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% as

they react to yesterday's sell off. japan down 3.9. china had a new four-year low. jim, let's dive right in and talk about not just the action yesterday but what the cpi print tells us today. >> i think cpi confirms the notion that's a decent number and makes you call into question what powell was thinking. he is in a box now. what happens is that you can consider putting out larry kudlow who said with the president saying he is a little restricted that allows powell to walk back his hawkish statements which are wrong. two things worry me. one is that the dow is down 400 and there are no trucks outside.

where are the trucks it's like thecabs. >> you mean tv satellite trucks. the bonds barely really budged. there wasn't very much. >> it's true. >> you mentioned the president critiquing the fed not just last night to reporters but this morning once again on fox. take a listen to all of that. >> the problem in my opinion is treasuries and the fed. the fed is going loco and there is no reason for them to do it.

i'm not happy about it. the federal reserve is getting a little bit too cute. that's ridiculous what they are doing. i would like our fed not to be so aggressive because i think they are making a big mistake. >> this morning he goes on to say that his policies have hurt china and i have a lot more to do. china has lived too well for too long. >> china four-year low. the president's words are not that considered. when he was doing this stuff about immigration and the wall, that played to his base. the new base is right here. it is like a block away. the new base is saying holy cow. we have to show some sort of respect for the fed. he is showing little respect for the institution. everybody has to walk back everything. you send your minions out and

they get tough. you play golf. >> you see the -- >> nixon was critical in his day. >> he was going to china and doing that now. nixon was -- he is not the -- classically not the role model including the christmas day bombing -- >> the feds reckless policies of the low interest rates need to be stopped or we will face record inflation. >> here is the issue. in 2011 he was on a tv show. this is now not a reality show. this is like the real deal. you can't do these things. he'll do whatever he wants. he is the president of the united states. it makes it so he has a harder

time saying maybe i spoke too soon. you send out guys who understand how to say things and get the point across without taking a sledgehammer to your head. >> the president's comments about t about china and noting a four-year low, china came out a lot in my conversation with asset managers, not as much prior to the show yesterday. as being one of the reasons why they were becoming perhaps a little less -- the lvmh comments about customs. that stock getting crushed. >> david fell off.

>> it means on behalf of others. the chinese went after anyone who went out of the country and brought back luxury goods. that is what -- >> get the lingo. >> i will. >> the larger issue of china trade and the trade war which we had discussed here for over a year and the potential implications as it has worsened suddenly seems to be cited as a real reason for caution. i guess in the last week or two things have changed. pence's comments, you is had the president talking and any number of different things. and the concerns about the chinese economy. >> chinese economy is pretty much slowing. the chinese economy is slowing and nobody knows how to do that. i will tell you, they lost

control of their stock market. maybe that is what the president is looking at. you say the stock market is growing big. the dow is at 25,000 and the shanghai is at 2,500. i think the president is saying this index is going lower and that is the barometer that you have to look at. >> also there is a belief that they are not going to back off in china. my point is that they are not going to see to our demands. >> we are so integrated that this is going to be felt all over the world. everybody is going to feel the pain with the caveat that they are speaking for the government over there. wilbur ross has talked about pain. >> you have a million of them, none of them are any good. >> my jokes? >> they are all good. the problem is this. china is weaker.

you don't want to win, so to speak. you want to change. when you try to win against the chinese maybe that means you have to break the index. i remember when you and i sat next to each other in august. the fed came on and said maybe it was time to do some cutting. that caused china to go down big and caused an incredible dislocation in our market. i hope that all the markets can handle the pressure. you have to wait. guys who are smart enough to buy in the last hour will be lasers. >> you are looking for a flush today or this week >> this is a man whose picture hangs on the stairs going up here. i got on the show once because i was screaming at him through the tv. why don't you come on. i'm bald and fat. i lost the loud part.

36 down to 31. >> what he said always more than -- that is how he called the so-called bottom is nine to one. i can't just sit here and say i dismiss all of this. i'm saying you might as well wait until the european guys are done. and then let them do the heat seeking missiles. you don't buy it up when the dow is up. >> a lot of the momentum names, they are not just split. take a look at square lately. >> the whole company is a platform. >> i only put her one and talk to her all the time. she was basically a fact -- not.

she did not come and try to get us to switch. we do use caviar. she is an analyst at goldman. everyone knew the credit lending would be fine. everybody wanted to own it at 90. >> she did matter. a lot of this is the fix. >> the finx -- it is the etf that is bringing down all of

visa and square. it hurt square. square is a momentum name. i come back and there is -- look at this. >> are you saying it was coming down for so many years, risk parody, this is the first indication of the pain they might bring? >> it is a little like the february sell off. one day we came the day before the super bowl which the eagles won despite what might happen tonight. the whole time you were saying it is the vix. we are going to find out what it is. we are not sure what it is yet. we are not sure. we don't know what is causing -- i know there are a lot of managers saying 600 basis points

more than the s&p and lost half the performance yesterday and are trying to lock it in. i don't think we know yet. i think you want to wait between one and two to finish what margin. you have the wells fargo. >> they have had some issues. >> monday bank of america. goldman and morgan stanley at 52-week lows. >> i never felt more like an idiot than i do now on goldman. >> all three. >> i worked at goldman. it is a great place. it is selling at the lowest multiple ever. it has really smart people and has done a great job. it is a bit of an anomaly. it doesn't have as big a

buyback. they have to let the fed come in. >> we will talk more about the buyback window and what happens when it reopens. >> we should have larry on today. >> kudlow and summers. >> you're right. we have the moe and larry. that's me. >> you have mentioned that a number of times. i'm not going to continue to allow you to insult yourself like this. >> you can look that up. >> let's take a look at the premarket here as we await the opening bell in just about 15 minutes off the lows. dow looks to drop about 150. we are back in a moment.

premarket not too far from the highs of the session. a little cooler. lowest since february. let's get to bob pisani on the floor and look at what might happen when we get the opening bell. >> cpi changed things. take a look at the global markets. europe was down two percent and cut the losses in half on the

cpi numbers. japan down four percent. shanghai at four year lows. watch the banks because we have the number coming up. yields down four poins or so. just watch some of the banks, bank of america, jp morgan over at the open here. how long is this going to go on for? i watched the v.i.x. futures and the curve. the front bumped the cash much higher than the futures contracts. that rarely happens. usually that signals a short term. short term we will have volatility. longer term we calm down. that is already starting to flatten out here. a little perspective. this was nothing like february. the v.i.x. went to 50 in february. s&p was down 115 points on february 5. we talked a lot about the

f.a.n.g. stocks and tech stocks. we spent all day talking about that. again a little perspective on the year. technology is still the market leader. it's up 11%. health care has been strong. these numbers right now, we are still up these amounts. we will talk about the open at 9:40. >> meantime, jim talked about a bunch of different topics including tariffs, inflation and the economy. >> you will see the impact in the first quarter of next year. inventory was here. it is on the shelves, warehouse and bought without the tariff. you will have an inflation pressure in the market which the chinese are trying to deflate when which mnuchin said don't do that. it's flat to the consumer here. i think the fed is going to have to be careful. the economy is not quite as

strong as the number indicated. >> it's interesting. a couple of commentaries saying this conundrum could be one of the great of all time. >> i think it confirms something. it is really amazing there hasn't been more inflation. he sees pretty much everything. he was saying obviously things are going to slow. inflation he did say would be tamed. but he is saying that the fed is looking at current data and not future data. i know there is a divide about what they are looking at. he says there is peak pricing. real estate coming down. >> his point i think is well taken in terms of goods and inventories and when it will start biting for inflation. we are at 25% beginning of the year. >> he is saying they pull

through. then you will see a quarter later -- that is what he is really worried about. he thinks the feds are looking at the inflation but not thinking about the deflation coming. you mentioned steel is going up so much that it is no longer economic to build. what does that say about back lending? >> infrastructure, how will that happen in this labor market? >> you have to pay more. people are unwilling to pay more because they don't want to hurt the profit margin so they are not expanding. he is just saying fed be careful. >> he is trying to figure out a way to make money. having known him for two decades now, he is a man for all seasons. >> he has made money. >> he has a nine percent yield. >> he talked about how the stock is way too cheap. i completely agree with him. very safe. >> very safe.

>> how safe he is and smart he is, how good he is. i'm with him. he never once called the fed crazy. >> he has not done that. >> none of that. >> a little too cute. >> don't get too cute. >> i won't get too cute. >> take a look at the premarket here. we'll get more squawk on the street straight ahead and the opening bell in nine minutes.

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future is not far away from session highs as we got a bit of relief on the consumer inflation number but still looking for a serious drop at the open here. >> if you have to think of something fine, we are not done because we haven't had enough preannouncements. don't freak out about that. there is weakness. i'm looking for micron, data center. i think the stock is up a lot still. i just want to warn people that hardware is the epicenter of the tech weakness. luxury goods epicenter of the retail weakness. be very mindful if you are buying like meditation, please be aware that if you buy it that

is not where you should be buying it. >> micron is up a tenth. >> it doesn't have as much exposure. japan is awful. that was always interesting. they had the confiscation issue. you pick ten watches. we are all worried about luxury. we are all worried about hardware. do you do those? micron is buying stock. they are going to stabilize. that is a gigantic product. i feel like i like what david was saying about square. the momentum guys loved it at 90. they just like it down here. some people bought it up from where it was a few minutes ago. those people are going to jam it. the only thing that was really strong, the delta quarter was

very good this morning. delta is extraordinary. >> you want to get to mad dash >> that's a great idea. >> even though given the day we had yesterday, we are very focussed on the broader market. there is corporate news or things we are watching. one is the continued demise of sears as it seems to hurdle towards potential bankruptcy filing, not so much because of what it means for sears holders. we know where the stock is, but what it means for competitors. >> like 16 billion sales first but you have something matthew put up. there is a transition. you will have a dark end of the mall. that could hurt everybody initially. that's the one that everyone talks about as the class of what comes in. people talk about this. a lot of people don't watch our program may think that sears has everything. 125th anniversary. they may be jared if it files

back. there is always someone who doesn't know what we all know which it is one of the great destructions of all time. the spanish american war compared to this. >> they owe 134 million on monday. journal says lambert will not lend them the money. there is pressure to go chapter 7 rather than 11. >> or will they end up doing toys r us as opposed to restructuring where you significantly pair your debt and creditors become your equity holders. you do get to organize and stay open with a certain amount of stores. >> you have 60,000 people coming up. >> it's going to be a big pool of labor for retailers if some of those stores close.

>> a lot of malls just overlap. j.c. penney gets its donation. >> we have a 3.7% unemployment rate. in an economy like that i think we are probably okay. >> three more rate hikes in 2019. are you crazy? are you loco >> what is the other thing you said >> you have to start having pressers in spanish. >> it was a little nutty. i have a -- >> good movie. how great. i once interviewed him. he was giving money away to people. he said he would find me if i admitted he was writing checks to people. he was a great man. >> is that cool?

>> it is probably off topic. >> only for 30 seconds and then we have to get back to the market. otherwise you get shocked. >> costco comps up. >> nobody cares. that's too positive. i would rather talk about abercrombie and fitch. they have 40% from china. they have minimum wage problems. thank you, amazon. they have promotional. they have weather. they have 23% of businesses in europe. it was the hottest june and august ever. they have the merchandise for that. it would be your one. >> before we get a bell in 30 seconds, industrial economy focus on ppg. floral is a reflection of that. >> it's a supply chain issue. a lot of grand inquisitors.

that thing -- >> take a look on the other side of the bell here. >> let's get to the opening bell and the s&p at the real time exchange at the big board. so what are the names to watch >> we have to watch amazon. that is one you have to be worried about. jp morgan reports tomorrow. delta if it can maintain its game. and micron, it is some sort of imaginary line. nvidia hangs in the balance. amd and nvidia in the balance. >> amazon still up 47% for this

year. 160 billion in lost market value. remember when it was a trillion very briefly in a matter of a few weeks. >> is that like $250,000 it weighs 37 pounds, by the way. >> do you have a 20 in your pocket he has like 250,000. >> look at that. >> percentage wise it is going down a little bit. maybe it is 225,000 now. >> i'm looking for a bounce because of what -- those who are wise enough to buy, they are flatly selling. down 72. i don't know. why not wait a little and see what happens. sellers will come out of the woodwork. don't be in such a hurry. you want to buy something small go buy. go buy something. you know that guy is a seller. he is not a buyer.

he is a seller. >> the warning out of ppg earlier in the week, the revenue warning on the floor today, you do not see as a pattern. >> they talked about five regions which is an issue for supply chain. the supply chain was totally caught offguard by what happened. floor is getting crushed. >> they have two projects. periodically -- i remember floor in 1979 when i read that they have to get out of south africa. it has done some things where it is -- they build everything and they are fantastic. the problem is sometimes the projects are too hard and they have two projects that are too hard. >> specifically is about europe and china, two areas where growth is -- you know what it is doing. >> if they had executed correctly then we wouldn't be talking about them. i worry that people are buying the tech bottom.

just be aware that there are people who bought lower and are now your enemy. they want to sell. they are not done. maybe later today. i like 2:45 to be the hour. >> texas instruments back above 100. >> the company bought back more stock other than most recently. it has the most consistent buyback. that is a great tell of the group. nvidia no buyback. >> those are fine. >> that was strange stuff yesterday. the fake letter from the d.o.d. that was a fraudulent letter trying to get people concerned about the potential view which is scheduled to close weeks from now. we are talking weeks. >> it's two u.s. companies. rand paul did make a statement that even though it doesn't seem to have been a coincidence that

he would have been talking about this the same time this fraudulent letter was making its way around. it wasn't about the letter. it's my feelings. >> this is something i hadn't counted on. i don't want people to get excited because our sellers are waiting in the wings because they don't think that powell is walking back anything. they are worried about powell sabotaging trump and the republicans. that is a narrative that i got yesterday. >> like vocal carter or green span. >> we are nowhere near those levels. >> and sabotaging implies something malicious. >> i don't believe it. i'm saying that it could be like the memo. this is what people are worried about. i don't think they should worry about that. i think powell is in a box. >> everyone is going to point

t ta -- to. >> the fed is no longer viewed as independent. you can barely figure out how to use the coffee maker. >> are you talking to me >> v.i.x. is lower but gold is up almost 20 bucks. where are we on panic signs? >> i went to my v.i.x. specialist who is saying we will give up the 3% s&p 500 and then bounce. we are not done with the v.i.x. going higher. i think that there are still people who want so badly to get out. you are giving them a chance to get out. you should not give them a chance to get out. let them -- let them sell and then you can buy. why are you helping people who are helpless and fearful and

panicked >> which means don't buy. that is what you are telling people. >> don't buy. >> don't sell and don't buy. just don't do anything. >> i like that. >> i like that. >> trying to understand. >> you want me to recommend? >> easy to do. there are no fees to do nothing. there are no transaction costs. >> i put some money at work for this opening for my kids. if they can't touch it until they are 40, it's a permanent long term view. >> on delta which is actually one of the winners today, he had a great interview with the ceo. fuel is up 30 year on year. they are able to recapture 85% through higher fares, fees, costs. >> passage of revenue. you'll love this. 655 million for an airline.

continue to buyback stock. do they hate it as much? sells it nine times earnings. i think that delta will have a hard time staying up but it deserves to be here. >> it's a good quarter. >> how about walgreens that stock is down about three percent. sales are up 11.3%. operating income up 15.4%. >> did you see the pharmacy? down 3.4%? by the way, boots saying luxury goods, beauty category being challenged. this is estee lauder. he is fantastic. it is a great company but i guess is coming in. >> so are you concerned about walgreens' inability to significantly increase sales in pharmacy >> i think that larry when he

merged -- >> hasn't happened yet. >> he saw this coming. he realized that that business would be a challenge business. amazon wants to be in that business. are you seeing where cigna is? >> i haven't looked lately. let me take a look. >> probably take a phone call. >> 208. >> at 175 i said it was the line in the sand. >> everyone is adapting except for walgreens. >> you had a few good ones. >> now it's at 230. >> people are nibbling at the gms, the fords, the tolls. they are not buying goldman. they are not buying morgan stanley or citi. >> where does it have to go,

goldman? if you are selling citi right now you are selling to mike corbett. >> morgan stanley -- identical amount. >> isn't that bizarre? >> totally different. >> the market doesn't treat them that way. >> it is one giant etf. >> that must be it. >> don't forget the finks. i think tapestry will be hurt. there was one company, hca. >> hospitals. >> how do you like that? what do you think? >> i don't know. i don't know what to think about that. i have to give it some thought.

>> i want to come back to goldman sachs. i enjoy that so much. i wanted to come back to it. when do you buy these? if you don't already own them. >> i think here, but i'm obviously so -- >> you like jp morgan, too as did everybody. >> i liked when he had stock in the 50s. i did. >> rates still are going up. isn't this what we have been waiting for? or those who argue there is not that much demand for credit? >> i think they are going to surprise. i like goldman. i like the stock. i also -- i worked there. i can't believe they have the lowest. that seems very odd to me. it seems very odd. >> tiny violins for all those people at goldman sachs. >> you began the show telling people to watch amazon which is about to lose the 17 handle.

>> that is what i was worried about. >> when was the last time it was below? >> we have to go back to july. >> so long, suckers. >> that's what people do. they buy these sucker openings and not realize that people bought amazon yesterday and blew it out. now you have growth managers saying i have to get out amazon because the post office is raising prices. maybe the president says that jeff bezos is loco. let it sell. let things stop. let them stop going down. it's still too early. it's 9:41. i think it is pretty early in the trading day. >> 11 minutes in. >> you know me, statingthe obvious. >> there are no excuses. >> captain obvious. >> ten year is back to 317.

>> it's a little bit of quality. >> oil is getting killed. these inflationary inputs are tame. the fed is in the box. it's like jack in the box which i think is coming down here. >> one might question whether m&a activity will be impacted by this kind of volatility. not if it lasts a day or two. if it does continue for a few weeks you might see. it is a nice reminder to the companies that are considering selling that your stock can go down and if you are ceo of a company that thought you are reminded if i get the big premium it is not always the worst thing. >> you are telling me it didn't mean anything to you >> those are nice deals. the smaller deals would seem right now are uneffeaffected. i think there has been continued concern on the part of ceos of

multinationals about china and about international and what really is going to happen and the risks that are posed there. but then you will start hearing people talk about corporate debt. there are a lot of different worries. >> did you see the break down in some of these. the sears bonds have been trading much longer than i thought. they really got killed yesterday. i like -- this is the kind of opening, if it had opened here i would have been much more bullish. you have to be careful. now the name to watch -- it's adobe. that is the stock that could bounce the most. they have had a lot of positive chatter. we know their business is really good. we just got the data point this week. watch adobe. >> bounced right off the 200 day. >> that is why it is adobe. >> got it. >> it's been an incredible

performer. i am aware of that. >> thank you, david. >> i wasn't actually. you're welcome. >> he is like don't thank me. >> john donahoe should be your guest. service now, adobe and swamp. >> not square? down another seven. >> he taught me how that business model works. >> once again verizon leading the dow. let's get to bob. >> the weaker cpi kind of messed with the down open narrative. it turned around. look at s&p futures. i want to show you this, 8:30. we had weaker than expected cpi. we moved immediately 15 points into positive territory on the cpi. you can see now opening somewhat to the down side. for sectors we opened yield

sensitive with yields down. staples a little bit better on the open. banks notably down side. techs were mixed open. microsoft opened up. we had some other stuff. apple opened down. we will call that a little bit mixed here. there you see the banks on the day before they start reporting earnings, jp morgan omorrow, yield curve flattening and bank stocks not doing anything. i tend to look at high volatility events at the v.i.x. curves. cash right now very high, unusual to see it higher than the other future contracts that are out there because that indicates traders believe there is a short term event going on that is freaking out and they think it is going to calm down. this is sometimes often associated with buying opportunities. this is nothing compared to february. we were at 50 on the v.i.x. in february. we are at 22 today.

a little perspective i think important yesterday we spent a day reminding everybody how many stocks in the s&p 500 are down 20% or more, about a quarter of the s&p is down. we saw a lot of tech stocks down more than 20% from the highs. perspective, look at some of the more defensive names. look at some of the sectors associated with value. you see overall they are not far from their 52-week highs. they have 52-week highs, utilities, energies, real estate, staples, health care. just keep in mind what is going on here and we are up on tech and up on consumer discretionary. we are up on health care for the year. why is all of this happening it is important to remind everybody. we were in for ten years, a low growth, low yield world. we are in a higher growth, higher yield world. in the old world you bought tech. now tech is somewhat less

fashionable because there may be other ways to get growth. treasuries is somewhat more attractive against stocks. that is the key narrative here. whether or not value wins over growth, i don't know. i think it has a better chance of winning right now. this has all gotten the earnings picture much more complicated. remember six months ago the economy is getting better and we got tax cuts. we have higher rates. we have higher raw material costs, higher wages, weaker foreign currencies. we have tariffs and the potential of the weaker china out there. this is an awful lot for the markets to try to digest. there are a lot of factors here and the question is how much weighting do you give each of these factors? this is a different narrative than six months ago. the bottom line, the world is a lot more complicated and the stock market is reflecting that the world is a lot more complicated. >> bob pisani, a reminder that larry kudlow head of the national economic council will join us to talk about the sell

off yesterday and some of the president's comments about the fed. >> i like the fact that we had the wash out that was good. the actual buy at the opening, let's watch it. i think larry will offer really good perspective. i think that larry is able to put things in a way so that everybody understands and makes it to where there is not a lot of panic. doesn't mean you should start buying everything. it is a nice moderation. that is what larry will offer. >> i will guess he will be bullish. what do you think? >> i think he will be constructive. >> i imagine him sitting there on a day like today. >> a little constructive. >> we are questioning it as an economy. i would say that is bullish. >> you don't want it to rally big here because then you will have the european sellers come out. it is very early. i said last night, you can nimble when it went down. now we have to wait for it to go down again.

the ten to one ratio, keep that in mind. i started talking in 1998 about the ten to one and more selling and buying. int it never let him down. >> there is the volume. there is put call. there is the number of stocks at a 20-day low. >> they are all extreme. you have to pick what you really like. does that mean you buy square? i don't know. at this point i think she made it so jack can do both. and it's not my absolute favorite. i understand when the stock is down like this, someone might say it is doing pretty well. caviar is doing great. there are things to pick at. don't load the boat on it. remember where things were at 4:00 a.m. remember where apple was down 3.5. >> here is a headline. dow jones saying the president

will meet xi at the g-20 in november. >> his old pal, xi. what is it like if you are his enemy? >> i'm sure larry will give us more color on that. that will be viewed as positive. a people are worried about i a cold war and if they meet together -- unless xi bangs his shoe like kruschev do people know who kruschev? >> i think some do. >> go to the world's fair? went to flushing i think it was your neighborhood. >> yes. >> you weren't born yet. i went to the world's fair you weren't even born. >> let's get to rick santelli. busy morning. >> it is but once again i contend if i put you in a dark room and only get you charts of the fixed income treasury market, you'd never guess what was going outside that room. certainly we dropped a bit but think about it this way, right now 2s are up two, 10s are up one, 30s are unchanged

from the high-yield closes over multi years, 10 years in the short end 10, years, 7 years, 30 year bonds, 4 years, from those high yield closes we're down three in two-year notes, down six in 10s, down five in 30s why am i telling you this? because yes there's been some mild buying pushing yields down when we had the number this morning that was cooler on cpi, but unlike many big equity events, the treasuries seem impervious to some extent. i'm not sure if they're telling us not to worry about equities or they are just on a mission and that self-adjusting mechanism isn't going to work as well as it has in the past time will tell let's look overseas. same scenario look at guiilts, still hovering at 116. italy, maybe that's a strange choice because they have a raft of issues on their own but here

they hover at close to 360 highest yield since 2014 let's look to canada, our neighbors to the north they're hovering above 250 and they're hovering in a zone that's the highest yield since early 2014-ish january, 2014 if my memory serves finally let's look at the dollar index. yes, it's down a bit but it's holding to 95. on that chart from july, once again, it really does show us that the dollar index and foreign exchange in general seems to want to go back into a range before the market volatility in august because there isn't a lot of foreign exchange or emerging market volatility right now but that doesn't mean foreign exchange isn't important. many believe what's going on has to do with fx spreads and the derivative markets carl, jim, david, back to you. >> thank you very much, rick santelli dow has gone green, 21 points,

obviously after a quick dip down to the 150 minus level or so. >> do a little selling if you scalp it it's a long day. this is what's supposed to happen you're supposed to get a bounce. now these are one big etf. it was okay to pick but now you have to wait you have to see if more selling develops this will alleviate the margin calls if we can keep it up the hedge funds won't have margin calls so between one and two if you stabilize, we'll keep going higher right now it looks like it controls but we've got to be sure -- remember, we have earnings tomorrow and the banks have to put on a good show so if you're buying stuff, be willing to remember you're going into earnings season. we know those companies that i mentioned, adobe, i just spoke with them, they're all doing well, or spoke with people near them i like the fact that the kimberly clarks are down because they're doing poorly and they were going up on safety so it's a long day but you might get another chance to buy a little

stuff but we have coil spring. let it -- if you didn't buy it at the opening, don't buy it i mean, didn't buy it at 9:41. that's where you can buy, now you have to wait i'm offering what john kenneth galbraith taught me when i was at harvard in 1974, they did a lot of that. so did daniel patrick moynihan. >> guys with three names at harvard. >> yes versus people with one name. larry. >> did you just mention daniel patrick moynihan >> of course i did the one-names people, right? larry and jamie. >> you know where he went to college? >> huh >> you know where he went to college? >> no. >> tufts university. >> i know your alma maters are interesting. the big focus on the fed as the president publicly criticized chair powell in the last 24 hours. >> 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. >> so is the fed, in fact, crazy? senior economics correspondent steve liesman is at hq hey, steve. >> here we are, carl, answering that question. who has it right, trump or snoul is t -- powell is it crazy or sane. one way to look is the forecast before president trump took office as you might remember a lot of stuff happened, and now what's going on right now look at this bar chart december, 2016, the fed forecast 2% inflation, it's come in right on target. but gdp was forecast to be two points, now it's near three points or a little higher. unemployment was going to be 4.5%, now it's running at 3.7% what did the fed do? it added exactly one extra quarter point in response to that higher gdp and unemployment is that crazy? you find out now look at where they were in terms of their outlook they added the quarter point in 2018, they added the extra one,

another 15 basis points for a higher growth outlook, unemployment outlook for 2019. and this is where people get a little concerned, it's that 3.4% outlook, the above-neutral outlook for 2020 that was added in 2017 exactly when the tax cut happened so it was in response to policies from the president. all that said, jay powell, the least forecast dependent fed and look, here's the other stuff that has happened 1. % more growth, 1% less unemployment tariffs, tax cuts, surging defer sits, all time high in stocks. so they added two quarter point hikes if you want to say that over three years in response to all of that. but jay powell is the least forecast dependent fed chairman i remember he almost mocks them holds them with some disdain at his press conference he may also be the most market savvy of the recent fed chairs he'll listen closely to market signals on whether that is warranted this year or whether or not we should have three next year i'll talk to charlie evans from chicago tomorrow

carl >> i assume you'll be asking him about this stuff. >> is the fed crazy will be the first question >> jim is going to stick around for a bit. we're going to talk to the president's chief economic adviser larry kudlow after this short break. dow is up 25 we started making wine

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if you're just joining us, good morning, welcome to a special edition of "squawk on the street." i'm carl quintinilla with sara eisen, david faber, jim crimer is staying with us a little longer wild ride for stocks in the green after the major selloff on wednesday. we saw all the major averages tumble and, of course, the nasdaq had its biggest one-day loss since june of '16 66% of s&p stocks were in correction territory or worse and now we're being handed additional news about potential meets with the president and xi in november. we'll talk to larry kudlow in a moment. >> one of the things i said would cause a turn in this market would be if we saw the cold war would thaw.

obviously if you're talking to each other, the cold war is thawing. but that's one of the things we have to do, we need to see fed chairman powell walk it back a little the drug stocks are getting crushed here the food stocks are getting crushed. people think he is going to walk it back. look, it's a long day. there will be some sellers coming out in tech names because they can't bear to hold nvidia and amd anymore, it's too painful. but it's constructive. let it come in a little if you haven't bought that. there's that window, maybe revisit that window. but it's a better market because the 10-to-1 down-to-up was silly. there were capitulations growing up and growth funds that were trying to lock it in but wait, now. you had your chance, maybe it comes back down a little. >> i know you say the fed is part of the solution, but some of the biggest names in the global economy are reacting to president trump who came out and blamed the fed for the recent selloff. and that includes imf chief

christine lagarde overnight. listen to what she said. >> i wouldn't associate jay powell with craziness, no. he comes across, and members of his board, as extremely serious, solid, and certainly keen to base their decisions on actual information and desire to communicate that properly. that's what i have observed. >> jim, you're not arguing the fed has been inappropriate so far in raising rates are you you're just saying they should calm down. >> ain't december hike and i want to see how things go. i take a janet yellen approach i thought janet yellen was a fabulous fed chief jay powell appointed by president trump after firing janet yellen. >> because she was a democrat and he was a republican. >> she was an empirical thinking who liked to worry about how workers do i'm not saying jay powell has a cruel black heart but janet

yellen was sensitive to the idea that maybe working people should make more money. i think the president made ill-advised comments periodically he seems to do that but that was wrong he did it because he hurt his own case you send out guys like larry kudlow to say maybe it would be good if you walk it back that's why you have people like larry kudlow the president has to stay up here he has to be what i call presidential not like lyndon johnson, you know that lyndon johnson play was good bryan cranston, i don't know if you saw that but you can't be like that president. you can't be like president nixon. my mother was a saint, but they'll never write a book about her. one of the best closing -- you don't have me to kick around anymore. >> i remember that line, yes >> we can't have the president at war with the fed and i think he's making up with xi, that's nice. >> you don't know he's making up with xi. >> he's having a meeting >> at the g20 which, by the way,

was anticipated. i'm not saying it's a negative. >> it's better than no matter. >> that's right. it's better than no meeting. >> but don't say somehow it's all kumbaya. >> wall street loves meetings. >> the market will come back down as people realize david was right, it was planned. but that was good. you killed the market. good for you. >> you know who knows better than any of us larry kudlow, the national economic council director. larry, good to talk to you. >> thank you, everybody, appreciate it. i love jimmy's narrative he's absolutely terrific. >> so is the president meeting with xi in november? >> there's a lot of discussion about it there's some movement toward it, that's the g20 meeting it will be in buenos aires it's a big crowd, obviously. i'll be there, secretary steve mnuchin will be there, a lot of people will there, john bolton and so forth and so on i don't want to get too far ahead of that story. there may be a meeting but it

has not been set in concrete as far as i know nor has the agenda been set in concrete they have lots to talk about so we'll see. >> larry, is the fed loco? >> is the fed who? >> are they loco are they crazy >> is the fed crazy? is that an institutional question or a personal question? >> i'm guessing you've heard the president's comments on this. >> i have. i spoke to him yesterday for a while. look, the president has his own views, he stated them many times. there's nothing new here as far as i can tell. we know the fed is independent the president is not dictating policy to the fed. he didn't say anything remotely like that. and as i say they are independent, they're going to do what they're going to do by the way, one little factoid here, the fed is -- >> apologies, larry, ipo over

here. >> the fed raised their target rate seven times in this new cycle, some under yellen, some under jay powell and jimmy, i looked at the stock market, the dow jones is up significantly. 40% since the election during that period when they raised rates seven times so, look, look i believe there's agreement here that strong economic growth does not cause inflationary and does not cause panic increases in interest rates i think yesterday my own view is it's a normal correction in a bull market. the economic numbers are superb across the board i mean, just this past week we not only started with a good jobs number, the isms were spectacular. the small business confidence was spectacular. we had a low inflation number today. paychecks are getting fatter blue-collar workers are going back to work

i'm saying this because the economy is very, very sound and although i'm not here to predict the stock market, lord knows, the reality is, if you have a strong economy that will provide confidence for stocks, but corrections come and go. the president said that yesterday. he said this was a long-awaited correction so i'll just leave it right there. i think he's on target and, by the way, i think jay powell is on target. there's no reason why economic growth has to cause inflation. and by the way, jimmy, as you probably know -- you all probably know this -- you've had a year-to-date increase of 60 basis points in the 10-year treasury that is a growth factor. if you look at it inside the tips market, most of that is the real interest rate it's not an inflation premium. that's a sign of economic health that is something to be welcomed and not feared. >> well, larry, look, you know i share your productive approach to it and yes the market is definitely up. i am worried about near-term

issues, chemicals, housing, worried about lending, some of the basic building blocks of semis, railroads and what i'm thinking is that it wouldn't be so bad for the fed to look at this near term data, maybe say listen, we have to get tariffs through the system, people have to move their stuff out of china we can take a harder look, n thre - in three, six months from now because we've done our job and our job is working, would that be so wrong to take that approach >> well, i don't want to second guess them on the seconders, jimmy. there's nobody smarter on that than you are i'm just saying that my opinion personally, they have handled the transition from ultra ultra easy money which many of us thought was not a great idea years ago but they're transitioning to something more normal what's really going on is that low tax rates on individuals and

businesses, a massive rollback of costly and burdensome red tape and regulations, a terrific comeback in energy which has been fostered by deregulation. these are the key factors driving what i call the new trump economy and they are taking over now from all this ultra easy money which was probably -- i don't want to even go into whether it was helpful or not you're seeing a transition and the economy is going into one of the best business investment booms we've seen in years. we had none of that in 2015 and 2016 cap goods, right plants, equipments, buildings, structures, technology, campuses, we're seeing all that develop as a result of the new opening of the economy through the tax and regulatory reductions and that's going to carry this, in my judgment, for several years to come. blue-collar workers, we're seeing the best gains there since the mid-1980s when i was a

cub scout here for ronald reagan lower end. lower middle and middle-class salaries and wages are rising faster than the upper end. i'm not opposed to the upper end, you know me, i want everybody to get rich and i want the non-rich to get rich i'm just saying all these things are shaking out beautifully right now. so i don't want to be pessimistic on the economy you'll draw your own conclusions on stocks but i think this picture looks as good as it looked in years. >> well, that would cut toward taking a pause and raising interest rates it would also cut toward taking a strong stance against china. larry, you know we're retaliating against china, i don't think we're in a trade war. i think we've not done anything until now. can it escalate to the point where we have to be concerned that there has to be collateral damage simply because we need to teach the chinese a lesson you know how many jobs they've taken from us. you know what they've done stealing our intellectual property isn't the cost of taking on the

chinese and retaliating to some degree a slowdown in some of the international stocks based here? >> we'll see how it plays out. i agree with your analysis, so does president trump unfair trading practices, they've broken many laws, they've broken wto laws. as you noted, ip theft, force transfers of technology. they won't let american companies own themselves so they can come in and literally a new regulation allows them to hack into american korcorporations t get information. that's more theft. and in some cases they're allowing better ownership, but they won't give a license for the company to start up and there is a trade imbalance in the numbers. i don't want to forecast where this leads, there's just a lot to talk about. there may be this meeting in g20, which would be fine i believe it's always better to talk than not to talk. but, but, thus far their response has been unsatisfactory

to our asks. and as you just mentioned, our asks are pretty common sense and europe shares our view, and japan shares our view, and canada shares our view so we'll see how it plays out. i think the chinese have got to come and say, okay, we're going to change our structure, we're going to abide by the laws and we're going to make a fair trade deal that will help the american economy and the american work force. they've got to do that they have not done that yet. >> in the meantime, larry and sara, their market is getting hit harder than ours their stock market, their currency is collapsing it appears their economy is slowing. do you believe that the u.s. can decouple economically in the markets from what's happening with the second-biggest economy in the world and the spillover effect that could create >> well, i don't know if it's a complete decoupling, sara. but, look, we're on a roll right now. the government doesn't run the american economy the government runs a big chunk

of the chinese economy that's a huge difference economic policies matter i believe china is going the wrong way on their economic policies i believe the united states is going to right way on economic policies right now to coin a phrase, we, our economy and the people and the workers and entrepreneurs, they're killing it we're the hot nest ttest in the. you look at the charts europe is slowing down, asia is slowing down, as you correctly noted, china is slowing down we are moving rapidly, 3.2% first half, 4.2% second quarter, the atlanta fed says another 2% in the third quarter we are the hottest economy in the world. we're crushing it right now and i think that's going to continue regardless of china. long run i would love to see some trade piece long run i've spoken to the president many times let's get rid of tariffs, let's

get rid of non-tariff barriers, let's get rid of subsidies, let's stop the theft of ip let's stop the transfer of technology these would be wonderful for growth in all the countries and a around the world but right now the u.s. is carrying the ball. i don't see an end to it with all due respect, i don't think this is anything resembling a sugar high. president trump has changed the incentives in the economy. the war on business is over. the war on energy is over. the war on success is over you keep more of what you earn and paychecks get fatter you keep more of what you invest and what you risk. that's the on the that i can has been mi-- tonic that has been missing for almost 20 years. we're getting it all back, america is on a tear. >> larry, back to china for a moment because when i hear you parsing -- not even -- just listening to you i would assume the advice you give the president when you discuss the economic impact from the worsening dispute with china is going to be very little if

nothing. that's kind of what you seem to be indicating. we're going to go to 25% on tariffs at the beginning of the year sara's point, the chinese economy itself, second-largest in the world really decelerating but you seem to be saying don't worry it won't affect us am i hearing that right? >> basically, yes, at this point, that the juncture, that would be my case we have so much momentum here. i don't want to get ahead of presidential decisions regarding tariff rate changes or new actions on that front. that's for the president to decide all i'm saying is right now we're on a terrific upswing and china looks to be on a down swing. i'm just going to leave it there. all things can be fixed. you know i'm an optimist, i'm a happy warrior. i talk about the three zeros with the president, no transfers or non-tariff barriers and so forth, no subsidies.

this is doable this is doable we could flood chinese consumer markets with great american exports, farm and beef, industrial supplies, if they only let us, if they only open up their markets to let us we can do that and that will help the trade balance and everything else so we will wait and see. i'm very calm about this i like the position we are in. i like the position president trump has put us in. again, stock market corrects come and go, you know that as well as anybody. i would just say be calm we are in a terrific upcycle it's not going to change for a good while in my judgment. >> larry, you know i share your constructive altitude but as you said i speak with a lot of companies and there's been a big decline pricing in chemicals, housing is apparently peaked and a lot of parts of this country the regional banks are telling you lending has slowed, they

will reiterate that on monday and tuesday, the basic semiconductor prices are coming down, rail carloads were bad in the last couple weeks. luxury good numbers have been bad. larry, i want to -- i'm creating a pastiche that i'm concerned about. it's short term, you're right, i think the correction will be short term, but i just think when you see those it would be terrific just to kind of let things lie and keep rates where they are i know you favor an independent fed as i do but boy it would be a shame if all the things you talk about were really cut short because we decided they were inflationary when you and i both know they're not inflationary. >> well, thank you jimmy, if you had told me six or 12 months ago that you wanted a seat on the federal reserve board i would have fought like hell for it. no problem no problem you never said that. this is the first i've heard of this desire. let's keep in touch on this, my

friend. >> with all due respect, my friend -- i have to be objective. i work with this man for four years and he is a delight. >> i'm assuming this is the philadelphia fed >> i struggle because larry knew i talk to companies, you do top down i've always felt you're best in business i'm concerned. i want the strength to continue is all i'm saying. it would be a shame if people felt inflation was out of control because it may be a three to six month blip-up and then we'll be fine i don't want anything to be derailed you talked about. that's all. >> it's great, look. we have to watch every number. i know that. you and i do that. i've got to do it here my colleague and great friend kevin is doing it treasury secretary mnuchin, we're all keen to the numbers but i want to say this you can have the short-term oscillations in certain business indicators, but look at the big picture. the big picture is we are growing faster than almost anybody dreamed possible, i

think it's the biggest story of 2018 i really do. we are in a economic boom most folks thought was possible we have penetrated the 1% and 2% secular stagnation zone. we are moving into new ground. the trajectory of the economy is going up the unemployment rate is 3.7%. inside that, all the different groups including minority groups are registering amazingly low, historically low unemployment rates. blue-collar workers are up i don't want to be redundant i'm just saying there's so much good news out there that we shouldn't just try to find a couple of numbers that don't look great, stock? you're going to get your oscillation. i think the picture is terrific. i mean, the stock market -- i was talking to secretary mnuchin, he's working in the conference in bali yesterday you know, with it all yesterday's correction and what not, the dow is not far from 26,000 the s&p not far from 2,800

since the election, these indicators have gone up 40%, 40%, 30% that's a sign of a healthy economy. even tech, tech seems to have led the correction yesterday tech is up 50% since the election so some awful good is happening there. this is something for investors and their 401(k)s. this is something for blue-collar folks, main street folks, community and regional banks where we deregulate and i expect to see better loan growth in the future. this is a heck of a story. let's embrace it, you may not agree with everything we do. i understand that, i'm very respectful, i have lots of friends across the aisle and you do, too, and they're good people and i respect them but i'm just saying for heaven's sakes, please look at the facts henry kissinger many years ago,

making an argument, said this argument has the benefit of being factually true i've never forgotten that line right now this argument has the benefit of being factually true. let's enjoy it and hope to continue. >> professor kissinger when i had him said you have to do different kinds of home work i want what larry is saying to continue i think we can get there. >> larry, thank you so much. larry kudlow from the white house. by the way, we'll talk to secretary steve mnuchin tomorrow morning, 7:00 a.m. eastern time on "squawk box." so market didn't move dramatically on his comments >> but i think he -- you kind of threw cold water on the notion that xi and the president get together it's a long day. you'll probably get another chance and remember there's earnings.

larry and i have disagreed i do bottom up, he does tops down but there are moment where you're in disagreement and i have too many companies telling me wow, things have gotten weak and we have a fed that -- i know the president didn't use the word choice that i would have, not that i'm a statesman but i wish he hadn't said that because all i'm asking is if the president and the fed see the numbers that i see -- and they probably will in the next ree to six weeks -- they may regret that they didn't say we should be more data dependent. >> larry said something important which is the fed is independent and the white house is not dictating fed policy and he's distanced himself a little bit with the president's comments. >> true. larry's a statesman. the president sometimes can deviate from a statesman like role. >> jim, thanks for sticking around it was worth it.

s&p down 10. jim, what's on "mad" tonight >> we're trying to put the show -- putting together a new show on the fly every single night. i want to talk to -- the biggest story is still cannabis. i'm going there. a week from today we will be full repeal in canada. it's a growth story that has nothing to do with the fed or larry or me or anybody it's taking over the world so i'm trying to put out something people should know is real but in the meantime, be patient if you missed your chance to buy, there will be margin calls now between one and two. watch at 2:45, that will be the witching hour to see whether the market holds and if it doesn't there will be another better time. >> europe has trimmed some losses >> the hardware is a tough segment. >> see you tonight "mad money," 6:00 p.m. >> thank you for letting me stay. when we come back, reaction to larry kudlow and what this extreme market volatility means

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we have continued volatility this morning you can see the major averages in the red we have actually been higher but, again, the loss isn't too significant. let's turn to ubs director of floor operations art cashin. what are you watching most particularly this morning after yesterday's big selloff? >> well, you're seeing pretty much classical action here i wrote in my pre-opening comments that after a bad day like yesterday the market traditionally opens down, they circle the wagons, you rally back into plus territory and then you see if the rebound begins to fade now that's exactly what's happened here. we bounced off the 200 day moving average in the s&p which is 2765. i think we got down to 2768.

the critical think for the viewers will be how we close so far we're okay. they can bring them back here, you'll wait and see what kind of news develops, but if they close negative, particularly if they close appreciably negative, down 70 or more in the dow, that's going to make for a bumpy rest of the week. we've got friday next five days or so. >> some people have noted there was no real flight to safety didn't see gold move much. the ten-year price didn't really increase in any significant way. is there anything to make of that >> yeah, i think there is. and it occurred in the final 15 or 20 minutes. you're absolutely right. for much of the 800-point selloff there was no flight to safety a little picked up in those final 15 minutes you saw a small smattering of it this morning when the yields

went down a little bit so i think they're cautious. i think you've got a variety of things working almost at cross purposes here. the tariffs and the higher costs of materials and what not. so it's not just 100% about interest rates and yields but that is a very, very strong factor and you'll remember back when we went into the taper tantrum, the fed began to taper off, the market took it badly and they started to rethink. so it will be interesting what we hear from the various fed heads over the next several days >> well, that brings up a point some have made, that a lot of this is about the trajectory of rates but a lot is about qt. we here in that period of tightening where it's accelerating and we thought it was going to be boring but maybe it won't be. >> that's the key point. you hear over and over again from me and from anybody you

bring up here that it's not so much the level of the rates, it's the rate of acceleration that got them there that they seem to move a little too quickly for most people. so i think we'll wait and see. there's a lot of commentary about shouldn't they spend more time working on the balance sheet rather than moving the rates up so there's plenty of debate out there. i think it's going to be very important to see if the various fed people, not just powell, begin to address this in their speeches. >> so often the white house sends out an official like a larry kudlow to speak calmly and he said be calm, this is just a correction, we're still killing it on the u.s. economy did it offer any reassurance >> well, you know, larry is an old friend but that's not vastly different than what mnuchin said yesterday and to some degree the

president himself for a while saying we've had a heck of a run, this is just a bit of a correction here. but i think when it dawned on him by the time he got out to his rally in pennsylvania, he felt he had to say a little bit more about it. so, yeah, no, i think the economy is holding up. particularly as we discussed yesterd yesterday, the nfib report came out and it was down slightly but the president of the nfib was giddy. she said that this is possibly the best economy that small businesses see in many, many years. the economy is moving along. the trouble is is something going to set it off balance and that's what the market is worried about now. >> art, thank you. >> my pleasure. >> art cashin. now for our etf spotlight, dom chu looking at the outperformance of value stocks over growth stocks

big trend lately, don. >>it is. the market, sara, attempting to stabilize after yesterday's big route as at least some of the traders dipped their toes back into those beaten-up names in technology and communications services that frames the growth versus value debate it's still relatively early in the month but growth is already showing signs of weakness against its value cousins and one place that it's playing out is in the etf market where the ishares russell 1000 value fund that ticker you can see, iwd, currently down around 3% compare that to the ishares russell growth fund, the iwf, that's down 7% so far. on a year-to-date basis, growth is still handily beating the value etf but it's the possible narrowing of that gap as you're seeing right there that has some traders watching for signs of a possible rotation.

also keep an eye on the low volatility exchange traded funds like the invesco s&p fund, that has fluctuations over time the top holdings are stay stopl stocks it he dependent on risk sentiment for stocks like in telecom and technology so growth versus value playing out big in the etf market. back to you. >> dom, thank you very much. when we come back, larry summers is with us don't miss billionaire bond trader jeff gundlach who will talk about these critical rates he's been watching for some time dow is down 40 points, s&p down 7. we'll be right back.

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story of the day, the market larry kudlow just joining us moments ago to discuss the carnage in stocks. he said be calm, this is just a correction joining us to respond is larry summers, former treasury secretary under bill clinton and harvard university president emeritus secretary summers, thank you for joining you on the line. >> very good to be with you. >> do you agree with the white house this is just a correction and as far as the u.s. economy is concerned things are looking great? >> i don't know what the future holds for the market look, i've got a philosophy and it was the philosophy of clinton and obama administrations that we focused on the fundamentals of the economy when the markets had a good day we didn't regard that as some kind of sign that we were geniuses and when the markets had a bad day we didn't regard that as a referendum on our policies

so i think the problem is not with larry kudlow trying to avoid blame for what happened yesterday, the problem is that the president and the administration have been regarding the markets as the lodestar for judging the quality of economic policies for months and years now. i think that they've built a temporary boom i think i was the first to call it a sugar high quite some time ago and i think that's right and it has lasted longer than many people expected but that's because they've done more to feed more sugar in than anyone would have expected in terms of these extraordinary tax cuts, substantial expansions in the budget deficit that have enabled such a huge quantity of stock

buybacks this year and that have allowed measured after-tax earnings to go up so rapidly so i don't have a view as to which way the stock market is going to move next but if we're going to be serious about economic policies in this country, we've got to get beyond using month-to-month or day-to-day stock market fluctuations to judge whether we're going in the right direction or the wrong direction. >> what about what the president said about the fed he's blaming jay powell saying they've gone loco, they're moving too aggressively when it comes to rising interest rates is there any truth to that >> i think very little i think jay powell is doing a good job the fed has to make some very difficult judgments. for a long time now, i've believed that the dangers are probably more on the tightening side than they are of staying

easy for too long so debates about monetary policy i would -- i myself would tend towards the dovish side. but that's not the key issue the key issue is that when the president of the united states blatantly politicizes the fed, he makes it much harder for the fed to ease if they think that's what's appropriate because no responsible central bank wants to look like it's bending to political pressure and it will damage its reputation and credibility if there's an appearance of bending to pressure. and so actions like the president are counterproductive in the president's terms because they make it much harder for the fed to adjust in an easing

direction or a slower tightening direction if they think that's appropriate. so i don't understand the rationale for comments like this even if there was a basis for believing what was being said. and i think the comments are totally inappropriate in terms of their merits, but i think they're also extraordinarily ill-advised because of the difficult position it puts the central bank in. that's why previous administrations have very, very systematically now for a full quarter century avoided getting into this kind of commentary on the fed, because they know how damaging it is and how much it

creates pressure on the fed to demonstrate that they're not responding to political pressure i think larry kudlow would use his time better explaining that to the president than constantly trying to cheer lead that we don't have very real economic challenges whenever worker in this economy knows we do have very real economic challenges and i don't mean economic challenges that are caused in beijing or mexico city i mean challenges that are caused in the united states of growing debt, rising inequality, limited quantity in middle-class living standards, rising sense about people and their children's future.

that's what he should be spending his time addressing not cheerleading and certainly not defending the bashing of the fed. >> given our limited time, i just have one more question. mr. kudlow did use a term you say you coined to describe this economy. he said it's not a sugar high and in fact he spoke to why he believes economic growth above 3% is a strong possibility to sort of paraphrase why do you believe otherwise when he's citing increased capital spending, the belief the tax cuts are going to have an effect far beyond the anniversary of those tax cuts, the decrease in regulation you've heard the litany of reasons cited by the administration why don't you believe it >> two core arguments. one, experiences that when the deficit increases that temporarily accelerates growth

but when the deficit stays high it slows growth down and we've gotten the stimulus and now we're going to get the addiction. it's just like taking an upper you're up for a little while and after that you have to keep doing the same thing to even maintain the feeling and that's what these deficits are. they're a steroid in that sense for the economy. that's the first thing the second thing is that if you look at the growth in the economy, a very substantial part of it is cyclical caused by declining unemployment maybe unemployment will decline to three maybe it will decline to 2.7, but it's not going to keep declining forever and if you strip out the cyclical component that can't be permanent then we've got mediocre growth rates

and the administration has done nothing to change that the third reason is that the policies that the administrations were pursuing that are counterproductive have their negative aspects only with some delay limiting immigration slows entrepreneurship over t e time reducing inputs to u.s. firms through tariffs makes them less competitive and less likely to locate here over time. over time the economy pays a price for deterring foreign invest investment over time, the burden of larger deficits compounds so this is a classic -- this is the same thing as a company that juices earnings by pulling sales

forward or putting off ordering new supplies you can get the impact in the short run but it's a huge mistake to extrapolate it in the long run this may well be the most short-sighted set of administration economic policies in -- certainly since the second world war. it's true if they double down on them and double down on them again and double down on them again they may keep the sugar high going but not forever and they set up for larger problems later. >> thank you very much, larry summers, former treasury secretary. >> very good to be with you. >> hearing both sides of the debate here on "squawk on the street" and both sides turned out to be named larry. >> meantime, dow is down 135, s&p down 14 points

looking at the technicals today, tom mclellan of the mclellan market report wrote on tuesday look for a bottom in stocks on wednesday. we got the 2% decline, will that be the end of the weakness tom joins us along with our own mike santoli guys, good to see you both a big part of your chart work will show viewers that we're getting the seasonal weakness we never got in the early part of the year. >> yeah, the market put it off like parentings has having to p together a bicycle on christmas eve. they got the work done in the last minute. they enjoyed a nice up trend during the summer and then at the last minute realized oh, shoot, i'm supposed to be over there and we got the outcome we saw on wednesday. >> does that mean as we look at a chart of the seasonalpattern in blue and what the dow has done in orange, what does that portend for the fourth quarter >> well, we're transitioning now into the bullish phase of season alty there will be messiness with

this transition as we try to fit in an 800 point decline all in one day and the market takes time to digest that. but we're now transitioning into bullish seasonality. we've got positive liquidity that should be coming back we'll look for confirmation in terms of strong data and return of the right sectors doing the leading but it should be a worldwide return of liquidity lasting until top two in late april next year. >> what do you make of the action so far this morning dow is positive, now it's down 150 points it's all over the place. >> i think it's characteristically apprehensive after a shock like yesterday i mean, i think when you get more than 3% one day move, it was a violent kind of catch-up effect of the overall index as to what's been happening below the surface so i think it makes sense you're tentative right now. you've widened out the bands of what seems like the markets trading behavior because where do we go three months or something without a 1% move and we get

this big bite in one day so i'm not surprised by it. i think you have to -- you're in the game now of evaluating the tactical indicators, are we washed out enough? yes, we look oversold but have you seen the outperformance by the average stock that kind of let us down here so i think that's the kind of position. >> what kind of headlines are you looking for? we got the fact that xi and trump are going to meet at g20 i would think that would provide some hope. >> i think one of the bigger headlines is the cpi and the fact that the bond market got a little bit of a rally out of that and to me something that changes this very kind of high momentum narrative toward rates are rising, yields are flying, stocks have to come down in that environment, i think we can kind of unwind a little bit of that. >> tom, repatriation we talked to kudlow a few moments ago talking about the levers that the administration has pulled to bring thus economic boom and we got it. we definitely got a spike in

repatriated profits but then we got the falloff. what does that mean? >> that's the best explanation for why the u.s. stock market has done so much better in 2018 versus the rest of the world we had a whole bunch of money coming out of foreign banks and coming back into u.s. banks courtesy of corporations doing repatriation in the first quarter of 2018, it was a rate of about $85 billion a month so we basically had qe-3 in terms of the amount of money being repatriated in the first quarter and it fell off in the second quarter we don't have the data on the third quarter. that's going to be front-loaded and at the same time quantitative tightening, qt, is catching up at a rate of $50 billion. so those things are going to collide and we have to do a balance of forces equation to see how much money coming in versus how much money getting consume bid the fed is what will equal.d by the fed is what wil equal. i look for positive seasonality

to outweigh negative seasonality we're just ending and i look for liquidity to pick up but we need to see confirmation of that. >> tom, always doing good chart work in advance of these things that take some people by surprise good to see you and thanks for the time tom mclellan, mike santoli on the market from sec chairman clayton. john harwood has more. >> we heard from president trump, talked about how the fed had gone wild and produced some of the reaction in the markets i talked to jay clayton at an event this morning, he said of course i don't do monetary policy, i'm concerned about functioning of the markets here's what he had to say when i asked how well the markets functioned yesterday >> days like yesterday make people nervous because obviously it is not expected when you see drops like this. drops like that are part of the

way markets work my question last night for the team was how did the market function how many up limit downs were there. what i would say is jumps that were out of the ordinary or continuity or things like that, and the assessment overall was the market functioned well it digested new information, new ideas, and functioned well that's our primary concern look, i don't want to say everything is absolutely fabulous or wrong, but highest volume day in a long time, the market functioned well >> so he said he is looking at areas susceptible to vulnerability, but overall, steady as she goes >> john, thank you john harwood with sec chairman the energy sector is down more than 1% now looking at 2% declines for brent, the international benchmark. the idea of slower global growth

hurting the commodities. "squawk on the street" will be right back

let's get to the cme group in chicago and rick santelli good morning >> good morning, carl. i want to welcome my guest, dr. rogoff, former imf chief economist. thank you for joining me >> thank you cpi is the most important, further down the pipeline, but many said that number really retreated. generically, inflation is a big topic. we don't see it coming in a huge wave your thoughts on that and the route the fed is taking in what they perceive to be a big wave potential potentially coming. >> obviously we have gone a long time with very low inflation, it is creeping up

nobody really has any idea if they're patient, raise rates more slowly would inflation gallup away. there are signs. the labor market is tightening, probably could still tighten more i think the answer, rick, is nobody knows and of course the slightly softer number calms temporarily some jitters >> i like your answer and i like the honesty of your answer, dr. rogoff nobody knows that's the answer with how quantitative tightening will be, the answer where they can't figure where productivity has gone there's a lot of strange things going on do you think the '70s and '80s poisoned the well so the federal reserve seems to think it needs to get ahead of something that hasn't occurred yet? are we forever tainted in that regard >> a long time passed since then i think the fed has been

patient. but it is very, very difficult to make the call if you look at long term interest rates, 30 year rates, they're still really low the anticipations that the real inflation adjusted interest rate won't be that high, inflation won't be that high if you look over a long horizon, i would say the market seems calm about it. >> dr. rogoff, we don't have a lot of time left i want to probe your brain i thinkcredit different agenials something they're talking about. a lot of investing from overseas, in order to do that they need to change cash flows back into the currency and do things like credit effect spreads, forwards, variety of derivatives. my quick question is i am hearing european banks due to

credit differentiation, are you hearing about fx directives? >> there's some weird stuff going on in terms of similar products having different prices that never happened before because of some of the limits on european banks broadly europe is running gigantic surpluses, unless germany suddenly decides to have a big stimulus, i don't think it changes. i don't think there's a longer term change. >> thank you i'm not sure germany is the issue, i think it is the other banks holding the other toxic paper. sara, back to you. >> rick, thanks. we are hovering near session lows bertha coombs at the nasdaq with more. >> yesterday's losers are attempting a bounce back we saw early strength in the nasdaq and communication and

tech sectors but it has been off and on chips off the highs of the morning, losing ground after the economic adviser larry kudlow poured water on talks with china earlier in the hour. chips crashed after a 200 day moving average they're up for the first time in six days we'll see how long that holds up a lot of the stocks, amd on semiconductor are bouncing, but hit fresh lows this morning. they're still more than 20% off the highs. same story for some of the big faang names which are mixed in trade. sara, back to you. >> sort of an unconvincing bounce thank you. don't go anywhere. we're all over the market selloff. on "closing bell" we speak with donald kohn. an interview you don't want to miss

♪ to err is human. to anticipate is lexus. experience the lexus rx with advanced safety standard. experience amazing. welcome back to "squawk alley. i am jackie deangeles, build in crude oil stocks of 6 millio