating it out to other benefits not just the pure lower effective tax rate. >> i think an important point

that investors may want to focus on and i've heard in my conversations particularly with bankers trying to determine values when they look and try to put together a discounted cash flow model, is how much of the benefit that we're seeing these companies talk about for tax reform in their current year is going to be competed away as a result of price competition. and that's a difficult thing to know and i think one reason why we see so many companies, whether it's verizon at 3.5 to 4 billion, cash flow from operations being improved or any number of others talking about flexibility, they just don't know and you don't know as an investor and it is possible, mike, i think that you actually can see cash flows up this year and then starting down next year as a result of some things being competed away, which makes your growth characterization more difficult. >> the benefits are front loaded and even when you talk about being competed away, it isn't necessarily price wars and things like that it's okay, we're going paying people a little bit more we now have incentives to do

capital investments with a lower hurdle rate. we don't know what the return is going to be. it may not be the best time in the moment in the cycle to do that but we're going to do it because we have the money to do that. >> nothing encapsulates that better than airlines you're talking about pressures on salaries and wages and benefits and a price war on top of that. income cost rising, final stage pricing power muted to down in this case. >> to get excited you have to say well, this is going to prolong the cycle by a year or two years beyond what we thought and therefore you can discount the benefits -- >> or have a beneficial effect on the economy in general that will increase growth it will be -- it's more difficult now to make assumptions in terms of a growth curve for some of these companies given as you say the effect being magnified this yea perhaps and not as much in the year -- >> which is why, maybe these one time bonuses are companies saying we want to pass this on

but we can't offer you something structural yet let's start with a one time -- and home depot -- >> and everyone is doing it, it makes sense. you know -- >> it is a gesture and as we pointed out many times, it's great but percentagewise it comes somewhere between 7 or so% of the one year benefit that many are talking about. >> i did see the analysts talking about jpmorgan's investment program and the thrust of the report was we got nervous about this then we saw that $15 billion of is really incremental loan growth. they are just kind of saying, we're going to open up the purse strings a little wider 15 billion, not tremendous. >> i looked at verizon, they spent 17 billion on cap ex last year, between 17.2 and 17.8 this year apple, we went over those numbers and thought that's a big number then we looked at the actual spend and the trend and it's the same. >> yeah, same with jp morgan in

terms of branches and all of that we'll talk more about that in a bit. futures are up after the dow posted a record close for the ninth time and dollar is hovering around three-year lows in the wake of the comments by the treasury secretary yesterday about trade. and earlier today at the panel in davos, nuchin clarified the remarks saying the administration is not concerned about the level of the dollar in the short term here's what he said. >> in the long term, i fundamentally believe in the strength of the dollar it is the resolve currency and will continue to be the resolve currency, given the strength and confidence in the u.s. markets >> journal has an op-ed making the dollar weak again. they kind of hammer mnuchin to a large degree for short termism here, turning your back on obviously strong dollar policy that former treasury secretaries have stood by. >> the journal edit page has wavered on some things over the years but a strong dollar kind

of hard money orientation has not been one of them they genuinely think it reflects strong economic fundamentals i think obviously the treasury secretary declined an opportunity to sort of revise or back pedal you can say that much at least on the other hand, these days treasury secretary and finance minister don't quite have the same ability to sort of fine tune the level of the currency maybe as they did in decades past but the market is taking it as they are not going to fight this trend and mario draghi today with some comments about currency volatility and what it means for their policies not sure how to necessarily tease apart the implications except the you're reuro rallied >> when he brings up the carter years and blumenthal's treasury secretary and 20% decline in a year under carter, you know they may not necessarily agree with what mnuchin is saying. >> yes we'll watch that and draghi by the way, press conference is

continuing, talking about underlying inflation remaining subdued. we'll check in with steve in a little while other story this morning is ford, 39 cents is a miss with revenue ahead, north america the only region that's profitable. again, on four x, commodity cost and just -- viewed as not being all that well positioned right now. it's without a doubt kind of a revamp and a show me story it's still -- it's under performed gm yet doesn't look cosmetically cheap as gm it doesn't make the case for ford unless you think they can get costs out and things like that i think we'll hear more about that. >> southwest gary kelly, getting a boost from tax reform, more stories on snap and northrun and kroger and amazon. we're back in a minute

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♪ let's get to the bond pits,

rick santelli, good morning. >> good morning, carl. big day in all of the markets. if you look at one week of tens we're a little elevated but we're still in the pretty warm range of the low to mid 2.60s, on a closing yield basis we haven't settled at since may of 2014 as you see on that chart. really today the action is in eurozone, today was mario draghi's big day we talked that the election november 16th seemed to have turned the equity markets rear first and our central bank has foreseen a big u turn and that has put a lot of pressure on not only the ecb but bank of japan bund yields popped to 62 basis points haven't seen that since november of 2015. the two-year, the shots, minus 55, minus 56 virtually the highest yield since july of last year.

this is all quite important and of course many are talking about the trade wars potentially they are talking about what's going on with the dollar index listen, there's a lot of squawking going on but at the end of the day, the weak dollar story is an old story. now, maybe that will have pushed it along a bit but you and i, you viewers, we've been looking at charts, looking at 1.25, 1.26 euro versus the dollar looking to bust 90 we're 87, 88 on our way down this is nothing new. it's a big trend how it will affect draghi and strong euro, that's the bigger story. you see the dollar index lower left since the end of '14. and euro versus dollar exact opposite some of the best levels since that point in time and many are actually thinking march r marrow draghi will raise rates at the end of the year i can only imagine no matter how you slice it, things are realigning.

you see the equities markets moving ahead and see continued good data in europe doesn't underscore the heavy lifting of mario draghi in the months ahead. carl, back to you. >> thank you, rick euro is on track for the biggest weekly jump since may. meanwhile, ford shares in the premarket falling after the out toe maker misses on earnings and beats on revenue we'll turn to phil lebeau in ft. worth, texas. >> reporter: this is less about what fort reported for the fourth quarter they guided to a lower range of expectations a week ago. if you look at shares of food, th ford, they did miss by 3%. this stock is under pressure because of what happened during the earnings conference call last night essentially, there was a lack of clarity, how little clarity was there? take a look at some of the summaries from analysts as they put out notes overnight and into

this morning rbc, many questions, few answers, jp morgan, initiatives currently lack specificity evercore isi clouds are looming and jp morgan, just -- morgan stanley just put out a note, essentially said, this stock is going to struggle without greater transparency and time and again on the conference call there were questions that ceo jim hacket deferred or said we will explain in the future at some point because of that as you look at shares of ford versus fiat chrysler look at the two. there's no comparison here when you talk with people in the industry as well as on wall street one thing they say time and again, sergio has a game plan. they are executing the game plan what's ford's game plan? we still don't know. and that's the reason this stock is under pressure today. >> phil, we have gary kelly of south we have coming up in a few moments and yesterday we were onset talking to oscar mun oz.

let's give viewers a listen to what he said about the strategic wrong term >> we listen too much to too many people and started being too cost conscious and too capacity conscious we started bringing you in new york smaller aircraft where our competitors offer more comfortable larger aircraft. we were wondering why you stopped -- >> so phil, after a tough day for the carriers yesterday on these capacity worries, what's most important to talk to kelly about? >> not only capacity, because i think look, southwest has long been very disciplined not only under gary kelly, but if you go back into history, very disciplined in terms of as it's adding capacity, where do they add it and what markets. southwest is less about what the united move is about united is clearly targeting american and delta, less about southwest. but i think what gary kelly can address, this question of whether or not you can see other airlines, major airlines add

capacity and add frequency and yet the rest of the industry remain disciplined because carl, we've talked about it and talked about it yesterday, the airlines have a terrible track record in terms of remaining disciplined when a competitor adds frequency or adds more seats on a particular route now, it could be different this time we could see that united does this and american and delta say fine, we're comfortable with how we're doing and the profit margins we're garnering on certain routes my gut says there's a point where they are saying, you're going to add seats on the route, we're going to match you >> if only -- the planes are too efficient and last too long and too easy to put a couple more out on a dessert and into a route. >> didn't southwest say 5% increase in seat miles expected in 2018? little more than last year. >> and phil, you've got doug parker later on today from american, a lot of airline coverage today which we like

that's coming up at 11:00 p.:00. >> you don't want to miss doug parker's comments. >> tomorrow on "squawk on the street", a lot to talk about starbucks kevin johnson. the company is due out with earnings after the bell and along with intel and w d.c. tonight. take a look at the premarket, another record high expected at the open "squawk on the street" is straight ahead it's all yours. wow! record time. at cognizant, we're helping today's leading life sciences companies go beyond developing prescriptions to offering subscriptions with personalized, real-time advice for life-long, healthy living. honey? you almost done? nope.

get ready, because we're helping leading companies see it- and see it through-with digital. tomorrow, it's a day filled with promise some live pictures this morning of the president with uk prime minister theresa may series of meetings with world leaders today before he sits down -- >> we've had a great discussion. we're on the same wave length and i think every respect. the prime minister and myself have had a really great relationship although some people don't necessarily believe that buft i can tell you, i have a tremendous respect for the prime minister, the job she's doing and i think the feeling is mutual from the standpoint of liking each other a lot. and so that was a little bit of

a false rumor out there. i wanted to correct it frankly we have great respect for everything you're doing and we -- it's really great and we're working on transactions in terms of economic development, trade, maybe most importantly military we are very much joined at the hip when it comes to the military we have the same idea and same ideals and there's nothing that would happen to you that we won't be there to fight for you. you know that. and i just want to thank you very much. this is a great honor to be with you. thank you very much. >> thank you very much, mr. president. thank you. as you said, we had a great discussion today and we continue to have that really special relationship between uk and united states and we're facing the same challenges across the globe and as you say, we're working together to defeat those

challenges and meet them alongside that, working for trade relations with the future which will be to both of our benefits, the uk and u.s. both do well out of this and it's been great to see you. >> it's great to see you one thing that will be taking place over a number of years will be trade. the trade is going to increase many times and we look forward to that but the trade concept, the discussions and discussions really i think i can say most importantly, that will be taking place are going to lead to tremendous increases in trade between our two countries, which is great for both in terms of jobs and we look forward to that and we're starting that process pretty much as we speak. so thank you all very much for being here thank you.

>> state we will talk about it. >> we'll talk about that >> guys, thank you >> thank you very much >> that's the president as we said earlier, a series of meetings with world leaders before he sits down for tv interviews his first television interview is in a few months later today you'll hear some of that sound tomorrow morning on "squawk box. and as much as he has to brag about guys, regarding the united states and economic and stock market indicators europe will respond with americale is on the c cusp -- >> everything okay seems to be the response it doesn't seem as if it's a zero sum, either/or type situation like a year ago. >> recommitment to the special relationship that we have with the uk given what has been

tumult in that relationship over the last year, saying we love your country and think it's really great. >> we're on the same wave length in almost every respect he said. >> they will fight for you, we're joined at the hip as well on military matters. so sort of a reaffi a firaffirmf that in the president's language >> we'll see if that tone is carried forward tomorrow in that address. opening bell in a few moments, going to be a doozy, don't go away obvious.

sometimes, they just drop in.

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jj, will you break it down for this gentleman? hey, ian. you know, at td ameritrade, we can walk you through your options trades step by step until you're comfortable. i could be up for that. that's taking options trading from wall st. to main st. hey guys, wanna play some pool? eh, i'm not really a pool guy. what's the hesitation? it's just complicated. step-by-step options trading support from td ameritrade you're watching cnbc "squawk on the street. the opening bell in about two and a half minutes busy morning with the prds as you saw a few moments ago in daf voes, big earnings out of cat and 3m, still haven't had back to back losses for the three major averages the longest such

streak to start a year since 67 when the first consecutive losses were january 25, 26. >> the superlatives keep piling up we keep finding extreme examples of the persistence in this rally. it's not an easy call to say when is enough the indexes were very stretched in the upside and overbougt and sentiment is frothy by a lot of measures but the news is too good it's almost like when earnings estimates are going up and it's really hard to paint a picture of recession any time in the whoize horizon. we rebalance into year end -- month end but it's hard to know -- >> which is why this howard marx note was so interesting. he had to put a whole list of positives with his list of negatives and in the end he basically said render -- defensiveness seems more sensible than aggressiveness.

>> not saying get out -- >> big risk reward and how should you stand relative to your normal risk tolerances. he went back to his own comments from 2004 from 1997 which mirror his recent views, well, you had some time to run in both of those instances, he's the kind of investor who wants the blood running in the streets and wants to feel he has an edge and that kind of open tunistic capital. this isn't that kind of market. >> to your point, we had good 2.5, three years left, '97 the same. >> we all remember certainly those same calls in '97, for example, yet we hadn't even come close. >> i do like to point out though that the bear market after 2000 took you back to 1997 levels it didn't last forever that is for sure, which will lead us to this new call out of amazon which we'll get to in a moment let's get to the opening bell

and s&p at the bottom of the screen big board celebrating its ipo, it's gates industrial, we'll talk to the ceo when the stock opens and nasdaq, screen slate living, sharing a message to children of young adults to rewrite tomorrow da davidson goes to 1800 on amazon, a street high. five-year target 2450. they cite whole foods as a big part of this and go on to say they think suburb ab washington, d.c. gets amazon hq2 because of political influence, he owns the post, a lot of i.t. workers serve the federal government. >> yeah, a lot of people came down to that conclusion based on the fact it was three different areas within that -- >> three finalists within that area your chances are higher, simple path, three out of 20. but we'll see. >> and i mean, just i think the

psychology of setting a price target for amazon has gotten so tough. i absolutely remember when 1350 seemed like the outer limits of what the street was willing to say, we're there and past it and i guess you would say up 30%, up 40% from here. a lot of stocks the most bullish analyst says it's up 30 or 40% it's a sticker shock and how much we're already up in the last year makes it kind of audacious. >> we were just referencing the late '90s, some of these moves, amazon, of course again 17% gain so far this year i don't know how many trading days there have been this year but it sounds like close to a percent a day basically. >> yes. >> and of course netflix up 37%. they are stunning, really are stunning moves and amazon's market cap now above or right around $660 billion. >> i do think it's interesting to your point those guys out, the qqq is up .6 of a percent.

yesterday was the underperforming, you had the head fakes, maybe this is a rotation and maybe we're going to get out of the big tech growth stocks and if the market in general is bullish and money is flowing in, they are not going to avoid the obvious consensus winners and that's what we're stuck with. >> right on amazon, you mentioned the gains they've had. we were talking earlier this morning on a 5-year basis, best buy has outperformed amazon, which we could not get our heads around this morning. >> it's a pretty specific window best buy got trounced into very early 2013 so you started right there and it did slightly outperform. >> is it really five years ago we were sitting here talking about the challenges best buy had and showrooming and questioning whether in fact it would even exist >> geek squad and all of that. >> yeah. >> downgrades best buy to market perform. i'm assuming valuation. >> saying the valuation reflects

the recovery, amentals are fine, the market recognizes it now i don't think there was anything much more edgy than that. >> and snap keep your eye on, the head of product tom conrad going to leave in march as see social media platforms continue to be a story this week with anthony leaving twitter for -- we did see analyst reports expressing worry about what it means for twitter in the long term and anl guysing snap to twitter, a fair bet snap definitely showing a little bit of the effect there down 2.8% right away. i was going to point out that the banks are the underperforming and yields a little bit -- to me that group seems captive to what the bond market wants to do for right now. and again, it's one of those kind of rotations a lot of people think is going to happen and going to be value stocks and financials to lead the way

it's not really taken flight, but it's kind of all relative because everything is up. >> alibaba shares up another percent plus and that's talking about amazon alibaba is up almost 15% since the start of the year. there's stories about kroger executives having visited with them i heard that last week as well very much unclear what if anything comes out of it bob is up i would argue and i heard this more because of a possibility of a dual listing in hong kong. something jack ma spoke about as a possibility. you may recall when alibaba went public here, one of the main reasons they won the ipo, hong kong didn't sign off on the governance structure, wouldn't allow it to procession there they changed that. the pro inspect of listing in hong kong and demand it would create is helping alibaba shares. >> hong kong one of the

strongest right now and it would help both probably, hong kong market at least in the short term and help maybe help alibaba's valuation as well. northrop, rate hike of 10%, they gain 2018 above estimates. >> very strong 2017 group. obviously aerospace and defense, and i will point out, we have cat beating and raising in terms of earnings and it's up 1.4% but yet again boeing is the biggest driver of the dow just because that's what it does every day. it's over 3.5 bucks -- so high priced stocks. industrials doing well it's the formula. >> other than ge. >> and not a high priced stock, obviously. >> down again is ge, two thirds of one percent this after yesterday's earnings it was all over the map yesterday and investors trying to figure it out

certainly this investigation as early days but we do learn it began at least in november the company alerting us to it yesterday on the conference call about earnings that having to do with the report we got a week or so ago about the write down of insurance related assets or policies and the cost thereof. that has not been able to get moment momentum, other than down momentum. >> you've had those days right out of the gate this year, people said okay, it was too beaten up, one of the dogs in the dow, let's buy it. that gets snamacked down by the headlines. the takeaway seems to be a little bit more complex and longer road to actually have any clarity about the value of those underlying businesses coming through. >> home builders not having a good morning, lennar did report in a 10k, a subpoena related to the mortgage subsidiary by the department of justice but overall too, limited supply

obviously lumber prices and prices for contractors and the 10-year, which got 2.67, might put pressure. >> mortgage rates are definitely out there. the supply and demand story has been point number one for the bull case for a long time now but at some point when you can't make deliveries and complete homes, it becomes -- >> guys didn't want to get back to one of the stories i'm following in the faber report and that is continued battle between broadcom and qualcomm. we're following this closely, would be the largest technology deal pretty much of all time, the largest hostile we've seen in quite some time broadcom challenging for the board seats at qualcomm. march 6th is the meeting that will decide the fate both companies in the last week have gone back and forth particularly one of the key areas of contention, namely antitrust. and whether or not this is a deal that we'll be able to get past regulators both here in

this country and in the eu and in china, where qualcomm does a lot of business. in fact, to that point, they have come out with a bunch of announcements today about chinese smartphone makers going in on qualcomm and 5g and things of that nature the sheer size of the company says qualcomm will trouble regulators and divest tours could amount to 30% of revenues and highly revenue in qualcomm's opinion include wi-fi blue tooth and wi-fi networking processors and then they also point out it's not just the u.s., it's the eu and it's the chinese that will be weighing in here importantly. what does broad come have to say? they went in knowing many of the divest tours we might need to take on. we're fully prepared to do that. when i speak to people close to the company dealing with anti antitrust review, they don't necessarily think u.s.

regulators will force a divest tour but say even though it's broadband based business we're focused on at qualcomm, we conceivably would be willing to move forward even if we went 0 for 4 on those die vest tours. when it comes to china, where qualcomm has said, listen, it's a question of divestures there and transfer of ip to its own state champions, broad come would say the chinese have never stepped in the way of a fully global deal and do not believe that any of those transfers if they were forced to happen would actually involve the real know-how that goes into the particular product and therefore would not trigger what qualcomm says is a potential review on national security grounds. as for the eu, they would point out, the eu is not coming after a conglomerate deal in 20 years. ge honeywell got reversed and that deal was blocked but

eventually was reversed in court, not that it helped ge there at all so we'll see where all of this ends up but i will tell you in speaking to sources close to the broadcom camp, they are considering all options at this point, including the possibility of going to a hell or high water provision. namely telling investors those certainly who are most concerned about the antitrust possibilities here the potential blocking of the deal and saying we will do whatever we need to in order to get the necessary approvals. that would not include a review were that to come up for example in some sort of forced divestiture, but might go a long way to ameal yor ate concerns. >> there may be pushback from index funds going to actually take the cash and potentially have to reinvest in a combined qualcomm broadcom and whether or not that would hurt the company

but something to keep in mind there. as for whether we get the price increase and when we get it, that's the key question. march 6th is coming fast, end of this month approaches and one would expect that hock tan, a man behind all of this will have to make a big decision how high he wants to go and whether it's going to have an eight in front of it. that is going to be one of the keys here. didn't want to get people refocused on it because we're days away, one would think, from the necessary bid increase that broadcom will have to come with, whether or not it includes hell or high water, we'll see >> good stuff, david, thank you for that dow is up 87 off the initial highs of the morning let's get to courtney regan on the floor. >> i wonder if today will be a repeat of yesterday? we saw gains in the morning and slow fade began around 11:00 a.m. we are adding to the record gains the dow saw yesterday and s&p close closing lower for the fourth time this year but all three major averages are higher going into the morning

so the tech heavy nasdaq is the outperformer, that was the laggard yesterday, having a little role reversal there if we look at what happened oversea tszs, the ecb is holding steady on monetary policy helping to lifts stocks in europe asian stocks mostly lower and dollar still guiding the action here today and now below 89 for the dollar index wti is supported above 66. gold is pulling back just say little down about $2 at this point. thompson reuters now looking at earnings for the s&p 500 to see growth of 12.4%. earnings is going to be a focus. take a look at the sectors and again we have a risk on day here we have materials and tech leading the way higher here. real estate and the financials are lagging just a little bit this morning we mentioned some of those dow components but quickly we want to pay attention to the action and caterpillar and 3m home depot also on the move giving their employees $1,000

one time bonus from tax reform for the hourly employees but also adjusting earnings. if we can skip down and end on brands, the company has names like rubbermaid, raw lings, goody, they are looking to explore strategic alternatives and sell some of those businesses and cut the warehouse and factory footprint as much as 50%. if that happens, shares down 20% at this point. back over to you, carl. >> when we come back, southwest ceo gary kelly will join us to talk about everything from earnings to tax reform dow is up about an even 100 points on the back of cat and 3m we're back in a moment

♪ southwest airlines reporting results before the bell that beat estimates on revenue, largely driven by an increase in passenger volume joining us for more on the quarter, southwest airlines krxtd eo gary kelly. it's good to have you back good morning. >> great to be back with you

all. >> quarter comes a day after sector got hit because of all of these capacity worries on the back of united's quarter are those worries overdone >> i think they are. you know, you can see by our results, we had a very strong fourth quarter and 2017 we were reversed the trend of declining unit revenues, we're looking for a positive unit revenue growth here in 2018 fuel prices are up a little bit this year which quite frankly to me is more of an issue than the concerns over the industry capacity but we're very well hedged and looking forward to expanding our margins, expanding our return on capital in 2018. so we're off to a good start and i'm really looking forward to a great year the rising fuel cost -- >> let's take you to davos quickly as the president is

making another appearance at the world economic forum >> it's great to be with prime minister netanyahu we've developed a great relationship both as countries where i think it's never been stronger and i can honestly say that and also as personal friends, we have discussions going with israel on many things, including trade. but the big move and something that was very historic and very important was the fact that we will be moving our embassy as you know to jerusalem and as we also know, that is way ahead of schedule by years and we anticipate having a small version of it opened sometime next year. so that's a long time ahead of schedule and it's an honor and it's a great honor to be with you. thank you very much. >> thank you >> thank you very much

>> mr. president, i want to say something because this is the first meeting we've had since the stark division to move the embassy and now expedite the movement of the embassy to jerusalem. i want to say that this is historic decision that will be forever etched in the hearts of our people, for generations to come people say that this pushes peace backwards, i say it pushes peace forward. because it recognizing history and recognizing the reality and can only be built on the basis of truth by recognizing history you've made us and we'll always remember that. we support you completely and your stalwart position on the iran nuclear deal, you said it's a disastrous deal and fatal f w flaws are not fixed we should

walk away from it. i want you to know, should you decide to do that, we will back you all the way. we also appreciate the fact that you confront iran's aggression with us and with other parties in the region as never in the r never before i've never seen the alliance between the united states, israel, and your other allies in the region as strong and as unified as it is under your leadership and the last thing is you stood up for israel at the u.n. in a remarkable way, rock solid support. this is a place -- a house of slander, israel against the united states. and by word indeed you have told them enough is enough. as you finish your first year in office, i want to say they look forward to continuing our remarkable tremendous friendship in the years ahead and i want to

express the appreciation of the people of israel thank you, mr. president. >> thank you my honor i have to say to the united nations, we were pretty much out in the wind derness ourselves, the united states, and we heard every country was going to be against us, and it was very interesting. i said, you know, we give billions and billions of dollars to these countries it amounts to hundreds of millions and sometimes into the billions for certain countries, and they vote against us, and i made a very simple statement that i'm watching. i'm watching we ended up getting 68 votes either yes or we'll take a neutral position, which is okay too. >> which was a yes. >> which was essentially a yes, that's right we ended up getting a lot of votes where i would say we virtually were going to get none we give billions of dollars away every year to countries and in many cases those countries don't support us they don't support the united states israel has always supported the

united states. so what i did with jerusalem was my honor and hopefully we can do something with peace i would love to see it you know, if you look back at the various peace proposals and they are endless and i spoke to some of the people involved, i said, did you ever talk about the vast amounts of funds, money that we give to the palestinians we give, you know, hundreds of millions of dollars, and they said, we never talk. well, we do talk about it. and when they disrespected us a week ago by not allowing our great vice president to see them and we give them hundreds of millions of dollars in aid and support, tremendous numbers, numbers that nobody understands. that money is on the table and that money is not going to them unless they sit down and negotiate peace because i can tell you that israel does want to make peace, and they're going

to have to want to make peace, too, or we're going to have nothing to do with it any longer this was never brought up by other negotiators, but it was brought up by me so i will say that the hardest subject they had to talk about was jerusalem. we took jerusalem off the table. so we don't have to talk about it anymore they never got past jerusalem. we took it off the table we don't have to talk about it anymore. you win one point and you'll give up some points later on in the negotiation if it takes place. i don't know that it ever will take place, but they have to respect the process also and they have to respect the fact that the u.s. has given tremendous support to them over the years in terms of monetary support and other support. so we'll see what happens with the peace process. but respect has to be shown to the u.s. or we're just not going any further. thank you all very much.

>> we're heading out we're heading out. >> thank you very much, everybody. thank you. >> thank you, everyone thank you, everyone. >> thanks, everyone. >> thank you, thank you. >> we'll see what happens. yes, we have a proposal for peace. it's a great proposal for the palestinians i think it's a very good proposal for israel. it covers a lot of the things that over the years were discussed and agreed on. but the fact is, and i think you know this better than anybody, there were never any deals that came close because jerusalem -- we could never get past jerusalem. when people say i set it back, i didn't set it back i helped it.

by taking it off the table, that was a tough decision israel will pay for that look, something's going to happen they're going to do something that will be a very good thing but they want to make peace, and i hope the palestinians want to make peace, and if they do, everybody's going to be very happy in the end we'll see what happens [ inaudible >> no, i didn't really read his remarks. i think i'm better off not seeing them. but we've done a lot to them, and hopefully they're going to make peace for their people. you know what? it's many years of killing people, it's many years of killing each other they have to be tired and disgusted of it. so let's see what happens. i they're eventually very sound minds -- i hope sound minds are going to prevail and it would be a great achievement. i said it from day one if we could make peace between israel and the palestinians. if we do that, i would consider

that one of our great achievements but the money is on the table. you know, the money was never on the table, i'll tell you up front. we give them tremendous amounts, hundreds of millions of dollars each year. our money is on the table. why should we do that for them as a country when they do nothing for us we want to help them we want to create peace and save lives. we'll see what happens we'll see what happens thank you very much. >> are you taking the money right now? are you taking the money now >> we're heading out thank you. >> guys, thank you, thank you. thank you. >> thank you very much, everybody. >> all right that is the president with israel's president netanyahu arguably the stronger relationship that the president has with the world leader with stern words for palestinians representing usaid saying

respect has to be shown. of course, on monday the vice president said the u.s. embassy will open in jerusalem next year mike, my apologies you were going to ask a question gary kelly, southwest, you mentioned fuel costs being up this year perhaps is an emerging concern. you also said maybe not too concerned about aid ed capacity and price wars in the past when fuel has been more expensive, the market took it as an opportunity to say, well, maybe it's going to take the pressure off some of the price wars do you see that dynamic playing out, or if not yet, at what fuel price might that happen? >> well, i think that is an excellent point. it puts a lot of pressure, especially on our competitors, because they don't have the low cost structure that we do, they don't have the hedging program that we have, and they're just a lot more exposed to increased prices you know, energy prices are up 20% over the last several months so, yeah, that could translate into more capacity restraint,

who knows. i was really referring to southwest and our concerns about our competitors' capacity. we're very well prepared to compete. we have a grtd plan for 2018 we're looking forward to continuing positive unit revenue trends even with this competitive capacity threat. we've got a great outlook for our unit costs for the year. of course, a very significant benefit for the southwest who's a full taxpayer from tax reform, so we're good to go and good to compete, no matter what. >> you know, mr. kelly, on tax reform itself, you say, of course, the reduction in the statutory rate will result in hundreds of millions in tax savings, and, of course, boost your earnings this year. what are your expectations next year and the year after? there are some who believe a lot of the benefits near term will be competed way. is that how you're sort of

expecting things to go >> you know, no. and i think as evidence, i would just point to recent history fuel prices relative to 2012 for us means a lower fuel bill just the fuel cost reduction for 2017 of over $2 billion a year and we haven't competed all of those savings away we've had record returns on capital. we've had record levels of shareholder returns, and i think the same logic would extend now to tax reform. it certainly puts us in a position where our cost aftertax are lower. it allows us to have a firmer commitment to keeping our fares low. and we'll use that money to share with our employees in addition to keeping our fares low for our customers, invest more in aircraft, and we'll have

an opportunity to further reward our shareholders as well so, no i don't think it will be competed away. and certainly our investors by their reaction with our stock price don't think it's going be competed away. >> but you think it will actually bring growth consistent with your expectations and not see margin erosion as a result. >> we're look at margin expansion here in 2018 so that is with the benefit of the tax reform all baked in. we haven't added to our capacity as an example in 2018. we'll be growing in the 5% -- low 5% range, 5.x% our growth plans are unchanged at least in the near term. now, if demand picks up because of tax reform, if we get an

economic lift, we'll be in a position where we can grow faster but if you assume that our tax savings in 2018 are roughly $500 billion, it will depend on our earnings, of course, but if you assume $500 million, we're not going to invest immediately $500 million to grow the airline. that's ridiculous. there's an array of things we can do with that money, and we'll put it to very good use. >> people believe wages and benefits will go up 12,000 plus. is that something we can get used to? >> there's a lot of noise in the background i'm not sure i totally heard all of your question in terms of salaries, wages, and benefits and the benefit that tax reform provides for us, it just puts us in a more prosperous position where we can

continue to take care of our employees so that they can take great care of our customers. we'll pay -- we're 85% uniion e uniionized and wages are negotiated that's not anything that will happen unilaterally. there are other threats in our business, whether it's recession or fuel price increases. so it there's a lot more to it than just our tax rate and thinking about our prosperity going forward. but it certainly puts us in a position where we can share more with our employees, and we have done that. >> all right gary, thanks to you. appreciate your patience with the president as well. southwest ceo fwar kelly we hope to see you next time. >> i look forward to it. thank you all for having us. we've got some economic data on the tape a few moments ago. rick >> i'll tell you what. there's some big data here and not necessarily in a great way,

but we did see leading economic leading indicators up 0.6. that's a powerful number the highest we had was october, up 1.2, but we've had plenty of 0.6s, solid number. let's move to the biggy. new home sales, that i were down over 9%. the actual number $625,000 seasonally adjusted annualized units. that's 60 grand below expectations here's the fly in the ointment last year $733,000 when it was released was the best number since july of '07. that gets downgraded in a very large way. that now stands at 689 thought stand alone, 624 in october. but that revision is a biggy interest rates at 266 are coming off as eck question it iss drop, but to find out more about that big revision, we go to our expert let's head east to diana ol'

nick d 'd >> that's a pretty big number. what's interesting is a lot of folks are going to be blaming this on bad weather in december, northeast, and midwest but that's not where sales fell the most they fell a lot more in the west where you see more construction and down 2% in the northeast where you saw that really harsh weather in december. what it's doing is pushing up the month's supply to newly built homes to 5.75. 6 is considered a better market. if you look at the existing home market, you have much, much shorter supply which the builders should be benefiting from, but they continue to raise prices i'm told that 33% of those were wrazing prices significantly prices in december for sales and these are people out signing contracts, not closing people shopping in december, they were up 2%. but builders raising prices with rising mortgage rates, that's going to hurt them back to you guys. >> diane, thanks very much for that, diana olick.

welcome to "the street." we had that pretty good open off the back of 3m and caterpillar, but as we said earlier cat has gone red and with that, dow's up 73. >> we should note that the price here at the exchange, gates industrial opened for trade moments ago. price at 19 on the bell industrial equipment maker owned by blackstone group is trading higher we'll keep trackinging this and bring on the ceo a little bit later on in the hour. meanwhile as we said stocks losing early gains the treasury secretary steve mnuchin continues to comment on the dollar in davos. he said the administration is not concerned about the level of the dollar in the short term but yesterday he said a weaker dollar is good for the u.s here's what he said on panel hosted by cnbc. >> my comments have been that in the short term where the dollar

is not a concern of mine, okay, that it will fluctuate, that in the short term there's obviously benefits and issues with a lower dollar and, again, in terms of the benefits, it is beneficial for our trade imbalances there are also issues for people who hold dollars so i want to be clear in acknowledging both. >> all right joining us this morning to talk about that, brievt levitt is oppenheimer senior strategist. both at post 9 glad to have you here. is what the secretary is saying revolutionary? >> no. the dollar made a tremendous run in 2014, 2015, came back, so depreciated by about a percentage point in 2017 but still that puts it at an elevated level compared to valuation levels

>> so you don't see him writing a new doctrine as someone accused him? >> no, i absolutely agree. the dollar rose as the fed was radsing rates the first time and the rest of the world did not look as good where we are now, growth outside the united states looks quite good real yields looks very attractive, so capital is being allocated there. growth in europe, growth in japan looks good money is going to look good where the growth is strongest. >> how do we win the tailwind for stocks at earnings versus what the journal's complains of which is purchasing power for consumers? >> right right. from the u.s. perspective, i'm not really worried yochl view a pickup in strul activity let by the global capex cycle saving rates have been coming

down, a fiscal package on the table. when you think about the external sector and the dollar, that's one of several factors pushing the u.s. in terms of the equity markets, it's redistributing. as a whole, it's not affecting global equity returns, but it's pushing returns into markets that benefit from a weaker dollar that's e.m., the u.s., and pushing them away from those who suv when the dollar is weaker. that's japan and that's europe. >> i would actually be far more worried if the dollar is strengthening here. when we had the fed rates in 2015 and signaling rate hikes in 2016 the dollar fell significantly. we at on enjaimer funds were saying if this goes on, we're going to have a recession. fed backed off, oil prices went back up, and the cycle continued. so the way this cycle is going to end is probably like all cycles end higher inflation in the u.s. or europe, tighter monetary policy in u.s. and europe

so this weakness on the dollar was a favorable thing that this cycle's going to continue for far longer. >> at the same time we talked to a lot of strategists here on the set and a lot of them seemed to be liking europe at this time. at one point does a weak dollar and strong euro provide a headwind for what seems to be the consensus trade right now? >> i mean that's already been happening, right so euro is the mackerel performer. so where does good economic news flow to, which in europe you're definitely seeing. it's growing at about 2.5% in a trend growth rate economy of about 1% so it's really doing well from a fundamental perspective but it's underperforming because they got parked in a stronger eurowhi, wc is a headwind. so euro strength is a bad thing for european equities. that said, unless you have a

strong view on the dollar and where it's going next month, i'm not sure you want to vote against it either. >> when you look at the united states, the saving grace is you have tax reform benefiting a lot of the domestic companies, a lot of the smaller companies, and then you've got the weak dollar. everybody is getting a lift here. >> they are, but what's interesting if you look at the performance in january it's still a growth market, still growth in a slow growth world where you would have thought -- i think a lot of strategists thought we were going to see more values. i believe they're going to favor growth in a world where we're kind of hitting the gas on fiscal stimulus, but we're kind of hitting the break on monetary tightening, so i think it's going to continue to be u.s. growth stocks and it's going to continue to be nondollar assets like emerging markets and the companies in europe that are going to benefit bringing those returns home into dollars and those that are taking advantage of emerging market growth. >> and in a couple of weeks as

we've already crossed year-end targets, are you guys going to boost your year-ends >> no. i think this your is one where you probably expect equities to do well. you probably don't expect a repeat of last year. i think we're fine wrewhere her. we should expect volatility. we haven't had it in a long time that probably comes with a couple of interest rate hikes by the fed. when volatility comes back in, that's when markets will get a little bit nervous, what i worry about most is a lot of investors have not loved this bull market. they're starting to come back into this bull market and then volatility is going to happen as the fed raises rates and they're going to go away and say every time i come back in, there's volatility that volatility is not going to be the end of this cycle we want to see through that. this cycle is going to continue to go for a while. >> that's going to make the year interesting. thanks, guys. president trump is at the w0r78d economic forum in da voerks switzerland, meeting moments ago with israel's prime

minister benjamin netanyahu and earlier with the u.s.'s prime minister theresa may michelle caruso-cabrera is there with more. good morning. >> they landed in a dramatic fashion on the ice here just half a mile from here, carried throughout the televisions that are on in all the hotels throughout the area. you can see him arriving he has been so discussed continuously here. vierts interesting the optimism about the world economy is very, very high and americans are excited about his visit, but if you talk to europeans, people from other parts of the world, you can sigh they're not happy that he is here and also they kind of grit their teerkts unhappy that the economy is doing so well while he is president of the united states as you mentioned, he's done bilaterals already, two of them with the british prime minister

theresa may and also benjamin netanyahu of israel and president trump gave a small hint of what he and theresa may talked about >> we're working on transactions in terms of economic development, trade, maybe most importantly military we are very much joined at the hip when it comes to the military we have the same ideas, the same ideals >> he also has a bilateral with the leader of rwanda and then executives here have told us they've been invited to a reception and din were president trump tonight. it's clear that the america first message has been modified somewhat for the davos crowd because we have already heard from members of the delegation, many of them who have been here since saturday that america first does not mean america alone. that has been repeated so that's a small hint, i think, of how his america first policy

might change as he speaks to this very international crowd, guys don't forget, joe kernen is sitting down with donald trump later today and we're going to carry some of that on ""power lunch"" and you can catch that on "squawk box" tomorrow. >> we look forward to that thank you. when we come back, the rally losing a bit of stream we'll break things down. speaking of earnings, union pacific out with mixed results wchl ee'll speak with ceo lance fritz. and later gates republic going public we'll speak with the ceo "squawk on the street" is back right after this when you look at the mercedes-benz glc... with its high-tech cameras and radar, contemporary cockpit, 360 degree network of driver-assist technologies

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welcome back to "squawk on the street." shares of caterpillar are now on the move it's down by 1.7%. the company beat on both the top and bottom lines, issued an upbeat look for the year morgan joins us with more behind the numbers. moer began. >> that's right. caterpillar levels pretty

stretched. caterpillar blowing past the high expectations with the adjusted earnings beating by 37 krentds. revenue growing. broad based recovery after a year's long slump. cod modties, energy, mining equipment all expecting to grow this year. a better than expected profit outlook. global growth has picked up. you've got a dollar that's weakened over the last year. this is just as cat's cost cuts have taken room. the ceo saying in the release, quote, we are in the early stages of implementing our strategy for profitable growth tax reform did result in a 2 president $4 billion charge last quarter but it will be interesting to hear commentary on the call which starts at 11:00 a.m. eastern also from full expensing, which incentivizes other companies to buy equipment. still it's not all rosy.

investors looking for an update on the investigation last month, in other business, pled guilty to dumping railcar parts in the ocean to hide unnecessary repairs. overall, whether it's cat or the other big industrials with the exception of ge, solid results so far united tech yesterday. there are high hopes for honeywell which reports tomorrow and boeing next week the big takeaway here so far, order books have been growing. back over to you. >> thank you very much we'll see you in a little while. >> when we come back, the ceo of gates industrial is with us. we'll talk manufacturing taxes, nafta, and a lot more, get a check of stocks at this how. doucetling into a range, up about 70 point, so stay with us. you always pay

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an ipo here at the knox. gates industrial opening for trade just a few moments ago this comes three years after private equity giant blackstone group bought the supplier. for more on the auto business, the industrial business, they feed into a lot of things.

trade negotiations we're joined by the ceo. great to have you with us. >> thanks for having us. >> we talk all the time about the globalized synchronized recovery what does the tax reform do to the company and the united states >> look. we're very constructive about the markets around the globe and we feel really positive tax reform is going to have an impact on capital depreciation that should drive further growth across the industrial sector in the united states. >> you feed into, as we had mentioned in the introduction, into a lot of end markets, whether it be construction, which seems to be in a bit of a turnaround here in strength upswing. where do you see strong growth and demand >> wee see it across all heavy-duty manufacturing and what's happening across the country.

>> is there no particular industry that seems to be stronger than the best or seems to be at the very beginning, perhaps, of an upswing >> look. i think cater pillar reported today, you see very, very strong numbers and good growth in heavy-duty applications like ag, mining, oil and gas, construction so we feel very positive about what we are seeing across those applications and economies. >> a big part of the caterpillar story is turning into capacity constraints. backloggers are growing quickly and they can't make them fast enough are you expecting a step up in capex either here or in other markets this year? >> look, carl. we have been very progressive, and we've actually announced a build-out of two new manufacturing facilities kind of at the height of the industrial recession that we have participated in. blackstone has been very supportive of our investments, so we're putting two new plants

up they're coming onstream in july and august of this year. we expect to benefit at having that capacity available. >> what's the impact on employment versus, i don't know, benefits of automation, things you couldn't do ten or 20 years ago. >> look. we have a very low labor content in the products of manufacturing. we've been investing in automation for many years and we don't expect it's going to be dramatically impacting our manufacture and supply of our customers. >> what impact if any does the trade uncertainty have on your business where do you manufacture do you manufacture for the local market or go across country lines with a withdrawal or retooling of nafta that could potentially impact you >> we have global manufacture. we have 48 facilities across the globe, 58 facilities in the united states. we believe in regional presence to support regional markets. we are in a very good shape from that perspective. >> so no impact from nafta

>> we don't expect there'll be an impact. >> the company's going public today. you're paying down debt largely with the proceeds. what went on over the last few years as a private company owned by blackstone that improved your operations so that you went to investors and said this is something where we were and where we are better now. >> look. we can spend a tremendous amount of time deploying what we call the gates operating system, which is manufacturing and front end focused philosophy to drive improvements across all facets of our organizational capabilities we have spent a tremendous amount of time improving the operational kaydance and capabilities we have refocussed our manufacturing assets to drive better assets utilization, and it has driven a pretty substantial improvements in our operating margins in the last two years. we've been zpanding those operating margins while we've been going through the industrial downturn, so we feel

very good about where we stand and the future opportunities that reside ahead of our company that and those opportunities as a public company, are they different than they were as a private company? >> i don't believe so. we're investing to drive organic growth we've been making those investments over the last three years as a part of the transformation we have put forward. we're very excited about the prospects to drive the organic across the entire portfolio. melissa mentions the incredible markets all over the world. if people look through the filing, what are the risk factors? is it classic input cost risk or is it something else >> look. we're a company that has been around for over 111 years. we have a tremendous iconic brand strength, so we believe to be well positioned to offset the input increases that i think folks are going to see across the industrial complex. >> all right ivo, thank you very much fm your time. >> melissa, thanks very much. when we come back this

morning, taxes are front and center at the world economic forum. wheel check in with jim stewart to talk about that and a lot more with the dow up 86. tomorrow, it's a day filled with promise and new beginnings, challenges and opportunities. at ameriprise financial, we can't predict what tomorrow will bring. but our comprehensive approach to financial planning can help make sure you're prepared for what's expected and even what's not. and that kind of financial confidence can help you sleep better at night. with the right financial advisor, life can be brilliant.

i'm contessa brewer. here's your cnbc news update this hour. president trump meeting with prime minister theresa may in davos, switzerland the president is pushing back somewhat on the notion that he and may don't get along. >> we've had graduate discussion we're on the same wavelength, i think, in every respect. the prime minister and myself have had a really great relationship, although, some people don't necessarily believe that, but i can tell you i have a tremendous respect for the prime minister and the job she's doing. >> at least three people were killed, 13 seriously injured after train derailed near milan, italy. milan police have opened an investigation. of course, this is the latest

incident involving italy's aging rail system. in 2016, 23 people were killed when two trains collided. in an interview with "in style" mags zone oprah winfrey declares she will not run for president. it's not something she's interested in and it's not built in her dna you can hear the sighs after her speech let's send it back to jackie. >> thank you, contessa we're watching the energy prices after they reported a drawdown of 288 billion cubic feet. now, this is a significant number it's pretty steep. it's higher than what we saw last year and the five-year average as well. that is because we're in the depths of winter now the temperatures out there are pretty frigid. so we're going to continue to see demand trends like this as we go on through the winter. natural gas is trading slightly higher, well over that $3 mark and traders telling me that the

coffers are pretty much stocked. they also know the supplies are out there if they need to access them this is very different than a situation we saw in 2014 when natgass spiked over the $6 mark for example. take look at that long-term chart to put these prices in perspective, guys. back over to you. >> thank you, jackie jackie deangelis. president trump is expected to speak in davos tomorrow with stocks up stronltly since the president took office, business leaders have praised policies including goldman sachs' ceo lloyd blankfein. >> i really like what he's done for the economy and i think he's gone out of his way to be very, very supportive of the system and i don't want to be antagonistic and frankly i want to honor that. >> by the way, don't miss the interview with president trump on "squawk box" tomorrow morning. joe kernen doing the honors. all right. joining us here right now is jim

stewart, prize-winning columnist and cnbc contributor the economy is strong and people giving us a sense of what they plan to do, although, very little, frankly, with the benefits from tax reform where are we now with your thoughts a couple of weeks in now that we've had time to hear from some companies? >> it's very impressive. i was here two weeks ago worrying about the market. i think it's gone up every day since i was here i said then sometimes you can be too early, but people get rich by being too early it's very impressive i think the blankfein comments are kind of on i think the impact of tax reform, the repatriation of the cash, it's having a bitter impact than most people expected will this last how much of this will really translate into a long-term economy, long-term higher wages? that, still, we don't know but it's getting off to a good

start. >> it is >> i mean it is financing by deficits, yo know. the new york feds have said there's no free lunch. there will be long-term impacts on our physical ability and whether or not there's a crowd-sized investment are you worried about that or is that for another day >> i'm note worried. yes,et a some point it oohs going to be financed we've got good growth going on i'm not skeptical about that i am a little worried an market that never goes down as many, many people who have lived through the last crash and it reminded me, it always feels like that before something is really tumultuous that it happens. the longer it goes on, the frothier it gets, the worse the correction is going to be. >> right but typically we don't know what is going to cause it is often the case do you have any gases of what that tumult might be caused by

>> one thing we know by history is something none of us can anticipate what everyone tells me is, yes, the higher interest rate scenario you start to get real competition for stocks for a solid return but everybody thinks that. so probably it won't be wait snies everybody thinks there's going to be a correction, that trees can't grow to the sky, and yet here we are. there's got to be a correction coming and the longer we go, the deep ter correction. here we are still putting money into the market. >> i've got to remind people i'm old enough i lived through 2000 and 2008 and i heard similar commenting about the market going up. it did eventually revert there were some big disruptions. my thought is don't bet against it don't try to market time just stick with the allocation and be really disciplined about it. >> we are a day ahead. we got you a day early this

week. >> yes. >> your column has not come out yet but you like a lot of people are fascinated for the search for the second headquarters at amazon. >> i'm beyond obsessed with it i think it's great for america to be in competition really these cities have had to up their game. a while ago i picked who would actually be in the finals. if you count montgomery county as baltimore, then all six of my picks made it. if you don't count baltimore, one of them didn't make it i went around the times newsroom, i said on the list of 20, what's the biggest surprise, overwhelm ily -- there are some long shots, nashville, ohio, miami. i don't see amazon and palm trees in the same place. what's the biggest surprise here the consensus in the newsroom from my informal poll was indianapolis i think that's borne out by the fact that the irish betting

operation, indianapolis is tied for last in the betting. when i searched for pundits who would say who's going to make the finals, nobody said indianapolis i think it's because it's a tech center did research on it i know indianapolis there, i went to college at depaul university, which is 35 minutes from the airport, but that was a long time ago. there's a new indianapolis out there. there are over 2 million people in the metropolitan area they've got walk trails, bike trails, a canal. i went kayaking on it. bon appetit did a special feature. i missed the one they went around to all the craft breweries, coffee roefrts farm to table. by the way, how close is indianapolis to farms? there are farms in the metropolitan area if that's what you're looking for. >> you're going to be travel writer that's what's coming, isn't it >> by the way, they've

investigate a fabulous airport. >> are they paying you >> no. >> i mean -- >> they're not it's not all -- >> they're not going to win, though, jim. >> i'm not picking them as a winner they have a couple of big hurdles. they don't have the high end tech force i think amazon realizes if they pick indianapolis, nashville, columbus, they're going to have to parachute a lot of talent in there. and, you know, still as i talk to several people, how would you feel about living in indianapolis and they basically kind of said like, well, are you kidding? so they've got a perception issue. and then just this week, the legislature is all roiled over the hate crimes. indiana is one of five states that does not have an anti-hate crime bill there's a strong streak of religious conservatives that runs through the state, although not, i should say, indianapolis, which does have anti-discrimination laws so the amazon people have told me that in round 2 they're going to be delving deep sbeer some of

these local political issues and it ooh going be a problem in north carolina too so there are some hurdles there. >> okay. >> but don't forget about the canals thank you, jim. >> you're welcome. >> jim stewart from "the new york times." >> who knew about canals in indianapolis. they're facing a pullback. mike is joining us with our etf spotlight. hi, mike. >> yes, of course. they droesh the nasdaq to that tremendous gain. taking a look at some of the different etfs, it shows your variation in performance obviously the bellwether, a lot of people look at the smh. we used to called them the holders. now it's etf and conductor index. both of those are riding the same line. the reason is they're riding the market cap wave. they have the greatest influence for the smh it's taiwan, semi.

for the soxx, and qualcomm however, there's equalweight 30% conduct tore stocks. that's lagged not only in this one-year period but year to date some technical analysts will are looking at it saying maybe they're tiring a little bit. earnings drove that sharp pullback more broadly it's been a narrower performance story so i do think the question is going to be can leadership transition if, in fact, that's what's going on semiconductors giving away to other areas of tech or if it's a more whole sale, we might be able to expect. >> thank you, mike mike santoli squloo when we come back, the ceo of union pacific wchl'll talk the rail industry, taxes and a lot more get ready for tomorrow starbucks will report after the earning bell and we'll talk with the ceo kevin johnson at 9:00

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running. can it continue? find out "squawk on the street" returns in just a moment in just a moment

free volumes and tax reform as the company reports q4 earnings this morning. stocks down almost 6%. joining us for a cnb first on interview. lance, good to have you. >> good morning. thank you. >> i wonder if you think the stock's action is reflecting fuel cost, train speerksd or is

it something else? >> well, if you look at the quarter, it was an okay quarter. we generated incremental earnings, we had some growth, we maintained, if you adjust for fuel, our operating ratio. but we did call out, we had some service blips that we needed to take care of, and i think maybe a combination of that and maybe they were looking for perhaps more optimism from us as we spoke about the future. >> you're going to spend some money on a new yard in texas , d and on the call you said we see our existing infrastructure is going to be overwhelmed in the future what do you mean >> we didn't, i don't think, quite -- i mean we didn't mean to say it in those words what we meant was as we look forward, the growth that we see coming from our network down in the southeast pork, which is texas, louisiana, that whole petrochemical area, it looks like it's pretty solid growth.

it won't overwhelm our network what i'm saying is we're going to have to spend some capital to stay in front of it. that's why we launched our yard in the middle of texas it will help us manage all of that future growth. >> wall street, fritz -- lance, excuse me -- seemed to be concerned about the decline or poor pricing that's the first quarter-on-quarter deceleration since the fourth quarter of 2016 does this one quarter make a trend? what can you tell wall street about core pricing in 2018 >> what we said on our call this morning was that if you really peeled back to the detail of third quarter versus fourth quarter pricing, it was not much difference at all. we said just under 2% pricing in the third quarter, and we said about 1.75% this quarter we said that the pricing action

that we're seeing in the marketplace looks the same third to fourth quarter. whatchanged was a little bit o the mix some of when we calculate price, we take total yield dollars and divide by total dollars in the quarter that's a little bit different than same store pricing, and from our perspective, it's a more kind of accurate what drops the bottom line measure. >> big week as these nafta talks continue we had the secretary of come mer on our show yesterday who said there's a good chance it gets renegotiated obviously you're highly leveraged to it. what are your expectations >> yeah. we're hopeful that the negotiation ends with all three parties remaining in nafta and we're having robust trading relationships moving forward of course, that's the right outcome for the united states. we do about $1.3 trillion in trade between the three. it's a robust pipeline for a lot of manufacturers and consumers

in the united states it support 14$14.5 million jobs it's right in the sweet spot of what this administration is trying to accomplish, which is you u.s. jobs, good paying u.s. jobs, and be able to get the economy growing at a 3% plus gdp. all of that supports having a robust fair and free trade with mexico and canada. >> mr. fritz, you said earlier perhaps it was a lack of perceived optimism among investors is one reason why the stock is down. you did say in the press release it will favor a number of your market segments in the year ahead. what market segments in particular do you see having the strongest growth potential characteristics this year? >> yeah. we called out for 2018 we expect our industrial products area to look pretty good, you know, when we think about frac sand that's probably still got good growth in it for

the first half of the year we talked about the plastics and the industrial chemical segment. we talked a bit about overall markets for kind of significant durable consumption like housing and construction the areas that look like they're a little bit more subdued will be things like automotive, which all that we see says the sales drops marginally, maybe a percent or two so generally speaking, we're optimistic and we see growth opportunity in our market's place. >> and specific to tax reform, obviously during the quarter, you had a benefit, but more about the actual statutory decline in the rate, what are you going to do with those savings? >> yeah. so when we look at the statutory change from 35% to 21%, obviously that has a net benefit

to us directly it creates more cash flow. we anticipate, you know, dropping that to the bottom line and what i think the big impact of tax reform is going to be is in our markets, it really realle our customers more competitive both globally and locally. that should generate increased demand and as demand increases, we'll be using that cash to invest so we can handle that growth and grow. hiring people again at very attractive wages >> one more time on the optimism point because you did say at the start that maybe you aren't as optimist optimistic on the call as other analysts expected. those observations were based on your peers when it came to pricing and volume a are you just being conservative at this point? are you as bullish as your peers

have suggested >> without commenting on what peer railroads or companies are talking about, we do tend to be a conservative company. a lot of questions were about pricing. we feel there's an opportunity to increase price. we said well above inflation dollars. wee believe that we're firmly committed to that we think there's growth opportunity. we're committed we're going to make margin improvement during the year i look forward to 2018 i think it's going to be a good year i can't speak to exactly what the expectations were. >> lance, thanks for that. good to talk to you. lance fritz joining us from union pacific. let's send it over now to john and get a look at what's coming up. >> we're going to talk the future and impact of amazon. 1800 on the stock. the chairman of panera who is on the board of whole foods before

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industrials standing out as one of the worst performance sectors. this morning down less than half a percent right now. notable weakness in transports as well. united, delta and american airlines all down 2% amid a price wars brewing we'll send it back down to melissa. thank you very much. shares of lion's gate on the move this morning. the company is talking to many people about a possible merger he wouldn't specifically say who lions gate is talking to, he made it clear they are open to a deal and there's preferences for certain partners >> we're very interested in that consolidation in space i mentioned at&t before which is you have this 800 pound gorilla that bought directv and now we look at this time warner merger and say, wait a second you now have an 800-pound

gorilla that is handing a bazooka, which is hbo, to the gorilla and saying don't kill the competition, i.e., showtime and starz. >> we put forth comcast, amazon and a combined viacom. he pled the fifth when it came to amazon. he said he was working a lot with amazon already and with comcast, our parent company. he said that would make a lot of sense. >> i continue to wonder whether this companies such as amazon want to poke their head up for a deal also cost of production for lions gate given the competition they faced from netflix and the willingness for them to dole out so much money is becoming much more of an issue it will be curious to see if it

does figure into consolidation given what you're talking about and what he was. >> he was frank about talking to people all the time. you want to do what's best for shareholder value but it seems a little more forthcoming. >> we never talked about megan >> we'll have to do it tomorrow. >> that's a story. >> sit a story >> when we come barck, amazon getting its most bullish call yet.

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