it's friday, october 5th the day after ten-four "squawk box" begins right now. ♪ live from new york where business never sleeps, this is "squawk box. good morning welcome to "squawk box" on cnbc, we're 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. things are relatively flat that's what you might anticipate given the big number we expect in two and a half hours time we have the jobs number coming up a lot riding on it because we've been watching with yields picking up we'll be looking closely not at just the jobs number but the average hourly earnings number that's important for what happens not only in the equities market but also in the treasuries market. right now the dow is down by 3.5

points, this comes after 200-point decline yesterday. there's headlines that say the dow falls the month in two months on fears of rising rates. biggest decline in two months, and it was three quarters of a percentage point keep this in perspective >> it was 200 points >> but the idea that was the biggest decline in two months -- >> i looked at the different news services that wrote the stories about the stock market tumbling, looked at the author -- >> we're always looking for action, but it's just a reminder of how little volatility we have seen today's number is very important. watch this number at 8:30 >> what if we gave the same attention when we were up every couple hundred points. right. look at what happened overnight in asia, the shanghai remained

closed for a holiday the hang seng was down 0.20% in europe, it looks like at this point things are in the red across the board the dax down by 0.7% the cac is down by 0.50% the ftse in london is down by 0.60%. the ten-year hitting the highest level since 2011, ten-year yield 3.204% the two-year at 2.885. the noble committee naming the nobel peace prize winners for their efforts to use sexual violence as a weapon of war and armed conflict mukwege was a congolese g gynecologist who specialized in women who had been raped, and

murad was held as a s.e.c. slave for three months she was named the goodwill ambassador for survivor of human thanking. in corporate news, tesla and elon musk back in the news shares of tesla are slipping after mr. musk mocked the s.e.c. in a series of tweets. literally just days after settling fraud charges he tweeted the short seller enrichment commission is doing incredible work and the name change is so on point. the post, we should say, is missing a word he was saying just want to say the short seller commission. >> he doesn't know when to stop. >> and where is the board? two other things took place. musk called out blackrock and other financial firms for pocketing excessive profits for helping short sellers. we should say that cnbc reached out to blackrock for a response.

we have yet to hear back the new tweets come after musk reached that settlement with the s.e.c. under terms after that deal musk will step down as tesla chairman for the next three years and they could vet his social media posts. >> this was not that >> this was not that the southern district court will judge whether this deal was fair and reasonable they have rejected some of these settlements before so there's a real issue about what could happen. the judge could say this is too lenient, and i imagine this will not help >> yesterday the stock was off by 5.5%. now if you have the s.e.c. forced to justify why this is a good agreement, tweets like that will take out any enthusiasm they have. >> twi again i initially thought the

settlement is done he can say whatever he wants >> so did he, perhaps. >> so they might take a dim view of this? >> the judge might say this might be a sham. >> the judge already said you have to justify this >> the other thing is where is the board? at some point don't you say look, you can't do this. we're not doing it this way. it's just -- sorry, we understand that you're a visionary, but we can't have you doing these things >> when you have investors like ron baron who came on earlier this week and said, look, i think he learned his lesson and turned his corner. a tweet like that undermines everything and everyone betting on you >> a lot of people believe in elon but then see these things, and they blanche, but maybe sometimes i think i'm out of step with the world because donald trump, our president, has

managed to succeed >> i was thinking the same thing. elon will be elon. he has a lot of great creative qualities. you have these other qualities down here that you don't understand or like >> but the whole story we've been hearing is that he's going to come away with this with less desirable -- >> you sort of think this guy has some problems. >> it's fun to watch >> fun to watch. he's not afraid. >> yeah. you know what -- not afraid of anybody, but he puts the investors and possibly more importantly the employees in jeopardy when he does things like this. >> do you wish people wo could e on here and say stop following the prompter, stop laughing. could you do that? i couldn't do that people got to do what they got

to do. >> it wruouldn't be a fun world >> pretty good, short sellers enrichment >> it's funny. i'm not saying it's not funny. i'm suggesting if i was running a publicly traded company and lots of investors were behind me, employees, if i was going to put that in jeopardy at all i would feel -- >> i understand. >> i have enjoyed watching t but i wish he would stop >> if the stock goes down, what's your response maybe he says i'm not responsible to the short sellers. >> i looked at him as crazy, but there's a certain panache involved >> i feel where you're coming from. >> right after he settles, he's back up on the horse >> yep i -- i get it. >> we'll see how it works out. we are tracking fallout in the stock market from yesterday's report that data center equipment may have been subject to chinese surveillance through a tiny microchip that bloomberg report has been disputed by the hardwaremakers,

but shares of lonovo fell as much as 23% before closing down 15%. lonovo said it is not supplied by the hardwaremakers in question and that it takes steps to protect the supply chain. the stock was probably down because of the chinese roots analysts may be more likely to choose an american pc maker instead. and shares of apple suppliers are also falling on that chinese surveillance story i'm not sure what to think about this >> you had apple come out with this remarkable -- they wrote a lengthy piece, you have amazon doing the same somebody -- >> amazon's wording was different. then later apple's wording was -- if you were parsing this, it may be impossible to say that it hasn't happened, but they were unaware of it happening >> somebody, it seems, is not telling the truth.

either the piece is right and the companies are wrong and they're trying to protect a relationship, i don't know, or business week flat out got it rock i don't know which is the case and who i'm supposed to believe. >> it's important. >> it's very important >> we're right in the middle of this mike pence is all over the place talking about things >> i want to believe the reporters who worked on this clearly had already gotten comments from the companies telling them they were 100% wrong and still chose to publish is >> they had six different sources. >> people telling them it was an accurate story unlike elon musk, i would argue that apple, there's a sense of responsibility if they're putting out something publicly this way and be as efussive as they are -- >> it's a bad thing if it proves to be true. tech stocks are peopling the

most pain. dominic chu weighing in on that do you have a take on this >> i have a take here's what i would say. i would say the reporters and editors who put that story together for bloomberg business week had this in the works for months or maybe a year or more i got to give them credit and say they had to look at their sources, they had to be spot on with them. at the same time i struggle with it, like you said, because these were strong words from the likes of apple and amazon with regard to the content of this story wla th what this does do is put this debate back front and center about how much foreign governments could be working against us we already know governments are trying to take us down with regard to cyber and everything else i guess i have enough imaginati imagination, i've seen enough movies to know this is not out of the realm of reason maybe that speak nors our

sociespeaks more to our society as a whole, we're all subject to hacking whether it's hardware or software you guys want to talk about the markets, because we should talk about them we had a fall yesterday. it was tech stocks that were the worst. looking at the s&p versus the nasdaq 100, just over the course of the past couple of days the s&p to joe's point earlier on in "worldwide exchange," we were only down about three quarters of percent there the qqq trust that tracks the nasdaq 100 off by almost 1.75% you know where the relative weakness was looking at some other places that we saw, this idea now that there could be outside moves in parts of the market. the banks were relative out-performers technology, the best performing sector in the s&p 500 so far this year has been the relative underperformer so perhaps a bit of rotation as rates are moving to the upside now looking at some of the ones we want to focus on with regard

to stocks that have been high as of late but have fallen the most the s&p 500, how many stocks hit about a 52-week high or better since the end of august? about 160 of them. of those, how many are down 10% or more from those recent highs? only about 11. here's some names we're talking about. we have the consumer ones. these are important for investors out there. consumer spending the bugging of the u.bulk of the u.s. economy look at macy's and nordstroms. they're down from their highs. other consumer names, kroger, perhaps kohl's, something like that some of those names as well. kroger and in this case here the darden restaurants are also well off the highs they just set. one more to end on because we talk about it so much. amd the best performing stock of the s&p 500 by a wide margin it's fallen off quite a bit

flirting with bear market territory. that is so say down 20% from the highs. not there just yet, but given amd's trajectory it could be something we want to watch in terms of momentum play back to you. >> thank you very much the countdown is on for the september jobs report. joining us now to talk about that is drew mattis from metlife investment management. and jim o'sullivan from high frequency economics. let's start this off just trying to figure out the numbers that we might anticipate not just on the headline number but with average hourly earnings. that's a key >> i will start by saying the back drop points to continued strength in terms of trend fwrad wa gradual acceleration in wages. i think we're due for a bit slower on the payroll number >> that because of florence? >> i think a bit from florence florence hit after the sample week started maybe not a big effect but a

little september numbers have tended to be low on the first print and revised up as far as wages go, last month we got a strong 0.4% the trend has been 0.2%. i got 0.3% which is consensus. solid gain though the 12-month change which gets attention will come down because you're dropping out of a strong 0.5% when you had hurricanes harvey and maria and then that reversed in october. i think the trend is up. you get sol lid monthly numbers >> what's going on we'll talk about this number in a moment you're seeing yields pick up yesterday there were wobbles in equities it was blamed on that is that a legitimate concern and is that one you have >> it's a legitimate concern but i don't think yesterday's moves in equities had to deal with higher yields because utilities were up. >> it was still only a 200-point decline for the dow, but people

are watching yields hit levels they have not hit in years that makes people think is this a real turning point >> i think it's a combination of things i think powell came out and said growth is stronger, maybe the neutral rate is higher >> two days ago in his comments where he said we'll go through neutral and we're no mr. near neutral right now? >> yes then you have this positive news on the economy the ism surveys have been strong and if you get to the number today, and you get a reasonably healthy payroll number, i think people will take that and run with it. >> meaning sell equities >> i think they'll be more optimistic on the growth outlook and yields could go higher >> we're getting into that scenario where good news is potentially bad news good news on the economic front means the fed will be more active >> i think people have to look at that going forward. i think that's the environment we're heading into but i also think we should

consider the fact that the reason the fed will be doing more is because growth in the economy is accelerating. if you have a good economy, good earnings, would you be buying stocks any way forget about the fed >> i think for the next few months i would be more risk on i don't look at stocks on a day-to-day basis i looked at utilities yesterday because i wanted to see if yields were the reason we do expect yields to move higher we do think riskier assets will do better in the current environment. >> jim, let's talk more about the fed and the comments from powell he's said a lot in the last week >> yeah. of course he's also pointed out that the dot plot does imply that they go to sightly restrictive policy but they're saying neutral rate is around 3%, the dot plot shows them getting to 3.3.

he talked about it the other day when he said we're a long way from neutral, they also dropped the word accommodative from the discussion they want to slow the economy down in term s of the downtrend in the unemployment rate we are starting to get wanl the a wages and the inflation bubble also >> if we get 3.8% for the unemployment rate, put that in context. 18-year low? >> it matches -- we hit 3.8 a few months ago and it matches that low we drop further, you have to go back to the 1960s. >> wow >> it's pretty low >> again, it's hard to look at this from the market perspective and say all this good news is bad. >> ultimately it's about inflation. if you can grow without

inflation, there's no reason for the fed to get restrictive but if the wage numbers are drifting up, there's a debate is that necessarily inflation, and that depends on productivity the more strength you see in the wage numbers it's telling you that the labor market is tight and ultimately that puts upward pressure on inflation. it doesn't mean the fed suddenly steps up, but it means they keep on that path for a while >> drew you said you would be into more -- less risk adverse, you would be into riskier assets what are you talking about specifically >> like high yield bank loans, things like that some things we look at that we have access to you know, it's not that you want to stay there indefinitely and if you have a portfolio you won't maneuver around a lot. but i do think the next 12 months, you know, there's low risk of recession over the next 12 month time frame.

when you ask when the next recession is, they say 18 months from now, you ask again, they say 18 months from now so it's a rolling 18-month window >> you're not saying they're missing something, you're saying that's how long of a lead way they have? >> that's how long they can forecast for some measure of liability. and most models can go out to about 18 months. you push past that, they break down they're all pointing towards basically a pretty healthy u.s. economic environment over the next 18 months >> all right thank you both for your time we'll take a quick break at the top of the show, you were very intently -- we were trying to have a conversation, you were preparing for that nobel peace prize read nobody knew how that name went

you definitively went with what you went with. it's mukwege it is mukweg it's a serious name. >> and dennis deserves to have his name said properly today >> i agree with that. >> i apologize to him. >> mukwege and i apologize to you i could have waited. >> until the commercial break. >> until the break >> let it all hang out here we go >> patriots quarterback tom brady hitting a milestone last night.

we'll tell you about it next as we head to break, a look at biggest premarket winners and losers in the dow. hi, kids! i'm carl and i'm a broker. do you offer $4.95 online equity trades? great question. see, for a full service brokerage like ours, that's tough to do. schwab does it. next question. do you offer a satisfaction guarantee? a what now? a satisfaction guarantee. like schwab does. man: (scoffing) what are you teaching these kids? ask your broker if they offer award-winning full service

and low costs, backed by a satisfaction guarantee. if you don't like their answer, ask again at schwab.

♪ in sports news, can't say i'm surprised. patriots go 1-2. we have bob kraft on he knows that's not going to last long. we've seen this story before the patriots beat the colts 38-24 last night in foxboro. tom brady threw his 50 0th carer touchdown to josh gordon tom brady the fifth nfl quarterback to reach that milestone. i could hear the cheers from

newport beach where mohammed el-erian was watching that game and cheering for the patriots. maybe not. >> maybe not >> you know, baseball sometimes is not quite as -- people don't look forward to it as much as football but yankees/red sox is good. >> yeah. >> that's with home run hitters, boston won 108 games it's at 7:30 tonight >> you going to stay up? >> i'm going to try. that's the sad thing i make plans many times i make plans, they don't always follow through, but blake is home, so maybe. rarely when i plan a friday night around a baseball game -- >> but tonight you are >> i think i'll have that on, yeah don't you think? yankees red sox in the playoffs? it's a good thing. >> reports out of japan say the estimated cost for the 2020 olympics in tokyo will be costing the government seven

times more than originally busted the new estimate came in at just over $7 billion the international olympic committee gave the green light for cities in canada, sweden and italy to bid for the 2026 games. the contenders still in the running are calgary, canada, stooling hom stooli stooli stooling stockholm and milan >> every time there's an olympics, the cities overpay, and the price goes up and up and up they have to make this a more sustainable situation. they'll run out of cities who are willing to do this it used to be developing countries did it, then emerging countries did it to prove themselves, but it is costing them money. a big ufc fight to talk about. joe is looking ank sbhxiousanxis

what is the issue tonight? >> conor mcgregor taking on -- >> the undefeated lightweight champion, i don't know -- first i get the nobel peace prize winner wrong, now khabi khabib nurmagomedov. >> the nobel thing happened -- >> he wrote it out to practice it he was going say what do you mean >> the reason we mention it, our agent that we share -- >> owns ufc. >> he's insisting that -- i don't mind i don't think we'll get money off on the agent fees. i said i'll mention the saturday

night fight. then i saw the name. and then it all came to me that we have to put -- >> look at that name look at that we got it. nurmagomedov, but you got to prepare. that was pretty good what you did. he will be taking on the middleweight champion. let's go on to the next story. >> that's how i roll you know what i do do the viewers know what i do sometimes because i'm so bad with the names >> you just leave out the name i try to point that out but i stopped. you describe the person. afrnlgts lot of time t >> a lot of times the people don't know who they are any way. why put myself in position of mispronouncing the name. coming up when we return, our jobs friday continues today. up next we'll take a closer look at hiring trends from the ceo of

a staffing firm. before we take a break, let's look at yesterday's s&p 500 winners and losers

when i was shopping fothe choice was easy. i switched to geico and saved hundreds. excuse me... winner! that's a win. but it's not the only reason i switched. hi! geico has licensed agents who i can reach 24/7. great savings and round the clock service? now that's a win-win. winner. winner. yay me! oh, hi! good luck. switch to geico®. it's a win-win.

this endangered species is getting help from some unexpected friends. these zebra and antelope. they're wearing iot sensors, connected to the ibm cloud. when poachers enter the area, the animals run for it. which alerts rangers, who can track their motions and help stop them before any harm is done. it's a smart way to help increase the rhino population. and turn the poachers into the endangered species. ♪ ♪ (nicki palmer) being a verizon engineer is about doing things right. and there's no shortcut to the right way. so when we roll out the nation's first 5g network, it'll be because we were the first to install millions of miles of fiber optics. and we'll be the first to upgrade the towers and put up the small cells that will power the smart cities of the future.

when i started at verizon, i knew i was joining a team that was pushing the industry forward. now, with the launch of the only 5g ultra wideband network, we're doing it again. this time, changing the way we learn, work and live. and i'll always be proud that we're not just building america's first 5g network. we're doing it right.

welcome back you're watching "squawk box" live from the nasdaq market site in times square. welcome back to "squawk box. more trouble for tesla the carmaker stock feeling the heat after elon musk taking to twitter mocking the s.e.c. this just after making that settlement with the s.e.c. musk tweeting in part the short seller enrichment commission that's what he's describing the s.e.c. as now, doing incredible work and the name change is so on point this comes after musk reached that deal with the s.e.c. to settle fraud charges over his prior tweet that settlement is still in front of a judge. we'll see what that judge thinks about these tweets in addition to what investors do evan spiegel telliing snap's

employees to aim for profits in 2019 shares of snap are now up 3% this morning also a major recall for nearly 7 million pounds of beef that may be contaminated with salmonella nearly 60 people in 16 states have gotten sick now in the outbreak the product includes ground beef that came in from an arizona company and packaged between july 26th and september 2th. i don't know if i would want to be eating meat that was packaged in july. but that's a separate issue. >> in arizona. >> i had not thought of that yeah i guess maybe frozen >> yes, frozen look at u.s. equity futures. all that could change. the dow up by 15 points. s&p by a point we'll get the jobs number at 8:30 a.m. eastern time

>> they sell it and you freeze it yourself you mean that's why it's still around >> maybe >> who buys frozen ground beef >>burger chains. that's what concerns me when these things come out. you can monitor what you're buying, but when overeating out of the home -- >> we buy ground beef, but it's always freshly packaged. i've been getting a deal lately, i'm like why am i getting a deal it looks fine. is it a closeout sale or something? we got to move this stuff before, you know, before the whole store smells i don't think. i can't imagine that -- >> do you have a local butcher that you frequent? >> we have a high -- we pay, you know -- have you heard of king's >> yeah. >> king's. so you pay top dollar. you pay probably 20% higher than

in a shop-rite or something like that but i expect you're getting something for that, right? it seems fresh there's a butcher counter there. do you go to a butcher in the city >> we have but also supermarkets. >> for your cut kale slices and tofu, is that -- >> why are you not >> we still probably should be doing it for other stuff, but we use amazon for other stuff a longer conversation. >> i have a bigger conversation we'll have on that later time for the squawk planner. the big event on the schedule is the employment report for september. polled forecasters expect an increase of 180,000 non-farm jobs, the unemployment rate is expected to tick down a fententf a percent to 3.8%. on some crazy website i saw

these huge numbers that are possible i don't think it's true. i think that would scare the markets if it was 250,000, 300,000, 400,000 it's ridiculous, right no way that's too much of an outlier, right? >> maybe >> i saw a crazy number. on twitter, you don't know what -- so much fake news. you never know it said like 500,000. joining us now for a look at the latest employment trends is tom gimbel what is possible is a big number possible given the -- what you're seeing or is there a bit of a slowdown in the torrid pace? >> i know there won't be a correlation between the job number and ground beef that's one thing i can assure you of >> all right >> what i do believe is that the number will be in the high 100s. i think the 300,000 number is too far out there. we are seeing the economy's healthy. all the experts you've had on from the economists to ceos and

the portfolio managers are absolutely right the job number has been never healthier. earlier this morning you were talking about maybe unemployment is too low could we have thought that would ever have been said ten years ago? >> no. and i don't think that the -- unless you're worried about financial markets and your stock portfolio, i don't see how it could ever be too low. you know >> it can't. because you want it to be. you would like it to be zero you would like people paid more. profit margins get hurt. that's the offset for having a strong economy to sell stuff into corporate managers ought to figure out how to pay people more and enjoy the good times that you have in a rip roaring economy. we shouldn't always worry about getting too hot. >> you can't continue to pay people more for the same job unless the demand is there we really have the effects of the global economy think about before the great recession, when would the stock market have been really buoyed

by companies that were not profitable there's really an interesting dynamic. when we look historically back, we're looking at a stock market that had a lot of companies that don't make money and ipos that don't make money, in the '50s, '60s, '70s, '80s that really didn't take place. 30 years ago a third of the work force was in the union, now a third of the work force is maybe in the gig economy we're gone from unions and pensions to a gig economy where there's no pensions and benefits for these workers. this is a different economy than we ever experienced in this country. >> this is an interesting point. you made it. i will say it without any type of editorial comment was so eve whatsoever the people at the low end are able to ask for more money now, and they'll leave and go elsewhere. tom said middle management needs to worry that companies will

start actually getting better middle managers because people don't leave companies, they leave managers think of -- the world would be a much better place with better middle management. have i got that right? >> i've been saying that to you guys for years the middle management is really the core of this country what we felt in the 2001 bubble burst, we felt it in 2009 and 2010, when companies cut fat, a lot comes in middle management amazon's raising the minimum wage for employees or the hourly rate to $15 an hour, they will cut bonuses and stock options to people to pay for that it's got to be coming from someplace. usually if you're going to pay lower level people more, the middle management will suffer. >> what a concept. pretty amazing can only hope. that is interesting, isn't it? i saw that point >> i never really thought about it that way. >> interesting interesting way to think about

it >> i'm the elon musk of -- >> no. >> -- of the show. tom gimbel, thank you. i'm not talking about you. you're a ceo, right? you're safe. >> i am. >> work on your middle managers. thank you. we'll let you know at 8:30 what that number is >> thanks, guys. when we come back, higher home prices and rising rates are pushing homeownership out of reach for some potential buyers. diana olick has that story next. and coming up at the top of the hour, we'll get you ready for the big employment report. we'll get predictions from allianz and b of a mer merill lynch. it's all yours.

wow! record time. at cognizant, we're helping today's leading life sciences companies go beyond developing prescriptions to offering subscriptions with personalized,

real-time advice for life-long, healthy living. honey? you almost done? nope. get ready, because we're helping leading companies lead with digital.

welcome back time for the executive edge. higher prices and higher mortgage rates are putting pressure on home affordable. diana olick has that story >> the two are a toxic cocktail for housing affordability. by the end of the third quarter affordability hit a ten-year low. that is calculated based on the

percentage of income needed to buy a home in the market the average wage earner would not qualify to buy that median priced ohm in 80% of the 440 largest counties surveyed. nationwide, the median home price of 250,000s was up 6% from a year ago, twice the annual wage growth. the average year on the 30-year fixed mortgage is a pull percentage point higher than a year ago regionally buyers would have to spend most of their incomes in brooklyn, new york, the san francisco area and maui. the most affordable markets are providence, rhode island, the philadelphia metro area and the click go metr chicago metro area denver, dallas, ft. worth and grand rap pits michigan have the most affordable markets.

>> if you try to look at the lfgt tre long-term trends what is driving prices >> supply and demand right now we have very little supply and a lot of demand we will see that if job numbers continue to grow if people can't find things, then they get into bidding wars and that's why prices are so high >> in terms of supply, i know that's a longer problem to fix, i would guess that real estate develope developers, builders, they get in on the action in situations like this. >> the builders are not building enough they're below the level of capacity that's because things have not recovered entirely from the housing crash, so they're continuing to add supply but not enough is needed and sellers don't want to put their homes on the market because they will lose that great mortgage rate they had when they first got the mortgage >> diana, thank you. great to see you

when we come back, crude prices hitting a four-year high. we'll talk about the factors driving the oil market next. and the ten-year treasury yield hitting the highest level since may of 2011. we'll talk interest rates at the top of the hour and where they're headed as we take a break, a quick check of european markets right now. a lot of red back in a mont me at&t provides edge-to-edge intelligence, covering virtually every part of your finance business. and so if someone tries to breach your firewall in london & you start to panic... don't. because your cto says we've got allies on the outside... ...& security algorithms on the inside... ...& that way you can focus on expanding into eastern europe... ...& that makes the branch managers happy & yes, that's the branch managers happy. at&t provides edge-to-edge intelligence.

it can do so much for your business, the list goes on and on. that's the power of &. & when this happens you'll know how to quickly react... this is a very difficult job. failure is not an option.a. more than half of employees across the country bring financial stress to work. if you're stressed out financially at home, you're going to be too worried to be able to do a good job. i want to be able to offer all of the benefits that keep them satisfied. it is the people that is really the only asset that you have. put your employees on a path to financial wellness with prudential. bring your challenges.

ron! soh really? going on at schwab. thank you clients? well jd power did just rank them highest in investor satisfaction with full service brokerage firms...again. and online equity trades are only $4.95... i mean you can't have low cost and be full service. it's impossible. it's like having your cake and eating it too. ask your broker if they offer award-winning full service and low costs. how am i going to explain this? if you don't like their answer, ask again at schwab. schwab, a modern approach to wealth management.

welcome back to "squawk box. oil prices dropping back below $75 per barrel but still trading within distance -- within striking distance of the highs hit earlier this year. here to talk about factors that could be driving the oil market is the head of oil market research and strategy at jpmorgan good morning to you. >> morning >> we've now come down a little bit. your expectation for the end of the year, where's oil really land >> so for brent we're looking at $90 and for wti closer to $80. >> what gets you there and what do you make of the tiny move this week?

>> we are seeing quite large intraday moves for the last few weeks. we'll probably see that going into the iranian sanctions the main reason for us to have a bullish outlook now is pivoted around iranian sanctions it's really iran that is going to cause supply shock. >> what do you think the saudis do i'm red to riyadh in two weeks clearly the relationship between u.s. and saudi has been good, but has been somewhat dependent on this very issue >> yeah. it is difficult to see, because right now we are expecting saudis to bridge that gap. do they have the spare capacity? we look at spare capacity from multitier perspective. they have it around 1.4 million barrels available. do they have it right now? there's a large question around that right now right away, we already heard they had some issues with two of their fields coming online so i think the markets are

skeptical. can they have that additional oil if it's -- >> how sustainable are these numbers? the reason i ask is if they are sustainable, you'll try to see more people come online. >> sure. you're looking at u.s. producers coming online. these numbers are sustainable i would say the next three to six months that's where the confluence of factors leads us into believing more of a bullish market we're looking at potentially refiners coming online from their seasonal maintainers towards the end of the year. we're also looking at potentialpotential ly u.s. production growth. >> you're only looking out six months i'm thinking more two to three years. >> sure. >> in terms of what production comes online, what that means for jobs on one end meantime and whether the price comes down or if the price stays this high, does this become a bad thing for the equity market and for the economy? >> in the next one to two years,

for sure what we're going to see is the higher oil prices will incentivize more u.s. oil production but right now, of course as you move beyond the end of '19, you most definitely see incentivized to bring more of their uncompleted wells online i think we have room to absorb more u.s. oil given the lack of investments globally we have had as long as demand growth doesn't fall off the cliff going into 2020 >> okay. it's nice to see you we appreciate your time. >> we all practiced together >> we did. coming up, the countdown is on the september jobs report hits the tape at 8:30 a.m. eastern. we'll bring you predictions after the break. then our popular help wanted segment takes a look at a field with jobs in demand. airplane mechanics i hope they're really good and they are

we'll be right back.

it's jobs friday market's on edge as treasury rates continue to creep higher app full rundown of what to watch when the number hit. that's straight ahead. the china chip threat. companies in the crosshairs of china's government the latest on that troubling story coming up. with the trade war front and center, mercedes is ramping up production in america.

a live report from their factory that fires up this morning as the second hour of "squawk box" begins right now ♪ live from the beating heart of business, new york, this is "squawk box. good morning welcome back to cnbc i'm andrew ross sorkin along with becky quick and joe kernen. we've got a couple of big headlines to tell you about. the dow looks like it would open up 15 points higher, by the way. we will get jobs numbers this morning and see where things land the jobs report out in 90 minutes. looking for unemployment to tick down to 3.8% from the previous month. we'll bring you those numbers as they hit and have some market reaction at 8:30 eastern time.

also, costco reporting strong sales growth in its fourth quarter on higher store traffic. the warehouse club says online sales slowed near the end of the quarter. costco also says it found an internal weakness in internal controls but has yet to find any misstatement of its financial results. that stock down over 2% right now. and wilbur ross writing in an op-ed for cnbc.com, he's saying the trump administration's economic policies are fueling new investments in plans and equipment. he also points out the crackdown on trade to read more on the entire op-ed, go to cnbc.com and take a look a few stocks on the move this morning toyota is recalling 2.4 million hybrid vehicles including the prius because of an issue that can cause the cars to stall. the recall covers vehicles produced between october of 2008

and november of 2014 jpmorgan downgrading hewlett-packa hewlett-packard. citing component costs the price target is now $29. that stock last traded at $26.14 shares of tesla, they are slipping we've been talking about it all morning. this is kind of remarkable -- another remarkable moment, shall we say elon musk mocking the s.e.c. in a series of tweets this coming days after settling fraud charges with its regulator. he tweeted the following he says, the short seller enrichment commission is doing incredible work. and the name change is so on point. the post, though, we should say is missing a word. i think he's saying just want to say that they're doing incredible work. also calling out blackrock and other financial firms for, quote, pocketing excessive

profit from short sellers. they're taking those long shares and selling them to the shorts that's what that's about we should say -- this is the most important part. these new tweets come after elon musk reached that settlement with the s.e.c under terms of the deal he will step down as tesla chairman. he also agreed to have tesla vet his social media posts that could contain potential media information. in that case, this isn't necessarily material it may be to investors but the settlement deal and here's the key part, hit a snag yesterday as the federal judge who's looking at this ordered the s.e.c. and musk to justify the agreement as fair and reasonable now, federal courts have rejected s.e.c. settlements in the past when judges decided if they were too lenient. and now the judge could look at this and say this slap on the wrist isn't really working >> here's my question. did the tweet come out before the judge issued that?

>> that's actually a very good question >> i mean, these are the type of tweets while it may not have been considered material, the types of tweets are the ones that we expected would stop happening after this settlement. we've heard from a lot of investors who said they want him, absolutely need him at the company. but they want the good parts and not necessarily some of the other things that led to concern. these have all been unforced errors that have gotten elon in trouble recently. >> so it looks like this came out at 4:16 p.m. eastern standard time. >> the tweet did >> yeah. >> we'll get back to this. we'll figure out the timeline. the september jobs report is less than 90 minutes away. it's shaping up to be a key number after yesterday's sort of angst in the markets, but they've turned around. they're up today this morning wall street pointing to a mixed opening as we continue to see a selloff in the bond market. it's a 3.20% on the 10-year.

joining us now mo mona and michelle we'll talk about jbs in a second mona, while i have you here, all your comments have to do with this 10-year rate which for me it's as simple as this is that move to 3.20%, do we view that as wow that was a long time coming? or wow that was a violent move upward, what the heck is going on i could look at it either way. i feel like we've been waiting for this forever and it's still not that high. is it just staggeringly negative for the market >> 20 basis points when the 10-year has been range bound between 2.5% to 3% for over a year now then we get a sudden move up to 3.20%. we see as rates rise, markets are basically cash flows discounted at some sort of risk-free rate as that risk-free rate is moving

upwards, we're getting valuations that may be more compressed that's one worry for the markets. the other worry is generally more that are we looking at an inflationary, you know, runaway situation? we'll get a little bit of insight from the jobs report today. but generally we haven't seen that core pc has been below 2% for five years now rates may be catching up to a what more inflationary environment. but will it really impact like you talked about the real economy? we're looking at mortgage rates, auto rates, et cetera. when does that really start to bite >> if you were to annualize 20 basis points in one day, it's oh, my god but if you look at it over a three-year period, this has been the most gradual rise in interest rates after that long period of percentage measures. if you put a little bit of a time frame on it -- and it was sun settling to see, but does

it -- does 20 basis points make that big of a change it's not that much >> the average 10-year rate was 4.5% before. here at 3.2%, still not extre extremely high. >> i think the question is this is an inflection point >> a couple more 20-basis point moves. >> there are technical factors at point here. we talked about hedging points some tax regulation that's come away in september. some of that may be driving this we look at longer term picture here we're looking at from a technical perspective, we haven't yet breached 3.25% once we breached that and hold it for some sustained period of time, then you're looking at the 3%, 3 3507.50% >> it's october, not a great time markets have been doing really well so maybe a correction is -- >> that's kind of what we're looking at here. we've seen a bit of it

yesterday. but october generally when you get those 10% corrections the majority have been in october. we saw the same thing in february but generally after that, looking at midterm elections coming up in november, historically after elections, november and december have been really solid out-performers. so if we're setting up for that scenario, again, we are looking at potential buying opportunities in october >> all right been very patient. thank you. let's talk jobs now. where is the economy it's a good jobs market. is it too good is there such a thing? >> i don't think it's a thing that it's too good i think it's been a little bit surprising the sustained momentum in the labor market we're looking for 220,000 for jobs we are a little bit above the consensus. but i feel comfortable with that the adp numbers were strong. and general the momentum in the economy has looked good. i think we should see that reflected in the labor market. as mona said, a key factor is

wages. that's the question whether or not we'll see an inflationary push in the market that's what can really start to move things even more than we've seen thus far. i think the wage numbers are going to look strong we're looking for 0.4% month over month increase. >> that's higher than the average too. i think the average estimate is 0.3%. >> that's right. we think stronger growth, higher inflation. part of the wage data is potentially distortion from the hurricane. so the hurricane led to a decline in the work week when we tend to see -- we think it will lead to decline in the work week you tend to have an upward bias to wages >> if you're still getting paid the same for less hours worked, it looks like inflation. but the market is not going to be very forgiving of that potential asterisk if we see 0.4% >> if you see 0.4%, it followed last month's 0.4%. with strong headline job growth, you're going to get a reaction >> so what does the fed do if we actually see that? are two data points in a row enough to say we see the whites

of their eyes? >> i think powell's been pretty clear in terms of how he's communicating the recent view which is that the near term data is robust. we think we have a green light to continue to hike. and this idea of normalizing two rates in the fact we don't know what equilibrium is. let's instead focus on the momentum in the economy, financial conditions and all that is saying to the fed you continue to go until something tells you to stop. and so far they don't have that something. if the data comes in today as we expect, strong job growth or strong wage growth, that's going to tell the powell fed, let's keep going >> you don't have a number for today, do you? >> you know what what we're looking at is if we get 2.9%, i think the market will be a little bit relieved. i think if we hit that 3%

threshold, the worry goes up we're inching up here. people maybe start getting a little more worried. we watch that 10-year still. >> so the stock market wants some perfect number again? not too hot, not too cold. >> yeah. i mean, i think even at 2.93%, it's a goldilocks scenario getting strong growth and in line pre-crisis hour average earnings at 3.5% we're still not too hot. >> what's this year end at overall? above 3 prst >> for wage growth >> nope. gdp. >> it seems we'll be around 3% for growth >> above or below? >> can i say at 3% >> and what horrible pessimistic outlook for 2019 do you have >> we don't.

we have a return around 2.7% for economic growth. which is still above the average we've seen throughout this recovery -- >> and hard to do with where population growth and productivity is. 2.7% is at the high end of what you're able to do. >> for sure. >> theoretically >> because we still have momentum coming in this year the bigger question is what happens the end of 2019 and 20120. that's where there seems to be a big debate in the market over when will the cycle end, how much room is there left to go? at that point, there's so much that can happen. >> okay. no one's telling me really to wrap i mean, i can talk forever >> really? i had no idea. >> do you -- how many years before we go, oh, my god it's inflation. it's really bad, where we got to do something how many year? it's been 15 already >> it's been 9.5

>> yeah, yeah. >> i think also next year -- >> a year only >> yeah. >> i mean, japan taught us you should speak in decades. >> that's right. i think if we see inflation start to creep into the margins and you get earnings growth slowing, that's when we see kind of that cycle turning. so as soon as average hourly earnings translates to lower corporate profitability, i think they're pricing in >> would that be bad given all -- i mean, thomas and all that -- i mean, around the world that's all you hear the left talk about we've got to do something about it how can wage growth and inflation and wages be a bad thing when we have income inequality >> it's not. we want so see some wage growth. i think what becomes concerning in terms of the feedback is if those wages look to be pushing into underlying price inflation. then you get this wage price

push >> it's inevitable, right? if you have people making more money, you're going to see demand pick up and so people can raise prices >> so that happens and that's okay where it becomes problematic is if inflation expectations become unhinged in that environment then you get the problematic spiral the fed has to increase faster and the risk is that ends up destabilizing -- >> we have a great economy right now and we're at low interest rates. something has to happen with that >> yeah. but i think we're far from that type of spiral and i think the fed has also been pretty clear that they're willing to accept some higher wage inflation they're willing to accept some higher wa eer price inflation >> we've got to decide whether a doubling of rates, if it's still doubling to historically low levels, is it still bad because everyone was set up for the low rates? can it still hurt? >> it would put a crimp on the government because everybody's going to have to pay the higher interest rates.

>> yeah. >> okay. thank you. >> thank you. >> thank you >> nice to see you okay coming up, a lot more to come. the race to make the best driverless car, it is in high gear right now we're going to look at some of the names in that space that may not actually be on your radar. we talk a lot about certain names. we're going to bring you some new ones right after the break then later, amazon and apple coming out swinging a that bloomberg business week report saying that china used microchips to track data the companies denying the report we're going to speak to the founder of the national security institute about the threat to corporate america and maybe try to find out who's telling the truth here we're back in a moment while i was in the navy,

i decided that i wanted to go for electrical engineering and you need to go to college for that. if i didn't have internet in the home i would have to give up more time with my kids. which is the main reason i left the military. everybody wants more for their kids, but i feel like with my kids, they measurably get more than i ever got. and i get to do that. i get to provide that for them.

welcome back to "squawk box. okay so down 200 yesterday on the dow. and it was down all morning long it has now turned positive the biggest pain in the nasdaq and that has not turned positive yet. it's at three. the 10-year's not above 3.25% yet. >> we saw it yesterday morning at this time >> what if it goes back down to

3% all bets are off again >> i'm trying to find a number that would make that happen. a jobs report. >> could be some crazy political thing. could be something in europe >> could be a trade thing. >> international >> yeah. could be an italian thing, you know, where you get worried about that >> we'll see in the meantime, the race for driverless cars is hitting the stock market joining us now with a list of the companies that could come out ahead in the race for autonomous driving is teague sanders from whittier trusts we talk about driverless cars and what it means. usually we're talking about the big guys but you've been following that down the line to find out the winners in the small cap arena that could benefit no matter who wins why don't you talk about what you've been doing on that digging front. >> yeah, sure. so about a year ago we were at

ces. we rode in an autonomous vehicle by aptive. everybody thinks it's going to be here tomorrow and the reality of the situation is when you sit in an autonomous vehicle today, it's a number of years off. saying who's going to continue to benefit as we go from level one to level two and we're going to be there for a little while companies that make the smart mirrors and a company which is a spinoff from autoleave earlier this year which is a little more risky. we think if you take those two together and put them together inside of your portfolios, you can get a synthetic exposure in the small cap space. >> all right let's talk a little bit more in depth about each of these companies. aptive, that's the first you started focusing on. that's a spinoff of delphi, right? >> that's right. what they're doing a great job

of is the sensors on the car if you think about the amount of data, sensors coming together. it's a lot of components that need to come together at the same time. aptiv has been able to push that through. they're really kind of the forefront in that space. we think it's a great way to think of not just all cars running autonomous all the time. but there's going to have to be a platform there's going to have to be a number of connecters and ways to bring the systems together >> what about gentex >> it's not really all that special. what it is is kind of this really nice growth kind of consistent earner in the mirror space. if you think about all of the technology that comes out. the auto-dimming and all of a sudden the picture shows up

these safety features are kind of what gentex has been doing. on top of that, they're going to the next level think of facial recognition inside of a mirror when no one owns a car, you can look at the mirror and it is recognized and you can begin driving the car. it's not so much they're the forefront of autonomous driving as it is they're a great kind of way to get a legacy exposure when dealing with one more about the spinoff. if you put them together, they make more sense. >> are there any of these names that really depend on one company winning? does everybody use the same suppliers for a long time? or are you looking at certain suppliers that are very closely tied to a tesla or a gm or a success at one of the other companies? >> no, in fact, you want to pull back from anyone who had a single large customer. at the end of the day, i don't think this is going to be one single point solution. there's going to be a number of

different people succeeding, a number of different people bringing value along the chain think of what mobile eye did they're a division leader. think of everyone using their platform you want to go with a company that isn't so dependent on one provider but that can bring all of that together so mobile eye is able to work with a lot of other oem providers. that's the company you want to work with. none of these are pure plays on a single oem >> are you of the view in the long-term that these -- that some of these companies may ultimately be regulated or the business itself when you get to level five or anything near that, that the amount of information that some of these companies are going to have to share about their algorithms about the maps they're using the brains of these things plus some of the different sensors that are incorporated are going to be effectively have to be approved, if you will, in a way they aren't today. >> yeah. i think it's absolutely going to

happen and this was going to happen in my opinion, the leader and the person that really develops the solution, they're going to have to be almost regulated in. that creates a mote or barrier for competition. if you think about who's going to be doing that, it's somebody who's working with a lot of other people and create the platform i think the platform is the important part to your point, if you get a solution that is that much better, it's going to be regulated in if you find a couple of companies that can be point solutions along the value chain there, those are the people you want to work with. mobile eye was a great example before they got bought but we think gentex is a great way to play swem >> my other question was, do you look at these as acquisition targets? do you look at the big oems saying they're going to play off of that and don't have the technology already >> it's interesting because that would be exact reversal of what they did back in the '80s and '90s but i think the technology solutions can be brought in

house. that makes a ton of sense because they're higher margin. there's not much labor intensity. that got them in trouble with suppliers they spun back out that is definitely an interesting point. and if you think about the fact the amount of money coming back from overseas from all these tax cuts, larger megacaps use caps as outsourced r&d. especially in tech and health care spaces as well. i wouldn't be surprise fire department a large infusion allow to pick back up in a small cap space. >> all right teague, thanks for joining us today. >> thank you >> it's an interesting angle on that story meantime, coming up when we return, thinking of hitting the stores on black friday if you're thinking of that we have an early look at who will be closed next. and then later, an explosive new report showing that china may have used a tiny chip to infiltrate u.s. companies hardware devices we're going to get a debate 'lether it's true or not

wel tell you about it when we return uber and lyft want to help you get out and vote uber adding a button to the app for election day on november 6th to help people find and book a ride to their polling place. lyft is promising something similar. it's mainly aimed at suburban

voters who live outside walking distance to the polls. the holiday shopping season may seem far off, but retailers are starting to roll out their plans for the holiday shopping season including when they'll be opening doors for shoppers or when they're going to be keeping those doors closed dozens of retailers say they will be closed on thanksgiving this year. costco, ikea, home depot, and lowe's will not be open on november 22nd. those stores have traditionally kept their doors closed for the holiday. 174 million people shopped in store and online last year's thanksgiving weekend >> played it back into and now playing because of black friday. it says my turn. this year's nobel prize -- peace prize winners have been named. the nobel committee named dennis

muquigy and nadia mava he is congolese gynecologist marad was held as a sex slave nor three months named to the u.n. as the first good will ambassador for the survivors of human trafficking so we have monday i think it was physiology and medicine. tuesday physics. wednesday was chemistry. no literature this year. when is the faux economics prize? >> we will see i like this winner i've seen peace prizes haven't been excited about because they got to political coming up when we return,

the china trip threat. plus ramping up production for mercedes in america. phil lebeau is bringing us up to date on the plans. we are now in the green with the dow up but jobs number at 8:30 could change all of it back in a moment i think that she's a very nice girl... ...you never got the brakes looked at? oh yeah. no. at cognizant, we're helping today's leading manufacturers make things that think and do automatically. imagine that, a world of new digital products and services all working together for you. can i borrow the car when it's back? get ready, because we're helping leading companies lead with digital.

get ready, because we're helping leading companies the sun goes down. you did a million things for your family today. but speaking to pnc to help handle all your investments was a very important million and one. pnc. make today the day.

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 front and center today, the september jobs report is out today at 8:30 a.m. eastern time they're looking for employment to tick down to 3.8% from the previous month when we saw 3.9%. snap ceo evan spiegel saying to aim for profits in 2019. he apologized for compromising the apps redesign. shares of snap right now up by

4.5% then reuters reporting that softbank is nearing a deal to invest $500 million in the ride hailing firm grab. softbank has already bet big on grab investing in 2014 grab acquired uber southeast asia business this year and looking into expand. a major recall for nearly 7 million pounds of beef which as many as 28 million quarter pounders >> that's good math. >> anyway, unfortunately it might be contaminated with salmonella nearly 60 people in 16 states have gotten sick in this outbreak the products including ground beef came from an arizona company and it was pointed out some of them were packaged between july 26th and september 7th. probably a good rule of thumb, if it's october, don't eat any

meat from july >> if anything was frozen, if anything was put into that or if it was canned and put into something. >> september or october versus july >> it's not going to be nice and red between that time. >> what color would it be? i mean, that might be -- >> black >> gang green or something i don't know mercedes expanding production in the united states despite concerns about global trade. phil lebeau, phil lebeau joins us now you got the triple intro good morning >> good morning, joe the reason we're here in vance, alabama, just outside of tuscaloosa is because mercedes-benz will be further expanding this plan. we'll talk about that in a little bit it has to do with electric vehicles in terms of production of suvs, this is one of the global centers for mercedes-benz. for all the talk about tariffs and whether or not fewer

vehicles will be exported to china, estes, they're looking at strong demand. that's why they continue to crank out as many suvs as they build down here. you have the vehicle exports, about two-thirds of what they build here, about 300,000 this year, about two-thirds will be exported 80,000 to china. why is the worldwide sales of suvs continuing to grow? the demand is there. especially on the luxury front record worldwide sales for mercedes suvs. up 5.4%. and luxury suvs here in the united states, you guys, up 9% for the industry this year there is clearly demand on the higher end when it comes to suvs for alabama, this is an important facility because alabama now builds about 9% of all the vehicles that are built in the united states and take a look at this map. it's all been kind of compressed going from michigan down here to

the gulf states for mercedes this is an expansion they're going to be building a billion dollars plant here to build batteries. those will be going into the gle. they'll announce that later today. add another 300 jobs here. so you're seeing an expansion of this plant as they try to do that conversion in 2020, 2021 into electric suvs and that will be with the gle. it'll be interesting to see how much demand there is for those electric suvs. but right now the luxury suv market remains red hot worldwide. back to you. >> it's like you're standing -- >> in front of a green screen. >> no. in front of a street or something. people keep beeping to get you out of the way >> that's the assembly line. >> why are they beeping at you >> they have to beep when they

come off the assembly line they don't just drive around. >> i thought they were like, who is this guy? the whole assembly line stops. >> while here, we've got to ask you about another story. tesla. what did you think about everything happened yesterday, elon musk with the tweet -- looking back at the timeline, his tweet calling them -- what did he call them >> the short seller commission -- >> enrichment society spp something like that. >> that tweet came out after the judge's ruling where the judge said she needs to see proof this is actually a fair agreement coming between the s.e.c. and the company. >> right it is exhibit "a" of why critics believe elon musk will not be able to be rained in in the future i heard from people yesterday and they said, here you go nothing's changed. nothing has changed at all

now, supporters of elon musk and tesla fans will come back and say, come on it was one tweet all he was doing was poking fun at the s.e.c don't make a federal case out of it but i will tell you the critics will look at this and say i don't think they'll be able to rein this guy in. >> by the way, it is already a federal case >> good point. >> are we hearing anything about whether the company or the people around the company want to rein him in at this point i'd heard weeks and months ago during this period, but this is a whole different situation. >> yes, andrew they do. here's what they want. they love his vision they love his drive and they think he is the thomas edison of our times. that's the term you hear from people at the same point, a lot of them are like, why even say anything at all rein it in there's no reason for you to be on social media saying what you're saying. >> right the other point, by the way, to

make is here he is effectively using twitter to demonstrate his hatred for the shorts. which is what that case was about. whether he was trying to manipulate the shares to hurt the shorts so it just -- it all -- >> for me it's -- well, the president's tweets always bothered you so much and i know how much you love elon seeing the same sort of thing happening -- >> and i'm troubled. >> that's what i mean. with tru with trump, you love it because you can hate the tweets. with elon, i see the pain. to see the pain as he, like, has these trump-like episodes is -- i feel your pain >> thank you >> you're tearing. i see a tear >> i do. no, i'm not. i don't think. it might have been the lights. >> okay. phil, thank you for that i'm sure we're going to see more of you today in the meantime -- >> what happened to the best and the worst?

i have to be careful don't you? you don't, do you? you're a good twitterer. a good twit. >> thanks. >> you're a bad twit >> but you got to be careful. >> you do. >> if you have a couple. you know, people try to -- they have a couple of cocktails, right? and you see some troll you see these -- they're anonymous. you see what they say. >> i will say there was someone -- i won't say who -- who sent something to me for a good five or ten minutes, it got under my skin in a terrible way i was going to send something. >> i never block people but i muted somebody yesterday. >> you don't block people? >> no. i feel like you're giving them satisfaction that they got to you. but i mute people. i rarely do that >> i've muted a few people but i mostly block >> i like to hear the criticism. i do >> that's why i rarely block people unless you're just so offensive. all right. let's talk tech. let's talk about this china story in business week

here's what's going on amazon and apple came out swinging following that explosive bloomberg business cover story exposing china spy chips. >> reporter: chinese surveillance chips wereembedde into data center hardware used by the u.s. government and major companies including apple and amazon that's according to a report by bloomberg's jordan robertson and michael riley. riley reported that chinese spies planted tiny chips like this one into server mother boards in an effort to snatch intellectual property and trade secrets. but those involved are vehemently denying the allegations. a spokesperson for supermicro says we remain unaware of any such investigation apple said it has never found malicious chips. amazon also denied any issues relating to modified hardware.

but the bloomberg reporters say they stand by their story. a hardware attack of this scope could mark a major threat to america's supply chain which is dependent on china nbc news >> okay. joining us right now to make some sense of what's going on here, george mason university's national institute founder here. help us understand i want to understand the threat this all poses but who do you believe at this point? >> it's really hard because you've got a well sourced bloomberg story with 17 different sources. all anonymous, it's worth noting but two very security conscious companies. apple with its enscription efforts on the hardware. so denying the story completely and so, you know, it's hard to know what's actually going on here and hard to figure out is the bloomberg reporting correct or are people talking about something different where

they're conflating different stories? certainly the question of chinese efforts to get into hardware, manipulate hardware and software and be different in space is an active ongoing effort we need to be concerned about. >> i want to go back to the story first. i want to get into that detail the thing i can't figure out in all of this, we have the business week reporters who worked on this for months if not longer they knew the denials before they wrote the story and they went ahead with the story. so they must believe their own sources more than they believe the companies. and yet then you had the companies on the record in the most -- somebody's not telling the truth here >> that's a great point, andrew. that's what's really hard about this particular story. the company's come out in a detailed way as we just saw from elon musk's

experience, you can't be out there saying things if they're not true if they're going to issue such strong worded denials, you've got to look at the story and see what pieces are accurate and what pieces might be open to questions. so, look what is very clear is china's engaged in a long-term effort to vote steel and intellectual property but also these type of hardware exploits and to get into systems. so what we need to figure out as a national matter bringing the government industry together, how do we solve these problems when we know they're happening whether this is true or not, we know they made efforts like this in the past. so how do we get ahead of that problem? >> are we doing the same thing to them? >> every government has cyber capabilities every government tries to get in other systems. there's always ongoing efforts as far as the details of what we

do, you know, that's another question but at the end of the day as for our country, the question we know that we've got china and russia engaged in active manipulation iran which are also active in the space. we've got a growing number of threats. the real challenge is we have to detect these things. one of the interesting things is you can still detect this by looking at net work traffic, looking at traffic on the mother board. you've got to be ahead of them >> that's what i'm thinking. i'm assuming that google, for example, and the google cloud or amazon is getting shipments or any of these are getting shipments of new servers by the hundreds daily and are installing them either to swap out old ones or put new ones into place and there are so many different chips on every different board, how are they able to actually check >> well, look. these companies are obviously security conscious they are hyperaware of the

threat i think they have a pretty robust spot checks and are trying to identify problems. what's interesting about this claimed hack, they're talking about putting a chip on a mother board. that's an amateurish way to conduct a hack because you can always manipulate on the chip without physically implanting something. it's an odd sort of effort by the chinese. >> if you could get onto the chip, then whether it's encrypted or not, basically every other security measure doesn't matter am i wrong >> well, there are ways you could detect activity coming off the mother board you can detect it as it takes place on the mother board. you can also detect it as the traffic leaves the computer. is the computer behaving in a way it shouldn't be doing because the hardware has been manipulated. there are ways to detect these exploits beyond just spot checking. >> do you ever see a day where there is some kind of truce

between the u.s. and china when it comes to both intellectual property issues but this kind of spies or do you think this is just something we live with >> look. i think that obviously the last two presidents have been very aggressive confronting china, the barack obama administration towards the end. so we've gotten more explicit. so a truce -- it's hard to know. they're very aggressive. they don't think about intellectual property the way we do if we bring them into this world system, we've got to convince them it's not the core of our economy and we're willing to take action against them >> final public policy question. there's been a big debate about enscription. this came up with apple in san bernardino, for example. one thing you kept hearing is everybody should be encrypted. it's safe their way. if we have a back door at all,

it will be used and it will be used by, for example, china. that has been what you hear all the time then you have people in the enforcement world trying to do national security issues around terrorism and other things here who say i need the back door to make it work does this change that game and that dynamic >> certainly it highlights the issues of things you can do even if there are encrypted systems that being said, strong encryption is critical at the same time, so it law enforcement access we have to find a way to reconcile our long-held believe the government does have the ability to get into systems and into houses with an authorized warrant when authorized by a judge. we've got to find that middle ground this is unsustainable long-term where the government doesn't have access to a terrorist phone and yet we still need strong encryption there's got to be a balance in between. we haven't hit it yet. >> thank you for helping us through this founder of the national security

institute at george mason. >> thanks. coming up, the aviation industry is looking for a few good mechanics kate rogers has a preview. i hope they're really good all the time >> reporter: me too, joe we're going to tell you about the importance of those aviation mechanics to planes like this one and why the industry needs more of them coming up after the break on "squawk." i'm ken jacobus, i'm the owner of good start packaging. we distribute environmentally-friendly packaging for restaurants. and we've grown substantially. so i switched to the spark cash card from capital one. i earn unlimited 2% cash back on everything i buy. and last year, i earned $36,000 in cash back. that's right, $36,000. which i used to offer health insurance to my employees. my unlimited 2% cash back is more than just a perk, it's our healthcare. can i say it? what's in your wallet?

♪ welcome back, everybody. with record numbers of passengers taking to the skies, more mechanics than ever are needed to keep the planes' fleets safe and operational. kate rogers tells us more with this month's edition of "help wanted." good to see you. >> reporter: hey there good morning that's according to estimates from boeing. some 754,000 aviation maintenance technicians are going to be needed around the globe in the next two decades.

aviation is doing its part to train the industry's next generation of workers. this isn't your typical four-year high school experience students like genesis santana will get a high school diploma but they also have the opportunity to work towards two faa certified licenses and enter directly into the workforce. >> i never thought that i could do all of this never in a million years would i think i'd be work og on a plane, high school curriculum, and volunteering, and so much more >> reporter: now, the high school partners with major partners like delta and jetblue. but getting into the high school is competitive they receive about 4,000 applications for every 500 seats in each class. the licenses they'll receive gives them opportunities for competitive salaries without necessarily having to get a college degree

>> our students cost $20,000 at the college level. once they graduate, they can start at $25 an hour, possibly $30 an hour where they're making about $70,000 out of high school in a few years, they can make a lot more than that >> reporter: now, not all of these students will go directly into the workforce a lot of them are first generation students with the opportunity to go to college back over to you >> it sounds like the airlines are putting themselves out there. there's a lot of good things on the line what are the hurdles that come up when they're trying to do reskruting what's the problem >> reporter: yeah, one of the biggest problems is something i just mentioned getting young people to want to take on that third shift a lot of the aircraft they're working on need to be worked on overnight. that's not something that's necessarily appealing to millennials, for example there's also a gender gap within

the industry they're doing their part to recruit more women but in speaking to the aviation high school principal, he said in the early 2000s, it was under 5% and now it's closer to 20%. >> congratulations on finding a jobs friday story you could do without a hard hat well done. >> reporter: thank you when we come back, a lot more to run through the markets this morning then at the top of the hour, we're going to welcome our jobs panel. get ready for the big number of the month. september jobs but what does the goldilocks number look like the one and only austan goolsbe will be here to mix it up. do you hear that?

no. it's quiet. too quiet. xfinity home cameras. xfinity home gives you an extra pair of eyes to help watch over your family. plus, you have added peace of mind from

24/7 professional monitoring. xfinity home. simple. easy. awesome. xfinity customers, add xfinity home and get a great offer. plus, ask how to get free installation. call, go online, or demo in an xfinity store today. welcome back when we return, the number of the month, the september jobs report is going to be out in less than 30 minutes we've got a big panel getting ready for predictions and reaction to all that data. take a lk ooat the futures right now ahead of that number dow looks like it's in the green. we're back -

the countdown is on. we are just half an hour away from the september jobs report we will get final predictions and tell you how the data could impact the rate hike and treasury yields. elon musk mocking the agency that he settled with what he said about the s.e.c. and the responding drop in tesla stock. apple suppliers posting big loss in asia overnight it's october 5th, 2018, and the final hour of "squawk box" begins right now ♪

live from the most powerful city in the world, new york, this is "squawk box. good morning and welcome back to "squawk box" here on cnbc i'm joe kernen along with becky quick and andrew ross sorkin 29 minutes, 29 in counting futures up right now 24. nasdaq down 12 26 now on the dow. just under two on the s&p. treasury yields at this point were right around last we looked at the new level of 3.2% there it is right now. this could get interesting at 8:30 with the employment report. shares of tesla slipping after elon musk mocked the s.e.c. in a series of tweets just days after settling fraud

charges with the regulator the short seller enrichment commission is doing incredible work and the name change is so on point the post was missing a word. musk also called out blackrock, another financial firm for pocketing what he called excessive profits. we haven't heard back yet. these new tweets come after elon musk reached a major settlement with the s.e.c but that settlement deal hit a snag yesterday as a federal judge ordered the s.e.c. and musk to justify the agreement as fair and reasonable. federal courts have rejected settlements in the past when the judge decided they were too lenient. that's the questions being asked here >> to some degree, the tweet itself goes directly to the heart of this case which was his motivation and whether there was an effort to manipulate or hurt the shorts that were against his company.

>> with his original tweet the s.e.c. was investigating about fundi ining secured. >> he's mocking the s.e.c. somebody could look at this in a different way. >> i thought he did this thinking that the settlement was still signed, sealed, and delivered. looking back at the timeline, the judge hours before had issued this statement. >> it just raises the question about whether -- there's certain people who believe the rules don't apply to them or they can push the rules he -- remember when he -- he was able to get the settlement back the day after. so there are -- >> he hates short sellers. >> if i were the ceo of a company, i would hate them too >> or does it indicate an insecurity about the whole -- >> it's probably a combination of all of the above.

>> no one can tell the future. we've heard he's working like 20 hours working weekends and trying to get the production out. so it's not a done deal. you would be mad if somebody was betting against you. >> you might be unhinged if you weren't getting enough sleep >> and a huge ego and everything else >> probably doesn't help he was smoking pot in an interview. what donald trump said earlier is at least i don't drink. >> my one good quality which was funny. >> i'd like to think the hit he took on that video was a one-time event maybe i'm completely wrong you're all looking at me like i'm crazy. >> he's admitted to -- >> i know. but he was looking at -- we have that one -- we have that ten-second video but it's not like that went on for two hours. >> no. but again, this all leads back to judgment call questions >> yes judgment to even take it, i agree. >> investors including ron baron who just talked with us a few days ago saying he's turned a

corner, he's learned his lesson. really >> okay. and by the way, we should also say, sorry we're going to mention your employer. blackrock. he went after bloc rock and other investors or big passive investors that loan out the shares to shortsellers in addition to all of this. that's a whole other separate piece of this. we are tracking the fallout in the stock market from yesterday's report that the data center equipment may have been hacked and chinese surveillance may have gotten through through a tiny microchip this is a bloomberg report that was in business week nonetheless, shares of computer maker lenovo, they did fall as much as 23% before closing down at 15% they said they aren't supplied by that hardware maker and it takes extreme steps in security. but analysts said that those in the u.s. might be using a pc

maker instead. meantime shares of apple suppliers also falling on that chinese surveillance story as well you're looking at those companies. semiconductor down 10% largan precision down 7% this is making waves no matter who you believe. it is jobs friday. we're awaiting the jobs numbers coming up in about 24 minutes now. let's get to the panel to get their take joining us now, kate moore, blackrock chief equity strategist and again, it's that time again. austan goolsbee, former cea chair, university of chicago booth school of business professor there. we all love the university of chicago now, austan, you know that they took a stand. >> we always have. >> they took a stand god bless them a lot of other universities could learn from that. what that in spite of or because of your efforts there, would you say? >> i was part of that effort. >> were you? that's good to hear.

and welcome. alex burls is here too kate ale start with you. 200, where are we are today? >> i think we're going to have a really healthy number. i'm going to say this one again. what the equity markets care most about are wages this is going to be the biggest question into third quarter reporting. as we look at where mash gins are going to evolving with i think there's a lot of anxiety at this point. people looking at other solid returns. if they get concerned that wages are squeezing lots of industries, they may use that as a reason for consolidation. >> austan, over the years you were always -- you know, you tempered your enthusiasm

>> i think there's going to be a weather component from the hurricane that's going to make this number smaller than expectations if it weren't for that, i think we'd be at 190,000 or something quite good i bet it will be some number smaller. and because it's going to have a weather question mark, i think almost any number's a goldilocks number unless it's a gigantic number, i think the fed could say we don't really know what happened that month. let's wait until next month. >> on that point, michelle meyer pointed this out earlier she said because of that you might see a lower headline number but you could also see a higher hour average number. the way that is calculated is based on the number of hours worked during the week in places where you have salaried employees who were affected by florence therapy numbers of hours worked will be down but you may see the same you might see a hotter number in the number the market is caring about. >> that's an interesting idea.

the evidence on that has been different than times in the past with big weather events. if the weather event is one that the people don't show up at all, it usually gets a smaller headline number. but they don't report a total earnings for that either they would have that future and wages might be big >> okay. alex, weigh in >> i actually share austan's view that the weather issue might be -- might play a role this month obviously if we look at the timing of the hurricane. but we were warning about that event all week i think that might have slowed down can can can -- some hiring on the east coast.

i think we'll see a solid number of growth and see the employment rate hold steady, not tick down. but i think it's -- one of the things that struck me is the sustainability on the low varmt over the last few months we're coming in right around 200 a month. a little bit softer the last couple but it's been continually good we look at the aggregate, it's been continually good when we look state by state. when we look at industry sectors, whether it's blue collar jobs, manufacturing, structure, they've added half a million or white collar jobs and professional services. they've added half amillion jobs in the last 12 months so the depth and breadth of this expansion this late in the cycle is impressive. i think we're going to see another month more or less on par with what we've seen maybe a little bit softer on what we've seen recently >> kate, what do you think happened with the 10-year. how did that actually happen is it italy? who woke up?

the it's a big market. >> we would have expected yields to rise much earlier this year based on the strong -- >> but what happened what happened that caused it just that day? >> i think it's a confluence of events there's some technical issues, italy raising its head once again. there are a lot of euro fans excited that perhaps the worst of the political risk is behind us i think people understand now that there's a lot more out there. things are a lot more focused on the longer term and what we're going to see in terms of our overall global demand for debt and there's this other pressure on the dollar. so i can't come up with one perfect explanation. all i can say when we think of what this does for asset allocators and how people think about equities, higher rates are something that we have been expecting to digest for a long period of time and it shouldn't really shock risk asset markets i would be surprised if people used that as an excuse for

selling off on the market. >> you didn't do it. blackrock didn't do it >> i thought maybe powell's comments had a -- >> that was my thought too that we're not near neutral and we could blow through it >> yeah. if you think about the implications of that for the job market, it might be going pretty strong but if the fed really starts raising rates enough that let's say it inverts the yield curve or it gets higher than what the economy can handle, where you would start to see that is the construction jobs will slow down the durable goods manufacturing goods will slow down anything that tends to be credit heavy let's call it. they'll start to feel it we'll go through a round of is it going too fast. >> all right we're going to take a break. it's coming at 8:30. there's no way of stopping it. i don't think there's any way that it will not happen.

i look at predict it it's 100%. that there will be a jobs report at 8:30. >> they actually predict whether it's even going to happen. >> no. i had another screen up looking at what they're predicting anyway other stuff happening in the world that doesn't concern us quite as much as the jobs number which we're looking forward to it >> coming up when we return, upstart stock exchange iex sees its first listing today. it's going to start trading two years after iex began operating. we're going to talk to the ceo of the exchange about fairness in the markets and why slowing down orders may make sense and we're just minutes away from the government jobs report we have final predictions straight ahead you're watching "squawk" right here on cnbc

♪ ♪ move to the enterprise-grade cloud that's built to handle all your apps. ♪ ♪ the ibm cloud. the cloud for smarter business.

the ibm cloud. dono.u hear that? it's quiet. too quiet. xfinity home cameras. xfinity home gives you an extra pair of eyes to help watch over your family. plus, you have added peace of mind from 24/7 professional monitoring. xfinity home. simple. easy. awesome. xfinity customers, add xfinity home and get a great offer. plus, ask how to get free installation. call, go online, or demo in an xfinity store today. welcome back to "squawk box. interactive brokers is switching from the nasdaq where we're sitting right now to the iex today. this is the first listing on the

iex since it was founded in 2012 and began operating as an exchange in 2016 its methodology for building fairer markets divided from the start now years later iex is fighting for converts. this is its first big moment right now to talk about all of this, brad katsuyama brad, congratulations on this. we talked about it when the news broke just a couple weeks ago that they were going to move from this exchange to your exchange i want to understand how that happened >> interactive brokers were the first retail broker to offer direct access to iex when customers were asking for it they've been a good partner from the beginning. it took us a year to get our listings licensed to list companies. so this year, that was our focus. and those conversations

happened i think up to the top of the chain, thomas peterfy has been incredibly helpful >> how is the experience going to be different? >> the primary exchange, it runs the open and the close but the stock trades on all exchanges, all of the other alternative trading during the day. it should be a seamless transition our focus really is on more fundamental investors bringing more real liquidity into the markets. i think over time as volume starts to shift, you start to see a different experience i think more liquidity, a little bit less unnecessary volatility. so i think from our standpoint again, it's still early stages but, you know, over time we expect the experience to continue to improve. >> tell us aboutthe pipeline and what the progress looks like in terms of bringing more companies online >> you know, it starts with someone going first. i think to have a sophisticated participant like interactive brokers. they understand markets, the

market structure fop have them go first definitely sends a great signal to other companies. we've had a lot of great discussions to date. we've had a lot of great discussions since it was announced in the middle of september. for us, it's continuing down that path. you look at 10 to 12 switches a year for us similar to the way we built relationships, it's about building trust and letting them get to know us, who we are, what we stand for i think over time, again, these conversations are going well and we expect more >> how much of this is a fight against the establishment? how much is a fight against the nasdaq, for example, against the new york stock exchange? >> yeah. i mean, i think iex exists because the exchanges in a way have kind of let us down you look at selling advantages they're supposed to be the referee in the game. they'll charge 3,000%-plus

markups on products they have a monopoly on. so their position in the market, i think they've abused it. and they've abused that trust. i'd probably still be working at a bank if exchanges played the role we thought they should be playing. that's why iex exists. yeah, it is a fight against the establishment. and again, they're fighting back it took us two years to get our exchange license they fought us every step of the way. we expect them to. from our standpoint, this is what we're fighting for. >> we had one of the s.e.c. commissioners on the show last week talked about how he thinks there's an unfair fight going on specifically took a hit on the dual feed issue. the public feed and the private feed do you have a private feed >> so yeah, so we have a private feed that is free. and we also publish information to the public feed in our private feed, it goes

through our speed bump i think from our standpoint, we think he's exactly right we have the exchanges who are ultimately selling different versions of the stock market you know, most people would think there's one version of the stock market there are probably hundreds of versions of the stock market depending on how much you're willing to pay the exchange, what you'll buy from the exchange, and what data feed you buy from the exchange. what that creates is people with faster versions of the stock market can trade it's like someone knows the horse race is over and betting against people who think the race is happening. totally agree with commissioner jackson. think he's spot on again, i think what you're seeing is that the s.e.c. is starting to question historical practices. this is 2018 it's a different regime. >> if the s.e.c. does crack down on these issues which you have advocated for, does that effectively put you out of business which is to say if there was regulation, would there be a need for the iex >> absolutely. i think what we've done over

time is we've built trust with investors. and i think even if the rules change, i think they'll continue to trust us to do the right thing. it's always been -- for us it's always been taking some for ourselves and delivering as much back to the customer as we possibly can we charge simple fees. charging a simple fee rather than charging based on shares outstanding which may have been relevant when they were paper tickets. you know, a 45-year-old duopoly, things get outdated. from our standpoint it's about efficiency in the market their philosophy has always been about keeping some for themselves and delivering back to the clients it's a good alignment. but the markets need to be disrupted. and i think when the s.e.c. is looking at it, you have brokers looking at it. you have places like iex looking at it. >> brad, thank you for coming on not enough courage to come right here to the nasdaq. >> you never invited me. i don't think i was allowed in the building, actually

i'll come there any time >> good luck, brad and we look forward to hearing more from you. appreciate it. >> thanks. coming up, economists looking for 180,000 jobs that were added in the government's latest report. we're just minutes away, truly, from the september employment data 100% chance still trending now that it will happen at 80.:3 stay tuned you're watching "squawk box" on cnbc 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. ♪

welcome back to "squawk box. mattress firm -- mattress firm mattress firm, mattress firm has filed for chapter 11 bankruptcy production that's the problem they should have thought of right at the very beginning that you basically say mattress firm, mattress firm. an initial group of 200 stores will be closed in the next few days and as many as 700 could be shuttered as part of the process. the company already anticipated scheduled deliveries to be completed normally though. >> what is it about mattress companies that always go bankrupt >> the business. >> it's gone sealy, serta, they've all been in this. >> we're going to be right back with final predictions from our panel. ta a qckkeui look at the 10-year ahead of that data your company is constantly evolving.

and the decisions you make have far reaching implications. the right relationship with a corporate bank who understands your industry and your world can help you make well informed choices and stay ahead of opportunities. pnc brings you the resources of one of the nation's largest banks, and a local approach with a focus on customized insights. so you and your company are ready for today. onmillionth order.r. ♪

there goes our first big order. ♪ 44, 45, 46... how many of these did they order? ooh, that's hot. ♪ you know, we could sell these. nah. ♪ we don't bake. ♪ opportunity. what we deliver by delivering.

and i am a certified arborist for pg&e.ughes i oversee the patrolling of trees near power lines and roots near pipes and underground infrastructure. at pg&e wherever we work, we work hard to protect the environment. getting the job done safely, so we can keep the lights on for everybody. because i live here i have a deeper connection to the community. and i want to see the community grow and thrive. every year we work with cities and schools to plant trees in our communities. so the environment is there for my kids and future generations. together, we're building a better california. quick from our jobs panel. >> 193 i understand the weather is a component potentially. but it's going to be a really strong month >> austan, how about you >> i would have said 190 but i think with the weather maybe

161. >> okay. alex >> 163 >> rick, what's your number? >> 211,000 >> okay. so you're the high one as we head into this we're going to get to -- what? 211. >> who's 220 >> let's get to ylan mui she has the numbers. >> 134,000 jobs nonfarm payrolls rose by 134,000 jobs in september. the unemployment rate dropped from 3.9% to 3.7%. it now stands at the lowest level since december 1969. average hourly earnings, those were up 8 cents to $27.24. there were some notable revisions to prior month jobs gains. july jobs were increased from 147,000 to 165,000 jobs. august's number was increased

from 201,000 to 270,000 jobs that's 87,000 more jobs than were previously reported the three-month average of job gains now stands at 190,000. now, it is possible that hurricane florence had an impact on these numbers however, survey responses were within the normal range. one sector, they said was leisure and hospitality. also down was retail that sector lost 20,000 jobs some industries that gained, however, were professional and business services. that was up 54,000 jobs. health care was up 26,000 jobs and manufacturing gained 18,000 jobs in september. labor force participation rate, that remains steady at 62.7% the number of people who are working part-time for economic reasons rose in september by 263,000. that might have contributed to a

slight uptick in uu6 guys back over to you. >> all right ylan, thank you very much. the dow futures up by about 48 points after this report we had seen the dow down 11% as we headed into the report. s&p up by about five let's get to our panel and get thoughts on all of this. then versus the 2.9% last month. >> i guess i wouldn't obsess about it too much. i would worry if we didn't have a strong number going into third quarter reporting. this data even though september jobs were not as high as some might have predicted or even my forecast, the upward revisions were exceptional the fed should stay on track companies should feel confident.

their top line and revenue growth not just for fourth quarter, in 2019 which i would expect to be very strong given income growth and as high level kbloi employment >> does this hit the metric of not too hot or cold? >> yeah but only on a technicali technicality that's an abysmal number if that were a normal month, we'd be looking at each other saying whoa what does this mean. but because of the weather, i think it's a goldilocks number. >> if you add 80 to 130 you get right to rick's number of 211. >> it's funny because on the trading floor, one of the traders behind me started to buy treasuries then he looked at the revision

and reversed his position. treasuries are now higher than they were going into the number. i'm a little disappointed by that even though it's subtle >> hey, rick just to be clear yields are higher on maturities across the board, right? >> yes across the board up a basis point 338 in 30s up two basis points since seconds before the number was released >> alex, what jumps out to you >> it always makes sense to look at a bit of a rolling average. i think the three-month rolling average, if i'm doing the math right in my head just went up a little bit so we're doing a little bert

if we average out the quarter than we do before, others have said weather is a play here >> what do we need to be thinking about you said one off with weather, but the trend numbers everybody is pointing out are still strong trend numbers. i go back to what you said earlier about how it was powell's comments that you think were pushing up higher how does the fed react to this >> look. i don't think the fed's going to do much. i think they're going to look at this number and say, well, we can't judge. but i think going forward what everybody should pay attention to is that if the fed keeps raising interest rates and is able to do so, so if the 10-year keeps going up, the danger of inverting the yield curve is kind of going down but as the interest rate goes up, let's remember that tightens the economy. where you're going to start to see softer spots will be in some

sectors that have had a really good run sop we've had a strong recovery in construction, residential housing over multiple years. we've had a strong recovery in these durable manufacturing goods over multiple years. they will be the first ones coming back and saying what are you doing? you're killing us. let's keep an eye on that. >> kate, we saw this quick hit where the futures bumped up for equities now they're giving it back we thought this was going to be the huge one to take a look at now we say now what. >> i'm going to be watching closely to what happens to sector rotation and performance over the next quarter. but really in the next kind of week or two. financials and banks have reversed a little bit of their recent weakness as the 10-year had risen in yield i think there was a tremendous amount of stress around what the flattening yield curve was going to mean for banks. we saw banked trade down on that the potential for inversion was a negative head wind even if we actually have a kind of flatter curve than people

would have predicted, i think the banks are in good shape and could rally a little bit i'm going to watch that closely and see how the market reacts. >> look at the dow come down a bit. we're going to go flat now negative >> you look at these numbers and think it's not too hot with wage inflation. then people are looking at the asterisks that come with this say, okay. we're going to get a huge clarification one way or the other on this. >> i think it's been one excuse or another not to take additional risk. the curve might invert, there are political risks, there are geopolitical risks, there are splay chain risks. i think at this point in, almost ten years into this bull market, there are lots and lots of people who are worried about staying in it for too long and are looking for a bit of rally as an opportunity to pull back and take profits and rebalance their books. i think the data we're getting not just today but over the last

week should feel confident that the expansion. consensus is probably a little bit too low especially when it comes to the u.s. in terms of their economic forecasts and we are nowhere near a significant slowdown or recession. if that's the case, i would expect the top line to grow. i would expect it to fade a little bit and we end up getting a little bit of a rotation in there. i don't think this is a time to be stepping away from equity risk at all. the market needs to get comfortable that this is going to be data -- >> all right who wants to guess on drudge what do they focus on? >> they would go to 3.7% >> oh, yeah. unemployment lowest since 1969 but then i am hearing from a lot of people this is a pretty strong number i'm hearing from others >> you're hearing from others. some people are saying >> yeah. some people are saying i mean,

guys -- >> you're not hearing from -- >> no, no, no. guys that return 35% a year for like 50 years. guys like that >> feel comfortable with this data >> rick, let me ask you. when been talking about yields to figure out why yields picked up this week there's all sorts of speculation. what are you hearing on the trading floor? >> second highest ism service sector number in history is a good place to start. listen, we could pick and find a few weeds, but you don't need to look for green chutes. i think it was a long time coming i think it's a lot of different threads all woven together i think we need higher rates we don't want the economy to overheat i find it fascinating as we continue to escalate in rates post number. that seems to be taking the drips out of the equity market you know, we're half a basis point from making a new intraday

high on tens we're about to hit 2.90% in the 2. i would not, i would not be putting jay powell in this notion that he talked the market down i know maybe he didn't phrase things exactly right or he's afraid of the president. he was appointed by the president. and all the lieutenants that are appointed by the president and jay powell is his own man. anybody who listens to him for two minutes can tell that. >> that's the key. he was appointed by the president but this is a position that has always taken a step back i think jay powell is proving that out austan and alex, i want to put you in double boxes for this joe just mentioned the drudge's takeaway on this the lowest unemployment rate since 1969 which do each of you think is the takeaway here? >> for drudge or for our headlines? >> for you what is yours? >> so the opposite >> i'd have the dual headline,

nice revision from last month, weather says ignore this number. >> all right alex, how about you? >> i'd say we've seen three months of strong economic growth in the labor market and we're adding jobs. i'd also just add, we're two weeks away from getting the state level numbers. i think that'll be informative both with respect to the weather effects and quite frankly with respect to some of the critical aspects. we'll see where these jobs are being created. >> state level jobs numbers are going to be released in two weeks. that's what you're saying? >> the state level jobs come out in two weeks >> all right folks, want to thank you all for being with us today. kate, austan, alex, and rick coming up, we're going to talk about the run-up in interest rates and what today's jobs numbers means for the fed's next move. u.s. equity futures at this hour perhaps i would say less important in where the yield curve went on this news. what are we looking at an

we'll hear from france we'll be right back. i know that every single time that i suit up, there is a chance that's the last time. 300 miles per hour, that's where i feel normal. i might be crazy but i'm not stupid. having an annuity tells me retirement is protected. annuities can provide protected income for life. learn more at retireyourrisk.org you might or joints.hingotected infor your heart... but do you take something for your brain. with an ingredient originally discovered in jellyfish, prevagen has been shown in clinical trials to improve short-term memory. prevagen. healthier brain. better life.

show of hands. let's get started. who wants customizable options chains? ones that make it fast and easy to analyze and take action? how about some of the lowest options fees? are you raising your hand? good then it's time for power e*trade the platform, price and service that gives you the edge you need. alright one quick game of rock, paper, scissors. 1, 2, 3, go. e*trade. the original place to invest online.

♪ december of 1969 the latest unemployment rate of 3.7%, the lowest numbers since 1969 the jobs number, 134,000 as a

headline that was a little below the 190 or so anticipated. but again you were dealing with a month that had a whole lot of different things playing including florence so all of those things people are looking at closely we watch the futures kind of pop during all of this the instant reaction was to see the dow run up more than 50 points from a decline of down 11 figuring this would keep the fed at bay then everybody looked at it and said, never mind we're not sure what to make of it dow futures right now indicated down by about 42 points. the nasdaq off by 32 also look what's happening with treasury yields. immediately yields across the spectrum jumped. in fact, take a look 10-year note is sitting at 3.225% we're continuing to see higher levels for the yield and this comes after what we've seen all week with the yields building to the highest levels

>> let'sget a look at what the jobs rates -- joining us now is chief officer of voya investment management one of the things you mentioned previous is the 10-year's moved but the 2-year hasn't much but now everything's moving. what do you think? >> the steepening of the yield curve is here. this is not a push higher. this is about the fed being slow enough to let the economy grow kind of a go with the flow if you will things are in motion to continue this rally nothing we see today will stand in the way >> are they -- if the president were to hear you talking, he might not always keep -- he may change his tune a little bit you say that this is showing good moderation with the fed and what they're doing is actually allowing the economy to grow

then you got to go too quickly when inflation comes back. >> i think powell's done a nice job. importantly, you're not seeing the 2-year move higher you're seeing the 10-year move higher the inflation break even assumption has not moved higher. you're at a 2.16%. you've also not seen a confirming sign in currency markets. really few signs that the market should be afraid of acceleration here without a confirming signal from another market, this looks like a continued gradual push higher. let the long end lead the fed. that's the way out of this >> you sound like this is totally goldilocks from where you're sitting >> it is the non-manufacturing ism numbers are very good. you still have the oneldilocks n

is the ecb has to start moving european rates have not moved higher with this eventually as they move, that can be a concern for the market. the one other thing we think people are misrepresenting is the narrowing of trade tensions is good news it's focused on china. that may be tough for that trading relationship, but it's a narrow band of uncertainty we think the markets like that we think that's supporting this move in yields >> the idea that we're going to run out of workers the more you see things like this, what do we fall back on? participation rate between 25 and 54, there's still people there to draw out? or the reason there's a shortage is because we don't have the right training for a lot of people or is it just really, really tight right now? >> we think it's tight but again you have another countervailing force that you hear people concerned about. automation and ai taking jobs

away so you have two forces fighting each other and it looks to be somewhat in balance right now. 2.8% hourly average growth no signs that it's accelerating away and automation should continue to offset that push. we will remain in balance over time >> i love this headline i just saw. this is perfect. u.s. stocks -- i'm not going to out who wrote it u.s. stocks set to open lower as jobs numbers disappoint. >> the market was lower before we got -- >> no, but that's the -- i'm not going to say exact opposite. but it's opening lower because thenominal number looks weak that would make it open higher but it's actually stronger i mean, that would be my take on it again, it's a millennial rating. >> we're right back to where we were an hour before the numbers. >> you think it's opening lower because people think it's still strong now >> we're talking 33 points. >> no, no.

i know all that. no, you're not saying that this is a disappointment that -- everybody we're talking to says the economy -- i mean, 3.7% and things are -- you add 80,000 in revisions, i don't think it's a disappointment and you got the hurricane too. so i don't think it's down because it's a disappointing number i don't. it is disappointed >> you think the numbers are too high that's too high even then lower than expected. >> the nominal number. do you think that's right? >> no, this number does not look too hot at all >> we are looking at futures right now, and futures are down marginally >> i am saying futures are back to where we were like an hour ago before we got the number this is a watch. >> watch financial is in here, too. >> you said it is strong but not too strong that's what you are saying if the market reveals it is too strong, you would not have financial rally into a week

economic yesterday it will give you a sign that things are too strong and the feds will kill it. you are seeing some suggestions of breaking into a new break it is no tt a disappointing number, that's the point you are right in the middle of both of those. matt toms, i give you guys too much free advertisement. >> oh my god >> i would not ask you as such have you try on cnbc, right? >> we do proudly. >> you don't have to thank you, we appreciate it. when we return, we'll get jim cramer's take on the jobs number and elon musk tweets on the sec.

futures down fracturely and the nasdaq is down by 17 sugar sugar it was number song in 1969. last time we saw unemployment, did you remember 3.7%? >> i remember neil armstrong moon walk. can i get some help. watch his head. ♪ i'm so happy. ♪ whatever they went through, they went through together. welcome guys. life well planned. see what a raymond james financial advisor can do for you. a new way to save on travel. now when you book a flight you unlock discounts on select hotels that you can use up until your trip starts.

so whether you want to go out, stay in, or be in the middle of it all... add the perfect hotel when you're ready, and save. add on advantage. only with expedia. what do advisors look for don't just track an index, help me meet a client's need. is the fund built to sell or built to last? etfs are only part of a portfolio. so make it easy to explain. give me a quality fund that helps me get clients closer to their goals. flexshares etfs are designed and managed around investor objectives. so you can advise with confidence. before investing, consider the fund's investment objectives, risks, charges and expenses. go to flexshares.com for a prospectus containing this information. read it carefully.

i want to get down with jim cramer right now let's talk jobs number, jim, too hot or cold, what's the take >> i will tell you something we got to play with american workers by raising rates they made 8 cents more this is ridiculous, what are we worried about? 8 cents more average hourly earnings, this is a great number we continue to starve the american workers so i bet that's the best thing for the stock market >> sarcasm >> all i hear about is we need to raise rates >> we have been talking about all morning, elon musk, renaming the sec with a new name.

>> there was no way he was talking about the sec. if he talks about the sec, he can take away the deal >> we'll see jim, we'll see you in jaus coup jus a couple of minutes. >> do you think they'll pull the deal >> arkansas. >> sec if you do that again, we'll slap you on the risk. this guy is just charmed he did not want to take away the ceo job, they didn't know what to do with it. >> there is no template. >> sec is a good offer >> when we come back, more stocks to watch including recall from a major automaker market reaction today, big jobs number, "squawk" returns in a moment

what do you look for when you trade? i want free access to research. yep, td ameritrade's got that. free access to every platform. yeah, that too. i don't want any trade minimums. yeah, i totally agree, they don't have any of those. i want to know what i'm paying upfront. yes, absolutely. do you just say yes to everything? hm. well i say no to kale. mm. yeah, they say if you blanch it it's better, but that seems like a lot of work. no hidden fees. no platform fees. no trade minimums. and yes, it's all at one low price. td ameritrade. ♪ a moment of joy. a source of inspiration. an act of kindness. an old friend.

a new beginning. some welcome relief... or a cause for celebration. ♪ what's inside? ♪ [laughter] possibilities. what we deliver by delivering. time for one very quick stock to watch, toyota recalling triple hybrid vehicles in clucln the prius. 830,000 have been sold in north

america. if you own one of these, take it in jobs number with a quick recap for you. number of jobs added 140,000 you did see the employment rate moved from 3.9% to 7%. futures are flat right now have a great weekend everybody make sure you join us on monday. right now it is time for "squawk on the street. ♪ good morning, welcome to "squawk on the street," i am david faber along with jim cramer we are live, carl quintanilla has the day off today. let's give you our futures, we are half hour to the opening bell and trading >> that's not much >> thank you >> given the fact it is goin