♪ live from new york where business never sleeps, this is "squawk box. ♪ good morning welcome to "squawk box" on cnbc. we are live from the nasdaq market site in times square. i'm melissa lee along with becky quick and a low wilfred frost. >> i came in this morning he was sitting like this. >> i was prepping. the screens are so low underneath the table i get for tv i have to go back up for the viewers, you made me stay like this >> there you go. >> i'm not going right to the top. >> the angel music >> i will go back down there we go. >> you are still too short >> yeah. >> you need a couple inches. there you go

u.s. equity futures now, we're looking at a positive open this is after four straight negative sessions for the s&p 500. looks like we'll be negative the dow is up by 6 1/2 points. the dow down by 13 the nasdaq yesterday broke a three-day losing streak. over in europe, italian bond yields came off a bit. that provided a bit of relief there. we will go to asia first, excuse me the nikkei up fractionally we have red arrows across the board. there is hope for a brexit deal, but the ftse 100 is down 2%. >> i would never say imminent for brexit deal. >> relatively imminent compared to past hopes, how is that >> no, i think a couple headlines over the past couple of days, encouraging >> narrowed their differences. >> yes next week is the crucial october 18th subject the tone since the last meeting in salzburg has improved, but

there's a lot of differences >> okay. >> improved that you get to a -- improved that you get to a co coordinated exit agreement >> the thing theresa may is looking for is coming back with both sides saying we found some agreement on the irish border issue and on trade then people can work over the following months to the finalized wording. i think you would see a big rally in assets if you got to that point but it wouldn't be set in stone because she would still have a tough deal selling it in parliament where she has a thin majority. anything too soft will annoy brexiteers, anything not firm enough will annoy remainders it's interesting that's how it's been reported in the "wall street journal" over the past 12 hours. again, some perspective is needed, but improving tones as highlighted by the pound which is at 1.3150

>> i guess everything is a relative game. >> hence relative. >> yes let's check on treasury yields that has been driving the sessions of late the ten-year note is at 3.225% we were at 3.226%. look at the 30-year treasury bond, that's something that people are watching more closely. 3.39%. it was at highest yield in about four yields but did fall off of those levels >> sears holdings is reportedly hired advisers to prepare for a possible bankruptcy filing this could come ahead of a debt payment due next week. the "wall street journal" says m3 partners has been working on the filing, though sears continues to discuss other options. cnbc reached out to sears but has not received comment sears has been losing money for years and closed 400 stores in the last year.

a bankruptcy filing would end years of efforts by eddie lampert to keep the company afloat the "journal" says lampert wants to restructure sears debt without filing for chapter 11. he sees that as risk for retailers. a special committee is weighing an offer that lampert offered earlier this year to buy the kenmore brand but sears warns it could go out of business as it awaits for approval of that deal >> we keep characterizing this as lampert trying for years to try to keep this afloat but he did that by stripping the place. i remember walking years ago into sears and kmarts and you couldn't find anybody. the cash registers were old and outdated the floors were falling apart. that's not a great way to keep a retailer afloat when you pull out assets they should have shrunk the footprint a lot earlier, invested in the stores you were going to keep open it's been a slow bleed for years

and years. he's tried to keep it afloat but i never thought that would be a path that would work >> it's a tiny company but it's one we watched because they defined retail think about the sears catalog and how iconic it has been it was the first amazon. you could order anything from that catalog now we're in a situation where supposedly they're going back to filing for bankruptcy. eddie lampert is the largest creditor and largest shareholder. even if he buys kenmore, it's got 5$5.5 billion in debt >> even the brands have been siphoned off the best brands and things in that store for years and years have been taken away thinking it would be a continuing asset. they've been harvesting this for a long time. >> shares down 85% this year

hurricane michael upgraded to a category 4 storm as it churns closer to the florida panhandle. courtney reagan is standing by in panama city beach, florida, first an update on the storm's path and for that we go to kalee dionne >> hurricane michael is now a very dangerous category 4 storm. let's look at the main list of things you need to know this morning. which is going to be that no category 4 storm has ever hit the florida panhandle. ever this storm will make history storm surge near the center as well as just to the east of center will be an issue as this storm makes landfall heavy rainfall will stretch not only where it makes landfall but all the way up the east coast. some of those places dealt with florence, all of that rainfall also it will move over some of those same locations and widespread

power outages because of the wind we will talk about the storm surge. what is storm surge? basically you have the forward motion of the storm and you have the winds. and the right quadrant of it, which will come close to cedar key all the way over to st. mark's and panama city, that will be the worst location for storm surge. we could see 9 to 13 feet. on top of that, heavy rainfall falling so you will see flooding at historic mieasures. rainfall forecasts, 8 to 12 inches of rain through the florida panhandle and rain stretching up towards columbia, south carolina and charlotte, north carolina we have sustained winds at 140 miles per hour peak wind gusts are more than that you have saturated ground and a lot of trees so trees will be down, as well as power outages up the east coast. the preparation time for this

storm is coming to an end. this storm will make landfall midday today we'll have updates throughout the morning. >> this seems like it came much more suddenly than florence did. with florence, people were evacuated for days before you saw the first bits of rain to hit the place. it feels like yesterday is the first time we heard anything about this was this a much more sudden storm to develop >> florence was moving really slow you could walk faster than florence was moving. the thing about michael. michael went into the gulf of mexico and exploded because the gulf of mexico really fuels these storms because the waters are so warm. that helps hurricanes to intensify. the waters are 2 to 4 degrees above average. you get in there and it inten intensifies so quickly that's why the storms are so different. it moved into the gulf of mexico and just exploded. >> thank you

right now we go to courtney reagan in panama city beach, florida. this is coming fast and furious. >> it really is. people here are not messing around it was a good point that you made that it did seem to happen quickly. the governor of florida, rick scott, did declare a state of emergency in 35 counties, and made that mandatory evacuation order about 24 hours ago basically said an hour ago that's it, your time is up if you're in the low-lying areas, you're sort of out of time to get to a shelter when it comes to businesses, many of them did heed the warnings and closed as of midday yesterday. big businesses like walmart and lowe's some were able to stay open later, but many started closing earlier than anticipated even the waffle house closed at 2:00 local time here, the one nearby when it comes to crops, luckily two-thirds of the citrus crop in

florida is in the lower two-thirds of the state. most of the storm's path will miss that. when you talk about the storm hitting georgia, the cotton crop is at risk only about 12% of it has been harvested as of earlier this week duke energy is forecasting between 100,000 and 200,000 people will lose power they have 17,000 in total power restoration personnel on standby but they can't get in and restore anything until the winds are below 35 miles per hour. the airports are closed from ft. walton beach to tallahassee. the ports are closed in alabama, mississippi, the port in panama city and the port of pensacola unfortunately we're running out of time and this storm is several hours away there's already been flooding in apalachicola it's coming fast and furious >> your best guess in terms of how many people were able to heed these warnings and evacuate

given the short notice >> we talked to the highway patrol and asked them that same question they said the traffic had been relatively light by sort of late in the day yesterday but when i was on the roads there were not have many people on the roads in either direction which tells me they hunkered down early or they left. then we talked to other people at home depot who were buying plywood, boarding up their homes. we asked why haven't you evacuated and they said we haven't decided yet if we will evacuate so this comes back this sort of came fast and caught people flat-footed. >> ocourtney, thank you very much we'll check back in with you at the top of the hour. trump doubling down on his criticism of the fed this summer he told joe kernen he wasn't thrilled with rate hikes. here's what he said yesterday.

>> i like to see low interest rates, the fed is doing what they think is necessary, but i don't like what they're doing. i will say this, we're normalizing money and that's good, but we don't have to go as fast president trump said he has not folk spoken to jay powell about the federal reserve decisions. >> i think he's dialing it back from past comments >> he said he hasn't spoken with him but you don't think jay powell hears these headlines it's clear messaging >> in a less clear way than before we've moved past the overt statements he said also we have great economic data. >> that's what i don't understand >> this was a newsly summarized, accurate point of view >> it was not out of left field, but to say i don't want to get

involved -- the president when he speaks, no matter what, when he speaks it will have some -- >> but this president speaks often and in very overt fashion. this was less so than the past >> i don't think this will have an effect on jerome powell or he'll change, but i appreciate the theater, watching it play out. >> there was a great question by eamon javers that led to a response i think the response was less than what joe kernen elicited. >>er it'sasterisks. >> all you heard from jay powell is that we may see more down the road potentially >> yet right now the markets are have be a tantrum because of rising rates >> because he's raised the prospect of raising rates faster than the market anticipated.

>> we're digesting it. >> my interest in this, it's hard to make the case this is the strongest economy, things are going wonderfully and the fed should never raise rates cramer has a much more nuanced view things are not as great in some pockets, and higher rates have an impact on things like home sales, auto sales, but also the tariffs play a role in this. that's why you hear from companies like ppg and others. to say you don't want to see it slowing down, that's already slowing down because of the tariffs. it's hard to say this is going wonderfully and we shouldn't raise rates. maybe the economy is not going as well as we think and there are other factors at play, but it's a hard line to walk to say this is the greatest economy, there's nothing wrong with it, and we shouldn't be raising rates. >> you hear from ppg, procter & gamble, pepsi about rising costs which are slowing things down, then you wonder if the fed should also step on the brakes

with a rate hike there's more question about how many rate hikes in 2019 and even a question about a rate hike in december we were talking the other night, it was said december may not be on the table it's not priced in because we don't know how this earnings season will go >> consumer confidence and business confidence is high, but if earnings growth may have peaked, that may have changed directions there are mixed messages to say greatest numbers ever and we shouldn't be hiking. there's always finessing of the phrases used going back to the point, the difference is joe kernen's interviews in davos and three and four months ago at the white house moved the dollar these comments didn't move the dollar >> there was probably no news. >> let's talk more about rising rates. joining us is ed campbell and

ryan payne let's pick up where we left off here, ryan what's your view in terms of whether there is a december rate hike and should we be concerned when we hear about the impacts of rising costs from the likes of ppg, pepsi, procter & gamble? these are not small companies and they're feeling the pain >> i think they are but also unemployment is low. wages will continue to go up, that will offset any of the impact that inflation has on the consumer overall it's a good thing rates are going up things are heating up. that's a positive for the economy. it's a paper tiger that we're concerned that the rates will keep markets down here >> what do you think especially when it comes to wanl growth th >> we've been in this period of incredible growth. this quarter we will see 20% plus year over year that is likely to carry over to q4

we'll see a significant slowdown next year. that's not necessarily a bad thing. we can't continue to grow at rates we have. we have the tax cuts rolling off. so a slower but more sustainable trend next year. and, yes, wages are growing. we want that to happen that's what we need in order to continue to have sustained economic growth. i do think it's a good scenario. >> where are the risks to the markets? to the upside or down side it sounds like you think the risk is to the down side we're close to record highs, yet you outlined a path of uncertainties into next year >> i think the risks are to the down side. the key risks are the stress emanating from emerging markets. that can spill over to developed markets. one key channel is european banks. then, of course, the geopolitical risks from trade,

which is going to raise input costs for us, to geopolitical risks in general maximum pressure on iran and the potential for higher oil prices which can continue to fuel inflation top line >> i have to respecticalfully disagree i think the risk is on the upside i think there's so much cash on the sidelines. i'm looking at millennials coming into our office every day with hundreds of thousands of dol dollars in cash on the side lines. >> hundreds of thousands of dollars in cash? >> we have seen small caps in bear market territory at this point, down 20% from highs, these are indicators of a more defensive tilt in the equity

markets, no? >> growth stocks could be overvalued here. but stock ownership is down 10% in the last ten years. that's crazy americans have not been invested in this market so you have the fuel of the cash on the sidelines coming into the markets. money managers underperformed like they do every year. they have lots of cash to put to work i think the melt up is the big risk >> that's an interesting point i wonder, though, if you see concerns in earnings and a pullback -- my feeling is the millennials have been hesitant to put money to work because they're still scarred by what happened in 2008 >> they weren't invested in 2008 >> but they lived through it saw their parents have tough times i feel like a lot of them are waiting for things to come back down so they can invest but they might get scared off >> that's the dynamic that's changing

it's like okay, i've been in cash and bonds for the last couple of years. i'm making money, i need to figure out what to do with it, and they're way more conservative than our baby boomer clients >> what do they want to buy? cannabis and bitcoin >> stereotyping millennials. >> is that true or not >> no. they have to be convinced that you need risk in your portfolio. they have to be persuaded that that is a good thing to have risk assets for the long-term. they don't know what to do with their money and their scared to make the same mistakes parents did. >> in the environment in which you see, more cautious outlook what do you invest in? >> we're still modestly overweight global stocks, multi asset class portfolio. we think rates are headed higher so we're overweight cash we have our pcortfolios skewed

thwarts t towards the u.s. we think there's a potential for a rotation to happen, but we're not there yet. so we're positioned cautiously >> thank you, guys still to come, walmart wants to collect your personal data, not your address and phone number, but your heart rate and body temperature. as we head to break, a look at the biggest premarket winners and losers there the dow we're back in a couple minutes

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handle if it sounds creepy, it probably is because that data will be relayed back to a central server if it shows a shopper is not satisfied it would sent an employee to offer help >> not just creepy but crazy >> how does it -- >> your heart rate goes up, i'm not satisfied? >> not enough tifrdifferent bras here >> how can they tell if that's relevant is that the worst product you ever dreamt of or the worst product? >> i guess they're trying to compete in an amazon world, where amazon knows so much about you. what you bought before it's a little creepy >> it sounds like data for data sake they have an investor meeting next tuesday we'll see what they say about all of this technology >> i agree with a lot of technology they invested in. this one seems weird >> it makes you rethink the apple watch heart rate check kind of details, which initially

you think how amazing if you can check on peoples health like that and stop issues from coming forward, but it's another personal piece of data that will be collected and accumulated overtime >> you wonder when there will be a pushback from just privacy concerns with everything in the digital world, facebook, google plus and beyond, the idea that you will measure me -- >> i would never use a shopping cart in walmart for that reason or wear gloves there's no way -- >> you have to plug in doesn't feel like a shopping thing to do. >> walmart's multiple, 20 times historically, 16.8 times >> it's hard to argue the small things when they've done so many big things right >> it was up this morning in the premarket after the deutsche bank upgrade

coming up, bill ackman investing in starbucks we will talk about his consumer portfolio which includes burger king, chipotle and nike. let's look at yesterday's s&p 500 winners and losers obvious.

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welcome back you're watching "squawk box" live from the nasdaq market site in times square. hurricane michael is on a path towards the florida panhandle, this is expected to be the largest storm to hit this part of florida. michael is a dangerous category 4. it is gaining strength over the warm waters of the gulf of mexico hi the storm is having an impact on u.s. oil operations. dozens of oil platforms have been evacuated taking 40% of all gulf shore oil production offline. japan's softbank is reportedly in talks to buy a stake in wework. the "wall street journal" says that softbank is in discussions about investing 15 billion to 0 $20 billion. wework is a shared office space

provider third point has increased its stake in campbell's soup from 5.6% to 7% third point is trying to replace the entire board of directors. a big hold up there has been family ownership the two largest shareholders are family members shares of ppg rebounding in the after hours yesterday. that stock was down about 10% during the trading session yesterday after the company warned third quarter and fourth quarter earnings would be hurt by higher material costs and slower demand in places. the stock bounced back after trian partners announced a 2.5% stake in the company ppg says it looks forward to maintaining a constructive dialogue with trian and nelson peltz. shares of nio rose sharply

after bailey gifford announced a 11.4 stake, that is also tesla's largest outside shareholder. nio listed shares on the new york stock exchange last month, they plan to make cars for the chinese market initially but could expand to europe and the u.s. >> it's only made 2,000 cars ever up to the point of its ipo. in terms of scale, it doesn't have any scale whatsoever right now. >> it's also suffered a lot from the share price has from china trade issues and the like. the recent jump is with that perspective as well. bill ackman's appetite for restaurant names is growing. leslie picker has the details on his starbucks order. >> reporter: you can eat all day from ackman's portfolio, you

have starbucks from breakfast, burger king for lunch, oreos for dessert. food brands have been paying off for pershing square. after three consecutive years of losses the activist fund is up 16% this year. his disclosed investments of 2018, nike, united technologies, lowe's and starbucks have been followed by little sabre rattling by the billionaire investor yesterday's presentation on starbucks was complimentary towards management and their strategy saying they're taking the right steps to boost same-store company sales it doesn't appear that will be much fighting between starbucks and pershing in the near-term. starbucks says they look forward to maintaining a productive dialogue with mr. ackman as they do with all of their shareholders a source says this will not be the end of activism at pershing square ackman will do more in the future >> big stake, significant

position for someone who has struggled with performance what was new in his outline for why taking this stake now? it didn't seem groundbreaking it wasn't like he uncovered something unique or new. >> i couldn't get background on whether this would be heldas a active stake or a passive stake. from the presentation, as you point out, there is nothing new in terms of suggestions to management which is his style, where he'll put out these presentations and he'll say x, y, z is what the management team should be doing to boost the stock price. basically what he said is the management team should be doing x, y, z, boosting operations in china, growing in the midwest and the south, improving the mobile app that's what the management team is already doing so, i see the active passive stake as an important distinction because it's unclear which one it is. >> jim cramer last night said starbucks has been rising

rapidly since they came out the beginning of september -- >> up 15% or something >> he was warning people not to buy based on ackman's investment on this. >> that's interesting. ackman says in his presentation that he believes the stock price can double in three years. that's based on hid best case scenario what was his order the drink he brought to the conference >> a venti tango passion tea -- >> tango >> tango passion tea no sugar. >> probably $8 >> venti, a big one. >> leslie, thank you time for the squawk planner. weekly mortgage applications are due at 7:00 a.m. we'll get the september producer price index at 8:30. two fed presidents will speak today. charles evans and rafael bostic have events scheduled. president trump travels to erie,

pennsylvania tonight for a rally. let's check on u.s. equity futures. we are seeing a positive open for the dow jones, up by 31, s&p 500 up in the green indicating an open up 2.5%. the nasdaq looks down about 4%. rising interest rates have equities on edge joining us now with his read on the markets and yields is chris zaccarelli from independent adviser alliance you made the point we have seen a tilt away from growth, a tilt towards value in probably most sharply in the past month. over the past few months does that continue >> i think it will continue in the short run, but by the time we get to the midterm elections you will see a reversion back to growth the economy is strong. corporate earnings have been great. we're heading into the new earnings season. on friday the big banks report and we'll get into the belly of earnings if earnings are positive all the positive news should

bode well for stocks there's a lot of fears on the table now in terms of interest rates moving higher, in terms of trade war with china, and the midterm elections, that's definitely hanging over the market investors are waiting to see what types of investments they should make. >> when we hear a warning like the warning we heard out of ppg, soft sales in china, rising input costs, is that a canary in the coal mine? we were talking to jim cramer yesterday, he was saying it's not a canary in the coal mine, it's a dead canary in the coal mine >> china is a big market around the world and that's something to worry about, but it depends on your point of view. we can work through it and it's a question of moving those sales around the world it's really europe that needs to come back to the table emerging markets need to stabilize. the economy can go on without china, but right now because china is a big part of the world economy, even if we don't have a

direct exposure from the u.s. impacts are being felt in the u.s. >> does the spike in rates speed up and capitalize a shift in investors minds from growth to value? is that what we've seen recently in the market moves? to take that a step further, which key sectors to if he cufon given that move? >> typically when yields spike you see technology start to sell off. technology is considered a longer duration sector in the sense that the cash flows that you will be getting from technology stocks are further off into the future. people move towards utilities, they move towards consumer staples, companies paying out more of their cash flow more quickly. so you move from this risk off sentiment or risk on sentiment to a risk off sentiment. in that environment people will go defensive i think you mentioned healthcare earlier in the segment and you look at consumer staples and

utilities as examples of those defensive sectors. those may work in the short run. as growth accelerates and we move past overhangs, again you want to move past cyclicals. there's a chance financials could do better, indust rams may industrials may do better. you have to wait for things to settle down before sector rotation in the market >> chris, thanks when we come back, the senate wants more information on the chinese hardware hacking story that we told you about last week. we have details next. and coming up at the top of the hour, a live reporter from the florida panhandle where hurricane michael is expected to make landfall this afternoon we're tracking this closely. the latest details for you and later this morning, white house economic adviser kevin hassett will be here we'll get his take on president trump's renewed criticism of the

fed and where he sees the economy. unemployment at moalst 50-year lows you're watching "squawk box" on cnbc

welcome back the top republican on the senate commerce committee is looking into reports of chinese hardware hacking. senator john thune asked apple, super micro commuter about a bloomberg report that the chinese government implanted malicious hardware on motherboards, it's been a confusing back and forth with bloomberg doubling down on the situation and citing over a dozen sources that they have spoken to. we'll see what happens as the senate now digs in as well drug prices at the pharmacy are about to get more transparent. president trump is expected to sign two bills today that would lift gag orders on pharmacists the new laws will allow pharmacists to tell customers if it's cheaper for them to buy a drug at the cash price rather than use their insurance the legislation will apply to

medicare and private health insurance. >> this is one of those about time why would you not have this. >> why can't you comparison shop >> you wonder why prices are too high on healthcare issues. this is a main component of that >> next stop hopefully services also how much is it a c.a.t. scan cost here versus there. senior officials in the trump administration have spoken with dina powell about the possibility of succeeding nikki haley as ambassador to the u.n yesterday the president confirmed that powell is on the short list along with four other candidates he did not name them nikki haley is expected to leave her post at end of the year. she said she has no intention to run for public office in 2020. coming up, you're probably familiar with newman's own products like pasta sauce. >> pasta sauce >> joe is not here, you still get made fun of. >> will sf a goof is a good spo.

>> now you're channeling the italian in yourself? >> yesterday on closing bell we got the adidas ceo to clarify. >> adidas? >> i asked him that on the show, he said adidas >> really? >> yes >> i will retweet it it's on our twitter feed from yesterday. >> i called it adidas, they made fun of me. i asked him, he took their side. >> really? >> yes >> he took my side yesterday over sara. >> was between january and now >> he just caters to his audience >> must be >> back in a couple minutes. 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...

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welcome back, everybody. many companies in the united states and globally launched philanthropic companies. but one company's outlook is to give away all profits to charity. bob, thanks for being here

today. >> thank you for having me >> for those who aren't familiar with it, but newman's own was launched by paul newman. i think it was to raise money originally for kids for camp, right? >> actually, he didn't think it would work when they said he had to put his face on it, he said he'd give all the money away some of the early grant making was for children with life-limiting conditions >> i think about it and a company that is giving away all its profits, that doesn't mean you don't care about profitability at all you must run this like a hard-core company. >> it is we compete, we innovate, we win, we lose, we pay our corporate taxes. we have no advantage to doing what we do in fact, it's a disadvantage to raise capital to run a company like that. but it's worked. we've given away over $530 million since the beginning. between all of our grants and charitable expenses it's about $33 million a year now >> you touched on this being

such a tough industry. packaged goods is getting -- is under siege on all corners how do you innovate and how do you convince people to continue buying the brand >> well, in the food business, of course, nobody's going to buy it again a second time unless it tastes good. you folks know that. and so we're constantly innovating on our product lines. we're constantly doing what any business does. looking how we're going to market changing some of our paradigms of marketing how we're going to treat things. we're getting more focused now on our core areas. pasta sauces, salad dressing, frozen pizzas, dog treats. those are big categories and we're going all of those things >> what are you doing differently? i think you mentioned potentially organic coming to the pasta sauces. >> we're very big in organic always have been newman's own has been a natural, organic company since the beginning. natural is now confused, nobody

really knows because the fda hasn't done a good job of the definition but all of our products are from the garden fresh products. organic is something people want more of and we're happy to do it coming out with pasta sauce in organic. we have dressings in organic >> who are your competitors? who do you look at and say this is who we have to fight against? >> we compete against the big guys we're not a boutique our frozen pizza, california kitchen. or pasta sauces. ragu whatever the case may be. we're a premium level product. if you look at the brands of the corporations, it would be kraft, general mills. those are our competitors. >> they're facing pricing pressure in terms of -- >> we all are. >> right so how do you weigh where they are versus engaging in that price to the bottom competition? because for you, this means a dollar less or 50 cents less

that goes to charity >> it's tough. we are constantly looking at pricing and how we can stay at a premium level. it's a quality question we deal with we think the charitable motivation is a big game changer for us where not giving away a little bit a buy this and we'll give that it's always been 100%. i think that really helps us >> tell us about the latest venture on that charitable giving front commongood.com >> that's a website that we've developed as part of our charitable program it's not about us. it's a place where all charities can come and we can tell through their stories, not through somebody writing about them, they can submit their stories about what they do so the whole tapestry of this incredible sector that america would not be america without a

charitable sector. i think everybody's familiar with it, but few people know it. and it's an essential aspect to our society. over 1.5 million nonprofits in america. >> can i just ask, you said you don't spend on marketing you mentioned that paul had to put his face on the product. he's an absolute legend. we all love his films. in 30 years or 50 years, is there a risk that the brand image will lack something more modern or is that something you think about with the long-term planning >> i offered my face, but it got turned down. no, paul actually when he was alive, his celebrity was declining as a movie star. which he loved, by the way he loved when people would stop him on the street and say you're the popcorn guy. he was uncomfortable as a celebrity. but it was always for him not about paul he was convinced he had to put his face on it to sell it first. he said if i do that, i'm going to give all my profits to

charity. he coined a phrase exploitation for the common good i'll exploit myself, but not for me it's about the purpose we're a totally purpose-driven company. that's where we want to feature in our -- the face forward and that our products have to be competitive on their own >> bob, thank you so much for coming in. know the products well have a lot of them on my shelves. bob forrister chairman of newman's own coming up, a report live from the path of hurricane michael. how people are preparing for this powerful storm. and later, kevin hassett will join us to talk the president's ned itisofheed stay tuned

hurricane michael set to make landfall along the coast. the possible economic impact of this category 4 storm is straight ahead it's a just a week before weed becomes legal for canada. one analyst says there's more room to run. >> i've been smoking since i was born i can smoke anything, man. >> straight ahead. plus a "squawk" news making interview with the president's right-hand man on the economy. kevin hassett joins us to talk about this environment, state of the economy, and much hour as the second hour of "squawk box" begins right now ♪ live from the beati ining h of business, new york, this is "squawk box.

good morning, everybody. welcome back to "squawk box" here on cnbc we are live from the nasdaq market site in times square. i'm becky quick along with wilfred frost and melissa lee. we've been watching u.s. equity futures. the dow is actually in positive territory. it's up by about 30 points the nasdaq down by just over six points following what we had seen yesterday with the down day for the markets. take a look at what else is happening in our headlines today. one of the morning's most notable stock movers today, shares of nio. nio was up by 22% yesterday and is adding to gains today all of this coming from news that bailey gifford now has an 11% stake in nio they're also an investor in tesla. that's helping out shares of nio which are up by more than 11%.

we'll get some fresh inflation figures this morning the september producer price index is expected to show a rise of 0.2% from both the headline member and the ex-food and energy inflation rate. those figures may play into how fast the fed raises rates. something president trump says the central bank is doing too quickly. the president says that benchmark rates don't need to go up quickly because of the lack of inflationary pressure the fed has raised rates three times this year. hurricane michael now an extremely dangerous category 4 hurricane. expected to make landfall this afternoon along the gulf coast courtney reagan joins us now from panama city, florida, with the latest >> reporter: that's right. this is really an unprecedented storm. if it hits florida as a category 4, it will be the first and only hurricane to hit this area at that level we're talking about winds of 140 miles per hour we are expecting a storm surge

potentially somewhere between 9 and 13 feet. i understand when it happens, it could happen very quickly. there's already been some flooding a little east of here in apalachicola. that's sort of where florida sees that bend mark. now, there are 34 shelters that are operational, but it might simply be too late to get there. the government really wanted everyone evacuated 24 hours ago and about an hour ago they sort of said you're out of time with the latest alert that came across there is a state of emergency declared in 35 counties across the florida panhandle. as you can imagine, everything is closed. schools are closed businesses small and large are closed restaurants have stopped serving food yesterday evening for the most part. even the waffle house we went to closed at 2:00 yesterday and you know those often stay open the airports are closed. the ports are closed in alabama, mississippi, and here in florida. duke energy is expected between 100,000 and 200,000 people could

lose power they have 17,000 total power restoration personnel on standby. but they really can only get involved when the winds are below 35 miles an hour when it comes to fixing or repairing any kind of lost power. verizon wireless has already put pre-positioned thousands of gallons of fuel for many, many portable generators. they also have portable cell towers they want to make sure the communication stays intact for as long as possible. they're right now going through their plan and we'll give you updates as we have them. for now, back over to you guys >> thank you very much for that. super low unemployment, high consumer confidence, and higher oil prices are creating some comparisons to 2007 just before the financial crisis mike santoli is here to tell us what's different this time >> some of the atmospheric conditions, there are at least similar. yesterday was the 11th anniversary of the stock market

top in 2007. now, that doesn't really mean anything except that it also was kind of a very marginal new high after having reached one a few months earlier but there are significant differences. a lot of them have to do with some of the issues preoccupying the market right now interest rates being one of them i think the market is seeing the yield pushed up. but it makes the yield curve a little bit steeper the yield had been flat and inverted by the time the market topped in 2007 it had been a couple years coming where housing had buckled and credit indicators had started to flare up in a big way before that. we're not seeing that now. the credit markets are very firm and seem like they're in pretty decent shape however, within the stock market, the message is very mixed. if you looked at the 52-week low list yesterday, it was home building stocks, auto stocks, also asset management. and semiconductor equipment.

i think you can still keep in mind the possibility that all we're seeing right now is kind of a pause in the market, a stealth correction you have the average stock down close to 10% even though the indexes are within 2% or 3%. >> where were interest rates back in 2007 >> they were up in the sixes the fed had raised rates at every meeting for a couple of years going into 2006. and the long end didn't really move you had flattened it out >> because there was inflation >> there was inflation, fear of inflation, fear of a housing bubble that was considered to be housing and oil were considered to be these two sources of potential inflation. >> super spike in oil prices >> in terms of the comparison differences when we also consider the epicenter of the last crisis being the banking system, banks are infinitely stronger than they were then and the share prices haven't run away in the same way financials were the largest sector in the market because the stocks had done so well.

and part of the story i'm telling on credit is there's not a systemic lending issue >> it's not 40-1 >> i don't think we should be talking about that this time even if you go to prior cycles, when consumer confidence is high, if you look out a few years, usually you have a little difficulty >> valuations? >> they're okay. they weren't very expensive in 2007 based on the earnings we thought we were getting. >> stick around. we're going to continue the discussion for more on rising rates and market head winds, we're joined by ali mccartney and gabriela santos good morning to you both gabriella, if i start with you, the rising rates have been expected but the pace we jumped in the last week or two, is that a concern? >> the pace is always the concern, right we would agree that rates are still rising from pretty low levels at this point they should also

equal higher stock prices far little bit longer. that relationship can still hold but it's always the pace that's a little bit unnerving we saw that in february as well when rates moved up very quickly and the market took a little bit of time to digest that we need to see yields stabilize a little bit and the stock market should be able to absorb it especially because this time it's not been driven by inflation fears. it's more about a good growth backdrop >> is the president right to raise concerns about how fast rates are rising he points out, too, you don't have inflation >> we were speaking about the 2006-2008 period the fed used to raise rates 250 basis points a year. we're talking about 75, 100 basis points a year. this is still a gradual pace of both short-term and long-term interest rate rises beyond a one-week move. so we should still be able to reabsorb this. >> one of the justify sets is

earnings growth has been strong the last quarters. do you expect that to continue in the next quarter? if and when it does start to slow the pace of growth, is that going to be a trigger point for investors? >> that a great question i think also the trigger is the right word that's what you're looking for you have the earnings from the second quarter, 26% expansion. it was super broad based it was geographical. that's what you look for in a really continued healthy expansion. we see that continuing in q3 and q4 now, the question is what starts to happen next year. right? because you don't have the tail wind of the changes and the tax policy you saw there is this inflection point where we are going to continue to see earnings growth and that's going to continue to move the market opposed to maybe some other things that have in the past but the pace of the earnings growth is definitely going to slow i think that is what is causing additional uncertainty and concern in the market with some

of the other things that you have, for example, protectionism. >> so things get worse in just a matter of months, then, it sounds like you're saying. if you're saying that q3 is going to be good and we're going to enter q3 earnings season with a look at q4, stocks will absorb those earnings to q4 then we're looking at 2019 and you say things are going to slow what's the upside here to stocks going into next year >> i think the upside is we're predicting about a 6% expansion next year. right? which is not a 26% that we saw last quarter but it's still particularly meaningful i think what you're going to start to see is transition from growth to value which we have been seeing already in the market and "b," i think we've had almost a ten-year with the exception of the fangs of rise up people buying riseups and asset management that you were talking about not experiencing that growth >> it makes it easier to buy an

index. >> exactly i think we're going into a market where it's going to be discreet you're going to want to be in the financials which we talked about. you're going to look for things that are low relative valuation. and you're going to have to pick and take some risk i'm an old vol salesman. the fact we got a 12 to 17 move in the vix on friday, that shows me that markets aren't complacent, right? and we need some volatility back in this market because there are some meaningful downside risks >> will china's -- the china trade discussions start to weigh on earnings more significantly throughout the rest of the year? and how big of a lift for markets could it be if that was an issue that was resolved >> that is something everyone is watching over q3, q4 much more the outlook for 2019 that we've been discussing and the impact any terrorist might have not just on economic growth but also earnings growth and we really think a lot of that risk has been priced in outside of the u.s., right

it's the been the beleaguered emerging markets, in europe, that's where it's been now the focus is shifting. how about the outlook in the u.s. things aren't looking as rosy here either. one point we would make is it would have an impact next year on slowing earnings. and as a result where we should be looking for more upside is where a lot of that risk has been priced in i would argue here for having emerging markets as a really interesting play for 2019. >> mike, a lot of people talk about this rotation from growth to value what does that imply not really for the underlying sectors but for the headline markets >> the markets will have a little bit of a harder time getting a lot of upside energy i only say that because we talked about this last night the value sector, the s&p 500 value is 46% of the s&p. growth is 54%. if you're talking about taking a few percent out of growth and some equivalent percentage move in value, you're kind of stuck as an index. and that's just kind of the corner we painted ourselves into

i actually think there's another move that people should talk about which is to quality which is a little bit different from value. basically less leveraged companies, more sustainable earnings that's kind of like growth, but not entirely the same thing. >> thank you both for joining us when we come back, pot stocks skyrocketing ahead of legalization in canada we will speak to an analyst who's recently upgraded some names in that sector right after this and later, council of economics chair kevin hassett will join us stay tuned you are watching "squawk box" right here on cnbc x1 is here to help.

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and even manage your account. finding your xfinity username or wifi password, restarting your equipment, or paying your bill is easier than ever with x1. x1 help. another reason to love x1. say "teach me more" into your voice remote to get started. welcome back, everybody. a new partnership just announced between amazon and insurance company travelers. the two are joining forces to offer home insurance amazon's alexa virtual assistant will be able to handle any policy questions that might come up you can see both those stocks higher this morning. we are one week out from canada opening doors to recreational marijuana use

joining us now vivian azer from cowan. it's great to see you. tillray and canopy this was a bump up because the stocks have run so much. what should investors know >> in terms of the target price changes, this is a good opportunity for us to go back to forced prince pbls and think of the durability of disruption we're bringing a $7 billion illicit market into the legal market so it does require a different valuation framework. and so what we've done is applied an underpriced value to sales multiple and then factored in growth. over the next five years

which is astronomical. that's what you want to factor in as we think ahead in terms of catalyst for the stocks, obviously supply is going to be critical one company that we don't cover talked about earlier this week, they're going to be short. and that is a concern. >> what is the driver in terms of the pickup in supply? and what would be the driver of revenue growth will it be more on the recreational side? or will it be more on the medical cannabis side especially after we saw gw pharma with its drug get rescheduled so the treatment of the cannabis will be different in the eyes of the fda. >> it's definitely adult use as you see profits increase outside of north america in regards to medical, it takes time for those markets to get on board. for example, germany which accounts for 15% of canopy's market is tight. because the lps are trying to

get all the inventory stocked into america as the adult use market comes on line, that's catalyst number one. catalyst number two down the road is medically internationally. >> vivien, i think of those coming on board fast and furious with this. i don't think you can discount entirely the idea that the federal government is going to say no more at some point. we've spoken with the fda commissioner about this. he's concerned about anything you're inhaling. may look at things from other directions it just makes it hard for me t see these massive volatility spikes and beyond with what happens with these stock prices knowing that that regulatory overhang is still there. at any point you could see something change and not necessarily for the good for those stocks >> well, sure. none of these companies participate in the u.s >> you don't think any of these are based on anything that might happen in the united states, any

speculative fervor around that >> there could be some there are primary clients. they recognize the u.s. is an opportunity. but that's not what they're playing for. because they see ex-u.s. opportunity insignificant in itself retail investors who are driving a lot of the volatility, hard to say what they're pricing in. the u.s. is a large market when we talk to our washington policy team at cowan, they have a hard time thinking that we'r actually going to take a step back the stigma continues to roll off the midterm election actually serves as an interesting catalyst we've got michigan and north dakota with adult use ballots. utah just passed medical >> there are so many risks associated with this that it seems to be getting overlooked medical is a different story, i think. particularly if you're not doing the inhaling the medical, i totally get that. >> how much in the prices is

people's takeover speculation and hope that there's going to be strategic investments from bigger companies whether it's pharmaceuticals, tobacco, or alcohol companies? i ask in the fact that tillray and their bond issuance. is that because it priced itself out because of the share price run-up >> no. i think on the contrary, it's all about kind of balance sheet management and the fact these companies are large and credible nuf to access as an interesting evolution of the industry. >> are they big enough on a revenue basis. it sounds like a lot of these companies should have to raise capital. expanding production takes a lot of money all these companies need to do that, correct? should we expect more capital raises >> probably not for canopy growth they got a $4 billion from the brands but absent that, yeah. the buildout is expensive. this is a global opportunity you're seeing capital being

deployed in europe and latin-america as well. >> does a rising -- concern you about tapping the markets? it's going to come at a higher cost >> i'd be more concerned about the consumer staples companies though >> like? >> i'll leave it at that let's focus on cannabis. no, the demand is there in the capital markets for good, large cannabis assets. >> for the canadian rollout, too, i think what investors think is it's going to be legalized on recreational base, but province by province, they each have their own rollout date, correct? so they make their own rules so federally it's okay in canada, but you can have a province who says we're going to wait a month, we're going to wait two months. we won't understand the full size of the market for months, perhaps. >> easily for months even if e-commerce is up and running in every province, brick and mortar retail will not in the largest province of ontario. >> do you think there's more money to be made in the

producers of cannabis or in the long run in the picks and shovels? >> ultimately, we actually think brands are where you're you're going to get the best value in supply chain by the construct today, all the canadian lps are integrated. >> thank you so much we know you're super busy with this sector. still to come, sears preparing for a bankruptcy filing this week details on that. plus campbell soup shows down with dan lowe after his firm increased the stake in the company that they have the story on that coming up next and then kevin hassett council of economic advisers chair joins us to talk rising rates and much more don't go anywhere.

♪ welcome back to "squawk box" here on cnbc we are live from the nasdaq market site in times square. the u.s. equity faucutures at ts hour have been mixed dow futures up by 49 points after the dow was down by 56 yesterday. s&p futures right now up by four points that's regaining the ground it lost yesterday on the nasdaq which finished up by about two points, down about that same amount this is an undo of yesterday's trade if we continue at these

points where we sit now. take a look at what happened overnight in asia. you're going to see the nikkei closed up slightly as well as the hang seng and shanghai european equities in the trading taking place are red for the major averages ftse is flat but the cac is off and then check out treasury yields here in the united states you're going to see that the yield on the 10-year pushes up a little bit 3.227% it's right around where we've been since we started this rate hike increase just over a week ago. japan's softbank is now in talks to buy a majority stake in wework aboutinvesting $15 billion in the office sharing company remember we broke the news about their $3 billion investment in wework just last year. sears is reportedly preparing to file for bankruptcy

as soon as this week sources tell cnbc the retailer has reached out to banks to arrange bankruptcy financing although sears continues to discuss other options. cnbc reached out to sears and m3 but hasn't received comment. ceo and top shareholder abbey lampert has been trying to keep the company going for years. dan loeb's third point raises the stake in campbell soup to 7% that's according to a new s.e.c. filing third point a unhappy with their performance and is trying to replace the entire board of directors. that stock right now up by 1.5%. drug prices at the pharmacy are about to get more transparent. president trump is expected to sign two bills today that would lift so-called gag orders on pharmacists. it will allow pharmacists to tell customers if it would be easier to buy at a cash price

rather than use insurance. it will apply to medicare and private health insurance coming up, the economy interest rates, tariffs, and more much. kevin hassett joins us for a news-making interview right after this break

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good morning and welcome back to "squawk box" here on cnbc we're live at the nasdaq market site in times square among the stories front and center, mortgage applications fell 1.7% last week according to the latest figures from the mortgage bankers association the average 30-year mortgage rate jumped nine basis points to 5.05%. that is the highest level since february 2011. snap has announced new scripted shows for its snapchat service. it struck new partnerships with hollywood studios and writers to stem a decline in users. the drop in users is the key

reason snap shares have lost about half their value this year with investors keeping close watch on interest rates, two federal reserve -- scheduled to speak at separate events in sports, the yankees are facing elimination at the hands of the arch rival red sox. in last night's alds game four, it was drama down to the final out with two outs on the winning run. craig kimbrel got torres to ground out at third base the out call was upheld after replay giving the red sox the win. final score 4-3. boston will face the houston astros in the alcs starting on saturday president trump making comments on the rate hikes last night. >> i like to see low interest rates. the fed is doing what they think is necessary, but i don't like

what they're doing because we have inflation really checked and we have a lot of really good things happening so i will say this we're normalizing money. and that's good. but i think we don't have to go as fast. i want to be able to pay off debt also and very importantly, i think that the numbers that we're producing are record setting. i don't want to slow it down even a little bit. especially when you don't have the problem of inflation and you don't see that inflation coming back. at some point it will and you go up i just don't think it's necessary to go as fast. i have not spoken to him about it no, i like to stay un-involved with that. >> joining us right now is kevin hasse hasse hassett. joining us from the white house. it's great to see you. >> good morning. great to be here >> let's talk about the economy first up we got some strong numbers on the jobs front last friday. >> sure we did >> we saw the unemployment rate

fell to the lowest level in 50 years. >> i was seven years old at that level. not only that, there were upward revisions to august. late in the quarter datawise is staying north of four. so absolutely we're looking at the positive response to president trump's policies. >> do you see any signs of weakness >> not within our economy. the thing that is starting to be worthy of note is emerging markets are starting to show some stress. and i think the imf put out a forecast that was a couple of tenths lower for global gdp. i think our models concur with that the rest of the world is looking a little bit weaker. now that, politically is interesting. one of the democrats' main talking points is the whole world is booming i think the current trajectory suggests there's some lie to that really. but i'm very concerned about emerging markets if you look at the indices, you

can see they're heading in a way that's troubling >> the imf lowered its global growth forecast. but also for the united states and china slightly because of concerns about the potential for a real trade war playing out over an extended period of time do you think their forecasts are correct in that front too? >> right now we're looking at gdp growth of 7.5% this year carrying on to something north of 3% next year. i think that's more optimistic than they are. i think we're all at the white house hopeful that trade can resume with china. but president trump is serious about it if they don't behave a little bit better, stop stealing our intellectual property, this could continue longer. >> the president made those comments yesterday about how inflation has not really shown up and that's certainly true. >> it is >> we've seen in a lot of the traditional places that we might measure it but we are starting to see places where wages have increased slightly and then you have just anecdotal

evidence from companies. companies like ppg which issued a profit warning earlier this week on concerns not only of weaker demand in china potentially in europe and the u.s. for cars, but some higher prices some of the biggest price increases they've faced in awhile do you see it popping up through the pipeline anywhere? >> you know, i think talking about whether inflation is popping up, i'm starting to get into the turf of the fed and we at the white house really do respect the independence of the fed. even what the president was saying last night made that evident where he said, you know, he stays out of it he thinks interest rates could do this or that. the fact is that the president's respect for the independence is clear in the quality of the people that we sent over there so anyway, i have to kind of stay away from the inflation picking up conversations >> i understand you don't want to be telling the fed what to do obviously, that's not your -- >> can i say more abstract away from the data a little bit but a broader point that's really important is that when you get a capital spending boom like we

have, that's a big increase in supply and in our models at the cea, that puts downward pressure on so we think the fact that growth is coming from capital spending opposed to a big surge in consumption is really quite relevant >> a finer point on inflation. obviously this is not you getting to tell the fed what to do, but to do your job you have to be looking to threats to the economy. inflation would be one of those threats. what are the places that you watch very closely as an economist to try and just know what the impact would be for the broader economy? >> right so i look at the pce deflator. i look at wages. wages have picked up a little bit over the last three months growing at an annual rate of 4% which is significantly higher than last year there are a numb of indicators that the economy is strengthening. again, if the wage growth happens because productivity growth is out there, then that suggests that the models are working the way we expect. it's something to keep an eye

on we are absolutely constantly monitoring risks and the biggest right now is stress in places like turkey and venezuela and argentina and china is going to lead to the emerging markets to sort of head into a direction that's more extremely south than we've seen so far one of the things about the emerging markets and that can come back at the u.s. a little bit is people tend to when they get nervous about it, they'll ditch the asset class. even countries doing great can find there's a big reduced demand for their bonds that's the kind of thing we're watching out for >> at what point do you get concerned about the emerging market's impact on the united states when you look at the chinese stock market, that is in bear market territory and it has been for a long time. 11% of s&p 500 revenues come from the asia pacific region to bring back the example of ppg, part of the warning was a slowdown in china specifically just because it's happening in china doesn't mean there's no impact here on u.s. companies.

so how does that plug into your model? >> you exactly nailed the numbers. that's about the way that i've been briefed about it. the thing is, though, that again, you know, if china comes to the table and as is the case with the u.s. mca, where we got this great deal with mexico and canada we've got a lot of progress with europe we've got a closed deal with korea. basically if something like that happens with china, then everything in china is going to turn on a dime and, you know, we're hopeful that that's a scenario people should keep in mind. >> that sounds like a bargaining chip to say to the chinese -- that doesn't sound like a bargaining chip for the chinese because this is something we in the united states should be concerned about. if you told any s&p 500 company that 11% of your revenues could be on the table, i'm sure many of the ceos would say we need, we the u.s. need to get back to the bargaining table and make this work. do you feel that -- does the administration feel that urgency? >> yeah. absolutely we've had urgency about the chinese situation from the beginning. we can see clearly the behaviors

that we like to have changed and the chinese understand what that is so we're hoping we can move forward with that. there's one last thing about china that you might recall when we were talking about the tax cuts last year we were saying, well, actually since capital is mobile in the u.s. but labor is not, then it's labor that bears the corporate tax. we should expect to see wages go up in china it's the reverse. capital is not so mobile if you put a tariff on china, then you're hitting their stock market you're hitting the immobile capital. we're seeing that strongly in the data i think that puts a lot of pressure on them because labor is more mobile than capital >> what else is your data and your models that you mentioned telling you about what the actual growth rate in china is going to be this year? put the stock market aside do you think that underlying economy is hurting a lot more than they're letting on? >> you know, i have a -- i face their data with a lot of skepticism you know, there are things we can do to try to noodle through what's going on, but, you know, i can't talk necessarily about that but i think china's looking

like -- yeah their data don't seem to vary as much as the other indicators suggest they should. >> to what extent do you think they are concerned or optimistic about the fact that you've made trade deals with some of the other countries you already mentioned? >> i would hope that would bring them to the table, but they've got a lot further to move. i came into this administration as the globalist, right? and when i started to look at the data at the misbehavior, really, of the chinese towards the u.s., then we documented things like they're stealing 1% to 3% of our gdp every year. so they've got a lot of maif behaviored that need to change which has been partly our point. that china needs to stand up and become a grownup member of the wto, the club of developed nations and stop doing things like forced technology transfer and the rest. >> do you see the chinese stock market as gaining an upper hand of the united states you made it sound like the

pressure they're feeling with drive them to the bargaining table. have you seen the decline in shanghai and hong kong and think, you know, that's better for us >> i'm not a negotiator. my wife doesn't even let me near the checkbook, right so i'm not involved in the negotiations if it were me and i were looking to the harm at equity prices then i'd be thinking twice about their current position >> i want to broach this next question carefully i don't want to with put you in a position to talk about something outside of your purview. steven mnuchin said he is concerned about the yuan's decline. it's been falling rapidly even this week in a couple of cases his concern is that if this is something china is doing intentionally as a way to kind of make their exports more attractive to what's happening in the united states you know how that happening.

i won't ask you to get into the negotiation on this point, but just in terms of how you look at the dollar and the dollar strength, what that means for your economic forecast next year >> right i think first secretary mnuchin is all over this he's got a great team of people that know everything about currencies that follow this stuff. as an economist, the one thing i can say is if you come up with your best model of the currency, then there's a big standard around what the right value is at any point in time if you're going to make the case for manipulation, you'd want to show the currency had moved outside of that. and frankly that's a big test because currencies are noisy >> in terms of how the dollar figures into your forecast for next year. >> the strong dollar is definitely part of the strong u.s. economy i think that american investors are throwing their money at the u.s. economy because they're optimistic about president trump's policies and that does put upward pressure on the dollar >> does the u.s. ultimately want

the chinese currency to be free floating if it was, it would be significantly weaker than where it is now. >> you know, i'll let our current position on policy be treasury mnuchin's place but i think we like market determine just about everything. >> to switch things back to the u.s., what do you make of the strength in oil prices of late and whether that's going to weigh on economic activity moving forward >> you know, i think that when you guys were asking me to think about risks, then that certainly is a risk to the outlook because one of the things you notice in the history of oil prices is that there's kind of a non non-linearity where all of a sudden you jump to a pretty high level. and there's a risk that we're in that non-linear portion of the curve right now. and if global gdp doesn't follow the imf forecasts but recovers quicker, that could put a lot of upward pressure on oil prices. we carefully modeled on the u.s. economy. and the interesting thing is the negative effect that used to be a big deal is much less of a big

deal because we're such a big oil producer now we get a negative effect for higher gas prices and so on. and those two almost cancel out. it's been a big change. >> have you modeled the effects of higher interest rates on the economy and at what level do you think it does start to weigh on the gdp growth that you can expect >> yeah. we've got a big model with 200-something variables that we follow right now the interest rates that are consistent with our growth forecast are about consistent with the fed forward guidance >> you know, kevin, most economists will say the economy is strong. but they look at two sectors and how they have failed to grow this year. autos and housing. they think maybe that's trouble under the hood but in the first and sect quarters, they fail to maintain their gdp and have been shrinking. that's causing some concern, maybe showing signs of stress by the consumer with higher costs

from higher interest rates and higher oil prices. how do you look at -- are those no longer good indicators of the economy? or is there some sort of d disconnect going on. the cars have such high quality. used to be the car would wear out and you'd have to buy a new one at a relatively high rate. i think it's possible we're level adjusting to a share of autos in the gdp on the housing side, one of the things that often precedes a recession is that you get a big housing boom after real estate prices skyrocket and then that housing boom drives real estate prices down because there's this big increase in supply and that puts a lot of pressure on lenders and so i think that if you're thinking about does this recovery have legs, then having housing moving slower than it did the last time we were booming like this is probably something of a comforting

thought. >> we asked you a lot of questions about potential threats to the economy that could be to the downside last question. is there anything that could lead to a better economy next year than you're anticipating. >> i think absolutely there are things that could surprise on the upside one is policy. president trump has an aggressive agenda he talked about back to the campaign and we're not done we've got deregulation we could keep doing and we've also got an infrastructure plan, for example, that we were hoping that we could move this year but i'm sure that president trump and the team will think about whether next year is a better time. if that big infrastructure project were to go through, that again increases the quality of capital of the u.s it could be a big positive for the economy. >> it's always great to see you. we appreciate your time today. >> thanks for having me. >> kevin hassett still to come, stocks to watch ahead of the open. plus the latest on murk hihurri

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hurricane michael upgraded to a category 4 storm. as it churns closer to the florida panhandle. meteorologist kaylee deon joins us from cnbc headquarters. she has the latest on this this is certainly coming up faster than people had anticipated. >> it's just a mind-blowing storm. it has exploded over the last 24 hours. so let's start by looking at the radar and the latest update with this you can just see by looking at the eye, it's a very closed off eye. and it continues to intensify. the latest hurricane hunters that have dropped some of that data, pressure is still dropg.

as the pressure tightens and drops, the wind speeds are going to continue to go up and we had just had an update of 140 mile-per-hour sustained winds at this point. also if you look here on the outer bands, they're still just offshore of tampa. those could bring tornadoes spinning out that's why there's been a tornado watch in effect and will be most of the day as the storm moves on shore, peak wind gusts could be from 127 at panama city it could go up to 150 to 170 miles per hour then it will continue to move inland and hold onto hurricane status all the way into south georgia so this is going to be a very strong storm to watch. it's going to make landfall after lunch today. more details coming up coming up, today marks homeless people's day. we will speak to david wolfe founder of leesa sleep and aly

raisman from the u.s. gymnastics team about raising awareness "squawk box" will be right back after this quick break making my dreams a reality

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all right, folks let's take a look at the futures this morning you've been watching particularly what's been happening with the bond market that's put all kinds of concerns in the equity market this morning we're relatively flat as we look through some of these issues dow was down yesterday, but up about five points right now. s&p was down it's down again by two points. and the nasdaq is now down by over 26 points concerns kind of playing out across the board as we watch what's also been happening in the treasury markets let's take a look very quickly at the treasury markets right now. because you're going to see that the 10-year note was just around 3.25% earlier this morning

that's what we've been watching closely this morning. >> the dow is holding in the green here mcdonald's is upgraded to a buy rating that's certainly helping the dow. mcdonald's stock is up by just about a percent in the premarket trade. $200 price target here from guggenheim that's a lift to the dow jones industrial average i don't know if we can take a look here. dropbox added to jpmorgan's analyst list jpmorgan sees an outperformance for the stock amid a atmosphere with tech stocks you see dropbox shares there up by about 2.9%. we're also watching ppg. nelson peltz's trian takes a stake. it is up 3% today. still to come, new data out this morning giving markets a read on the housing sector we'll find out what's next in

this rising rate environment 10-year as we just checked in at 3.223% this morning. we'll be back on "squawk box" in just a couple minutes. 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.

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a developing story hurricane michael strengthening to a dangerous category 4 storm and it's on a path for florida breaking economic news a key read on inflation just 30 minutes away plus rising interest rates >> i like to see low interest rates. the fed is doing what they think is necessary, but i don't like what they're doing >> call me a little cautious i think we can go higher, but the stocks takes us higher are the wrong stocks if you believe the economy is in good shape. >> should investors be worried we'll bedate as t-- debate as te 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, everyone welcome back to "squawk box"

here on cnbc i'm becky quick along with melissa lee and wilfred frost. joe and andrew are both off today. we've been watching the futures. things are relatively flat it's up by seven paints on the dow. then the nasdaq under pressure again even though it ended up yesterday, it has been a long downward streak for the nasdaq now indicated down 32 points treasury yields continue to hang in where we've seen over the last couple of sessions. maybe since friday of last week. 3.22% for the 10-year right now. our top story this morning, florida's governor warning hurricane michael is forecast to be the most destructive storm to hit the panhandle in decades courtney reagan is there and joins us with the latest >> reporter: hi. we have recently measured 145 mile-per-hour winds for hurricane michael. this is going to be an unprecedeunpre unprecedented event.

right now you can see behind me there is still beach we don't have a storm surge here yet in panama city beach, florida. but east of here in avp latpal a apalachicola, there has been a surge. there are 34 shelters. we understand there are some people there but it's basically too late you haven't gotten to a public shelter yet. everything is closed when it comes to businesses, airports, ports themselves even the air force base by here had their fighter jets moved in some cases to texas. of course there are national guard troops some 2500 ready to act if necessary. 340 florida patrol members as well as much as 200,000 people could be losing power. we spoke to verizon. they say that they have portable cell towers, portable generators, thousands of gallons of fuel for those generators

ready to deploy when they need it right now they're watching the situation like everyone else this is life threatening conditions so everyone needs to be very careful and pay attention to all the warnings i promise we'll do the same thing. lastly i want to talk a little bit about the crops. luckry a lot of the citrus crop in florida is in the lower two-thirds of the state so it's out of the way of where most of the damage is expected however, the cotton crop in georgia is only about 12% picked so that really could be at risk. for now we're going to send it back to you guys and keep watching this storm. >> thanks very much for that investors closely monitoring hurricane michael as well. taking nearly 40% of all gulf shore oil offline. prices right now as you can see oil slipping a little bit off recent highs new data out this morning giving the markets a read on the housing and mortgage industries.

diana olick has the recent numbers. what did it show >> it shows the borrowers don't seem to like a five in their mortgage rate. that's what they got for the first time in eight years. so mortgage application volume fell 1.7% for the week according to the mortgage bankers association. seasonally adjusted report, volume was 15% lower compared to a year ago now, refinances fell another 3% for the week and were 32% lower than a year ago. applications down 39%. the refie share two years ago was 62%. now, interest rates are nearly a full percentage point higher than they were one year ago. the average rate on the 30 year fixed crossed over to 5.05%. that's for loans with 20% down the highest since early 2011 and that's an emotional line even if it's not historically high

now, in order to afford more home, more buyers today are turning to riskier adjustable rate mortgages they have lower interest rates for their short fixed term but then can adjust higher since the end of august, the arm share has increased to 7.3%. and that as the 30-year fixed rate jumped up a quarter of a percentage point all of these numbers are on cnbc.com right now back to you guys >> that seems crazy. >> it does >> the idea that adjustable rate mortgages, these people don't realize the rate environment is going to go up, up, up from here >> adjustable rate mortgages can be fixed for up to ten years and if you don't expect to be in your home for longer than that, it's a great option because it is fixed for that term if you expect to be longer, absolutely rates could go up significantly. >> have we seen an uptick in interest onlies? >> no. in fact, on the arm loans right now, you do have to pay

principal which is different than a decade ago when it was no money down, no interest, nothing. those are not the loans today. >> thanks. joining us now cheryl young, danielle hale. ladies, great to have you with us danielle, i'll start off with you. it seems like we're getting two different pictures of the housing market we've got the home builders which are basically a 52-week low. indicating it's not very good. and yet we have an environment where supposedly it's difficult to find a home so what is the truth here in terms of the health of the market >> yeah. depends on your perspective. so as a seller in most markets, it's still a good time to be a seller inventory is still relatively limited. builders are not optimistic. they're not building as much as the market demands and part of the reason we're seeing that is builders are finding it difficult to build entry level homes affordably and that's what the market is demanding. >> cheryl, in terms of the 5%

mortgage rate that diana said borrowers don't like fives in their rates. is this a case where people have to adjust? this is still historically low or has a 5% rate been so long in the rearview mirror that it's going to be even longer in terms of an adjustment period? >> yeah, well, i think there is a lot of difficulty in the housing market right now a lot of head winds for home buyers like danielle said, inventory is very limited we've seen affordability also decrease especially in that starter home market. so when you tack on higher mortgage rates, people are actually seeing costs rise for housing. so i think it's been sort of propped up, the demand for housing in the past several years. but now we're seeing that low inventory and increasing home prices really catch up with people >> danielle, which cities look most vulnerable in terms of house prices >> so house prices are most vulnerable in areas where there's not a lot of building. so that tends to be in areas

with limited land availability and also in areas where, you know, there's not as much price run-up we've seen inventory come back in a handful of expensive cities in san jose, california, for instance and seattle. we're seeing more homes come on the market part of that is due to construction part is buyers taking a step back and maybe reassessing with high prices and high mortgage rate where is that leaves them in position to whether or not now is the time for them to buy a home. >> do rising rates shake out investors, cheryl? or the opposite? who gets the upper hand? a buyer to live in the home or one to buy and rent it >> so those looking to buy right now, that's actually going to be a major head wind for them i think that people who have purchased a home in the last six or seven years have really taken advantage of those low rates but that also means that those re-fi numbers are going to stay

down with that low demand. and investors, of course, they're still out there and liking i think people are looking to capture low rates because they are still relatively low compared to, you know, seven-plus years ago >> ladies, thank you cheryl young, danielle hale. when we come back, a businessman and and olympic gymnast teaming up to helpnd e homelessness they'll join us when "squawk box" comes right back. place, the xfinity xfi gateway.

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past anything that stands in its way. ...well almost anything. leave no room behind with xfi pods. simple. easy. awesome. click or visit a retail store today. welcome back to "squawk box. checking the futures right now we are looking at a higher open at least for the dow jones industrial average indicated up 14, 15 points now. being helped by an upgrade of mcdonald's to a buy rating at guggenheim today is world homeless day. that's a day we look at an issue that affected millions in the united states and countless more around the world our next guests are trying to tackle the issue of homelessness joining us is david wolfe. he is the cofounder of leesa sleep. and aly raisman who is the

former captain of the u.s. women's gymnast olympic team welcome to both of you >> thanks for having us. >> david, let's talk a little bit about what you all are doing when it comes to homeless day and what you're doing in terms of bedlessness what is that people who don't have a bed to sleep on >> well, today is world homeless day. we're trying to raise awareness for the issues and also the solutions that we're involved in there are places you can go for shelter if you're experiencing homelessness most of those places don't have comfortable mattresses when we started leesa, we wanted to provide one mattress for every ten we sell. we've donate d -- we have upped it to one to one to help on this day. >> aly you have taken on a bigger role in advocacy projects and things you've been talking about. how does this fit into that?

>> i think in the last year i've been so grateful for all the support. and i realize the platform that i have and i think it's so important that, you know, i think there's so many people in the world and if we all focus on things we're passionate about, things that will make the world a better place and have empty for people to do the west we can to help people, that's important. so there's so many brands out there. i've been a fan of leesa i used the mattress long before i worked with them when i like a brand, i'll research it online and if i don't like what they're doing, i switch to another brand. the partnership, we've been working for a few years now. i saw all they did and wanted to help in any way i could. >> choosing your issues in which you advocate, how important is it that the issues are apolitical i think you won't many people out there that say let's improve conditions for homeless people but there are some other issues that may veer towards the political. how do you view that >> i mean, i just think it's

important to do whatever we're all different and we all -- i think it's important to do whatever means something to you. and so, of course, speaking out on protecting children and standing up for women's rights and helping people that are homeless and i've visited homeless shelters with leesa. just to be able to see the kids' face when they open up a mattress these are such young kids. the excitement, it's just so incredible and means so much to me it's inspiring to do more and to be part of such a brand that really cares it's really refreshing and hopefully more brands will follow in their foot steps >> i guess the lack of a mattress and a bed is one part of the homeless problem. what else given your knowledge of this area needs to be done? >> well, that's a fantastic question really, i thought about homelessness as, you know, someone in the street. you're going to put your hand in your pocket. have you done that today but actually these are people that suffered from extreme trauma the thing that's missing in their life more than anything

else is dignity. things to give them bag their dignity, a comfortable bed is one way to do that but talk to them i thought about look behind the cup. talk to them ask them their name. understand and give them a little dignity and from that, they can wake up the next day feeling a little better because what they need is a helping hand we call it the circle of love. aly is part of the circle of love so are the shelters. everyone at leesa feels it every day. it's going to work to make a difference. >> aly, in terms of the 2020 olympics, have you made a decision are you going back >> i haven't i'm not training right now i'm working a lot just taking care of myself i think it's the first time i'm really listening to my body. i meditated this morning i've been trying to meditate a couple times a day and really take care of myself doing a lot of self-care so i haven't made a decision yet. >> well, you look great. thank you for joining us with this incredibly important issue. again, aly raisman and david

wolfe the ceo of leesa still to come, the biggest threats threats. jeh johnson is here to talk about the key cyber threats to the unitedtas. ste

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♪ welcome back homeland security secretary christine nielsen will be testifying on capitol hill with the midterm election weeks away, questions remain about the election infrastructure. joining us now former homeland security secretary under president obama, jeh johnson >> good morning. thanks for having me >> before we dive into the election, something we were just commenting on in the break with you which is you think the whole cybersecurity threat that the u.s. faces at the moment is going to get worse before it gets better. >> correct i came from the department of defense before i joined homeland security so my orientation was counterterrorism which i believe needs to continue to be the corner stone of that department's mission, of dhs's mission.

but i quickly learned that cybersecurity has to be the other corner stone it's not just a threat to our homeland there are attacks daily, hourly. i do believe that bad cyberactors including nation states including russia and china are tenacious and ingenious and the threat is going to get worse before it gets better. those of us on defense have yet to turn the corner >> is the nation state threat part of this relatively new and is the china state part of this new and is it rising? >> it's not relatively new you have to put the cyber threat in different buckets espionage, the potential for sigh e cyber attacks, hacking, rans ransomware part of offensive cyber activity is espionage, that we're all fairly acquainted with but there's also hacking and

stealing, cyber theft, theft of intellectual property. which the chair of the council of economic advisers talked about. so you have to put these things in different buckets in order to defend against them. >> you feel they're better prepared for midterm elections than for 2016? >> i believe that we are better prepared now state election cybersecurity is in the hand of state and local election officials i think they got a somewhat late start. some are much better than others they're making progress. i think there's a lot more to do i believe that the real threat aside from election infrastructure cybersecurity, the other threat we have to be concerned about is fake news and the publication and republication of extremist views which has a cybersecurity component to it. >> facebook and twitter, you're talking about? >> -- still understanding that on the 2016 election >> you said you don't believe

the 2016 election was hacked at the election booth but you're talking facebook and twitter and social media companies in particular. >> our democracy, our freedom of speech, our freedom of expression, our open society which is one of our greatest strengths is also one of our greatest weaknesses, frankly because of the information platform now which has almost no barriers to entry and no standards for exit we are vulnerable to foreign influences on the information platform what americans read and consume in terms of their information, political debate, news about candidates, and the like >> i agree that's a weapon but in the view of the department of homeland social security, the department of defense is using a platform to spread fake news, false information. is that really a cybersecurity threat or is it just the platform was used as a tool? >> well, it has a cybersecurity

component to it. because of the capability of bad cyber actors to infiltrate and pose as someone else, go on without proper attribution but there should be a caution behind all of this which is that the security agencies of our government should not become involved in regulating speech, regulating political debate. we don't do that in this country. we do that -- we see that in other countries. it should not occur here >> in terms of the recent bloomberg report that there were chips inserted into servers, how concerned should we be about this especially since the supply chains of u.s. companies largely exist abroad in places like china which is a major cybersecurity threat to the united states. and when the u.s. government awards a contract to private companies, do we hold that contract in the implication -- the execution of that contract to the same standards as if we did that work in house

ourselves? >> two things. first, this is in part what cfius is for the committee to evaluate foreign investment in the united states when i was secretary, i was a member of that committee to evaluate whether there was a security threat to foreign investment in something here in the united states that is critical to our defense, critical to our economy. in terms of the supply chain, it's as weak as the weakest link >> right >> and so in my view, those at the top of the supply chain should insist that if others in the supply chain are to do business with them, that they adhere to a certain cyber security standard. >> in terms of what you're talking about both in the supply chain but also on the social media platforms, do you think any of these companies have done a good job of keeping up with these concerns that you've laid out? >> well, it's a very difficult environment to operate i'm pleased to see that a number

of these companies are taking steps to insist on better attribution, better cybersecurity. but it's because of the nature of the information platform and how americans receive their information, receive their news less so on tv and through a variety of means, it's a problem we're going to be dealing with for some time now. and i believe that the government itself should be very hesitant to step into trying to regulate content, regulating speech. >> if the u.s. does face a severe cyber attack, what is the correct response fight fire with fire cyber response or could it be a military response to a cyber attack >> it depends. i used to be the general counsel of the department of defense before i was secretary of homeland security. in response to a cyber attack, it is not legally required that the response be in kind depending upon the effects of the attack for example, if a cyber attack

had a catastrophic physical effect, i wouldn't rule out some form of kinetic attack and response so it depends on the nature of the attack very definitely but there are a number of things we could be doing in the private sec nor tor in defense raising the awareness of those who use our systems, insisting on more sicybersecurity. >> thank you for joining us. i'm afraide' o o wreutf time "squawk box" back in two >> when we come back, breaking economic news. to make sure that we get there safely, and that we leave that scene safely and go home at night, is train. and we train all the time in the fire service. no matter how much we train, the last thing you want in a disaster is to lose communications. without communications, we have nothing-- people get hurt. when disaster strikes, that is when your communication service can really become your lifeline.

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welcome back to "squawk box. yes, we have breaking news the first of two inflation data points today september ppi. the numbers say up 0.2% on headline if you strip out the all-important food and energy, don't see a read there yet, actually let's look at ex-food and energy that's up 0.4% double what we were expecting that follows up 0.1% a little cooler than expected.

0.2% cooler than our last look if we look at ex-food and energy year over year up 2.5% ex-food and energy and trade up 2.9% looks to me like on the ex-food and energy headline core, looks like unchanged but let's put an asterisk on that one, wilf 3.23% currently in tens. that's the highest yield close in years that was established at the end of last week we'll continue to monitor of course the chinese currency's always envogue with how close it's getting to seven. so these are very lofty numbers as the chinese try to balance people trying to control capital and of course trying to be stimulative with respect to what's going on. ex-food and energy is up 0.2%.

that is confirmed. wilf, back to you. >> okay. rick, thank you very much. the broader dollar index essentially flat today hasn't moved too much off the back of this data. steve liesman here with his take i guess the key thing is not enough there to really worry markets to a further spike higher in yields >> you're right to point that out. there's three things we're looking for in this day pa and i think you hit the first one right there which is kind of on the edge of our seats here. trying to see what the inflation story is to understand what the outlook is going to be for the bond market. and of course the federal reserve. i don't think this does much it shows a little bit -- the thing we call the core is ex-food, energy, and trade that's up 0.4% two push me, pull yous in this data here. the first one is rolling off of the hurricane. you have the surge in prices that happens in the wake of

hurricanes it looks to be exerting a little downward pressure inside the other one are the tariffs. in this report, you have the new inclusion of $50 billion in the october one, this is september. the october one will have the inclusion of the additional -- somebody help me out with that number >> 250 i think >> i thought it was 200 plus the original 50. >> soon you're talking about real money we are talking about a real amount of goods that will show up eventually in the ppi these will be one off things what happens is you get the adjustment to the tariff to the price. and the next year when we measure it, we won't see the same increase. >> doesn't mean the tariffs are still going to be on a year from now. maybe you see prices come back down if the tariffs are resolved and rolled off. >> so this is an interesting question you raise, as you always do, becky there's some thinking that there's a separate line of thought in the administration between the chinese tariffs and those for canada and mexico and

europe canada, mexico, and europe some are seeing as negotiating tariffs. china may be a different story and that's -- think about the reason why on the one hand, yes they seem to be negotiating for the technology on the other hand, if what you want to do is reduced a reliance of china, those tariffs have to be in place for awhile you can't just create industries in the united states by erecting tariffs for a number of months it would be a number of years. so there's something -- there was a story in "the wall street journal" a couple days ago we polled for this several weeks ago in our fed survey about the attitude of economists are these long or short. and some people see them as long a third of them see them as long-term. >> i think they started out as a negotiating tactic the question is whether they'll be successful or not they get rolled off if you get what you want on the other end of things. those tariffs i assume would come back. >> i would push back on that

if you listen to peter navarro and read what he's written, i think a guy like peter navarro sees them more as long-term. erecting barriers that would protect u.s. industries and allow u.s. industries -- anyway, it's a question. >> i hadn't thought about it that way that may be what peter navarro thinks i could be wrong but i think about the people we've spoken with. even kevin hassett who we spoke with this morning saying he now understands -- he comes from a globalist perspective. but being at the white house, he understands the unfair things china is doing and sees this as a way to try and take some of that inequity out of the relationship. >> we should mention to your point, and adding in the double reverse psychological department here, the fact that i think they may be long-term is what the president would want the chinese to think >> sure. >> right okay in our game theory discussion -- >> so you're helping the negotiations

>> i'm helping the negotiations by arguing that -- however, listen quickly if they do want them to be protecting u.s. industries, clawing back some production from china, they can't be temporary. >> in terms of the fed -- so we look through september because they don't reflect the impact of the most recent round of tariffs. we get october some time in the early month of november. does the fed only get one more round of data, monthly data to assess the impact of the tariffs? or does it get two >> yes october will come and november -- no early december. you'll get a couple rounds to -- >> we get two rounds to see a rise there will be conference calls throughout the season to talk about potential impacts. >> we're getting some of that now. the way these things work and the reason economists hate them, not because you have this rise in foreign goods american producers don't come in underneath they come in at the level.

so you have a double hit at the prices first the import prices go up. then u.s. companies feel clear to raise to that level. >> just to throw one more item onto the table, the fed looks at two things it also looks at the jobs numbers. and the jobs report for last month were recently because of florence hurricane michael is now coming on shore >> right so two polluted pieces of data >> you're not going to see strong numbers >> i think this in fairly simple terms. if you're a banker and you have a 3.7% unemployment rate, lowest since 1969, and you're not raises rates, it's malpractice i don't think -- >> december is still off >> i think december is odds on unless we get a decline in inflation and i think you're right, this -- the fed will need to look through. it could be a pause if the data

is severely -- >> if you don't see what they are anticipating >> notice by the way the adp which is not affected by storms was very strong in the month so it's something worth noting the jobless claims, they've shown we're still strong and i think the fed going to a neutral level is a lock. and the debate as bob pisani keeps pointing out, what do they look like. >> thanks very much. >> thank you the earnings season is upon us, but will corporate profits keep the markets moving higher dom chu has keys to the quarter. >> i've been listening intently to the discussion you've just been having. so many parts of wall street come together to look at those things you were talking about. like the jobs situation. like what's happening with trade and tariffs. so we put together a sampling of some of the different viewpoints on how the experts are looking at earnings season and what the keys could be. we'll look at three right now. from a big picture standpoint,

this is james lou. he says the three things he's watching, are we at peak earnings could we see that growth continue and can that earnings growth sustain the market that's going to be something to watch there. tax cuts and the trade disputes. could the benefits of tax cuts and the negativity of trade disputes resolve positively or negatively he's looking for company commentary on those fronts then the stronger u.s. dollar. will that be a head wind to corporate profits? another point of view is out from the economist side of things we spoke to chris at mufg. he says his three things to watch, is the earnings recovery for real or is it short-term driven by the tax cut and jobs act? that's what he's watching for. also the china effect. on overall demand for goods on the economy and also material costs. are they going to go up or down depending on tariffs and when will higher interest rates really start to hurt the company outlooks overall that's what he's watching out there. and we'll round out with a portfolio manager's view they invest money for a living

what are they watching a small cap manager -- here we're talking to eric marshall he says sales growth is it really there especially in consumer related names. also, capital expenditures for small cap companies. could they be putting more money to work in investing and also the impact of inflationary cost pressures. all things that these people are watching there's going to be themes in the market these are examples of what they're really watching for this season >> thanks. dom chu back at headquarters coming up, insurer travelers. plus we're tracking hurricane michael. kalee dionne is standing by. >> we just had an update still a category 4 145 mile-per-hour winds. when we come back, we are going to show you the latest track and also what you need to be aware of as this storm mes ldfakanall in just a few hours. we'll be right back.

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welcome back to "squawk box. futures right now are pointing a little bit lower we have lost a little bit of impetus in the last half hour. we're now down 50 on the dow s&p down just slightly seven points a powerful category 4 hurricane is tracking toward the florida panhandle right now.

nbc meteorologist kalee dionne joins us from cnbc's headquarters she has the latest on this what can you tell us at this point, kalee >> it has intensified more since the last update. 145 mile-per-hour winds. here's the latest information. a category 4 storm it's only about 90 miles southwest of panama city, florida. and it is rapidly moving to the north at this point. then it's going to take a turn to the north/northeast if we look at the radar, you can see the outer bands are already starting to impact those folks along the far western edge of the state of florida so let's go ahead and look here. i'm going to step to the side so you can see. the yellow on the map is going to be a tornado watch. that's in effect through the entire day there will be embedded tornadoes that pop up. they're really quick and they're going to pop up and move onshore. this will also be the case as the actual eye makes landfall. so it's a very powerful hurricane that we're talking about here still on track to make landfall between panama city and mexico beach as we go right after the

lunch hour today as a category 4 storm. if you look at the track, it stays as hurricane status all the way up into georgia. we're talking about power out annals for the florida panhandle up into south georgia. that could last weeks. wind gusts could approach weak wind gusts 170 miles per hour or even more as this storm moves ashore we are going to be watching this very closely for you, but life threatening storm surge, heavy amounts of rainfall, and of course those strong winds all going to be an impact moving forward. >> kalee, you told us earlier today that this was not something people had anticipated because it wasn't until it got into the gulf of mexico it exploded it picked up all the warm water there with temperatures warmer than usual i saw a statistic earlier and i don't know a lot of specifics on this, but i know the lower the barometer reading the more powerful i saw something that said the lowest level barometer reading we'd ever seen was 1954 going back to hazell

and that was a reading of 938 millibars. this one has been tracked at 937. i guess the lowest ever for a hurricane that hit land in october. what does that tell us >> it's a huge storm and it's actually -- over the last few days prior to this has had wind shear. that's supposed to weaken a hurricane. but it stayed -- it has powered through that at this point so with the warm waters and the shear really not doing any da damage, that's why we're seeing such a strong hurricane at this point. as the pressure drops, the wind speeds are going to go up. the tighter the pressure, the higher the wind. we could see that pressure drop even more. that's something we have to watch. >> kalee, thank you very much. hurricane michael could have a huge impact on the insurance industry morgan brennan joins us we the latest >> hey, guys that's right if there are two things that i think are potentially better news in this, the first is it's going to be a storm that's mo

moving quickly you won't see the type of flooding event with florence or harvey last year in one sense, that's kind of a good thing because flood insurance can be a big issue many people don't have it. you can see a lot of damage that's not insured, et cetera. there are going to be things to look at from an insurance standpoint but the other potentially better news situation is it's moving through an area that's not as densely populated. so because of that, right now the early estimates for this storm's insured losses are $1 billion to $3 billion. so not huge. very manageable. but that was, of course, estimated when this was still a category 3 when you're looking at florida specifically, though, it's a very different insurance market from the rest of the country largely because they got hit by a lot of hurricanes in the '90s and then katrina and other ones. you saw a lot of insurers move

out of the market. a lot of smaller insurers have come in since then the way the laws are created, a lot of the risk goes out to the re-insurers. names to keep an eye on, nun ver sall insurance holdings, heritage insurance holdings, hci. axis, everest, and renaissance >> i think they've had a partnership with amazon? >> that's the other news of the day for insurance. take a look at travelers this morning. it's light volume, granted but shares are up about 1% right now. that's because they've partnered with amazon. it's what they're calling the first industry digital store front on amazon.com. and basically what this means is that they are going to be offering these smart home kits with devices and installation through amazon and their homeowners insurance policy holders will get discounts on those many of them will get discounts on their actual insurance.

they can also through the alexa devices ask questions about their billing and other insurance information and get that information and they can also potential policy holders be directed to the travelers site through amazon so this is a shop scenario in terms of insurance and centers things that are meant to basically digitize your home and help prevent some of these risks and some of these common issues that can cause damage. >> sounds like a lot of information for the insurance companies. could it actually backfire when it comes to the consumer the data is not good that travelers is able to monitor and they want to jack up your premiums. >> you know, that's a really good question. i need to do a little more digging on that, but i think it's -- in some ways, i think it's similar to what we've seen both in auto insurance and also in health insurance. and it's sort of this focus on using technology for more kind of preventive care, if you will.

and incentivizing that incentivizing people to take better care of their property or in health insurance, of themselves the other thing i would note on this is that we've been hearing for months now that amazon was looking to get into home insurance whether it was in the uk, here, india. this is one of the first confirmations we have that they are dipping into home insurance. right now it's a state by state approval process i'd expect to see it expand from there. when we come back, jim cramer will join us live from the new york stock exchange. here's what he told about the fed's effect last night on the economy. >> here is what he told us last night. the stocks going higher are the wrong stocks they're the right stocks if you believe bright and we could have a fed mandated slow down i hope i am wrong. on days like this where we get some dire news from ppg, i am feeling right.

>> we'll hear from jim live when "squawk box" comes right back. i think that she's a very nice girl...

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>> hey, will, how are you? >> i am well indeed, sad not to be there with you in person. >> look, last night we had a company called trencio, where does that go because electric goes to lighting and building and construction and consumer goods and consumer electronics and medical devices. ppg was right to be down and i know it is up because it is trying i keep on dealing with these companies and say things have gotten weaker. i know what steve liesman says, he's talking about 2019. if it gets dire, maybe they'll break from the lock step we tried that in 2005 and 2007,

how does that work out you may have been over at london at the time? >> affected by similar sentiment market >> what about bill ackman and starbucks. >> when you read his report it is kind of like a journalism account. there is a lot of better research on the streets with starbucks. i know china should turn to jack ma big buy back if you buy it right here you have to bet that this quarter is going to be good and i don't think it will be it is a fourth quarter story i do like the way that kevin johnson is buying back at a 53 level but i don't think he's supporting it. >> jim, great stuff. we'll see you in just a couple of minutes don't forget to watch "mad money" as well the ceo of carnival cruises and

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amazon uses artificial intelligence because it learns bias against women the problem here, majority of those resumes came from men. the ai system taught itself that male candidates were preferable began penalizing that including the word women amazon edited the program to make it mutual for the category. there is no guarantee that ai were developing other ways that could prove discriminatory >> how did it teach itself that? did you have some sort of input that you base it on? >> ai is looking at the data and teaching itself or find itself based on the output.

just like driving a car, the more you drive, the more miles you get. every successful candidate that moves through the process was a man. >> based on human input into that >> exactly thank you very much for joining me today >> folks, make sure you join us back here tomorrow, right now it is "squawk on the street." ♪ >> good wednesday morning, welcome to "squawk on the street," i am carl quintanilla with david faber and jim cramer. >> s&p and futures are threatening a fifth day lower. a lot to watch today including hurricane michael and the president on whether the feds are hiking rates too quickly ppi is up for the first time in three months