let's get a final check on the markets on this thursday morning. futures have been under pressure for most of the morning. you see s&p futures off by six. the ten year was trading around 3.2%. make sure you join us tomorrow. right now it is time for "squawk on the street. good thursday morning. welcome to "squawk on the street". futures trying to get out of the red as the s&p is down eight of the past ten sessions. china down across the board overnight. today more cautious guidance from more industrial names. europe is mixed. u.k. retail sales are a miss. watch the two year close to a fresh ten year high as the

market absorbs the somewhat hawkish minutes. u.s. stocks poised for another drop of the open as digesters invest the latest from the fed and the crazy swings in asia. >> alcoa after what was a very strong quarter. big beat coming from travelers, black stone and others. >> after the sell off, is it time to rethink f.a.n.g. is now the time to buy we will check in with jim on that one. stocks are set to open lower. volatility remains in focus during wednesday's session. the dow was down more than 300 and rebounded into positive territory and closed in the red after the fed minutes showed more rate hikes may be on the horizon. even though we are down eight of ten, we can have our best week in four months. >> it's incredible. the tuesday rally has not been

repealed. there are some big downs this morning including apple saying china's slowing could matter. i think that it is exactly as you lay it out. the tension is a fed that does not like full employment. and how grateful employment is for the economy. that's going to play out. and then you are going to see a decline in lending for the regional banks. that has been a theme. you are seeing industrials that are crumbling and have issues. we don't know what the deal is other than the seal there. they have the typical freight issues and the input issues. that's like saying mr. chairman, you are right. and my problem is the more he raises the worst it is.

>> sealed air, textron, granger, bmw, we are getting a gallery of negative comments. >> working on textron right now trying to figure out what happened. they are discussing -- they are not saying it is a demand problem but say tlg are certain execution issues. they are willing to take action to reduce or sell the divisions that are necessary. so i don't think -- it is down six. i am not saying it is not opportunity to buy. they have been doing quite well. sloppy has been the case of a bunch of industrials. >> it has been tracking the things they are mentioning on the calls that have negative impact. number one is fx. number two is raw material cost and then labor cost and then tariffs and then transportation. the dollar is -- trade weighted

at 5.25 is the strongest in a couple of years. >> i think people are overreacting to the same negatives. when i look at textron, they have increased production. a lot of things are good. if you have a lot of orders you are going to be stunned. the supply chain is not able to handle a lot of orders. they are the biggest maker of truck bodies, they have the same problem. they have the high quality problem of too many orders and not enough workers. if you are in indiana which used to lead the country in unemployment, those are cases, those are absolutely cases for chairman powell. the biggest issue, by the way, in trying to find oil, trying to find more oil, we don't have enough schools and infrastructure for all the

workers. schools. they're kids. >> interesting you mention oil because that is down again today. >> well below 70. >> somewhat unexpected given everybody seemed to be talking about $100 oil. >> there is a subtext that people are talking about which is the murder of the washington post journalist and the way to appease the president which i think maybe not what he is thinking about is for the saudis to -- they have the ability to take it up to 12 million. they haven't thought about fracking yet. can you imagine when they start fracking >> i don't think they need to. >> it's kind of like texas. it is absolutely possible that they are driving the price down in order to be able to appease the president who has repeatedly said that opec is too powerful.

>> you don't think the stock piling is adding up to people having foreseen some of the volatility >> there are two big pipes being built right now to bring the oil. i think it's political, geopolitical which makes it a little more neutral. i'm thought saying this is a vast conspiracy theory. i'm saying no one else can figure out where the supply is coming from. it's not like someone just discovered a big field. >> then we have the fed, obviously a big topic for chairman greenspan who was on earlier this morning. andrew asked him whether or not he got direct influence from the white house regarding policy. >> every president has an insight into how the markets work and where interest rates ought to be which is always superior to that of the federal market.

i think the best thing that you can do if you are in the fed is put your muffs on and don't listen. >> andrew said, did you ever get a direct line? he said he gets that all the time. >> i think it is really incredible when you read these stories that say is he going to fire chairman powell as if it really is the apprentice. i called him up and explained to him. >> you're fired. >> he usually likes to blame it on other judges. sometimes when i was a judge i was often mentioned as the person who really wanted to fire the person. i offered my reviews. i didn't realize if it was someone that was popular i would be the fall guy. that is all i can say, because we all signed nondisclosure agreements. that parlance so early in the term when you are supposed to fulfill your term is frightening

to people. that just makes powell -- i think he is one of the foremost anti-inflation people. i think he is just going to say i'm going to do what is necessary regardless of what is happening. you should be listening to the growth of the community banks. tennessee is one of the great areas of the economy because of the taxes. >> if you are a company and you have a big cash balance because of the tax cuts, what need do you have to finance anything >> i think if you a small to medium sized company, the back bone of the economy, larry kudlow always talked about it. you are absolutely right. the balance sheets are such that you don't need to borrow a lot. if you are going to expand,

money is a little bit tighter. you have to go to non-bank sources. is full employment positive? >> do we really have to debate that >> can we get back to you? >> why would it be anything but a positive >> if you think that what matters more than anything else is inflation, what you would say is you bet because it leads to shortages and a wage spiral. i really believe that that is how chairman powell feels. until he comes out and has been more like my pal -- >> you want to keep the economic expansion going as long as you can. >> why do you talk about overshooting i may have to tamper with it, tamper with a fly ball and put my hand in the glove

>> it wasn't in the glove. did you see the replay >> it feels very much like chairman powell. >> to your point, though, jim, bull rd is saying weak inflation and other factors means the fed does not need to raise rates further. >> all i can say is there is a man who has really figured out. i think that man has horse sense. >> do we have tape of him going after -- >> it got spicy for a while. >> he sees the facts. >> i remember that. >> it was always a nice guy. bill pool, the guy who really skewered me, he was an extremely nice guy. i may say that jay powell is nice. >> he is very nice. >> very well thought of. >> i think that is good.

he wants -- he feels that full employment i think is a ticking time bomb. i think it is fantastic for our great country. >> the dual mandate -- >> i told you that if asked i will -- >> we are going to talk to stan fischer in the next hour. >> stanley fischer is a genius. he is no longer on the fed. >> still to come -- campbell's soup. >> it said we are going to remain mediocre. we are thrilled. >> third point and download are out with their latest and perhaps harshest yet. they are releasing a video to shareholders that we can show you first.

what an incredible waste, one of america's most iconic brands being left behind by failed leaders who pushed shareholders' loyalty. >> we will have much more of that and what is a very more difficult winning hand. >> it's even funnier than the dow one when they made fun of the licorice. >> we'll have more on that. we have a lot more "squawk on the stetwh wco bre" ene meack. ♪ a moment of joy. a source of inspiration. an act of kindness. an old friend.

a new beginning. some welcome relief... or a cause for celebration. ♪ what's inside? ♪ [laughter] possibilities. what we deliver by delivering. ♪ ♪ (buzzing) gather new insights, leave your data protected on-site, and put it all to work with ai. the ibm cloud. the cloud for smarter business.

when netflix manages up five percent, that shows you how resilient this group is. it is resilient for a reason because the company business hind the app are never going to stop innovating. i think alphabet and amazon have come down enough that they can be purchased at these very levels. >> interesting, jim. yesterday you told us that netflix was not the economy. is netflix a good proxy for

faang. >> it is the classic surprise to the upside because the demand exceeded what anyone thought. i think that alphabet had been taking other than the youtube outage, they have become this tremendous source of a place to advertise for consumer package goods. facebook does not seem to want to break from the level. >> every day the journal has an interesting story on their failure to fight fake news. let's see. they have really set you up unless they can do some 20%. amazon, we were so worried about the $15. i am focussing on the automation and focussing on advertising. amazon web services. i just have to tell you, they are pulling and pulling and pulling away.

i had vivo on last night. amazon web services over and over and over again. >> google gets outperformer today. unrivalled collection of high profile platforms. >> i am stunned by how much these come down together. there are many etfs. it is the other a that is getting hit by friend of apple which is talking about china-led slow down in the app store. why? gaming restrictions by the prc. the prc is not a democracy. activision gaming -- >> i'm flummoxed.

>> pivotal has a couple of lines. try as we might to not write about every negative story in the press on facebook, when several items come together it seems neglectful not to write about it. >> i remember when i was a crime reporter and we would meet to talk about what story we will play up. my great late editor saying d.a. probes rockets. got nothing to say, we have thrown that headline constantly. that is the headline now. if you have nothing to say at the "new york times." congress probes fake news. facebook is a generator of negativity and the advertisers

ruaddicted to stories because it is where the buyers are. how long does your wife look at her story line feed before you go to bed? >> she doesn't, but my teenage daughter does. >> my wife says here is something carl posted. this is posted by betsy. i'm like i really don't care. i'm watching espn plus. at no point does the tv go on other than when the eagles play. >> i actually read. have you heard of that books, magazines. >> we are busy looking at what everybody else is having for dinner. >> when i look at the cocktails that people are serving i want to reach in and order that cocktail at that very moment. >> i used to read books. i remember. we know you used to. >> i have -- >> the last book i read was called "to serve man." you know what it was

a cook book. >> it's a cook book. i also know how to throw a party because i read a book called "the donner party. >> we will get the mad dash and count down to the opening bell. stanley fischer is with us in about 40 minutes. we'll hear what he has to say about rates and the president's criticism about the fed. 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. each day our planet awakens but with opportunity comes risk. and to manage this risk, the world turns to cme group. we help farmers lock in future prices, banks manage interest rate changes and airlines hedge fuel costs. all so they can manage their risks and move forward. it's simply a matter of following the signs. they all lead here. cme group - how the world advances.

seven minutes before we get started for trading here on a thursday here at the new york stock exchange. >> let's talk riorities. purple ties, spirit day. it's correct. people should understand that. gap stores. matthew boss, one of my favorite analysts talking about a parade of horribles. freight costs going higher for them. wages in the mall going higher. tariffs, 22% of the goods are from china. they have been saying the second half would be good. gap stores joins abercrombie as the mall companies that we don't want to be in. i lump in elle brands.

>> it does not have one unprofitable store. >> you are absolutely right. it's just decel rating. >> these are different. a really interesting article talking about one man's quest. it is so captain ahab, it is incredible. >> somehow thinks it was not a function of him getting it wrong. he was right. >> the customer was wrong. it wasn't him. it was the customer, for heaven's sake. >> what do you do with a name like this at this point sth it is going to be a new recent low. >> i think the stocks that have gotten creamed here you either take the loss or accept the fact that it is not going to do anything for a long time because the future that matthew boss picks is going to go right through the holiday season. it's not sears.

there is no captain a hab here. >> all right. >> what happened with the end of that book? >> it didn't go too well. they closed every store and then they started making money. >> you know what else? we can hold off. >> we have an opening bell five minutes away for you. we will be back and following campbell a bit more. we will have an update from caesar's. >> you broke that story. ten percent move off your story. we have to go. purple tie. this is a good cause, spirit day.

every investor should ask questions. is our money in the right place? what am i really being charged? and is it eating into my returns? is my advisor a fiduciary? is he always a fiduciary? a good place to start is with an independent registered investment advisor. as fiduciaries, they live by a simple rule: always act in the best interests of their clients. that's why charles schwab is proud to support more independent financial advisors and their clients than anyone else.

visit findyourindependentadvisor.com ♪ (whistles) ♪ come on. come on, squirt. (dog barking) whatever your financial goals are, a u.s. bank wealth management advisor can help make them a reality. talk to one today. u.s. bank - the power of possible. you're watching cnbc "squat -- squawk on the street." big swings in china overnight.

three percent. they are closing in on 35% for the year. some other tech indexes are down almost 40. >> i now am back to where i was three years ago where i care can they hold 2,500? where is the government? it is holding our market hostage, i think, other than some industrials that disappointed. we are really on -- when you look at alibaba it is down almost as if the company is doing poorly which it is not. >> it is one way to play the deteriorating prospects for agreements between the countries. >> it has become a proxy for the navaro war. the other guys are being blown out. navaro talked about the sipping.

it is about a bipolar world, us versus them. nothing to do with economics but everything to do with -- larry kudlow had expressed that this is a man of tremendous rigor. i couldn't agree more. i do think that is bigger than -- what are you eating? >> forgot to have breakfast. >> that was the worst. >> i like my life cereal. >> why don't you eat some campbell's soup? >> we are going to get to campbell's. >> down here at the big board celebrating an ipo studio international holdings. it's a gaming company. atari doing the honors.

nvidia, goldman goes conviction by following a 38% multiple compression. >> i think the big issue and they don't like analogue devices which is one of my absolute favorites. there is a long term which is absolutely fabulous which is gaming which is really fantastic, machine learning. it deserves to sell at a premium. we are going into a period where people are once again turning on the highest multiple and liking the lower multiple. you haven't gone wrong on nvidia and constellation. >> they say it is a good defensive play in a cyclical downturn. >> it did come down a little. the hardware semis are very hard to trade right now.

it is really, if you watch micr micron, every day there is a chance that it is going to break down. i think this group is too hard right now. let me give you why i have some pause. they have a chip for gaming that is so unbelievable. it is life like. you have to have people who write the software for it and write the games for it. one of my friends is one of the largest creators of game centers because he believes that younger people, their parents will try to get them scholarships. they want to go nvidia high end. there are simply not enough games to make it so you want the product which is a product gap that has happened to nvidia and that is when you buy it. >> will they not write for it? >> it's so brilliant.

this is just quantum. >> when you have the guys who do rock star and grand theft auto, they can't just turn on a dime. those games are hard to do. red dead redemption, for those who in my family are gamers, wow. you can't do number three right now. >> jim, cat below 140 once again. is this sort of the textron economy talk sng. >> -- talking? >> united reynolds does not use caterpillar. textron is a quadry on the conference call. people are generally confused. confusion is not positive. he has a terrific business. what really matters to me is that people keep saying cat is bad, uri is bad and that is a

mistake. it's what the people do. >> i remember when it was like a big infrastructure proxy and going to the moon every day. >> and they also built -- they kept buying companies that were involved with oil and gas. those are coming back. i'm not saying you have to buy uri here. people are getting a little too negative on parts of the economy. they are saying we do three next year. it is out. three and you are out. this is the three and you are out economy. some guys are already feeling it. nothing is as clear as ppg just being terrible. textron did not do a ppg. this is my worry is that we are going to see preannouncements and negativity and you have nobody to blame but the freight. >> i think it is a buy ahead of next week's earnings. they have a fantastic buyback.

i know we have to buy them when nobody likes them, hence the airlines. csx wasn't bad. it just ran to 75. >> alcoa is having a nice day. >> how much did you see that theygained from tariffs? 27 million. >> their net loss was 41 million, 22 cents a share, excluding special items. revenue is 3.4 billion. generally, jim, a positive -- there it is. positive response in the market today to these numbers. >> the one company that was supposed to be not so hot was great. the one that was supposed to be great is struggling to find a buyer because it bought a company involved with an aerospace where they overpaid. >> you are talking about iconic where there are reports of

private esquity. >> it would be a large deal for private equity requiring a club deal. the equity check is too large for any one. although there are plenty of reports, that continues to be the long in terms of the possibility. that would be one of the biggest we have seen in a long time. >> i think that there is enough negative news whether it be apple or a couple of industrials or the regional banks that continue to disappoint that you can be colored to the point where i guess we will start repealing a serious chunk of the tuesday rally. the best stock is philip morris which has been terrible. >> before we get -- >> we were speaking about lbos. blackstone reported numbers this morning. in part, their investor day not that long ago. there has been some hope they

might move to a c-corp. that has been one of the key considerations. numbers look good. stock is not reacting. it did go up on the investor day. 18% increase overall in assets under management. they are talk ag lot more about the stickiness of those assets and the puerpetuity and the fact that they are going to be earning to even out. the market doesn't seem -- >> they have a great return. >> incredibly well run. >> cannabis, jim you have aurora going to begin trading here. acb will be the ticker on tuesday. >> i think this is the time canopy has come down. i will use this as stopping

trading as we talk about constellation. i think there is too much fluff because we are not going to get a lot of earnings. i do recognize the long term thesis. the long term thesis is a very positive one. the long-term secular thesis in the consumer products has been mccormick. they bought franks hot sauce. i think it is millennials that are driving the cannabis and people want to be where the millennials are. >> the millennials don't want to be in soup. >> is that true? they don't like canned condensed soup like when i was growing up. did you like swanson's tv dinners more or less >> i was not a swanson's guy. i was stoufer's macaroni and cheese. >> you probably were -- >> did you use tang like the

astronauts >> my dinner in my 20s was ravioli followed by chips ahoy. i never used my stove in 11 years. >> i would love to know more about what dan lobe is doing with campbell's soup. >> yesterday was not a particularly good day and the stock price showed it. it was down over five percent yesterday. why? the vast majority, all the family members that matter, 41% that they own of the company, they are all voting to support the current board of director's. he is trying to unseat everyone of those directors. the math was not in his favor tlmpt had been a hope that he could turn them. they are with the rest of their family members, perhaps it was not a realistic hope on his part. now, what are you fighting for you want to get perhaps a very,

very large majority of the minority or not quite the minority or the majority of those that are not family votes, even if you are not going to prevail perhaps you can show so much opposition to this current board that they will feel they need to reach out to you and give you a seat or two. i don't know. things are getting a little testier. he is not giving up. we have a bit more now on taking shots at the company, the board and its former ceo. >> the board failed to hold one ceo accountable for lousy performance. instead they lavished her with more than $60 million in total compensation. >> my favorite food is the coffee. >> the board failed to plan for

succession leaving shareholders without a permanent ceo at a critical time. fixing campbell is not a simple case of adding a little salt or trying gluten free noodles. it's far too late for that. it's time to empty the can, refresh the recipe and restore shareholder value. >> i'm not sure i like that part of it. an interesting video. what it is showing is his willingness to continue to fight. i wondered from the very beginning of this exactly what mr. loeb was thinking because it was not clear how much value you can add unless youwanted to believe you would sell the company right away. i think there is a belief to put a new ceo there who can change the direction. it was an uphill battle and more so now. there is an importance here of marketing when you are a large

fund that has typically been known as an activist, it is not uncommon or perhaps it's not the worst strategy to make something high profile even when you might lose because what may be more important than performance is aum. if you have a chance to use this and say remember we started this whole idea of being a clever activist, forget those guys who keep showing up everywhere. don't forget we still do it. we'll see what ends up happening on campbell. the vote is still a month and a half away. >> it is still iconic but smaller and smaller every day. it is not as big -- it is the same size as canopy. >> that is incredible. guys, dow is down 128 led lower by cat. let's get to bob pisani. >> we have a problem with industrials.

there are three issues. you have china issues. how much is the economy slowing down there. you have the ten year moving up a little bit. that's causing some issues. finally, carl is right, industrials are taking a hit. let's look at the sectors, slightly defensive tone. you have utilities, consumer staples. materials, emerging markets. tech and the semis are weak. there are your industrials on the weak side. look at some of the companies that are reported. we talked about sealed air. they cited unfavorable currency and higher raw material. textron missed on the top and bottom line. they join a list of companies that have had some issues. ppg, granger all similar comments. the common theme is margin pressure. they are talking about weaker foreign currency and higher labor costs. you throw in pockets of demand weakness in autos particularly in china and europe, you have a

problem. you saw this with the autos. look at ford and general motors. morgan stanley talked about auto sales falling in china. they talked about 40% down year over year volume for ford in china. that's quite remarkable. they are down 25% overall. speaking of china, we saw another tough day for china. the china stocks your baidu, alibaba on the weak side. it has been an ugly year overall. a lot of tech stocks down dramatically down 35%. hong kong, mainland stocks not down as much because it has more institutional ownership. mainland china is mostly small retail players. they are not terribly sophisticated and scare very easily. the chinese stock market is very small. $7 trillion, that is one fourth of the united states value.

we have a $30 trillion value. the bond market is north of 50. bond market is one-fourth the size of the united states. bank deposits also small number overall. don't kid yourself. this is not necessarily the best indicator of the overall health of the market particularly with the overall retail base that is in that. i think you should be careful about drawing how much china is really declining the economy based on what the stock market is doing. i think a very big deal in the asset management business invesco. this has been an awful year for the asset managers. it is a very big company. i would point out that they have a well known etf brand flaname. look as how the ast managers have done. even your big leaders like black

rock which also owns the shares have been down dramatically. investors down more than 40%. federated, franklin, legg mason and blackrock. if the problem is active management and etf providers have seen their shares decline. overall problem is just fee compression. active management has been under assault for many years. passive investment is growing. it is roughly 50% of assets under management. this is creating dramatically lower fee revenue that is not being made up. there are alternatives where you buy stock based on rules. it's quasi active management. the fee structure is much, much lower. these companies are strcramblin to find ways to keep up the fees that are the life blood of the companies. it's not just assets under management but how much you can bring in as a percentage of the

assets and that number has been going down for a while. carl, back to you. >> bob pisani, let's get to the bond pits. rick santelli i'm sure will tell us what the two year is doing. >> they are zoom, zoom, zooming. we clicked off 2.90. look at a one week of tens. here we are at 3.21 in tens. two basis points off the high yield close which was basically two weeks ago friday as of tomorrow. the interesting point about that is the retracements throughout the period have been above the original breakout point of 3.11 which had been the high yield close for may. that might sound a little confusing, but if you are a technical analyst, that is nirvana in terms of knowing

where the market held, holding the exact spot and going to challenge another extreme. if we look at tens minus bunds, nothing says divergence more than this chart. this chart goes back to '93. i have one that goes back to '89. you see the widest differential on the chart. you talk about another key technical level. you see that drop right around tuesday? that was a drop through '95 intraday. if you open it to october you can see it held that line like a champ and many traders on this floor think that that really is proof. and when you add in the federal reserve and the minutes the dollar will continue to add firm. one reason the dollar may be firm, look at the doctorllar. it is close to challenging the

january '17 highs. once we do, it jumps all the way back to 2008. carl, jim, david, back to you. coming up later this morning david kostin on how we should navigate volatility in the market. today on the half it is an exclusive with gary cohn, former chief economic adviser to the president. coming off early lows, utilities and staples are in the ckn mite. two sectors up ba ia nu. ♪ ignition sequence starts. 10... 9... guidance is internal. 6... 5... 4... 3... 2... 1...

♪

♪ ♪ (buzzing)

gather new insights, leave your data protected ite, and put it all to work with ai. the ibm cloud. the cloud for smarter business. biggest decliners on the s&p, you have to have names that had recent guidance in recent hours. textron, sealed air, activision blizzard we'll get stop trading with jim after a short break. place, the xfinity xfi gateway.

and it's strengthened by xfi pods, which plug in to extend the wifi even farther, past anything that stands in its way. ...well almost anything. leave no room behind with xfi pods. simple. easy. awesome. click or visit a retail store today. let's get to jim in stop trading. >> constellation down six points why? because rob sand said he'll step down, the executive chairman, come the spring. stock is held in because bill nguyen who is just terrific, i had a big teach-in for the street, i met with him for a long time, he is really the guy

who understands the cannabis situation, remember, the right to go up to 50.5 with canopy so i think smooth transition last quarter was great rob told me when do you do succession when things are good i want to contrast that with another company that uses cans, which is campbell's. and a third one which is the great movie "the jerk" when it was the cans they were shooting at so i believe that rob pulled it off again, did the right thing, made a thousand percent for shareholders, not that shabby. congratulations for an amazing job. >> what a run. what a run what's on "mad" tonight? >> we have green growth. that's the -- you know, aeo market -- well, it's very wealthy family and what i like about this is once again i think the fluff has come out of a lot of these and canopy is a buy because i think they'll have a monster 2019 and bill newlands is the guy who

will do the liquids and bruce litan will do the others, particularly medicinal watch out icy hot. watch out opiates. everyday there is an ad from a company that used to be a big producer of opiates, i won't mention them this stuff works better than opiates and it doesn't kill you which i think is an astoundingly positive thing. >> good thing. >> to serve man. it's an opiate. >> we'll watch that episode of "the twilight zone." jim, see you tonight "mad money," 6:00 p.m. when we come back, rates and the president's criticism of the fed. you'll hear what former fed vice chairman stanley fischer has to saabt a w down 150. good start packagi we distribute environmentally-friendly packaging for restaurants. and we've grown substantially. so i switched to the spark cash card from capital one. i earn unlimited 2% cash back on everything i buy. and last year, i earned $36,000 in cash back. that's right, $36,000. which i used to offer health insurance to my employees.

my unlimited 2% cash back is more than just a perk, it's our healthcare. can i say it? what's in your wallet?

welcome back to "squawk on the street." last bit of breaking news for today. our september read on leading economic indicators. up .5%, no surprise. question a little history over the last 20 years, low watermark down 3.3, that was in october, 2008, no surprise there. up .5, yields up, dollar index

up carl, back to you. >> thank you very much, rick santelli good thursday morning. welcome back to "squawk on the street." i'm carl quintinilla with david faber and sara eisen at the new york stock exchange. a couple pressures renewing themselves, namely the two-year yield. >> and our road map does start there. the fear of rising rates the federal reserve indicating it's staying on course with policies despite attacks from the president. >> former federal reserve vice chair stanley fisher will join sara straight ahead. plus, navigating market volatility the major average is back in the red. where you can put your money to work goldman's head of u.s. equity strategy david kostin is here. >> and the fang play is time to rethink how you're investing in big names in technology. we'll discuss that. first up, though, the volatility trade continues on wall street this morning the dow is extending its losses. s&p down for a second session, already down eight of 10 as we said, treasury yields

raiding close to ten year highs as rate fears overshadow corporate results. joining us at post 9 is goldman's chief u.s. equity strategist david kostin who says we see limited further down side why? >> well, think about the key drivers of the market. we got earnings, we have valuation and we have money flow and those would suggest the trajectory of the market would be modestly higher as we look out into 2019 and the thought process is as follows, we have third-quarter earnings results right now. first quarter, second quarter each showed 25% year over year growth in earnings, this quarter will probably get similar type of earnings growth but that's largely a benefit from the lower tax rates. so we look into 2019 we're looking closer to 7% year over year growth which is still modest and in line with the long-term averages so that's your profile for

earnings with respect to valuation, we have valuation which is high, we can debate exactly how high it is relative to long-term history but it's at the higher end which suggests the pressure from higher rates is likely to cap any pe multiple expansion. then money flow. that's very powerful on the part of corporates buying in their stock. if we look at 2019 for next year, this year we had 44% jump in the amount of cash spent on buybacks and next year looking for 20% increase so that's close to a trillion dollars that we'll forecast that companies will be buying in stock. so earnings, valuation, and money flow would tell you the broad trajectory market is higher. >> is it an echo of what you said in prior quarters and this is we get this drawdown, it's answered by a resumption of buybacks is. >> and what we see is the

average since 1928, that's almost 100 years, the typical duration or period of time between a 5% drawdown is about 70 days and we, in fact, had 69 days before the last drawdown so it wasn't particularly unusual exactly what the timing or the catalyst would be difficult is predict, but not so unusual. the market has been basically range-bound and forecast remains 28.50. >> what about those who say, well, in a rising rate environment companies are less likely to finance buybacks with debt is there truth to that >> the cash generation of companies will generate and spend around $3 trillion of cash in the coming year so there is plenty of cash but certainly lots on cash generation. companies are funding their capital spending projects, funding mergers, forecasting a 16% rise in cash spent on mergers for 2019 so there is a significant amount of capital that would be directed towards

repurchasing stock and that's part of the corporate bid that helps the market and when the market sells off or comes lower, companies have been stepping in on the opportunistic basis. >> but why are you not afraid of rising rates >> well, the idea of rising rates is what's the cause of those rising rates is that an issue of concern about inflation, is that term premium? is that reflection of growth and the idea the fed will be tightening we have had bond yields rise towards around 320 right now in terms of ten-year treasuries the market valuation reflect asahi valuation, the risk is that multiples go lower. would be concerned it's always a source of some concern but the pace with which long bonds have been rising or ten-year treasuries has been modest. >> are you making the argument that as long as they're rising for the right reasons which is growth in the underlying economy? >> the perception on the part of many investors is that higher rates is a negative for valuation and it's more

complicated than that bays while the discount rate may adjust, there's the numerator. you have generally higher revenue growth the economic activity that we're looking at this year is almost 3% gdp growth. a deceleration next year but that's significant in terms of driving earnings growth. >> which sectors high growth names that are taking us higher >> i want to think about focusing on two different strategies one is low variability of revenue growth and i know david earlier said about the fang stocks it's actually software and services legacy tech it's the tech companies that remained in the tech sector as opposed to shifted into communications services, we want to focus on those. those software companies have very, very, very durable high-growth but stable and that variability is unusual if you think about the software companies as the new defensives because the characteristics of

their earnings are very stable and you add growth and defensive nature of their durability and partly that software spending, more and more companies directing more cash in the form of software spending as a way of compensating for the fact that labor costs are rising and companies are concerned about the upward pressure. >> i wonder how you think about small caps versus large given the differences in exposure to global trade and some argue dote exposure as well. >> the most important issue the balance sheet. and since the subject was raised of higher interest rates, larger companies tend to have stronger balance sheets and that would be a preference for stronger balance sheets and particularly some tech companies who w not a lot of debt. so that's an area of focus last week we had the goldman sachs chief financial officer conference so a lot of cfos

gathered together. business activity remains very strong and that's a fundamental component of why the market is likely to move higher. >> probably a year ago you brought us a screen of companies where margins were increasing. i think it was 50 names. is that screen as relevant more relevant? >> it's more relevant than ever. not just the high margins, it's the stability. so thinking about gross margins, and the risk here is what are the three issues i'm most concerned about? one is the tariffs and what that suggests about margin pressures with higher input costs. the second is labor costs. we have the positive aspect that unemployment rate is low but that's leading to wage inflation and risk for pressuring some companies and the third is balance sheets and the idea of interest rates rising so those three areas of risks, companies that have been able to demonstrate high and stable gro gross margins are likely to outperform that's particularly the area you focus in in the software and

services >> another good kick start, david. always so dense and full of information. thanks for sharing it. when we come back, full steam ahead. the fed indicating it's staying the course on interest rate hikes despite growing criticism from the president former federal reserve chairman alan greenspan weighing in earlier on "squawk box" on how the fed should respond to trump. >> every president has an insight into how the markets work and where interest rates ought to be which is always superior to that of the federal market community so they think. >> i mean, the best thing that you can do if you here in the fed is put you're muffs on. >> that's a great line should the fed put on its ear muffs? stanley phisher er fischer is .

i don't know what's going on. i've done all sorts of research, read earnings reports, looked at chart patterns. i've even built my own historic trading model. and you're still not sure if you want to make the trade? exactly. sounds like a case of analysis paralysis. is there a cure? td ameritrade's trade desk. they can help gut check your strategies and answer all your toughest questions. sounds perfect. see, your stress level was here and i got you down to here, i've done my job. call for a strategy gut check with td ameritrade. ♪

you can do things like change your settings, learn tips and tricks, troubleshoot, and even manage your account. finding your xfinity username or wifi password,

restarting your equipment, or paying your bill is easier than ever with x1. x1 help. another reason to love x1. say "teach me more" into your voice remote to get started. one week since the worst selloff in stock and president trump continues to blame the federal reserve. here's recent quotes from the president. my biggest threat, raising rates too fast the quote is, quote, going loco, out of control, i'm not happy with what he's doing that's all been in recent weeks. joining us now is the federal reserve vice chairman stanley fischer, also former governor of the bank of israel welcome to the new york stock exchange. >> thanks, sara. >> what do you think when you hear the president call the fed

loco >> well, i don't think it helps at all even if he think ths that so the fed could go either way they could probably raise rates faster, which is not what he's looking for but i believe this is a highly professional board the fed board was chosen very well by the administration and it's a good group of people and they will do what they know they have to do they have to make their professional judgment and that should be what the interest rates is and it should be totally independent of political pressures. >> is that possible? it sounds like what you're suggesting is that this will actually impact policy that they might continue to

raise rates to prove to the president that they're independent. >> i'm saying there is that possibili possibility. i don't think they'll do it. but if the rates go up they'll say i told them not to and if it succeeds and we don't have much inflation, i'm going say i guess i got it wrong, just going to fall by the wayside >> should the fed take a pause >> i don't think the fed should take a pause right now but it's a year since i left the fed and things happen. the economy seems to be doing better than we expected it would a year ago and i trust their judgment they're a good bunch of people. >> alan greenspan, former federal reserve chairman, said all presidents complain about fed policies or have some ideas about it, the fed should put on its ear muffs. >> well, he's right. and the season is right for that as well. >> do you worry about the fed's

independence in this kind of environment. >> well, the central bank is never fully independent the the sense that they can change their law. i don't think they want to do that so i don't worry that much about their independence but i do worry about how the markets will interpret what they do. >> on this question of what they're going to do next, the economy looks good data coming in strong but inflation doesn't appear to be out of control how do you explain that? >> it's a global problem, every country you go to can't understand why inflation is low. thro listening to other countries, they think it's competition from lower income countries that is keeping wages down that's a possibility but we don't know and it's something we watch all the time it could have something to do with lower productivity growth

that we have than we would have had at the similar cycle 20 years ago. so that could be another factor but it's simply a problem that has to be understood and it isn't fully understood. >> where's the risk right now for the economy? is it overheating or slowing down >> well, there's one big threat on the horizon and that's the trade war which we may or may not have with china. this is not something -- the president said trade wars are great, you can win them easily well -- >> you disagree? >> i don't think he knows what a big trade war is about not playing with canada now, playing with china which is very important in the global economy and important for us so it's going to be a harder game to play and it worries me.

>> do you think the u.s. can stay -- if you look at the markets, the chinese market suffered so much worse, so has its currency, the u.s. has been remarkably resilient in the face of trade risks can that remain the case >> it can. and we've seen that when the market has in recent weeks begun to worry a little bit and the market goes down, then everybody starts thinking the game is o r over at some point the economy will not grow at this speed this is faster than it can sustain. and i always say we the central bankers cut interest rates severely to encourage growth and to support equity prices that adjustment hasn't been fully made yet prices have gone down a bit but they haven't gone down relative

toy where they were 20 or 10 years ago and this adjustment may not be over and so that has to happen at some point. we're going back to normal we're very close to normal but we're not there yet. >> i think the fear among some investors is that this fed is so focused on trying to get back to normal or neutral or whatever that is that they may be overlooking signs of weakness in the economy, like what's happening in housing or the global slowdown potentially impacting the u.s. and they're potentially hiking into a recession. >> well, that is always the case and you have to make your judgment and they've been right so far for quite a while and businessmen always want lower interest rates when they start going up and the fed has to make a judgment as to what is needed and they are undoubtedly looking at the rate of growth which is very high by historical

standards and worrying about inflation. that's what's going on and the only big problem is there are lags in this process you raise prices, you raise interest rates now because of inflation you fear down the road. and so it's very easy to say always, yeah, they're premature. well thashlgs bett well, they better be. >> sounds like you're worried about the trade war. do you predict the fed will have to respond >> you mean by cutting interest rates? >> potentially if there's an impact. >> well, if the economy slows down, if the growth rate slows down too much or if the fed expects it to slow down too much, which it clearly doesn't do right now yes, then they will cut rates as any central bank would. >> what about what's happening globally the imf took down the global economic forecast to 3.7%

growth. >> right. >> does that sound right to you given the acute crises in emerging markets the trade tensions which are escalating with china? the fed raising rates? >> well, i can't really tell the difference between a forecaster 3.9 and 3.7. they both seem to be pretty good but the direction seems right in light of the trade situation and the fact that we're heading for confrontation. it's not clear there will be a confrontation and in every case so far in the end the united states has compromised so the big question is are they saving up the non-compromising actions for china or that going to be like the ones we've had so far >> do you think what's happening in the u.s. is a sugar high? larry kudlow says it's not, but there's some debate. >> well.

i don't know, is that going to go down? that's another way and i don't think it's imminent but you can't tell on these things. >> are european union and japan ever going tighten and get back to normal? >> yes, they will get to that situation and eleven say it's prematu premature. >> do you ever talk to them? >> i don't you're asking them to do something which they shouldn't do which is talk to an outsider so i don't call. >> so if you have a message for chairman powell who i know you served on the board with and you know very well given the debate

about the economy, what would you tell him >> i'd say it looks good from the outside. i can't tell but that's my current guess and don't listen to the politicians you've got to not let what they say move you in either direction because i can make an argument why they'd cut interest rates and why they raise them because they're worried about their reputation as well if they lose the reputation for independence, monetary policy becomes a mess you never know why they're raising interest rates you have to understand these are professionals, their job to be professional, their profession

requires them to be professional they don't want to be regarded as the guys who folded. >> should they listen to the markets and have the markets thrown enough of a fit for them to do anything about it? >> i can't make that judgment from a year out of the fed and what's happening today i don't think so if they were a big market move they might slow things down a little bit but it would take a lot to get them to move at the moment. >> i know you're careful about what you're saying as a fed outsider from an insider, we appreciate the comments and thoughts and advice hope chair powell is watching. >> well, i hope we're appropriately -- i'm appropriately cautious

i could say things but i wouldn't believe them. >> we'll get you far out from the fed. stanley fischer, thank you. >> thank you, sara. >> always appreciate it. the former vice chairman of the federal reserve. back to you, carl. >> big interview and more, huge interviews today on cnbc at noon eastern time our senior economics reporter steve liesman will sit down with former national economic council director gary cohn and later on the closing bell don't miss an exclusive with the new ceo of goldman sachs, david solomon you're watching cnbc dow is down 117. an informatio. and the car has become an accessory to the smartphone. ride hailing, car sharing, carpooling... ...mobility services are proliferating. and there's a new generation who don't seem to want to own cars in the first place. it all means massive disruption to the car industry, cities, businesses and investors. ♪ ♪

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...

at fidelity, our online u.s. equity trades are just $4.95. so no matter what you trade, or where you trade, you'll only pay $4.95.

fidelity. open an account today. spotlight, mike santoli is with us. chinese stocks suffering another sharp selloff overnight. >> almost without let up you've seen this underperformance of chinese stocks you had a little relief in september but that's fallen apart. if you look at the fxi etf, the broad biggest 50 stocks of china companies listed in hong kong, another leg down you see 15% down year to date

relative to 4.5% up. that 20% spread in performance is basically as wide as it's gotten so clearly the capital flight out of china is the main story. about half of this etf is financials it's financials, energy, old economy, about the chinese economy and the export economy look at other ways to cut the chinese market the ashr, that's the proxy for the mainland list eed a-shares market has done a good deal year to date. that's where you see local investors. finally the internet names, the big ones that we know about, the baidu, alibaba, ten cent, that's down even more if you look at that relative to our tech stocks it's been pronounced so it's the ongoing

nature of the slide in china and every turn of the currency seems like it makes it worse so even though our market has wobbled, it hasn't closed that gap. >> a reverse etf >> you can find those. >> they're not giving you a long term short. >> so they're not mirroring the actual -- >> as you say, the thing about shorting an etf, just short it there's no limit. >> just curious. >> let's get over to sue herera and get a cnbc news update. >> good morning, everyone. here's what's happening. the investigation into the disappearance of saudi writer jamal khashoggi continuing with a major operation at the saudi consulate in istanbul.

turkish crime scene investigators were seen leaving the building carrying boxes and bags british prime minister theresa may coming under attack from british politicians after saying she's considering a proposal that would keep the uk bound to the bloc's rules for more than two years after it leaves in march. >> we are working with european union to deal with this issue offen suring that if there is a gap between the end of the implementation period and the point at which the future relationship comes in, we don't expect a gap to exist but if there is we want to ensure there's no hard border between northern ireland and ireland. >> act visions call of duty black ops 4 has topped more than $500 million in worldwide sales in the first three days of its release. and the total number of players climbed from last year but investors are apparently not satisfied with the results and

the stock is down nearly 8%. you're up to date. that's the news update i'll send it back downtown to you. when we come back, rethinking fang. is now the time to buy in these big tech names forces are called for joined for mark zuckerberg to be replaced as chairman of facebook. zuckerberg controls the vote but the drum beat is growing for from public fund athat could mean straight ahead. dow is down 90 i wanna keep doing what i love,

that's the retirement plan. with my annuity, i know there is a guarantee. it's for my family, its for my self, its for my future. annuities can provide protected income for life. learn more at retire your risk dot org.

and i am a certified arborist for pg&e.ughes i oversee the patrolling of trees near power lines and roots near pipes and underground infrastructure. at pg&e wherever we work, we work hard to protect the environment. getting the job done safely, so we can keep the lights on for everybody. because i live here i have a deeper connection to the community. and i want to see the community grow and thrive. every year we work with cities and schools to plant trees in our communities. so the environment is there for my kids and future generations. together, we're building a better california. volatility have been unforgiving to the technology sector over the last month the s&p tech sector underperforming the broader market are we seeing a rotation and perhaps into value while weighing in on both sides are the portfolio manager and head of the advanced growth team

and long time tech analyst gene munster of bloop ventures. thank you both for being with us if you're running a large cap growth portfolio, how do you underweight technology where do you go to fulfill your mandate? >> we think that we're fortunate in that we're in a time there where there's so many secular trends and it doesn't have to be within the tech space, communication services, plenty of secular growth there. the old-fashioned consumer space, lots of secular trends there so we believe diversification serves a purpose and can be profitable. >> why are you underweight tech? >> we take it on a case by case basis. we don't think about tech as fang, we don't think about tech as one mono lithic area. we take it on a case by case basis and we go where we see the

best opportunities and right now we see we see lots of opportunities in a lot of other areas away from tech but we have plenty of tech exposure as well. >> but what gives you pause about technology is it the trade war? is it the fed? i don't know what are the reasons >> well, again, if you look at some of the head winds that not just tech but the overall market is facing from trade wars and cost pressures each individual company is affected in a different way and we can go over all the individual names but as we look at our names collectively it adds up to that underweight in tech right now. >> given the selloff we've seen, how do you assess the valuations and what looks cheap >> apple looks cheap

that's your best bet not only in the near term because the iphone asps are going up but a subtle shift to apple so am ever al ev-- there's a big opportunity there. but i want to point out one thing i think that respectfully that lou is missing here and that is that tech is really the fabric it becomes the arms supplier to this race with transportation, automation just take, for example, what happened more recently with google and some of their ai deep learning that's used to detect breast cancer. 99% effectiveness in doing this and there's a study that the accuracy for detecting that when there is a time constraint is

35% accurate so there's a huge opportunity that is missed no one thinks about google's valuation when it comes to the opportunities in health care but that's a great example of why tech is sustainable overweight. >> lou, we talked about zuckerberg and this push to have a different chairman in the company. you got all these reports about the data breach in september, various accounts that appear to be -- that were military and didn't look like it. others that they -- complaints they kept metrics that were false quiet. how do you synthesize the rain of news regarding facebook right now. >> i think you have to look at they're experiencing significant cost pressures trying to alleviate the security issues out there while at the same time the user metrics are not as robust as they had been in the past so they're trying to balance the cost pressures with the slowing of the overall business and this sometimes can

be a challenge and i do agree with gene on google that, look, technology is the leader in being that arms dealer to all the technological shifts going on. we like google, that's one of our top positions in the portfolio. i disagree with him on apple, though. >> what do you disagree about? >> i just think expectations are way too high given head winds in china and i don't think they can drive asps on their phones forever. >> lou, i'll give you the last word on apple. any response to lou's concerns >> look at the average asp for the iphone lineup this year versus last year, up 26% the street is mined for asps up 5% seems like there's room for upside. >> guys, thanks for your insight. appreciate it. >> thank you as we go to break, look at the major averages obviously at this stage an echo

of what we saw yesterday a big drop at the open getting bought as we get into the 10:30 a.m. hour. dow is down 52 dow is down 52 don't go away. whooo! want to get a move on your next vacation?

tripadvisor now lets you book over a hundred thousand tours, attractions, and experiences in destinations around the world! like new orleans! from cooking classes, to airboat tours, tripadvisor makes it easy to find and book amazing things to do. and you can cancel most bookings up to 24 hours in advance for a full refund. so your whole trip... will be smooth sailing! read reviews check hotel prices book things to do tripadvisor

the nasdaq is on pace for its worst month in almost two years and the man who ran the biggest tech fund during the dotcom bubble believes there's ndutorain ahead. fi o me on trading nags dtion dot cnbc.com more "squawk on the street" coming up.

♪ the lexus ls 500 & ls 500h. take advantage of great offers on the 2018 ls 500. experience amazing at your lexus dealer. ♪ mmmm, good, that's what campbell's soup is ♪ mmmm, bad ♪ >> what wan incredible waste one of the most iconic brands being left behind by failed leaders who punished shareholders loyalty. >> who said proxy wars were boring

that was video david show you from the last hour from dan who is pushing for a new full board. the company says it has the full support of the original family members who are shareholders so the chances for loeb are slim. but they have 41% of the vote and this is clearly an attempt to make fun of the company for underperforming of the prior ceo so from the company's perspective nothing new here, nothing of a case here for them in fact according to source he is hasn't engaged with the company since they announced their strategic review which was their own turnaround effort, tried to contact him, hasn't had a conversation a >> and his slate is out there, he's taking it to the street and yesterday's news was as you might have xpected, down 5.5%. the math was very difficult but the idea that perhaps he could flip a family member or two is

certainly gone now with that 41% block set to vote in favor of the existing board i think mr. loeb feels perhaps he can win by losing. >> maybe he gets a lot if not a very, very large portion of the unaffiliated vote and the company will still be under pressure to listen to some of his recommendations or to put the ceo in that apparently i think he already has in mind potentially for the company. we'll have to wait and see as for his holdings he may wait and see who the ceo is before deciding what to do. >> before the end of the year they'll have a new ceo they say they've got qualified candidates but you're right. no matter what happens it will be a really uphill battle for this company to turn itself around there have been numerous efforts and acquisitions and it's tough. this is a challenge business and

a challenge industry. >> as you have pointed out many times and have told me all about. >> another company i've told you all about, nike in the news getting an upgrade the firm forecasting strong growth ahead saying a technological evolution is under way at nike. the dow component is up more than 20% so far. joining us now is the analyst behind the note, brian neagle, senior analyst at oppenheimer. you say there's a 15% upside why, brian it's been such a winner and sitting at historically high valuation. >> we've studied nike very closely lately and we think the story and the stock has further room to run here the lens we're looking at nike through as we re-evaluate the consumer sector, that's more digitally focused and nike is a prime example of an already dominant legacy company. legacy brand that is very aggressively embraced digit al

that's what's fuelling the results and what would likely be a strong trajectory for the company for the foreseeable future. >> parker spends a lot of time on the conversation calls talking about digital and how they're winning and investing behind it and direct-to-consumer are they ahead of their competitor competitors, adidas and under armour >> i think the answer is yes companies are talking about digital but it seems nike is ahead of the competition here and using that as a means to differentiate its product. one of the key things we saw with nike over the past several quarters is the company fighting back and taking more market share. now, that had to do with much better product, more innovation but that was also digitally backed >> one question is on china. that's been a huge source of growth for this company,

continues to grow double digit every quarter. we are in a pretty escalating trade skirmish with china. if that gets worse and we hear about tariffs on sneakers and apparel, what happens to nike's stock and its results? >> sure. look, the situation is obviously fluid and as we issued our upgrade report i was talking to a bunch of clients and that's a key question we're getting we think there are significant levers nike can pull with regard to manufacturing out of china. the other key point is pricing power with consumers the degree to which customers are willing to pay off the high quality product. that tells me there's a significant amount of pricing power to the extent that nike is

forced to push some type of tariff cost through the system. >> who will be the toughest competitor in north america, brian? >> there's a lot the names you mentioned before whether adidas or under armor but there's a lot of upstarts out there. we're seeing this throughout retail and consumer. there's smaller companies that are fighting their way into industries that have been dominated by major players so there's competition from across the board but the key with nike is and one of the reasons we're p positive is that that that competition has forced nike to up its game and made it a better company. >> brian, thank you very much. upgrading his target to 90 today for nike of oppenheimer. >> let's get to chicago and the santelli exchange. good morning, rick. >> good morning, carl. i'd like to welcome my guest, professor john taylor. professor taylor, you've recently written an op-ed with

jean-claude trichet among others saying we're at a critical junction, there's no going back to multilateralism i look at brexit maybe there are some countries and economies runningaway from the notion of a collective on a global scale because politics and trade get awfully hard to separate your thoughts? >> well, i think what we need to do is find out in this environment the best way to move ahead with trade, with capital markets and i think what we've been learning is that sometimes what the country does to make its own circumstances better is better globally so we need to look for those kinds of things sometimes it will be bilateral, sometimes it will be multilateral, sometimes it will be just what the best policy is for the country. >> when i look at the markets, professor, i see interest rates have resurfaced to the upside after a couple of weeks of going sideways, whether you look at 2s, 5s, 7s, 10s, 30s, they're all close to cycle highs in the case of the 10-year,

seven years. i look at china and its stock market and currency getting close to the weakest levels since '17 if not 2008. i know that this isn't supposedly good for global trade, but certainly there are winners and losers here. will that make a difference? >> absolutely. i absolutely you are seeing a development in the u.s. that's quite positive probably have good growth numbers third quarter when it comes out soon second quarter was quite good, you've seen a change of policy for the better i think on the tax side and regulatory side and even the monetary side, so china is struggling at this point and needs to know what to do and i think to some extent the struggles have to do with keeping check on reform which they have for many years and gotten off recently. >> professor, everybody that looks at interest rates wants to talk two topics, one is supply and deficits, the other is some banter between the fed, although it isn't really an online type banter, meaning the president

tweets about the central bank and what they're doing what are your thoughts on that dynamic? you were on the short list if you were in the shoes of jay powell and company, would you take it as hyperbole there doesn't seem to be reaching across with concrete requests by the president or his administration >> there is some rooeceaching across the fed has communicated on it, it is gradual, it is normalization, it is the balance seat, so people understand it. i have been talking to central bankers around the world, they're beginning to understand it it is a global phenomenon, you're seeing that europe was steep as a result of that that's something people should take into account. i think the so-called banter, i mean, the president said normalization is the right thing to do and i think it is a question of pace and timing. i think the fed has clarified as much as possible what it can do.

of course there's uncertainty but i think it is on the right track. >> professor taylor, i ask this to all my guests so you can give me your version or your answer is divergence something that has any significant runway in front of us? could the u.s. continue to outtrot all of the other economies or is the weakest link scenario going to bring our economy back down a bit. your final thoughts. >> i think what we're doing is correct in the u.s. on the policies, it's a change and the results are good i would like to see other countries move in the same direction. there's a lot of growth left in the world, a lot of things countries could be doing in a way, the u.s. is showing more leadership on the regulatory and tax side, i think it is positive and will be positive globally as well. >> real quickly, i have one more question a group of conservative

economists have said that zero for zero on tariffs. is that something you back >> absolutely. that's what it is all about, get our tariffs down, promoting that many years zero for zero. we'll do zero if you do zero it would be better for the world economy. >> thank you, professor taylor david, back to you >> thank you, rick let's send it to jon fortt, get a look at what's coming up on "squawk alley" from him jon? george lee is chairman of goldman, sachs global technology media and telecom grp.ou he joins us coming up on "squawk alley.

as we talk about communication services, technology, worst performing sector, among names leading, com services, and netflix, facebook, google parent company alphabet the worst performing stop is

activision blizzard, on pace for the worst day since february of 2016 this is coming, despite the call of duty game, the latest version surpassing $500 million in worldwide sales in the owning weekend. take that, movie industry. back to you, sara. i haven't played it in a while thinking maybe i should start up again. back to you. >> thank you. coming up later on "closing bell" a huge interview you don't want to miss we have it all day today on cnbc david solomon, brand new ceo first time he will be speaking at ceo cna bc exclusive meanwhile, "squawk alley" up next dow down 31.

it left behind an when environmental issue.down, it was environmentally contaminated. one of the biggest successes we had early on, was entering agreements with the epa on cleaning up the property. we're recycling over 98% of the products on site.

the impact that this project will have on the community will be enormous. ♪ ♪ good morning it is 8:00 a.m. at facebook headquarters in menlo park, california, 11:00 a.m. on wall street "squawk alley" is live ♪ ♪