good morning, it's 8:00 a.m. at amazon headquarters and 11:00 a.m. on wall street and "squawk alley" is live ♪ and here we are good tuesday morning stocks tumbling for the second straight day although the major averages are off the lows of the session. joining us at post nine to help

us put this into some perspective, our senior market commentator mark santolli. >> you have the two day shakeout that is not yet undone last week's rally you kind of gone up so far in a straight line and everybody acknowledged that the market itself is very extended to the upside sentiment is way too bullish you needed some kind of a rest i think you've had convenient headlines to come in there and grasp on to, whether it is apple on iphone demand they say okay maybe it's time wlachlt is interesting is a lot of people pointing to this month end idea of rotating from stocks into bonds bonds don't have a very strong bid right now. yields are not going up much anymore. but they're just sitting there so i don't know if it's just that or if it's just kind of time for a reset and a rest of sentiment. >> does it make you worry about february >> it makes you acknowledge that february is smimdzometimes a gi back month i think that brings it pretty much front of mind right now i think if you look back to august, this is the highest

level of the volatility index since august august, mid august, august 18th or 19th is when this latest liftoff took flight. so that was about an 18% move in five months. you're kind of seeing maybe this tl is something else coming on which is a mob choppy phase. we priced in the incredible up warld revisions perhaps. a the love the tax cuts that we opened oversaturated in the good news >> we tumbled to levels we haven't seen since wednesday >> right >> so has anything fundamentally changed or one area that is reacting more unusual? >> i wouldn't say anything fundamentally changed today. you also would have said a week ago did anything fundamentally change that we're up 2%? i think that is the market we're in it's very much about flows and sentiment. and today obviously you're seeing some victims. you're seeing obviously the health care group get smacked. in recent days, it's really been mostly the defensive stocks, the

yield stocks that have been baring the brunt >> and certainly some of the traders i spoke to here today say outline all the same things you just talked about. the fact that maybe this market was getting a little ahead of itself not seeing major losses positive day. i think there is a sent. on the floor that the selling could accelerate >> there is always a possibility. one thing way don't know is how much accumulated positioning there was which was an implisive bet on low volatility. and the fact that it was getting more of the same one thing i'm surprised about is this little kind of back off in the stock market was not accompanied by the dollar rallying and maybe even yields coming back down it would have been a general unwind of the pattern we've seen for weeks right now which is just this sort of global move toward higher yields, lower dollar and higher stock prices so we'll see if it develops. i'm looking at the credit markets. that's one thing you want to keep an eye on to say, look, is there something being sniffed out here in term of more fundamental things they're calm

they're not really too disturbed. that's one little benefit. >> in barons over the weekend, someone from a group said that if this isn't the silly season, we don't know what is. meaning this oversaturation of good news. so you think if we were in a silly season it's ending >> i think that ind coo of one way type, you know, nothing can keep this market from going up phase may be what we're seeing right now. it's going to be a little more of a two-way take. by silly, i think it really was a magnitude of the gains in a short period of time as of coming into this week, the stock market was compounding at 125% annual rate >> yeah. >> if it kept rolling at that pace, that's where you got to, i don't think anybody in the world thought we were going to have that kind of year. >> mike, thanks. mike santoli on an interesting morning. >> they're teaming up to tackle health care and lower costs for their employees. let's check in with bertha coombs who is following that

>> talk about a disruptive force potentially. large employers hand will more than 60% of insurance. they really set the tone a the love times for health care these three teaming together say they basically want to really take more control by forming a joint company that is going to look at reducing costs, creating better efficiencies, more transparency through technology and also doing it without what they say are the pressures of a profit making insentives that for a the love people would say that they're taking aim at the insurers, middle men who do a lot of the processing, a loft the negotiations for them, processing the claims. and they are lower today, particularly anthem, cigna, which will very much aligned with large employers united health as well. unitedhealth also has the pharmacy benefit side and it's getting some pressure on that side as well these middle men are ones that have been under pressure and a the love folks have been saying they need to come down on their pricing. but the ones who may be among

the winners, if indeed this initiative does go large, could be some of the providers like the hospitals. they're up today in part hca having a better than expected earnings results better than expected admissions. but hospitals could maybe start contracting directly with them, lefrg the insurers out, lefrg the middle men out and getting better margin with regard to that while trying to give them pricing. but ultimately when it comes to controlling costs, you really have to try to get better prices, not just on the services, but really when it comes to drugs and health care itself >> bertha, i have a quick question for you i know you've been following this all very closely for quite some time. we've seen some consolidation coming into this sector even ahead of all of this news. you know, cvs and aetna and the other deals expected to come off that merger. what do you think this does to the consolidation, i guess, speculation? >> i think it's going to continue even more the whole point here is that you

need to prove that you're able to control costs and that's what these players are looking for in consolidating and to do some sort of vertical integration, to be able to cut costs no the just on their services side but also on what they're ultimately providing we're seeing the hospitals look to perhaps try to produce their own generic drugs in order to push out some of the suppliers and push out some of the drug makers who they say are raising prices too much on basics, things like iv bags. so it's one of those things where you're seeing everybody trying to find where the value is and how they can extract the most value to be able to provide that to the ultimate payers which are the employers and consumers. >> good stuff there, bertha. thank you for that bertha coombs watching this announcement today for more on this corporation disruption of health care, let's get to our guest this morning, walter isaacson. and roger mcname good morning to you both so to bertha's point, i mean,

sounds like they want to drill down and get a true baseline for what these services cost >> i think the really important part of this is when you go to a single payer model like this you have a chance to go after all of the overheads. bureaucracy is where the -- >> zero budgeting somehow. >> you look at it and realize we have layer upon layer of things designed to take costs out and the cost associated with the guys taking the cost out is become a huge part of our total expense. and so i look at this and i go knees are three companies that are in the top six, three of the top six in the fortune -- in the s&p 500500 and they have 1,100,000 employees in total so when they speak, it's going to carry a lot of weight to me, health care is just out of control in the country. it's too big a part of the economy. we delivered low quality health care benefits relative to the rest of the world. our best outcomes are the best in the world but our average outcomes are not actually that good and i don't know how long it

takes to do this, but this is a really credible group of people to do it i mean the fact that amazon is bringing a technology piece of this gives me real hope. and incentives are huge for them to get this right. >> walter, the three of them together still not as big as walmart. i think at least in terms of number of employees that they're potentially bringing to bear and what is going to allow them to do this more efficiently than kaiser >> i think you just talked about taking out some of the costs and the bureaucracy costs. i think also in addition to that, the really big play is both the disruption that technology could cause and using data lining to make sure you get every treatment right. i'm down here in new orleans i just got a very long briefing at the health hospital system here about how they're using data mining to make sure that no treatments are unnecessary how they're using technology to monitor patients at home all the time this is something that amazon in

particular brings to the party and i think we've not seen the disruption that technology is causing other industries we've not seen that in health care and this consortium is going to help do that >> and to dig into that a little further, roger, what are the examples of some of the technology that could really streamline the costs and what are some of the companies? >> the really obvious thing to do is keep people from getting sick in the first place. right? with amazon, you have a the love technology that people have around the home that if properly applied, can help them be well every day. so that their needs for health care are discovered sooner when they're cheaper and that in general people take wellness more seriously than they do now. to me, in the united states, we've have an obesity epidemic it is really important to try to get in nt fro of the hospital as the place to do the health care. >> all right walter, i wonder what would happen in other industries if somebody came along with an initiative and formed a new

company where there was no profit incentive people invested in in space to make money, not make better health outcomes for the country. how likely -- what's that going to do to margins over time >> well, i do think that there's a the love profit involved for the companies if they can save on health care but also you can see a path just like amazon did with amazon web services where it works well for themselves and their partners and soon they can roll it out to other people when you talk about the type we just talk about obesity, but, you know, when i went to the hospital a couple days ago, hypertension is a huge killer in the united states. if can you monitor your blood pressure and things like that on four, five times a day instead of once every three or four months, then you could really start taking the cover thes out of health care >> we'll talk more about it over the coming weeks and months. other story this morning, shares of apple are slipping again. goes red for the year, actually,

on reports that company will cut iphone x production on weak demand it comes ahead of the earnings report walter, i wonder, i've been wanting to ask you all the reports we get, it's been happening for years signing unnamed suppliers, logistics problems and so forth. how do you know when the company truly has a production rollback and when they don't? >> well, you know, we'll eventually find out and certainly tomorrow's earnings report will be important but the real question to me is the funneldamental question whi is founded on which is are the new products really innovative and really great i still use an iphone. i love being able to turn it on with my thumb print because it is something i can do quickly and easily and not noticeably. whereas, you know, the new iphone and the new technology hasn't quite caught on likewise, the watch has been very successful. but it hasn't transformed things i think apple needs to create a

transforming product and one of the places they could do it and have been doing it a little bit or actually a lot is what we just talked about which is health care. which is if apple is monitoring all your vital systems with the apple watch and they're making deals with places like, you know, the hospital system here, then perhaps you'll see our two stories of the day joined together >> roger, i think a lot of people might be missing a manufacturing cop kmp in japan saying the demand slowdown, we're not seeing it. it's not like all indications are in that direction. and then the iphone x is not the only new iphone. the 8 and 8 plus are also new. so all of this is higher margin mix potentially. it's possible that some of those demand issues for the x could be true but also apple could have blowout results with new phones at the same time >> jon, i'm completely with you

on this. apple has done two things differently in this particular cycle than ever before with the x they broke the $1,000 price point which everybody is freaked out about. but what they're not paying attention to is the 6 is still in the market, the 7 is still in the market, the 8 is the new product. they have the much higher margin products out there the x is the lowest margin thing they got by a mile and the reality is i think it's an amazing product and i think in time people will adapt to it. they did a lousy job communicating the new features of the product so people have had trouble with the new gestures but they will figure it out. they will eventually like it i'm actually still optimistic about the report and i think honestly with the valuation the stock has, if you like the markets, you have to like apple. if you don't like apple, i don't know how you're supposed to feel about the market right? i'm looking at this and going i like the chances here. if they sell it off, you probably buy it. if you're a bull on the market, you want to be a bull on apple >> you like the market now

you said you like the x, right >> you called it delightful. >> certainly, i love the x i still carry a 6 and a x. what i keep finding on the 6 is i keep doing all the gestures from the x i like it that much better i think the face recognition for logging in is really epic. and, you know, there are a the love really cool aspects i totally get why people say $1,000, too much i mean that's fine but in time that will work out they don't need that thing to be a blowout for the stock to be a reasonable stock >> guys, we'll find out what they say >> exactly it's the market. >> totally true. walter and roger, thank you gentlemen. talk to you next time. >> and still ahead, much more on j.p. morgan, amazon and berkshire's attempt to revolutionize health care. john sculley, former apple ceo and current health care executive is going to join us to weigh in plus, facebook's problems in europe germany's anti-trust chief joins us next. and a look at the dow at this hour.

it is down about 226 points. "squawk alley" back after this

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you know what's not awesome? when only certain people can get it. let's fix that. let's give this guy gig- really? and these kids, and these guys, him, ah. oh hello. that lady, these houses! yes, yes and yes. and don't forget about them. uh huh, sure. still yes! xfinity delivers gig speed to more homes than anyone. now you can get it, too. welcome to the party. regulators continue to close in on facebook more than 100 child development experts sending a letter to the company today urging it to shut down its mess efrpger kids app saying that elementary school age children are too young to have social media accounts and across the atlantic germany's

top anti-trust agency is targeting the social network for misuse of user's personal data and of abusing the dominant position in the marketplace. joining us now from germany is president of germany's federal cartel office. good morning to you. now it looks like the product, the feature at the core of your issue here is the facebook like button which as long as you're still logged into facebook as you go across the web, visiting other sites, anyplace that has a like button collects your information for facebook i guess it is possible for that only to happen if you actually clicked one of those like buttons. is that the main issue here that you feel people haven't explicitly said facebook track me outside of facebook >> at least this is part of the

problem. we believe that facebook is holding a dominant position in germany. facebook has 23 million daily users. 30 million monthly users you see they have an enormous market share when it comes to the use of social media over here in germany. and indeed facebook has a data driven business model which means whenever you enter a website where you see a little like button at the bottom, all you'll see a share button, exact lib in this moment facebook is collecting your data which means they know you are on that website, how long you're going to stay there and that at a moment when i think consumer user does not even know that this kind of data is collected at this moment it would be more transparent if the data was only collected if

they touch these kind of buttons or if he makes use of it but, in fact, your data is already collected only whether you are on that website. and this is part of the problem for us >> facebook disputes the idea that they have a dominant position the numbers you cited say they have a third to 40% of the population of germany, i believe, logging in every month. how do you define dominant >> well, first we define the market and we here have defind a market of social media. which is a market where you as a user find a very rich experience where you connect with people, where you find friends, where you exchange views which is a very special market and it means, bythe way, that we do not include into these markets, for example, youtube or professional networks like linked in. we believe facebook is a market

on its own maybe there is one competitor that might be google plus. so if you look at the market share, that facebook is holding over here and germany, it's half of the population. i already mentioned the figures. 23 daily -- 23 million daily active users 30 million monthly active users. so you see that facebook is really covering almost -- or at least a huge, huge part of the on line population over here and now i think that is fair to say in this case that about facebook holds a dominant position and is not only popular as facebook stated. we also believe that facebook is very popular we think in a technical sense facebook really holds a dominant position when it comes to the use of social media in germany >> i get the point you're

making i want to dig into it a little bit more critics of this investigation have really highlighted particularly the use of antitrust law where this is concerned. they say it's not clear how this is actually hindering competitors. how is this potentially hindering competitors? >> i mean, when we look at facebook, we see that facebook holds a completely data driven business model there is so much in the way of how facebook is hindering competitors. we look at a different angle here >> we do believe that we have a kind of exploitive abuse in this certain sense because data is the new currency in the internet in the web

i think you can compare use and the harm is if facebook holds a dominant position and if facebook forces the consumer to hand over the data in a way that is not in line with privacy and data protection regulation, this might be kind of exploitive abuse. in fact, that is the theory of harm that by asking for all the data, the facebook might exploit consumers to a certain extent. so if you want to transer if it to a monetary driven business case, it's kind of a effective pricing. >> okay. data, massive data collection. antitrust the first times we're seeing that. thank you, president of germany's federal cartel office. >> and whether we come back, the fallout continues over the steve

wynn sexual misconduct allegations. we're live in las vegas with the latest plus a look at the dow united health is responsible for 25% of the dow's drop today. 25% of the dow's drop today. the dow is down about 271 points what's team spirit worth? (cheers) what's it worth to talk to your mom? of not just wealth, but things that matter. morgan stanley more "squawk alley" coming back.

new questions about wynn resorts in the wake of the alleged misconduct by the chairman and ceo steve wynn. we're in las vegas watching that story. good morning, contessa >> good morning, carl. you know, the bookings have already begun being canceled the republican governor's association is pulling out of the planned conference for 2020. it was supposed to be here at wynn and a decline in group bookings is just one of the potential problems here. that could possibly face wynn resorts. wynn, of course, is part and parcel of the company that bares his name his signature is the brand on all the buildings.

he's planning a new 26 acre development in las vegas there is likely to come under increas increased scrutiny they have their regularly scheduled meeting next week. but they are very pro active in massachusetts, gaming commission has a special meeting for tomorrow to tackle the allegations against steve wynn with what it says will be rigor and urgency. and analysts are closely watching to see what the impact will be here let me put this in perspective there were only two highly coveted gaming licenses awarded in the commonwealth. one went to mgm. the other went to wynn and wynn is in the middle of this big $2.4 billion construction project the largest private project in the state history. it's employing thousands of people and spending millions of dollars to rehabilitate a waterfront site. but the real question here is would wynn have awarded that gaming license if the allegations against the ceo had been public at the time.

the question, even if you have a winless wynn, that steve wynn would separate from the company somehow, would massachusetts have a brywynn branded casino in the state. it's a much different state than nevada >> contessa brewer in las vegas. huge story, obviously, that we're going to pay close attention to thank you so much. let's get over to dominick chu back at hq >> carl, no surprise here. european stocks participating in that global selloff. all across the board, we're on track for the lowest daily performer in six weeks now despite the declines, most of those european markets are poised for a monthly gain. the exception here is the london ft-se due in part to a stronger british pound which is up 4.5% against the dollar and that's just so far this month that pound moving up again today, the euro though off the highs of the day still stronger against the

dollar new data out showing the euro-zone economy actually expanded at the fastest rate in the decade that was in 2017 looking at the sectors under pressure so far, no surprise here the banks on track for the worst fall in five months. deutsche bank also barclay's, bnp among the digest decliners falling copper prices weighing on the miners. you have anglo-american and bhp billiton in the red. european oil majors like stat oil, total, bp, royal dutch shell, they're in the red today. >> the earnings front, phillips moving lower after dispinlting quarterly results despite an increase in orders for the hospital equipment but swatch, that's one of the lone bright spots to dafrment the swiss watch maker posting profit growth for first time in four years helped along by recovering deplanned from shoppers and, of course, china that is the biggest market results, swatch says they'll expect very positive growth, john, in 2018.

back over to you >> thanks. and when we come back, what investors need to watch whether president trump delivers liz first state of the union address. we check the stocks and we're having the biggest two week drop for the dow and s&p 500 since last august. the dow down 293 points. jufr ov just over 1%

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good morning, everyone here is the cnbc news update sergei laugh revolver was trumented by people clanlting pro and anti-russian slogans during his speech at a peace conference for sear yachlt moscow described the conference as an effort to speed up political settlement for the war torn country sos mediterranean releasing dramatic video of a rescue at sea. rescuers from the ship aquarius distributing lifejackets to dozens of migrants as they tried to get them into waiting boats the two dinghies holding them were deflating causing panic the incident happened on saturday one of kline's biggest

manufacturers announcing plans to open a new solar plant in the u.s. it comes after the trump administration unveiled tariffs of up to 30% on imports of solar panels and picasso's golden muse debuting in hong kong ahead of a london auction the painting created in 1937 has an estimated value of $50 million. it will also be exhibited in taipei and new york before heading to london for a sale on february 28th. we'll keep you posted on what it goes for that's the news update this hour back downtown to "squawk alley." jon, back to you >> thank you, sue. for continued coverage of this selloff here on wall street, let's get to our bob pisani on the floor. >> hello let's take a look at the s&p 500. we're off of the lows, 2820 is the lows after 10:00 eastern time but not by much, maybe eight points or so volume right now slightly on the heavy side i'd say we're 4-1 declining to advancing stocks put up the s&p 500 for me. there we go. not really changed that 4 to 1

declining to advancing stocks. take a look at the sectors we talked about that trade, the global growth trade. it's in retreat today. you see energy is weak all the kplcommodity stocks, se are weak industrials. this is the trade all week health care week for separate reason, of course, on that amazon-j.p. morgan-berkshire story. volume is heavier than normal. take a look at the s&p 500, etfs here all slightly heavier volume. this may be due to end of the month rebalancing. look at the risk to the market, several things first, the higher rates that we've been talking about 2.5 to 2.7 on the ten year in three weeks. that's a lot end of the month rebalancing is tough to figure out. there may be some people selling stocks and buying bonds to get more in balance. sent is elevated and at peak earnings right now. and that may be decelerating as we go closer to 2019 just show you this sentiment to high here. a number of big firms have all noted that they're sentiment

indicators are the highest in many years, five years for merrill lynch, ten years for goldman sachs. and generally when you get numbers this high, the market tends to pause and that's what we're seeing at least in the last two days. guys, back to you. >> thanks, bob on the floor of the new york stock exchange stock. the steloff coming ahead of president trump's first state of the union address. more on what investors should be watching today joining us now is shawn golhar at barclay's and chris krueger, washington research group strategist at cowen. thank you for joining us today shawn, i'll start with you we had gary cohen on our air earlier. he said one focus tonight is a $1.5 trillion infrastructure plan we've been looking for this for a while. we're light on details wlachlt you a what you are looking for >> we're still very skeptical. i want tow where the federal funding going to come? are we talking about a new tax r revenue stream how is the federal government to

stimulate demand to create funding to allow this project to go forward they keep talking about getting private capital into the markets to make this happen. it seems a little vague on details. >> and, chris, it seems there is just a year ago that we had the president giving his speech to the joint session of congress and in that speech he talked about infrastructure then, too why should businesses be thinking that we're any further along in this process now? >> they shouldn't. particularly now after passing the tax bill after spending a whole year on repeal and replace with republican only votes, the whied that the democrats are going to give trump a big win going into the mid terms seems unlikely think with most trump speeches, it's sort of, you know, big picture, getting a lot of detail in the speech, specifically where you're going to fund this infrastructure bill. infrastructure has different definitions for not only different parties but also different republicans. so i think you'll see, you know, painting a pretty positive picture in this speech but, you know, lots of

adjectives, very little math >> and, shawn, any potholes that we should be concerned about as investors in this speech plenty of issues that the president has stepped in over the past few weeks that will ril people up. >> i think trade is another big issue. we're finishing up the last round at nast yachlt does fta. how do we feel about nafta going forward? there is no clear deadline on nafta. this can just continue along. he can suspend that. this could muddle along through. he could actually withdraw and use that six month window to extract concessions. i'm listening to what he's going to say on trade? how does he feel about this going forward? >> chris, certainly one of the other hot topics has been really immigration especially in light of the fact that we're getting to the end of this latest continuing resolution next week. how closely should we be watching the rhetoric for an immigration deal and also for a budget >> i mean there is sort of linked and also sort of not.

february 8 you'll get a short term extension to keep the government going march 5th being that deadline on daca although with the deportation order sort of hung up in the courts this is also an issue that doesn't really have a hard catalyst anymore. i think you'll see trump try to paint a pretty positive picture on immigration but he's going to talk about the wall quite a bit he's also got folks who are his special guests at the state of the union who are the parents of folks who were murdered by ms-13 gang members you have a number of democrats in attendance with daca. registering. so i mean the bid ask on this bill is pretty extreme i think you'll definitely see it as a big topic but getting any closer to resolution seems unlikely but possible >> looking at some pictures from his address to the joint session

last year. which was followed by a sharp raly i . >> it could be repeated? >> davos he was this bipartisan guy that talked about america first and we're not going to be alone doing. this i think you're going to see a the love bipartisanship in the speech coming out tonight. but again, i think if he goes off script a little bit, he's been known to do that every once in a while, you could see investors take that as the other side of it and think to themselves we might be in for a few more, as you mentioned before, potholes >> yeah, chris, i know one point you just made was teleprompter trump. >> yeah. >> right i mean, there is the very different teleprompter trump versus twitter trump i think you'll see a teleprompter trump that will be followed up by tweets whether it's at jay-z or whoever else you'll see a victim ray lap tonight. seeing the president do a gronkesque spiking of the political football you see a lot get done this year whether that's in spite of trump or because of trump, judges,

deregulation, taxes, i think you'll see a strong victory lap by the president this evening. >> gentlemen, thank you for joining us shawn and chris. we'll be watching tonight. >> meanwhile, a lot more on the market selloff dow is close to 300 points to the down side. 294. rick santelli, what you are watching >> you know, look at the distance between all of the maturities on the yield curve, two, three, five, seven, ten, 30s then ponlder we're looking at 75 to 100 basis points of higher overnight fed fund rates is the curve going to invert what does it mean?

when will it happen? all after the break.

coming up top of the hour, we're back at the stock exchange with a halftime report exclusive interview with howard mark we're going to find out what he thinks of the selloff, the rise in interest rates and, of course, where he can still make money in the markets plus, the volatile airline stock one top analyst gave a double upgrade to we'll debate it in our call of the day to day and we are trading today's big health care announcement is the big drop in the health care stocks today a buy? it's all coming up at the top of the hour post nine. we'll see you in a few >> in the meantime, let's get to cla chicago and get the "santelli exchange." >> there is a lot of odds going on about long end rates. and i completely understand why.

nobody wants anybody to even get near the light switch when et gets late. once again, i bring up the proof that is irrefutable. on november 8th, 2016, somebody happened and it's -- huge in terms of how irrefutable it is. everything changed that day. you could argue why. and i've been on record. i think it's really easy pro business is worth the premium. it's worth the premium especially when it turns the globe. the globe after the crisis was going into a mode of financial repression with little groups of brussels all over the planet and every country kind of trying to arm all the controls and steer everything it's not possible. these economies need some room to breathe and they need pro growth policies so they don't have a boot on them and they can grow better to me, that's the simple tone. but the problem is we still have all the leftovers from that

period of time now we could argue about our central bank doing the right thing. but the distortions still exist. i'm talking about the yield curve. tens minus twos yield curve right now two weeks ago i had traited below 50 that the flattest it's been since 2007 this goes back to 1985 the point is pretty simple every cycle ends up at or slightly below zero. it goes inverted and i'll tell you, it just doesn't look like you can dispute the fact that it's going to happen again. but you notice how clean these cycles are look at the way it really was quite messy. this is because central banks own so much of the long end, there is your distortion the point of the matter is, i think you can count on us seeing zero but if you're going to have 75 to 100 basis points of tightening in the short end with maturities like sevens and tens and 30s so close together, i think the fed wants to avoid

being pointed at is the catalyst for this so my opinion, the number of rate increases this year is going to have a lot to do with where that curve is trading. morgan, back to you. >> and certainly everybody will be watching the fed very closely tomorrow thank you. rick santelli in clachicago. when we come back, amazon, j.p. rg a berkshire's health care initiative. we'll weigh in

more "squawk alley" after this

dow session low was down about 350, so we're off of the lows of that session but just a handful of components t green, namely proctor, coke and american express. more "squawk alley" in just a minute

welcome back amazon, berkshire and jpmorgan announcing a joint venture this morning tackling health care for their u.s. employees according to the release, its goal will be to curb rising health care costs and it will be a separate company in order to be pfree from profit-making incentives and constraints joining us is former apple ceo john scully now chairman and chief marketing officer at pharmacy benefit manager rx advance. john, good morning granted, these companies have not given detail on exactly what they plan to do, but my big question is how can they do more for efficiency than, say, a big company like kaiser, which is vertically integrated, has about 10 million members, i believe. how could this work? >> well, it really can work. i think if you look at the trio,

these are the three giants in corporate america. trying to eliminate billions of dollars of cost and jamie dimon is the most admired executive for disruptive innovation in the financial world. so they are coming out and saying that it's time to have an alternative task to what the politicians have done by focusing on replacing obamacare. what these ceos are saying is there has to be a better way we've got disruptive innovation. the one thing they know that's different than even a successful organization like kaiser is that anything that is going to be disruptive in any industry is going to be about business architecture of platforms. bezos who's done this, so have

the others, and health care has been left in the dark ages the health care technology is in cases 30 years old. >> but not always -- but not always, john i mean if you look at kaiser, which, granted, some members have complaints with, other regional organizations like, say, in silicon valley, the palo alto medical foundation, some of them are doing quite well in providing technology where all of the different doctors communicate with each other. the customer, the patient has a single point of digital information to, i guess, have some agency over their patient life i'm not sure that that's disruptive if just three companies are doing it so do you have insight on how it really could be taken to a different level? >> yeah. the examples you're giving are great success stories but this is a $3.3 trillion industry. as good as those companies are,

kaiser permanente is an exceptional organization the reality is it barely touched the surface in terms of taking hundreds of billions of dollars of cost out of the health care system the private sector gets to weigh in now we don't know what the answers are, they don't know what the answers are, but we do know there's a spotlight now on the need for transparency and for looking at better solutions. technology is available, it just hasn't been adopted in the health care industry and that's why you're seeing the health care stocks all taking a hit today. >> john, would you be looking with rx advance to partner with these companies? >> well, rx advance is actually very aligned, i think, with the aspirations, as i understand them i don't have any previous insight on what they are thinking but they say they are looking for new answers. i think we are going to be one of the companies that has some of the answers we'll be doing a lot of things in 2018 and 2019 i think will be

setting the way. other companies out there too i hope will be bringing innovation in it's time to let outsiders come in and be able to participate in this gigantic industry that really has got to find a sustainable way to manage health care costs into the future >> so, john, before we let you go, obviously we've seen a lot of shares of companies trade down on the news what area of health care is most liable if this works is it pvms, insurers, hospitals or something else? >> i think the big focus right now is probably on pvms. the reason is that it is so large, it's hundreds of billions of dollars it's so opaque there's no transparency in terms of how much profits are being taken out by whom. and this is one of the perfect areas where a platform architecture can come in and truly bring value-based care into a sector that hasn't had it

before >> all right, thank you, john scully, the ceo and founder of rx advance as we finish up the first half of the trading day, taking a look, work day, up better than 3% twitter also having agood day but a lot of stocks not so much. >> getting close again to session lows let's get over to the judge for "the half. and welcome to "halftime report." i'm scott wapner our top trade this hour, rally watch. why stocks are selling off hard for a second straight day and if it's a sign that long-awaited correction could now be closer than you think with us for the hour today is joe terranova, josh brown, city ofly link, jim leven thal. an ugly picture down here where stocks are down and rates