>> announcer: live from new york where business never sleeps, this is "squawk box. good morning, everybody. welcome to "squawk box" on cnbc. live from the nasdaq market set on times square. congratulations to the philadelphia eagles this morning. the team soaring past the patriots last night. final score, 41-33 eagles winning their first super bowl ever. stopping the patriots from winning the most super bowls ever amazing. i'm becky quick along with andrew ross sorkin joe is out this morning. the chairman of oshares ttx. and i didn't know the entire story. you were in boston last night? >> i was i never missed the party i went to for 27 years, i think

and we were depressed because we were hoping for the classic ending, the come from behind >> by the way, it looked like -- >> the long bomb in the hands of gronk. had it happened. the two-point conversion never happened >> hold on, an end of an era, do you think the moment is past now? >> i do actually, i'll tell you why, you know, the team was actually struggling the whole season you know, pulling stuff off in final moments of every game. really it happened that way. the defense was weak throughout the entire -- >> i agree with that >> it looked -- i don't want to be a naysayer, but i think it's going to have to be a structural change if that team is going to have to stay in super bowl contention next year most of us want to see the coronation of brady agency the greatest ever. and belichick, the greatest ever we needed that win last night. >> so coach wonderful, what's your structural change

>> i'd keep brady. obviously, they have to keep brady. it was a money decision to whack their number two qb. you know, at the end of the day, he's not a spring chicken and i think the town is going to be talking about this. i love the guy >> by the way, he got in a car and drove straight down. >> yeah. i felt if i wasn't at that party they were going to lose. it was done of those karma things >> which made for a very rough ride down. >> it was brutal >> congratulations to philadelphia fans. we're also talking so much about the markets. and joining us for the hour is mike santoli mike, it's wonderful to see you. were you rooting for the eagles? >> i was leaning towards the eagles >> a green win last night but not the case for the markets take a look at that 666 point decline to see a rebound this morning, you're going to be disappointed to see the dow

futures down by over 200 points. decline of 203 points for the dow. a decline of about 14 points for the s&p 500. a decline of 20 points for the nasdaq again, this is after a big decline for the week overall, the dow down by 4.1%. still above where we started this year. but this is the first time we've seen a big selloff like this in fact, if you went all the way back to the last two years back to february 2016, you've seen the s&p 500 rally about 59% without ever seeing a 5% pullback people are going to be asking if today is the day take a look at treasury yields because this has been the big story in moving what's been happening in the bond market we saw this on friday in a better than expected jobs market looking at year over year wages up 2.5%. that has everybody and we'ring if you're going to see the fed moving more quickly. and the two-year, 2.8% and take a look at currency

markets you'll see at least at this point it looks like the dollar is up against the euro, 1.2455 and down again the yen 1.0986. let's get up to speed, sri joins us in london but we'll start with nancy live in singapore nancy. >> hi there, well that selloff on friday on wall street spilling over into the asian session. as you can see a screen of red behind me. let's start with the underperformer that's the nikkei 225. almost in lockstep with the dow's move on friday a percentage loss of 2.55% here. yes, the dollar has been giving back against the recent gains against the yen. that tends to weigh against export exporters. that is broad-based against the shanghai deposit there was conservative data on the services sector coming out of china

elsewhere, traders did speculate that there could be buying from state-backed funds into the big heavyweights in shanghai let me show you some of the heavyweights on the move to the upside as you can see the big banking names higher by about 5% to 4% shanghai today very much outperforming the broader session. on the dow side, tracking losses on tech names. apple suppliers bearing the brunt of some of those losses as you can see here, lower by about 5% to 3% across the board. this comes are of course, after apple's own dip on friday in the united states. let's go to sri for the view on the european equity markets. >> nancy, thank you for that we've been trading for about three hours. and as you can see here from the map, the losses are stacking up. interestingly, barred with magnitude, we're not doing too badly compared to our rivals in asia those markets are down by call it 1.5%. with the exception of the greek

indices down by 2% broadly, it's negative and when you look at the sectors it's been broadly quite weak as well with the exception of utilities. earlier on today, it was the last man standing. but even utilities and defensive sectors have been falling. so, that's testament to just how broad-based this selloff as well i wanted to highlight financial sectors because that sector is down by 2% we got bad news from deutsche remember on friday so this really speaks to the pace ever restructuring at some of the european banks. some of the investors not quite happy about the speed. and we will get to paribas later this week interesting to see the progress they're making. oil and gas over here, down 1% and we'll be speaking to bob dudley, the ceo of bp tomorrow broadly all in all, negative session. we got the data which was constructive very quickly. look at the euro, knocking on

the door of 125. once again this is another challenge for equity markets and especially scomborexporters. >> sri jegarajah let's get back to questions now everybody's minds is the market the one that everyone is waiting for. mark santoli joins us. >> becky, i think it's the dip that everyone told themselves that they wanted and told themselves they were ready for this is how they feel, they're not comfortable. they're sometimes sharper than you would like and sometimes confusing what exactly is causing it i do think you have to go with the assumption this is more than just a pullback in the market that everybody agreed was incredible overextended and a need for backing off this is more normal, what we had going up 7.5% in 18 days, that's abnormal, that's extraordinarily calm in strong markets i would point out for context, dow loss of 665 points or so on friday, was a top-ten point loss

all time it was the 599th largest percentage loss of all time. more than a few times a year on average the dow skiexisted of t sort are we going to see some forced or mechanical selling? i think, guys, hearings the thing to keep in mind. january had so many things going right in terms of acknowledged economic acceleration in terms of tax cut, in terms of risk appetites going up and for conditions incorrectly loose meaning the rates were not challenging any of this picture. well maybe some of that falling out. good news, bad news. >> i are to say the first time i had seen that take place on friday after the jobs report when all of a sudden good news became bad news. that is the inverse of what we've been watching for years. >> keep in mind, friday's move in the bond market was not dramatic

the bond market was steadily going up in yields >> did you read in "the wall street journal" the price decline in bitcoin and gold? >> that bothered me a lot. >> i didn't agree with that piece. >> and bitcoin is why we're down >> oil futures are down. >> it's irrelevant >> i think what they're trying to say, essentially all of these kind of risk markets have been captivated investors on the upside and now there's a little bit of liquidation or unwind. >> i think i got an alert on my phone. >> i think the more interesting conversation happening right now, are we back in a world, this relates to your point, becky about good news being bad news, where bond prices go down. >> right >> and the turn which is the way it was for a long time >> a long, long time right. and that to me was like a stark reversal >> i think it's just trying to make its peace >> when you see the td

ameritrade ads, selling the bitcoin futures. i thought this might be the high sign phil orlando is here he's the chief market strategist and ahead of client portfolio management at federated investors. and steve whiting. guys, welcome. jump in on this. what is causing this >> i'm sort of in michael's campbell, we've got to take a deep breath and put this in perspective. from roughly the election to a week ago, the s&p 500 was up by 41%. everybody was whining the biggest correction over that period of time 3% back in august now, we get a 4% correction last week and the sky is falling. >> tim put out a note over the weekend, he said the s&p market was up 59% in the last two years without a 5% pullback. that is stunning >> it is stunning.

and you look at what happened friday, the readthrough is a positive one if you understand what happened. the jobs numbers were terrific with the wage data and the wage and inflation went up 2.9%. we think that's going to grind up towards 4% the next year or so that's all good but the readthrough what is poum awell d the fed going to do and everybody was freaking out >> so wildly overboard for the first four weeks of the year, we worried about nothing but the stronger growth outlook. then for one week, we worry about nothing but the higher yield outlook. the truth is, we have to deal with both. the u.s. is going to need more money, real money to finance government expenditures this year the fed is going to shrink it's bond portfolio by $400 billion and we require saving flows.

take a look at what the u.s. dollar has done. we have not akt traed foreign savings flow so the u.s. dollar is showing some weakness. >> is the u.s. dollar weak because of that? or is the u.s. dollar weak because of growth in asia and europe >> these are all competing for around the world capital flows what you saw up until last week, foreign bank participation in the u.s. treasury department has not been wonderful at higher yields hedging costs somewhat higher. so foreign investors are required to take u.s. dollar risk some exchange rate risk. as well as rate risk right now but we do, when we find that cross volatility comes down when we see the bond market has reached its new level we'll look back and say what can we do. >> would you change your allocation for clients into fixed income into credit or debit at this point? >> it's getting more attractive. >> new dollars today, where would they go? >> so, i think in the u.s., we

rank higher already. so, the short end of the yield curve is where we've been, we're liking that as an alternative to cash we could consider going farther throughout the yield curve >> right >> in the last week or so, you're no longer seeing it >> the stronger growth fundamental leads to us a higher yield. we've got to come to grips with that we're getting more attractive to credit products. >> having said this, we're still in earnings season every company that comes out and announces talks about how they're looking at much better potential for profit growth based on what they're seeing in the tax returns. it seems like a difficult time to be selling short of markets >> i also look at corrections like this, any correction with my theory of the review, new dollars coming into the market today. if you had to put money in the market today if you hadn't done anything in the money for the last two years would you change your allocation? you got three things, cash,

credits and debt earnings have never been better, ever so, i'd put money back to work in equities, particularly domestic that are looking for a 23% increase in cash flow if all of the revenues are u.s.-based, because they've never had an opportunity like this. to me, this is a mild mannered reporter correction. this is nothing. and still wouldn't change. >> but, kevin, if you did nothing in your portfolio for two years you're massively overweighted in stocks >> the market just did that four >> do you find credit returns more attractive than equities? >> no, but the barclays, 3.5%. that's not nothing >> you can find domestic companies mid and large cap that are yielding return of capital of 2.4, 2.5, 2.6% now.

do you think you'll get that, i think you will i still wouldn't go to credit. we've got 300 basis points still on the table before i get heavy into that. >> you'll wait for 6% yields before you would have any fixed income because that is not sort of how we do things >> obviously having a portfolio that's multiasset class that has some component in it that goes up when stocks go down, that's high quality >> well, depends on your time horizon. >> what are you getting? >> you're getting municipals for u.s. investors, you're going to get 5% on taxable yields right now. we have overweight in equities and underweight in fixed right now. it's not to say that u.s. credit is not getting more attractive as yields go up. >> we've got a 6% overweight equities right here. treasury yields have gone from 2% to 2.5% we think the bernanke temper

tantrum will be retested this year in that environment you've got to maintain the equity overweight earnings up 3% in the quarter. three quarters of companies are beating by an average of 5%. >> when you continue to hear these earnings calls day after day. >> that's pretext. that's pretext >> right >> and the guidance has been terrific >> and what about the dollar the weakness of the dollar has been particularly helpful for some of the manufactures in the united states. >> certainly, the large cap based companies exporting goods and services are benefitting from that. you've gone from 1.03, to 1.05 dollar our bank is removing -- >> i've been shocked at the dollar over the last year. >> agreed. over the course of this year, the nonconsensus traders are going to see a bid on the dollar but today's not that day >> so, where would you tell

people to be investing? would you say broadly in stocks? are or there areas of leadership >> there's certain areas of leadership we like stocks over bonds. we discussed that. in terms of the stock market, there are two areas that make sense, certainly, large cap, domestic volume over growth. growth has outperformed value by something like 200 basis points. this is one standard deviation of that that's occurred five times in the last century. we think that will reverse we also like small caps which have underperformed relative to large gaps we need to see the dollar strengthen in order for there to be a catalyst there, we like overseas, the developed markets in europe and japan, we think there are places to make money right now. >> why not uk? >> we've still got brexit-related issues that we're not sure how that's going to shake out. >> did you notice there was a green screen in china last night? >> no. which one? >> the chinese market was up

0.7% emerging markets have lower correlations to develop market stock. if you're diversifying a portfolio, and you take a look at the selloff that we've had you're going to see that there are a great number of markets that are just not sucked into the same extent as this bond turmoil. >> although if the fed starts raising rates, the markets are going to go high >> well you're seeing stronger growth inline, every bit as strong as wee seen in the u.s. without tax cuts >> there's a story floating that that increase is due to a state-based buying program i don't know if you heard this it's all over the web. >> hong kong is up 7.5%. brazil has nothing to do with, and up 10% even with the selloff. >> i love conspiracy theories. >> steve and phil, i want to thank you both >> thank you coming up, when we return, wells fargo shares, they are down sharply this morning as the bank received an unprecedented

punishment from the fed. the details and broader implications we're going to talk about it when we return back in two nobody's putting their money into equities. they're not investing in commodities or fixed income. what people are really putting their money into is what they hope to get out of life. but helping them get there requires a real refusal to settle for average. because when you approach investing with a tireless desire to beat the status quo, something wonderful can happen. those people might just get what they wanted out of life. or maybe even more.

welcome bax ck to "squawk box. take a look at futures we're in triple digits in the red this morning dow 20 points. s&p 500 looking to open up almost 16 points among today's top corporate stories, wells fargo getting slapped by the fed on janet yellen's last day as chair wilfred frost joins us with this story. wilf, it kind of got lost in the news we were following friday. this is a pretty big deal. >> yeah, it's a huge deal. wells fargo shares down 9.5% in the premarket as the bank braces for the unprecedented reprimand for persistent misconduct. the fed will limit wells fargo

growth by capping total assets this means they'll have to restructure the balance sheet in order to write loans which will cost them up to $400 million sloan, according to tim sloan. the bank must submits a new risk management plan in the next 60 days and will face a review on the 30th of september before the sanctions can be lifted. concurrently, wells fargo is also replacing four board members following three changes in 2016 and three last month shares now at 9.5% i did this calculation moments ago down 7.5%. 7.5% decline equates to $23.5 billion fall in market cap if we apply that to the company's $400 million that gets 5.6. clearly, investors think the impact will be much bigger than tim sloan gave even though he

maintains the company is open for business on that note, kbw, one of the investors to downgrade the stock saying wells fargo will have to shift from offense to defense. that could be the reason for shares down 9.5% in the premarket. >> wilfred, quick question, this very difficult approach that the fed is taking, do you think it would be different if the s.e.c. or another agency had taken a harder approach earlier? >> fascinating approach, andrew, i've been debating this all weekend. clearly the cfpb is one that settled. some people look back and say this isn't that big. this is huge action from the fed. and it comes 17 months after the original wrongdoing with no new information found. the company was clear to show that, it's not that they've uncovered any new wrongdoing you could say eight or nine months from the extra developments as opposed to the

months where they increased the fake accounts. but the timing very interesting. and actually framed by some analysts over the weekend, does this now spark more action from some of the other rergtss. whether the san francisco fed. the regular state regulators, the occ, they haven't acted yesterday. certainly with the timing given they didn't find anything new, the timing you would also say is a big blow to the company who have continued to talk about the changes they've already made and yet the fed thinks it's necessary. >> and is this a janet yellen i'm leaving and i'm going to do this now, by the way, i used to be in san francisco, because i don't believe that jay powell will do anything like this >> again, i think the timing one has to look at and say it's not just a coincidence it was on her last day the feds say the actual day it was signed by 16 board members of wells fargo have to sign the consent order. but sources at the company the first day ever heard that the fed was looking at this is when

janet yellen mentioned this in a public hearing in september. they then heard nothing about it until the last couple of weeks so whether it was signed in the final day or not, it was going to come in the final weeks so something driven by the change in the fed. you can also say that a new share has taken over at wells dparg go in betsy juke who has a regulatory background. perhaps the wells fargo side wanted to get this down before the tenure but the timing is a question that is a big issue for both the fed and the company. >> wilf, thank you very much all right, when we come back on "squawk box," complete coverage of the global markets red arrows the dow futures pointing to triple digit losses. the dow 220 points below fair value. stay tuned you're watching "squawk box" right here on cnbc

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what happened with the super bowl and what's happening with the markets this morning well, the super bowl, eagles won. check this out with the markets. if you thought we were going to bounce back after the big declines we lost last week you were wrong check this out dow points down 220 points below fair value if you add this decline to the losses we saw last week, 1.4% pullback last week, almost a 5% pullback you need to be 220 down on the dow. and as you can see we're almost there. s&p 500 down by 15 points. the nasdaq down by 25 points and again, a lot of the concern coming, just the huge buildup that we saw throughout all of january, massive march forward and also what's been happening in the treasury market if you check out what's been happening to the ten-year yield. it continues to climb. right now, the yield 2.85% and this all coming as growth looks strong across the board people are anticipating trying to figure out if the fed is

going to have to raise rates more quickly while we're watching this, we're also watching shares of qualcomm and broadcom, multiple reports say broadcom is raising its offer for chip-making rival. a new offer $120 billion or 80 to $82 a share broadcom's original offer, worth $70. you can see qualcomm up 5% and broadcom down by 0.3%. and in an exit interview is janet yellen said this about the markets. >> and there's a source of some concern of asset valuations are so high. what we looked at if stock price or asset prices generally were to fall, what would that mean for the economy as a whole and the financial system is much

better capitalwise, the banking system is more resilient and i think our overall judgment is that if there were to be a decline in asset valuations, it would not be damage unduly the core of our financial system >> yellen stepped down as fed chief on saturday, after one term, after just one term. i should say red president-elect trump opting to replace her with powell she addressed it in her interview. >> it is common for people to be reappointed by a persons of the opposite party i made clear that i would be willing to serve another term. and so, yes, i do feel a sense of disappointment. but i've been in high-level positions in the federal reserve for many years where i think i've had a seat at the table to make the arguments that i thought needed to be made and to advocate for good policy. >> yellen will become a fellow

at the brookings institute where her predecessor ben bernanke also hangs his hat meantime, we've been talking markets all morning, another potential risk the government could be headed to another shutdown. joining us jonathan swann, national political reporter at axios. sounds like we might get a deal. if we do, it's a band aid. >> yeah, it's the same lurching, stop, start situation we have now. pick your start date is the permanent reality in washington. thursday, the government will run out of money at the moment, what i'm hearing from leadership, both republican and democratic leadership they're most likely going to do another short-term continuing resolution or cr it will probably run through late march they still haven't fixed the end date yet they're looking at doing it with probably democratic votes, the

ultra conservatives are not going to support this. they're probably going sweetene i'm told expect health extenders. >> jonathan, you said this is not something that we'll lurch this time, but we'll be lurching all year, if not forever my general premise is the whole rest of the year, they're holding things together with chicken wire and duct tape >> i think what that source meant, look, the conventional wisdom in washington is they are going to get a deal, a budget deal they're going to come to some agreement on immigration on daca. they're going to come to some agreement on defense spending and domestic spending but what if they don't? we haven't talked about this much we haven't talked about what if they don't come to a caps deal what if they can't agree on

immigration? during an election year, everybody is partisan. i don't think it's a fait accompli that all of the stuff gets ticked off in probably the most dysfunctional city in america. >> let's talk about infrastructure it's another big thing on the table. you've written about it recently a meeting. tell us about it gary cohn, internal meeting >> well, look, we leaked out much to their annoyance, their infrastructure plan which everyone has seen and basically presented that plan at the republican retreat but big picture, i mean, we can get caught in a wage, you can discuss this plan, but it ain't going to happen. this is like fan fiction they are not going to pass a massive infrastructure bill this year i've spoken to nobody in leadership or the white house who really thinks that this is going to happen. the chasm between the two

parties with democrats wanting almost entirely federal spending and republicans who already, by the way, added to the national debt although the republicans were confronting people like paul ryan at this retreat and saying, hey, weren't we supposed to be the party of fiscal restraint? we just keep ballooning the debt and deficit. so there are republicans on the hill concerned about that, and an idea of a big boondoggle bill is concerning to them. >> where were you six months ago on taxes did you think that was going to happen? >> yeah, i did i absolutely did i was pessimistic about health care but taxes was the thing that united republicans. honestly, i'm pessimistic about welfare and infrastructure mostly because the chasm between the two parties is so big. and they can ram taxes through whereas they can't with these final things >> and every time the stock

market has gone up he's promoted that how do you think he's going to react with the market going down >> well, the president -- the stock market has become the president's new poll, one of his aides described to me as his fetish i think he will ignore it but his polls are going up maybe he'll start talking about his own approval 91s as a replacement. >> jonathan, great to see you. >> thank you when we come back b bitcoin prices dropping again this morning but do cryptocurrencies have any relation to the markets? that was a point of "the wall street journal" this weekend has a lot of us questioning that we will talk about that next by the way, look at the futures this morning, we are looking at triple digit losses for the dow once again dow futures down 226 points just a few points away from what will be a 5% pullback for the markets over the last six trading days we'll be back in just a moment this is "squawk box" on cnbc

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it's a new kind of network designed to save you money. call, visit, or go to xfnitymobile.com. all right. welcome back to "squawk box," everybody. it's a market loss this morning and continuing this morning. the dow futures down, the worst since this show started 41 minutes ago, dow futures 270

points below fair value. indicating more losses to come if we stay on this pace as we head towards the opening bell. nasdaq down by 40 points s&p futures 20 points below where we would be on the implied open our guest this morning, mike santoli and kevin o'leary are here talking us through what has been the first pullback we've seen of over 5% in two years we've seen the market march higher by almost 60% over the last two years this is the first time we're seeing the pullback of 5% based on the losses last week and implied open this morning. you called this on friday. you said that we rarely see the end of a rout on a friday. >> right, that's the wall street rule of thumb that markets don't bottom on a friday when you have a selling cascade. it really means there is a followthrough. after you've had a huge momentum on the upside. think about who that last buyer

is, they're buying just to go up >> and waiting and waiting and waiting. >> right you have to get back down to see where that buying interest it. you sometimes fall into the trap of feeling it's a purely tactical thing it's not really. it's when people are deciding okay i think the stocks i've been watching for a while are in my zone. the vix is getting up above 17 is another factor here you want to see that spike lower. >> volume difficulatility. >> but all of this in the mix. those streaks, i think it's important that we wipe those away i think we got caught in the whole idea that there was a magical run that the rules of gravity of markets were repealed >> and that we never see stocks go down. >> right i think this is probably a more normal-type environment, a back and forth market you say we were overdue for 3% and 5% pullback. what else are we overdue for >> right >> probably more volatility.

and yourdownturn i don't know >> kevin, to put this in perspective, anybody putting money in the markets at the beginning of january are still looking at things when they got below these declines? >> i always ask yourself in corrective days like this is there anything fundamentally different from 60 days or 90 days i would argue you can't really change 3% rates on ten years, still excellent for stocks you have to get up to 5 or 6 to really change your mind. >> ten-year yield. >> sure. at the end of this day if we're down another 400 points, it's still okay and then everybody blames the growth these days when you see this volatility. it was algorithms, buy, buy, buy, and now they're reversing that i say looking at earnings and

they were great and they continue to be it's very hard to say any reason to moving away from equities and buying something else instead. so, do you really care there's volatility, it's great to have my old friend back i like vol i really do. that was an anomaly, just having no volatility month after month, now we have it again, so what. >> looking at the asset classes that all makes sense but i do think it makes sense that the market has to come to a peace. we've been in this world sofor o long -- >> by the way, higher federal government. >> people think you need zero percent loans to sell cars maybe that's not true. but the market is suggesting at the margin you lose some >> do you remember the days of 17% interest rates >> yes >> my parents had a mortgage on their house with that.

>> that is high interest rates, 3%, 4%, you can go back and see how markets continue to rise >> market p.o.s are 9. let's talk bitcoin let's talk bitcoin in the context of the markets, talking about "the wall street journal" article earlier. the rise in cryptocurrency in the past month take a look. bitcoin, you can buy for 7500 bucks right now. joining us nolan byron director at research. good morning >> did you see "the wall street journal" piece >> i didn't actually okay, the journal piece is trying to correlate what's going on in the stock market with what's going on with bitcoin, oil? do you think there's a correlation? >> i don't the crowd invested in bitcoin have their own cadence, their own ebb and flow they're very sophisticated >> why do you say they're

sophisticated. i'm going to make the argument most are retail folks who in the past two or three months got in what now seems clearly inflated prices without being killed. >> the sophisticated ones are the ones killing it. they're the ones who noticed they all got in. they watched the price go up these people measured their earnings in bit koirn. when they see a drive up like that, they expect it to come down >> they're killing it by selling it to them >> they're taking the super liquid of the asset, they're moving, taking the cash position and coming back in with the bitcoin lower. >> i'm glad you're here today. you you. i have a question. i've been getting approached every week to fund mining operations, for example, iceland. another one was pitched to me in cambodia where energy prices are basically free tell me why this isn't going to eventually end up being the situation, if it costs right

away, say, $100 of energy in capx, you have to buy the service to service it and everything else, to make a coin, any coin and i'm being offered an opportunity to invest in it, why is it that ultimately there's nothing proprietary in the coin, i'm going to be given an infrastructure rate of return. so maybe i can make 7% a year at a farm in cambodia and mining x, y, z joicoin if the market gave me a 7% return, i would do that deal that imputes the price on bitcoin back to a few hundred dollars. tell me why long term that isn't contactually what's going to happen >> bitcoin can be considered the important way, most secure system in the world. >> i was told that why am i getting more than an extraordinary return why would i be getting thousands a year in the long rung when

really most markets will provide 7% >> you can increase transaction fees the miners are making fees on a number of things we saw market volume >> but if a coin costs 1200 -- if the intrinsic mining cost $1200 and the thing is selling for 7, what's going on here? >> the competition is making those mining rates long term >> i'm saying those mining rates are part of their own economy, their own infrastructure, they're competing to be faster, strong >> but they have to be connected to the price tag of the actual coin they're mining. >> that's why there's more coins to mine. more jobs for miners being created every single day >> but is my theory, give it 7, 8% i'd be happy to put money to work long term 7% if i believers intrinsically that the market would allow me to make that return in mining these coins because i'm taking electricity i'm spending on capx

to make coins. >> that's why you saw hydroquebec just a few weeks ago saying they're going to lure the miners with attractive electricity prices >> but think, kevin, the reason it doesn't go back to commodity economics is because it's limited. >> i don't buy that. wonder coin. i could start my own wonder coin. >> sure. one of the things you're missing here is these miners have to waste energy there's an infinite amount of electricity they can waste they need to waste electricity to waste mining. >> do you think there was manipulation going on in the market tether might be a manipulation in all of this and the price tag we saw in december when it rose up to $19,000 was completely artificial >> so i think the important thing is the cftc subpoenaed that back in december. for two months they were minting

new coin so it should be capitalized about 2.2 billion. that seems like a reasonable number it would be very audacious for them to have minted the coin with that close of an eye on them. >> thank you for coming in this morning. good to see you. when we come back this morning, the yield on the ten year treasury trading near four year highs we continue to see above 2.8% at 2.843% we have market watcher mark grant joining us with his forecast for government bonds next futures down triple digits "squawk box" will be back. when this bell rings... ...it starts a chain reaction... ...that's heard throughout the connected business world. at&t network security helps protect business, from the largest financial markets to the smallest transactions, by sensing cyber-attacks in near real time and automatically deploying countermeasures.

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all right. welcome back to "squawk box" everybody. check this out the futures this morning under some steep pressure. dow futures indicated down by 250 points below fair value. s&p off by 18. nasdaq off by 37 this is coming after the big declines that we saw last week when the dow was down by 4.1%. with these declines today dow is now looking at a 5% pull back. that's something we haven't seen in more than two years joining us right now is mark grant. he's the chief global strategist at b. riley. it's great to see you. what do you think when you wake up and see red arrows like this?

>> i thought this might be one of the possibilities for this morning, becky i think we are seeing a pull back in the equity market. it's probably relatively healthy, however, having said that, and you just put it in context a minute ago, we're still up around 1.6% for the year so it's not like we're negative in the first month of the market's opening. >> so what do you do this morning if people are just waking up? what would you tell them if they are looking at maybe putting new money to work or maybe holding off? what would your recommendation be >> wait. >> things are going like this and we're having moves like this if you have carbon the sidelines, i would wait until we have some stability here i do have a program with a number of money managers, i call it cash flow investing, which is part bonds, part closed end funds that are in the bond area and also in the mlp area it's yielding about 8%, but the good part of that strategy that i've had, as you know, becky,

for more than a year, is that every month you have money coming in because a lot of the closed end funds pay monthly here's the money and you have to adjust to the markets and that gives you, in my opinion, a huge advantage. the people that are getting hit here, of course, are the people that were speculating just in equities. >> mark, we've been running on at the mouth and we're out of time we miss you. want to see you back here very soon thank you for joining us. >> thank you, becky. >> folks, we will continue focusing on what's happening in the markets. "squawk box" will be back. highest in investor satisfaction with full service brokerage firms... again. and online equity trades are only $4.95... i mean you can't have low cost and be full service. it's impossible. it's like having your cake and eating it too. ask your broker if they offer award-winning full service and low costs. how am i going to explain this? if you don't like their answer, ask again at schwab. schwab, a modern approach to wealth management.

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good morning we have a market alert for you this morning dow futures pointing to a triple digit decline after a nasty day on friday. abroad a sea of red. full coverage.

mr. wonderful is here, kevin o'leary. blackstone coo tony james is going to join us in the studio one place people were seeing a lot of green on the field last night. the eagles hold off the patriots to win their very first super bowl we'll talk about that and so much more. "squawk box" continues right now. ♪ ♪ live from the beating heart of business, new york city this is "squawk box. >> good morning, everybody welcome back to "squawk box" here on cnbc we are live from the nasdaq market site in times square. i'm becky quick along with andrew ross sorkin joe is off today sitting in with us, kevin o'leary. he is the chairman of o shares etf, a shark tank investor and cnbc contributor we're glad to have him here today. want to very quickly tell you about breaking news that is out this morning

we have been telling you about this, the rumors of this qualcomm shares -- take a look at all of this, broadcom had been halted for news bro bro broadcom is presenting its best and final offer. $85 a share. this offer represents a 50% premium to qualcomm's unaffected share price back from november 2nd of 2017. the original offer was for $70 a share. this one $82 a share you can see qualcomm up by 4.4% on this news this comes on a down day for the markets. broadcom down by 1/3 of 1% >> i have to tell you, this has to bring them to the table the other bid made no sense. it was too low. >> it enhanced the breakup fee they're serious. >> before everybody thought it was sort of a joke and they were taking advantage of the fact that they were in the middle of this apple lawsuit >> this is a great deal. >> you like this deal? >> a lot what other company litigates all

its customers? think about what qualcomm does it needs adult supervision apple is still -- very contentious relationship. >> we should talk markets for one comment. if this deal goes through, the number of jobs that are going to disappear will be huge. >> because >> those people will get hired by other competitors. >> if you look at the synergy numbers they've talked about, you have to decimate, decimate -- it will be a bloodletting in this administration, if you think what's going on in this world right now you would look at this deal without looking at the fact that the number of people -- i mean, thousands of people will -- >> it's a wonderful thing. if you can cut your costs by 50%, they will be. >> get the whacking stick out, i love that. >> i hope you're right. >> wonderful opportunity whack, whack, whack, whack, whack. fat trimming, it would be great. >> let's look at the broader markets this morning if you are just waking up this morning, it's something you have

to see last week we saw the dow down by 4.1% now we are looking at the dow down by the biggest points we've seen this morning. decline of 326 points if we were to open here this puts us well beyond the 5% pull back over the last sessions over last week and then today. s&p futures are now down by 23 and the nasdaq off by 56 and by the way, we are still looking at almost down 5% for both the nasdaq and s&p 500. we'll keep an eye on that. take a look at what happened overnight in asia. a lot of this bleeding through because of what we saw on friday the nikkei was down by 2 1/2%. hang seng was down by 1% and shanghai up by 3/4 of a percent. you'll see at this hour this is all affecting things there down across the board by 1% or almost 1% for almost all of the

majors the cac in france and ftse are off by 1.3%. a lot of this happening with what we've seen happening with treasury yeeltsdields. you'll see the yield on the ten year has continued to pull up. it's at 2.843% the two year yielding 2.4133%. the treasury yields have been boosted. we've also been watching the dollar check out currencies right now you will see that the dollar is up against the euro at 1.2448. finally, oil prices, which last week were down by about 69 cents but still trading above $65 are just under $65 this morning. wti trading at 64.97. >> in the meantime, for more on the market itself, get over with dom chu. the markets at or near correction territory. >> that's right.

if you take a look at the stock market volatility picture, we've been talking the idea that volatility has returned. to put it into context that are nearing the correction territory phase, remember with the volatility index over the past few years we are at elevated levels that we haven't seen since november of 2016 so this is a market selloff that, yes, is big but, remember, we are still up pretty decently year to date and we are of course up massively since the election remember this is a big deal but not quite panic just yet however, these stocks are interesting because we take a look at the russell 1,000 broader large cap index. turns out that over half of them have hit a 52 week high or better, right? 52 week multi-year, maybe even a record high sometime in the course of the last maybe couple months here. just 2018. of those, 77 of those stocks have pulled back from those 2018 highs by 10% or more and here's a sampling of it. ford motor

some are thematic, some driven by earnings and other micro specific catalysts ford down 21% from highs that hit this year. lenar, one of the biggest beneficiaries of the trump trade, lenar shares, the home builder, down 17%. ups didn't help. down 14% from the highs that we saw so far this year chevron down 11% earnings a big part of that. everyone wants to talk about apple because it is the biggest weighting in the nasdaq composite and the s&p 500 as well these stocks a among those 77 that have fallen by 10% or more. we'll see if the number grows by the 300 point selloff. >> thank you, dom. for more on the broader markets we are joined by david lefkowitz and michelle myra is here at bank of america global research. good morning to both of you. >> good morning. >> help us understand what you

think we should be doing in this sea of red as everyone is describing it. go for it. >> sure. i'll start out in terms of predicting the next couple of days, obviously that's going to be somewhat more difficult. i think if you're asking whether or not the bull market is still intact, i think very clearly it is. >> would you be buying right now? client calls you up now because that's what they're calling and asking you >> yeah, look. the way we approach things is we're looking at long-term returns and meeting our client's objectives over their longer term perspective so, yes, buying today is a little bit more attractive versus where it was last week. >> you're not expecting this to continue to fall >> look, like i said, we could see some more -- i think we'll see more volatility, that's for sure if you look at the fundamental underpinnings of what's driving the market over the past few years, it's been phenomenal earnings growth. that is still very much in place and the fed has been raising interest rates but only very

gradually. that's going to continue to be the case inflation is not a problem i think that's the key thing here is that we're not going to see the fed move it a very restrictive policy any time soon that's a good stock. >> mr. wonderful, are you buying with both hands this morning >> i did buy some in europe before i got here. >> you did >> yeah. >> what did you buy? >> i bought a broad basket of large cap european including in british pounds what i always find about corrections is it's really hard to find. you might sell off 350 points by 10:30 and then have a reversal we bought also on friday we went into the asian markets i've learned so many times if you can't figure out when it turns because the algorithmic buying is violent. it could happen today, it might happen tomorrow, but european stocks -- >> or it might not >> yeah, it's true european stocks are now yielding -- you can find names

yielding 2.6, 2.7% that's very attractive i was going to ask both of you at what point would you take the incremental dollar and buy credit or debt what interest rate would it take you to go off equities right now? >> i think to me it's the point about how you think about the fed and how you think about the risks of the business cycle. so is the reason that the stock market has been selling off because there truly is concern around higher inflation and the fed's going to hike dramatically and that's going to derail the business cycle then you're talking about a real kind of tantrum in the bond market that can destabilize all those asset classes. if you're talking about concern that maybe things are a little bit over done, a little bit more specific to the stock market and the fed is going to continue to remain somewhat supportive -- >> if i offered you a triple b credit from a good corporation in america today that was yielding 5.5%, would you rather buy that than a broad-based basket of equities what number does it take for you to change your mind and move

away from equities 6%, 7% what do you need right now you can only get 2.7%. >> spreads are still pretty narrow. >> they're terrible. >> stocks, especially this point in the cycle where you have much more up side in equities than you do in credit, stocks still look pretty attractive. >> although, kevin, interesting you were buying european equities. >> yes. >> not u.s. equities. >> i just look at the risk/return, you know, and say to myself, if i can get 40 basis points more return of capital for the duration of this year, that's very attractive that's basically what europe offers you today people talk about italian risk, german risk, this risk and that risk, they change their government i don't care those economists look very attractive back to credits, you know, i look at this and say do i

realign my cash to triple b? i find that really unattractive. you seem to agree. >> yeah, i think very much so. it still comes back to the fundamental underpinnings of what has been driving the market corporate tax growth with money in the pipeline. that will be incrementally better inflation is picking up a little bit but it's not getting the fed to the point where they're going to try to tighten the monetary policy to rein in growth that's the key point. >> michelle, you said it depends what the fed is going to do. kevin made the point, equities still look more attractive when you're talking maybe 3% on the ten year we're not talking historically anywhere near normal rates. >> that's exactly right. what happened on friday you had a strong wage growth. >> 2.9%year over year. >> yeah, so it started to seem

like we were seeing the inflationary yield build you will see more momentum build. maybe you can start to think about higher productivity growth, little bit higher business cycle which would be favorable for stocks so i think it's not only the level of interest rates that matter, it's why are we getting to that level of interest rates? is it because of an inflation scare? >> good news story or bad news story? >> that's going to be critical that's a function of what the dow tells us. >> the last time we got to around the levels, it was 13, 14 and gasoline prices were much higher wages were lower it's just the environment is much better. companies and businesses and consumers are in a much better position to handle interest rates. they're not that high. >> david, michelle thank you for being here kevin o'leary is our guest host today. let's get you caught up on today's top story.

wells fargo shares are under pressure this morning. this happens after the bank was ordered by the fed to replace four of its board members and was hit with new restrictions on its asset growth janet yellen said that the fed cannot tolerate what they call pervasive and misconduct at any bank also, larry lindsay -- by the way, we should note wells fargo shares down by 8.8% this morning. in the meantime larry lindsay has withdrawn his name for consideration of fed vice chair. former national economic chair director says it was an honor to be considered but a variety of personal obligations make it impossible for him to serve. the according to reuters they say that a probe authorized by the former cfpb head richard krourd dre was scaled back mick mulvaney has not sought

testimony or ordered subpoenas equifax shares are flat this morning. when we come back, another market risk could be heading our way. a potential government shutdown. we will talk to former commerce secretary carlos gutierrez next. in the meantime, take a look at the futures. this looks about the worst that we've seen since we started this morning 1:15 ago the dow futures down 382 s&p futures off by5. sd down by 71. "squawk box" will be right back. it's all yours. wow! record time.

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this is cnbc breaking news market selloff welcome back to "squawk box" this morning take a look at the futures because we are down triple digits in the red in a very big way this morning dow looks like it's going to sell off and open down about 345 points down right now. nasdaq opening down as well. 68.5 points. s&p 500 looking to open off as well about 24 points really questions seem to be emerging about what exactly the fed is going to do and whether maybe the market's gotten a little over heated we'll talk more about that in a moment. also new this morning, we

have a big headline to tell you about. broadcom officially raising its offer to buy qualcomm. largest chip deal in history $82 per share. $60 per share in cash and the rest in stock. they're calling it their best and final offer. broadcom's original offer was $70 a share. did not get anybody to the negotiating table. the expectation is if you could get over what they call an 8 handle, that would bring people to the table we will see how qualcomm responds >> all right let's talk more about the markets and the potential risks coming out of washington, including a looming government shutdown and trade renegotiations joining us right now is carlos gutierrez. he is the group chair and former commerce secretary under president george w. bush mr. secretary, thank you for joining us this morning. >> thank you good to see you. >> good to see you, too. you've seen volatility but it's been a while since we've seen a pull back like this, more than two years for a 5% pull back for

the dow while we've watched things march almost straight higher we do have some risks coming out of washington. why don't you tell us what you think those are and what that could potentially mean for the markets. >> i think some people were spooked by the 2.9% wage increases, but it's very interesting, becky, that it's like we live in two worlds people in d.c. are very worried about trade, but in new york i have the impression that people aren't really thinking about the trade and it's not priced in there's nafta. they've had six rounds already interestingly, the ustr feels a bit better about mexico and they feel very pessimistic about canada, which is certainly a reverse of what they felt four months ago one of the options circulating around washington is that we end up with a free trade agreement

with canada and a free trade agreement with mexico. it's interesting to run economics to see if that's good for a try lateral deal the other risk that's probably the bigger risk is china the administration is determined to take action against china, whether it's a 301, but maybe even bigger is the word reciprocity that the president used in his state of the union address. >> and in davos. >> that would be a tit-for-tat with china that would impact the market i'm not sure investors are thinking through that. >> it's interesting to hear it laid out like that, that our risk runs greater with canada right now than with mexico what happened? because canada's our biggest trading partner. >> apparently they're making some progress on autos, they're making progress with mexico with some of the issues that were mexico specific. canada's really dug in on some of the big issues, dairy and some of the other issues they have with dispute settlements.

>> the bombardier thing didn't help either. >> that's right. that's right it has totally turned around and now canada's on the hot seat that's one option or one scenario is we end up with two, three trade agreements that would cause some disruption that's not priced in either. i just think we have to may mpae attention to it now. it's real. it's like it's two worlds. new york doesn't talk about t. washington is talking about it every single day and somewhere there's a balance there in the middle. >> our resident canadian at the table, kevin o'leary -- >> i wanted to ask you going back to the canadian thing, the average car chassis, because i'm an investor in automotive part companies on both sides of the border, goes over seven times back and forth detroit, ontario, back to detroit. it's not pragmatic to breech that it's too destructive for both parties. most canadians look at this and

say, whatever happens it's going to be a pragmatic outcome. trump is not an idiot. wilbur ross is not stupid. they know in the end this will be a pragmatic outcome even if it is a bilateral deal it's not going to be much different than what exists today. you can't unwind a chassis going back and forth seven times it's not possible to do it. >> look, i agree with you. i think most people will say in the end logic will prevail let's just remember we have a president who's committed to his ba base, who is in it politically and this is something that's never been done before and it's very attractive to the president to do something that's never been done before and be the president who took on nafta. that's not logical, that's not rational it's emotional, it's political, but i wouldn't discard that. i agree with you, it's been 23 years of supply chain, of information systems. the tremendous integration

the tremendous cross border commerce, parts being made in different countries. it's remarkable, but i wouldn't discard it. >> secretary gutierrez, thank you for your time today. good to see you. >> thank you pleasure. coming up in the next half hour, we're going to talk market retirement with blackstone ceo tony james at 7:30 eastern time. we're back in just a moment.

there he is. coming up, blackstone coo tony james is going to join us on the set. making his way over. nice to see you, tony. futures in the red we'll talk markets with him and so much more dow off about 300 at 65 points let's hope it doesn't go down to 600. back in a moment

♪ ♪ ♪ maybe nobody can drag you down, but you ought to see the futures this morning stay tuned good morning, everybody. welcome back to "squawk box" here on cnbc i'm becky quick along with andrew ross sorkin joe is out today but sitting in with us for the morning is kevin o'leary.

he's a shark tank investor and ctf investor 's he with us for the next three days >> great to be here. >> we'll show you the futures. the stories that are front and center one of very few number of stock winners swimming against the tide drug maker bristol-myers squibb beating estimates on the top and bottom lines with the latest earnings report. the company announcing that the fda approved a new use for its cancer drug optivo it's a lung cancer treatment that stock is up by 4.2% on the economic numbers on today's agenda, the institute for supply management is going to be issuing the january non-manufacturing index. that hits at 10:00 a.m. eastern time the measure of u.s. services economy will improve slightly from the december levels apple music may soon be the number one music streaming service in the u.s according to the wall street journal apple music is seeing a

rise as we mentioned, the markets under quite a bit of pressure this morning last week the dow was down by 4.9% -- 4 point be point 1% kind of hitting a crescendo on friday when it was down by 666 points this morning the dow futures down by almost 300 they've been down much more than that at points through this morning's session. s&p down by 27 points. nasdaq down by 57. with declines like this, the dow is down by well over 5% over the last week of trading sessions that we've seen. that's the first time that's happened in over two years you can see some volatility coming back into the market. take a look at what's been happening in europe in the early trading there. at this point it looks like european indices are under quite a bit of pressure. both the cac in france and ftse in london are down by 1.3% german stocks down by 1.9% the ten year yield, treasuries

were putting pressure on stocks. this morning the treasury on the ten year is -- i'm sorry, the yield on the ten year is at 2.836%. joining us now to talk about that and so much more, tony james, blackstone chief operating officer. he's the author of "rescuing retirement." he has provocative ways to try to change the dynamic with retirement in the united states and elsewhere. before we get to that because so many people are thinking about their own 401k this morning and investments, how to you think about this and what's happening in the markets >> markets >> yeah. >> you've been around here for a long time. >> people have been saying for a long time the stocks are over valued i think it's catching up. >> are you saying you think the stock market is over valued too? >> yes. >> you do? >> i think the stock market is very fully valued. >> by how much >> well, i think you could easily see a 10 to 20%

correction sometime this year. >> 10 to 20% we're talking about 5% here. >> we've got 5 already >> what leads you to believe that >> just every historic norm says the stocks are very full of value. if you ask people why, the case they make isn't that it's fair value, the case they make, that it's -- if you want any return, it's the only place to go. >> that point is historically different looking at treasury yields and figuring i've got to pick which asset class i've got to put my money in that's why the stocks play for a long time. now you see the economy picking up and earnings picking up as well >> well, the economy has been picking up for a while people think that the tax cut will stimulate, but i'm not sure we need stimullmulus right now. if you worry about things the stimulus could tip us over into a spike. >> 20% correction would get you

a yield of close to 3.8% return capital including the tax cut, the 20% extra cash coming into that market. that would be unprecedented and extraordinary. >> kevin, one thing i think that the market is over estimating is how much average earnings that tax cut will bring >> i agree with you on the s&p if i'm a company in california paying 39% making surgical devices, i am getting a 21% tax. i own that stock i know that story. >> yeah, okay. i don't know that stock but one of the things that a lot of executives we're talking about, how much of the tax cut go to shareholders, how much to r&d. >> do i care do i care? >> you should because the market is thinking it's all going to earnings. >> that's an interesting take. >> let me ask you this i want to get to this issue of retirement you're with steve schwartzman. your partner and colleague.

>> i've heard of him >> i remember leaving getting on the airplane back from davos you would have thought, by the way, that the market was going to the moon the level of optimism about the economy, about people's businesses was off the charts. there was something going on then, by the way, we landed and on monday the market went the other way. >> so it's your fault. >> davos is one of the great contraindicators of our time by the way. but even talking to steve you felt a sort of exuberance about the business. >> well, isn't that what you always feel at market peaks? i mean, look at the excesses of bitcoin. look at the excesses of some of the things i think it takes exuberance and confidence consumer confidence is as high as it's been in 17 years it takes that to drive markets up that's what you'd expect to see, i think. >> let me talk to you about retirement because you've written this book. this is now the second edition

>> well, yes, so to speak. >> so to speak >> this is a new, improved version. >> new, improved version >> you have a very provocative -- you have multiple ideas. there's a provocative idea under how you want be to remake retirement in the united states. it is what >> well, first of all, let me just frame the question. the question is 1/3 of americans have no retirement plan at all and the average savings for someone between 40 and 50 is 14.5 thousand dollars. >> what do you do about it you have to mandate savings. you have to require people to put money aside or they won't do that the problem is for median income is they live paycheck to paycheck we take the deduction and redeploy that into a $600 per

person in america. >> regardless of income? >> regardless of income but it matches their retirement savings contribution that is 1 1/2% of savings. then the employer matches that with 1 1/2% of savings. >> it's a savings program. >> you're asking corporations to add another 150 basis points of costs. >> 150 basis points of labor costs. first of all, not total cost secondly, they don't have any other retirement plan obligation. >> i think that's a very hard stone to move up the mountain. as a shareholder, i'm not okay with that. that's a government mandate you want to put in place >> absolutely. >> okay. >> because otherwise corporations will be taxed very, very heavily in my opinion because you have a humanitarian crisis. >> this sounds like i'm from the government and i'm here to help you. >> i don't know about that this plan will save corporations that have money, that have pension plans or 401ks. >> as an employee who's got

better benefits than that from my company, that makes me think is my employer going to be incentivized to do less. >> well, to reduce them? >> yeah. >> they may over time, but there's a three-year window when they cannot do that. over time it saves companies money and you get people with savings. those savings are pooled and invested they're pooled and invested like pension plans. 401ks earn 2 to 3% pension plans have earned 7.5, maybe now 6.5, but something in that range it's a huge difference when you compound that over 40 years. hang on, one other thing then when you retire your savings account is automatically turned into a lifelong annuity for you and your spouse. >> if you are the trump administration which has said jobs, jobs, jobs is your mandate and your only real mandate, do

you think this is going to help with that? i'm thinking depending how this is structured, if you're an employer, small business or otherwise, this might actually slow down some hiring. >> i don't think so. >> it's raising your costs. >> isn't there a different problem here. >> it's affecting everyone equally. >> you're talking lack of financial literacy basically you're telling me people don't know they have to save isn't the root problem we teach them reading, math, sex education. average salary is 52,000 if you put 10% aside you'd have 1.2 million. >> financial literacy -- >> i'd rather do that than have the public mandate. >> if you have a certain amount when you retire, you don't know how long you're going to live, you don't know what your expenses are going to be, you don't know how to invest it, how are you going to take that at retirement and figure out how much you can spend, how much you have to save and what you can invest in? that is a highly complex problem. the nobel prize laureate calls

that the most complex problem in america. you can't have enough financial literacy. >> just the concept of having the government come and tell me what i'm adjusting on my income statement is against every aspect of my dna i hate it a lot. it leads to -- it's fraught with risk. >> what kind of reaction have you gotten in washington >> reaction has been very positive. >> has it been political, meaning down the aisle you talked to dems, they like it, republicans say no. >> i talk more to dems and they definitely like it. >> okay. >> i have had a number of talks with republicans they like it in fact, if you look at paul ryan's "a better way," he says we have a big retirement crisis in america and we need to plan for it i've talked to paul about it very interesting, i want to hear more not much of a commitment i've got -- >> we've got to go final question for you the james family given what's going on in the market right now. are you holding cash, waiting for a big correction are you selling now thinking something bad is going to

happen what does the james family do on a day like today. >> i have money in floating rate debt instruments that yield about 6%. >> bank loans. >> bank loans, mortgages, stuff like that. >> yeah. >> off loading rate. >> makes me feel warm and fuzzy when i hear that i have a lot of those, too. >> a lot of private equity. >> i get it. >> appreciate it good luck with the book, "rescuing retirement" is the title. when we come back, another 80 s&p 500 companies expected to report results we have a scorecard of the earnings season. the futures, dow futures down by 311 below fair value we will tell you more when "squawk box" comes right back. oh, not so fast, carl. ♪ oh no. schwab, again? index investing for that low? that's three times less than fidelity... ...and four times less than vanguard. what's next, no minimums? ...no minimums. schwab has lowered the cost of investing again.

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all across new york state, we're building the new new york. to grow your business with us in new york state, visit esd.ny.gov. this is cnbc breaking news market selloff all right, folks if you are just waking up on this monday morning, the selloff that started last week is continuing it is well underway again this morning. dowfutures right now down by 340 points below fair value. s&p futures off by 25 points the nasdaq down by 73. this comes after friday when the dow was down by 666 points

in fact, if you add together last week's losses with today's losses, we are seeing in the pre-market you are looking at the dow down by more than 5% that's the first time that's happened in over two years you saw the s&p march up by 59% over that period of time today the staupd is not down by 5% although it is close. we will continue to watch this as we get closer to the opening bell in the meantime, fourth quarter s&p 500 growth tracking at nearly 14% that's up from under 11% just a month ago. joining us with an earnings scorecard is michael thompson. he is the head of the s&p investment advisory services thanks for being here. >> thanks for having me. >> this martha we've seen in the s&p 500 in the strong earnings calls we've heard with the guidance they've been giving, that's why we've seen the market up by more than 7% this pull back that we're seeing, we're still looking at a market that's up for the year.

what's happening and what do you expect. that's fantastic earnings growth those tax adjustments. that's getting its way through all the earnings investments what they do know is that by and large that will be a tailwind. some of it is priced in. analysts don't know because companies are still sorting out how that's going to impact them. we do know the effective tax rate is going to drop pretty significantly. we just don't know how much. that's really another big tailwind to earnings

that's more of a mechanical thing. i function that as a different type of animal but it's helpful. earnings are not the problem with this market, okay valuations are high. we're still over 18 times. now the key thing here is can earnings expectations catch up with those valuations? because with those kinds of earnings growth numbers in fact what will happen is the market multiple will come down. the reality is this is not about the economy, this is -- it is about the economy in that inflation period but nobody really thinks inflation is a problem. >> what multiple do you see is the down side? 16 times >> that's the historical average. that's the ten year historical average. you'd need to see a better return coming from the fixed income markets to get that level down. >> which is not there yet. 2.7 on triple b best case. you have to go seven years to get that. >> terrible. >> yes. >> i don't look at the price or the multiple if i can't -- when i'm looking at deploying capital

i go to the triple b market and say, what do you have for me tie up your money for seven years i give you 2.7%. yields at 2.4, doesn't make sense. that's what i think is interesting about this problem here if you're right about pe compression, go back to historic '16 where we have another 20% dow. >> earnings growth can take care of that. in fact, what happens is earnings growth can basically take care of all of the multiple the earnings are expected to be so strong that i'm not quite sure why people are selling. i mean, if you ask people, and we service investment advisers, when you ask them why are you selling, they don't have a good reason what are you going to do >> because the market has gone up so far so fast. >> we're still up 5.5% as of friday looks like a little weakness cooler heads will prevail. i'm questioning the nature of this selling. >> 5.5% on the s&p 500. >> as of friday. >> this morning will be a bit

lower, but what i would say, why are you selling? ask an investor this do you think the market is going to be higher or lower next year? alternatively, are you going to buy fixed income, this current ten year you have to wonder how fast yields are going back up what we sort of see is that this is not an unhealthy thing. it is kind of a -- i think a little market digestion, the fact that we had almost a 40 basis point backup in yields in a relatively short period of time since effectively the end of the year. but what has changed we have a strong macro economic narrative. we have great earnings growth. people are willing to pay a premium for a better risk adjusted return for equities until the dynamic changes in the market for more profoundly i'm saying more than 3%. far north on the ten year. i think, you know, people might be a little bit ill advised to go panic at this point. >> michael, thank you. coming up, a deadly crash involving an amtrak train and

csx train killing two people and injuring hundreds. we have the very latest on this story coming up.

still an active investigation so a lot has yet to come out but csx is not commenting on the details specifically, but this does come at a crucial time really for both railroads. now for csx, it's in the midst of a turn around with a new ceo at the helm of jim foote after hunter harrison passed away in december it comes amid pretty tight scrutiny by federal regulators after cost cuts and service regulations triggered service woes what this crash raises for csx is the question whether those cost cuts and operational changes maybe went too far now for amtrak, even if it's not at fault, yesterday marks the third fatal crash involving an amtrak train in less than two months that comes as the government

subsidized passenger railroad has experienced really a turn around of its own with record ridership, record revenue, record operating earnings posted last year. the question for amtrak, is this going to dent all of that consumer demand? lastly, once again, this puts positive train control back in focus and specifically why the safety tech is not in use yet here in the state. the short answer, it's expensive. it's been costing the industry tens of billions of dollars to implement and there's no single universal operational system what that basically means if one company uses the tracks of another company, there's been some technical difficulties. for example, what we saw happen yesterday. guys, the railroads have until the end of this year to get ptc in place as we've seen with some of these crashes, it really potentially would have made a difference back over to you. >> morgan, thank you for that report in the meantime, take a quick check on the markets because we've been seeing red all morning. triple digits on the dow side.

dow opening off 328 points nasdaq off 74 points the s&p 500 looking to open down as well, off about 23 points same story in europe we'll show you that screen real quick and we'll show you what's going on in treasuries right now. you're looking at the dax, cac, ftse 100, italian ftse and what's going on in spain down 1%, some cases 1.5%. treasuries real quick, flip that screen around now, 2.830 is the yield. a big hour ahead on "squawk box" as we try to understand what is going on and how the selloff may be manifesting itself. we're going to talk market strategy right after the break. plus, it is jay powell's first day at work. he's got a tough first day he'll be sworn in. a rundown. what you expect for the powell a wh it could mean for

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that selloff that started, it sped up back on friday of last week. the yield story also at play here the ten year treasury is yielding near a four-year high ahead of key data and auction news that's out this week. plus, an unprecedented punishment from the fed. wells fargo shares down after the bank gets a major slap the final hour of "squawk box" begins right now ♪ ♪ live from the most nowerful city in the world, new york. this is "squawk box. good morning and welcome back to "squawk box" right here on cnbc live at the nasdaq market site in times square. i'm andrew ross sorkin along with becky quick sitting in is shark tank's very own kevin o'leary. mr. wonderful. not a wonderful morning. good to see you. take a look at the futures,

triple digits in the red dow looking like it would open off 318 points, 321 points now down nasdaq looking to open down, 65 points down. s&p 500 looking to open 21 points down. we'll show you treasury yields which may be a function on the reverse end of what's going on here you're looking at the 30 year right now at just crossing the 3 mark there all right. more on the market selloff in just a moment, but first here are the other top stories that investors will be talking about today. check out shares of wells fargo. they are under quite a bit of pressure this morning even after being down this week the bank is replacing four of its board members this year. the fed has announced an enforcement action that will limit wells fargo's growth it comes in the wake of the 2016 sales practices scandal. the stock down by 9% it's been down by 7%, been off by 9% earlier in the session we will continue to watch those shares broad com has raised its bid for

rifle chip maker qualcomm. the new offer is worth $82 a share. $62 in cash and at best the offer they had made earlier that was about $70 a share. they are calling this their best and final offer for shares of qualcomm the latest bid values qualcomm at $121 billion. you can see qualcomm down by 3.6% reversing some of what we had seen. >> why do you think that is? >> i don't know. have to dig into it more deeply about what's happening and why. >> people love this deal. >> is it the cash stock split? >> there's a concern about the size of the breakup fee now because this will cost a lot of money. >> yeah. >> broadcom if it doesn't happen >> you would think qualcomm stocks should not be dropping. >> an hour ago it was up 2.5%. it's reversed. >> you would think it would bring you to the table. >> i wouldn't read much of this. you have the wave of the market.

>> broadcom shares have reversed >> your point earlier, andrew, you think to get synergy they have to do whacking. >> that's like 10,000 engineers. >> in this all you hear sb is jobs, jobs, jobs >> he's already made that deal, now he's going to synergize america, which is even better. >> laying off america? what are you saying? >> i use a different word. >> these are not jobs that are going away >> they will get -- i tried hiring every day in california i can't. there's such a lack of engineers all across america partly because our immigration policy

doesn't let our good ones stay. >> qualcomm famously, you may say they over spend, but famously has spent on r&d is one of the great crown jewels in our industry if you think of what they've done broadcom -- >> you're talking qualcomm. >> broadcom is very well run and never has been famous for its r&d piece. >> there are many shareholders including me who think qualcomm is very poorly managed i would like adult supervision to come in from broadcom, work it out with apple and make it so that i can make more money with apple as opposed to litigating until the cow's come home. there's a chance you could lose that litigation. i'm glad to see the bad management get cleaned out many people that owned broadcom and qualcomm like me want to see this, want to. >> by the way, at $82 you might get it, too. >> i'm very happy. >> another big story for this

morning, j. powell's going to be sworn in as the new fed chairman that will be taking place in washington at 9:00 a.m. eastern time now back to the market selloff. joining us is todd gordon. founder of trading analysis.com and joe aborynga chief economist of the americans. welcome to both of you todd, let's start off with the markets. what should people be doing? we haven't seen a 5% pull back in the dow in over two years. >> two years. >> is this the end time to jump in or do you hold off and see what happens >> i don't think so. i don't know i need to watch what happens today if there's follow through. i don't know yet i'm a short-term technical guy i like 26.90 that for me is going to be the decision level get through there, then you're looking at a long-term decision. 26.90 gets you down there. there's a lot of macro forces that are pushing this.

we need to see what happens today in terms of the continuation. >> just to put this in perspective though, we have not seen a 5% pull back in two years which is really, really unusual. >> quick math on your number, that's 17.5% pe? >> sure. in terms of volatility, let me take you through maybe 100 years of history in about 30 seconds the range that we've seen in the dow is the lowest in over 100 years. if you look at the monthly high to low range, which is essentially just volatility, right, that's all it is, the average range in the dow in the month was 4.2%, which is the lowest since before 1905 if you go back and look at every significant market selloff, which was 29, 87, 2007, the market never sells off significantly from a very low range point of view. there's a period of about 9 months to 20 months with volatility or range will increase i think we're in that process now. we're starting to see that range. >> we had katie stockton --

>> she's good. >> she's at 2700. >> 26.90. >> wouldn't be surprised at all. >> i think we're in this major range expansion. the other thing we were talking about in the green, i don't know if that's where you were going to go, joe, is the 30 year bonds are on the cusp of a four year decade i think it transcends fed. we're looking at up trend in bonds and down trends in yields. there's a pretty significant macro shift. >> i want to say what todd was saying about the dow and s&p 500s or stocks broadly, low volatility, fx markets, bond markets, very little movement. this is not just a stock story it's been a market story that is a function of qe and importantly forward guidance because the central banks have worked to take risk premium out of the market and now we're seeing the ball come out of the water a little bit.

>> j. powell is stepping in today as his first day on the job. does he have a tough -- >> he has a tough job because yellen had a great -- in terms of employment and inflation she had a great record going to be tough to beat. but the market is going to push powell. >> to raise rates faster than anybody is anticipating? >> to say go do it the run thing that makes me feel better, we've seen the yield steepen. i don't think the fed is going to go very much. >> that's good news. >> we're going to shake out the week longs here. this will be a buying opportunity. it's only when the curve inverts or gets close to inversion that the market is sending a signal of disintermediation that i would worry about risk assets. i look at this as a healthy phenomenon i don't want the fed too hawkish. >> spread between the 2 and 10. >> what spread gets you nervous?

>> when you get basically inside 25 basis points. >> we're a long way from that. >> right we went from 50 to 70. that to me is a good -- >> 50 basis points worth of buffer >> yes you have sometime then to get out because the yield curve tends to lead by a year. more an tis ticipatorial. >> i don't see a lot of inflation. i don't think yields over seas are going to pick up interest rate differential will keep u.s. yields from really spiking. >> a lot of the growth i think we're seeing in the u.s. market is coming from over seas from this dollar weakened story, this reflation na reflationary trade we're not getting inflation forces from the u.s. stop. is that going to start pressuring snem and the reason for international markets rallying is out the window >> i don't think so. this is the first globalized secret -- this is the first

synchronized global recovery since '07. this is the fourth year. >> the 30 year getting past 3.1, that means we consider atpe -- >> why not 20? >> even better that would be a wonderful outcome. 16 and a half. >> rates are igher >> 67% so i find that very interesting that you -- to me guessing the 30 year is tough, but if it stays 3.1, 3.5, 18 times is a deal. nothing wrong with it. >> no, i agree i say 20 times at 155 earnings puts you at 3100. >> would be wonderful. >> hard to top that. >> where do you go this morning if you look at this. that is a great outcome if that happens. >> what about zbhoeld gold breaks through 15, 1600, is that a risk on or risk off? why is gold so strong? >> it's the reflation trade now short term.

>> people see wages. >> bitcoin wasn't the replacement for gold that's what we've learned the last two weeks. >> right >> listening to the conversation all morning in terms of, i mean, how much is the bitcoin animal spirits, the quest to try to derive some return. >> horrible. the quest to find volatility. >> i think it's the psychological mind set that we're finding here in order of animal spirits, find some return are they correlated? no >> in my shop, a lot of young people, bitcoin and cryptocurrencies take up 20% of the verbiage all day. >> yeah. >> and constant new opportunities to invest in it coming to the old man, that's me i look at it and say, this makes no sense, no, you can't put $2 million into that. >> how about percent i've been shorting bitcoin in the futures market last week and now i'm starting to -- >> there's always a play.

>> no more than 15% of cash i'm playing. >> that's a lot. >> 15% >> we're young we'll bounce back. >> you've lost some money in this lately, right >> i've been buying bitcoin -- i first bought it at $330 and held it. >> your average cost -- >> you're already playing with monopoly money >> but it just ties in the same feeling i'm trading bitcoin, you're supposed to stay nonemotional that euphoria in terms of all of a sudden we have volatility again is impacting my day to day. it's fun great to have volatility. >> todd, joe, thank you. great to see you. >> thank you. tax reform played a huge part in the recent story ylan mui has a bit of up side. good morning >> reporter: hi, andrew. we talked a lot about companies that are giving bonuses or pay raises as a result of the new tax law. there's another bright side to this as well, and that is a

lower electric bill. public utilities are required to pass on any cost savings to their customers and i'm outside a pepco substation where today the company is going to be announcing they're reducing rates by $31 million for their customers in maryland. that plays into 2 and $3 decrease in the average monthly bill the company says they're planning to do this for customers in d.c., in delaware and new jersey as well local regulators need to approve any rate changes that's why you're just starting to see these ripple across the country. indiana went first and they will lower monthly bills for customers by 2 to $3 in florida what you're seeing is power companies using the cost savings from that reduction in the corporate rate to pay for repairs after the hurricanes that those states have

experienced. it is just a few dollars a month, between 2 and $5 a month, but, guys, when you factor in the fact that 221 million americans receive their power from a private power company, those numbers really do start to add up back over to you >> thank you very much, ylan when we come back on "squawk box", stocks on the verge of a 5% pull back actually, more than that if you add up today's losses on top of that dow futures indicated down right now by 300 points below. the nasdaq off by 58 ctinill put today's trading piure perspective next. stay tuned you are watching "squawk box" right here on cnbc of out performance. where a rising middle class powers a booming auto industry. a leap into the digital era draws youthful populations to mobile banking and e-commerce. trade and travel surge between emerging markets. everyday our 1,100 investment professionals around the world search out opportunities for alpha.

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bingo. welcome back to "squawk box. take a look at the futures right now. we are in the red in a big way down triple digits dow opening off 290 points nasdaq looking to open down as well at 56 points off. s&p 500 off about 18 points. bring in jack eiler. he's with barons magazine. >> is something else going on right now? >> really. >> the eagles won, how about that that was a good game i see becky's wearing green, and

your tie. >> except for the fact that the markets are not following suit with the green we had tony james on, by the way, who said, 549e% correction maybe we'll get a 10% or 20% correction. >> it went parabolic when that happens you know this is happening. >> the up swing was parabolic. >> yeah, now this happens. my favorite stat was the market was on pace to return 158% for 2018 now we're paying for that. we think now the momentum has obviously shifted. i wouldn't get in the way of this freight train. >> you wouldn't get in the way of this freight train going down >> yeah. short term. >> the problem is you never know when the bottom -- >> so don't mess around with it. use this as an opportunity -- >> to buy in >> no, get your asset allocation in line. i'm a boring financial guy i'm not a trader i'm not going to tell you what

this is. we're back to january 20th imagine you're there, everything is peaches and cream what am i comfortable losing if i'm 80% in stocks, could i afford a 40% loss. the answer is no. >> unless you are looking at far down the road. >> right. >> if this is your 401k, you were talking about not retiring in one decade, two decades. >> in my 401k i haven't done a thing. in my daughter's 529, she's 14, i put her 15 more% in bonds. i was lucky on the timing but i think that's the sort of thinking people should be doing. >> can i ask you what happens on barons on a friday like we had because you're -- >> putting the -- >> pretty well everybody in financial services is going to read the saturday morning edition. >> exactly. >> i'm expecting for you to comment on it because you're barons. >> right. >> you only have, what, an hour to react to the close at 4:00 before you go to print what do you do >> yeah, but it was pretty clear by the middle of the week things

were scary luckily ben levenson who wroets our comment, he went very negative in january 27 this week he was prepared for that. >> how late can you go before you actually commit in. >> i love the business trade secret the actual close of the magazine, everything gets to the printer at 8:30. >> p.m.? >> on friday. >> can hit the copy desk sometime >> depends how fast people are could be 8:00. now there are differing opinions i would have had a great big red 666 onthe cover. luckily i work with calmer people who kept sustainable funds. >> let me ask you about sustainable funds. >> sure. >> sustainability sounds like a great thing. when the market's rising, everybody's earnings are great, everybody wants to be sustainable. i imagine this capitalist over here thinks sustainability is a marketing gimmick. >> completely. is there any evidence that sustainable anything is a good way to put your money to work.

>> i'm sad joe kernen isn't here because i thought he would take that position. i'm glad you have. one, we've been looking at sustainable funds versus the broader actively managed universe for a while and the sustainable funds out perform. as a group all of those actively managed funds lagged the index when you compare apples to apples, sustainably managed, sustainable wins. >> i was having an argument. they don't endorse bullets and tobac tobacco. if you're stupid enough to smoke, i should make money off of zblu for centuries tobacco has been a terrific investment. >> instead of saying no guns, beer or tobacco they're saying look at these elements that are not only good for the world but tend to help companies outperform a great example. i ask your question to a woman at morgan stanley, a sustainable

investor, she said exxon just issued 30 year paper that was in 2016 in 28 years are we fully confident people are going to be filling cars with gas? i wouldn't make that bet we might be but i wouldn't get -- >> i bet you 30 years from now they're still smoking and shooting bullets at each other. >> i would agree you know what, some of these companies, with calvert, they didn't exclude on the basis of what you do. they used a screen on -- you're urging me here to run. they used a screen on how you treat your customers, how you treat your shareholders, how you treat the environment. whatever industry you're in. >> jack, take a look at the barons piece thanks for your commentary on the market now we know when the close comes forbearance. >> 8:29. when we come back, an ugly day for wells fargo not to mention the broader markets. investors and wells fargo reacting to that getting an unprecedented penalty from the fed.

down by less than 7% we'll talk more about that the futures under some pressure. we're off the worst in the morning. dow futures down by 231. "squawk box" will be back. in miami, but to the nation how great we are. and how great we can be. ♪ ♪ i'll stand by you. ♪ i'll stand by you. ♪ and i'll never desert you. ♪ i'll stand by you.

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to grow your business with us in new york state, visit esd.ny.gov. welcome back to "squawk box. i'm julia boorstin a look at the biggest winners of the super bowl ads after an nfl season dominated by politics and lower ratings

advertisers played it safe and relying on humor, nostalgia and movie stars like this rap battle between morgan freeman and peter dinklige amazon turns to celebrities featuring voices from carly b. and andrew hopkins tide's running joke that all ads in the super bowl are for tide over a series of four spots. there were eight movie trailers last night including one for disney's hans solo "star wars" spinoff and one for "the next avenger. plus there was the black panther. the 60 second spot for dodge they used a 50-year-old speech by dr. martin luther king jr. drawing backlash with the king center tweeting dodge did not have approval. the ram said it worked with king's estate. we'll have to see the real value of those ad investments, $5

million for a 30 second spot we learned how many people tuned into the game. we'll learn that later today becky, back over to you. >> thank you very much, julia. when we come back, does janet yellen fear a stock market bubble we will hear from the former fed chair next as we head to a break, the u.s. equity futures, dow down 230 points if you're just waking up, believe it or not iits well off. we were down by 365 or so. stick around, "squawk" will be right back

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touch. widen your world. ♪ ♪ good morning, everybody. welcome back to "squawk box" here on cnbc we are live from the nasdaq market site in times square. we've been watching the futures this morning even though we're down triple digits, dow down by 210 points, this is not the scariest numbers we've seen this morning. we've been down significantly more than this i saw the dow numbers down 365 points right now the s&p futures are down by 15 nasdaq is down by 48 believe it or not, even with these declines last week the market was down by 4.1%.

even with the declines for the dow down 201 we are not looking at a 5% pull back over the losses we saw last week and this morning if this were to continue talk more about that this morning. in the meantime, some of the stories front and center, corporate earnings three companies that have reported this morning are all moving higher even in this down market first up bristol-myers squibb beating forecast on both the top and bottom lines bristol-myers announcing several pieces of upbeat news about the cancer drug optivo including one new use and another clinical trial for a new treatment. that's up 4% s sysco up 78 cents. it was able to successfully manage what it calls expense challenges stock is up by half a percent. metals producer arconic came up with earnings of 31 cents a

share. results were helped by aluminum parts used in manufacturing aircraft at this point the stock has turned around. it is down by over 5%. other big news, wells fargo getting slapped by the fed on janet yellen's last day as chair. wilfred frost joins us with more details. >> wells fargo shares are down nearly 7% in the free market that's a decline of around $23 billion in market cap. as investors react to friday evening's unprecedented reprimand from the federal reserve for the bank's pervasive misconduct dating back to the misconduct scandal there have been a slew of stocks the fed's consent order will limit wells fargo's growth by capping total assets, thus, they'll have to shrink some business lines and a constant from going on the offensive. they must submit a new risk management plan in the next 60 days they will face review on the 30th of september before the

sanctions can possibly be lifted ceo tim sloane says the company is open for business he's confident they'll pass the 30th of september review and that the earnings impact will only be $400 million though the share price decline suggests investors fear a far greater impact wells fargo is replacing four board members following three changes in 2016 and three just last month including a new chair in betsy duke. these here are the board members who received 70% or less approval at the last meeting three of the promised four changes will be made at this year's agm in april. wells fargo share prices since the scandal broke is now 40% behind the kbw bank's index, guys. wilf, we were just talking about that that basically means the entire board has been replaced and brought out since the scandal first broke, right >> not the entire board. it's still 16 members. once the four latest ones come through, there will be significant change

you know, on one level you could say if they needed to change the board members, they can't just click their fingers and change 16 at once you need some continuation this is fast pace as you can imagine. it's different than the one that first appointed the current management team. >> is there a clear management strategy that would prove to the fed that they've learned their lesson and mended their ways how do they proceed? >> no. it's an independent third party review that the fed has appointed to do that by the 30th of september it's a qualitative process not a quantitative one some analysts were surprised that the specific 400 million in earnings figure that the bank came out with, this has a lot of different ways it could grow in the meantime there's, again, a big question about the brand image of the company and whether at a time when the likes of jpmorgan are pushing into new

geographies, geographies where wells fargo are strong that causes a longer term, more permanent hit to earnings and reputation as opposed to this rather specific and small figure relative to the share price decline that we've seen from the company. >> did you just say the san francisco fed will appoint the person to oversee this by the 30th of september meaning there's no chance they're getting out of this for at least the better part of this year, at least? >> at least by the 30th of september, absolutely right. the next 60 days they have to submit their new risk management plan, then they will have a third party review on the 30th of september but that review will be done by an independent party which wells fargo will choose with the approval of the san francisco fed. >> that ens me a very long cloud hanging over them? >> absolutely. the earliest it can be lifted then then it will be up to jerome powell and his board to decide whether the third-party review is sufficient for them to lift these sanctions.

absolutely the earliest is then as you say, they can grow in the meantime, but they have to do some engineering on the balance sheet and leave corporations aside in order to write loans and things like that it's unprecedented punishment, no doubt about that. it will be in place until september. that's why we're looking at 20, 25% in market cap wiped off. warren buffet owns a significant amount of the stock. that's 2 billion plus. >> wilf, thank you very much you mentioned jerome powell, which is the perfect transition to this next piece we're talking about. j. powell is set to be sworn in in the next hour as chairman of the federal reserve board. janet yellen leaves him a solid economy but a difficult situation to navigate. steve liesman, hi, is here and he joins us right now with a look at powell's -- what he's inheriting. >> calling it owell's predicament right now, and powell enters office with

significant questions on the table about the outlook for rates and inflation and how strong is the economy relative to potential that's really the inflation game a tax cut now working its way through the economy promises substantial near term risk there is more government borrowing in the months ahead before any supply side kicks in. it raises concern that long awaited inflation may finally have arrived add to that high market valuations that raise questions about whether the fed ought to respond with higher rates. fed chair janet yellen addressed the market valuations in a series of exit interviews over the weekend. >> so the stock market, the ratio of price to earnings, which is a measure of valuation, is near the high end of its historical range, and if we look at, for example, commercial real estate and other seaassets, we'

seeing high valuations. >> march 88%, june 58%, december the third hike so you can see three rate hikes more than half priced. now let's take a look at something we've been doing the last couple of days, the chance of a fourth hike this year not much november and december but january, which i think that one contract is a proxy for a lot of next year now pricing in so it's not really a fourth hike this year, but that fourth hike is on the table. the bottom line of a major tax cut and that's given marginal equity buyers in my opinion some pause. they may not return until the outlook stabilized i know mr. wonderful -- >> you start that way. >> no. no no it's true. deep respect nothing has changed. my point is this, it's that when i look at what's happened to the growth outlooks inflation outlooks, the five year, five year forwards on tips, i do see a big change

here about half a point what that's done is taken in my opinion some people who were comfortable holding equities at 2.5, under 2.5 ten year and make them less comfortable. >> 3. >> there's a rocky boat here the boat rocks before it tips. my opinion. >> height, it's not bad. i know where you're going. >> three 100 basis points on the two year, where does it get you? >> let me do the math, 3 >> okay. now i have a decision. >> not bad. >> i get to take money and buy risk free at 3%. >> it's even better than that. it's even better than that >> how can you say -- >> you have higher earnings coming from the tax. >> right >> in addition, if you look at what's happened to the corporate borrowing rate the tax cuts come through. they're going to pay down some debt so you have this narrowing of spread. so the effect -- here's the thing. >> no competition for equities. >> there isn't, not right now. >> so even with your worst case

scenario. >> my point is you get back to the good scenario after a little bit but you've got to stabilize. this is a concept that joe kernen has here, which is this strong hands you've got to pass the potato around for a little bit until people are holding stocks who are comfortable holding them at a 3%. >> every day i have to make a rational investor decision new money comes in, i have to put it to work i go up to the credit markets where i would say, gentlemen, what can you give me for 24 months >> right. >> everything is sitting under 3% maybe it gets to 3.5% on triple b paper. >> i can make 2.5%. >> you had a dividend in europe. >> absolutely. tell me why after your worst case four increases by the fed that i'm going to sit at this statement and say rational investor is looking at what you've given me is an option. >> it's not bad. >> it doesn't change anything, that's why nothing has changed learn from me, grasshopper, on

this one. >> i agree with you, but right now there's a period here, a period of passing the hot potato around. >> let's just call it volatility. >> there are pension and equity funds right now. there are some investors who were in stocks reluctantly because of the low yield you bring it up to 3 and there's a collection of people -- >> you're making on the margin argument. >> on the margin that's what happens. i can tell you what's going to happen with the fed, with the economy, with the inflation. what i can't tell you is where the marginal buyer's position is that's really the key to short-term movements in the market, my opinion. >> we'll have to wait and see. this is volatility i'll bet you by today -- >> are you owning the vix here as a hedge >> i sold my vix position on friday i made 30% in a week. >> nice. >> i used that as a vehicle just to protect my assets it used to work and it stopped working for a year think about that. >> it was a really bad way to hedge something when it don't

move at all. >> nobody uses this as a long term protection vehicle. it's not that. >> how do you protect yourself now? let's say my theory is right there's a short term volatility. you can invest through it. >> yes. >> especially if you're not a high flyer like you but a regular joe like me and did you in every month at the same time, can you do that. or is there another way to protect yourself >> you go to cash. the risk that every investor has -- >> that's lame. >> what? >> there's asset classes. >> come on, something more sophisticated. i have to make the indecision every day. it's the rational investor your very meager two year yield is worthless. >> you think minus inflation i'm still getting -- >> i would never put money to work in a ten year bond yielding 3.1% that's ridiculous. that is a bad outcome. i realize some mandates require

that but it is not a place to make returns, which is my point. i'd rather own an american company having taxes reduced by a mass sufficient amount >> your earnings are still going to be good >> nothing this morning that changes my mind about equities, this morning. >> i didn't think so >> steve, thanks for being here. great to see you. >> as we head to break, let's show you what's going on with the futures. we are still down. triple digits in the red dow looks like it's going to open down 237 points down, 238 points that's better than we were, we were down 300 points s&p 500 off 15 points. when we come back, a rundown of the stocks at or near correction territory, we'll telyou oul abt them, plus where things are headed stay tuned, you're watching "squawk" right here on cnbc.

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market selloff we are continuing to watch this. the dow futures are down by 225 points below fair value. we should point out that if you're just waking up, this is better than we had seen about an hour, hour and a half ago when we were down by 365 points below fair value s&p futures down by 13 and the nasdaq is off by 32 points if we were to open right here. of course, this comes after last week's steep declines. a crescendo on friday with the dow down 666 points.

jim urio is managing director at t.j.m. managing institutions and a cnbc contributor jim, we've had a lot of talk around the table this morning what this means. mike santoli pointed out early this morning, look, you might have expected this on friday you rarely see a rap come to an end how do you feel about things so far? >> the traditional risk off assets like yen, gold, tens wer hit as well on friday. this isn't a panic in the traditional sense. if you look at high yield, if this was a panic you'd see high yield just be founded and this wasn't this was a repricing prior to this we knew rates would go higher. we knew they would go higher at the fed's leisure and discretion there was the little tidbit in discretion now we have to reprice thinking there's a small chance that the fed has to tighten quicker than they thought before. to me this isn't a huge deal, garden variety correction.

i think the weakness could last. 2700 seems very reasonable to me. >> so what would you tell people to do? i realize you're generally a shorter term horizon kind of guy. people are waking up, what do i think? >> if you're an investor, i think this is no big deal at all. when it gets to that 2700 level i think you're supposed to start adding to positions. if you're a trader, if it makes new lows, that 2733, if it goes below there, that will mean on the short term weakness is there. it will go very quickly to 2700. on the up side when it goes to 2770 and it can hang out there a little bit, then maybe i believe this correction is over. you know, but that's still 20 points away on the up side. >> we had mark grant tell us this morning don't do anything until you see some sort of settling out today >> but i do think if you can get down 7%, which 2700 is in the same week where the atlanta fed is estimating 5.2% gdp in the

first quarter, whatever it was, if you can get 7% down, i think that's probably a time to add. i don't think you're supposed to sell into this by any means. >> jim, thanks for joining us. good to see you. >> thank you good tosee you. >> when we return, a rundown of the stocks taking a beating in or near correction territory that's next. check out what's happening in europe right now we have red arrows pretty much across the board stay tuned, you're watching "squawk box" right here on cnbc. ♪ ♪

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welcome back to "squawk box. for more on the markets, i want to get over to dom chu >> andrew, last hour we told you guys about all those stocks within the russell 1,000 that are at or near correction territory. 77 of those members have hit 52 week highs just in 2018 and now pulled back by 10% or more we want to put today's action in a broader context for you and the s&p 500 over the last week of 3% decline. we could see the 5% pull back. a lot of traders have been

looking for but have not seen a while. we have gone 400 plus days of s&p 500 without any pull back. we are in that territory right now as something to watch for sure the s&p 500 has done pretty well on the broader context, they're off of a tie but no sense of panic just yet as for some of the sectors, over the last week or so, since those highs, it is energy and healthcare that's the biggest decliner in that span. utility stocks have been losers but relatively on a lesser so basis we'll call it that the vixs right now highest level that we have seen since november of 2016. a pretty decent span of this kind of volatility the 10-yr treasure no yield, we

are seeing stability there you can see they are 2.82% we have this week as the treasury's regular scheduled sale of security this week will be 3, 10, 30-yr notes and bonds, we'll see if investors stepping up and taking a look at u.s. treasury, guys, back over to you >> appreciate it we'll return with the count down to the opening bell as futures point to major losses, stay point to major losses, stay tuned on "squawk box" on cnbc. banks manage interest rate changes and airlines heds. all so they can manage their risks and move forward. it's simply a matter of following the signs. they all lead here.

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this is cnbc's breaking news, markets sell off >> dow futures is down this builds on 666 points. the dow lost on friday and other gains earlier in the week. we are close to a 5% pull back within just a few points of that s&p 500 down by about 16 points below fair value the nasdaq is down by 39

our guest post all morning is kevin o kevin o' leery >> we have not seen a 5% for a long time, it seems to happen regularly. >> everybody is trying to figure out why. does it really matter in the end? i am going to guess this market is not giving you too many chance to buy in about this. the one aspect about markets that's always true is earnings, we have had phenomenal earnings and reports of the last few days have been fantastic. not one analyst have been able to come out and tell me what the actual tax rate will be for the rest of 2000s. nobody can do it which means there is all kinds of interesting nuggets in there have not figured out how much enhanced cash flow they'll have as a result of tax changes >> meaning none of this is baked in the earnings estimate >> to me, the real buying

opportunity is the correction going on and the russell 2000 and taking positions in there. they have built from their own russell 2000s, they have built one and i talked about it before, ousm is the only profitable i have been buying a lot of that and we'll eventually show the cash flow. >> just going back to 6:00 a.m he thinks the russell 2000s are out performing at this point >> steve was just here talking about the competition for fixed income verses equities even if the fed raises four more times, 25 basis point, that's 100% increase into the cost of money. it does not change where the better returns come from we need major increases and interests, we forgotten how high it could be. if i can make 7% on the two year

bond, that would be competition for eck tquities. >> we are half way of normalization if we think of it. >> 2.7% or a triple b five year of paper is extremely interested >> kevin is our guest host today, he'll be with us tomorrow >> make sure you join is tomorrow with mr. wonderful. "squawk on the street" begins right now. this is cnbc's breaking news, market sell off. >> good morning, i am carl quintanilla and david faber and cramer is on his way back from the super bowl where his eagles are finally champions. off session lows and 5% pull back from all time highs nikkei dropped 2.5