this is a total coincidence. no we knew. these clothes were laid out for me it's valentine's day, february 14, 2018 "squawk box" begins now. ♪ >> live from new york where business never sleeps, this is "squawk box. >> good morning. welcome to "squawk box" on cnbc. we are live from the nasdaq market site in times square. i'm becky quick along with joe kernen and andrew ross sorkin. let's look at the u.s. equity futures. we see some green arrows today >> love. love of stocks the color of red would be -- >> that's true >> but green arrows today. dow futures indicated up by 121 points the markets have been up for three days in a row now. gains on friday, monday and

tuesday. the major indices have recovered about half the losses they saw on the lows from february 9th. from february 2 chnd to february 9th a big selloff, but we've seen half of that regained let's look at treasury yields. yesterday the ten-year was sitting at 2.837%. once again this morning, ten-year at 2.84%. 30-year at 3.124%. overnight in asia, the nikkei was off by 0.4%. big gains for the hang seng. up by 2.27%. the shanghai was up as well. check out what's happening in the early trading this morning in europe. you'll see green arrows across the board. the cac, the dax, and the ftse

all showing gains of better than half a percentage point. stocks are higher in italy and spain. check out the dollar, which set a new low, 15-month low against the yen yesterday. you can see that continuing. the dollar down once again, 10 7.45, the dollar against the yen. oil prices are actually below $59 this morning wti sitting at 58.72 brent is above 60, 62.43 those prices continue to drop. >> couple big stories we're watching january consumer price index comes out at 8:30 ooeeastern tie this report is important as it is the first read on inflation since the rise in treasury yields sparked that selloff in stocks before things rebounded uber's loss narrowing in the

fourth quarter following cost cutting measures by dara khosrowshahi and twitter's jack dorsey downplaying comments that the company could be a takeover target he says he seeing value in twitter remaining independent and that if twitter were connected to a larger company, they would not be able to do as much rumors about a potential deal were reignited last week sort of a switzerland argument, if you will. >> i guess i guess. >> all right among the top stocks to watch, chipotle shares soaring after the company tapped taco bell's chief to be

its new ceo. interesting, i think, because for years, kate rogers, chipotle had this aura of no, we're not taco bell, we're fresh, we're that now it's come over and help us i love both. i do love taco bell. if i can't get doritos on top of my taco, it's not as good. >> what else is there to life? >> they have stuff -- they merge -- it's not even -- no one in mexico has seen any of this stuff they serve at taco bell. they merge things, the words go together like burrotacos, it's all good with me >> it's innovative marketing an has been successful for brian niccol

chipotle's search is over with the burrito chain announcing late yesterday that brian niccol will take over for steve ells on march 5th. niccol has been with taco bell since 2011 and has been ceo since 2015 he made taco bell a lifestyle brand. he launched the breakfast offering as well as mobile order and pay across taco bell in a statement chipotle said ells expertise in digital technologies, restaurant operations and branding make him a perfect fit for chipotle a we seek to enchance customer experience, drive sales growth and make the brand more relevant yum brands, the parent of taco bell, just invested in grubhub and chipotle hopes to make a greater push into the delivery space in 2018. one downside that analysts did note, chipotle is company-owned, and taco bells are majority

franchised, and that could be learning curve for niccol. others say ells role as founder could make it a challenge for him to step away as ceo and become executive chairman. chipotle got a pop of 12% yesterday. >> he's been there through some important years for taco bell. >> certainly breakfast mobile order and pay. he was there when they moved into clothing with forever21 making this an important thing for millennials. >> does the core product at chipotle change at all and move more towards -- i don't know what you refer to taco bell mexican food as. it's different than baja fresh >> menu innovation they're not scared to experiment >> i don't think you'll see doritos at chipotle. they're all about the fresh food but are in dire need of somebody

coming in and setting things up, centralized planning all the stuff they had problems with because they are locally source the food. they need centralized control over some of these things. >> my own experience, i don't think they have a great taco offering at chipotle >> that's true >> the bottom line taco bell taco, if they say we're out of everything else, that's all i can get, it's like 79 cents. >> still good with you >> that's fine >> you think a taco is key to the turnaround >> more key than a burr reit to. >> for chipotle? >> i don't know if he'll do that >> i don't know if i want a taco at chipotle. >> they are known for their burritos >> rice. eh beans. what about a soft taco >> they're okay. but what about -- >> you know the fufu taco? they got cilantro in them.

i don't know there's something about that 79 cent -- if i have to get it. then they sort of make ginned up version of those >> the supreme taco supreme i do know what you're talking about. >> then the fire sauce, kate the fire sauce they're not cheap with it there. there's big vats of the sauce. some places they give you one thing. i could help, kate i can help >> i had know idea you were such a big taco bell fan. they should have tapped you for chipotle >> mexican food. i could each rancheros for breakfast. probably not good for anybody here other stocks -- thanks, kate shares in baidu rose after an increase in quarterly revenues the chinese company announced it

was planning to list its video platform in the u.s. fossil reported better than expected fourth quarter results. fossil had an increase in same-store sales during the holidays the company had a market cap of under $500 million at the close yesterday. >> metlife says internal failures that resulted in not making payments to thousands of pension recipients go back 25 years. that problem which was revealed in december, has prompted some investigations and a $70 million charge in the fourth quarter that charge along with the hit from the u.s. tax law changes dragged down metlife's fourth quarter earnings by more than a third. >> 25 years? >> goes back 25 years. >> wow >> amazing inflation data taking center stage today. the details of which could rattle equity markets all over again. for more on that we're joined by

jim o'sullivan and covering the equity angle, david leibovitz. welcome to both of you jim, let's talk up the cpi number we expect the consensus is for a gain of 0.4% versus 0.1% gain we saw in december >> the focus is more the core. that's the real key here >> 0.2%? >> yes that seems reasonable. over the last year that's up 1.8%, and give or take a tenth there's a lot of focus on this number and pressure on this number the core is the key here >> let's explain why this is important. the core is the number without food and energy wrapped into it. inflation concerns are sparked some of the issues that we saw starting at the beginning of this movrnth where people thougt my gosh, inflation is coming faster than expected

if we see a 0.3% read on that core number instead of 0.2% -- >> it will feed into that. >> would that affect you you're right, we're talking about tenths of a percentage point, but do you think we'll see that hatch >> it is likely to go in march any way. at the end of the day one-tenth will not make or break a trend could it be 0.3, 0.2 today it won't dramatically change my view of where we're going. if core inflation is up it makes a huge difference to what the fed is doing >> may not change jim's mind about where the economy is headed, will it affect equities traders? >> i think if the print is higher than expected, we see core inflation rise, it will destabilize the equity market. what has happened over the past week or so is that the bond

market has begun to price the stock market's outlook the stock market has been focused on healthy mick growecoc growth, solid profit growth, the bond market is on structurally lower growth i think a hotter than expected inflation print would destable i equitie equities >> we have now seen stocks make up about half of the losses. >> yes >> that they took through that time how do you value where we stand right now an where you think prices are fair or not >> i think that prices are -- prices around the world in asset markets are elevated given where we are in the broader kochb text of the economic cycle. on a relative basis, equities are looking attractive against fixed income

i think there's room for stock prices to rise the year-end targets are still viable ones as we look to the end of 2018. >> what year-end targets >> i've seen numbers around 3,000. that's a consensus -- >> for the s&p 500 >> yes we think even if the multiple doesn't do that much, you can get close to those numbers based purely on earnings growth. >> jim, let's talk about where we see bond prices as a reflection of what economy looks like david laid out a good case for the bond market saying we see what the stock market sees, we see strong economic growth is that what you think is happening? >> if the fed keeps tightening, bond yields keep rising. i have the fed tightening four times this year. that's >> that's aggressive >> ultimately bond yields go up as well. so ten-year treasury yields i have alt 3.20 at the end of the year >> you're on the high end of a

lot of those estimates >> yes there's a lot of debate on how sustainable is growth it looks like growth is picking up. i'm expecting 3% growth for the year, but the key is sustainability if that's associated with an unemployment rate that flattens out, it's sustainable. if it is because unemployment continues to fall and we're down to 4.1%, the message to the fed is that this is too much relative to the economy's potential growth rate. ultimately that's key because the unemployment rate keeps falling. in association with that do we see more upward pressure on inflation numbers. if unemployment is flat, inflation is doing nothing, the fed could do two moves all year. if wages are drifting up, they go every quarter. >> david, if you look at your valuations for the stock market being a reflection of what you get there versus the bond market f you're looking at 3.2% for the ten-year what does that mean for equity valuations? >> i think the pace at which

rates rise is going to be the most important thing to watch over the course of this year we got evidence of that last week when rates moved aggressively if we get to 3.20 on the ten-year, we'll have investors thinking about their asset allocation to us, the magic number is 3.5. if you assume the fed hits their 2% inflation target, rates around 3.25, 3.5, that's a real return of 1.25 and 1.5 with a volatility of 3 or 4 from fixed income, versus 2 to 3 from equities with a volatility of 15 plus once fixed income starts paying you again, the calculus changes on what portfolios should look like if we get to 3.5%, would be taking money off the table in stocks and putting it into bonds? >> yes, as fixed income moves north of 3%, it begins to look more attractive. we're late cycle

this is not a market to be a hero this is the time to rely on asset allocation you need balanced portfolios >> i have a 3% dividend, you're going to wait a year to get 3% >> i still like equities relative to fixed income but for the average investor -- >> don't you remember historically where yields were even 6%, if you have core inflation, you need a return stocks typically -- even if it was tax free >> the issue is you've seen investors going through a period where -- >> zero bonds. >> bonds paid you nothing. so it's not about the lkt heongm it's about where we are today and the relative valuation of those two. >> i'm staying in stocks

>> we're staying in stocks as well >> is that your valentine's tie? did you think about that >> i did >> andrew s that your offering >> this is mine. >> it's a red thing. >> because of red roses. >> jim, you've been unlucky in love >> it was last-minute i was called on to the set do you have a valentine? >> i do, my wife >> you sure? >> i'm in purple it's okay. >> it wasn't intentional that you just blew it off >> blue is a cold color. >> very cold unlucky, that's a song >> i have like 8 valentine's you have at least 5. >> i have kids, i have parents >> parents >> she's probably not watching, i should have done this yesterday. i have a grandmother who turned 99 years old happy birthday a day late. we talked on the phone yesterday. i wanted to do that yesterday. >> you didn't do that yesterday? >> i didn't. >> she turned 99 years old

we love her. she lives in merrick, long island >> happy birthday. that's great coming up, when we return, are investor s fa eor s fallinge with safe havens u.s. equity futures at this hour, we are in the green. dow looking up about 145 points. let's build a better world for investing. let's hold ourselves to the highest standards of ethics. as investment management professionals, let's measure up. cfa institute.

transparency. expertise. these are the building blocks enduring relationships are built on. as investment management professionals, let's measure up. cfa institute.

welcome back to "squawk box. it's valentine's day we have flowers here we have beautiful flowers. we have viewers who own a flower store. they sent over roses for much of the staff here thank you for that that's the good news >> nice. here's the bad news. the dollar -- this is a business show, transition -- >> yeah. >> -- it hasn't gotten much love in the past year >> yeah. there's some arguments, if you're an exporter, that's not bad news if you're exporting roses. >> you know --

>> they're importing these they are from ecuadoecuador. they're importing these. >> maybe we'll hand out roses as the show goes on the dollar index down more than 11% in the past 12 months. now tax reform may have some moves in the offing for the greenback. joining us is david woo from bank of america merrill lynch. always great to see you. you have been generally bullish, happily so for the most part it's been a great call this past week or two shaking any of your faith? >> not really. honestly i've never been this bullish about the u.s. economy in ten years dollar that been going down for most of the last year. i can only assume the market does not see the economy the way i do i think because people see

the tax reform as glass half empty as opposed to half full. some conversation i've been having across the country, i must have met with 200 s&p 500 companies. one cfo told me that that they produce in 40 odd countries, he said it cost the same to build a factory in thailand as in illinois he said with this tax cut, the next factory they build will probably be here in the united states across the country, what i'm hearing from companies themselves is that with this tax reform finally u.s. companies will be able to compete on a level playing field with the rest of the world. from that point of view i cannot be more ecstatic of course the financial market does not see it that way they see it as a fiscal still plus that will cause the economy to overheat, cause the fed to tighten. >> i don't think 9 markthe marks seen it like that.

it saw this coming, went up 45%, now it's a simple consolidation. >> joe, i would love to believe you, but if the stock market has been trading tax reform, small cap stocks would be destroying tech stocks. small cap stocks, most of the earnings in the u.s., the effective tax rate into the 30s, as opposed to microsoft, intel, most of the money comes from outside the united states. >> the optimism you're expressing is being felt by business owners, small business owners across the board, consumers. if you do polls on the outlook on the economy, people have not been this bullish. >> let's stipulate and say all of that is true. are you worried about the other side of that what the market has been worried about the last week and a half, this idea of inflation this idea of what the fed will

do to maybe slow it down marginally >> i'm very bullish on growth. i'm not sure to what extent inflation is going to -- today's number, anybody's guess. i think inflation will to the have as much upside and growth will have upside on 29th street there are three residential buildings, each of them 50 stories tall and going up in my neighborhood, vacancy rates are going up holding down the rent m al rates are ten-year yeel yooe-year yie with 3% growth >> growth in other places has been strongeranticipate.

we still have higher interest rates than any of those other countries. >> this is why i believe the dollar deserves to be higher what you're seeing in terms of rates is repricing of the u.s. growth prospect and then that is leading to a one-off configuration of pricing for stocks, for basic credit an everything else. once we move to higher growth, higher rates, that has to gb for t good for the u.s. dollar >> the onus is on the bears at this point to prove the pullback is anything but a garden variety correction in a bull market. if they prove it, they do. at this point it's tough to point your finger to the underlying negative that would cause a 20% bear market in stocks it looks like a retrenchment from a market what has been going since the election

until it proves it's more than a 10% garden variety correction, i don't know whether we need to -- >> you're right. >> maybe it will maybe i'm too complacent i can't figure out where the fly in the ointment is now for things >> but that said, one thing -- i'll bullish on the economy, bullish on the stock market is something else in 198 we had 6 we had an amazi reform and then the year later the stock market crashed and we had an incredible '90s >> i hope you're right >> are you sure? >> you never want to bet against america, joe that means trump it successful >> we want this country to be successful >> we've got that on tape. cameras are rolling. coming up, the top stories >> doesn't mean you have to agree with everything the man

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♪ welcome back you're watching "squawk box" live from the nasdaq market site in times square. good morning happy valentine's day. a look at u.s. equity futures this hour, not in the red, but we are in the green. that's good news dow up about 140 points higher in the premarket s&p looking to open up a little

over 11 points chipotle has named a new ceo to help lead its turnaround efforts. the burrito chain struggled to recover from food safety issues. chipotletapping the ce o of taco bell -- >> i can't find a taco at chipotle i would almost move next to a taco bell. >> he may have to move next to a chipotle now he's known for launching mobile ordering and new menu items at taco bell >> it's time for the squawk planner. there's a trio of economic reports on the wall street agenda

this morning we have the january cpi. retail sales out at 8:30 a.m. eastern time followed up by december business inventories at 10:00 a.m. hilton, tripadvisor, marriott, hyatt all reporting results today. and it's valentine's day, guess who is joining thus morning. >> incredible. >> he has some of the most syrupy sweet love songs -- >> he's a crooner. >> that's maroon five. we need some dancing on the ceiling. >> no, once, twice, three times a lady >> he will sing for us that's coming up at 8:20 a.m. eastern today. two weeks into february now,

but it's already been a busy month for our next guest first he retired from the biotech giant celgene after two decade there's, and yesterday he announced he's seeking the republican nomination to become the next u.s. senator from new jersey joining us is bob hugin. we're joined by our own meg tirrell. you were chairman still at sell jean at celgene >> executive chairman. >> did you do the math on the split numbers on celgene it farmed into a pharmaceutical company from a start up. when you joined what was the adjusted stock >> around 60 cents >> now >> way round 100 -- >> dollars, not cents. >> past performances no

guarantee, but you did a good job. >> things have worked out great. most importantly for paptients >> and shareholders. what is market cap at celgene? >> about 82 billion. >> that's like a pharmaceutical company, right >> i think the prospects for the company are bright even though i'm not involved in the company -- >> we called you a politician. you sat there and took it. >> i hope you will talk to me about being a senator, a public servant. >> yes you're going after menendez's seat, right? >> absolutely. >> would that be a -- i should recuse myself. that might do a favor to the entire state >> it's serious on a couple fronts i grew up in union city. i was the first in my family to go to college. we grew up in the same town. we grew up in the same town.

it's a tale of two bob's it's more serious than the embarrassment of what he's done. how can other representatives of new jersey be taken seriously when this guy has done the things he's done that bring such disrepute to new jersey. and the business community, how do you not think, if you're not from new jersey that every politician is not corrupt in new jersey it embarrasses and disgraces people trying to do the right thing for new jersey new jersey is a tough place. a high-cost state. we need every advantage. the other reason i'm running, not just because he embarrassed the state, he failed to deliver for the state. new jersey is 50 out of 50 in what we get back from the federal government it's not a wealthy state it's a high cost state he's failed to deliver for the people of new jersey >> how would you go about delivering >> a couple things strike me i have two sons that are marine officers my nephews are in the armmy.

>> you were a marine, too. >> i was proud to serve my country. in california, there was a post-traumatic stress disorder institute in california. why not in new jersey? why does the irs have a big headquarters in ohio i was joking with the va secretary, i said let's move the va headquarter the to new jersey if you want to take away a local tax subsidy, bring in an army division, do something else. the cdc is in atlanta. government has to recognize new jersey deserves more and we have to get more from the fed the people of new jersey deserve better >> how do you affectuate that? what do you have to trade away for that you have to trade your vote for something for that, if you get into this position that's how this whole game

works. >> i think you have to lead. you have to convince people the logic and rash flal tional of it new jersey should be first on the list, not last on the list like it is today you can't have these people who have so partisan on one side saying everything trump does is bad. you have to say there are some good things and you have to negotiate with people. you need business oriented solutions. we need solutions. we need problem solvers, not just people squawking at each other. what is your take of president trump? >> i think he went there as a disruptor, washington was stagnant we got disfufrg shysfunction no solutions. i'm an independent i want to bring a fresh view if any democrat has a good idea for new jersey, i'll support them if president trump has a bad

idea for new jersey, i'll oppose him. >> new jersey is a purple state. >> no, it's not. it's as blue as it can be. christie won a couple times. >> we have had good republican governors. >> kain. but it seems blue. hillary won by 25 points >> i'll have to really kick butt and do a great job so people know the story >> historically republicans have been relatively fiscally conservative, against debt and adding to deficits and you could make the argument that president trump's budget plan even this week would add $7 trillion to the debt there's been a conversation about infrastructure, what the tax cuts meant where would you land on those issues >> government has to be more efficient. new jersey needs better infrastructure you don't have to drive on many roads. i drove out to warren county last night to be endorsed by the

warren county chairman, it's like, my god, i hit a pothole, i didn't think i would get there we need infrastructure in new jersey it will help the economy. we have to spend money in the right place. >> how does your experience at celgene influence what you're planning in the race especially since drug prices are a bic issue on both sides. at celgene there's been some focus on the big cancer drug price increase how will you address those price increases? >> i can't speak for celgene anymore, but the drug is a valuable drug for patients it's such an important break through therapy. it's more important and more beneficial to patients today than it's ever been. celgene invested hundreds of millions if not billions to increase the usefulness of the

drug, and still is investing in expanding label indications. more patients benefit from it today than ever before let's remember, this is a competitive space. you may hear these stories about this and that what are people talking about? celge celgene's most widely scribed drug had a 30% net price reduction. >> because of the discounts in the system >> yes i did an op-ed here to cnbc, we need reform of the healthcare system we deliver healthcare in america today like it's 1960, with the hospital the center of the care. we have to innovate. i was with jamie dimon last week, what they're doing, amazon and berkshire is a great thing we need to experiment, innovate and try new things we need to break this system down and fix it. i will go to walk and i'm craft specificposals to reform

healthcare we're moving we're going to change the whole healthcare system but we need leadership i will help provide that >> who is on the republican side in your way here >> one of the candidates just last friday endorsed me before i announced my candidacy there's still one or two people in there i'm focused on -- >> you think you'll get the nomination >> i'll be on the ballot in november 6th this is all about november this is getting a senator we can be proud of for new jersey and somebody who will get things done for the people of new jersey november is the date that matters. 265 days from today we'll have a change new jersey, whether you're democrat or republican they are unifying around me i think it will be a lot of

momentum we're in a good position, we have a lot of work to do we'll demonstrate that i'm the picture of the american dream -- >> you are calling yourself a fiscal conservative. unlike the republican -- more in line with the democratic party that andrew talks about for years has been known as the party of fiscal responsibility they always have been there. they've always been there. >> the whom cle conversation ab debt has turned around completely >> that's they're calling card >> these labels are nonsense the last republican senator elected in new jersey was the first year i voted, '72, casey, he was a civil rights activist republicans foigt f fought for l rights woe have to get rid of the labels >> you're telling me lincoln was a republican that's not true.

>> a historic evening in south korea. shaun white taking home usa's 100th all-time olympic gold medal. we'll have carl quintanilla in a few moments. and lionel richie will join us live this valentine's day we got the music this time i will be dancing on the ceiling. later, inflation is the name of the game today stay tuned, you're watching "squawk box" on cnbc tomorrow, it's a day filled with promise and new beginnings, challenges and opportunities. at ameriprise financial, we can't predict what tomorrow will bring. but our comprehensive approach to financial planning can help make sure you're prepared for what's expected and even what's not. and that kind of financial confidence

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welcome back to "squawk box. last night shaun white reclaiming his title as king of the halfpipe it was an emotional moment for white after winning gold for the third time in his career his win takes a special place in u.s. olympic history it marks america's 100th gold medal in olympics history.

it was something to watch. you have to see some of this air he will take don't know if we will see it all. look at that >> he's coming back, he thinks >> unbelievable. >> may do it again in four years. had a great first run, but another guy was ahead. so everyone was on pins and needles for the third run. the second run, there was -- wasn't perfect or something. >> best two out of three >> so one and three. okay the olympic park super store is not just for buying souvenirs, it's also another opportunity for sponsors to show off their involvement. carl quintanilla took a quick trip around the store to see what's available >> welcome to the super store. of all the companies that sponsor the olympic games, no one has a physical presence here that has more to do with the core business than visa.

you can buy anything olympic related here a lot of mascots the dollar can add up. this store in rio did $15 million at the physical site alone. there's even a store within a store. north face has an entire corner here where they sell overall olympic branning north face name here, the pyeongchang slogan here. pyeongchang sweet potato sticks, tofu snacks, pyeongchang lollip lollipops, pyeongchang chocola e chocolate. not everyone needs a stuffed curling stone, but everyone needs some hand warmers. there's only one way do it >> coming up, cutting the red tape how president trump hopes cutting the time it takes to start an infrastructure project, the permitting, maybe that could help awes ll jump start economic growth we'll be back.

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all right. welcome back to "squawk box," everybody. the white house's infrastructure plan seeks to shorten the process from ten years to two years for permitting kayla tausche joins us with more on those efforts to cut the red tape she's in bayone, new jersey, this morning i have a suspicion about why you are there, that bridge behind

you. good morning. >> good morning, becky this $1.6 billion project, the raising of the bayone bridge will have taken nearly a decade by the time it's completed in the middle of next year. the white paper that inspired the white house's plan, called two years not ten years, points to this project as a poster child for red tape saying that a faster environmental review and fewer federal agencies involved would have hastened the progress it's changes like those that ed mortimer of the chamber of commerce would get more business involved listen >> we believe that you can do this without changing environmental law or changing the public input in the planning and approval projects but the bottom line is right now it's taking too long and it's not getting 20% of the costs of a project are now in the planning and approval process and not in the infrastructure itself. >> unfortunately it's not that simple in practice the permitting process for the

bayone bridge actually only took two years. that's the white house's ideal time frame it was led by one federal agency, the coast guard. it's actually the engineering of the bayone bridge that has taken six years raising a nearly 100-year-old structure amid a few severe winters and extremely heavy commuter traffic amy goldschmidt is the new york director forclean water, she says a project like this you have to take time and evaluate all of the impacts on all of the stakeholders including the community. >> they made it happen pretty fast and they did it with total disregard of the communities we think that the laws should be more permissive of the state and the community to be involved in coming up with, you know, solutions that also raises the bridge. >> so there will be many stakeholders who will want a say in this process. there will be detractors on both

sides but the economic impact is clear. since the bridge in june of 2017 started letting bigger ships under it, cargo volumes have reached a record for the back half of the year we've been seeing some of those ships coming by throughout the morning. we were hoping there would be one coming through when we came to you guys live, but we'll have to wait a little bit longer. >> we didn't quite nail the timing but, kayla, thank you that lays out perfectly exactly what washington is facing right now. kayla tausche who is in bayone maybe we'll catch a ship then. when we come back this morning, we're going to be getting ready for the trading day ahead. futures this morning are indicated higher three days in a row of gains so far. right now you see green arrows with the dow futures up by 141 points, s&p up by 11 and nasdaq by 34. we're going to be talking about banking on higher rates as well. financial rates poised to run in ons.coming mth

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love is in the air ♪ ♪ stocks posting a three-day winning street as the correction comeback continues a look at what's driving the market is straight ahead. was wall street's fear gauge manipulated? a whistle-blower writing a letter to the sec about potential manipulation and the blowup of the vix last week. former cftc commissioner will

join us to talk about the claims and -- ♪ ♪ live from the beating heart of business, new york city this is "squawk box. happy valentine's day, everybody. good morning welcome to "squawk box" right here on cnbc live from the nasdaq market site in times square i'm andrew ross sorkin and becky quick and joe kernen we'll explain the music. let's show you what's going on do have a little bit of green so a little bit of happy news to tell you about dow up about 135 points looking to open that way nasdaq opening 35 points higher and s&p 500 looking to open 12 points higher. headlines for you as well. as we mentioned, futures are higher but whether they remain that way may depend a lot on this morning's economic data

economic data out this morning looking for an increase of .4 of a percent. january retail sales will be out. other big news, warren buffet' berkshire hathaway is selling shares of phillips 66 but this is important, not because it's bearish on the stock's prospects. berkshire selling 35 million shares back to phillips so the holding amounts to less than 10% of the company that will free it from regulatory requirements that come from owning a stake of 10% or more. they've run into this little dilemma before, about a year or two ago with wells fargo, it had to sell some shares. some of those original sales were based on the 10% regulatory mix at that time cleveland fed president loretta mester being considered for the vice president job it's vacant with the position of jerome powell to fed chair

they say the choice isn't necessarily imminent. >> we don't need to explain the music. it's valentine's what do you mean, we'll explain the music later? >> no, i thought we were going to maybe -- ♪ ♪ >> whitney houston. >> and who we have later. >> lionel ritchie. >> we don't have whitney. >> no. >> that would be something. >> yeah. >> that would be a booking. ♪ hello >> there we go. ♪ is it me you're looking for >> becky knows every word. >> joe's looking up the lyrics i sing along because i know them. >> lionel ritchie, 8:40 a.m. >> he's got like -- >> come on. ♪ all night long par ♪ all night >> that i don't -- ♪ ♪ >> dance on the ceiling. >> no. go back to the commodores. >> i didn't realize he was brickhouse. >> i don't think it's his voice

sipping on it. >> right he's gotothers say you ♪ say me, say it forever ♪ that's the way it should be >> stocks posting a three-day winning streak as the major averages continue to recover from the correction levels reached last week. mike santoli, got nothing for valentine's day on. >> it was more important to match becky. >> thank you >> that's nice. >> she's married, as you know. >> so is he. >> so are you so -- >> yeah. >> i don't get that. >> just aesthetics >> yes stocks hit this three-day rebound. i actually think that that's why we should do a report card on them and rate this rebound and see where we're at what happens from here for it to be a little more convincing that last week might have had the lows obviously we have about 45%, little bit less than half the total losses experienced from the january 26 high back to last friday's interday lows that's pretty good i think people feel as if that's a decent little cushion.

not dispositive at this point. sector leadership is encouraging. consumer discretionary has out performed before and after so it looks like the cyclical story is still intact based on the message of the markets the credit markets have stayed firm they did not get at all upset about the equity market correction so that's all encouraging that there's not a big bad economic message. what is it we need to see for it to be a little bit more convincing a lot of folks are technically looking for another percent up side get past last wednesday's highs. another 2% in the s&p. you want to see the vix bleed further down it's been sticky high after all of those months being sticky at low levels observe the next bond move whether it's yields going up or down, see how stocks respond to that. >> good news is good news or bad news is bad news. >> cpi number. >> that's what i was going to say. if the cpi number comes in high, if the market turns down as a result where does that put us? >> right this is one question

another one is has the inflation story line run far ahead of inflation and reality? and are bond yields due for a rest and a pull back i think if you look at positioning in bond futures, things like that, it looks like there's not a lot more up side immediately to treasury yields would that refresh stocks? >> i don't know. 2.84% was the tick on the ten year that's kind of setting things up we've come back off of -- >> a little. it's marginal. i think maybe this number decides where that toggle is. >> all right thanks, mike joining us, joao matteae amato y zeren, chief u.s. equity strategist for ubs wealth management americas. jeremy, you had an s&p year-end target already on the books. what was it? what is it >> we estimated that the s&p will end the year between 2850 and 2950.

>> we haven't changed that. >> from the highs that's a fairly muted advance. >> yes from the highs it's muted. from current levels it's roughly a 10% total return the way we think of it, last year was the perfect year for stocks because we got 12% growth and inflation under shot expectations we came into the year thinking the market wasn't going to be able to keep up with earnings growth so we pegged earnings growth at 16% and assumed some multiple contraction based on the fact that inflation was likely to be more in line or slightly above expectations. that would ultimately start to hurt valuations. certainly we didn't expect to see the valuation contraction that we saw over such a compressed time period over the last few weeks this is indicative of what's going to happen this year where it's going to be an earnings driven market. earnings are a solid trajectory. 16% this year, but the investors are going to wrestling with what multiple do you pay for stocks in an environment where growth looks pretty good but we're late cycle and starting to see budding inflationary pressures. >> as the year started out, joe,

we probably -- we were asking people, okay, are you at plus five are you at plus ten? are you at plus 15 are you at plus 20 and now we're -- i really think we need to ask are you at down five or down ten that would be a statement it's happened it's happened before is that factored in to what you think is possible now? >> certainly you've seen in past years strong earnings growth yet the market is not necessarily responding if you think back to even 1987 you had 25% earnings growth and the market ended up low to mid single digits, but we think this volatility that we've seen over the course of the first eight weeks of the year, six weeks of the year has been in the backdrop a strong fundamental. you've had strong economic growth in 2017 that's rolled into 2018. the earnings growth that's following through from that should support the market, but yo you're also in a period where you're adjusting to what looks

like a bit of a regime change in inflation and rates. during those periods the market should have more volatility. we think equity prices will grind higher and it's an opportunity. >> if you had rates move and you had multiples contract, earnings could go up but stock prices could go down. >> i was looking back at other years where you had very strong earnings growth but the market didn't really do a lot '94 was one and rates were going through the roof you had this huge macro scares and that was a lot of the stuff with the european sovereign debt and the debt ceiling and all of that it happens but you have to i think have something else pushing down. >> do you know anyone, mike, on the street that has a negative s&p number >> i think the only one that stands out is not really the street but jeffrey dunlop. said the stocks will be down. >> from them to get down where he said they would be down would have to come a long way. >> it's tough to tease out. >> how do you keep doing that?

now i really think they're going down well, now -- now -- now they're really going down. google it. >> he called the election. >> i know but since then he's -- >> got it. look, i'm not -- >> google it. >> almost nobody is saying that the market is -- should be down because the inputs don't point you in that direction. >> right >> so, you've got parts of the market that will be -- that will, you know, participate more if it goes up and maybe even be resistant if it goes down? is technology good or bad at this point >> technology is good. you still have secular growth stories and the market isn't paying an exorbitant multiple. it's trading at roughly a 5 to 7% premium and you get superior growth we like tech i think on a rebound here you want to have more of a pro cyclical tilt over defensives. if we're right and markets stabilize and head higher over

the next 6 to 12 months i think you're going to see financials lead the market higher, especially if the fed follows through. we get three interest rate hikes this year. i think the one contrarian sector tilt that we continue to advocate for is energy energy looks very, very expensive and i think the market is pricing in lower oil prices forever and i think that ultimately we're seeing tightening in the energy markets. supply and demand should lead energy stocks higher timing is difficult, but i think that over time there's very good value in energy. >> finances have moved haven't they in a big way already, joe would you stay in those? >> financials are one of those pro cyclical sectors that you should benefit from a step up in rates and the tilt of the curve will affect them in terms of their funding costs and overall earnings growth prospects. we certainly like the financial sector. >> that was -- and we know that in bull markets you get these sharp corrections, but let's say there really was some underlying -- something amiss

that we just don't know about. what would it be could it be that the fed is unsuccessful in extricating them this was unprecedented what the fed -- >> i think this -- >> could they screw this up? >> there's an inflection point in central bank support. if you look back to 2016, '17, you had 1 billion inflection it is an inflection point in terms of that level of central bank support again, the market is wrestling with that regime change. you'll still have continued expansion in europe and japan but the u.s., it's going to be meaningfully lower in terms of the balance sheet. >> anything that we're just not -- did we know about the housing crisis in '06? >> i think people were concerned about -- >> what are we concerned -- is there anything now the bond market worldwide is like over bought. >> there doesn't seem to be any, you know, area of the economy, either u.s. or global, that's over heating. >> not even -- not interest rates at zero for so long?

>> i think interest rates are low and likely to normalize over time there's no part of the real economy that's over heating. when you have recession risks it's because you have a cooling down of the major segment of the economy that rolls over. it's hard to identify in this cycle because growth has been so low. >> i always like to say whenever you go looking for something to worry about, china is there. people looking at the liquidity measures in china. lunar new year. >> throw in north korea. nearby. >> yeah. it's the force majeure clause. something could happen or china in trade. all of these things are your standard disclaimers because it's not easy to find that macro trend. the markets are obviously ignoring. >> i agree with joe, at the end of the day the biggest risk isn't the economic trajectory, it's the policy. if central banks over tighten and raise rates too quickly, that could ultimately stunt growth it's a relatively low growth

there's not an inflation problem. inflation is running low that is the key risk to watch out for this year. >> gentlemen, thanks jeremy, joe, thanks. when we come back, guess what it's valentine's day so what stocks can be heartthrobs or heart breakers dom chu will take a look at those after the break. speaking of love, bank stocks bouncing back after latz week's dip. we'll take a look at the sector orngthe moves this mni stay tuned, you are watching "squawk box" right here on cnbc.

welcome back to "squawk box" on this valentine's day. want to find some hearthrobs and heart breakers of the stock market that's a little too over raught. dom chu making the love connection. >> you've got to sell it, andrew love is in the air >> where are our flowers dom? >> i'm wearing red i'm hoping some other people are wearing red. i'm trying to get into the theme of valentine's day. >> see, here here this is -- >> i see them. i see them >> they're not for you so give them back. >> what hokie thing did they assign to you today? what are we seeing >> joe, the hokie thing we're talking about, what andrew just

alluded to it's valentine's day which stocks have been heart throbs or heart breakers it's thematic. we're trying to keep with the theme. i think you would expect to see more valentine's day related programming throughout the course of our stock specials during the course of the day let's see if that happens. simplistically put the s&p 500 has had some great performers year to date despite the current market conditions and some pretty bad ones as well. some of them are fairly interesting. the heart throbs investors have loved these names because they are among the best performers year to date in the s&p 500. netflix stock, maybe netflix and chill, theme for love and chill. that's up 34% so far amazon up about 20%. kohl's, 15%. trip adviser 15%, under armour 15%. that was largely off earnings just the other way some of the heart throbs in the market battleground stocks for a lot of

these bulls out there. let's talk about the heartbreakers because l brands, it's down 19% overall. forward motor is down 15%. expedia on the travel side down 15% as well. newell brands down 13% signet jewelers, down about 13% as well. those are some of the names we talk about in terms of heart throbs and heartbreakers the next iteration will be trying to figure out what the heartthrobs and heartbreakers that the analysts find are it comes to mind that delta airlines have 100% of the analysts having buy ratings and some other stocks on the other end. i'll take a look at that back over to you. >> happy valentine's day, dom. >> happy valentine's day. >> pfinancials feeling the love. chris whalen is here as the chairman of whalen global advisers you're wearing a red tie.

>> of course happy valentine's day. >> are you loving the financials >> the big ones i'm always lukewarm on as you know, but they'll go back up they have injected so much into this market. >> the central banks have injected so much inflation what do you mean >> they own 1/3 of all securities it's not assets. >> they're going to start online. >> yeah, but it's going to last for years. the europeans are still buying, the japanese are still buying, the swiss. >> before we sort of just land on the financials and banks themselves, you're a former fed man yourself. >> uh-huh. >> explain what you think is going on inside the fed right now. what is the conversation that they're having especially when it comes to where you think rates are going to go because that ultimately is going to affect the rest of this. >> well, i think chairman powell has a problem that was left by chair yellen as she went out the door, which is that they did too much they should have stopped after qe2 and then we wouldn't be looking at this market up 30, 40% on an economy that's

cruising along at 2 or 3%. you know, the industry, banking, doesn't grow this fast when you see zombies running at 35, 40% year over year gains, that tells you something you should start running yourself you know, seriously. bank america was the best performing large bank in the country last year and it was because of cost cutting and a lot of other changes that made it far more attractive you know, after seven years -- >> okay. >> they have a lot of work to do. >> oh, yeah. >> they've done some pretty remarkable things. >> yes but the point is that the growth underlying that business is in no way supporting that kind of gain in the stock. >> powell is going to do what? let's talk about what that's going to mean for the banking world. >> powell, as you said, back in 2012, has to unwind the short volatility position. >> you just said the central banks are not going to unwind or they are but it will take a long time. >> the fed won't sell. do you notice congress confiscated the capital. they will not take a loss so

they'll let it run on. this is going to take a lot longer than the fed thinks they they they're going to have $20 billion every month but i think it's going to take longer. the mortgage backed securities are going to pre-pay much slower than they think so it's going to take -- 2024, 2025. >> let me ask you a separate question you were one of the early folks sort of screaming before the last crisis and you talk a lot about debt and leverage in the system is the debt and leverage in the system what we're not focused on right now? >> yes you have a lot of infewer i don't remember companies able to raise money at investment grade spreads. as spreads widen we'll start to see loss rates go up it won't be a catastrophe but it will certainly be a drag on earnings the plus right now is lower expenses, regulatory costs are going down, a little bit of up side from interest rates and net interest margin but there's no real top line growth here. none of these large banks are growing. if you look at the different loan categories, they're pretty

pedestrian compared to two years ago. >> who do you like and who won't you touch? >> the best is wells self-inflicted wounds. the best performer of the group. >> more mess >> warren buffet's -- >> good question >> they offer an instructive example of how boards should not act, which is they did nothing they sat there, becky, and did nothing. >> are they out of the woods at this point >> i think so. >> you do? >> look. >> can he keep his job >> good question >> what is wrong with the culture at that place? what is in the water there >> i don't know. they were not responsive the one thing we've learned from the crisis is when the regulators call, you respond you don't sit there and stare at them that's what they did they made a mistake. >> we're going to leave -- who don't you love so everybody knows? >> everybody is banging the drum on citi. i've never been a fan of that franchise. not much left.

>> what about jpmorgan >> it's well valued. wells should be at 2. >> great to see you. happy valentine's day. >> coming up, the vix investigativexed. bart chilton joins us to talk about claims of manipulation and market confidence. check out the futures up triple digits this morning. 156 on the dow "squawk box" returns after a quick break. time now for today's aflac trivia question. what car did elon musk share with his brother and the company intern during their first startup? the answer when cnbc "squawk box" continues and a gentle wave-like motion... liberate your spine... aflac! and reach, toes blossoming... not that great at yoga ya but when i slipped a disc, he paid my claim in just one day. so he had your back?

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♪ ♪ good morning, everybody. welcome back to "squawk box" here on cnbc

we are live from the nasdaq market site in times square. among the stories that are front and center this morning, we are just an hour away from the january inflation data this is the cpi, the consumer inflation. that could be a key to today's market action. the consumer price index is expected to be up by .4 of a percent. the core inflation number is the one we'll be watching. it's expected to be up by .2 of a percent. checking on some of this morning's earnings, molson coors earning 62 cents revenue for the beer brewer essentially in line with the forecast it was pleased with the 2017 performance amid some challenging market conditions and the stock is up by 1.7%. hilton worldwide beating bottom estimates beating the street expectations by 9 cents earned 54 cents a share. the results were driven by an increase in bookings and higher hotel room prices. the stock is off just slightly. weekly mortgage applications data is out.

diana olick joins us with that good morning. >> reporter: good morning, andrew stock jitters and higher interest rates were in play last week they hit mortgage demand which fell 4.1% seasonally adjusted. it was 3.5% from one year ago. home buyers drove the drop with applications 6%. 4% annually. potential buyers are facing a market with record low homes for sale which in turn is causing prices to rise far faster than they should. mortgage applications to refinance a home loan were lower falling 2% for the week. 2.8% higher than the same week one year ago refinances are most sensitive to moves in interest rates. the average rate for the popular 30 year fixed rose to 4.75% from 4.50 from 80% ltd loans while mortgage applications have been weaker those to purchase a newly built home jumped sharply.

mortgage rates have been rising since the start of this year and the bond market may be in for yet another shock in a little less than an hour when we get the latest read on the consumer price index. again, rates the highest in just over four years. back to you guys. >> diana, thank you. diana olick. in the meantime, the recent market swings drawing some attention from the regulators. the financial industry regulatory authority is reportedly looking into the s&p 500 options trading to try and see if there were orders placed to try and influence the cboe's information. the allegations of manipulation and market confidence. for more on all of this, we'll bring in bart chilton. bart, thank you for being here today. >> good to be with you happy valentine's day, becky. >> happy valentine's day, bart let's talk about the allegations because they are incredibly serious. whistle-blower saying that they

had some insights into market manipulation, traders manipulating the volatility index which sparked the entire selloff that we saw this month what do you think about those allegations? >> well, and the important thing about it, it's certainly the vix, the fear gauge, which is an important thing, but it's the related financial products, too, becky. so many things are based upon the vix, other products that there's contagion really quickly. cboe, chicago board options exchange generally does a good job. the vix has been suspect for at least seven years, people have been concerned about prices being pushed around, although there's never been, you know, any hard evidence. there's been a couple of traders. last year there was two traders that were buying bass of violations related to trying to push prices around with the vix, but it rings true to me, you know, i don't have the details like i did back in the day, but i've had traders contact me

also, becky, and tell me they've lost money they think prices are being pushed around. so it doesn't surprise me what we're seeing and i'm glad that regulators are looking at it they'll never say they are, at least it's unlikely they'll say they're looking at it, the regulators, but i would bet that all of them, not just finra, but the sec itself, my old agency the cftc and perhaps the national futures industry which is the parallel to finra in the futures world. >> bart, yesterday the cboe put out a statement saying they didn't believe the voracity of the charges from this whistle-blower they saw some inconsistencies in the statement and so, therefore, they were questioning all of the information that was in it but if this is true, if the whistle-blower is right and the traders were allowed to put these prices up,move things that they never actually had trades that went through on, i mean, how difficult is it for the regulators to look at it and say, this is a way that you manipulate futures

how do we stop this? how do we make sure this is not going to impact billions of dollars of trading >> well, there's a couple of things there to unpack, becky. one is that, you know, this whistle-blower is talking about a glitch in the system that would allow the high frequency traders, the guys i used to call cheetahs, who do provide important -- >> cheetahs or cheaters? >> cheetahs. not cheaters cheetahs so fast, in and out of markets micro dollars in milliseconds. they provide importantly quit at this what this whistle-blower is contending is that they were able to put buds and offers out there without actually being hit and that that alone putting the bids and offers out there, which we know can work, we call it spoofing in the trading world, and that actually wasn't illegal until dodd frank i worked on crafting the regulation on that so there's spoofing is one thing, but then there's the outright manipulation, which

we've talked about it in the past it's really difficult to prove you have to prove that you had the ability to manipulate markets, that you had the intent, so you've got to find an e-mail or a wire tap or something, and then you have to show that they took a trading action and that that action resulted in an artificial price. so it's like a four hurdle that the regulators have to go through. so it's a really difficult thing to proof that said, i'm sure they're looking at it. again, this has been something that's been in the wind for a long time. it wouldn't surprise me if we don't see something coming out of it this time. and literally i've been contacted by four or five traders who tell me, look, this time it was real i know one fellow who lost $750,000 in this, in one of the products, not just on the vix, in one of these inverse etps. >> right >> that gets sort of crazy. >> etps or etns.

they trade off of the volatility thing. the cboe has a vested interest in continuing to trade these products by some estimates this is 25% of their volume what should regulators do? should they allow the trading to continue you pointed out how difficult it is to track it are the people who lost money going to have any recourse how does this play out >> i don't think they should shut down the vix. i think they need more monitoring. >> what about those things that trade off of that? >> the etps? there needs to at the very least, becky, be additional disclosure look -- >> additional disclosure that says what, you might get cheated, you might lose your money, beware investor >> if you can lose 2 to 3 times your investment and the etps are compounded daily. >> commodities. >> i think a lot about cvss back in the day >> you just pointed out.

>> it's secure. i wanted the regulators. >> it's dangerous. some of these risks. with the inverts the exchange traded funds. great financial product.

we certainly need at the very different classification. >> they think there are valid reasons for concern. >> whether that's functional, i don't know you have to meet these standards. at this point it would be unfair for me to say. it has been for a number of

years on these products. even more now i think it definitely deserves a strong look see by the regulators. >> bart, great it was great to see you. hope to see you soon. >> thanks, becky. when we come back. the medal count from the winter olympics. chipotle has a new chief investors scooping up shares we'll have more on the move and what taco bell brings to the table. "squawk box" will be right back. let's build a better world for investing. let's create jobs, build bridges, insure prosperity. as investment management professionals, let's measure up. cfa institute.

thwho hold themselveshe to a higher standard. they are called "cfa charterholders." demand the best. demand a cfa charterholder.

cfa institute. all right. welcome back, everybody. let's get a quick check on the latest medal count in the pyeongchang games. take a look at what's been happening. right now we can tell you that the united states now has seven medals total, four of them gold. netherlands leading the way with 5 gold, 11 total norway with 3 gold, 11 total germany and canada u.s.a. at the bottom of the board. seven total. cacau is the south korean app. and it's mow gis are taking it

by storm kakao. >> reporter: it's an app that's more popular than facebook in south korea. kakao. 97% of phones have this app downloaded many in the u.s. may know it as a messaging app to send texts or animated emojis, but it provides a social networking service, a taxi service that has better reach than uber and lyft the wide reach has recently caught jack ma's attention they invested $2 million in kakau. >> translator: when i went to china i met jack ma to talk business china is so big in size. the way they think is different, which i like. >> reporter: this $8 billion internet giant has nearly 50 million global monthly active users and it's the first profitable messenger in the world.

that's because it's mow gi business is also booming it's no longer about buying and sending emojis, its characters and franchises continue to grow with emoji stores around south korea selling clothes, stationery, even kakao themed cupcakes i'm carl quintanilla in pyeongchang. a lot more from south korea. coming up in the meantime, chipotle stock getting some love this valentine's day after a bad breakup. you can see all of the puns. investors with more than a year. will a change at the helm turn things around. check out shares in europe right now. "squawk box" returns in just a moment

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. shares of chipotle surging on news that it has hired taco bell chief brian niccol as the new ceo. the stock right now indicated up 12%. joining us to talk about the big move, r.j.hadave, a senior restaurant and retail analyst at morningstar. uconn kur with the market reaction that you'd be hard-pressed to find anyone better than this to go to chipotle right now, r.j. why? >> i think it's a home run for this company i think if you look at what he's accomplished at taco bell, if you look back at the last couple of years, some of the big product and marketing news that the company has had, some of the

real success stories in the restaurant space, he understands the technology side and how mobile ordering works. more importantly, in an organization like young brands where you had to deal with a ceo of the entire organization, active investors, i think he's a good fit for chipotle and how it's going to be structured. obviously with bill ackman part of the group i think all counts it's a great hire for the company. >> they're different, just in terms of what you get there on the menu. >> yes. >> you say that -- i understand the mobile ordering stuff, you've got to be a digital genius, i understand that. i think the most important thing is menu innovation which i think dhi poll tai needs it's just me to be perfectly honest, when i've been in there, what do you sort of make your own stuff. they've got the meats -- taco bell makes it easy i know i like a lot of the stuff that they have do you expect chipotle to resemble taco bell more after

this or will it still be -- he'll just use the way chipotle is right now and just improve that what do you think? >> yeah, i think there are limitations. i don't think they can exactly steal taco bell's playbook i don't think what worked for taco bell will work for chipotle i think a lot of consumers have moved past the food safety issues but the experience and menu innovation haven't been there. i think that's what brian can bring to the table i think you'll see new things added to the table, things like na chose, alcohol, platforms maybe something like breakfast. >> how about a taco? that's what i'm getting at why can't i buy a taco at chipotle >> i know. >> soft taco. >> i want a choice i'll get a soft taco and hard taco >> that's part of it the customer experience and bringing things that we haven't seen before to chipotle. that's what we need. obviously chipotle has been known for its simplicity i think that's gotten them to

where they are today i think they need that innovation very short attention span among consumers today. they need something like you see, some of the innovations we've seen at taco bell to get things going and get people excited about the brand. >> still some hangover from the problems taco bell is selling clothes he's -- this guy knows how to extend a brand, right? >> really does really does. >> is it possible to extend a chipotle brand when what you think about sometimes, maybe you see it as they've had all of these problems >> it's not going to happen overnight, but i think there's an opportunity to do that. i think it starts with the innovation if you get people excited about the product, the experience, something you enjoy, you're proud of the brand, then you can certainly move into those other channels it will take time to fully repair the brand but i think this is the right step in the right direction. >> have we talked about what happens at taco bell should we worry about -- personally now should i worry about taco bell? are they -- you know, they had a -- like what are those things

called they're like a taquito half taquito and half taco. >> a wrap with a different label? >> yeah. then they stopped making it. >> here's my question, do you want chipotle going in the direction of taco bell, either both in terms of price or in terms of adding the -- these partn partnerships with doritos? if they start doing a deal with doritos or something, does that make sense with them >> i don't think they'll do any deals with outside brands at least in the near term i think it's more coming up with creative ideas that we haven't seen on the menu before. things, hey, maybe i'll go try that out in the consumer's eyes. i don't think we're going to see that to the same extreme level like a doritos locos taco. >> there are still people who won't go in a chipotle given the headlines over the past two years. >> yeah. >> what do they have to do to change that perception >> well, i think the first step right now, and you're absolutely right, when the food 15i69 at this -- safety issues came out,

you certainly lost a segment of your consumers you have another group going less frequently and another group that doesn't care. i think the first and foremost is getting that group coming back, maybe get them back in the stores more often. once they do, once people start seeing that there's a lot of new things on the menu, the experience is great, i think that's what leads you back to that group that has maybe given up on them and will maybe give chipotle a second look. >> for me i'm looking at the replacements a couple of people are replacing niccol it sounds pretty good. julie fellsman president of taco bell north america. liz williams, president of taco bell international both going to assume some leadership i'm more interested in things not changing too much at taco bell seems okay seems okay. >> i think they're in good shape there. both of those -- >> all right >> both executives are great strong team. >> any difference between like

company owned versus franchise will that make a difference? >> yeah, that's going to be interesting to see if we ever see a push towards franchising i don't see it in the near term for chipotle brian does have experience in operating in a large franchise organization i don't see that happening overnight. i think first and foremost getting the menu, getting experience down, making sure the lines are working right. i think that's his first priority but maybe down the road a hard look at the ownership structure. >> we're done. what's the salsa offering at chipotle is it in like a vat and you put it in a little thing or something? is it green? is it -- >> remember, they put it on for you. >> they do >> chipotle? >> yeah. i don't know you can't get it and you can't make your own? >> sure. you can ask for it on the side natural, cilantro. i like the stuff, fire, who tho, come in packets. >> you go down the line with the

buyer reto people. have you ever been >> i've only been once i'm not a fan. >> they ask you what you want. >> r.j., i like the packets. i take extra packets i use it on other -- i put it on scrambled eggs, my fire sauce. >> you take it home with you >> i do. that's what i was saying, they're not cheap with it. vat -- >> do you also take the little shampoos at the hotels you take those >> depends depends. depends whether i get really -- some of it makes my hair too dry and i don't even want to take it i have a specific kind i use, very expensive that i use for my -- and it's -- you know, you can work on colored hair kidding, r.j it's a joke. it's not true. i don't. i swear. only my hairdresser knows. anyway, thank you. >> thanks. coming up, legendary love song lyricist. wow, that's a lot of ls. talk about his new found love, venture capital investing.

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breaking news this hour. we're minutes away from a big economic report. >> the first read on inflation since investors fell a little out of love with the stock market the numbers and the instant reaction coming up. plus, why lionel ritchie is looking for love in venture capital. ♪ hello, is it me you're lookin for ♪ >> music legend will join us live as the final hour of "squawk box" begins right now. ♪ hello, is it me you're lookin for ♪ >> live from the most powerful city in the world, new york. this is "squawk box. ♪ you're all i've ever wanted >> good morning. welcome back to "squawk box" here on cnbc live from the nasdaq market site in times square. i'm joe kernen along with beck quick and andrew ross sorkin

our guest host is david wetzel, huge, huge lionel ritchie fan. you cut yourself shaving. >> i got hit by an inflation -- >> you have a beard but you shave. >> you do the shave -- >> it's tight. >> the trimming. >> part of the appeal of having a beard is you don't have to shave. so you have a beard which the soup gets stuck in, the eggs, then you still shave. >> first you're giving food advice and now you're on to cosmetics. >> fashion advice. >> this is like diversification of the cnbc franchise. >> i'm worried that you had some kind of procedure. >> yes. >> we get to our age. >> self-inflicted. >> self-inflicted. okay i've had a couple of things that, you know -- i read when stars -- when it happens to stars, they call it a cancer cell basal cell that's not a cancer cell it is.

anyway, the futures -- we digress. futures indicated up about 140 points quick look 135. 135.5. 31, 32 on nasdaq indicated up 10 on the s&p let's take a quick look at europe which yesterday was sort of trading off of what was happening. nothing up a percent all green. we don't want red because it's valentine's day. we'll take the green treasury yields have moderated in recent sessions that could all change when the inflation data -- is the inflation data today >> 8:30. coors anticipated to be 0.2% the other 0.4% we'll see. >> we have lionel ritchie. >> let's tell you about some stocks to watch as well. hilton out with earnings the hotel operator reporting an adjusted profit of 54 cents a share. revenue beat expectations up 24%

on greater booking volume and higher prices, too stock is up by 2.1%. shares of soda stream, the maker of carbonated beverages, citing household penetration of its machines and that stock is up by 6.5% then check out shares of avis which is under pressure. goldman downgraded them and cut the price target to $33 a share from $37 avis joins rival hertz as sell rated. both under quite a bit of pressure avis down 4.8 and hurts off 5.2. cleveland fed president loretta mester is being considered for the vice chair slot according to multiple reports. other candidates have been interviewed as well. the reports say a choice isn't necessarily imminent counting down to key inflation

data in 30 minutes steve liesman joins us. >> many calling this the most watched inflation data report after inflation fears were sparked and a raise in bond yields and a sharp selloff in stocks stephen stanley writes, the january cpi will confirm the notion that inflation has begun to girl, but he goes on to say, however, i suspect that market participants have worked themselves into such a frenzy on inflation the release could yield a bit of relief. fueling the inflation fierce, rising wages, tight job market, weak dollar, and strong government stimulus. on the other hand, which by the way, is a professional economics term, the professional inflation term has been how low it's been. they say they can't hit the 2% inflation targets. they wonder out loud if globalization is keeping inflation prices down. it is a world where prices at the corner store face prices on the other side of the country

and even the world core inflation has averaged 1.8% the past year and the past decade economists looking for a strong 0.4% but only 0.2% in the core rate so, folks, investors out there, take your pick are the forces of globalization and technology should have kept prices low about to give way to tight job markets and over heated economy that will spark a new era of inflation we're going to get a read on that in a few minutes. >> we had someone making the point earlier a one month read over the long haul you won't put much into this market but others will >> i used to work with david wetzel and put my nose down. >> now he's on television. >> it turns out that the long term has made a whole lot of little short terms when the market reacts to something like this, that

reaction stays and remains it's important what i'm trying to say is there's a lot of forces that go with inflation tens of thousands of prices and how they are affected by all of the global and local forces at work i think from an investment thesis you have to take a step back, look at it, process it, put it into your evaluation. i think this remains very powerful and you might have a cyclical uptick in what i think is a sector down trends. >> with unemployment headed to 3.5%, most history suggests that inflation will pick up i think what the markets are wondering about is how will jay powell and the fed respond to this. >> proper introduction, dave wetzel is here from brookings. what do you think a proper response is? >> from the fed? >> yeah. >> i'm in favor of patient if inflation starts to pick up, they have to ensure people they are on the case. they're not locked into three

rate increases this year as the numbers get stronger, especially with all of the fiscal stimulus. the big change with the fed, they knew the tax bill when they sat down they didn't expect $300 billion in additional spending over the next couple of years i think they will be on top of it as steve said, there's no reason to rush. >> i tried to explain the inflation dynamic to my family the other night when there was a piece of steak on the table and i was -- >> really? >> it's true it's true. my family asks me these questions and it always ends badly. >> what an exciting dinner conversation. >> my younger son is very interested in this stuff anyway, the problem is that i can't conceive of a world of supply constraints where that piece of meat is the only piece of meat available and so people bid up the price of it because it can't come from argentina or

brazil or wherever else we may impo import in this world, i don't think we've even tried or stretched our supply chains. has anybody ever gone to vietnam and said, you know what, you're doing it really cheaply. do it more cheaply. >> i hadn't thought of this until you brought it up. what about the idea where we are talking about unwinding some of our trade packs and the impact that that could potentially have >> i think there is potential upward pressure from trade, although i have to say i believe the trump administration has been more bark than bite i think the president has more notions on the trade they speak to possible discontent >> in areas of the country that have been left behind. >> when it comes to doing things, he has been very moderate in that that's been my experience so far. i don't expect the massive change to the price structure because of trade, at least not without huge changes to our trade relations. >> yeah, i agree with that i think that there was a lot of

anticipation that the president would be even more aggressive than he has been but this drip, drip, drip of tariffs, we know what direction that pushes prices and it's not down. >> if you get retaliation, that's a bigger issue. >> that's a year or two -- you think that's -- there's like an immediate -- >> no, i agree by the way, the wage rise in the february jobs report, that would not show up in the january inflation report that's another thing that takes time to show up in the inflation numbers. >> we've been through a large period of below target inflation and the economy is getting closer to full employment. we have a huge fiscal stimulus and huge tax cut coming through the pike it seems like for the first time there's going to be upward pressure on prices the question is, what does the fed do if its forecast shows that inflation will rise a little bit above 2%? when they say symmetrical, does that mean they fight down as well as up

do they say after a long period of below target -- >> answer your own question. what do you think they should do and what will they do? >> i think they should let it go above 2% i don't think they will. >> do you agree with that? >> i need to hear more from jay powell no complaints. he's only just taken office. >> right >> we don't know a lot about what we call the reaction function, how he inputs data and then outputs policy from that, about how he thinks about this he's talking in a limited way about his views on the economy, about his views on policy. my guess is he's going to be patient. what i keep saying is that before you get to 4, and i'm quoting monty python, thou must proceedeth to 3. i think he's going to take it a day at a time, a meeting at a time do the one in march, check it out. watch the inflation numbers and do another one in june probably or maybe september and then move

on so i don't -- i know everybody wants the -- i don't think jay powell has in his mind yet is it 3 or 4 i think he has a base case of 3 with a swing factor of 2 or 4. >> while we have you here since you're a washington watcher, trump out with the infrastructure and budget plan this week. dead on arrival? not dead on arrival? >> dead before arrival. >> dead before a sfliefl. >> by the way, if any element of those were to get implemented you would also be adding to -- there's pretty interesting issues that could come. >> basically congress has already decided what they're going to spend in fiscal '18 and fiscal '19 the president comes up with a budget that the congress has already moved beyond that. the infrastructure thing is butkus there's $20 billion a year at best and they have this grandiose scheme that somehow it's going to be leveraged to 1.5 trillion over ten years. i don't think any of that will show up in the near term that's okay. infrastructure is a long-term

project. i think what's important is to watch the congress, not the president. there is no appetite for doing anything about the debtor the deficit. in fact, just the opposite the more that the debt and the deficit projections worsen, the less concern there seems to be in congress. >> therefore, when does the market get concerned about that? >> i have no idea. the bond vigilantes we were worried about going to discipline zboft spending? where are they they must all be in the hampt s hamptons. >> dips don't matter until they do that's been the story for a long time you can see how the markets wake up to information that's been out there. suddenly they freak out about it for the past six or eight months i've been coming on the air to talk about the fed's plans to reduce the marketplace maybe it was me as joe might suggest. it seemed completely unconcerned with the information and now you hear all of this talk about, well, you have all of the large

deficits and the fed reducing the balance sheet. suddenly the information that's been out there is suddenly relevant i think we need to understand how the treasury is going to place what is now new information which is somewhere along the lines of $1.2 trillion if you're adding in what the fed is doing and you're adding what's happening to the deficit spending side. >> you think like a nebulous market itself gets distracted? even the overall markets >> i think that that game candy cane or whatever it is. >> candy crush. >> that they were playing -- >> there are two or three guys listening and they tend to mix the money. that's okay. >> steve, thank you. >> my pleasure, becky. >> david is going to be with us. >> stick around. >> we have a big hour still ahead. here's what's still to come. at 8:30 eastern time we'll get that key inflation data that we've been talking about the number and the instant market reaction is less than 30 minutes away you have to slow down for this music. plus, five stocks that five star

fund manager bill nygren is falling in love with 8:40 eastern time. your heart might break if you miss this interview. lionel ritchie will join us live the legendary lyricist is courting another industry venture catapil. he will explain. stay tuned you are watching "squawk box" right here on cnbc ♪ some moments can change everything. you can't always predict them, but you can game plan for them. for 150 years, generations of families have chosen pacific life for retirement and life insurance solutions to help them reach their goals. being ready for wherever life leads. that's the power of pacific. ask a financial advisor about pacific life. the markets change... at t. rowe price... our disciplined approach remains.

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sure. still yes! xfinity delivers gig speed to more homes than anyone. now you can get it, too. welcome to the party. welcome back to "squawk box. check out the futures that we're witnessing this morning. up 142 after a turn around day yesterday. triple digit losses in the morning. ended up 30 or so, 35, something like that. today indicated up 132 the dow jones. s&p indicated up 11. nasdaq up 35 twitter ceo jack dorsey is downplaying recent speculation by analysts that the company could be a takeover target

speaking at the goldman sachs internet convention dorsey says he sees value in twitter remaining independent. rumors about a potential deal were reignited after twitter reported its first ever quarterly profit. ryan murphy inniking a deal with netflix it's a five year, ready for this, $300 million deal. murphy's new deal begins on july 1st when his current deal with twentyth century fox expires take a look at shares of netflix. he said up until a couple of months ago he thought he was going to be buried on the fox lot. there's a huge element of this transaction with disney that actually impacted, he says, his thinking about -- >> where he wanted his -- >> about where he wanted to be i think there was this safety -- >> i have thought about the impact on creative with deals that are hanging out there.

>> exactly in fact, i think iger and others have made a play on saying, stay here it is a big loss having said that, there's a number of programs obviously that are on fx that he's still going to be involved in for a very long time. >> he's not an -- he's not a ryan philippe, ryan gosling, he's a -- >> the brains behind -- >> all right because ryan is a good actor, new age actor type name, isn't it i get them confused. >> all the ryans >> yeah, reynolds -- >> i don't get them confused, no >> anyway, i'm trying to stay woken. you're going to see here, trying to stay frosty our producer's working with me up next, what better way to celebrate love than with lionel ritchie, the legendary musician has a new bay. >> i like that. >> bae systems. >> no, it's before anyone else.

>> bae >> i've heard it before. >> i'm woke. i'm woke i'm going to stay woke he's going to join us right after the break. world. and energy to fuel its growth. real estate such as e-commerce warehouses. and private debt to finance transportation and infrastructure. building blocks of strategies to pursue consistent returns over time from over one hundred fifty billion dollars in real assets. partner with pgim. the global investment management businesses of prudential.

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investment singer, songwriter, newly minted venture capital investor joins us now can you promise this could be the beginning of a beautiful relationship, mr. ritchie. if you do ever get back here -- we thought you were going to be on set for a while and the excitement was palpable. >> i'm "dancing on the ceiling." >> next time you're here, will you come in? >> that's a promise. i'm so happy that's an absolute promise joe, andrew, becky, let me tell you, i'm so happy to hear that you are having sleep problems over there i'm thinking you all do this every day in the morning this is not rock and roll time, you do know that, right? >> unless -- unless -- as we have said many times, unless you're still up. that's the only time. >> that's exactly right. >> that's the only time maybe that it works. >> what a career, obviously. some of the most iconic -- you look -- i looked through a list just to get them all it's like, oh, my god. i forget some of them. there are so many that we know

that it's just -- what a career. fantastic. now venture capital and i think we've had nick on. >> you did. >> we had nick here before. >> you had nick on. >> what an idea. and if you could go into, you know, your background, how you were raised and i remember, too, those little cases that the gp would bring when he showed up at your house unheard of maybe possible to do it again. >> it was the easiest pitch ever in life to come into -- they said, lionel, what do you think of this? i want to run the idea by you and tell me what you think of it a doctor comes to your house he actually will be there in about an hour or less for $99, you can actually covers insurance. a doctor will come to your home to deliver medical services. and i said, that's the new idea? and the guy said, yeah what do you think? i said, i grew up with that idea that's not the idea, that was

how it was and so we can now do this instantaneously. we have the app. you are completely in control with the doctor. the doctor knows all of your vitals you develop a relationship with your doctor. that's the new old thing and of course when nick presented it to me i was on immediately. i said, that's the solution to health care because so many people find it so difficult to actually get to the doctor, to have a relationship with a doctor if you can have that personal attention in your own home, that's the beginning of great health care. >> yeah. the internet obviously -- with the promise of the internet, we try to figure out the way it drives this. that's the only way it's possible to make it affordable with people, you know, worth while for the doctor, you know, we know that, you know, these guys spend a long time in school and they're pretty well compensated. it seems like it would be prohibitively expensive to get

doctors to do it only possible because of the internet and having the right application. >> also what they have available now, which is a new app, you actually have all of your vitals. >> right, already there. >> already there for the doctor to read. all you do is put your finger in the little apparatus they have and the doctor's talking to you in real time, real medicine. >> lionel, while we have you, we all saw you on the super bowl ad for t.d. ameritrade. all night long 24 hour trading the reason you were doing it at the end it had a little tag about bitcoin. i was curious, are you trading any bitcoin? buying any bitcoin >> do you know what, i missed bitcoin. bitcoin at the time was something that floated past my table. i kept thinking, i'll get back to that. you know what, i missed bitcoin, but it looks like it's going to be very popular. i'm still -- i still have my eye on it but it's one of those things that at the time it came across my desk i wasn't that keen on it, but it's going to -- looks like it's going to take

off and get interesting. >> now that you're a t.d. ameritrade man, are you playing the markets every day? >> i am now asking more questions than ever. now that i have my folks around me and once they said the commercial, i said, guys, i want to get in. i want to play with this now they are playing with me i'm loving it. i must tell you. it's a new pastime which is great. >> i can't believe we don't have more time. you have some guys advising you. uri millner and others you ought to come back and every platinum record you have you should pick a different vc investment and follow it that way. we've got to go. next time you're in new york for whatever it is, will you stop in 'de studio we appreciate it. >> i promise i promise i'll be there without a doubt. >> we love you. >> take care, you guys. >> thank you today, the new new york is sparking innovation. you see it in the southern tier with companies

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welcome back to "squawk box. i'm here in chicago. we have a lot of data coming out. the cpi numbers came out and it was higher than expected cpi month over month is plus .5. we were expecting plus .3. last month it was a little bit higher it was very important because remember the stock market hated a little bit of inflation when we saw it came with employment data the stock market went from plus 13 on the day to down 12 on the

day. so it's a pretty big move in the stock market the rest of the data, cpix, food, energy, plus .3, higher than expected. year over year, 2.1 expecting 1.9. all the data in cpi is significantly higher than expected retail sales numbers came out, too. retail sales numbers month over month down .3, expected .2 retail sales numbers weaker. aut autex-auto steady. negative .2. we were expecting plus .3. retail numbers coming in weaker than expected. the cpi numbers came in significantly higher than expected and the stock market is suffering a little bit because of it. the ten year was 2.82 going into it and it's already almost 2.87. so pretty big reaction to this number back to you, joe. >> all right for all of these people that wanted red arrows today for

valentine's day, i hope you're happy. >> oh, that's terrible. >> matches the flowers. >> yeah, exactly let's check the futures. right red across the board it was all green earlier so i hope you're satisfied, liesman. >> i did not want that >> did you say -- it's weird it's not necessarily where you would expect it. why apparel? apparel was up >> apparel's been down a bunch and a bunch of guys are saying it had to turn around. >> what's concerning in the number then? >> i think what's concerning is the number of 2s and 3s that i see going down the line here. >> such as >> you know, rent. 0.3. new cars, 0.2. sorry, new cars minus 0.1. gasoline up a big 5.7%. >> that's not part ofcore. >> not part of core. commodities up a full 1% working its way down through the

system there's only four aces, one of them being andrew's favorite airlines down 0.6. they warned me not to start that it's been a big surprise given how much we import minus 0.7 year over year gasoline up 8.5%. >> take a look at the futures. down 260 we were up 150. >> big change. >> lost 400 points in the last three minutes. >> the market is focused on the probability of near-term inflation. i'm looking at yields. it might be worth while to throw out the ten year which looks like it's up three basis points just in the past few minutes here what i'll do is also check the fed probabilities which we went

in under 50%. >> up 6 -- >> no, i take that back. i take that back i can check again. the two year looked like it went up as well it's a real shame not to have rick flailing his arms at movements like this as he would be very excited up 2.145 on the two-year note here then i think the disappointment in retail sales also means you don't get the other side of this you have a little more inflation, a little more growth but it looks like you want to always be careful with the january retail number because you've got a huge seasonal adjustment coming off of december but it would have been -- there's the two year right there. you can see that's a sharp spike. then obviously you're going to put up the -- >> in yields. >> the futures and what you'll see is it reacted the opposite way. we're back to that concern about inflation. the year over year, 2.1 and 1.8

is still not that concerning. >> again, look, the market had to this point before we saw the futures this morning made up about half of the losses that it suffered between february 2nd and february 9th >> right. >> people knew this number was going to be a tricky one. >> right. >> if we saw stronger than anticipated inflation that would mean the fed could potentially raise rates quicker. >> i know it's hard to say here. you should not read the numbers the first 15 minutes of trading. the people are poised to believe that inflation is going to get worse and when you get these little symptoms of it, it reinforces their view that we're now finally after all of these years trying to get inflation up, that it's going to pick up >> i think it's truly important what you just said, david. in the first ten minutes of a big release, the first five minutes, i don't think a human has touched a button all algos. people should know the algos read the headlines and they trade according to

pre-programmed trading commands and so what's happened is -- >> right. >> -- the biggest part is -- >> then you have algos on top of that >> look at what's happening right now. the dow -- the futures made a bump up as -- and i think what happens is -- i think you have an initial algorithmic trade around fed policy statements, around big numbers like this and then the humans take over and they adjust. we'll see if that -- >> we have four minutes. let's see. >> we want to bring in cnbc contributor and net -- >> texas. >> chief economist joe lavournia here >> it's worse than expected. to david's point, it's 1.8 on the core cpi it's supposed to increase

production capacity. that's disinflationary >> now they're turning the other way. do you think investors are over shooting >> i do. i do >> a rational mind by the end of today should be thinking what? >> that the fed is now going to move more than 2 we're going to go back to 3 and maybe 4 hikes, which i think is stupid, but that's what we're going to do. my view to the fed would be take rates to neutral which is 2% and let's see what the quantitative tightening is i actually wrote the article for cnbc and just wait and see what happens. i mean, we just haven't had an inflation problem in a long time. >> steve, you added the stupid line. >> i think it's important what joe is saying, what are we talking about here in terms of the up side risk from the federal reserve? are you telling me you're going to reverse your whole investment thesis about tax cuts, better profits and better growth because the fed might do an extra quarter point that, it could be 4 instead of 3? i find it very difficult to

think -- if you tell me the delta is 50 basis points or 100 basis points, then i'm worried. >> you guys are both right, david and steve. look they tell us longer term and we are at that moment in markets where we need any hints. the market is trying to get out ahead of the potential -- >> i think there's a lot of pressure on powell to show that he won't be weak on inflation. so you don't really know whether he has the ability to be as restrained and patient as yellen would have been. >> by the way -- >> i disagree. he's going to be tested. i think the pressure is the other side i think a guy comes in like this, appointed by a republican with a guy like marvin goodfriend if he ever gets through the senate. >> not going to happen. >> not going to happen >> turns out if you want to put little strips in dollar bills to reduce their value, you annoy just enough republican right wingers not to get it. >> anyway, i think there's going to be a more hawkish board or the perception of a more hawkish board. the pressure will be on them

>> at the rate they're filling jobs the hawkish board will come in 2025. >> yeah, that's right. probably true. >> one last question for you, when you think about where we're -- when we get these -- >> right. >> forget about this month the question is what you think directionally is going to happen over the next three, four, five months and what does it say to you today? anything you're saying -- >> no. david and steve is right the trends are soft after having under shot for a long, long time david's orrect, you're not supposed to look at one month. to me if we get a cap exboom, which is certainly possible this year, that will increase productive capacity, increase productivity wages will rise but they'll be rising for the good reasons. powell is supposed to fight against that, andrew. >> right >> i'm really worried, steve's buddies, phillips curve, cost/pull people -- >> i have a different question yesterday or the day before we talked about the wealth effect and what the market was doing. >> yeah, it was yesterday. >> i asked you a question about what does volatility do to the wealth effect.

i'm curious what you think volatility unto itself, all of this stuff now, what does it do to the quote, unquote, wealth effect, what does it do to catch ta -- capital investment. >> i think people take a break it's a very small effect. >> a lot of decisions at the margin that are made, do you go up to that suite when you're going on vacation or do you go to two rooms with the kids >> i'm not talking about that. three weeks ago when we were in davos these guys were ready to spend money like it was going out of style my question is has that changed at all >> no, it hasn't changed because the outlook is still good and some volatility over a short period of time won't change things in terms of the wealth effect to me it's overrated. people who have the money have a lot of say in things this has been the only business cycle where consumption has 4% despite high wealth. >> yeah, i agree we know the direction of the wealth effect, i just don't think it's very big. i think the question is does

business still have confidence that if something does go crazy in the markets, that this administration can handle it and i think that's why there's a lot of pressure on powell, because i don't think they have confidence in the president or in the treasury. >> okay. what do you think could be going crazy in the markets >> if something more than market moves, it spills over into some kind of financial instability thing. there's some surprising weakness. >> you think they had confidence in jack lu. >> more than steve mnuchin. >> gary cohn >> you don't think we needed some confidence to go up 45% in the stock market >> i think that the question now is -- >> from your side of things, david, this has been the rap since november 9th, that there's no confidence in this administration unfortunately the market did exactly the opposite of what that viewpoint -- >> no. the question is is the confidence that the business community has that things are going to get better shaken. >> the flip side, the data are excellent. >> one of the great crisis watchers and historians of our

time, let me ask you a different question one of the other conversations that has come up in the past two weeks is all of a sudden a sort of new-found respect for deb and deficits and what that means. so my question, is there some element in the market right now that you say to yourself, this is scary is there anything in the world right now that you go, there's something like a little wrong here >> well, i think -- >> i'm not looking for it. >> i think one of the reasons that i'm confident that the economy can withstand this market turmoil is i don't see a lot of imbalances out there. i worry about the geopolitical risks. the debt and deficit is a problem. it's a problem in the long run >> okay. we are going to leave the conversation there. >> although we should point out very quickly we should talk about the futures in a moment. we have seen a sell off, i move of 400 points based on the numbers that were slightly hotter than expected all happened in the last 12 minutes. up from 148 to down 200 plus in the futures. we'll talk more about that in a moment. developing story that we're

watching, the fbi, the police and local law enforcement officials are responding to an incident that took place earlier this morning at nsa headquarters nsa spokesperson says the disturbance took place at one of the security vehicle entry gates. the situation said to be under control and that there are no ongoing security or safety concerns at this point >> up next, we will get back to the markets. again, take a look at the points now.

the quarter may be more important. it was up 0.3% versus up 0.2%. that was expected. that came as a huge shock to the markets. little hotter than expected. people suddenly worrying that the fed is going to raise faster than anticipated as a result the dow futures went

up close to 150 points to down 200 points very quickly a 350 point swing to the down side on this you also saw this play out with the s&p futures now down it spiked as well. 2.875% getting up towards 2.9% like we saw earlier this week. joining us earlier, harris associates, u.s. equities cio bill nygren. portfolio manager of the oak mark funds this move people were thinking we were maybe out of the woods now the hot jer than ever cpi numbers saying, we have to look at inflation again is this the right knee-jerk reaction >> at oak mark we aren't trying to out guess the market the statistic of the day we're trying to think about how do business values change over the next five to seven years and if we're thinking about buying -- when we buy stocks we're thinking of buying

businesses and over the next five to seven years these giggles of a tenth of a point inflation being higher or lower just don't even matter when it comes to trying to estimate what businesses are. >> fair point. let's not talk about the last 15 minutes then let's talk about the last two weeks because this is about trying to reassess our long-term view of the markets and the economy. what do you think is the implication? are we at some sort of a sea change where you're worried about inflation and the fed raising rates a little faster than anticipated how does that play into your thinking >> we don't try to time the market we've got a basic belief that if you're a long-term investor you're going to make a lot more money owning the business than lending to the business or lending to a government. so we encourage people to have asset allocations that are heavy in equities and then to use volatility, both up side and down side, to rebalance their portfolios. >> what should we be doing in terms of rebalancing since we have sold off 10%, back up half

of that. what does this mean? and i get it that you're not looking at quick moves in the market, but obviously interest rates are gravity on stock prices so if interest rates are going up, that does have to make you rethink how you value individual pieces of companies too. >> well, a couple things there i think, you know, what you do in rebalancing depends on how recently you last rebalanced market's up a lot over the last couple of years, if you were fully invested in equities, you probably have too much in equities and should be trimming. >> and putting that money wherein stead? into treasuries? into cash? >> cash or bonds again, back to your target allocation between equities, bonds and cash but if you had the appropriate amount in equities in mid january and the market's down 10% since then, that's an opportunity to reinvest and get back up to your targets. i think, you know, through most

of this recovery in the past decade investors have been beneath their target allocations. even though you would expect market increases to be market opportunities for them to sell, because they never got reinvested back in in 2008. most investors still don't have as much equities as they should. >> what would lead you to change your advice? >> i guess i would have to have a basic belief that owning business is no longer an attractive opportunity owning the s&p 500 has made something 14 times your initial investment and it is certainly not like the past 25 years has been a panesia, a lot has gone wrong. this is been a hotly traded industry at this point, what makes you like those three

stocks >> well, stocks like citi and bank of america sells twelve times earnings, which is a sharp discount of s&p, and we think because of that they have the opportunity to grow per share earnings everyone if economic growth remains on the side we don't think they deserve to sell it such a large discount to the market with ally you got another issue of their primary asset is autoloans and there is a lot of concerns of the autocycle. because of that, you are can buy allies of nine times earnings. don't see the autocycle as being as scary as some others do >> great, bill, thank you for

your time today, good to see you. >> thanks becki. >> when we come back, jim cramer, here is the futures right now, down under 200. ked s like we went to bed an wo up again. down over 200 points we'll be right back. obvious. sometimes, they just drop in. cme group can help you navigate risks and capture opportunities. we enable you to reach global markets and drive forward with broader possibilities. cme group - how the world advances. ♪

jim cramer is joining us now. if we were looking at the markets the past couple of weeks, we know it is inflation worries, right jim >> this number is too high, you don't need me to tell you that i don't think all the different lines are bed. it does put more pressure on jay pal and see what he's going to say. i don't think january is not an important month for a lot of things we can get ten guys who say i don't invest in year's term, i invest in long-term. i love bill nygren, when you say in invest in long-term, i guess that's fine, too not a great situation when you have something like apple that's up two and now down two of the largest company in the world

>> jim, just to add to your point. apparels fall positive because retail selling season is so great. don't read too much into this. >> so i mean we can sit there and sweat the program or go to amazon and buy all the clothes a lot cheaper than people think. i respect the markets to be complete wrong and the vix being in control today the vix is a great product and so are all the doubles and triples and i am glad they are vetted there, that's the message brought to you by who ever >> there, i did it >> all right, jim. >> no one paid me to say it. >> happy valentine's day >> oh, same. >> love ya >> good hoops tonight, jim

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thanks to our guest host, david wexel. i love the tie >> want me to get you one? >> i love double v's i do >> you cannot buy it >> you have to be nice to me and maybe i will get you one

>> oh, that's going to be a problem. >> can you wish him a happy valentine's day? >> anyway, it is time to go. we are down to one more look 250. oh, it is 160. wait until 4:00 to make any determinations make sure you join us tomorrow "squawk on the street" is next ♪ good morning and welcome to "squawk on the street," i am david faber along with jim cramer and parol quintanilcarl h korea with the olympics, carl quintanilla. the numbers at least if you are long this market, it looks a lot worse. >> futures already coming back lets take a look and see how the markets in that part of th