d for smarter business. good morning, it's 11:00 a.m. here on wall street and "squawk alley" is live.

good wednesday morning, welcome to "squawk alley." obviously red across the board today as major averages now extend their losses. the dow is down 323, more than a percent. nike, microsoft, boeing leadin those declines the dow and s&p are close to seeing their biggest loss since june nasdaq down well over 1% all of those are tied to the treasury yields which are surging and we'll pay attention to more auctions later on this afternoon. the 10-year as you can see right around 3.22. not quite the highs of the session. 30-year at 3.38, got awfully close to 3.4 joining us are mike santoli and bob pisani bob, what's important to know? >> the theme continues

so remember, we were in a low growth, low yield world. in the low growth, low yield world you bought technology stocks anything that had growth now we're transitioning to a higher growth, higher yield world and technology is out of favor. it makes some sense. if you see what's going on since last wednesday, tech stocks in the nyse, on the dow jones industrial average, intel and microsoft, cisco, apple, they're all down 3, 4, 5%. there you see the numbers there. the s&p is down 2%, 2.5% the picture has gotten complicated because we're not just deal with higher rates, we're dealing with weaker currencies and tariff issues so a second sector show the industrials here and you've got boeing, caterpillar, united technologies, all down we're debating whornt value will come back. should we buy consumer staples now that's been out of favor for a long time. you see some of these defensive names. these names are up here so the

market is acting in a rational way if you understand the transition from low growth, low yield to higher growth, higher yield. >> i think the market investors would be very comfortable with that you make this uneasy piece with a higher threshold of yields if they were persuaded the high growth would be sustainable. that's what i think you're seeing here when you see housing, auto, material stocks this idea that there's a little more friction in the world economy because of trade and currency stuff, i think that's what's kind of knocking people back a little bit. also, though, just context wise, the s&p is now down 3% from it's closing high it seems like a catch down move to the average stock and small cap stocks which have been suffering quietly or less quietly recently with greater losses it seems like the market was a little bit imbalanced. you had big cap indexes, the u.s. working when non-u.s. was not working. all these things are getting readjusted a little bit here. >> and remember you had market caps ridiculous on these tech

stocks. >> 10% from what it touched a trillion. >> a viewer this morning said we should have had a banner when amazon fell below $900 billion. >> i don't know, apple in a way is a tech stock but it's valuation has never gotten that crazy. is flattish the new down we this seem to be talking about corrections anymore when it comes to the major indices >> it's hard to talk about a significant correction we talked about past 10% on the s&p. when you've got an economy this strong, we're going to have revenue growth of 7% this quarter. we're in 7% into 2019. when you have revenue dprogrowt wage growth is up and we've got tariff issues but if your costs are going up 2% and your revenues are going up 7% or 8%, that's really going to help your majorins

mike, that may be the ultimate savior if we can continue the strong revenue growth. this whole issue may become less important down the road. >> on the flip side, you've got transports down another 2% today. some of the data among the transportation and freight carriers are starting to soften a little bit i can't help but wonder if that is potentially a canary in the coal mine for slower economic growth is that telling us something >> the market is leaning in that direction. i don't know if it's just bottlenecks and cost pushers truckers were down as a group 2% plus today the air freight had a little bit of a stumble as well and the airlines so i do think that's kind of the message you're getting but to me it's not clear if the market is sort of being stingy about giving the economy credit for being able to sustain itself or if it's just going to be a little bit more of a profitless prosperity story >> you cover the railroads, i mean look how crazy csx and

kansas city, those stocks went parabolic for a couple of months. >> you mentioned we're off 3 from the highs in a world where japan and france are down 9, korea down 20, mexico down 30, brazil is down 50, how much of that is catching up to what planet earth has done >> another of the catchdown aspects of it. so the u.s. pulling back to at least close the spread a little bit. it makes sense in that context i do think one of the bear points that i've been kind of coming back to, and it's not so much bear, just more of an observation. look at the abundance of good news it has taken the s&p to get to a high single-digit gain year to date. you had 20 plus percent earnings growth you have dividends and buybacks in shareholder hands unemployment below 4 you've got the index muscled up to like an 8% year-to-date gain coming into this week. so that leaves the question is

the market being just less generous about how it credits what all this good news is and how much it will continue into next year. >> it's certainly a much more complicated picture for earnings season look what we have to deal with now. higher rates, higher raw material costs, higher wages, weaker foreign kcurrenciecurren potentially somewhat weaker china. nobody was talking about this six months ago now this is a really complicated earnings season. it's tough for them to pull out the threads. then you have all these other tariffs. this announcement today, we're exempt from the tariffs. >> on the gillette razors? >> can fastenall get this? i want one. >> get in line >> i think we can have this conversation and still come in tomorrow and say, wow, that nasdaq looks really oversold the banks actually acted well today. it's not something that i think changed the whole character of the market but, yes, it's more complex, a little more of a push/pull and there's an offset

for every good news. but i don't think it means that somehow all of a sudden we're in a downtrend or we actually have to give up the year's gains before the phase is over. >> one of the other things we've seen and you mentioned the higher rates, utility stocks higher again today we've been seeing it all week. what's going on there? >> well, to a certain extent these are just defensive plays i think we need to see a few weeks out here let's see what the rate situation looks like a few weeks out. if this thing calms down, then historically utilities would not be the obvious thing to buy. but remember, if you are talking about -- this is why this is so complicated. if the knee-jerk reaction is let's go to defensive names. let's get a little bit past that and see what happens once the rate thing calms down a little bit. i think then you're going to have an interesting debate about this rotation out of growth and into value all of a sudden if that really does happen on a trend, all of a

sudden some of the names you might not think would be that intuitive might make a little more accepsense. so you might get rates, consumer staples and utilities. remember how you define value. value is mostly a price-to-book thing. you're just looking for cheap stocks it's a very quantitative approach >> while we've been having this conversation, stocks have taken another leg down and tech stocks worst of all names down 3%, roughly 3% or more include amazon, ebay, palo alto networks, snap is down 4% netflix was down more than 5%. so quite a few big names. >> i think all the stocks that are farthest out on the valuation frontier and all the book gains that you have embedded in those stocks are the ones that will have more taken out of them right now. it makes a lot of sense. again, i don't think it's necessarily something that says it's game over i think the nasdaq is still up twice what the s&p is or so for

year to date or 1.5 times. so to me it's kind of a painful adjustment phase it's been a quiet correction we'll see if it develops into something deeper. >> all right, guys, thank you. mike and bob well, a monster storm is bearing down on florida. hurricane michael just hours away from landfall, leaving farmers from florida to the carolinas scrambling to limit crop losses. we have the latest on the sectors most impacted. courtney >> reporter: hi there, morgan. yes, this category 4 storm is going to be historic, unprecedented. it will hit us in several hours. as you can see we're getting some of these outer bands now. the winds are only 22 miles per hour now and the waves are already extremely high and very stirred up the water coming all the way up here to the dunes. so we're going to stay safely up here on the deck for now when it comes to the industries down here, of course you would expect that tourism is huge. the panama city beach tourism

board telling me that it's up 10% for the year, so that's going to take a pretty major hit, at least for these several days and potentially some time after that depending on the damage that's done to the beach and surrounding areas. when it comes to power outage, pretty good right now, even though we could see up to 200,000 power outages. right now we only have about 6,000 as far as the power utilities are reporting at this point. businesses, of course, need power to operate and many of them are shut. a lot of the retailers even shut around midday yesterday. i'm talking about lowe's and walmart in the area. walmart started boarding things up even waffle house closed at 2:00 here locally, so we ate before they closed the doors on us. when it comes to energy, we always think about what's in the gulf all the productive assets are really actually west of where the storm is going to hit. even the refiners in mississippi are going to get spared.

they still did clear some of the personnel from those rigs, the platforms, so you're going to have some hit to production there and we did see oil prices go up ahead of the storm, which is typical, although now they have extosort of come back groud now let's talk about the crops fruit is mostly in the two-thirds lower part of the state so that will be spared but georgia is going to be hit very hard. only about 12% of the cotton there has been harvested according to the usda. the pecan harvest just started, so if those trees get knocked down from the wind or the water uproots them, that's going to be a major problem. we'll see what happens we've got a couple of hours until the worst of it. we're going to brace and for now get back to you, guys. >> thank you, courtney reagan. and let's get a check on the markets as we head to break. stocks are tumbling, now near session lows the dow is down about 374 points, some 1.4%.

the nasdaq is down worse than that, 2% s&p 500 also down about 1.4. we'll be right back. at fidelity, our online u.s. equity trades are just $4.95. so no matter what you trade, or where you trade,

you'll only pay $4.95. fidelity. open an account today.

you'll only pay $4.95. you can do things like change your settings, learn tips and tricks, troubleshoot, 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 to "squawk alley. i'm phil lebeau with breaking news from volkswagen they have named a new ceo of the volkswagen group of america. his name, scott keo.

if it sounds familiar, it should, because he has run audi of america since 2012. he will move over and take over vw's operations here in the united states and rick vokpin will move to an advisory role. so scott keogh who has run audi of america and grown sales 62% will take on the challenge of growing voex wlkswagen sales hen the u.s. guys, back to you. meanwhile, a rough day for technology as you watch the nasdaq a sea of red the index has fallen more than 1%, on pace for its lowest close since early july it's about 4 percentage points above what you'd call a collection down now, i could say, the nasdaq more than 2%. faang stocks getting hit hard at the same time. netflix the biggest loser of the group, down more than 6% joining us now, aaron kessler

who coverssnap, amazon, alphabet, facebook, among others aaron, good morning. speaking of facebook, that stock now below 155. if it goes below 152, that will be, i believe, a 52-week low that it's hitting. what's going on here it's hard to cast too wide a net because amazon has been doing really well. facebook, snap, not so much. how do you navigate this as an investor >> it has been difficult for facebook recently. obviously you have the continued privacy concerns additionally there have been some concern in the market for facebook usage slowing or declining in some cases. offsetting that thankfully is instagram which continues to grow very rapidly and we think instagram is gaining share consumers have so much time in the day, they're increasing instagram usage but to some extent at the expense of facebook facebook gave slower guidance than expected in the last

quarterly call kind of sub 20 times earnings, we're sticking with it >> are we seeing netflix' achilles heel here, interest rates? is that what it takes, or is this just a bump in the road >> internet space obviously is growing. we've seen that on the small cap side as well where small cap names have had more growth so the question is did some of these names get ahead of themselves i think we're seeing a shift from growth back to value. if that's the case, we want to stick with names like google, like facebook, that have kind of reasonable valuations around 20 times earnings or below. we believe they're a little more defensive in this space and hold up a little bit better if we do see a correction. >> apriaron, i want to dig intoe comment you just made. given the fact that we have seen the big tech cap names sell off as much as they have over the past week, big runs in these stocks this year

is this profit-taking or do you think that this could be indicative of a bigger, greater rollover and shift by investors out of these names and into other parts of the market? >> we haven't seen a big change in fundamentals yet obviously and some of our names, if you look at the small cap valuations, they're trading 30% above the three-year average they have continued to run until recently so we have that correction does this get into more of a corrections from the last couple of weeks we think we have a little more downside in some of the small cap names. large cap is a little more insulated given lower valuation levels but in terms of fundamentals, do they get affected is the second rate. do higher interest rates start to affect fundamentals for these companies. i think we're early to make that call but that would be a concern maybe longer term. >> aaron, before we let you go, snap down another 4% right now it's trading at $6.70 a share.

i know you've had a sell rating on the company they just announced their exclusive shows they're rolling out today. does that change your take on it >> not yet so far the original content we don't think has got them much adoption or the content side, especially the discovery platform we still view snap as mostly a messaging platform and messaging platforms like snap have been difficult to monetize and they lose users to instagram in our view and advertisers haven't really gone to snap. in our view it's still a difficult market for them to navigate. >> yeah, tv that you have to watch then because it disappears innovation that sounds like the '80s and '70s when i was growing up i'm kidding, of course, it doesn't disappear like that. aaron kessler, thanks. >> reruns. up next, more on the sell-off we're seeing in the markets right now. we'll explore some of the pain points of today's sell-off when "squawk alley" comes back. the dow is dn 0 in rhtow39potsig now. stay with us

whooo! want to take your next vacation to new heights?

tripadvisor now lets you book over a hundred thousand tours, attractions, and experiences in destinations around the world! like new york! from bus tours, to breathtaking adventures, tripadvisor makes it easy to find and book amazing things to do. and you can cancel most bookings up to 24 hours in advance for a full refund. so you can make your next trip... monumental! read reviews check hotel prices book things to do tripadvisor

close to the lows of the session for the dow. briefly fell below 26k for the first time in several weeks. the s&p is down 100 points in a week dom chu is looking at some of the pain points in the sell-off. d dom. >> so far only two specks of green. i want to show you some of the other parts of the market industrywise that could be seeing real pain right now one of them is in technology that's the semi conductor space. the vanec is down huge right now trying to find some kind of bid here we're not seeing that so far also check out what's happening with transportation stocks, also flirting with and now below their long-term trend line as you can see there, off by 2.75 of 1% certainly some bearish comments from a luxury retailer out of

europe is helping to take a lot of these retail names down but because we want to be a little bit more balanced about what we see here with regard to the market moves, we want to call your attention right now to a slate of companies that have shown a bid in this particular marketplace and that is the multi-line retailers within the s&p 500. we're talking about kohl's, nordstrom, target, dollar tree, they're up pretty decently on an otherwise very down day. so it sure seems like that there's a move away from some of the retailers more tied toward international trade and china perhaps on the luxury side of things and more towards domestically focused retailers like these guys here back over to you. >> dom chu at hq. let's bring in senior investment strategist brian jacobson brian, thanks for joining us today. >> my pleasure >> all right given the fact that we have the dow down about 400 points right now, you've got rising rates is this just sort of the latest step in what some market experts like our own mike santoli have

been referring to as a stealth pullback or is this the beginning of a deeper retreat? >> we believe this is probably a short pullback what we were expecting at the beginning of the year is that we would see the s&p 500 make a run towards 2950 with the portfolios that we manage, we had an overweight towards u.s. equities. when we got up towards 2930 we started taking that back in anticipation that rising rates and all the troubles in the world that everybody seems to be fixated on would probably experience a bit of a pullback, probably 5% or so. so not to say that this is kind of following a textbook approach to a pullback, but we do believe this is the beginning of a deeper retreat it's not uncommon to see value stocks start to outperform growth stocks in this part of the cycle, especially given the dramatic run-up that we have seen in quite a few of the large cap growth stocks over the last

year even from a longer term perspective, you think about it, we've only given back half of the gains on the nasdaq so far at one point we were up 16% year to date, now up 8% 8% is still a pretty good return unless, of course, you bought it when we were up at a 16% gain. >> where would you be putting your money right now >> we've actually been talking about that quite a bit as to how to redeploy cash on some of these pullbacks. on our multi-asset solutions team what we've been doing is anticipating an increase in treasury yields. we expected that we'd probably get up to 3.25%. looks like we hit that, maybe went through a little bit. but perhaps now we can actually be a little bit more comfortable with some of the duration exposure of a lot of the portfolios not to say that yields have peaked but maybe in the short term we'll have a tough time moving past 3.25% there. we're also rotating a bit out of

growth in more towards value, so it's not that we're going a massive overweight into value, just more pulling back the overweight that we did have in place with our client portfolios to growth, shifting it more towards the core. >> and that's a question that i get from friends all the time that i can't answer because i tell them i don't give stock advice but ask people like you on air, you watch cnbc and get the advice, how do you do that people are wondering is this it? is this the top? should i sell everything they have been asking that the past couple of years as you rotate cautiously not getting entirely out of equities, what do you think is the smartest way to sort of -- it's almost like averaging out, i suppose, when you get moments like this too? >> that's a good way to put it a lot of people are very familiar with the concept of dollar cost averaging into positions. you can also dollar cost average your way out of positions. for example, what we were doing as far as with our overweights to the s&p 500 is that you have -- we have the luxury as an

institutional investor being able to use futures contract and such, but you can also do this with other instruments. you can effectively ease back on some of those positions. so with the futures as we got up to 2900, we had a target in mind of 2930 to 2950 as far as when we might want to remove the overweight completely. you just scale it back as you move, so you can almost sort of adjust the throttle as you go. now, too many people, i think, sometimes take this binary approach to their portfolio, where it's either all in or all out. the danger with that, as most people are familiar, financial planners will tell you all the time if you take that approach, you have to get it right twice once getting in and once getting out. but then three times because when you are going to get back in again so it actually increases the chance of error if you take that binary approach as opposed to more of that dollar cost averaging approach. >> one of the challenges of trading, brian what makes you think that yields might take a pause here? why don't we blow out to 3.5,

for instance >> i think yields right now, i believe a big part of the move over the last week or so has been triggered by the federal reserve effectively saying we're a long way from neutral. chair powell said that kind of took me by surprise when he said we're a long way from neutral. what does he mean by that? john williams now at the new york fed i think clarified that saying that neutral might be over the next year, so maybe four more hikes from now so part of this i think is just guesswork on a lot of traders' parts about how much more hiking does the fed have left before they actually are comfortable saying that maybe now is the time to take a pause chair powell planted the seed, thinking that, well, maybe they're going to just rocket past neutral, neutral being around 3% on the fed funds rate. if that's the case, longer term yields probably should rise more i think what we'll likely hear is back tracking on that

rhetoric to clarify what exactly they mean, because i would be concerned that the fed would be pulling away the punch bowl a little bit too quickly if they actually did decide that they were going to hike a total of, say, six times over the next year as opposed to what they have been talking about which is one more time for the balance of this year and three more times for 2019. >> brian, before we let you go, if yields are the highest they're going or near the highest that they're going, at least for the foreseeable future, what do you see as the biggest risk for the market right now? >> i think the biggest risk for the market does continue to be the federal reserve as far as the open mouth operations that they have been engaging in what are they talking about until terms of their neutral or terminal fed funds rate. a lot of the worries in the world seemed like maybe it might not be that bad. you have the midterm elections coming out worst case scenario depending on your political stripes, either the status quo or gridlock

you have the brexit negotiations, which by all accounts look like it might be resolved sometime soon and then you do have the trade tiff between the united states and china, which we expect is going to continue to cause some pressure on the chinese economy, but likely to be resolved by the end of the year but after the midterm elections, because it is a political talking point. so some of the -- i think that the biggest risk right now is that the fed keeps talking up too quickly how many rate hikes they want to do. >> yeah. well, brian, thank you for your input. brian jacobson, wells fargo asset management let's get to sue herera and get a news update this morning. >> good morning once again, everyone here's what's happening at this hour cameras on board the international space station capturing views of hurricane michael, which is expected to make landfall early this afternoon on the florida panhandle. the hurricane is now a dangerous category 4 storm >> this is the worst storm the

florida panhandle has seen in more than 100 years. again, this is the worst storm that our florida panhandle has seen in a century. hurricane michael is upon us and now is the time to seek refuge >> new footage has emerged of the devastating tsunami that struck indonesia two weeks ago the video shows people running away as the tsunami strikes and water sweeps through the streets. that video was shot from a balcony where one resident had sought shelter. and the american cancer society says tobacco controls should be the highest pri oorit in a national plan to reduce cancer rates it says more than half of the drop in cancer rates since 1991 is linked to decreased tobacco use. that's good news, but they say a lot more needs to be done. you're up to date. that's the news update this hour let's sending it back downtown to you guys. jon, back to you. >> thank you, sue. let's sending it back to headquarters seema mody has the european close. >> hey, jon, european stocks

closing sharply lower, led by a sell-off in mining and retail stocks bhp, anglo american among the big names trading down european consumer names are also in focus names like l'oréal, adidas, daimler and volkswagen are lower as well. luxury firms also feeling the pressure after morgan stanley downgraded the european luxury sector shares of louis vuitton falling by more than 7% after the world's largest retailer, luxury retailer said it is moving lower amid concerns over a slowdown in chinese demand traders also say the weakness in the chinese yuan could diminish chinese purchasing power those china concerns weighing in a number of luxury brands. dior off by more than 4% gucci down 6%.

burberry among the other luxury names this focus today this as bond yields continue to tick higher. the german bund level hitting its highest level since may. they cut the forecast from 1.8% from 2.3%. guys, back over to you. >> seema, thank you. $36 billion in three-year notes are up for auction this morning. let's get to rick santelli in chicago. what's demand, rick? >> demand was a charlie minus, a c minus, so a little below average. it's not the only auction today. we'll come back at 1:00 eastern for 10-year notes. but this $36 billion at three-year notes went off at 2.989. highest since may of 2007. that shouldn't be shocking to anybody. let's go through the internals, shall we 2.989 was close. 2.56 bid to cover the lowest in

july since 2.85 ten auction average. 9.8 on directs also a bit below 10 auction average which is 10% so a little light in key areas but it did price pretty tight. we'll come back for $23 billion in 10s if we look at what's going on in the marketplace today, very interesting, because rates in and of themselves moving higher. that's not what people and investors seem to be nervous about. it's how the markets are dige digesting that there are no memos that come out every morning about this process. there are signals that have historically gone on between the sectors and the signals between rates and stocks is very strong. but post the credit crisis obviously it's weakened because the signal was diluted by management, by central banks here's the key, the tug of war still goes on.

so stocks have had a run of softness, mostly predicated on all the adjustments and the higher margins and deleveraging that goes on with the bottom of the food chain increase like rates. it isn't only the u.s. the u.s. is the most markedly increased on a rate of change, but all rates in all areas are going higher, just maybe not to the same extent. think bonds versus 10-year spread, how that is historically wide those issues continue to make it difficult. so when i look up, i see that the 2-year is very solid because the fed isn't supposedly in the eyes of investors going to be disenfranchised at least for the here and now about raising in december the intermediate part of the curve and the long end are going to try to grapple with financial issues, corporate finance, but the long end on the economy. so here's where it gets interesting. we have seen very little giveback if you look at a couple week chart of 10-year note yields, they move higher, they stick,

they go sideway for as many as 23 sessions in a row very little giveback the economy in many ways is like that but remember, the stock market is not the economy the stock market has a lot of logistics associated with it and what we are witnessing right now is the logistics kind of breaking down a bit as everybody gets comfortable for the interest increase and the volatility associated with it, but that's low the final analysis, nobody knows where neutral really is, the fe doesn't know i will tell you this, what we should look at as the best signal and what jay powell will ultimately be looking at to pick neutral is the yield curve it differentiates between the fed finance and long-end growth. a lot of other factors in effect, long rates like central bank positions carl, back to you. >> all right, rick, we will see you at 1:00 eastern if not before our rick santelli. when we come back, some new

data this morning showing the immediate impact of rising rates on home buying the ceo of red fen will join us. the dow is down 406, worst day since may 29, worst day for the s&p since june 25. we see the longest ling reosstak for the s&p in two years back in a moment

we continue to track today's steep sell-off as the dow falls more than 400 points all of this tied to rising rates

over the past week and one area that's closely affected is housing. joining us to discuss, red fin president and ceo and our own steve liesman. gentlemen, good morning. >> good morning. >> good morning. >> glen, i'll start with you given what we've seen in rates and the fact that mortgage rates are closely tied to that 10-year yield, we've seen issues around inventory crunch and affordability for housing. does this continue to cool the market >> it will in large part it's a response to the inventory crunch and rising prices the fed is acting because prices in housing have just gone through the roof prices and other assets could follow now you're seeing buyers really step back. for someone buying a $300,000 home, this is an extra $200 a month in mortgage payments. >> glen, have you seen that in terms of activity through red fin? >> we've seen it on our website, we have seen it through our

brokerage, we've seep n it acro the board in the industry. some people who thought they could afford a house are questioning whether they can some people who decided to buy instead of rent are now looking again at that equation because there is more rental inventory now reaching the market, especially in major coastal cities so folks are shifting back towards represenntals because t monthly payment will be lower there. for the past few years, it's been going in the other direction. >> steve, red fin's survey shows that fewer than half the people said they would cancel their plan to buy a home because of rising interest rates or really slow down. but is that true how do rising interest rates really affect the potential homeowners, home buyers and how does that filter through the rest of the economy as people slow down home equity loans, refinancings and things like that >> i think on a day in a week where rates are up as much as

they are, we tend to think that that's the sole decision or the sole factor that cements the decision on the part of somebody is the interest rate in truth there's so much more going on in people's lives there's their job, there's their salary, do they have kids. are they ready to move and planning to move, do they need to move out of the city? all kinds of personal stuff that goes on. and the interest rate becomes a decision inside of all those other factors but it's not often the most decisive thing. i get that it can be a lot of money at the lower end as you move up it becomes less important. the thing that people forget is we just focus on rising interest and the added cost is the other side of the equation you're doing 150,000, 200,000 people each month have jobs. you have salaries going up 2.5% to 3%. there's a bit of sticker shock on the interest rate right now but i don't think it's the

decisive factor when it comes to either the housing market or the economy. >> steve -- >> i'd actually agree with you. >> go ahead. >> oh, go ahead. >> go ahead, glen. >> i was going to say we really aren't going to know what's happening in housing until 2019 starts if the stock market is roaring, if the economy is strong, if wages continue to rise, there's no way the housing market doesn't shake this off i think it's fair to say for the first time in six years, we are going into a new year with major questions about whether the market is going to go up or down in terms of sales volume at the very least so that's why everyone is having this conversation now. >> but, glen, aren't you going to have an effect on affordability eventually it becomes clear people can't afford homes at the price that people are asking, then that price has to come down or the price is unrealistic on the market either you have a housing market or you don't and so one thing that happens, and people argue this, by the way, was that cheap interest

rates inflated housing prices. if you're going to make that argument, don't you have to make the reverse argument >> no. the laws of supply and demand will take care of us here. >> thank you. >> as buyers pull back, sellers will be less demanding but what you have in between are two parties who can't easily agree on a price sellers are reading yesterday's news, buyers are looking at interest rates for the time being you have a standoff and that affects sales volume if we go into 2019 with a really strong economy, this is a basic need people have got to live somewhere. food, shelter, clothing. they are going to buy houses but i think on the margins, you will see less activity if interest rates continue to rise and the rest of the economy doesn't push through that. >> yeah, i would -- as we wrap this up, i would add to the bucket of factors that decide into a home purchase, student loans are also tied to the rates. definitely important to the millenials and upcoming

generations. guys, great to get both of your inputs, appreciate it. we're getting a check on where we stand in the markets. the dow is down 367 points, about 1.4% s&p 500 about the same level, down 1.4%. nasdaq down 2%, just kind of been sitting down there. that's near the session lows a lot more on this sl-f elofon "squawk alley" still ahead when it might be time to buy or sell? with fidelity's real-time analytics, you'll get clear, actionable alerts about potential investment opportunities in real time. fidelity. open an account today. when you're looking for answers, it's good to have help. because the right information, at the right time, may make all the difference. at humana, we know that's especially true when you're looking for a medicare supplement insurance plan. that's why we're offering seven things every medicare supplement should have. it's yours free just for calling the number on

your screen. and when you call, a knowledgeable licensed agent-producer can answer any questions you have and help you choose the plan that's right for you. the call is free and there's no obligation. you see, medicare covers only about 80 percent of your part b medical expenses, the rest is up to you. that's why so many people purchase medicare supplement insurance plans, like those offered by humana. they're designed to help you save money and pay some of the costs medicare doesn't. depending on the medicare supplement plan you select, you could have no deductibles or co-payments for doctor visits, hospital stays, emergency care and more. you can keep the doctors you have now, ones you know and trust, with no referrals needed. plus you can get medical care anywhere in the country, even when you're travelling. with humana, you get a competitive monthly premium and personalized service from a healthcare partner working to make healthcare simpler and easier for you. you can choose from a wide range of standardized plans. each one is designed to work seamlessly with

medicare and help save you money. so how do you find the plan that's right for you, one that fits your needs and your budget? call humana now at the number on your screen for this free guide. it's just one of the ways that humana is making healthcare simpler. and when you call, a knowledgeable licensed agent-producer can answer any questions you have and help you choose the plan that's right for you. the call is free and there's no obligation. you know medicare won't cover all your medical costs, so call now and see why a medicare supplement plan from a company like humana, just might be the answer.

here's what's coming up at the top of the hour. we are debating whether this is just the beginning of an even bigger pull-back in the market the s&p pacing for its longest losing streak in two years. plus is jay powell's fed too aggressive and is the president right when he says they should slow down? and mcdonald's shares are a rare green spot today. one analyst says now's the time to buy we've made it our call of the day and it's all coming up at noon meantime at the nasdaq with an update on this sell-off in tech. bertha >> reporter: it's very much tece small caps pulling things lower. it's a large cap sell-off. and the largest of the large caps are the big drag here if you combine amazon, microsoft, and apple, that's about 40% of the decline in the nasdaq 100 in terms of point impact.

in spite of a lot of potentially bullish news or one would think was bullish news with amazon signing $1 billion in deals, transactions with s.a.p. and symantec on top of its partnership with travellers. microsoft lower as well. we've seen that rotation out of the big cap names particularly in the chip sector that's the biggest drag right now, the philadelphia semiconductor index down for the fifth straight day we're seeing the biggest decline here it looks like since last summer on june 26th. among the stocks that are under pressure, nvidia and amd as chinese at this point maker unveiled two new ai chips, the chips everyone is looking for. overall within the chip sector there are real concerns about pricing and concerns about demand we are seeing some new lows today including marvel

technology among the 240 new lows here on the nasdaq where the breadth is abysmal now let's bring in jim paulsen who joins us on the phone. jim, when you look at the sell-off today, stocks have been doing generally pretty well this year but the velocity of the sell-off has some people concerned. does it raise an eyebrow for you? >> yeah, i think so, carl. i think, you know, the fact it's been obvious that rates have been going up fast enough to finally affect mind-sets on wall street, not just that growth is good but maybe it's too good, if you will and i think that the fact we're taking the leader out,

technology, which has been building here not just in the last couple weeks but for the last few months, i think is interesting. one of the things that catches my eye, too, the defensive stocks, utilities in particular but even consumer staples, dividend, s&p index, they've been outperforming or matching the market now for the last several months and it's interesting what's the message from that? what's the message from underperformance by financial stocks what's the message from a 10% decline in industrial commodity prices there's a lot of message coming out of the markets now that perhaps economic growth is about to slow down more than wall street expects and if that comes after this rate rise, i think there could be more damage for the stock market >> jim, we've seen the major average s reach technical levels when you see the weakness in tech, the beginnings of deeper

retreat for this market. >> my guess is it's kind of the beginning or ongoing process of a deeper retrenchment. you get into a day like today there's a lot of technicals at work and that's kind of how it ends up trading. i'm not sure that's what caused it when you get into this we're looking at later day you have to think traders are thinking about a 500-point decline for the dow going and testing that there's some critical points here, what if the s&p breaks back below 2800 and you're back in the same trading range you were in most of this year. what if the russell 2000 doesn't have to go much lower to actually have negative returns here to date and certainly the f.a.n.g. stocks and the tech stocks are breaking down. the new york f.a.n.g. index is below its 200-day moving average overall, so there's a number of things technically going on

today and then don't forget the fundamentals tomorrow morning at 8:30 we'll get a cpi report >> jim, just to give you a couple props, you have been skeptical in the face of the rally all year and have been looking for a tumble how does this compare to what you've been expecting? >> well, i thought more recently we got to do highs that we would have another correction. i still kind of do that's my guess. what i want to see ultimately here, which could make this bull market continue is if we get enough correction that doesn't tip the economy to recession but what it does do is scare investors mightily and it refreshes valuations big time. 15% correction, if we go down more than 10% from here, then i think you'll see a lot of calls for recession, a lot of calls for bear markets in reality if it doesn't happen, that could be a good buying

opportunity. i don't see panic right now. the vix isn't above 20 gold is hardly up. the dollar is down on the day. i think this thing could get worse and maybe panic shows up before we start talking about a bottom >> all right, jim paulsen. we'll leave it there, thank you. >> thanks. as we head to break, taking a look at the dow, we're off session lows but still down 350 points s&p down about 40 points the nasdaq down 155. industrials and tech stocks are leading the losses

the dow down 362 this morning. s&p down 41. a week ago it was 2940 keep your eye on that. ten-year auction at 1:00 p.m. eastern time, $23 billion. if the chinese decide to sit out or participate in a light fashion, that could alter yields which in turn could alter the path of equities today >> speaking of yields another big auction for ten-year treasuries at 1:00 p.m keep your eyes on that did you just mention that? i'm sorry.

i had a blond moment, carl i'm sorry. tech stocks again the biggest losers, also industrials, chips, transports as well raising a lot of questions here about economic growth and the future. >> and the overall indices don't tell the story look at the individual stocks. >> plus the 1:00 p.m. auction. i'm scott wapner is the s&p's longest losing streak in two years a sign even more selling is ahead? interest rates front and center yet again today. now new concerns from washington to wall street that jay powell's fed could be moving too fast it is noon and this is "the halftime report. stocks drop. is there real fear the president is right >> the fed is doing what they think is necessary, but i don't like what they're doing. plus, the number one chip analyst says that sector tanks down more than 5% this week. and the big call on mcdonald's