it's objec it's october 11, 2018, "squawk box" begins right now. ♪ ♪ live from new york where business never sleeps, this is "squawk box. good morning welcome to "squawk box" on cnbc. we are live from the nasdaq market site in times square. i'm becky quick along with joe kernen and andrew ross sorkin. our guest host this morning is peter boockvar, the cio of bleakly advisory group, also a cnbc contributor let's get you caught up to speed with where we stand on the coverage of the market selloff the dow plunging more than 800 points yesterday the vix hit the highest level since april. a 43% spike in one day there it is playing out in a time lapse down 3.1% by the end of the

session for the dow. this morning the red arrows are back right now the dow are indicated down 317 points. s&p futures indicated down by 30 points nasdaq off by 81 this is all coming as we continue to watch what's happening play out in the treasury market. treasury yields, which you might have seen reversing course if you thought things would do things differently did not do that yesterday the ten-year note yielding 3.16%. gold also was not a place where investors rushed for safe haven. that may lead you to think this was a bit of panic selling >> did the yield on the 30-year come down or did it close up people were pointing that bonds were going down, stocks were going down by the end of the session the ten-year had gone up, not the yield. apparently the 30-year was higher >> everything moved in tandem.

>> by the end of the day it didn't move in tandem, the bonds went up at the end of the day. >> all relatively marginal i was looking at -- you always laugh, i was looking at bitcoin to see if people thought they would go there that went down >> gold was not a place that investors rushed to either >> cramer, when he follows the fed, you remember the first time with the giraffe dress that that person was -- >> they know nothing >> yeah. they know nothing. he got -- he's been a little on it, ppg he read a lot more into ppg than people thought. the best point is fed guys, it's a rookie mistake to not just always say data dependent. we're data dependent what are you going to do we're data dependant, to not say that and say we're a long way -- long way from neutral.

>> we'll go right through neutral. >> why would you not say we raised just now. we'll be data dependent, you made the point in makeup, couple of guys getting makeup together, you said those charts are insane >> the dot plots >> looking out to 2019 for dot is worthless information >> we are getting to the point -- i understand what jerome powell is doing he's trying to break away from the concepts of the dot plot that the fed used for the last ten years. >> you don't think he's saying i'm learning on the job? >> he think he's been trying to get the markets away from being spoon fed and told exactly where markets will go. i think this was a mistake he made in saying that, but i understand the general move to say we're not doing this anymore. this is calming the markets in a chaotic time we need to get the markets back to the idea of where we don't know where every step will take

us >> real rates are only at zero >> we don't know if he needs to catch up we don't know if inflation is a problem yet. >> it's not. historically the fed funds rate was above the rate of inflation, and we're at the tenth year and we're only at the rate of inflation. whenever the next downturn happens, they don't know what to do >> here's what i come back to understanding what cramer is saying about take it easy, go slow with these things and understanding what kevin warsh told us last week, other measures have not been sopped up yet. that's the big fat balance sheet. you could unwind that balance sheet and sop up liquidity without hurting people who are trying to buy a car or finance a home right now or spook businesses to some of these points that's the thing that i thought was underappreciated for this year the fed is double tightening by raising rates and shrinking the balance sheet.

everybody is focused on the rate moves. >> the rate moves hurt main street more. >> but the shrinking of the balance sheet is also a big deal the fourth quarter of this year, if you add up the bank of japan, ecb and the fed, the net liquidity injection is zero for the first time in years. >> the journal goes right to ben bernanke, they skip yellen it's 3% yesterday. this morning first thing i was doing is multiplying 0.9 times the s&p and dow, and multiplying 0.8 times the s&p and dow to see what is a 10% correction look like and what does a 20% -- >> we're 5% off the highs. >> 5% already. >> 5.3% for the s&p 500. nasdaq is steeper right now. it's down 9.2% >> every one of these guys -- not you, necessarily -- they say we can always have a 10% correction so these things do happen.

>> i think it will get complicated. >> don't get bullish >> i'm not bullish >> i think you might have something there that there is some support from earnings underneath the market. except for ppg >> not only ppg, but ceos will be more cautious in commentary in terms of future outlook >> especially given this week. >> is it weird it's october again? is it because it's halloween >> it started westernings because a ceo said on a conference call that our customers are getting affected by supply chain issues because of tariffs >> that's why ppg is so interesting. it's weaker demand in china. weaker demand for cars in europe and the u.s. and higher prices it's a combination of everything

you're looking for >> we'll hear that through the next four weeks. >> is this an interest rate story or a tariff story or is this a china -- >> it's everything >> the interest rate story -- >> what happened yesterday that mixed them altogether for the first time >> you get deeper into a tightening cycle, investors are less tolerant of outside issues. with misses, earnings misses or tariffs or whatever. you have a more sensitive market to issues, and then you throw in the ppg, micron talked about the impact of tariffs. here we are ahead of four weeks of earnings, people will get nervous. >> when does -- does powell listen -- number one, the president said he's crazy, he's loco cramer says -- >> i think you're right. i think he looks at this and says holy cow. >> i think it was a rookie

mistake. to get a 5% or a 10% selloff in a market that's this richly priced, all he's got to do is body language. doesn't take much. >> do you think it's a rookie mistake? i don't know yet >> a long way from neutral is -- >> my guess is he won't say that agai again. >> trump saying he's loco, unhinged >> those comments were in an interview. >> you take him not literally, just take him seriously. that's what we learned about the president. >> but not powell. >> i don't know about powell >> i'll get out my salt shaker let's get inside the numbers of the big selloff.

dominic chu is at cnbc hg and has been poring through them >> the s&p 500 tech sector at the epicenter for much of the action down 5% making it the biggest decline since august of 201. all 65 members of that closed in negative territory looking at the communication services side of thing, more than 80% of that sector closed in correction levels look at some of these names, twitter, facebook, tripadvisor, netflix, all down by at least 20% from the recent highs. com services is a part of that f.a.n.g. complex we talk about the semiconductor stocks hit hard also. look at their falls from recent highs. all of these are in the 20% p l pullback zone. applied materials, 43% lam research, micron, amd, all 20% or more declines from recent

highs. also on the consumer discretionary side of things, more than three quarters of that group closed in 10% pullbacks. wynn, ford, multi-year lows there, under armour, chipotle, amazon some notable names within discretionary. if you want to look at some of these names that bucked the market trend yesterday a number of consumer names includi including kohl's, dollar tree, dollar general, focusing on mid scale consumers based in the u.s., they did well. as we talk about the market dynamics developing here, yes, it was only 17 stocks in the s&p that closed higher yesterday, many of those consumer staples some of them multi line retailers like these here. >> crazy, loco, going wild

that's what president trump said about the fet aftd after the ma sold off yesterday eamon jave ejavers has more from washington >> the president told me on tuesday he doesn't like to get involved on these issues i asked if he spoke with jay powell about his feeling that the fed is going too fast, the president said i don't like to get involved he said, no, he hasn't spoken to him. that was tuesday yesterday the president said the fed has gone crazy the president reacting to that 800 point drop in the dow yesterday, and last night he called into fox news and went further than that. >> the problem in my opinion is treasuries and the fed the fed is going loco. there is no reason for them to do it. i'm not happy about it >> there the president saying the fed has gone loco.

overnight we got reaction from the imf in bali. a number of officials responding here's what they said. >> i wouldn't associate jay powell with craziness, no. >> the fed has not gone crazy. the fed policy of normalization is the appropriate one >> of the many qualities of chair powell is he's an individual who really understands the plumbing of the u.s. and global financial systems. >> it's interesting to watch the white house's response over the course of the day yesterday as the numbers eroded on wall street at first a senior administration official gave me a statement saying the white house was monitoring the selloff, not concerned. they said they were more concerned about the hurricane in florida. another senior official said this is a bull market correction and probably healthy after the market closed we saw the president come out and make those comments about the fed having gone crazy.

so the intensity of the white house reaction amped up during the afternoon as those losses mounted. >> do we have any sense of what conversations go on within the fed when this happens? >> jay powell said he would not be persuaded by political pressures, and the president said he has not called jay powell to express this to him. of course they have televisions at the fed, they can see this. so the question is what will they make of it. i have no idea i can't tell you >> you have to feel a bit for powell there's guys that throw the party, hey, punch bowl, come on over let's drink. go go then someone finally comes in and goes, no you had enough last call. it's 2:00 a.m. suddenly he's in that position

>> what's crazy is negative interest rates, zero lates for seven years, massive multi trillion dollar increases in balance sheets that's crazy >> not only that, the s&p did not see a move below a 1% decline for the entire third quarter. this is a situation where this has been a long time coming. >> and put this in context we've seen presidents -- we've not seen presidents call the fed crazy before, but we've seen presidents frustrated with the fed time and time again. >> yep >> so this pension betwetensionn independent fed and white house that wants these things to go up, the question is how will they iron out differences. so far it's just rhetoric from the president and maybe powell can just shrug it off. >> you remember the first bush, he never forgave greenspan and

blamed greenspan for his loss to bill clinton and raising rates when he didn't need to prior to that election. >> presidents probably have said things stronger than crazy in private but never anything as strong as crazy in public. >> yeah. all right. could be more this morning >> we're going down to the white house in a few minutes and we'll see kanye west at the white house later today. so more news from 1600 pennsylvania avenue later today. >> excellent of course we'll see kanye. >> could be up for ambassador to the u.n. job >> he is looking at 2024, too. >> i'm not looking at 2024 >> for kanye >> he could be 2020. >> keep america great. >> you think that's his slogan >> he already said that. for more on whether this is a healthy correction or the beginning of a bear market we are joined by steven whiting and

steven cheveroni i could have done that -- >> without the phonetics >> i have seep it before we have peter boockvar still here we're members of the media, i always watch the way the media -- articles that they write, do we do a service if we overplay this? does that not conjure up some of the complacency that causes the correction in the first place? or should we feel silly for doing it >> the thing to feel today out of the market would feel so good, yet if you felt that way and you never reinvested at the bottom of 2009, if you were in cash every asset class outperformed you >> even a couple years ago we had a 10% correction

when we were down 10, it was difficult to buy >> 2016, january through march, and here we made new highs i don't think an economic downturn is imnept in the united states but this is an older expansion with a tighter fed this will matter >> do you think we need to see anything in the underlying economy or in corporate earnings that sort of show why this happened could things be steady as she goes in the economy and still technically the stock market goes down for whatever reason? is there something necessarily wrong with the underlying economy? >> i don't think there's something necessarily wrong in the sense that we have a higher hurdle now treasury yields across the curve average 3% you can get into high quality municipal bonds without taking a

long duration bet and get a 6% taxable equivalent yield this is a higher hurdle and that will matter. in the end you will get a strong earnings season, unlike the february/march period, we don't have a new trade war, we have the existing trade war corporate confidence is telling us there will be preannouncements, but in the end that we won't completely derail this downturn. in a couple days time we won't see this correlation spike across every market. >> steve, you do -- you're in charge of asset allocation >> is that funny >> no. normally it's so easy. i'm 60/40. now you have to say something today. should clients be lightening up on stocks and going into bonds >> today is a good day to take a breath 3.25 on the ten-year is not dangerous, but what is concerning is that we went 3.05 to 3.25 in the space of three

days is it justified? has inflation spiked since a week ago no no wages were growing this year we started growing 2.7%, we were at 2.8 in the last jobs report i knows there concerns that powell's comments have signified a more aggressive fed, we don't think that's the case. you have three dots on the dot plot next year and we're not sure they would achieve those three. >> boockvar, would you be surprised to see us breach 3% again heading south? >> i would, but that means the stock market would be lower. >> right >> historically the ten-year is where nominal gdp is nominal gdp is 5%, 6%, ten-year is 3.25. we also have to look at longer term interest rates, japan is

letting long rates rise, ecb is ending qe. so we'll see a rise in interest rates just in response to the rise in rates overseas the rise in rates here is a confluence of factors with growth and inflation just two of them >> it's weird it's almost self-correcting. higher rates cause the market to go down, the market going down causes people to buy safety. if it goes back to 3%, we'll say what was that all about? you don't think so you think we're permanently above three on the ten-year? >> i'm worried about european bond yields. >> they're catching up from much, much lower levels. it's still a good deal >> they're playing the music thank you both >> a lot more to come on "squawk. the other big story of the morning, florida residents waking up to devastation from

hurricane michael. we will take you live to one of the hardest hit areas in the panhandle. then we'll dig through the factors contributing to the market selloff including the sharp drop of the yuan as we head to break, a look at the premarket winners and losers in the dow what do advisors look for in an etf? don't just track an index, help me meet a client's need. is the fund built to sell or built to last? etfs are only part of a portfolio. so make it easy to explain. give me a quality fund that helps me get clients closer to their goals. flexshares etfs are designed and managed around investor objectives. so you can advise with confidence. before investing, consider the fund's investment objectives, risks, charges and expenses. go to flexshares.com for a prospectus containing this information.

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welcome back to "squawk box. yesterday's selloff is continuing this morning. it's 6:24, still early, but we're looking at 300 points on the dow of additional selling this morning 2 29 on the futures. the s&p down 31. the nasdaq -- how about is the nasdaq down from the highs, it's worse. but it made a much bigger move than the others as well. >> it's down 9.2% from the highs.

>> the other day somebody was saying we have all these stocks that are a trillion dollar market cap like that was a positive >> we don't have all these stocks that are trillion dollar market caps anymore. >> exactly look overseas in asia. that's the last thing they need to go down more. red arrows in europe as well across the board under 2% losses, which may be surprising >> didn't carry out there as it did in asia. asia had declines of 4%, 5%. you're looking at the features here, so you wonder where the end is >> let's get you up to speed on the other top story, that's hurricane michael. businesses along the florida panhandle are assessing the damage after the storm ripped

through the region courtney reagan is live in panama city beach, florida, near where things happened, the peak of where things happened what can you tell us >> it was quite a wild day as you can see from some of the damage here. we're at legendary marine in panama city beach. behind me there's remnants of a boat it's upside down and in pieces that's a small smattering of what we've been seeing as we've been driving around. look at this massive facility. this was basically a parking garage for boats was. there's no more walls. the roof is off. some boats may be okay on the inside but it's hard to tell it's still early and dark. there's a lot of other damage in the region a gymnasium at a middle school nearby lost its roof there's home destruction, power lines the road, trees in the

road we're under a boil water advisory there's a curfew in effect until 8:00 a.m they say violators will be arrested we know tyndall air force base suffered extensive damage from what they tell us. we also know that there are nine airports closed between alabama, florida and georgia. tallahassee airport will begin to reopen, but priority for those relief flights to start. power is out for more than 730,000 people across those three states the most outages are in georgia, followed by florida. when it comes to the business response everyone is waking up and taking assessments many of the retailers i've been in contact with are not sure when they will be able to open their doors. they don't know what kind of damage they sustained. we know there's a local family dollar that all but collapsed.

so a lot of folks will need help and recovery we don't have accurate estimates again for the insured loss or economic loss, but it's fairly extensive. communication is still down. power is very spotty if it's working at all back to you. >> courtney, thank you very much. coming up, we'll continue to dig through all the factors that contributed to yesterday's selloff in the market. up next, we'll focus on the dip in china's currency relative to the dollar we'll tell you what that means for american consumers, manufacturers and investments as well let's check the futures before we head to break you can see down 339 on the dow. 33 on the s&p. as we head to break, a look at yesterday's winners and losers in the s&p 500

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welcome back you're watching "squawk box" live from the nasdaq market site in times square. good morning welcome back to "squawk box" live from the nasdaq market site in times square. buckle your seat belt because the selloff, i hate to say it, getting worse. after the dow fell 800 points yesterday, two-thirds of the s&p

500 stocks are in correction and 20% are in a bear market look at u.s. equity futures at this hour. dow opening down about 337 points right now s&p 500 would be off about 32 points nasdaq opening down 94 points. i want to show you some of the losses on a percentage basis here's the european trade right now. you're looking at it there red arrows across the board. the worst of it, the ftse 100 down close to 2% in asia, the shanghai fell more than 5%. stocks in hong kong and japan falling more than 3.5% the slide in global markets can be tied to the sharp drop in the yuan seema mody is here to talk about the ripples in china >> the yuan swung back into the global spotlight the last time the market was this concerned about the yuan was in august of 2015 when china

devalued its currency sparking a global market selloff. this year the yuan has come under renewed selling pressure it's down about 11% since mid-march. while chinese officials continue to deny that they will use their currency as an alternative way to retaliate against tariffs, strat swrirs egists say china m no choice but to let the yuan fall further but a weaker yuan effects many companies. luxury retail verse come under pressure names like lvmh, burberry, gucci, the fall in the yuan caught the attention of steve mnuchin who said he is closely watching the currency and next week the treasury will release its currency report and the question is whether it will designate china as a currency

manipulator or keep it on its warning list goldman sachs yesterday in a note to clients wrote that naming china a currency manipulator does not seem like the logical next step at this point. that said the administration's continued focus in this area means we cannot rule it out. guys >> seema, thank you. hurricane michael ripping through the florida panhandle and ripping no georgia joining us now to talk about the impact on the insurance sector is craig poulton, this hurricane was violent. winds were high. storm surge was high it's a double whammy what's the impact going to be in terms of the insured losses, uninsured losses, any lessons we should take away >> the lessons we should take away are numerous. right now the projections are that it might get into the $5

billion range. a lot of that will be determined on how slowly it moves across the land mass now that it's made lan land i'm guessing the flooding part of it will be between 1 billion and $2 billion that the nfip will be responsible for. >> national flood insurance program. >> national flood insurance program. the wind and the other damage, i'm sure this will exceed 5 billion. >> the wind damage is the part that the insurance industry is on the hook for. >> yeah. the private market is on the hook for most of the windstorm and the nfip, the government and taxpayers will be on the hook for most of the flooding one of the reasons i mentioned the reforms, we need to get the

government out of the flood insurance business >> what is your concern about this we talked about this because of florence, too. what's wrong with the way the flood insurance program is set up >> originally congress viewed this as a bridge for the private market to gather information for how they should rate flood insurance, but it's morphed no a no m monopoly, and it's not an efficient monopoly if the private sector were allowed to bring the invisible hand into the flood insurance market more freely, and you can buy private flood insurance -- >> but your concern is the pricing is not appropriate prices will be higher if the private industry was higher and it wasn't the government >> the efficiencies of the private market would probably bring prices down for everybody. the repetitive losses would not

benefit. >> they wouldn't be nearly repetitive -- >> exactly with artificially low prices you incentivize people to build where they shouldn't, hence the massive values we have on the coast were facilitated by our own $50 billion as taxpayers that we pay for losses >> too big to fail, sounds like the financial crisis if you have someone else covering losses -- >> exactly >> if you can't lose, you keep doing it >> exactly >> the invisible hand was 1776, you said it, i was like that's really smart it's been so long. >> what's the answer now >> interestingly the answer is pretty simple. either the administration can act and tell federal lending regulators -- the impediments for flood insurance have emanated from the nfip, and

federal lending regulate wloers were to regulators who were told by the nfip that flood insurance is dicey, and they can't get past that so they try to tell banks not to accept private flood insurance when they should be saying accept it, accept it, accept it. >> who can make the decision to change that? >> the administration can do it or congress can do it. >> congress is probably not going to >> in 2016 the house of representatives voted unanimously to correct the problem. and now we're still waiting for the senate to act. so the senate is where the logjam is to correct the problem and let the invisible hand solve the problem. if we let the invisible hand solve the problem the nfip would become the backstop insurer.

most people would save money by getting a private flood policy, private flood would not approve the building of places that are stupid to build in >> craig, thank you for joining us >> thank you. coming up, global market reaction to the selloff. that was interesting two-thirds of the s&p is already in correction territory. >> yes >> it's been a rolling correction it's been a rolling correction, small caps, everybody else we'll talk to the ceo of europe's largest private equity fund don't miss that. at the top of the hour we will have some earnings we need some earnings. we have walgreens, delta air, both set to report we'll talk to the ceo of delta, ed bastian he will join us at 7:00.

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welcome back to "squawk box. we have full coverage of the market selloff that is spilling over to the futures today. it's gotten worse than it was last night

dow futures now indicated down 360 points after the 800-point decline yesterday. s&p futures off by 35. nasdaq down by 102 right now it is time for the executive edge >> yes jim cramer sat down with barry sternlich of starwood capital on "mad money" last night and asked about the health of the u.s. economy. sternlich said the cost in real estate in that market are rising for materials and labor and we may not feel the full effect of the tariffs until next year. >> you will see the impact in the first quarter of next year inventory was here, on the shelves, in the warehouse, bought without tariffs you will have a pressure in the market that the chinese are trying to deflate by knocking their currency down, which mnuchin said yesterday don't do that doesn't mean they won't continue to do this knock the currency down 25%, and

25% tariffs, it's flat to the consumer here. the fed has to be carecareful. the economy is not as strong as the number indicated >> our guest host for the hour is peter boockvar. i guess you give me some new information on what barry was talking about. that is -- i was saying if inflation stays dormant, we stay where we are now, but you say we are already a couple points low. >> the fed waited to long to reverse policy, powell is in this box of trying to play catch up he was left with a tough situation. >> i wonder if -- i never say it's different this time, but with where rates are around the world and everything else, i wond fefr ther if that normal relationship between fed funds is at an appropriate level

>> it's not. >> maybe that's not as big a problem as you're making it out to be. >> hopefully the new neutral rate is 100 basis points above the rate of inflation according to the fed, historically it was much higher. just by that they are telling you they can't get to that old relationship >> this is getting interesting all this stuff we talk b it's about them again it's about the fed again we have to go back to that liesman will be here every -- >> yes >> it's tariffs, earnings, tech, and we're talking about every utterance of every fed person. it's bad to get so dependent on the fed. >> get used to it. >> you think they have a plunge protection program we used to have a put. there was some type of put we thought we had is there a powell put? >> the powell put is further out in the money >> that's a good way of explaining that. >> coming up, we'll talk more

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now closing on the lows of the day, down 800 points ugly and broad base, across the board. welcome back to "squawk box. etu partner, the world's largest private equity firm. joining us, the ceo and managing partner. just talking about the markets, the equity markets and how you think about the equity markets how you think about interest rates. >> yeah. >> it's sort of a mixed view, because one is opportunity for you, the other is a little more complicatee complicated. >> i think it's great what's happened we have 1100 euros >> do you think pricing is about to get cheaper for you how are you assessing the situation? >> i think what's happening, the bull market is coming back, for our clients, or customers to put money toward

so i think what's going to happen, unfortunately, it might be assets. so, going to have a price correction >> that's good news for you, if you're looking for things to buy? >> that's the good news, yeah. >> bad news, if you're thinking about the ipo market >> that's right. and that's shot. >> you believe that is shot? >> yes >> already >> yes >> it is your sense, this selloff is a beginning of a true recession/fair market situation? or do you think this is just a hiccup along the way to something to a better place? >> i'm born a bear >> you're born a bear? >> i'm born a bear >> with the stock, it's very cold and dark. >> okay. so you're normally skeptical >> yes so, i think i've been calling for the storm for quite some

time maybe this is the time >> tomas, you spent i lot of time talking about the fed we have the bank, switzerland, and ecb going to try to get out of negative interest rates this year how is that going to go? how is that going to affect financing costs? >> selloff's been good our banks have been too accommodating. because with the bubble, that's not seen i don't know how they'll get out of it, they have no ammo, what are they going to do go down 1% it doesn't work. >> in terms of things you might want to buy, where are you looking to buy >> i love telecom. that's the best place to be. i've moved through some assets telecom is nice. health care is nice. industrials are not nice

commodities, whatever you do stay out of it >> you're thinking of investments in the telecom space. how concerned are you about the noise, or headlines, i should say, coming out of china, especially chips being used to take information >> right >> is that something you're concerned about? and do you think that's going to actually change the dynamic? one of the reasons we're even talking about the selloff is because of dynamic with china and some reports we've heard this past week >> basically, i'm not that concerned. eriksson and nokia, are having a field day. well, i think we'll see change in the world here. i think that that's actually going to give us opportunity change is normally very good for us >> we've also been talking a lot about the supersizing of private equity funds, private equity funds, obviously, softbank is leading this charge. you should is that changing the

way you're thinking about investing? is it? >> it is suddenly, somebody has become a king maker, with that ammo, with that resource, they will change the game so that is concerning and that makes you think twice. if they're betting on a horse that we're betting on? will they win? probably not because they're just going to outgun us. >> so what are you doing about that >> well, we haven't figured that out yet, to be quite honest. and they can't buy everything. we're going to have pick our best >> tomas, thank you for being here with us come back for the conversation >> the blue lights for depression, right? >> there's a reason why -- he's not a happy camper >> there are a lot of good golfers. have you noticed, stenson -- >> they learned to play in the

dark. >> they come here and they live in florida >> a lot of viewers are concerned about your upcoming trips. what about the gofundme efforts for the selloff? it's going to be less likely it's going to be harder. your donations are drying up anyway, thank you. >> thank you, nice to be here. >> peter, thank you. >> thank you we have a lot more to come this morning including technology stocks. they led the markets lower in yesterday's selloff. we're going to talk about the biggest losers and potential safe havens. that's next. and we're going to hear from dow and walgreens, and delta's ed sebastian will join us in a cnbc exclusive interview "squawk box" will be right back. our philosophy is one of service, not sales...

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it's a sea of red here in asia and the united states. what you need to know ahead of the opening bell and what you should be doing with your money. second hour of "squawk box" begins right now >> announcer: live from the beating heart of business, new york this is "squawk box. good morning, welcome back to "squawk box" right here on cnbc we're live at the nasdaq market site on times square i'm andrew ross sorkin along with becky quick right now the dow would open down about 305 points the s&p 500 looking to open

about 35 points this morning the nasdaq looking to open up about 85 points this morning all of that coming after a remarkable day yesterday, in terms of the fall. we will talk about that. its lowest level in quite some time right now, since august 16th anyway, the ten-year note. let's show you what's going on there. these things should be operating in different cycles, but they're not clearly doing that ten-year, 3.176. let's also show you the dow -- i don't know if we're going to show you gold as well. it's not the safe haven that you might have expected yesterday. the dow is 9518. european markets right now, across the board, we are showing red arrows, ftse 100 down a little over 1.5% the global markets following wall street's lead, especially in asia. let's get to sri jegarajah, he has an update in what happened

in the arsian market overnight. >> becky, good morning it was the china markets that absorbed the full brunt of the pressure let's start with klein, the composite that had its worse day since february 2016. down 2.5% -- down, in other words, 24% over the past 12 months we got china trade data for september coming out tomorrow. that is friday our time. there is a localized risk event in that data set the september numbers should show some kind of tariff-induced slowdown, given all of the uncertainty on the trade front, for the month of september it's actually a slowdown in september exports. no surprises that technology was a big, big laggard here today in asia and a case in point, tyex down

and the london biggest supplier plunging given the drop on the nasdaq it was a bit of a safe haven bid. we saw some pivoting around the dollar yen and that aggravates the declines on the nikkei over the course of the session. we ended 900 points lower on the nikkei social ar southeast asia was not immune. singapore released its q3 gdp tomorrow this is a very sick -- cyclical trade dependent data your cpi, that print is going to be very, very important for us whether it is strength high yields, if it does, that's not the best of look, guys, for emerging market asia joe, back to you

>> yeah, with the emerging markets, doesn't seem like we're at the beginning of something necessarily. it's been happening for a while. i'm excited, to talk to you, sri, but i want to know where we're in this corrective mode that we're here right now. >> sure. >> and it seems we're at the beginning of it, even though we're hitting new highs there was a stealth correction going on in a lot of sectors >> yeah. >> two-thirds of the s&p down 10% already. 20%, emerging markets, small caps so, is that good that maybe this has been going on for a while? >> that's exactly where i was going to start, actually we've been talking about this for weeks, the kind of disconnect where small caps and yesterday was not a bolt in the blew for the market. it was headline stocks, things

that people thought were going to hold on forever that just broke. actually, that's where the nasdaq has been suffering the worst. because of that, because you have had the damage done, you're looking at indicators saying the market could be oversold already. what does oversold mean, right it means that the market is down in a hurry, it's basically stretched within its trading range to the downside. also the number of percentage of stocks that are below their averages, moving averages, s ofy sort shows you the makings are here >> kramer was pointing to ten sells to any purchase, 10 to 1 >> yeah. 90% of volume. actually through the entire bull market has been more common. yesterday was a pretty aggressive washout so what you look for is those

extremes in center attem s in volatility index, yes, it's good that it got into 20. you want to see it get to 20 and then back down you have to see the fever break. >> and watching the index this morning, the futures this morning, you would think there was any dieback or wait before the market opens? >> right it's probably good that it's a weak rally you don't usually like to see that >> i could argue as if i could be on either side of the debate team >> because you're a psychopath >> yeah, because i'm a psychopath we always crave the capitulation, and all of those things it would be weird if it was the winning of the selling climax already. as a news organization, i don't think that we're going to start seeing this at the end normally it would have more to go, i would think. >> typically -- >> the damage done, it's going

to take time you get more selling you have to retest the loan before you get a sustainable rally. >> yeah. >> that's what you normally think but it would be pretty interesting if we had a correction already, and that was the capitulation yesterday >> one of the things you do is look for confirming markets. it wasn't as if people were selling all kinds of risky stuff so it didn't send a bad economic signal necessarily that mean it's the stock market dealing with its own issue >> let's bring in fast money trade, steve grasso, and scott nations of nation shares also a cnbc contributor what were you saying last night? >> so, think about it, though, everything you guys just said, the january/february selloff that we had, this sort of mirrors it, but the seasonality is on our side to break the market, very difficult going into year end. funds trailing the benchmark

how many funds are trailing that can't afford to take a step be back and not buy the market, right? >> that's a good point earnings seems to be the issue >> well, earnings, you don't have that runup that we had in january. we probably shouldn't sell off as much is myopinion >> what are you expecting from ceos that i imagine are going to be cautious, almost given the markets, irrespective of their own business >> confidence is still off the charts consumer confidence, ceo confidence even though they like to kitchen sink it every quarter, i think you have that tailwind of corporate tax cuts still giving. i still think it's a positive environment. >> october, so many times, starts off bad, has horrific market breaks, but coincident with that are market lows, too don't market lows occur a lot of times? >> yeah, it's known as the bear

killer month but look, i don't think what we've seen so far is a complete washout. >> that's what i mean. >> maybe you don't need to see that so we're not quite as overstretched as we were in january and february >> scott nations is looking at the nationwide implication, is that right right, scott? nations shares, what is that is that you? >> actually, joe, i think what matters is global. mike hit it right on the head. we didn't see confirming indicators yesterday in the ten-year yield you know, i started in the business of 1987 and what happened with the crash was astonishing. but and what in the bond market afterwards was also astonishing in that bond prices rallied in a huge place. >> i remember that, scott, 200 basis points the long bond. >> right and we didn't see any of that yesterday. in volatility and generic volatility, it climbed a little

bit but in tail which measures the cost protection, it didn't close above 20 in february, it was at 95. so that tells you that's another indication that we didn't see the secondary markets capitulate maybe in the way that we did in the stock market you know, it's easy to look at the s&p and say down 95, boy, that's huge. but given where we're at now, that's just barrel more than 3%. i think much more important is what's going on with asia. the shanghai composite is in a bear market. it's down more than 21%. it's down 5% today i mean, they're the ones that are driving the bus right now. and given everything that's going on with trade tensions, i think that's going to continue to be the real problem for us. >> scott, you were like almost a certificate certified tin hat guy along with the protection team at the fed is that gone has powell noticed anything

yesterday, does that affect anything he does or says >> okay. if you're thinking about donald trump -- >> i'm talking about cramer more than trump >> i'd listen to cramer. why not take a step back and say, you know what, maybe i was wrong about being so far away. or maybe i shouldn't have said it or maybe we're more data-dependent than i indicated when i said that last week or whatever >> i think they're allergic to appearing to cave into the president and giver up any of their independence so, i think because the president spoke out yesterday, that they're actually not going to do that they're going to do the opposite of what he wants we know, we know, that the worse thing the federal reserve can do is actually keep rates for too long for too long. if you're watching, if you're trying to buy a house, buy a car, whatever. you think low rates, that's great.

we also so it fueled the bubble in 2005, 2006, and 2007. if i have a beef with the fed, it's not where rates are, they're not unwinding the balance sheet, they ought to be practicing lipo. and unwinding qe because if the yield curve bursts, it's not going to be organic. it's merely about the pufed and the yield curve. >> i think it's reminding the market of the fed's existing forecast for next year and saying the market has to get on board with that possibility. but it is part of this, i think, generalized worry that rates are going up, the fed is probably determined to get them a little bit higher, at a time when we just don't know if there's any deceleration in the economy. the other thing is -- >> how big is the fed thing versus the china thing >> i think it's more china, more the rest of the world.

>> last selloff? >> yeah. >> the last selloff, you have to go back to when powell spoke he spoke on october 2nd. and market started collapsing on october 3rd. >> and it's the free bond market you see little volatility. you didn't see a day in the entire quarter where the s&p had a pullback of 1% >> when you look at the momentum so clearly carrying into next year, if that's the premise, why should we say -- >> because what he said was, we're nowhere near neutral >> we don't know what neutral is and we don't know what near is we don't know any of those words. >> the economists that trot out on a daily basis say it's not going to continue to next year >> what's powell saying? powell's been emphasizing a positive >> but he's also saying inflation is king. >> so if we're talking

inflation, you can sit on your hands for december >> big tech stocks have outperformed the rest of our market by massive amounts. yesterday was a very kind of sudden coming together of a lot of those things. amazon is down 300 bucks, a trillion dollars down 14% very quiet why? well, i don't know, why did it go up 14% to an all-time high. no particular reason >> where's apple's cap right now? >> it's still $1 trillion. >> all right, santelli >> thank you >> and scott nations as well, and mike prosser will be with us throughout the show. hurricane michael now pushing through central georgia and leaving a bath of destruction behind courtney reagan joins us with much more on this. she's on the ground in florida and saw the storm come through yesterday. courtney >> reporter: hey, becky, it was pretty frightening i admit when

that storm made landfall, 155 miles per hour we're actually at legendary marine, you can see -- marco, if you can pan over, look at the boats that were literally just tossed around as if they were toys from this boat storage area, almost a boat parking garage which has been leveled almost like match sticks the roof was torn off. the siding was torn off of the main structure here in the middle some of these boats may be intact, but i'm not sure how you're going to get to them to determine that and the wind did extensive damage, to homes, to roads, to schools, ripping siding off of the roofs. also, a number of retailers were very heavily damaged here. many of them still doing their assessment i've been in touch with at least several of them this morning, lowe's is going to be meeting at 8:00 a.m. to sort of determine

what to do home depot is able to open one store at 8:00 a.m. in panama city beach but the panama city store has suffered too much damage and will not be able to open at this time we have extensive power outage, 740,000 without power in the main area. if you add in the carolinas, more than 800,000 without power. we still have nine airports closed and some of the ports are trying to open, but with restrictions back over to you guys. >> courtney, thank you very much when we come back, the ceo of delta air lines joins phil lebeau and the "squawk box" interview. we will talk quarterly results field prices and the selloff. dow futures down by 309 points s&p futures off by more than 1%. nasdaq down by 1.2%. and "squawk box" will be right back your company is constantly evolving. and the decisions you make have far reaching implications.

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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. earnings in this hour from walgreens boots, profit of $1.48 a share. that comes in three cents higher than expected. of course, this is in a broader overall market selloff keep that in perspective, too. delta air lines with

quarterly results. revenue topping forecasts and talking about whether it's going to come in strong. phil lebeau is at delta air lines with ceo ed bastian. >> thank you let's talk about the third quarter. i think there's a lot of hand-wringing out that we were going to see some pressure on earnings and yet, you guys were able to manage this pretty well? >> we had a strong quarter we have a revenue record performance. $12 billion top line, revenues in q3. demand has never been healthier for the delta brand and delta product. fundamentally, the business is doing great. our team's doing great, providing great service for people outlook looks strong >> we're going to talk about jetblue in a second. i know a lot of people are watching, you're really close to hurricane michael. although it did not impact your work here in atlanta

how much has it made you rework your operations? >> in south georgia and the panhandle, fortunately, our operations got through pretty well we're already turning service back on in atlanta atlanta, we had no cancellations today. we're welcoming people to come on down. >> let's talk about jet fuel as jet fuel prices continue to move higher that you guys are just not able to recover that increase and yet, 85. of the jet fuel increase you have been able to recover. how are you able to do that? >> we've done a great job in the quarter. first of all, pricing. the brand has been healthy so pricing was up 4% in the quarter. secondly, the productivity initiatives we've been working on have been working so that helps offset the cost fuel and as a result of that, 85% of the cost of increase in fuel which is up 30% in the quarter,

we were able to offset $600 million in that cost including the full year, we're expecting a profit of $5 billion this year which is similar to what we had last year despite a $2 billion higher fuel price the team's doing a great job the industry is in a different place than ever before >> corporate travel is not slowing down is it >> corporate travel is picking up speed we had double-digit growth as well as the price has been strong again, a lot is the product and brand. >> and the ability to up-sell, in other words, you may say to a corporate client or some of its people and say, look, you may have a company that says you have to fly domestic, but we're giving you an opportunity to move up into the higher class, correct? >> it's been one of the changes we've made first class, we used to give first class to just about everybody in our royalty arrangements but today, we sell about 50% of

our first class. upgrades about 50% we've also redesigned the cabin. so comfort-plus is a great problem optimization. it's about optimizing it and getting the price points right and getting the configurations to match what you want to sell >> one last question, you're a finance guy, you watch what's going on with interest rates not asking to you comment on the federal reserve, but how worried are you about interest rates and what the impact is on the economy? >> for us, we haven't seen much. we're looking at another 8% growth in q4 at delta, we've paid down the vast majority of our growth. the debt level is arguably the lowest level in our history and we also have a pension liability. and as interest rates climb it actually causes pension liability to come down we'll probably be a net

beneficiary on the month >> and for the overall economy, are you worried about the higher interest rates? >> we're watching them but haven't seen any demand for them we'll continue to work heart >> guys, stat of the day, listen to this, in the last three dele than they made in all of the three years prior to that. back to you. >> steve grasso is here. steve, we had a top-rated analyst on earlier in the week who said when it comes to the airlines, he's looking for the profit to be 10% or more on the year when you have fuel costs and other things it will keep our competitors from coming in and doing stupid things. >> right capacity has plagued the airline. maybe you see delta play catch-up i can't see united going much

higher than this >> really there's bifr indication bifurcation in the industry, you can figure out why >> i think people are doing some jiggling, and changing their seats. the economy is the middle ground were they're selling those seats at double the cost of economy. so it gives them that hybrid and recouping what they choice would have lost. >> but, by the way, if you think there's downturn coming, business customers are not going into those seats the question is if you get caught -- if you're bearish, which i know you're not -- >> you can be bullish on the overall market and bearish in different segment of the economy. but i do think the airlines have that capacity issue that rears its ugly head and that's a sell signal coming up, a check on the markets. we're going to talk fang stocks

with tech invest gene munster. and might be doing the shares of ose stocks, buy more, sell, who knows. "squawk box" will be right back. welcome back futures right now have been down 300 or so for most of the morning, still are but could cut into that a little bit. might get a two-handle at some point. we're watching 303 quite a bit worse, earlier, s&p

down 30. nasdaq down 86 joining us a cnbc contributor and our guest host continues with us, steve grass so, cnbc market analyst jim, sometimes, it's nice that you get a bounce early on in the morning and you kind of watch that sickening selloff like in the middle of the day. maybe we get some of this work done this morning, and the futures, as far as going down. and then it builds throughout the session. is that what you would expect? nobody knows >> what you notice is a very real thing, the anatomy of a correction is interesting you usually get the first big pounding like we got yesterday but then it's a wake-up call on people perhaps they got too much risk on. through the day, you see people say oh, i have a little bounce the proclivity is to sell the bounce this is not a one-day thing, but

i don't think it's an enormous thing. the vix was coming in 10 or below. we were about at a 12 vix. as we started to get hit in january, we realized everybody piled into these short positions and we needed to move. i don't think that's a situation close to this. to me, this seems like a garden variety, small correction, on the downside of the target >> really, even though we're certainly watching what happens in the bond market and now we're back to listening to every utterance from the fed because a lot of it has to do with it. you know, we've got presidents involved and others talking about it >> sure. your point is right to worry about it but the rate thing, for two years, i think the biggest hurdle for us is how are stocks going to do in that environment. so far, fine the movement from 380 to 325 is

not a big thing. i think that the market can live with 3.25. i think if we got to 3.5 on the ten-year, then we'd have something to worry about attracting money from a safer investment there away from risk. i think it's rates going higher. i think it's china, and that's, you know, part of the whole tariff discussion. and italy, number three. but all of those things existed a week ago >> jim, you keep talking about this was the first day that we had the correction we've been talking how long the actual stealth correction has been occurring it was just sort of a catch-up with a lot of the momentum tech stocks maybe yesterday are we near the end of a rolling rotation or stealth correction is there anything to that notion >> sure. the fang stock is getting blasted. whoever is leading the charge is clearly going to encounter the enemy first. when we come into a risk-off, they're the ones that are going to suffer mightily and they have. yeah, sure

we've seen it happen a couple different times where we have this rotation. i'm hoping we have a lot of bank ratings on friday. perhaps we start to rotate into them yeah, i think that it can be unsettling for the market to lose its leadership. but i don't think it's anything -- this is normal in my opinion. this is the way the market is supposed to trade. >> well, we've been through a lot of these things. and the last i looked, a week and a half ago, we were at an all-time high in a lot of places >> 5% on the dow 3% on the s&p. >> sure. but again, the underlying story is still relatively positive you guys just had the ceo of delta on talking about things getting better >> what happened to delta's stock and american airlines? >> the storm has a big effect, too. a lot of issues there. >> fuel prices, maybe. >> but i rarely hear a ceo that's negative on his stock or the environment. >> good point. >> but they may be negative

about what they can predict in terms of future. >> sure. >> and that is the one thing to kind of watch because ceos have been building up such confidence and leading us, you know >> right >> it is interesting that jim doesn't see the same thing what happened in january and february it's almost a computer-driven issue that you're seeing >> right >> i'm glad to hear him say that, it doesn't mirror what we saw. >> a lot of vows, jim. >> it's 82%. >> good for you, jim >> do you think it's the first time i've been made fun of for the name >> yeah, over. he's heard it before >> they called me jimmy devals because people didn't know what my name was down here. fine with me. >> all right >> thank you among the stories that are front and center this morning, warehouse retailer costco

reporting its september sales numbers, comparable store sales were up 8.4% from the year early. that is well above what the street was expecting consensus was 5.5% the stock, costco is up 31%. keep this in perspective let's take a look at delta air lines. the airlines beating estimates by six cents with quarterly profit of $1.80 a share. revenue topping estimates. revenue available seat mile up 3.3% from a year ago and despite the pullback, the stock is up 2.2% and then we're getting another reading inflation this morning with the release of the consumer index in just about an hour's time the energy expected to be up 0.2 from yesterday when we come back, president

trump says the fed is going crazy with its path of interest rate likes >> loco. >> but is the fed wrong with the agenda we'll get to that. as we head to the break, dow futures down 330 points fair value. nasdaq off by 100. s&p down by 32 and "squawk box" will be right back 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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welcome back to "squawk box. president trump responding to yesterday's selloff by taking a shot at the fed. >> the problem, in my opinion, is treasuries and the fed. the fed is going loco. and there's no reason for them to do it and i'm not happy about it >> loco, loco, loco. here's the global response from i s imet's annual meeting in bali over overnight. they don't think he's loco >> i wouldn't associate jay powell with crazy, no. >> fed is not going crazy. >> of the many qualities of chairman powell, is he's an individual who really understands the plumbing of the

u.s. and global financial systems. >> so, is the market getting it wrong when it comes to the fed chair powell's agenda? >> who's got it right, andrew, trump or powell? is the fed crazy or sane let's take a look at it before president trump took office. let's walk through this chart. core inflation was around 2% it's come in right on target gdp was forecast to be just below 2% it's come in, oh, call it a fuel percentage point this year these are forecasts for 2016 to 2018, okay look at unemployment, it was forecast to be 4.5%. now, it's running at 3.7%. in the response, that's what you see in the right most part here, the fed funds rate, they think they're going to come in, if you do that extra rate hike, 2.4

versus 2.1 is that crazy in light of the forecast to do an extra quarter point forecast now, that's not all. it's not what they've done, it's what they've forecast. let's take a look at what they have done, becky, and what they said they were going to do a year ago, this is what they forecast for rates, 1.4, 2-1, 2-7. they're one guarantee behind 2018 and 2019. and that's where people get freaked out, the 2020 forecast, which is a half point higher for 2020 when did that happen september 2017 >> that is not why they're freaking out >> if there's a reason to freak out -- what has changed one percentage point more growth one percentage point less

unemployment all-time highs in stocks which the fed views as what -- essentially a loosening of financial conditions so some need to lean against that jay powell, though, i will tell you, the least forecast-dependent fed chair that i recall. he practically mocks these forecasts at his press conferences. he may also be the most market savvy, maybe the most market-dependent of fed chairs he's going to be listening closely to whether a hike is needed >> that's not what happened. he said something in a press conference wednesday that spooked people that was in terms of where are we in the neutral >> no matter what you say, you should end with we're data dependent? >> okay. could you guys call that line chart up there the fed going neutral -- since

december 2017 -- we can agree what the fed thought neutral was. 3.2% >> 3% because that's a percent above inflation? >> it's because that's where they think the neutral ratie is right now. these are fuzzy terms. what we do know for sure is what happened >> and he couldn't figure out where inflation was and he's enamored by lack of inflation. he's inflation is tame or i don't understand what's happened to the phillips curve and that's boggled all of us. and there should be a stat for the inflation and there isn't that >> there is not. it has crept up quite a bit. remember we were talking about 1.2 and change now, it's almost a percentage point higher look, steve, my point is if you're not confused you're not

paying attention there is a lot of weird stuff that should be that way that isn't. >> joining us, david bianca, and david kronk. david, since the last time you were on -- >> good morning. >> -- the last week or so, have you modified any of your recommendations? or are you leaning one way or another, different than you were a month ago? >> hi, joe, good morning from minneapolis, i'm in jim paulson's seat this morning. our thinking has been that the market would dip before the midterm elections. not because of the midterm elections, but because of this backdrop of the fed hiking that's why i wanted to be in front of you this morning. my thinking is this is a dip that's already a little bit oversold in terms of s&p fair value. but i think we have just a little bit more to go downward before we bounce higher because u.s. equities are not oversold

versus foreign equities. europe is being beaten up quite badly. 15% decline from its highs and emerging markets, asia, on the pressures of these tariffs which we think are going to get worse, that is down well into bear market territory. >> i actually would agree with david, i think what's interesting about yesterday, if you paid attention to the market action of yesterday is that it was tightly contained in equities everybody wants to talk about what happened with yields yesterday. the yield curve actually steepened. that's a bullish side, right we're at 32 basis points flight. you're heading into a good season, obviously into the spring with the fall of markets, credit default swaps, very well behaved. they just didn't show the signs of stress. so, when you get that type of action, just in equities, i agree with david, i think it creates a bullish sentiment against the fundamental

backdrop remember, it's not just the fed that's tightening. you've got interest rates going up, balance sheets shrinking but oil prices four-year highs the u.s.-weighted dollar up 10% which is a tightening or constraining of financial liquidity. so there's a number of factors at play here all working to tighten financial conditions simultaneously >> i agree with that i just would add to that that this isn't about gdp the market is taking concern with the earnings outlook for 2019 so, in my view, chair powell was very right to be confident about the expansion. but should be more cautious about just how fast and how high the fed hikes rates over 2019, as the global economy is going to decelerate, the u.s. economy will be fine these tariffs are irrelevant for u.s. economy and inflation, however, they're significant for earnings and i think you'll hear from

companies during third quarter earnings reports that the 2019 estimates are too high and where the tariffs are going and where the dollar is going, a bit higher from here i think earnings are only going to be 5% next year >> wasn't it eight days ago that we hit an all-time high in the dow? wasn't that october 3rd today is the 11th >> just to be clear. what's happened to fed policy in those days >> only 5% off what's been more dramatic is the bond market. >> i have a lot of sympathy with the argument that it's not the amount of the move, it was the speed of the move. >> right >> right >> but ultimately, the change in the outlook, it's earnings, it was strong growth. it was a strong consumer there were all of these good things happening eight days ago. i go on vacation and i don't know what happened >> good things for gdp >> and a curve flattener and a big rush to fight the quality to drive the yields

down >> why are we seeing the financials react to the positive slope, or, as you said, the increase in the yield curve? >> they actually did, steve. they on a relative basis perform much better than a lot of what we call long-duration assets, you know obviously, tech is a long-duration asset. >> forget about the relative basis. we see nothing but flattening of the yield curve. now we see the yield curve steepen, are they less concerned with the lack of growth? >> that's a very good point. credit growth has been a concern all along. >> because you're not bearish, are you going to be buying all morning? >> no first of all, i'm pragmatic when it comes to marketplace. you have to look at where the technicals and financials wash out. it's more of a systemic versus risking. >> i think it would be nice if you would tell us whenit's mor than a garden variety

correction should we always assume it's a garden variety correction? >> it's like every guy on a trading desk has never seen a rising rate environment. every guy that's trading is the buy the dip mentality. so we're going to say it's a buy the dip mentality until it's is not. >> the february lows -- >> bianco, will you call here when it's more than a garden variety correction >> just a heads-up >> of course, i will >> you will. >> and at this stage, we think it's a dip to buy. you always have to wait for the dips in order to get the buys. to our viewers, buy big banks, stick with growth stocks and try opportunities to abroad. thanks >> all right darrell cronk. and david bianco, dws group.

steve grasso is sticking around. when we come back, the nasdaq having its worse day since brexit 2016. we'll tell you what to expect in today's moves. gene munster will join us after this break. or time for today's avenue fli aflac trivia question, when did the new york city subway system start accepting the afflelac cad the answer when cnbc continues. how am i gonna pay my rent? all these bills? aflac! oh, aflac! and they pay you cash in just one day. see how aflac helps cover everyday expenses at aflac.com.

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welcome back to "squawk box. among the biggest losers in yesterday's selloff, the nasdaq deposit. joining us gene munster. jeff bezos lost $9.1 million personally netflix and others down in the premarket this morning as well is this a buying opportunity a dip situation, or do you think there's something more material happening here, gene >> i don't want to send a mixed message here, i think it is, unfortunately. near term, i think these will probably continue to trade lower, more so large cap tax especially something like amazon with high multiple and facebook facing diminishing user growth metrics. i do think apple is the positive

outside here but the big picture here is that this correction doesn't replicate quite the correction we saw earlier in the year the 10% drop so, the simple answer is, brace yourself on this large-cap tax for another stepdown >> what does the dow say to you? >> i think we should probably see another 5% downside with these larger names i apple's going to be a positive outlier, just given it's valuation. but i think we see another 5% drop here. still very bullish on the sector, for other reasons. but the near term, this psychology, has a way of playing itself out in historical patterns and that's what the historical pattern would tell us. >> you talk about apple being a safer name anything else you'd put on that list >> that's probably the safest one that really stands alone google is also kind of in that camp more broadly we think that there's going to be, really, a split in how the fang is going to perform companies like facebook are going to underperform the fang

in the next year but i think apple and google are probably in the best camp. amazon that high multiple, is probably going to give you a challenge. >> we've been talking about this as a bit of an inflation story and the fed on the other hand, with the china piece of this, both on the tariff side and now these increasing questions about security, ip, et cetera. who on the u.s. side of the technology story is going to be impacted by that, do you think >> i think the larger cap name, apple and amazon have really gone out of their way to emphasize that they have not been impacted. >> do you believe them somebody's lying here? somebody's lying, right? >> yeah. i think that the source of it, from what i've understood, starting to back off on their credibility a little bit so, i think i would say this in talking to people close, let's say, around apple. typically, they aren't as emphatic about anything. i mean, they tend to be pretty

close-lipped and encrypted how they talk. but it's been pretty clear, at least on apple's front, that this in fact -- that they were not compromised. but to answer your question more broadly, i think we should see smart u.s. component names perform well >> just on apple, gene, when you start talking about china and trade tensions rachet up, it seems that trade is number one in the strains in relationship do you have any concerns about that >> we do, just because that has been, you know, such a big piece of apple's business comes from china. the simple answer is it seems that based on what we've seen with the administration that they've been doing a good job of navigating that. when something's come up more recently around wearables -- >> we've got to run. any hardware companies in the u.s. that will benefit from any of this? >> amd >> amd

thank you. gene, appreciate it. coming up a lot more on "squawk," a lot more on the global market selloff. plus inflation data. everybody will see that 8:30 a.m. the data reaction. plus the chairman of the cftc is keing to join us ta alook at the futures. we're a little up in the dow 28 points. a little better than before.

under pressure, futures pointing to another round of major losses on wall street. the day after the dow plunged more than 800 points in its biggest drop since february. global selloff asian stocks getting smacked with china's main index trail be by 5%. fang stocks biting the bull, leaving the sector suffering in its worst day in more than seven years. the final hour of "squawk box" begins right now >> announcer: live from the most powerful city in the world, new york this is "squawk box. okay let's get ready. let's cue the countdown clock.

we're getting ready for the opening bell on wall street as futures are a is good indicator. they are it doesn't look so pretty for the bulls, quite a bit less than earlier. >> down almost 400 >> almost the entire show, we've been down more than 300. somewhere between 325 and 330. now, 238 nasdaq has proved, s&p down 30, now 22 asian stocks closed lower. china's benchmark index suffering its biggest loss since february 2016. i'd like to know the year-to-date on that little gem. where we are, with klein because it's got to be bear market >> 24% down 24% for the last 12 months. i don't know year to date. >> and more than 1,000 chinese stocks fell by the daily limits. that equates to 1 out of 4 the shanghai composite closing below the 26 level that's a market that wasn't even

reached in 2015 and 2016 and in europe, right across the board, germany now down less than a percentage point. and less than 2% moves down across the boards. treasury yields this morning we did come back below 320 on the ten-year 3.18, 3.15 earlier in the ten-year, 3.36. we did see a steepening of the yield curve yesterday which could be taken as a positive if a picture is worth a thousand words, the chart is priceless. we have investor john dom chu. >> those charts are bread and butter for many investors here, certainly at cnbc.

they do tell a story of trend lines. they do tell a story of how things are playing out in regard to how they've done in the past. the epicenter of the market so far has been technology and communication services many of those stocks are part of the nasdaq composite and the reason why so many folks are keying on this right now that leadership from the downside has now pushed the nasdaq composite below it's 200-day moving average something is that hasn't happened in a couple years but you can see over the course of the past few years, there's been a few years that we try to get there. and it's providing some support. this is something to watch for the nasdaq if you take a look at some parts within that technology space there are the semiconductor stocks another point of pain in the market right now and one that you can see right here is now well below it's 200-day moving average it has been for quite some time there. that's something to watch there. whether semi conductors can find some kind of a bid they've been a big leadership

group to upside. one place to watch, maybe more broader in terms of economic commentary and impact is the transportation stocks. oftentimes, folks like to liken these particular trucking, airline, whatever, companies to indicators of the american economy. and perhaps even a global one. and we're now down below the 200-day moving average as we talk about the key marketplace, semiconductors and transportation stock are among those stocks that have moved marketly below their long-term trend line, andrew if they can find a bid that could bode well for the market, of course, we'll see if the minus 200 or 300 days are going to resolve themselves with at least some stability as the opening bell comes around. >> dom, thank you for that and patiently waiting to talk oil, the energy sector, these stocks have performed well jackie is here drilling down on the sector, jackie >> good morning, andrew. that's exactly right the energy sector was one of the best performers over the course

of the last month, that's why oil prices were on the rise. and now the market is shedding that off it's focusing on the stock market with rates rising and growth in question, stocks tumbled yesterday and so did oil prices. the correlation is back. and that's because falling stocks raise the fear of falling demand for oil so take a look at some big energy names, exxon, chevron, bp, shell, all stocks that have lost ground in the selloff later today, from the department of energy, the api already indicated that a build is coming that stockpiles are robust here in the united states and opec out with its monthly report this morning showing that the cartel went from 36.2 million barrels in august to 38.8 in september. and there's chatter that the saudis can raise introduction if need be. so less of a concern that it was.

and the stock market jitters more central and slamming the gas stocks as much as any group, the industry dropping by 4% yesterday. many stocks down this morning. brian sullivan is in the permian basis. where it remains optimistic but also a little cautious brian, what you hearing? >> reporter: yeah, becky, we came out to talk about peak permian. let's talk about the industry, you know as well as i do, becky. this is an optimistic bunch. we had 600 oil investors wandering around talking about the market let's make the bull case and the bear case. the bull case, 3 1/2 million barrels a day. they're talking about going to 5 million. ramping that production up right now, it's still strong smart wells. they're not just putting pipe in the ground and coming up dry

pretty much all are ahead because of technology. let's go to the bear side. the bears say, wait a minute, on this cost side, no, no, no cost came down when oil slid they're on the way back. people, sand, waters for fracking, those costs are up as well certainly, lack of infrastructure if you don't have a pipeline to get the oil out, you really have nothing. saudi aramco telling us a couple weeks ago, we think it's going to drain faster. that's not one straw down there there's five, eight, ten straws down there and too much debt. this is an industry built on sweat. it is built on people. but it's also built on capital and there's a lot of concern, about 240 billion in debt that may come due over the next five to ten years if oil prices fall. how will that get paid back? >> were people nervous when you

talked to them there. >> reporter: you know, eight or nine busts over the last 40 years, they're optimistic. but i will say this, the folks we talked to, we talked to people whose stocks were down 6%, 7%, they say if this keeps up, and it is optimistic, it is one day. that is not a trend to make. but coming up on cnbc, we'll show you who is owed so much debt, 95 million going to $235 billion. who owns it and if rates keep going up it could be a double or triple whammy for this bunch here >> thank you joining us the head of u.s. equity and quantitative strategy at bank of america our guest host steve grass so is

here, too. >> so many people trying to figure out is this too much of a selloff. we are seeing the red arrows continuing what's your take on it >> my take is this is kind of normal so, in a way it feels bad because volatility has been so low, but this is essentially normal i think the good news is the valuations of the s&p now closing in on long-term average levels where they were very elevated heading into this year. so, i'm more bullish today than i was a couple weeks ago i was bullish a couple weeks i think what we want to focus on are earnings, which are still healthy in the u.s valuations have come down. and what's interesting about the selloff over the last few days is that credit has remained remarkably calm. despite the big move in the vix,

despite the big move in the market you know, i guess if we start to see rates stabilize, if we see credit not necessarily imply that this is contagious, i think those are all positive signs for equities >> you know, watching some of the sectors. >> yeah. >> we've been seeing a takedown in the technology sector >> yeah. s&p broad based technology worst day in seven years >> absolutely. >> is that also a case where you say pile in, or is it different sector by sector >> i think selectively tech is the most crowded in the s&p 500. it was a 30% overweight by the average fund manager >> so you think it deserved? >> part of that is positioning risk that has now been removed to some extent i think within tech, you want to buy cash-rich tech companies and you want to sell some of the more growthy credit-sensitive areas of the market. i mean, i think the rule that we want to pay teengs over the next

12 to 24 months. the cash fields are rising cash becomes more important and leverage becomes more evil anything with credit sensitivity i would avoid. i would buy cash-rich, large companies. >> what about the financials we're about to start hearing from the big banks into the earnings season. normally, when we talk high interest ratings that's great news for the bank? >> yeah, i do think financials could be the quality sector going forward. they're now a seventh of where they were at the peak of the crisis i mean, financials has totally cleaned up its act so, i see it a beneficiary of better economic growth a beneficiary of interest rates, as long as they don't rise too quickly. and i also think that balance sheets are not a concern like they were in '07 and '08 >> steve, what do you think? >> not to discount what was just

said, i think people are still searching for that growth punch. we've seen that anti-growth environment give a kick start to financials now, they're concerned with global growth. and if global growth is in question, you don't get people lining up to buy the big money-setting banks. that would be, i would say, the seasonality would be pushing back towards those tech-owner names for the beta going into the last year. >> i think the issue is that global growth might be slowing down but u.s. growth actually looks pretty healthy >> the problem is their exposure to the global environment. >> yeah, but i think if you look at u.s. banks, their exposure to u.s. gdp is much higher than global exposure and they're superdheer supercheap >> but they've been supercheap for a long time? >> but rates are finally

starting to materialize. and that might have been the overhead >> we were talking about it during the commercial break, the issue of buybacks. the idea that companies right now because of the earnings season that we're in are basically out of the market. >> yeah. >> they're completely out of the market i would argue, i don't know if there's real numbers on this at the moment at the moment, it looks like buybacks can be 20%, 30% of the market you take the buyback situation off the table, who is left to fill the vacuum. at the same time, call me in three weeks when companies are allowed to buy back their shares and does that change the dynamics >> you're right. corporate has been the biggest buyer of stocks for the last eight years. it's kind of freaky when they stop i think, though, the other buyer that hasn't really stepped forward are individuals. if you look at asset inflows into bond funds versus equity

funds, bond inflows are 2x into the next cycle and everybody know that interest rates were eventually goes to rise which is bad for bonds. i think the buyer that steps in might be the individual investors that are overallocated. pension funds there are a lot of buyers of equities that haven't benefit as aggressive as corporate. i think on a season basis, this might be the time to buy equities but the good news they're likely to come back. >> savita, great to the see you. >> thank you savita and steve both mentioned financials will they provide the selloff pip wilfred frost has been looking into this. >> indeed, they could provide some relievful they show the benefits on the rising yelled cup. on note, net is expected to rise

4% with particular focus on the middle market which could be soft credit costs should and need to stay benign. and credit scores will be key. when it comes to deposits, how much will banks have to pass on to customers goldman sachs indicates they'll pass on 40% of rate rises, that's up from 34% last quarter. and government beaters while rising are still relatively low for retail banks raernl for online offerings and slight gains in banking and equity trading slight declines on income trading. there could be interesting company differentiation to look out for. on a pe basis, the large-cap banks are attractively valued. they're currently valued at 65% the s&p 500 average to the

historical average of 80% on the s&p average. that said, on a price to book, the sector is more fairly valued the index is now down to date. >> can i ask a quick question -- 27, 28 days to the election? is that where we are right now >> yeah. >> a lot of tiles, the market sells off before a midterm and then it rallies after. i think there's some uncertainty about this election. grassley was on some radio show and says if the house goes, trump's done in terms of his program. he has two years left. it's going to be status quo. nothing is going to happen unless he gets re-elected, there's nothing done but so much of his rally is built -- >> do you think there's angst to that >> could be. >> on the 538, they're 80%

>> the polls say that president trump is going to get elected. >> the kavanaugh impeachment and possibly trump impeachment they say it's going to be. >> i think the thing is on the table. but, yes, there could be some angst about that but i think this is more about, we'll see that when it comes and usually, after the midterms, you do get that upward momentum in the marketplace >> if you look at the year after a midterm, this is 18 of the last 18 times, going all the way back to 1943 -- >> so what you're saying, there's a chance. >> -- the market is higher the market is higher in the year after a midterm election no matter what. >> but what joe is saying if this already loaded on the pro-growth qualities -- >> but on those pro-growth qualities, if they roll that

back, the market has gotten what it wants >> right if you look at it anymore. >> what was tailwind becomes headwind at that point to the marketplace. but we're so enamored with china and the fed flighright now, i dt know when that comes in. >> we have not been talking a lot about china this morning we've been touching on it here and there. >> we went from china to now the fed. no one cared about the fed a couple weeks ago and now we're back to the fed again. and i think it's better to be myopic on the other things versus the fed there's too many things there. >> we're now down. it was in the teens a second ago. >> i'm actually looking forward to talking to jim. >> he doesn't really tell people what will he thinks a lot of times. >> no, last night, he did. >> yeah. we will hear from him.

>> we're also going to hear from southern company's ceo tom fanning. wei he's on the advisory committee of the federal reserve he's also going to give his take on the storm because they have a lot of customers in florida as well take a look at futures dow futures down by 225. we were down by almost 400 points earlier nasdaq down 61 s&p, 19. after big ssloes yesterday we'll see where this is headed we'll be right back. (sounds of race cars) the same iot technology on the ibm cloud

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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 box. this morning, i want to show you what the futures look like they were off. it was over 300 points earlier the dow now looking like it's going to open up about 225 points it's got marginally better nasdaq, 65 points. s&p 500 looking to open up, we'll call it, 19 1/2 points right now. in large part, there are questions about the fed and inflation and tariffs and china.

and president trump calling yesterday's selloff, a correction we've been waiting for for a long time. he attacked the fed, though, again. >> well, i think the fed is making a mistake they're so titlght. i think the fed has gone crazy you can say that's a lot of safety it is a lot of safety, and it gives you a lot of margin, but i think the fed has gone crazy >> weighing on the fed yesterday, he joins jim cramer on "mad money. >> inventory was here, on the shelf, on the warehouse, bought without the tariffs. you're going to have a laden-inflation pressure on the market, which china was trying to leverage by knocking it down. mnuchin said don't do that doesn't mean they're not going to do it

it's flat, right, to the consumer here. but i think the sfed going to have to be careful the economy is not quite as strong as the number indicated >> and our other top story, hurricane michael, businesses along the florida panhandle are assessing the damage after the storm ripped through the region. and joining us now, thomas fanning, chairman and ceo of southern company you're right in the storm's path, i think, or close to it, right, tom >> well, southern company is headquartered in atlanta we have georgia power, of course, gulf power is the panhandle of florida, alabama power, and mississippi power so, this thing has come right through. you know, joe, we talked about it in florence, i helped lead something called the esscc the electronic sector coordinating council we helped coordinate that. look, this thing came in as

almost a cat 5 right over panama city first time in our history, it went through the state of florida and hit the state of georgia as a cat 3 we've never seen that kind of strength before. now, it appears to be moving pretty quickly 800,000 people out right now good news is that we've had 30,000 people already staged and engaged in restoration those came from 24 states. so the preparation of this industry has been terrific my own numbers here in the southern company, georgia power, alabama power and mississippi power. at our peak, we had 530,000 people out we've already restored 170,000 people so, we're down to about 360 and we're going to work really hard to get that done but boy, let me tell you, the devastation, the pictures associated with the storm are just amazing the heroes that are the lines crews, those guys are working.

and we're also paying attention to family services to help the people left behind to make sure they're in as good a shape as they can be. >> obviously, we talk financials and stock markets, but this is obviously something that is front and center hopefully, everyone that needs help is being helped and our hearts go out. there's a lot of property loss loss of life, everything else, tom. but while we have you here since were you chairman of the atlanta fed, there's some things going on in the markets as well. related to not necessarily atlanta fed. but you've seen powell's comments from a week and a half, to two weeks, whenever that was. and you've seen the president's comments about what's happening. and you've seen what's happened in the markets the past couple of days. what are your thoughts on all of that >> joe, i've got to tell you, i've been laser-focused on this storm, to be honest with you,

working with d.o.e., homeland security and our own company, and i really didn't see the market correction and kind of this reaction really until i started watching your show this morning. but i've got to tell you, it's fun in, leisman, i've been with you guys many years. we're great friends, i've seen hig s his segment earlier this morning, i think he's right on the money. you look sat inflation, it's right where they want it to be unemployment is better than they thought it would be. there's other resources coming into the market, so inflation isn't taking off because of fiscal policy, largely, i think tax reform. reduced regulation i think unwinding, and you can see our way through some of these trade stats that have been going on gdp is better than everybody is calling for. i've been calling for a 3% number and sure enough, we're better

the i think that i think is in my opinion, an overreaction to the few days of comments, et cetera, really is this idea that you've got to keep your eye on the long-term projection, not on the day-to-day movement of the fed of what they will or won't do as pointed out from a year ago to this year, there's not much change in the three-year forward curve. i would look at that, in my opinion again, i think what's happening is an overreaction >> all right if you hear the guy that's got his hands on the steering wheel and he says, whoa, i can't believe how far away from neutral we are i mean, we're going to be raising rates forever. if you hear that, that may not be as good as saying well, you know, we're data-dependent, we'll see what happens, here's where we are and obviously we're going to watch the data there's two different ways of saying it. ryan he's, you kn-- i mean, i t

learning on the job. even body language i'm watching the expression on your face right now. i'm not sure what to think there's 17 different ways to tell someone is provaricating >> yeah, joe, it's not what you say, it's how you say it, that's for sure keep your eye on the ball. this economy is great. the foundation is great and i think the fed is consistent. i would tend to ignore the short-term stuff >> tom fanning, we appreciate you tuning in. you're probably working 18, 24 hours a day. >> oh, yeah, these guys are working 24 hours a day >> thank you >> thank you we're just seconds away from

jobless claims and the september consumer price data that people are watching so closely. this morning, again, look at the dow futures. down by less than 200 points that's cutting in half what will we saw earlier the ten-year note also to keep an eye on. let's get to rick santelli >> reporter: good morning, becky, right on cue, we have numbers breaking september's cpi, up 0.1 head line. and no revisions in the rear view mirror. year over year, head line cpi up 2.3. not only is that less than expected, it's 0.4, yes, 0.4 less than our last look. do keep in mind, our last look was 2.7, before that, it was 2.9. this number does backtrack it's

the lowest number in february. if you're looking year over core, as expected, 2-2, exactly is in the rear view mirror let's look at real earnings year over year, up 1.1. if you look at average hourly earnings -- they were up 1.1, i'm sorry. so, we want to pay attention to that as well finally, jobless claims, 214,000. that's a jump of 7,000 last week treasury yields are supposed to go down when the stock market gets squeamish, and they did 3.14ish, 3.15ish one thing, becky, andrew, joe and the gang, keep an eye on volatility, obviously. keep an eye on fx swaps, around the globe, china

lofty levels, lots of moving parts. back to you. >> quickly, rick, thank you very much let's take a look at the futures, folks as the numbers come out. and you heard him say it was the cpi data not as strong as anticipated. consumer up 0.1% on the head line and core number expectations had been 0.2% what we saw on the dow futures we had been down 200 points. and now s&p down 140 points. s&p down by 10 points, the nasdaq down by 24. steve leisman is on set, crunching some numbers, making faces at his computer. >> grunting and otherwise. i'm not sure the head line is the case this time next month. and looking at the rest of it, it's all sort of modest.

the core comes in at 2.4% which is unchanged from the prior month. it's pretty much on target with where the fed is going to be i guess the new debate, crazy or not, the new debate, you can argue this, hey, we don't have an accelerating inflation although there's perhaps some in the pipeline if you look at unemployment being down so low. and all of the anecdote evidence that we get from employers saying, hey, wages have to go up and aregoing to go up to attract workers. >> hasn't happened we talked about the phillips curve. and we've been waiting for this inflation to kick in i think there's still room that we're not chasing it to stay ahead of policy. that's the debate. i think it's going to be an ongoing debate >> back in august 2017, we were

at 1.7, and now we're at 2.2 it's half a point. we have the fed, should the fed wait to accelerate rates? >> does anecdotal evidence matter when you start hearing from companies like ppg and others? >> the first thing john writing told me 25 years ago when we met, he was at this firm that we won't mention but he was a genius over there that anecdote is not evidence. that's a thing that a smart investor looks into and you look at a single report and you say what's happened to overall macro earnings that's really not changed much, the macro earnings, the broad outlook is pretty strong >> i know you have to go but i want to thank you. do you want a final word >> you don't have to be a hero here you're undecided about the markets, let it shake you out.

markets work in three to five-day increments. let's it shake you out dip your toe back in, add a position if the market starts to fall again precipitously, then you decide to lighten up on your own risk tolerance >> thank you >> a different perspective on the data, john riding the aforementioned here. good morning >> first of all, the five bucks i gave steve to give me the plug was the best money i spent >> but i think -- >> i think you paid too much >> but there's a lot of move parts here the question is what's driving and this backup in yields that we've seen has been a move not in inflation compensation. it's been a move in real yields which is in part growth signal and i think it's in part the fed

unwinding its balance sheet. yeah, you know, if you look at the equity market, the equity market is, in a sense, the multiple is in a sense like a bond yield just turned upside down. as the yields go higher, it provides a challenge and the markets barely had a challenge. we had one blip earlier on the year on the unwinding of those volatility funds and this is likely another mini correction. >> what's the downside from here >> oh, i don't know. we're nowhere near recession look -- you think recession as an event is nowhere in the numbers. and the recession event is only a 20% drop you know, these days 5% is the correction but i'm not -- as an economist, i can't look at increments of three to five days as an economist, i can look at increments of three to five quarters >> you look at the conversion

that powell used, is that a mistake? >> no, he's been a master of communication, compared to -- >> people are loving him fed chair until they weren't >> the trouble with saying he made a mistake there which i probably shouldn't have said it, but, look, nobody who follows the fed didn't hear those remarks it's too negative. basically the people who heard those remarks, okay, what he's saying you're going a rate hike or two above neutral 3.5, 4 i don't think anybody heard powell is going to 4, powell's going to 5 >> i heard those remarks. >> you have to do it in context to what powell has said. >> he was in a forum, an interview. he would have never said those things if he'd been writing out his speech i think he spoke off the cuff and i think there are ways to interpret it >> if you want to interpret it

that way, you can but you have to ignore evidence >> they took the word "accommodating" out of the statement. the numbers, we'll say, were not neutral yet. might have benefits but not at neutral yet. the fed plots it out and expects to see the interest rates go a little shy of 3.5% and moving very gradually. and i think that's right becaused low inflation because the fed has been adjusting rates higher, the fed is not neutral just telling us there's more rate hikes to come the fed has a rate hike in december in its forecast it has three rate hikes next year my guess is the inflation numbers will push the rate to 4. none of that is a disaster, as long as companies generate

profit the best piece of news was cutting corporate tax rates which massively expanded markets. and sometimes, it has to settle down >> okay. we've resolved it. >> we've resolved it >> i just would add very quickly that if you're going to have strong growth like we're going to have, and you're going to play the market as if we're in a new environment of 3%, you should expect that the rate environment would be different >> yeah. >> and i think part of what happened here is the market was sort of wanting its cake and eating it, too and then somebody came on and said, wait a second, if you're going to trade 3% growth, you better start thinking about a 2.5, 3% fund raise >> and they say it's fine. then is happens and people are ooh. >> and the markets just relax. >> rick has an idea that the bond market trades like adults

and the stock market trades like kids and the bond market sort of saw this coming and was kind of ready for this and the stock market kind of, whoa, what's going on here it was alerts. but if you go back to what i showed you in the last hour, this was in the plan the whole time >> the market had a heck of a moof move in september. >> you're not seeing a rebound from yesterday but we were down 400 points >> when he says come down, it may have come up >> we got to go, do you have a forecast for the ten-year? >> 4% by the end of the year >> and is that it, does the fed get to 3, 3.25 and it stops and the fed gets to 4? >> no, that sounds high. no, no, don't do that. >> no, this is what we have to start trading on, joe.

>> a healthy economy should have a real ields >> a real yield. >> 1.5%. >> for 300 years the real yield -- >> a real yield, plus inflation. >> okay. >> all right >> what is the number, 2%? >> 2%, 1.5%. >> okay. john, thank you, sir, for playing along. a programming note, we should tell you, we're going to have a tease for the show tomorrow reserve fed charles evans. that's 8:30 eastern time given all of the conversation we've been having, that's a conversation you want to see meantime, when we return, new comments from president trump this morning on the fed. we'll bring you those comments and then health care is the best performing sector of the s&p. bio-tech telling a different story. the stock is going to get hit the hard we'll go to the break.

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it's our healthcare. can i say it? what's in your wallet? welcome back to "squawk box," everybody. we've been watching the futures this morning after the decline of over 800 points for the dow you continue to see red arrows this morning however, we're off the lowest levels in the morning.

dow futures were down almost 400 points at one point. right now 180 points s&p off by 12.5, nasdaq, 44. bio-teches were not immune from selling off on wall street. meg terrel has the story >> hey, joe. the sector has significantly underperformed it may be the rising rates or fear of rising rates. many bio-tech investors say because of the it, the higher interest rates could mean smaller performance. according to the bio-tech, the ibb influence said by large caps and the x large companies. despite the fear of higher interest rates, mapping 20 years of bio-tech performance with the

ten-year yield, they actually found when rates rise, bio-tech stocks generally do as well. what they say is more interesting is the investor's appetite for risk which may play a bigger role in the environment that we're seeing, guys. and saying they feel paralyzed looking at the market. they just don't know it could be a really great day they just don't know what's going to happen. >> which plays into the whole idea for the market's tolerance for risk >> yes >> so watch the vix. >> big night last night. the whole pharma category. >> what? >> yes >> i missed it >> did you get all of them >> in the question, it had ph -- like one of those form -- amgen, eli lilly -- >> oh, wow >> i can't believe it. number one i can't believe i was watching "jeopardy!. >> you've admitted before. >> i have. and i was thinking of awe alyou.

i was going to call meg. meantime, social stock, julia borstein joins us with more >> good morning, the social stock snap to a new low. shares of snap plummeting 20% losing 6% yesterday alone. this was dragged down by the analyst michael nathanson saying the company is quickly running out of money facebook shares are down nearly 7% over the last five trading sessions down 4% yesterday alone. that company is suffering from revelations of a security bug at whatsapp that allowed hackers to take a user's applications when they answered an incoming video call that is the latest in a string of privacy concerns. twitter shares fell 8.5% yesterday. that's the second worst

performing stock in the s&p 500 following tiffany. in addition to the broader selloff, all of these companies are facing the risk of pending regulation, particularly when it comes to privacy, andrew zbl >> julia, if someone said you're going to be on page six, normally, you'd worry, right >> normally, i'd worry >> that was fine >> my stellar performance of "vanity fair." >> that was good did you see it if you ever hear it, it's like, what -- that was a good one. that was a good one. anyway that was fun >> way to go >> he was riding a scooter -- >> yes in the meantime, joining us right now is chris gian carlo, he's the chairman of the commodities and trading commission good morning to you. we've been talking about the vix all morning. where the markets are.

i know you're not a prognosticator, what are you thinking this morning? >> look, we're pleased to be noting that the markets are functioning the way one would expect there's good liquidity in the markets. our exchange operators operating throughout the process, through the rest of the day very well. we saw no trading halts in any products that trade on our listed future exchanges and a limit number of halts in equity exchanges. all in all, the american markets have handled this correction, this movement in the mark very well as market overseers, our core responsibility is to make sure our markets meet the demands of investors and risk hedgers and that the markets function smoothly and that's what we saw. >> chris, one of the questions, though, that's been hanging out there for a very long time with the emergence of etfs with it's emergence of the passive investor, if you will, that the

ups and downs are going to become more pronounced and in a crisis scenario, very pronounced is that something that you watch for? >> we watch volatility and the volatility index, the v.i.x. index is relatively low. it was trading in the 12 range leading up into the last 24 hours. the futures contract was trading above the volatility index indicating that market was pricing in risk more than the index was showing. now that has reversed in the last 24 hours. the futures are trading slightly below it indicating that the markets may be perceiving that the volatility event is taking place. we watch that very, very carefully. >> you have fought back at this idea, if you will, that your exchange in particular by the market more broadly has not been

enforced. there is a prevailing view that enforcement has not been a watch word over these past several years. do you think that is wrong >> it's just not supported by the facts. we just reported our first fiscal year's results and by almost every measure enforcement activity is up. we have seen a record number of penalties. we have seen more active cases filed, more large cases, more manipulation cases, more greater partnering with other law enforcement partners and really importantly more accountability across the spectrum of market participants from the lowest level trader. the notion that enforcement activity in the current administration is down is just not proven by the facts. >> i have a crypto bit coin question. there have been a lot of etfs and efforts to bring these things on to exchanges.

>> in our markets we have launched the very first two bit coin futures. our markets have traditionally been very innovative and we continue that innovation. >> the s.e.c. has not allowed a mutual fund. >> it has a different beat than ours. they have a greater focus on retail markets. we have a different historical and statutory approach to certifying new products. >> thank you so very much. we are getting new comments from president trump this morning on the fed. >> reporter: we talked about the swipe that the president took on fox news at the fed last night. now we can talk about the swipe that the president took on fox news about the fed this morning. the president has been calling in to fox's morning show and had a couple comments on the fed. >> the federal reserve is getting a little bit too cute.

that's ridiculous what they are doing. the democrats, you look at what they would do to it. they would knock it down. instead of up 50%, it would be down 50%. when i took over this economy, this economy was ready to crash. we were at 1% gdp. now we are at 4.2%. it was ready to crash. if you look from the great depression, it was the worst recovery in the history of our country. don't forget, obama was playing with 0 money. he was playing with funny money. it was very easy. i'm paying interest at a high rate because of our fed. i would like our fed to be not so aggressive because i think they are making a big mistake. >> the president there saying that the economy was ready to crash when he took office. you guys can speak to folks on wall street and see if wall street agrees with that. also, continuing the drum beat of criticism on the federal

reserve and criticizing the obama administration saying they had it easy during the economic recovery. i think you can find a couple of obama administration veterans around this town who would tell you they didn't feel they had it easy. the president continuing this drum beat of criticism against the federal reserve intending to put political pressure on the fed. we'll see how the fed responds. >> eamon javers, thank you. jim cramer joins us. yesterday after the market did that steep down turn towards the end of the session you were the voice of calm adding a little bit of perspective to things. how are you feeling this morning? >> i wish it hadn't -- when i got up the dow was down 400. it is down 162. that is down. we wanted it to wash out the sellers. we have to be careful. earlier there was talk about

anecdotal versus empirical. when i learned that you do a lot of homework -- here are a list of companies that are weaker. chemicals, housing, regional banks, autos, apartment building, rails, brokerage, luxury goods, engineering construction, small business lending, small business hiring. when does it become imperical? i don't know what emperical is if that is not. i talked to many ceos in every group because i don't have a life outside of this work. i will tell you that is not anecdotal. i didn't go to college to get stupid. >> do you think powell made a rookie mistake. you think he should throw in -- >> kind of. he is a first round choice. he was definitely a first round choice. first round choices -- they have guys on the offensive line blow

right past him. the guy could be all pro eventually. this is what i call a first round mistake. this is the nfl. this is not pop warner. you have to stay focussed. this is not the s.e.c. on cbs. it is s.e.c. in washington. >> every time you say anything can't you say we are data dependent? >> that depends. our president, the crazy fed man fired janet yellen. i think chairman powell will learn to walk it back. he sent out people and said inflation is running higher. i know it is an anecdotal number. we have to say he screwed up but will walk it back somehow. i wish the president wouldn't put him in a box like this. he has to worry about the independence of the fed.

>> i bet he doesn't admit he makes a mistake but walks it back. >> we're going to see you in a few minutes. thank you very much. later this morning, don't miss top white house economic adviser larry kudlow joining the "squawk on the street" team. we'll be right back. cme group can help you navigate risks and capture opportunities. we enable you to reach global markets and drive forward with broader possibilities. cme group - how the world advances. ♪ not long ago, ronda started here. and then, more jobs began to appear. these techs in a lab. this builder in a hardhat... ...the welders and electricians

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last check of the futures. 164 on the dow. s&p 500 down 11. nasdaq down 40. tune into "squawk on the street" to continue to monitor this and please watch us tomorrow. the dow falling more than 800 points. futures indicate some stabilization as cpi comes in cool. investors will focus on the action here at the big board. we will cover the bases. welcome to squawk "squawk on the stree street". europe down about 1% or 2% a