october. anyway, 2018, you into you that. "squawk box" begins right now. ♪ baby come back any kind of fool could see ♪ >> live from new york, where business never sleeps, this is "squawk box. >> good morning, everybody welcome to "squawk box." we're live from the nasdaq market site in times square. i'm becky quick. our guest host for the hour is charles campbell, trading desk specialist at mkm partners gra et great to see you let's get into what is happening with the markets the rebound. first a look at how we got here. the major averages, each fell 5% over the last two days the dow was down another 546 points yesterday after falling more than 800 points on wednesday and most of that activity came at the end of the session. however, things are turning around this morning. take a look at the u.s. equity futures. you'll see that right now it looks like the dow futures are indicated up by 300 points

when you add up everything that's happened, the dow, s&p 500, nasdaq, they're all on track to post the biggest weekly losses since the week that ended march 23rd and that's interesting that 800 plus point drop was the biggest drop that we've seen since february but again, on a weekly basis, this goes back to march. so seeing a 5% decline not all that unusual unless you're paying attention to only the last few years over night in asia, you did see a rebound in the markets the nikkei ending up by .5%. hang seng up 2% and the shanghai composite up by 1% given the steep losses we've seen, i wouldn't say this is a bounceback it is a stabilization. you're not seeing continuing red arrows like we saw yesterday morning. >> so viscerally, i think everybody around thinks 300 points by 10:00 we could be down 600. >> that's what people think.

then i watched it. >> oh, no, my heart was in my stomach. >> today though, stlnisn't ther feeling that this can't last i think it's a feeling this won't last either. which makes me think it could be a rebound day. it's all -- you know, you have to do the opposite but then, i got a lot of other thoughts my thoughts are, i just heard, you know, people calling the massive damage that has already been done. it's 5%. okay i mean, real corrections that are scary can be -- we could go down 15% theoretically. you always could charles, we had huge gains the last couple years. 15 would not be insane and certainly 10 >> if you're looking at the russell 2000 they're already there. they're down in correction territory. >> and a lot of s&p 500 stocks are already -- had already gone down before the last two days. >> if you think back to what happened in early 2016, we had

the worst opening ten weeks. we were nowhere near that earlier this week. >> what would capitulation look to you >> 7% single session the absolute number of points is very misleading. >> we're not used to it. >> we haven't recalibrated the u.s. market didn't participate in the down move that we saw with the european down at 20 month lows. the shanghai market is bear territory. we recoupled to some degree with that u.s. data is stronger nonfarm payroll report, it encourages the fed to get back on the philip's curve mantra >> if you're looking for 7% in a day, you're talking about more than 1500 points >> that's right. but we're at 27,000 now. or were. >> i'm just saying for people to get their heads around it. >> we haven't recalibrated 800 points sounz like what we

used to think of 800 points. its no the anymore >> we were up to 1300 points >> we have to recalibrate. >> the hedge fund managers from the $100 million to the $100 million plus, this he see the pullback as frustrating and annoyance but not anywhere near a capitulation nothing even close >> we want capitulation though >> this is an opportunity. but for -- you know, the hedge fund guys typically have a mandate to be fully invested doesn't mean they have to be 100% net long. they have to be fully invested they have to have the investments in place so they have a mandate from the retail investor. necessity have to be in there. but that doesn't mean for me, you know, on a personal basis, 3%, i wouldn't even think of putting cash to work that's not enough. 10%? i'm interested >> in our minds, we still think 800 points is a lot and it's not. is it good that we -- that we,

you know, merchandise all this gloom and doom and build bottoms? i mean, i think the media overdoes these things, right and we talk -- we have specials and i watch other networks how they talk about it so we've made 5% seem like it's the end of the world >> right. >> is that help bring out the complaisancy so we don't need a complete deep correction to wash out people can we wash them out earlier >> there's a logic to that >> i think social media and everything -- everything is a big deal now anything that is on twitter. >> is it where you interfere with the experiment? >> right >> the problem is with all the headlines you have information age. there is no depth. it lacks context so people need to realize, well, you know, where did we come from how much were we up in 2016? how much were we up in 2017? we were up a locht. look at the data 6% principle, 4% dividends typically. we outsized that the last few

years. >> charles, here's the question. are you telling foam buy right now? are you telling them to wait for that 7% pullback in a day? >> it depends on your audience if you're a retail investor and they're fully invested and a little bit of cash, you wait or you dollar cost average that's always, you know, historically pretty good >> meaning >> putting a little money in every time it -- >> that's right. institutional investors are typically stock pickers and maybe some asset allocation. so they're looking for opportunities. and they're looking for catalysts. what are the catalysts out there? you have the mid terms what is discounted in the mid terms? what is discounted in a g-20 >> the institutional guys have the other thing. you have the hedge funds a lot of them are running behind in the indices right now how do you make up to are that in the last couple months? are they going to be a little more panicked about making sure they have year end numbers >> when you see the exposures go down on day like tuesday, the names that get sold off the most are the ones that have

appreciated the most because they're protecting -- they're in capital preservation mode so they're pulling back. so they will -- if the markets stabilize and move higher, they will move higher and they will increase equity exposures gradually because of the time of year we're n we're in october. if they're up 400 on the year, they don't want to -- >> we'll have to get used to 1,000 point moves up or down i remember the joe granville, you know, do you remember that he caused a crash in the market. it was 27 points so i mean we have to recalibrate these things and we're not there yet with 1,000 points 800 points, you know, you see that in the mainstream media or cover of a newspaper, it's like the world is ending. really, it's only 3% yesterday's 500 points was 2%. so maybe it's still good >> can i talk about the down side again we talked about this yesterday briefly. now there is an article as it happens in the paper about it. about the buyback situation. which is to say that right now

we are in the midst of earnings. there is no buybacks they slowed to a crawl and the writer of this piece has now looked at all of these periods. and every time that -- not every time, but almost every time there's been an earnings season, when the -- that's when we've had much more volatility so the question is, if you're investors, you just know that. i don't think most investors know that companies basically stop buying back the stock during this period so if you're 23e% of the market -- >> i think it depends on how -- >> that is counter >> -- how closely they follow the markets. what would happen if you have companies reporting once a year instead of four times a year what would happen? well, you would have a lower frequency of volatility. but when they had the reporting periods, the magnitude of the move would be much greater because of the lack of continuous information. >> i don't know what the real numbers play out bob pisani took a look at several individual stocks j.p.

morgan included and said if you look at the october sales, they were below the stock buybacks were below what they were in november but they were equal to what they were in december they report on the 12th or 14th. there would have been two weeks they couldn't have been actively buying back. they were following that but apparently not all companies follow it. i think it's a little -- >> it may be company specific. but if you were just playing -- if you're just playing a total overall index, clearly there were periods that they almost seem to correlate i haddicl. >> it's not like insider buying. you know, the insider buying takes place -- can only take place in certain windows >> right >> insider selling apparently picked up a few weeks ago. >> but that can be for any number of reasons. >> right >> the buying is unambiguous >> right >> all right a big potential market mover today. yep, it's the official kickoff for earnings season. maybe it should be welcomed if things are really going pretty well

it will be judgement day for quite a few of the banks we'll hear from j.p. morgan at 6:45 a.m. eastern. at 8:00, wells fargo and then citigroup results will hit the tape as well weech there is a lot in these numbers. a lot of different metrics to decide whether it is good or bad. they should be doing better with steeper yield curve. >> if we really think rates are going to go higher faster than expected >> that's the other thing. we have to recalibrate what we think is a big move in rates too. we were talking about it at the break in 1987. treasury bonds rallied 200 basis points i mean we just freaked out >> with 32 being the influence >> for the one day >> it was a -- >> i know, we have to decide whether it is relative or whether it is absolute moves that, you know -- >> a lot to think about. >> stocks are bouncing back. after the two day 5% selloff with major averages, dom chu is

here he is taking a look at the picture. good to see you. >> good to see you you've been talking about this idea of bottoming processes happening and just the degree of magnitude for some of the moves. you are absolutely right the idea here is that bigger the point moves are on a much bigger basis, say, 7,329 for the nasdaq doesn't seem quite as big anymore. we're moving quite a bit off the highs. for the nasdaq, almost in correction territory or that is the term some traders use to describe a 10% pullback. we're at about 9.79% off the levels so the nasdaq one to watch there, that's a reason that people are citing that as the ep i center for a lot of the moves lower. taking a look at the other hot spots we're talking about from the large cap indices perspective. if you look at the russell 2,000, we're in correction territory now. a pullback of greater than 10% again that, term used by some traders. so we're about 11% to the down side here. that's why small caps very much

in focus one other place to look at is just some of the industry specific side of things with regard to chips. that is something that plays out within the s&p 500 that is that 200-day moving average that was broken just yesterday and again this idea that you can move below a longer term average for a major market index is something that has some traders a little worried we had a couple times over past year when we were flirting with that 200-day average one of the big divergence that's a lot of people are watching is the year to date performance of some of the sectors within the s&p 500. if you look just back again month to date, the utilities and consumer discretionary, this gap here is the widest between any two sectors in the s&p 500 it tells you a little bit, joe about, that whole defensive interest rate play for the utilities versus that cyclical play for the consumer discretionary retail stocks. thats a gap we're watching in the coming days here as we start to see perhaps a bottoming

process or perhaps an acceleration to the down side. >> that's interesting. i heard yesterday people talking about how they would be buying up the utilities if they were really getting defensive but the idea that they've maintained and stayed flat while everybody else dropped 10%, that's the same equivalent >> not just that, remember, a lot has been made. this is obviously subjective and everyone's got their own kind of metric on this but many people say that if the dow is going to drop 13 to 1400 points, you should have seen more than a nine, ten basis point drop in yields on the ten year u.s. government note. this idea that a flight to safety should have taken more hold and played out more aggressively in ten year note yields that is lending some of the experts to say that interest rates really are the focal point of the story and that the idea that interest rates are on a path or trajectory higher is going to outweigh a lot of the other forces that plau in the mark -- that play in the market overall. >> dom chu doing double duty i saw you earlier. i guess it wasn't hard for you to stick around.

>> i have a cot. it's not quite under my desk yet. but i'm just going to put it off to the side. the people around me just think it's pretty bad. >> it's dedication that's dedication g to hear. let's talk about the wild swings in the market right now. joining us, u.s. head of asset allocation at ubs global wealth management ubs, but not in any fancy thing like that. is there a cutoff? what do you need to get -- i mean what do i need to get -- never mind i'm not there. >> ask nicely. >> yeah. randy is portfolio manager at baron discovery funds. i guess that is for the hour charles campbell, managing director and trading desk specialist we're going back and forth between fundamentals and technicals i always trying to figure out what the crowd is thinking or sentiment. i feel like we're up 300 points. i worry we're going to sell off immediately. but that makes me think i could be wrong

my feelings are wrong and actually we could have a pretty good rebound what is most important to think about now? fundamentals or technicals >> fundamentals is always what i focus on that's what's going to drive the markets. >> for sure? the fundamentals might be changing in the market might be ahead of how we view the fu fundmentals. >> you can cpi yesterday below expectations dovish the futures are up so we're not getting inflation pressures. overnight, the data out of china, all consistent with kind of a global economy that is doing quite well slowing but the fundamentals are good that hasn't changed. what changed almost certainly what happened yesterday if you look at the tape, the movements seem to suggest entirely, you know, program selling, risk selling. the volatility and the nasdaq day to day is a saw tooth. that doesn't seem fund mentamen

based. rates move rapidly you have a correction. it takes time to digest and then you move forward >> what do you i where are you? just buy stocks when they're cheap that you sflik. >> we're fufund mentally orient well we're looking for value and while the markets are running really hard that we're careful to manage our valuations on the upside about thut giv but this gives us a chance to look at stocks that are beaten down we see acquisitions even in mash markets like today we have a stock that got bought today. and so what it means is that we have to keep our focus on the long term. keep the focus on the fu fundmentals? >> yeah, i'm looking more at individual stocks. we're not trying to get day to

day. i don't think i'm that smart long term i could have a different view than other investors. that's where we try to make our money. >> seems easier, i guess, than living in your little world? >> yeah. sometimes you just you have to just turn off the monitor and get back into what you know. >> i mean you don't need to really go that far you can leave -- can you put the mute button on or something. you don't have a neilson box, do you? >> no. >> then turn it off. it doesn't matter. at this pointwould 15% surpris you? that's what we were talking about earlier. >> 15% total down side >> yes >> i think that will be extreme. i can see 10%. >> we moved up, you know, i mean the nasdaq moved up 50%. >> yeah. but the s&p 500 is down about 7% over the past two weeks. so we're back to kind of early july levels. >> what is the end goal in sight for the corrections? >> you know, right now i think we're just adjusting to the

higher rate environment. >> 30 basis points higher? >> that's one factor the other factor is on the trade side you're starting to see some companies give guidance to how the tariffs are impacting them we look at a basket of stocks that have been outperforming the past two weeks you've seen significant underperformance there is a little pricing in the trade risk that leads to weakness but not a significant deterioration of the story on the valuation point, it's interesting that after this pullback, the forward multiple for the s&p 500 is around 16.25% the long term average is 16. so it's hard to look at the market and say this is really expensive given where we think earnings are going to go its no the cheap but really not expensive. it doesn't seem like there is a lot of sentiment in the markets. >> should i aspire to some day being with that division of ubs? or you are just have no interest in -- >> you should -- i provide advice to our financial advisors and the channels >> all right so i'm getting the advice -- the

advice i'm giving is as good as -- >> you're hearing it directly from me, yes hopefully yes. >> i mean if you were really doing your job at ubs, maybe you could bring me into the wealth management era i'm not there yet. i mean this is not my fault. i'm doing everything i can >> you should speak to your financial adviser. >> all right i don't know i know ron baron, maybe i'll give everything to you >> well, we're a mutual fund company. so $1500 >> thanks, jason ubs global wealth management which i can some day think of. and randy, baron discovery fund. you'll be with us for the rest of the hour. do you take personal accounts? >> we don't. sorry, joe >> fine. thank you. >> coming up, when we return, one of the driver's of volatility this week is china. we're going to talk about trade war of currency and potential meeting between president trump and president xi we'll have that conversation in just a moment. rvelgts then at t then at the top of the hour, treasury secretary steve

mnuchin. we're going to ask him about the president's krit scriticism of d and rising interest rates. here's a look at the biggest premarket winners and losers in the dow. what do advisors look for in an etf? i tell clients, etfs can follow an index, but which ones target your goals? it's not about quantity. it's about quality. no trendy stuff. i want etfs backed by research. is it built for the long-term? my reputation depends on it. flexshares etfs are designed and managed around investor objectives. so you can advise with confidence. before investing, consider the fund's investment objectives, risks, charges and expenses. go to flexshares.com for a prospectus containing this information. read it carefully. when you rent from national... it's kind of like playing your own version of best ball.

because here, you can choose any car in the aisle, even if it's a better car class than the one you reserved. so no matter what, you're guaranteed to have a perfect drive. [laughter] (vo) go national. go like a pro. see what i did there?

dono.u hear that? it's quiet. too quiet. xfinity home cameras. xfinity home gives you an extra pair of eyes to help watch over your family. plus, you have added peace of mind from 24/7 professional monitoring. xfinity home. simple. easy. awesome. xfinity customers, add xfinity home and get a great offer. plus, ask how to get free installation. call, go online, or demo in an xfinity store today.

a surplus with the united states in september. the surge from a year ago after posting a nearly 10% increase in august economists say the rising surplus likely due to exporters increasing the orders before president trump's tariffs hit. those figures are likely to show stress in the months ahead meantime, plans are under way for president trum top meet chinese leader xi at the g-20 next month want to bring in venture ceo, a taiwan accelerator partner in emqq index committee myrrh and also leyland miller is, chinese beige book ceo want to thank you both for being with us. i'm going to go to you first only because you are here and you've seen some -- >> he made the effort. >> he made the effort to make the trip richard, i'll get to you in one second but to me, the larger story here given where the markets are this

week, that's -- that's partially been a story of interest rates and inflation. but much, i think, the bigger story may be china and our relationship with china and these technology ip issues and everything else. what do you think is happening >> i think that every time the market drops significantly, you're going to start getting stories about how u.s.-china relations are not that bad and how president trump is going to meet with someone or make a big change i don't think it's surprising that they're talking about the meeting in late november this is giving people hope that is not going to slide off a cliff. january 1, rising tariffs to 25% was ominous before and now this gives market hope and a reason to rebound if it wants to >> richard, are you in the same place? are you of the view that there is going to be a solution here >> well, there has to be one if it was just canada and aluminum and steel, that is kind of micro but if it's the two big guys in the neighborhood going toe to toe, and then it becomes multiindustry, the market might

be looking now for something to say will this correction be something worse like a bear market if they don't fix this, this is a good reason to be worried. >> how much do you think, by the way, i don't know how much you've been focus on this, you know, last week after that business week article came out about these chips, that were potentially in our systems and the company said it's not true but that also seemed to spook the market especially the technology sector how much of that is weighing on this >> i don't think it's critical variable but it's weighing on some investors. some are using it as a buying opportunity. >> buying opportunity for what >> for some of the chip names that were associated with it as being responsible for the breach by and large, it creates negative sentment for investors. but one thij is interesting, what do you gentlemen think president xi and his administration thinks of our president? how do they perceive him

>> well, i think that they are re-evaluating a bloost they thought before they thought he was going to be someone who could wait out and who would eventually roll over because he didn't have much attention span they have definitely re-evaluated that. i think the one thing they hold out hope for is that this is a guy that can change the landscape with a tweet he can come late november and make a deal and change everything so while they are getting increasingly nervous about future supply chains, currency, et cetera, they realize that they can't push this too much because there is always the possibility that their luck could change i think january 1 is a very big deal if the tariffs do go up, i think they think the ship sailed for a while. but until then, will is hope this could change. >> richard, how damaging does the chinese economy and therefore how much leverage does the president really have here >> zoom town a ten year chart of

emerging markets and you can see that emerging markets looks generally side ways since the financial crisis in general. and the u.s. has been generally upwards. 2018, s&p 500 straight up emerging china and ending other down the concern is more of the u.s now you're talking about chips from china i think about that but what i do know is that the chinese are looking at this election and kind of thinking, what does trump want from me we don't like the u.s. forces to move up from the dmz to our chinese border we have that on trump. what else can they impose? any tariff war means that trump voters that buy stuff on amazon and walmart are not happy with this added tax for their shopping list. so for now, i'm just trying to think of what can trump use to go against that in his election year if he's just pointing fingers at a potential enemy so that he can make himself as the leader to change things, so be it. just i think the chinese have a

pretty good hand >> okay. we have to leave the conversation there we're going to come back to you in a little bit. richard, thank you thank you, leland. appreciate it. >> i don't point at xi as the enemy. i think jake powell is the real enemy. anyway -- china is fine. it's these guys here crazy fed, loco. da dartmouth professor peter fisher -- >> is that what he is now? holy smokes. >> he has a very full schedule >> you no he what? look at the sweater. he is at dartmouth now he has that little gray on the sides there. he is very wise. anyway, market is volatile he is a former head of black rock we'll get his comments plus, earnings season kicks off. we're expecting results from jp morgan the company in the next few minutes. we'll bring you the instant reaction as we head to break here is a look at yesterday's s&p 500. are there winners? we'll try to find some winners and losers there's a couple gold stocks and miners delta? >> they did well

hi, kids! i'm carl and i'm a broker. do you offer $4.95 online equity trades? great question. see, for a full service brokerage like ours, that's tough to do. schwab does it. next question. do you offer a satisfaction guarantee? a what now? a satisfaction guarantee. like schwab does. man: (scoffing) what are you teaching these kids? ask your broker if they offer award-winning full service and low costs, backed by a satisfaction guarantee. if you don't like their answer, ask again at schwab.

if you don't like their answer, the sun goes down. you run those miles, squeeze the toothpaste from the bottom and floss to set a good example. you fine tune the proposal, change the water jug so no one else has to, get home for dinner and feed the cat. you did a million things for your family today but speaking to pnc to help handle all your investments

was a very important million and one. pnc. make today the day.

good morning if you're just waking up, futures are pointing to a rebound. getting back to maybe about half of what we lost yesterday. not including the 800 the day before but at least it's not down another, you know, futures in the morning going into a friday a lot of times can get scary especially in the month of october. we'll see. it could still. >> a long way before we get to

the closing bell and a lot of information between now and then >> in percentage terms, that's what 300 points looks like now nasdaq rebounding a little more than that. the f-a-a-n-g stocks this morning, they're all up. rebounding after some significant losses not just in the last two days but really recently for the last month or so even though the other averages were hitting highs. overnight in asia, take a quick look and then the european stocks it's green a little bit hang seng, cramer talked a lot about china overnight. hopefully talk to him and ask him some questions near the end of the show. and there are the european markets. the gains there have moderated a little bit but after we lost, you know, 2% again yesterday, you're not seeing the follow-through in the european markets at least they're up. they didn't match what we lost. >> time for the squawk planner the main event today will be earnings if not the market but this morning we're expecting results from j.p. morgan

citigroup and wells fargo thashgs coming up. on the data front, import and export prices for september. that's going to get thrown into the mix at 8:30 a.m. and some fed speak as well given that inflation and interest rates seem to be the issue of the day the chair of atlanta's rachael bostick in chicago and charlie evans all scheduled to speak today. charles evans will be joining "squawk box" live from ann arbor, michigan, at 8:30 eastern time right after we get the important export prices. >> let's talk more about rising bond yields and the volatile week for stocks. joining us is peter fisher he is senior fellow at the tuck school of business at dartmouth college. the u.s. treasury and black rock peter, thanks for being here >> my pleasure. >> we need you to wear all of the hats, fed hat markets hat and help us interpret what we heard from jay powell. jay powell last week spoke

he said some things about how we're nowhere near neutral and that we're going to power rirgt through it and keep raising rates well beyond that and that spooked first the bond market and now the stock market. what did he say? what did you interpret and is the market right to react like this? >> i think jay powell has been doing a really good job of trying to walk back the fed's xra extraordinary forward guidance the fed doesn't know where rates will be a year or two from now they've been promising they know how to tell us that. >> as a way to calm markets? >> and during the whole qe process. we're going to stimulate so we've got to learn to walk back from forward guidance and jay powell is shorter statements talking about uncertainty, talking about balanced talking about for now. but then he did let slip near the top of the cycle, slipped his lips whether giving a talk and the top of the cycle sml real - cycle is something very difficult for the fed. they can't tell us when the last

hike is going to be or the first cut is going to be if they tell us that, they just did it >> so you think that was a mistake? >> it was a freudian slip. i don't think he knows where the top of the cycle is. therefore, telling us what the forward path is a real problem i think the equity correction is -- stocks got ahead of themselves look at the facebook repricing over the summer. that should have warned lots of investors and tech stocks in general and the market in particular not just facebook. so animal spirits have been driving stocks higher for two years. the better cash flows have been driving stocks higher for two years. real rates are going to catch up that's not a news item the market's got to adjust the uncertainty ahead of us, i think that is still ahead of us. >> what you said is important. the idea that the fed has no idea where it's going to be two or three years down the road because, steve liesman talked about something yesterday that was a little calming he said if you look at 2020 where the fed ultimately expects rates to be, you're saying it

doesn't matter you have to throw out the playbook they don't know. we're not going to know. we're in a new era >> yeah. it's this late cycle problem greenspan -- >> what does late cycle sneen. >> it means we may have to raise markets more than the economy expects. but we might have to ease more than the market expects. it may turn on us. we don't know where the top of the cycle is the top of the cycle is i don't know >> so we're truly data dependent even though fed heads have been saying that for years and years. this time it means we really r we have to look at every single data point >> i think they should throw out the dot plot even if they don't, we investors have to we have to start ignoring that they don't know where rates are going to be two years from now that's silly what it is going to look like when we look at the dot plot and a third of them are going up and a third side ways and a third going down what are we going to do with that >> charles, what do you think about that >> i think what peter is suggesting is that the fed

should aband on the dot plot scenario if they wering to do that, what i would ask you is how would investors respond to less disclosure even though he discounts it, powell discounts it and related to that, since we have a duel tightening going on, what is your expectation of the balance sheet normalization? we go from 4.5% to 4.6 trillion. we go to $4.5 trillion cutting back 5% to 7% a year roughly. how far do you think we're going to go before they say let's take a break? >> i don't know and they don't know i mean, they just don't know now i don't think that they know what balance normalization means. whether it's -- i think last trillion was a pla placebo the information content we attribute to it changes that i think that is so unwinding the balance sheet is another uncertainty. we just don't know whether it matters or not at this scale

>> and if there are economic projection ez they say we're not going to provide one anymore, how would markets respond to that >> not well now. that is why they should have done it a year or two ago and it wouldn't have mattered they should have taken the dot plot away when we said it doesn't matter we know what they're doing >> right >> if they take it away when we wonder what they're going to do next, it has to go up a lot. and that's going to happen anyway >> yeah. >> whether they take away the dot plot or whether we do it ourselves. >> if were still looking at bonds and trying to figure out what to do with it all, what is your answer at this point? >> well, real rates are going to grind higher that's sort of dog bites man there is no news there implied -- in fixed income assets, has got to go higher people are too ready to pick up that insurance and that's going to stop happening. that's going to then impact -- >> we're still talking about inkreldbly low levels historically

does it matter when we talk about a rast change? >> both real rates grinding higher and implied vol grinding higher and you have to brace for. that that's my message >> did -- what's the endowment at dartmouth how much >> i'm not on that side of the house. >> they don't talk -- they got you? >> you're hanging out there? they don't even call you and say can you -- >> they're based in boston >> i know. >> i say $1.5 billion. >> don't you think that they would use you as -- >> maybe i can talk to them. >> do they have guidelines for how to dress when you went up there? >> no. >> i mean, did you order some patches? >> no. are you going -- are they on order? they're coming >> they're hanging up there. >> are there guidelines? >> no. >> you just came up with that. that's amazing you look different do you, don't you? >> he looks relaxed. >> you i always wear the sweaters. >> did you have to move up >> you don't live in hanover >> about half the time

best of both worlds. >> molly's balloon >> it is called molly's now? >> it's no longer molly's balloon? >> peter, thank you so much. >> my pleasure >> peter fisher from the tuck school of business when we come back, the official kickoff to earnings season is here j.p. morgan is set to report in the next few minutes we'll bring ut results ayou the instant reaction then the newsmaker of the day, treasury secretary stephen mnuchin will join us from bali to talk about rising rates and the wild ride we've seen in stocks this week also late eshgs fed reaction to president trump's criticism chicago fed president charlie evans will join us at 8:30 a.m. eastern time

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

you're in the business of helping people. we're in the business of helping you. business loans for eligible card members up to fifty thousand dollars, decided in as little as 60 seconds. the powerful backing of american express. don't do business without it.

time now for the executive edge the hardest hit stocks is tech check out the two day drops of some of the widely held stocks netflix down 9.7%.

take a look at qual come and amazon, both down more than 8% those stocks rebounding nicely today. you look at amazon, up 3%. qual come up 1.5%. nvidia up 3% as well we should show you the rest of the f-a-a-n-g names for just a moment we flip it around. you're looking at facebook up 1% apple, by the way, amazon we mentioned up 3%. apple up 2%. of all the f-a-a-n-g names, apple may be the safest. we want to get to our guest coast charles campbell when you look at the f-a-a-n-g names, are there certain names that people cluster the names as if they're all one group

do you separate them out at all? >> we have a fundamental analyst who follows these companies. he knows them intermatly you know, his attitude is individual business models look at them separately take a long term point of view that's the way can you really get to the fundamentals. and the long term competitive advantage, the barriers and the moving advantages. so he is constructive on a number of the companies. >> constructive, that is such a ridiculous word. >> bullish. >> on which ones >> favorable. >> with ones >> just about all of them. he takes a -- i mean he written, you know, what is the 20-year horizon for these type of names? alibaba, he was in china he knows the senior management very well. he has an intimate knowledge of them and positive bullish on a number of these names. >> we're waiting on j.p. morgan. tell us what you're expecting from the bank this is morning.

>> banks are supposed to be the second best performing group the question, is banks have done, i think, fairly well year to date. but the stocks have underperformed every earnings report you've seen the last couple quarters, the stocks have traded lower my question is why is that >> yeah. so if we look at the earnings like you just talked about, we need to -- >> this is marty >> we need to properly introduce you. he's been here for our instant reaction when we get the j.p. morgan numbers you're front running the numbers. anyway, marty? >> the key thing is what you said earnings per share is up 30% stock prices from a year ago are flat so what we're looking at is all of the tax reform, everything that we got in ccar from the capital announcements. none of of that is baked in. that's what we have gone through. why? why so many positives?

why the fundmentals continuing to improve >> and the answer so your question >> the yield curve got flat through the summer when the yield curve got flat, that was an indicator that we were going into recession. paranoia about a recession throws this sector into temper tantrum. and that's what we went through in the summer. >> okay. >> you got to then ask the question are we going to resnegs. >> we're going to press pause. we're waiting for the numbers. we're going to take a break and hopefully the numbers will hit and we'll get that reaction. no front running going on here joseph >> all right coming up, we're still waiting as you can sort of tell from j.p. morgan's report now it's hitting >> yeah. >> they're messing with us >> i can tell you really quickly. it looks like $2.34 for the third quarter. the street was expecting $2.26 >> also -- >> that's higher >> it's higher no matter how you look at these based on the headlines. we have headlines right now. not the entire issue

they also talk about revenue on a managed basis which is the apples to apples number $27.8 billion. that is above the $27.54 billion that the street was anticipating you can run through the numbers. marty is looking at the numbers too. >> the stock up is significantly. >> at the very end of that, it moved higher just in stan takenously with that it was already up a little bit >> marty, a couple other numbers. noninterest expense, $15.6 billion. net interest income, $14.1 billion. return on tangible common equity, 17%. return on common equity, 14% just your quick reaction to the top headlines? >> well, we expected j.p. morgan to come in a couple pennies better the good news is it's in the revenue side so we probably had a little bit better trading and investment banking. the number was better than what we thought which meant the margin held in which is going to be one of the key factors we're looking at in this earnings season >> okay. what are the numbers you're

digging into i can tell you about the provision for credit losses, $948 million i'm not sure that matters as much as it used to commercial banking revenue, $2.27 billion. then the corporate investment bank revenue, $8.81 billion. >> when you look at the you loo provision number, the reason why it doesn't matter it's so low. it has to stay low are we going into recession or not? as long as provisions -- >> that means the bank itself which has long leadway because it has so many customers and things it can see is not anticipating a recession so that gets back to your point if we invert the yield curve, there are so many people who are worried that's a sign of a coming recession that's not what jpmorgan is signaling it sees. >> that's right. and the yield curve is steepening now we're coming out of the danger zone in that metric. >> is that a reason to buy these metrics? >> the reason for buying financials is are we going into recession or not, the second is

fundamentals continuing to improve. we're seeing both of those you know, we couldn't envision getting above 15% just a couple of years ago we are seeing that in profitability improvement. >> very quickly, you do have a buy on jpmorgan here >> yes >> what is your favorite stock among the banks? >> so we do think the money center banks are going to be a little bit more pressure because of trading we see right now. seasonally they do a little bit better as we get into the first part of a year the super regional banks are what do well in the back half of a year these are banks that we do believe will push through and show the profitability improvements through the capital deployment they've gotten. >> pnc is reporting today. would you put that bank in the category too >> it is they kind of feel like they're a little bit more late cycle and are acting that way. where some of these others are proactively thinking there's still growth ahead of them >> thanks for joining us today

jpmorgan, better results than expected >> and if that wasn't enough for you, you have two more coming. i mean, the gifts keep coming today. two more set to report we'll bring the reports from citigroup anwes fao.d llrg we'll have all that stuff, again, when they hit the wires stay with us at&t provides edge-to-edge intelligence, covering virtually every part of your healthcare business. so that if she has a heart problem & the staff needs to know, they will & they'll drop everything can you take a look at her vitals? & share the data with other specialists yeah, i'm looking at them now. & they'll drop everything hey. & take care of this baby yeah, that procedure seems right. & that one too. at&t provides edge to edge intelligence. it can do so much for your business, the list goes on and on. that's the power of &. & when your patient's tests come back... ♪ ♪

put your data to work on the cloud that drives business. the ibm cloud. the cloud for smarter business.

i want to thank our guest host this morning for helping us through this wild right. we'll see where it ends up later today. jpmorgan out with its earnings we'll talk about them in a moment when we come back, our news maker of the morning is up next. steven mnuchin is going to join us live from the imf annual meeting in bali. we're going to talk about the wild ride in the markets and china's currency then later, earnings season is here we're going to be getting reports from citigroup at 8:00 a.m. "squawk" returns in a moment i think we should do that meeting tomorrow.

well wait. what did you think about her? it's definitely a new idea, but there's no business track record. well, have you seen her work? no. is it good? good? at cognizant, we're helping today's leading banks make better lending decisions with new sources of data- so, multiply that by her followers, speaking engagements, work experience... credit history. -that more accurately assess a business' chances of success. this is a good investment. she's a good investment. get ready, because we're helping leading companies lead with digital. get ready, because we're helping leading companies something is transforming and our world.. it's the longevity economy - americans 50+ driving 7.6 trillion dollars... of economic activity every year. right before our eyes, aging is unleashing exponential growth...

...in every industry. are you ready? we are. a-a-r-p is teaming up with business leaders and innovators... ...sparking new ideas and real solutions. so, what are you waiting for?

wall street pointing to a major bounceback after the dow dropped nearly 1400 points over the past two days. it's the relief rally. we're going to walk you through what's driving the bounce. we're live in bali where the imf is holding its annual meeting. steven mnuchin will join us for a "squawk" interview earnings season yet again kicking off. jpmorgan, citigroup, wells fargo just some of the names reporting this morning the reaction straight ahead as the second hour of "squawk box" begins right now ♪ live from the beating heart of business, new york, this is "squawk box. >> good morning. welcome back to "squawk box" right here on cnbc live from the nasdaq market site in times square i'm andrew ross sorkin along with becky quick and joe kernen.

joining us on the set to discuss what has been a wild ride of the market this week, tom lee of fundstrat global investors we've got the dow jones looking like it would open up higher, first time in a couple days now at 354 points. nasdaq up about 159 points and the s&p looking to open 40.5 points higher. jpmorgan out with numbers a moment ago and they were better than expected. >> shares trading higher on the results here beating on both the top and bottom line. revenue coming in at about $27.8 billion versus the $27.5 billion that analysts were expecting on the bottom line, $2.34 per share compared to $2.25 that the street was expecting now, on the revenue markets side, $4.4 billion

down about 2% largely thanks to the fixed income side of that business which was down about 10%. higher interest rates and tail winds from the tax cuts continue to be a boost to the profit for jpmorgan as for macro comment, jamie dimon saying their u.s. and global economy continue to show strength despite uncertainties which at some point in the future may have negative effects on the economy we're looking forward to his comments on the call later today. back to you. >> want to bring in marty mosby. you've been going through the numbers. what's your headline >> the headline is revenue's better than expected provision half of what the market expected. so a lot of your net positive to the street is going to be this provision number why you don't get a lot of credit to that, it goes back to

this fear factor of recession. it speaks to the fact the credit rate wills stay low. >> somebody like a jpmorgan that has so many clients, customers, are we talking six months or a year >> you're supposed to have that in accounting principles -- >> in terms of what you're seeing in the economy -- >> we have a credit cycle monitor that we used when i was cfo at a bank. the banks have these things they're using. it'll give you a got 18 months to look out. >> what's your stock price for this company right now 12 months out at this point and how does your model change after this >> it doesn't change that much credit costs are a little bit lower. this is what we expected again, we haven't been changing our models even when the prices have been going up and down. we keep that fairly steady which is why right now we have --

>> is there anything in these numbers that changes your impact or thinking on what we'll see from wells and citi? >> give us more confidence about net interest margin. the next issue is has it been trickling up and that's not having the negative effect. because our calculation says the threshold of pain is really around 70%, 75%. >> final question from me which is of all the banks and i know you have buys on a lot of them >> we do >> but if you're a retail investor watching the show right now and you can only buy one or two of them, who are you going to pick? >> a super regional bank like we talked about earlier you know, we have key corp., sun trust, mnt bank. they are good samples of things that can take advantage of the environment we have right now. >> but you're -- just to be -- put a fine point on it, you're not putting jpmorgan on that list >> right they're 12% to 15% upside. so again, very strong upside in

jpmorgan but stronger at the super regional banks >> we'll have more from mr. mosby in a bit when we get citi and wells fargo. thank you. >> thank you >> santoli's here. a little over 30 years ago -- you weren't here >> i existed >> you didn't follow it closely. it had been a bad week but it would have been 5700 points in one day. so i'm just trying to put that all in perspective we're bounce iing 360 points for a rebound, that sounds like a lot but we know it's not a lot. since we're down 5%, you see the amount that the media has given in this market or do we look like we don't realize we're much higher

levels is it good or bad that we make such a big deal out of what is an unbelievable move >> if, in fact, this is going to be an overreaction -- >> if it was a real correction, though, couldn't we do 10%, 12%? >> we're down 7% from the highs. >> okay. don't use just the last two days >> here's a bit of context we ran these last night. down 5.2% on the s&p over two days there have been 88 times since 1980 where you had a two-day loss of more than 4% so this happens more than once a year on average. >> but then maybe we haven't done enough work on the downside >> that's where you have to kind of inspect the numbers a little bit. it has been a comprehensive selloff. >> and if you go back a couple of weeks with the rest of the averages, there's been some rotational -- >> only 1 in 25 stocks is above its ten-day average. this is the up trend from the dimon bottom you're still kind of -- you're

above there. that kept you honest in february you more or less stayed in line with that uptrend. >> okay. >> you know, it's still a show me >> we don't want to overdo it, but i don't think it's really a correction until we get double digits, don't we >> two-thirds of all s&p stocks are down more than 10% >> should we imagine this erodes today, going into the weekend? >> you don't know. on friday, the intraday low was on a friday in february. the imf meeting being held in bali right now. our own geoff cutmore is there he joins us with a special guest. the u.s. treasury secretary. >> thank you for that. let's kick off in the studio, so they were just talking about whether this is a correction, whether it's something more serious happening

in markets how do you read it >> i think the fundamentals are still very strong. the u.s. economy is strong, u.s. earnings are strong. so i see this as just a natural correction after the markets were up a lot. >> so it's about valuation rather than concerns around interest rates or the actions of the fed going forward? >> there's really no new information on the fed or on trade for that matter. so i really see this as a reaction of markets tend to go too far in both directions and they have natural corrections. see the market's traded up a little bit over night. that's a good thing. >> there were some curious moments in the trading session where we saw both equities and bonds being sold at the same time which raised some concerns that maybe there was a broad retreat from risk and concerns about the level of u.s. debt but you don't see it like that

>> i definitely don't. as a matter of fact, in the bond market four weeks ago people were asking me if i was concerned the yield curve was too flat and if that indicated recession for next year. i said absolutely not. four weeks ago i said markets aren't always efficient. so you've seen a normalization in the yield curve which makes sense. the fact that that's occurred at the same time is good. >> does this in any way change your timetable or make you think twice about the amount of new debt you're going to put on the market >> one of the things about treasuries, it is the largest most liquid market we're very focused on predictable offerings so that market participants understand the supply and the market has taken the supply very well so we still see a lot of demand for u.s. treasury securities >> you don't think in any way

that the market on the second day of the selloff became concerned that president trump appeared to be attacking the fed with his comments about the crazy actions that jay powell and his team were taking >> the president's been clear. he likes low interest rates. i think that's really what it was about. >> so in no sense at all do you think people are uncertain about the president's attitude towards the fed and it hasn't in any way damaged brand fed? >> not at all. and the president has said, you know, he respects the independence of the fed and they're doing they're job. >> here we saw very strong defense of jay powell. christine lagarde, the imf chief said she felt he was a serious man with a serious team. governor carney also weighed in from the bank of england and said he's a man who understands the pipework in the financial system why, if they can give a spirited defense, does the president feel he needs to attack the federal

reserve? >> well, he doesn't feel he needs to attack at all again, the president likes low interest rates the president's concerned about the fed raising interest rates too much and slowing down the economy. and those are obviously natural concerns >> what's your view on jay powell >> first of all, i think jay's doing a great job. he understands the regulatory environment. spending a lot of time here on regulations. we took bank regulations too far in the other direction i think that whether it's the occ or the fed or the fdic, we're now allowing our u.s. banks to be able to lend that's an important part of the market in economic recovery. >> let's talk a little bit about the progress being made with the chinese at this stage. you had a high-profile meeting here with the chinese central bank governor. what can you tell us about what was achieved in the meeting? >> well, before i talk about the chinese specifically, let me put

this in context. our economic platform has always been around tax reform, regulatory relief, and trade we couldn't be more excited about the $1.2 trillion trade rewrite, the u.s./mexico/canada deal we're excited about the south korea deal we're in discussions with europe president announced last week negotiations of free trade agreement with japan and we've been very clear with china that we need to have structural changes that we need a reciprocal trading relationship and we should be able to increase our exports by hundreds of billions of dollars so i did have a very productive conversation with governor ye from the people's bank of china. we had a constructive discussion about the currency i expressed my concerns about the weakness in the currency and we also talked about what would be a pathway to getting a more balanced trading relationship. >> do you think that they are

understanding how serious your intention is to change this relationship because i remember you being on cnbc back in may, and you said we're making really good progress and here we are in october and for many in the market, it doesn't feel as though we're getting very much closer to a resolution to the current dispute. >> like any negotiations, you take steps forward you take steps backward. you move forward a lot of these issues are the same issues we've been dealing with for a long period of time we've been very clear on the actions and the items that we'd like them to take. and we believe that that'd be good for our companies, for our workers, and for their markets opening up and reaffirming their markets will be good for their economy. >> are you getting any specific signals for some of the key signals in section 301 around ip theft and piracy or, indeed, the

inappropriate use of chinese technology whether it's in handset devices or other devices any specifics you can share with us, mr. secretary. >> they understand the issues. i want to be careful of going through the specifics. but let me just say the president is absolutely right in that these tariffs are very important negotiating tools. and the president is determined to change the basis of this trading relationship and have balanced and fair and reciprocal trade. and we're having discussions about a potential meeting between president xi and president trump at the g20 leaders meeting. we'll see if we make progress if that makes sense >> and if terms of the arrangements for that meeting, is it being set up because you are optimistic that something can be signed or inked before that or at that meeting >> i don't want to speculate on where we'll be if it looks like we can make positive direction, then i'm

sure the president will have the meeting. but we need to do work in advance to be sure there are changes and have a balanced trading relationship and that we're going to be make sure we don't have forced joint transfers and forced transfer of technology. >> is there a timeline in which you in your mind are working towards and if that deadline is reached ultimately it becomes a full-blown, all-out war on various fronts with the chinese? >> there's no deadline i go back to -- again, we've been very clear on the economic agenda trade's been a big part of it. we're simultaneously negotiating with different trading partners. and as the president has said, you know, this is about creating balanced and reciprocal trade. which is good for american companies and american workers >> my colleague andrew ross sorkin has written recently about the so-called nuclear

option the fear that the chinese decide to start selling down their treasuries is that in any sense in your mind a remote possibility? >> i can't comment on what they're going to do, but what i would say is that there's lots of demand for treasuries you know, if they decide they don't want to hold them, there are other buyers and obviously that would be very costly for them to do. them selling out of u.s. assets would be something that would be very costly. >> but not impossible. i mean, it's something that they may consider if they don't feel they're getting the right deal >> they're looking at economics the way we're looking at economics. it's not something i'm at all losing any sleep about >> you talked about the currency is there a possibility that in some way the chinese actions on their own currency could be linked into a broader trade agreement? because let's face it. there are all sorts of restrictive currency controls in place at the moment.

and the chinese don't seem to be showing any intention to remove them >> well, we're going to make sure currency is definitely part of these discussions we want to make sure that whatever we make up on trade, we don't lose on currencies and if you look at the usmc deal, the first time we put a currency provision into the agreement. that's going to be important going forward for trade negotiations >> the chinese just printed a blowout record number. that would indicate that maybe this trade dispute is having an effect on trends >> i don't think that's the case at all my guess, and i've been busy here in meetings so i haven't had time to analyze all the data, but my guess is that you've seen a lot of purchases in advance of the tariffs and the tariffs going up we saw the same thing occurring in steel and aluminum in the beginning. i think it's a monthly blip.

>> would it be a reflection, perhaps, of the weakness we have seen in the chinese currency in recent weeks >> i haven't had an opportunity to study all the data. my guess is it's more of a reflection of people loading up in advance of tariffs. >> can you clarify what's going to happen with the issue as to whether you cite china as a manipulator. because we all know the report is coming out. there have been lots of sources, stories attributed to your staff at the treasury saying it's not going to happen. what clarity can you give us >> i'm not going to comment in advance of the report coming out next week, but what i would say is the stories are not accurate. i'm not going to comment on the conclusion one way or another, but we have an integrated team on treasury of excellent career staff, excellent people who we've brought in

we review these trends constantly we go through the data we have very specific rules and mechanisms that we report to congress under two different parts of legislation. so part of this is a function of the report and part is a function we monitor all these currencies on an ongoing basis. >> how can you not cite them given that you have expressed concern about the way the currency has been used in trade terms? if you don't cite them, won't you look weak to the president's base >> let me just describe there's two different issues yes, i am concerned about the weakness in the currency i've reflected that to them. we are going to continue to have discussions about that we went through some very good information today. i think it was -- they made it clear it's not in their interest to see depreciation further. but what we go through on the

report is a technical analysis that follows certain rules so again, i'm not going to say what the result is but this is very thorough analysis and analytics >> can i ask you about the growth story because here at the imf event, we've seen a downgrade in growth expectations i would say a relatively down beat for you about the near term risks and some commentary around how current bank resolution plans since 2008 are untested and therefore a potential risk factor it doesn't sound a lot like how you see the current state of the u.s. economy and global markets. >> i think there's two stories the u.s. story is incredibly positive and for -- we have reasonable visibility out into next year. we see a very strong u.s. economy.

inflation looks like it's under control and not a concern at the moment the fed has been targeting 2% inflation which is about where we are if you look at growth around the rest of the world, european growth is significantly weaker so i think there's really a tale of two stories i think part of the reason you see the strength of the u.s. markets is just the fundamental economics. it's not a surprise. the u.s. market is up considerably the china market is down considerably there's two different economic stories. >> no prospect for a soft patch in the near term as a result of ceos and executives holding spending decisions until they see which way the wind blows on a trade agreement. >> well, there's specific markets that may be impacted if you look at the overall u.s. economy, the china trade may be significant in certain areas, but it's not going to slow down

growth at all. as a matter of fact, big changes in the tax code, automatic expensing. we see huge capital investments change from a worldwide system to a territorial system. lots of money coming back on shore. so this is really a game changer combined with regulatory relief. and other reforms. and we couldn't be happier with the performance of the u.s. economy. >> can i ask you about a slightly different issue it's one that is vexing a lot of kmektiv executives at the moment they've got to make a decision about whether they travel to saudi arabia for the fii event currently as i understand it, you are scheduled to go. but even as we speak, we hear leaders elsewhere pulling out of the event. so are you still determined you will attend at this point given there is still, i think, no clarity as to what has happened

to mr. khashoggkhashoggi, "the washington post" journalist? >> we are concerned about what is the status of mr. khashoggi although i haven't had direct conversations with the saudis, i know other people in the executive branch have and those discussions are under way. i do plan on go at this point. if more information comes out and changes, we could look at that but i am planning on going >> and what would your advice be to executives in the united states and elsewhere who are asking themselves the same question about whether they should be attending? >> my comment is we all want information. so let's wait and see what information comes out in the next week. >> are you concerned at all that there may be any wider damage to the relationship with that country as far as the u.s. is concerned or any economic implications.

>> one of the areas why i'm going over there is last year we started the terrorist financing targeting center with all the gulf countries and it's based in saudi. we co-chair with them. i've committed to go back at least once a year. that's a major focus of my trip. >> and as you wrap up your meetings here at the imf world bank, can you give us some thoughts about how you found the mood here and the attitude towards the united states on an international level? >> i think the attitude was very good with the united states. i think there was on almost every single issue, there were common views we had very good two-way exchanges. whether it's issues of debt transparency, of cyber, of wto reform, global growth.

this has been a non-stop, action-packed three days non-stop meetings from the beginning of the morning to at night. so very good discussions both with meetings of the g7 and g20 here >> i know you've met with lots of leaders from europe just to circle back for a moment, can there be a deal with european before there is a deal with china >> absolutely. if the europeans are ready to make changes, there could be an agreement tomorrow now, we'll see whether that occurs or not, but again, we're actively in discussions with europe, with japan and if china wants to make changes, we'll sit down at the appropriate time and deal with them as well >> secretary mnuchin, thank you for giving me so much of your time it's been a pleasure catching up hopefully we can do it again soon let me send it back to you guys in the studio, then, from the imf world meeting here in bali. >> thank you, geoff cutmore.

also our thanks to secretary mnuchin. let's look at the markets after the comments he made broad comments about how he thinks this is a natural correction in the markets after the markets were up a lot. also said that he says they continue to see a lot of demand for u.s. treasury securities that's been a question, too, about whether the demand would be there comments on jay powell too he said he thinks he's doing a good job dow futures have been up 350 to 360 mutch of the morning. right now the dow is indicated to open up by about 400 points s&p futures up by 44, nasdaq up by 160 wti this morning up by some amount looks like the 10-year -- wow -- yielding 3.175%. we'll get more reaction to

secretarymnuchin's comments, also talk about the fed, right after a short break. in the next hour, chicago fed. charlie evans will join us for another "squawk" interview stay tedun you are watching "squawk box" right here on cnbc

the u.s. economy is strong the u.s. earnings are strong so i see this as just a natural correction after the markets were up a lot. >> all right welcome back to "squawk box," everybody. that's steven mnuchin just moments ago here on cnbc we have been in positive territory all morning long with the futures up by 350 to 360 points now up by about 385. tom lee of fundstrat global advisers is our guest host secretary mnuchin had a lot to say, tom what jumped out at you as the important points he commented just on what he thinks is happening on equity markets right now. >> yeah. i think the overarching takeaway for me is i think the u.s. administration, you know, current government has a pretty good handle on what's happening. they're on the right side of this trade war and i think these help calm the

market >> let's talk about the trade war with china obviously we're still in a bit of limbo but mnuchin did say they're going to be pushing for a couple things forced joint ventures and forced transfer of technology that's deeper than we want to make sure there's not a trade imbalance. that goes to the heart of feeling like it's unfair, the way the system's been set up >> absolutely. you know, i think in a lot of ways a lot of these agreements were in place when china was a as much smaller economy. today they're one of the largest economies in the world i think the rules they sort of have to play by need to be more like other g7 or developed nations. i think it makes absolute sense. >> obviously we're in a position of our economy being on strong footing right now. and you have the bonus of the stock markets while we've been talking about this selloff over the last couple of days. really the stock market is going very well here versus what you've seen in china where i think for the last 12 months they're down by more than 25%. >> yeah. it's a pretty big

underperformance of china and emerging markets in the last 30 years, it's only happened like five times yes, one of the reminders we've seen in this correction is that the u.s. is one of the better countries to allocate to and the u.s. stock market has held up great. >> what do you tell people to do today? having watched the selloff being heading into earnings season >> i think this is more about a regime shift the market was really narrow in october. but in the last two weeks, six sectors are out-performing so the markets broaden value has clawed back a third of its underperformance and i think we're back to the 200-day which is kind of where risk reward is pretty attra attractive this is really a buying opportunity. >> tom lee is our guest host today. thank you. all right. coming up, the fed in focus. what rising interest rates could mean for the markets

then later, we'll hear from chicago fed president charles evans. plus big banks reporting on deck, citi and wells fargo and the market reaction coming up we'll be right back. good morning, welcome back to "squawk box" right here on cnbc live at the nasdaq market site in times square two banks out with earnings this morning with two more to go. we've got jpmorgan chase

that was 9 cents above estimates. a stronger consumer business helping negate weaker results in trading. then there's pnc financial also beating street forecasts still to come this morning, just under a half hour, we're going to get numbers from siti and wells fargo at the top of 8:00 a.m. we'll also get import and export numbers. as we look at inflation indicators both expected to increase for the last month after dropping in august then the latest pushback on president trump's criticism of the fed. former chair janet yellen speaking in south korea this morning. yellen said the fed is certainly not crazy in its strategy. so the loco comment going global we just spoke to treasury secretary steven mnuchin who shared his thoughts on rising interest rates and president trump's comments on the fed. >> i think jay's doing a good job. he understands the regulatory

environment, spending a lot of time here on regulations we took bank regulations too far in the other direction. i think weather -- >> joining us now is julia cornato. she's a former fed economist also phillip swego who served as assistant secretary for economic policy at the treasury department under hank paulsen. thanks to both of you. jul julia, let's start with you. the market is going through this process of thinking, maybe we didn't realize how quickly the fed is going to raise rates. are they right to be going through that sort of soul searching process right now? >> i think the fed's plans have been clear there may have been some presumption that they would somehow stop or pause earlier. but as the economy continues to run strong, plans are very clear that they're going to raise not more quickly, but every quarter until they get closer to something that looks like a

neutral interest rate. >> but neutral, that is a question a lot of people have. what is neutral? jay powell's comments. we're going to blow right through it >> yeah, i think the market maybe over-interpreted his comments he was just describing what's in their forecast which is it's about three our four from here but they'll be watching things like the economic performance, inflation to determine where neutral is and he's carving out sort of a wide area for them to assess things, to be patient, to pause or to keep going depending on how the economy is performing >> we spoke with peter fisher earlier who talked to us about this too he thinks part of what the market is reacting to is just this idea that we could be in a late cycle that we could be to a point where the fed's really going to have to raise rates more as the economy continues to pick up on all of these things. he also suggested, look.

the idea of the forecast from the fed about where they think those hikes are going to be, that's going to come away. nobodyknows how quickly that i going to happen. we are data dependent. do you agree with that >> we do i think the fed left a lot of room and what happened in the last couple of days is we had this series of speakers who led them to think they really meant four and faster than this implied before i don't think the fed meant to do that. maybe it was a glitch in their communication. and i suspect over the next couple days they'll dial that back >> thauz they woney won't reall or they just don't know? >> i think the latter. they didn't mean to get people focused on four at this point. because like peter fisher told you, they just don't know. they left too little uncertainty, i think >> julia, it's interesting you see the different markets reaction through powell's

comments and a lot of the rhetoric that's happened since then the bond market has not had much panic. the stock market, perhaps had been playing their hand too heavily. >> i think this is what financial conditions do when the fed starts normalizing policy. they are supposed to tighten and the stock market had been sort of holding onto this very rosy view that we're going to get both strong earnings and a strong economy and permanently low interest rates those two things don't really go together if you've got one, you're going to have higher interest rates. and so it's sort of a natural process. i mean, secretary mnuchin called it a orrection it's absolutely a natural correction to see some steam come out of that it seemed like a natural part of the cycle. >> tom, what's your thought when

you hear this conversation >> well, it's clear the market hasn't been comfortable with both fed visibility and with the level of interest rates. so, you know, communication is a huge part of the fed policy. >> it was to try and calm markets when we were in chaotic times. if you look beyond the ten years before that, it wasn't such a big priority can the market handle it >> yes i think as long as we have good economic handles, and that's what we have right now companies are at decent profitability. so i think there's a lot of resilience in equities right now. >> let's talk about what we mentioned with the president's criticism of the fed you know, he says he doesn't want to get involved in this but he's vocal about the fact he likes lower interest rates he's said that all along he's a real estate guy is that something that causes

concern at the fed obviously they see the news. >> this is a group of people whose professional reputations depends on being independent i wouldn't be surprised if they're doing the opposite of what president trump says is personally the right thing for them >> that creates a problem too. like, if they are trying to make sure they look independent, are they going to raise rates more quickly? >> absolutely. that would be a concern. if i were president trump, i would -- it would have been wiser for him to stay silent or talk about the fundamentals as secretary mnuchin did. this criticism of the fed is -- it's unwise. >> you totally disagree with that >> i disagree with the idea they're going to raise more just to show how independent they are. i think the fed has fully expected this criticism to come from trump it will come again and they're going to make their

decisions the same way they always make their decisions which is through the prism of the data, looking forward, what can they expect? i don't think they're going to change, go more or less because of what president trump is saying about them. >> if we look at what ceos are saying in conference calls, are they digging down that deep? >> absolutely. especially right now about trade polic policy, what they're saying about hiring and how they're affected by all this uncertainty and the trade war. they're trying to be particularly forward looking given the uncertainty about the outlook. again, they're not just going to go mechanically every other meeting. i think they are going to be watching the tea leaves very carefully. and their ultimate goal is a soft landing that may mean a pause at some point. >> all right thank you very much.

julia and phillip, thanks to both of you. >> you got to admit when we have, all right breaking news janet yellen says fed is not crazy. it's just so stupid. i mean, i understand trump says things and he uses language for that i wish rates weren't going up this quickly so uses the word crazy then journalists ask these people in the world, is the fed crazy. and they take the question seriously. and say, coming up, volatility strikes back -- >> then went on tv and called them loco. >> it was global yesterday because christine lagarde talked about it yesterday we act like it's real news but we know what it is he wishes -- other presidents have done it h.w. did it. obama talked about it. >> it's the language >> i got it, andrew.

we understand how you feel everything knows you're on record we're going to talk about this spike in fear and what it means for your money here are the futures at this ur they're actually up but not as much as they were right when mnuchin spoke. we'll be right back. no-good break. gooood break. i'm so sorry we can't make your barbecue. i'm just sick about it. aflac!? different kind of sick. if i can't work after surgery, 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.

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 who do all of that. the diner staffed up 'cause they all needed lunch. teachers... doctors... jobs grew a bunch. what started with one job spread all around. because each job in energy creates many more in this town. energy lives here. today, there are more sensors on our planet than people. we're putting ai into everything, and everything into the cloud. it's all so... smart. but how do you work with it? ask this farmer. he's using satellite data to help increase crop yields. that's smart for the food we eat. at this port,

supply chains are becoming more transparent with blockchain. that's smart for millions of shipments. in this lab, researchers are working with watson to help them find new treatments. that's smart for medicine. at this bank, the world's most encrypted mainframe is helping prevent cybercrime. that's smart for everyone. and in africa, iot sensors and the ibm cloud are protecting endangered animals. that's smart for rhinos. yeah. rhinos. because smart only really matters, when we put it to work- not just for a few of us, but for all of us. let's put smart to work.

volatility's been the name of the game recently joining us now, tim freeman. it's a little more volatile, but what about the lack of volatility we'd seen for how many months? >> s&p realized vol for months was under 8% very quiet market. >> what did you attribute that to >> solid economy, accommodative fed, people need to be long assets >> even though the fed has been less accommodative >> there's worry about that now. first and foremost, the big bullet points are people that caught offside the last couple of days. i expect the vix to fall back to the 16 to 17 range this was a tactical rating market those are the same managers. they'll be back in the market buying it next week as

volatility falls rate concerns, velocity of rates is the question that everybody seemed to want to talk about this last week and question their assumptions and if you look at rate volatility, we're just not seeing that priced in the markets right now. so we think the market got a little bit ahead of itself in terms of those assumptions selling begot more selling we'll see it more next week. >> does the actual volatility we're seeing, is it -- >> this isn't a huge move, i wouldn't say -- >> but is it volatile now? >> the market participants clearly got caught with -- >> but they're 2% swings we remember what real volatility is >> correct the issue is when you look at the underlying structure of the market that we've all talked about is there are not real

buyers and sellers in these markets. they're very takctical buyers or sellers. that bid in the market will dissipate very quickly you know, as we saw yesterday, we got a little gappy as we started to move to the downside. simply machines get turned off and it can get a little hairy. when we look at the underlying fundamentals, my partners will point out with leading indicators, things turned slightly but we're less bullish. >> what do you mean the machines were turned off? the thought was the machines were turned own and that adds to volatility >> the bid has turned off. and to your point, the sellers are accelerated. right? they feel they've got little room to run. they'll push it. and the bids all off economically we seem to be in pretty good shape. the bank announcements this morning will be very important for the market look at cpi data we got yesterday.

i think that really started to make people question are rates really going to move as fast as the -- but keep an eye on euro markets. >> if this was mainly a positioning shock as you say, right? you had all these people loaded into momentum stocks and then the relationship gets them turned upside down what are we looking for to say it's played its way out? the vix went up. i know a lot of people look at that if it pulls back a few points during the day while the stock market is still on its lows, does that mean the fever has broken what else are you looking for in terms of are people trapped? >> well, one of the big things i look at when we talk about vix performance, we look at -- we regress it against underlying cash performance the vix performed very, very much as expected as we move along it did not out-perform on the

downside which again tells me that the markets were caught a little bit offsides they hedged and were sort of back to a neutral. let's wait and see >> not like in january and february >> correct volatility performed to what we would consider to be very normal yesterday and the day before we did not see tremendous out-performance on the trade we immediately saw it hit 28 and then it's down at 25 and lower this morning >> you're saying it's been weeks since we've seen rotational correcting of a lot of stocks. are we closer to the beginning of this? or are we closer to the end since there's been a lot happening under the surface for weeks? >> i was listening to the comments that you guys had on the prior segment about the fed and what they do

the market goes in the same fashion. they look at current prices, expectations, they build their models then they'll trade as they get information in it's not a very emotional process. it's a very model-driven process. >> what does that mean closer to the end or the beg beginning of a correction? >> closer to rates going higher to an extent >> does that mean we're going to correct more in the stock market sometimes it takes time, not action on the downside to heal a correction but we were just at new highs. so every correction we've talked about here ad nauseam has resolved with the stocks going higher >> i think we're going to move in a fashion where we look at what are the current growth on the assumptions we're getting? if either starts to move dramatically, then prices will adjust accordingly right? i expect us to go ahead and get decent growth in

i don't expect rates to skyrocket. and i think the market's going to settle. >> tim, thank you very much. >> you're welcome. when we come back, oil prices shedding more than 5% during the last two-day market selloff. this morning those prices are bouncing back some brian sullivan is in houston with the preview of what is coming up. >> reporter: yeah, becky it is not just oil prices that the reason energy stocks are selling off. coming up after the break, we are going to give you three reasons why oil stocks are selling more than the market that is comi uonsqwk x.ngp "ua stick around

the meeting of the executive finance committee is now in session. and... adjourned. business loans for eligible card members up to fifty thousand dollars,

decided in as little as 60 seconds. the powerful backing of american express. don't do business without it.

welcome back to "squawk box. we want to talk oil this morning. brian sullivan joins us now. he is in houston with more on why interest rates impact this industry more than any other brian? >> reporter: yeah, andrew. listen this is an industry built on three things rock, people, and debt and i think the higher interest rate move is causing this industry to sell off more than any one of the worst performing sectors yesterday, one of the worst performing sectors over the last two days. the average big cap stock. i mean exxon, chevron, down 7% marathon petroleum down in nearly a bear market, guys it is a bigger hit to the oil

stocks than the majority of the overall industry as well i mean, every stock is down. we know that, right? but the majority of the big cap oil stocks are down even more. three reasons why. okay high debt. all the debt is -- $240 billion in debt is due in the next five years. $41 billion next year. $45 billion the year after that. $68 billion in 2022. that's got to be either refinanced or paid off as rates rise that gets harder. a lot of worry about cash flows. well, you're composed of the consumer the gas demand would slow down that means they don't have to produce less oil as well and steel and aluminum today on "power lunch" we're going to talk to the consumer king he's exposed to everything restaurants, hotels, gambling. we're going to ask him if the consumer is hit, what -- this is

a big deal, guys >> okay. brian, thank you very much, sir. nice to see you. we'll see you in just a moment again. still to come, we've got earnings from citi and wells fargo after hearing from jpmorgan bank. and later, chicago fed president charlie evans is our guest we'll get his reaconti to the interview with steven mnuchin. "squawk box" will be right back. it's all yours. wow! record time.

at cognizant, we're helping today's leading life sciences companies go beyond developing prescriptions to offering subscriptions with personalized, real-time advice for life-long, healthy living. honey? you almost done? nope. get ready, because we're helping leading companies lead with digital.

get ready, because we're helping leading companies you're in the business of helping people. we're in the business of helping you. business loans for eligible card members up to fifty thousand dollars, decided in as little as 60 seconds. the powerful backing of american express. don't do business without it.

new this morning -- >> part of the reason why you see the strength of the u.s. markets is just the fundamental economics. it's not a surprise. >> steven mnuchin on cnbc. and the news makers keep coming joining us this hour, chicago fed president charles evans. plus a big day for the big banks. up next citigroup and wells fargo. the reaction as the final hour of "squawk box" begins right now. live from the most powerful city in the world, new york, this is "squawk box. >> good morning and welcome back to "squawk box" here on cnbc

live from the nasdaq market site in times square. i'm joe kernen along with becky quick and andrew ross sorkin citigroup out with quarterly results. let's get to leslie picker she is at the breaking news desk with the numbers don't break anything, leslie but how were they? >> it's in safekeeping a beat on the bottom but miss on the top. beating consensus by about 4 cents per share. that's largely thanks to lower expenses because on that top line, revenue came in at $18.38 billion falling short of estimates and relatively flat on a year over year basis citi says including a pre-tax gain from its fixed income analytics business, revenue was up 4% thanks to its so-called icg. that comprises capital markets now, the company's efficiency

ratio did come in at 56.1% below last quarter which was 58% and on a year to day basis, revenue is up about 1% over that period revenue from the global consumer banking group up 4% while icg is higher. share have been trading higher largely since jpmorgan's results were out we're looking forward to their call in 45 minutes and subsequent analyst call around 11:30, guys. >> all right >> wells fargo just crossing i don't know whether there's something in this -- >> there is. >> because the estimate is $1.17. so how much is in the $1.13. >> diluted 3 cents for the quarter because of the redemption of the series -- >> that's it >> yeah. but marty mosby is itting right her -- sitting right here

is that in the estimates or should you take it off the top >> take it off the top those are excluded non-operating items. start of the day, wells fargo earning$1.03. they hadn't really been showing that the last couple years >> so that revenue number, $21.94 billion is managed. $21.897 billion was the estimate >> we're seeing revenue growth for them it's also share reduction because of the capital announcements. so we're expecting them to be able to bring down their shares 2% >> this says net share repurchases tripled. >> to they'so they're getting t benefit.

even though we're not seeing so much on the revenue side >> 52 bucks. what do you think it should be >> i think we could get back into the 60s but we have to see the expense thesis come to play. so that's next year. they've got to clean up this year >> we're still in clean-up mode. >> yes 2019 is the inflection point so we're still going through all the issues making sure that they are batoned down, no more exception problems then we go to 2019 to pull the expenses back. >> so all three of the banks we've reported are all up pretty nicely this morning. so citigroup has upped quite a bit. so far so good, i guess, for earnings season. we've got three of them. so we're on our way. okay let's get you through some of the other top stories this morning. marty, thank you for helping us through all of this. jpmorgan posting better than expected revenue

take a look at jpmorgan shares this morning they are up as joe just mentioned as a result of those earnings i don't know if we're going to show where that stock is playing on the screen right now. up by 1.5% this morning. meantime, steve mnuchin describing wall street's two-day plunge as what he called a natural correction he joined us in the last hour. >> in the bond markets four weeks ago, people were asking me if i was concerned the yield curve was too flat and whether that indicated recession for next year. and i said absolutely not. four weeks ago, i said markets aren't always efficient. you've seen a normalization in the yield curve which makes sense. so the fact that that's occurred at the same time is a correction in the stock market. >> for more on that interview -- >> i think jay's doing a good job. he is spending a lot of time here on regulations. we took bank regulations too far

in the other direction i think that whether it's the occ or the fed or the fdic, we're now allowing our u.s. banks to be able to lend that's an important part of the market and economic recovery >> for more on that interview, you can go to cnbc.com i just wanted to make a quick comment. one of the questions that was asked of the treasury secretary was whether he plans to go to the saudi conference which is taking place in about a week and a half now i had been planning to go to be one of the moderators and decided yesterday to pull out. and a number of other media organizations including the financial times and "the new york times" have pulled out now. uber has pulled out which is a remarkable decision because one of the saudi governments is on the board of uber. which is quite extraordinary also a huge -- saudi made a huge investment in that company richard branson is pulling away. it's going to be interesting to see. clearly the secretary says he plans to go but he'll wait to

see if more information comes out about the fate of jamal khashoggi, the saudi journalist we talked a lot about. appears to have at least disappeared and of course lots of reports say he was murdered >> the numbers of people pulling out of that conference have -- >> but also in the last couple of days, literally overnight head of the imf just dropped out. mellody hobson so we're going to see what this does it is a black mark for saudi and the relationship between the u.s. and saudi and i have to say, for myself, having been there just a year ago and if you remember a week after a year ago, we saw what happened at the ritz-carlton all of -- i had so much hope and promise for what was going on in that country a year ago. i really did i remember leaving feeling like there was so much change about to happen. i think a lot of social change in a god way has occurred, but underneath it there's so many

questions. >> very difficult for us to decide how to approach it because we have big arms dealing with the saudis. the saudis are one of the main ways to try for us to try to push back on iran and their an important partner. so here you have these big arms deals. we want to help the saudis arm, but at this point we're probably more aligned with them than iran and then the human rights record across the board in the middle east is not great. so it's like, which one is the worst? you can't even pick. i think none of us should really be -- it's shocking if you read what really may have happened to this -- unfortunately, to this gentleman. i don't know how much of the rumors we can believe. it's frightening what may have gone on. there's pictures of the guys arriving on a couple of private jets >> saudis who were arriving --

>> the hit men basically but then again, you look at what's going on probably in prisons -- even in turkey there's 120 journalists or political prisoners that are in deep, dark dungeons. so it's almost like we have to look at what our interest is and then it may still mean that we need to almost look the other way on certain things. depending on what our interest is >> i don't know about that >> how do you -- >> i wonder if there's a way to thread the needle which is to maintain a relationship with the country, which by the way, by default you have to do and at the same time be able to send a message and by the way, i want to say for me as a journalist, i didn't feel that i was particularly sending a message. by the way, i think this event if it goes off, if it still happens, it should be covered by journalists. i would argue it should be covered more so. my particular situation and i

think a lot of the speakers' situation was we were going to be on stage. that was my concern. i think a lot of the concern of other ceos who have talked about their social values and what they represent i think it's complicated you look at uber, that's one blackrock, larry fink, that's complicated. if you're steven schwartzman who's just taken money from the saudis, that's complicated if you're jamie dimon, jpmorgan has a big office in riyadh that's complicated >> this guy was like this young 30-year-old -- >> i was optimistic. >> renaissance man women can drive now, arab spring opening up then to see this -- >> it's discouraging >> it's pretty regressive. this is just brutal if what went down really went down. and done with a lot of sort of

hubris, and arrogance not worrying about what the world would think. we don't know. >> we don't know >> but if true, it's like -- i mean, it's kind of shocking in 2018 >> these things happen >> yeah. all right. it has been a volatile week for investors. dom chu joins us right now this time he's taking a look at the pain and pressure points in the market dom, what do you see this morning? >> what we have this morning is a bit of a bounceback, whether or not it does sustain itself. you've been talking about for the last couple of hours now at this point is it more of just a process or could we actually be seeing a bit of a bottoming put into place right now? if you are going to look for the hot spots, there are a few places in particular that have been hit very hard over the course of the last two days in terms of losses. within energy, we know that oil prices are lower that's driven a lot of these energy names down over the last few -- couple weeks now. in the last two days, marathon's down 13%, newfield down 7%

hess down 10%. oil, no surprise there maybe a bit of a relief rally there. maybe tied to oil prices, we don't know we'll see if that bid comes back for oil. the other places to look are in consumer discretionary, technology, and communications services the hot moment tum plays netflix down 10% qualcomm down 8% and amazon down 8% as well some of the names in those three sectors that are hardest hit as you talk about places that we could see bigger bounces, mindful right now that netflix and amazon are premarket up. we're seeing some of that play out right now. if you are looking for where some of the best performing stocks were over the last two days, the ones that have held up relatively well, check out lbrands. it's up5%. it is still the worst performing stock in the s&p 500 so far this year maybe just a bit of short covering maybe a little bit of a balance.

some would call it a dead cat. maybe not. delta up about 1%. smuckers part of that consumer staples trade that's been in a down trend for awhile. relatively flat. and kohl's relatively flat as well whether or not this is a bottom remains to be seen, but if you do look for places in the early part of traders where we could see the biggest bounces, some of these types of names could do the best in the early hours of trading. back to you. >> thank you very much, dom chu. when we come back, technology taking a body blow. we're talking emerging in the sector when we come back and later, an exclusive interview with chicago fed president charlie evans. everybody wants to know what the fed's thinking right now you'll get a peek right here on "squawk box. stay tuned

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

dono.u hear that? it's quiet. too quiet. xfinity home cameras. xfinity home gives you an extra pair of eyes to help watch over your family. plus, you have added peace of mind from 24/7 professional monitoring. xfinity home. simple. easy. awesome. xfinity customers, add xfinity home and get a great offer. plus, ask how to get free installation. call, go online, or demo in an xfinity store today. welcome back to "squawk box. futures right now have been in rally mode bounceback mode for the entire premarket session up 380 now on the dow.

treasuries have moderated. they were above 3.20% on the 10-year. back below that today at about 3.17%. the technology sector getting hit hard by the selloff this week. joining us now with paul meeks he's an independent tech investor just overall, what you think about that did it catch you be surprise >> i think it's a long time coming and i'm tempted to be a buffett-like investor and be greedy when others are fearful but because we've had such a rally in tech stocks for so long, that i don't know that even after the correction of the last couple of days if we've blown off all the froth. but on a stock-by-stock basis, there are some interesting stories out there. >> like what

xpi is one of them >> an xpi is one of the stocks, and here's a company that is one of the leaders in chips for automobiles. particularly the theme of autonomous driving and a stock at one time was valued by qualcomm in a takeover at $127 a share. now the stock's in the high 70s. and the ceo and cfo recently in the last couple months bought in their personal accounts stock at $94. so we are in a tough time in the cycle for semiconductor stocks but that one seems to be very compelling to me for the long-term. >> let's talk about some of the big names people talk about. some of these fang stocks. a stock like a facebook. that's a position you'd be adding to right now? >> i'd like to see facebook test its previous low of $149, but we're getting awfully close. that's one of the stocks i'm

particularly intrigued about, because it started to melt down long before the correction of the last couple of days. and so there the froth might be blown off. >> amazon's at its 200-day moving average >> i do like amazon. you know, you're never going to be able to make a value case for amazon, but they seem to do a very nice job as we've all followed over the years of taking one pre-internet industry after another and amazoning everybody in the space so i do think no valuation case there, but if it supports the 200-day moving average, i think it's compelling for the long-term. >> what about apple? still got a $1 billion market cap. >> i think apple's interesting the way i look at apple these days is no longer as a growth story. it's more of a value and dividend play. and when i take a look at the growth forecast for some of the

uber-bulls on apple, they're too aaggressive. its div dent will move forward so i think it's a solid relative value tech name. >> and very quickly, you say you're chomping at the bit to buy alibaba, but there's one thing holding you back -- looks like that froze back let me tell you what that was. he'd like to see more happen with the negotiations with china before he feels really comfortable with that. again, our thanks to paul meeks. okay when we return, a lot more exclusive interview with chicago fed president charles evans. we want to hear from him about what he makes of president trump's comments on the central bank, what jerome powell said, and whether that's impacting things then we'll take a technical look at the stock market. katie stockton will join us.

she always has something to say. stay tuned wchg quk x"n bo o cnbc

welcome back to "squawk box. pa

lucky left facebook in 2016 amid a lot of controversy over political contributions for far right groups that had him on the opposite end with a lot of people at facebook i spoke to him this week at the establishment summit in los angeles. you've supported the president. >> yes >> how does that -- in your day-to-day interaction at silicon valley, what has the response to that been? >> i mean, kind of riffing off what i said earlier, i think a lot of the really smart talented engineers are actually pretty sane, reasonable people with reasonable ideology and they're willing to have a debate the people that you see losing their minds and saying that they refuse to work with republicans and they're all racists and all bigots, yeah that is a significant percentage of silicon valley it's amazing that silicon valley companies are allowing people to say that about their coworkers, but most people in silicon valley don't agree with these

things and executives don't if you're interacting with people on the executive level, you don't have executives running the companies having insane beliefs that we need to divide the country and you can just write off half the country. >> luckey also weighed on that google wouldn't be going with pentagon over ethical concerns >> people believed they were doing the right thing. they were making sure there would be fewer civilian casualties, they were going to have less collateral damages, they were going to save lives by building this technology for the military and when they pulled out, they undid all of that good so i think the implication is pretty scary russia has their best people working on defense technology. china has their best people working on defense technology. and especially in china, people don't necessarily have a choice about this stuff so it's very scary that people in the u.s. have the choice -- it's great people have the choice in the u.s. to not work

on this stuff. it's scary they're taking advantage of that to pull out of programs that could save lives >> we should say palmer luckey has a new company in the defense space working on prospects for the u.s. government for defense. working on a digital wall with surveillance rather than building a physical wall he's building a vr system called latis that has growned in the air and all sorts of other ways to track the border. >> i hear far right and i'm wondering -- since it's all relative i'm just wondering what kind of crazy organizations are you talking about? like -- >> he had got nnten in a little bit -- >> i think mainstream media would call the heritage foundation far right, right? and it's all relative. we know about the universe you don't know where you are unless you can have the basis to compare it to.

i don't think andreessen or thiel or this guy are wacky, far right nut cases, are they? >> i'm not suggesting that i want to get you the name -- >> "the wall street journal" far right? >> no, no, no. let me -- he had supported a group called nimble america. the group was incorporated, wants to take some of the -- well -- give me a minute let's do the commercial and i'll give you the list if you want it >> like, i can give you far left groups that you would think are, like, right down the center. right? it's all relative. do you hear that?

no. it's quiet. too quiet. xfinity home cameras. xfinity home gives you an extra pair of eyes to help watch over your family.

plus, you have added peace of mind from 24/7 professional monitoring. xfinity home. simple. easy. awesome. xfinity customers, add xfinity home and get a great offer. plus, ask how to get free installation. call, go online, or demo in an xfinity store today. welcome back to "squawk box. rick santelli here with live breaking news. our september read on import and export prices. import prices month over month up 0.5%. that's double expectations sequentially following a revised minus .4%. if we look at ex-petroleum, all of a sudden we can see where the pressures came from. unchanged. although a lot of the petroleum issues may be changing as we speak. they were up 3.5%. a little hotter than expected following 3.8%

year over year they were up 2.7% that's a big drop from our last look at 3.5%. the entire yield curve all rates are about exactly where they were yesterday afternoon and last week we closed at the high yield close for seven years at 3.23% which puts us down seven basis points for the week. andrew, back to you. >> okay. thank you for that, rick meantime we want to get to steve liesman with a special guest chicago fed president charles evans. the timing could not be better >> yeah. i'd rather be lucky than good here i'm at the engage student investment conference. student it is have an investment contest sponsored by the david kudlow foundation. that's why we're here with

charlie evans. thank you for joining us >> morning >> the federal reserve is crazy, that's what the president said yesterday. how does the federal reserve react to those comments? >> we're looking at the economy, a strong economy and fundamentals, and we're adjusting the policy stands. we've been doing that gradually. i kind of think neutral is in the 2.75% to 3%. after many years of accommodative policy which i have supported, it's time to readjust the policy stance at least to neutral see how the economy is performing at that point then we might have to do a little bit more of that. >> let's do the math neutral you're at 2.25% now. so that's three more hikes from here to get to neutral. >> that sounds right by that measure. >> i don't like doing math live in the morning on air. >> i don't either. >> and then do we have to go to

a restrictive policy, you think, at this point? >> so i would say that my forecast, which has growth above trend, this year 3.2%. next year 2.5% year after that maybe 2%, 2.2% that's above trend and i expect the unemployment rate to fall to 3.5% before it eases back up a little bit this is an environment where i'm not worried about inflation. i think inflation could go to 2.2% but with unemployment like that, setting policy ever so slightly restrictively makes sense. we could hold that some measure like that for some time until we get exactly -- exactly is not the right word until we get outcomes, you know, really consistent with our dual mandate which at the moment we just want to maintain. >> so what does restrictive mean one quarter point above neutral? two quarter points >> i've said in past public

commentary that i kind of think of maybe 50 basis points above neutral. you have to remember there's a lot of uncertainty about neutral. we have a lot of opinions about what that is there's different measures in terms of short run, neutral, and this longer term so we night have to feel our way around that a little bit, but i'm going to be looking at how inflation is performing and the momentum in the economy. >> there's two aspects to the president's comments one is the rhetoric. and we can get to that in a second i do want to get to that the other is the substance and he's not alone in critici criticizicriticiz criticizing a lot of what you just said. you're going to be raising rates. clear on any present inflation danger how do you justify that? why do you keep going above neutral? >> i was in flint, michigan, on wednesday and i was asked a very similar question i said exactly what you said which is it's a fair question to

ask, you know, do we really need to increase rates? do we need to increase them as much as some people say? this is what the policy debate is and i would say with the unemployment rate headed to 3.5%, we're in a more normal environment where an accommodative stance of policy when we got pro-cyclical policy and very strong economy, we probably need to be a little bit on the above neutral side. but i don't know that we need to be a lot and as we continue to raise rates, we're going to be data dependent and look at how things are playing out. and "fasif there's some break, would do something different but at the moment it looks good. fundamentals are strong. >> there's a certain irony here of a president complaining about interest rates going up. how much of what you're doing on this now is because of presidential policies which have improved the policy but created

rates. >> we're looking at the state of the economy. it's the case that we have been dealt, you know, tax cuts which are strongly improving consumers and businesses i mean, you know, i think that's probably worth 0.4%, 0.5% on growth this year it's definitely added to that. this is coming at a time when the unemployment rate is below many people's measures of the sustainable rate of unemployment i think this is a good thing at the moment i think it allows more people to come into the labor force. includes their attachment to the workforce and have a longer permanent effect, potentially, on that. having said that at some point, you might see wage growth. we might see it a little more in line with stronger inflation than would be ideal. we have to understand that process. >> so you're really coming to the party and saying we need to, what take away the punch bowl here? >> i don't think i've said that

at all >> take alcohol out of the bupuc bowl >> i don't think i've said that. on the way to neutral, we've still got the punch bowl in play, going up a little bit. if you like that, you know, analogy. i guess it's a little bit. but it's very small potatoes at this point >> i need to get to the market, but i want to ask about the rhetoric of the president. should the president be saying the fed is crazy should the president be commenting what is your thoughts on whether or not it's appropriate from the executive about the federal reserve? >> i can't answer that but i feel the federal reserve has a large amount of autonomy that is granted us by congress and the president through the federal reserve act. we're supposed to pursue monetary and financial conditions that support maximum employment and price stability i believe we've done very well on our dual mandate over the last few years and this natural adjustment of policy up a little bit above

some benchmark that might be viewed as neutral. i think it's what we do. and we let people comment. and we'll, you know, jay powell will go to congress. he goes out in public. he just did a large number of media events to explain exactly what we're doing so i think our communications are in line with the policies that we're prescribing i think it's important we need to be accountable. and i think that jay powell and the fed are doing a good job with that. >> i want to get to becky in just a second. but i want to ask you about the recent market selloff. 800 points how do you view that is that a concern for you that there's over-valuation in the market and potential economic effects from the sell off? >> so, you know, at the federal reserve, we obviously pay attention to financial stability issues, market valuations are part of that also leverage, credit spreads, how people are able to gain access to mortgage borrowing and buy houses every quarter we have a discussion about that and it's certainly the case that asset

valuations have been more elevated and that sort of probably adjusts upwards the risk assessment for financial stability. on balance it still seems moderate i can't say i don't know anything about the valuations on the stock market i mean, paul krugman the other day i saw something where he said he's not qualified -- he doesn't know why the stock market went up or down i don't know better than that myself at the moment but i will say that what is of great interest and importance is the ability of the economy to continue along its current path even with the increase in volatility we've seen. so the fact that the economy can continue to go, labor market bs stro -- settles out, it would be sound for the current economy. >> becky, go ahead >> president evans, thanks for being with us today. you said the economic fundamentals are strong. but we've also started seeing some weakness in some areas. particularly if you look at

places like mortgages where the 30 year fixed mortgage is 5% and up that's affecting home sales. you see it in auto sales and you see it in companies. we're getting into earnings season, so we're starting to listen to what companies and ceos are saying they see ppg came out with earnings it was concerning because they talked about higher prices and weaker demand coming from china, coming from auto sales and europe that's kind of a dangerous combination when you're thinking of corporate profitabilities to be facing higher prices and demand at the same time. how do you put that into your fed deciding calculator? >> becky, that's a really good list of issues to be thinking of on the corporate earnings side corporations, i think their balance sheets are really good they've been doing stock buybacks if they have challenges with where they are, that's part of the decisions they made. that's not something that concerns me at the moment. i think mortgage rates going up,

auto rates going up, that has an effect on the consumer i have to say that is part of the monetary transmission mechanism. as we adjust rates up, i expected mortgage rates to go up if they go up a bit more and already the credit standards for getting a mortgage are much more difficult than they were 10, 15 years ago. so it's a more challenged environment. we need to be looking at the housing side to see that the building is proceeding i know when i go around my district and i talk to people in ft. wayne, flint, iowa, they will say that, you know, the middle market for housing is a very difficult one the supply is not really sufficie sufficient there are supply challenges and we'll monitor that but at the moment this seems like normal transmission mechanism. >> hey, charlie. if you were convinced that the secular disinflation was the new normal and it has been for awhile, would you recalibrate

how normalized rates really need to be? if someone could tell you there will be no wage inflation, that it's not going to be like previous cycles where that finally rears its head is it possible to just roll the dice and stay low and just maybe not get back to the normal relationship you see between fed funds and -- because you're a little bit below right now based on where inflation is. but it's good. i know trump is looking at it simplistically, but lower rates for everybody, we all like lower rates except maybe banks is it possible we could be in a period where you don't have to go back to the old way of doing things because it's actually different? >> that's a good set of observations on the lower rates must be good i'm old enough to remember just a few years ago where i would come on here and get beat up

because interest rates were really low and we were killing savers and everybody else. it depends where you are and where your portfolio is. i would say that because we have been able to increase interest rates gradually so people have been able to see it coming and that we're at a decent level, t2% to 2.25%. on the wage side, there's a sense in which i've been disappointed that wages haven't been stronger. now i have to look at the data and recognize productivity growth has not been as strong. in the 2000s we used to see nominal wage growth 3% inflation has been lower that also reduces that if, in fact, wages end up growing lower than those benchmarks and businesses aren't able to get the prices and we end up with lower inflation, that would tell us that our

policy is more restrictive when we say we're supposed to deliver 2% inflation, we're supposed to deliver it and a part of not being able to do that is wage growth is lower, we need to do something to make sure other parts of -- >> i've got a list of other nobel prize winning economists i've got a list totally different than -- if you need one to cite down the road besides paul krugman, i've got a whole other list that i can send you so that you don't need necessarily to mention -- andrew probably likes it. >> i thought this was a useful one. >> i can tell you a lot of things he doesn't know why is occurring, i think given some of his recent stuff anyway, andrew >> charlie, you touched on the topic of buybacks before really just the remarkable number of buybacks that have taken place in the market especially after the tax cuts. one of the reasons we've talked about whether there's even volatility in the markets today is in part because during

earnings season, they effective companies out of the market. how do you think about buybacks? how do you think about it in the market and how do you think of its real impact on the economy? >> well, i mean, i think tax reform was a good thing. i think the tax cuts help a lot of people. i think if we'd been able to do it in a budget neutral fashion, that would have been better in terms of reducing increased pressures from the debt over the next ten years but in terms of corporate earnings and corporations, i talk to a large number of business people. they are really quite smart. especially in the things that they are working on. their businesses so they know when they make these decisions to give back capital to others. there is a risk that six months later, they might have needed that i assume they've done this for all the best business reasons. and it's been risk managed very well i'm not going to second guess

that >> peter fisher was here earlier. he said it's time to get rid of the dot plot nobody knows where we're going to be three years from now because you all are so data dependent at this point. does he have a good point? >> not really. i think that the dot plots are very good communications vehicle. there are a lot of people who look at the large dispersion in the dots and they go, i don't know how to make sense out of that okay that's a reasonable reaction but i will tell you when there's a large dispersion of the dots, that is reflective of the debate that we are having in the committee. if you don't want that type of transparency in all of our different arguments, you know, getting rid of the dot plot would take some of that information away i really don't understand it now, from a market perspective, i can kind of understand this is complicating my life it's easier when i know a little bit more this might be too informative. i think it's a very good vehicle.

i think there are moment where is it's better. >> if you are data dependent, i can understand the argument that it's hard to know where you're going to be in two or three years. we don't know what the data is going to be this week or next. >> yeah, i agree with that i mean, this is looking out into the future is difficult. everybody's got to do it if the fact that you don't put a forecast out and therefore people think that you're smart because it wasn't proven wrong, i don't think the world works that way >> there's a quote in a book by peter bernstein "against the gods." we're aware the long range forecasts are useless however we still require them for planning purposes >> columbus had to have a forecast on where he was headed even though he was wrong >> right >> steve, i want to know exactly -- becky needs to know this too the punch bowl it used to be grain alcohol. what is it wine spritzer now? what are we? how would you characterize that? it's pretty weak punch at this point. >> i'm a little different.

you know, it's full of rum in my book >> still >> and some awful sort of tasty fruit punch stuff. >> i think it's like a wine. about 4% alcohol bartels and james. >> the problem with the punch bowl is you drink it, you don't realize you're getting drunk the trouble with conversation is i've got a fed president to my left and we're having a conversation about alcohol and fruit and bowls. >> with marijuana, it's a whole new thing to spike it with >> exactly i don't know if we should admit on television. right. but i want to get back to what's happening with the 10-year right now. 3.25%. i have to say we've had a whole bunch of talking and hand wringing several months ago about the yield curve being flat and inverting. and now it's going the other way. what message to you take from

higher interest rates right now? is this an inflation concern is ate growth response is it a response to the fed? how do you dissect what happened to interest rates of late? >> that's a good question. you know, the discrepancy between the 10-year and 2-year rate isn't as blown out as you expected with the 10-year rate going up if that's at interest, that still is hanging around. i would say that according to some of the analyses that have tried to dissect how much of it is inflation and expectations, how much of it is the real rate, how much of it is term premium, it's been a little balanced. you know, it's probably been half of it at term premium and half of it real rate and half of it expectations. i don't see it as anything to cause me to change how i'm thinking about the economy obviously if it continued, then higher term premium would -- you know, the higher rates are going to feed into higher mortgage rates, higher auto rates and the consumer

so, if anything, that might -- as we've often said in the past -- do part of the tightening for us. we have to understand the financial markets, but remember as we started increasing rates, we had more financial concern. and so this way. >> this may be balancing it out. >> does it help you out a little bit? >> we have to look at how our forecast is adjusted with the new condition. fundamentals are really strong something much larger would have to you know take place in order to change my forecast dramatically charles evans, thank you for joining us today guys, back to you and thanks very much with your help >> thanks for bringing us that steve. very helpful given the last week let's get a check on market technicals joining us now is our strategist and short term over sold conditions in your view are widespread or benchmarks over sold for the first time since

mid 2017 we don't need a lot more work in terms of scaring people at this point to maybe balance >> we have already seen an event that we tend to see two or three times a year, we are already there in terms of the extreme over sold conditions it is across the board and it is not in the mid cap bun only 11% is the 50-page moving averages it is rare to see that extremes and especially associated with market sentiment it is overly bearish >> we have seen a lot of times we think it is not just how deep a correction goes but how long it takes you are not dating from just the last two sessions. how far back do you go to where it started like acorrection in

some of the names we don't follow closely is it three-week old or a month old? >> about three-three week, if you look at the russell 2000, that's why it is already to extreme just after a couple of days of extreme downside prize action with the downside that we have seen, there is not a lot of break down on the charts and i tell people that to me the market is broken when you have a lot of stocks breaking support level. we don't have that this time around the stocks that have broken down with the laggers the stock that is are trading out of line with the major indecies >> ahead of this week is only sentiment. the sentiment does peak ahead of

the market by several weeks. if you look back at the late august reading, it did teed it up those 200 days moving averages do tend to act as a push in. the russell is testing it as well we should see a little price action here flirting with the 200-day moving average like before we'll see it come back the last time we have seen these readings that we have in the market was actually on february 9th. >> and you are saying it is allowing us by 79 that you are seeing it manifested right now we have to go back and test the lows, do we need to do that this time >> the retest, right >> yeah. >> there is often a retest and i would not rule it out. you want to be there for the first relief rally following the

price action because that first relief rally tends to be explosive. if you miss that, you miss a lot of upside and i know it can be heroing to by in this week today should help. we'll see it manifest itself next week a little bit more and obviously to the benchmark you want to be there regardless of the potential >> thank you, katy stockton, i was hearing similar things from jim about buying today of the first day. >> let's get down to jim cramer, thank you katie and we'll go down to the new york stock exchange, mr. jim cramer, is this morning the morning to go both hands in? >> well, yesterday i would say the explosive nature of the downside, we got a crescendo and

what between the two and three ridiculously done. you are talking about etfs impacting the market you saw seven to one volume sellers yesterday in these negative reversal etfs that are bearish. we are right in earnings season and you can't do that. it was way over done yesterday and it is a real rally >> what charles evans said, he's not concerned of the stock market i don't want to go into what he says other than the fact that this is how you cut numbers in 2019 he does not seem to care that much that's not the way i play it i am not saying that he' he's -- what was the president using for those terms? >> local >> i am a little more of a

diplomat mr. evans is making some mistakes that i heard from 2006. we got to mobilize and moving up jp more dgan said on the call, f we continue to have these problems overseas then we'll have to not be doing as well i wish that mr. evans had talk like jamie dimon who's a sensible man >> i was going along fine and then i said wow -- reevaluating this whole conversation. >> it is good and i think auto matters he's looking at flinn and i am going in emperical over antidotical. >> it is good to get all the views. later this morning, you don't

want to miss jean-claude trichet, it is going to happen at 10:40 stay tuned, you are watching "squawk" on cnbc which alerts rangers, who can track their motions and help stop them before any harm is done. it's a smart way to help increase the rhino population. and turn the poachers into the endangered species. ♪ ♪

wat t. rowe price, hundreds of our experts go beyond the numbers to examine investment opportunities firsthand. like a biotech firm that engineers a patient's own cells to fight cancer. this is strategic investing. because your investments deserve the full story.

t. rowe price. invest with confidence. we perform over 50,000 operations a year in places like this. for the past 15 years, chubb has identified ways that we can strengthen our safety measures. and today, our hospitals have some of the best patient safety records in the country. now, we're constructing new buildings that will define the future of piedmont and chubb is here, insuring our expansion. two million patients a year depend on us. and we depend on chubb. i want to thank our guest host this morning, tom lee

what's happening to bitcoin? >> i think it is good that we are here >> 6200 bucks right now. >> andrew is wondering why there is not a rush for safety for bitcoin? >> that's not going into bitcoin. >> relatively flat which is not bad. >> tom, thank you. everybody have a great weekend, make sure you join us on monday. right now it is "squawk on the street." futures is pointing to a 300 points the s&p looks the break a six-day losing streak, down 43% in two days. good friday morning, welcome to "squawk on the street," i am carl quintanilla with david faber and jim cramer at the new york stock exchange. mnuchin on "squawk" today. nikkei's highs over night. our road map begin