one quick look at where we are as we go handed over to "squawk on the street" down 413 points now on the dow and 117 on the nasdaq make sure you join us tomorrow, "squawk on the street" is next thanks michelle. good tuesday morning, welcome to "squawk on the street," i am carl quintanilla with david faber and jim cramer. here at home, dow futures point to a 400 point drop at the open. caterpillar guides below consensus. 10-yr is back below 314.

futures pointing to the sharp drop at the open dow set for a 400-point loss >> china's growth risk in the world's second largest economy are also sending global stocks lower. apple bump, iphone promotional offers help boost to s subscription of wireless adding to the sell-off 3-m, cut guidance while caterpillar outlook is over shadowing. it is the best ever q-3. >> look we are in a tough market what i find amazing is i don't know anyone who thought the raw cost would be good if you take a look and the thing is i didn't want inventory up 800 million. that was not good. you know lower than second

quarter. i don't like to see that sharp increase in demand and supply challenges, my bottom line on cat is it is not as bad as the stock is indicated verses 3-m which is as bad as the stock is indicated my father worked for 3-m and i am kind of really surprised. >> cat is a material cost story. 3-m is a dollar story. they're trying to figure out how you go from a 5-cent tail wind to a 10-cent head wind >> and i rather say how could they be executed poorly of multiple year executions i don't want to be sober about it i thought it was eye opening when it came over. i talked to jeff marks, okay, we cut this position but the fact

is i really genuinely believe that this would be the quarter they'll get it right healthcare, you can back the currency in. you can do whatever you want the fact is the dogs don't need it the dogs don't eat the can wow, i expect better from great american company caterpillar? you know you can look at cat and united technology. you can look frankly at honeywell which was better than excellent and i can craft a scenario, wait a second we got to test our lows and the vix to spike and then we'll come back and look at some of these great stocks 3-m is not one of them technology -- >> we can't wrap up in this. >> the stock has been down as

many of our viewers have known in part because of concerns of black rock deal. the numbers themselves very strong and eps guidance is up o 720 to 730 the organic numbers were great ahead of what the analysts have been anticipating. >> china is very strong. >> what is a very good quarter but otherwise you probably would argue i would think, jim, would be up if it was not for a broad, significant decline in our market >> yeah, going back over to read a couple of things, one is vice president pence's incredible speech you got to go back on october 4th. what happens last night, we send the curtis wilbur through t

through -- remember you are talking about the chinese government the chinese aircraft is huge to make the 919 aircraft they got to approve this for their own good >> let me share of the most recent quote from gregg hayes. we have one that we made up. he has been asked numerous time of what's going on >> yes >> let me try this one more time ton chinese approval just to be clear. i am quoting gregg hayes, we heard nothing from the folks at sam mark to prove these transactions that would cause us to believe there is any political issues that's holding up the approval of our deal. we got the regulatory authorities and back in august it was contingent of doj

approved the transaction which did not happen until october i know people are excited. there is a lot of tension between u.s./china we don't see this impacting the deal we have al very large presence in china we have been investing for yours. years we have 24,000 employees that's the latest from gregg hayes. i have been trying to communicate that because they are confident. >> now remember maybe we have to get through the midterms i am not a politician here and what are you going to do if you are in the chinese government, we got to quit this deal and we got a cruiser destroyer going through the taiwan straight? we'll ignore that and take the high road.

nobody is taking the high road >> on the other side of the planet now, an official is saying that brussels will tell italy to resubmit its bumper-to-bumper traff budget. that never happened before what's going to happen the next couple of months. >> they're trading like italy. look i think italy is a troubled country with little growth they're going to press and compromise with italy. i am not concerned with italy as i am of what i regard of being a fed chairman who do not care of what's happening >> i want to ask you about that. steel prices are up 30%. food inflation is going to hit the high range jet blue operating expenses is 28 fuel is up 36. how is that something the fed is not vigilant on. >> the fuel is volatile and i

think it should come down particularly it is worldwide gross slow down. steel is manmade we created this. steel would be down. our country created this i am not saying our country should not create it the president made it clear that there will be great consequences we'll cut the taxes so therefore and now we'll go to economic war against china. you got to go back if i were china, i would be scared to death. the thing that we are saying to china had nothing to do with trades >> a lot of different areas, jim. that's not new at this >> you can't imagine there is the surprise >> united technology >> what about it >> you just heard gregg hayes' comment. >> i know. there are things in the works that you can't think that our economy is going to accelerate

and grow and caterpillar as good as it did. the overwhelming thought when i listened to hasbro and wow, prices are going up >> you can't have monetary policy ex tariffs. >> mr. tariff, tear down that tariff poll. >> the point carl just made, your fview got the fed being too aggressive and the face of the things you said is going to raise -- >> you go to zillow, just take a look at how much your house have gotten back. >> i think zillow says has gone down the last six years. >> the rear-view mirror says

employment is strong if the fed simply says we'll see what happens thank you janet yellen >> we have been having the same conversation >> because we work for a living. >> when it come to what we are watching here in terms of the broader market being down a fair significance amount, is it the earning? what is it today as oppose to yesterday that matters today somehow? >> there is a coalesce of things we have what i regard as being a fed that has not walked anything back nothing. >> they keep on talking about restrictive. >> auto is bad and housing is terrible and the end of october, right?

mutual funds selling people don't want to hear anything positive. listen, united technology is the best quarter they ever had what do i hear when i talk to people, well, it can't get any better than that come on. i am just saying the market wants to go lower, i want to see if the vix test 25 we did a program last week where it has been haunting me. mark bass is incredibly right and he says the vix has to top i don't want to be technical if the vix top at 25 and market keeps on lower, i think we'll be okay the last four days of the quarter. october has been very strong seasonably >> right i do find the rhetoric from the president is pretty tough all around it is the midterms i think he's playing to his base and his base loves the antichinese.

rhetoric i don't think that's going to let up i don't think these tensions are going to let up any time soon. i am not saying it out of the blue >> we are going to go to 25% that's less than 2.5 months from now. it could be the way the world is for quite some time to come. the chinese are not going to back down. >> as hard as we believe it is going to be on the economy >> of course, i think it is the new world and it is over shadowing and what i regard of being amazing earnings particularly from china. china has not booed us the only client that's really cracked down by the chinese. the united technology should not be stopped it is tough for them to say yes, go send destroyer or a cruiser >> if we retest 2710 which is

the october of the 11th low. what happens then? >> i think that's when buyers come in and all the weekends are out. i was listening to guest earlier who says stocks are expensive but don't worry about it because things are better. stocks are not expensive, i am worried about it because things are worse. i have a contrary narrative. i do believe that midterm elections are playing havoc with stocks because the president's rhetoric is different. it is not the kind of thing that makes you think i am going to ignore that. well, can't ignore it. >> 3-m guidance had nothing to do with what the president said in houston, you know that. >> i am not saying i am a guest. i am saying come o on -- healthcare healthcare is just one of their

sm their -- it is what they are good at. what we are seeing is decline and 3% in consumer and 4% in energy and electronics these are astoundingly bad i don't think the board is going to stand for this. i don't think the board is going to stand for this. >> wow >> we can end on a positive note verizon is going to be up. >> statistically, a relevant index, is it we'll do more verizon on the other side of the break. >> mcdonald's is good. >> united technology is good and honeywell is good. last week we had united health was really good. nobody cares right now i am saying let it go. >> nobody cares! >> we have to go soon. what i am saying is that let it come in and pick among the

winners. let it come in and let people be scared and frighten. let people be nervous, okay? >> okay. >> all right, with that, wall street bracing for a sell-off as we count down to the opening bell another look at the premarket, we are talking about 2710 is as retest of those october lows likely to give up 25-k at the open a lot more "squawk on the street" from post nine in a minute

looking for a sell-off this morning dow futures down and s&p down four in a row and on track for the worst month over three years. got to go back to august of 2015 >> we have two stocks in the green, at least it looks like it is in the green. mcdonald's is at the top and bottom line. you can see it is looking up as well as verizon, one of the morning's view bright spots. it looks like we'll have high open in the pre-market 15,000 retail post net additions. the turn in this business is just dramatically decline from a couple of years ago. people just don't want to bother anymore. .80% >> yeah, remember it used to be

1.4% >> when you multiple it by 12 and talking about turnovers. >> total revenue growth of 6.1% and total consolidated operating revenues up 2.8% from the first quarter of 2017. a strong quarter at verizon. the first one under new ceo vespar, that stock is looking strong we have been monitoring of conference calls we'll bring you of anything significance if when and set on that call. generally speaking, verizon is putting up numbers 5-g is the talk now. lighting up a few cities and moving towards that. it will be some time where it is apart of your life frankly >> he's apart of technology. they have been when 4-g and 3-g,

the leader, john ledger would say no way you are not the leader >> you can't call them dumb and dumber >> sprint, we'll absolutely be the leader of 5-g and we'll see if the regulators allow for that combination but a strong quarter at verizon >> i got to tell you mcdonald's. what do people do? i don't understand this man has lower prices and blown out number you are talking about plus 5% comp stores overseas >> the worries here, the growth came from check and not from customer count how are they going to get more people in the door >> you know i do think that he has been saying. it is a work-in progress he has delivered in this work-in progress environment with some really good numbers. i think he had a lot of overseas issues ahead let's face it, i don't care how you get to 5%.

5% is extraordinary. now, you know domino's told me when we start seeing everybody else's numbers, we'll love domino's better. steve easterbrook, this man, i do not have a crush on this man. mcdonald's is delivering some fantastic numbers by offering value to people. i think this man may have -- he has done a lot of great thing and returning a lot of capital >> apple bee's have 7.7. people are going out >> they're going out apple bee's is a restaurant. they offer good salad and chicken salad. i think people are going out >> the market were down, you

would say wow other than 3-m caterpillar is killing it and double digit engaged in the u.s. and i love united technologies no, we look at the future and we make a decision that everything is bad what i am saying is that we'll get to a level where we'll start saying wait a second maybe after the midterms, you have to see through the midterms, i don't know who's going to win the midterms i talked to democrats. >> banks and autos and home builders it is not all 3-m. let's make it clear. >> the regional banks showed tremendous cross current verses these non-banks. the non-banks that's cutting in the the profit >> and there is bank of the ozarks they failed to deliver good numbers.

>> i think this is savage. >> we'll talk about that after the break and get cramer's "mad dash" and another look on the premarket on the potential sell-off here. more "squawk on the street" in a more "squawk on the street" in a minute what do you look for when you trade? more "squawk on the street" in a minute 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. 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. ♪

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. oh, let's give you a look at futures, opens in less than five minutes from now you see the bottom there, larry kudlow, telling reporters that xi and president trump will be meeting at the g-20. not quite sure what it means

whether they'll be meeting and significantly discussing trade issues or sort of say hello to each other at the least half of a positive sign although it does not have an impact on the overall market picture at this point. >> we are in the heat of battle at this point and everyone is ignoring the positives >> i feel like we have gone back and forth a little on. i like to understand more of what it means of a formal meeting that'll be set up to discuss some of the key issues let's get to our "mad dash" though one of the finest companies that i follow estee lauder it is apart of the selfie generation wendy nicholson at citi, she's saying there is awfully a lot of smoke but will there be fire

travel retail sales are very important. what this note says is that you are having an impact from the chinese consumer whom people are talking about are getting weaker david, you reference this to me that the government care how weak the chinese consumers -- we had chinese consumers maybe trading down from the dark, brown to beers what this estee lauder piece is saying we are not at the bottom yet. we are a fine company. be careful because everything that touches chie ma na is negae >> i am not going to disagree with that. i do think apple got a lot of levers i think when this selling squall is over, we'll come back to apple typically if xi and trump are meeting.

i am saying there is a little too much negativity building that's what you want you want to see caterpillar only down five. i want to excel 3-m. you want to see united technologies up and honeywell up you want to see united help and aetna and cbs up that can happen after we get the vix to 25 and if the vix stops there, i don't want to be technical there. if the vix stops at 25 which is my target price. you will see things are over, done we are almost at the level >> we are in the shade of it this morning >> you shop or you stop selling? >> look, i think you are getting terrible prices if you sell right now. i do think so. >> europe is down 1.5. europe is not necessarily bad as we are when it comes to the fed. it is not as bad as we are when it comes to china. they did have one apple supplier

that had a bad number and logitech there is a lot of weakness. >> you know i am not hearing you say -- >> the cat numbers were not. >> construction were good. i know you have been working on some things of agriculture >> well, we'll talk about it i do think that's china. china is behind so much of the weakness if you saw any just kind of, a handshake at the point, there could be a short squeeze >> nikkei is giving up all of its gains since labor day. >> it is amazing they got some companies doing very well. i am looking at europe down 1.4% when we go down 1.4%, fire will come in but there are many, many

things that are coalescing making people fearful and at the same time it is the end of the fiscal year. they don't want to give up their games. let's get to the opening bell here s&p at the cnbc realtime exchange the big board is oil service at the nasdaq enterprise celebrating its acquisition adapted insights, liberty. it is a stock that you may want to look at at the selling halt >> i wonder if you see anything different today and that as we spoke suggest, we have seen selling before but it has come on pretty flat opens that deteriorate during the day >> it is a different talk. >> thank you, what i have been waiting for is as wash-out a wash-out does not happen

what happens is when you kradcrr at the opening and you will get 9-1 volume you will get a sense that well, we are down 1.5% that's equal to what europe is down unless you think we'll be at 2.5% today i think that's extreme i am saying this is extreme and you are not getting good prices. you really ought to be betting when we are down at 3% or 4% >> it is living up to its reputation >> it is being spooky. y yes, it is >> s&p is back to levels that we have last seen on july 3rd we'll hear from bostic who votes and chaplin and george today if any one of them whispers about the fed is moderating financial conditions

>> you will get a handshake in china and you will say why did i sell down 3% >> why did i sell? the answer is because you were fearful that other people are going to sell after you. what i am questioning is when you have the vix spiking which is the fear index for those who want to know when you have the really good companies reporting great numbers, when you have this kind of thing with the big banks that did quite well because there are words of -- then i will say okay, the panic is so right that it is no longer a strategy i am offering who you are selling? you will sell down 2%. that's a great call other than a couple of octobers where things did not work out later in the day and we are not at that point. i don't want to be a seller down 2% i don't want that.

>> 2715 as what we said earlier. 2710 was the level to watch from october. from the time being, only two dow components are green and that's mcdonald's and verizon. >> i get that but once again i counsel people if you sell down, you will get down 2% of what you sell and you better have a good darn reason of why you are selling. this may be a garden variety united technologies was great. honeywell was great. if you hear larry kudlow say you no what, all the stuff with china and you may not think it is all this stuff on china, we are going to put it on pause, you know how we feel and we make our point to the electric and we don't want them to interfere in the midterm. interfering directly that's going to make people say

okay, why didn't i sell? you better have a good reason to sell down 2% i don't have a lot of good reason to sell down 2% i just don't >> on united technology, it is not just of the question of the rockwell deal that we have given you gregg hayes' comment on. it is the expectation that the company is going to slit itself up after the rockwell deal is completed. mr. hayes did say listen we are going to talk about it in november that's when they're planning to discuss that and having said that so as the ability on the board to make a different decision right now we are on track and i made my view pretty clear since mr. hayes. focusing on over the long-term he does say the board have the obligational to assess and a lot of questions we continue to answer with the board. he feels confident that the board will come to a final decision shortly it continues to sound like there is going to be a major break of

this company after the deal. >> i certainly believer th that it makes a lot of sense and i do think the deal will go through when i saw the level of aerospace numbers, they're so superb back on caterpillar for a second the analysts are saying wait a second, this thing is coming back to earth. hey guys, where were you now at 118, we are discovering not so good. the same people at 60 told you going at 75. at 37, whoa, be very afraid. it is jason meets halloween and that's nixon and black mirror? >> that's the market, right? that's the way it all is this thing trades at a minuscule

multiplier >> nvidia got a difficult transition with the storing chip they have not written games yet. it don't matter to transition, they are the best of economist driveri driving and the data center. you start saying well, and i am saying overly -- caterpillar at 118 is not the same at caterpillar at 158 it is a cheaper company. it is less and it is not like it is ge. i feel that everything is ge you are not freaked out about losing the 140 and 135 level that have been a support >> a lot of line in the sand let's say you got a plethora of

fed figures, right we made some comments that we said that were definitely going to no matter what and add to three rates. maybe we are not going to be monitoring this. looks like some of the earnings we are seeing may not be as good a monitoring is worth and the vix did not take out my 25 level. it is not taking out the 29 level that we had last week. the vix is going to very accurate predictor of too much fear we are not going up anymore in the vix. the vix spurts of 26 yes, problematic i am trying to get so the people do not sell to a vortex and a whirlpo whirlpool. >> i did want to talk about a particular company, remember buyer the german company bayer spent forever trying to

acquire -- now, they may find themselves wondering why it was a case that was first tried in august 10th in the court of california. it was about, it was specific to a gentleman who claims hodgkin's lymphoma -- not what investors have been hoping for or what the company had been hoping for. the judge ruled against monsano of 30 millions -- still the total reward is $78 million. she did not importantly get rid of the liability she ruled that'll stand and many are seeing that as perhaps

evidence that there was substantial evidence provided at trial that in fact this disease was caused by as well concern that monsano having acted with malice or oppression bayer is going to appeal there is 9,000 cases you can imagine investors are trying to understand what it is going to mean even if you have this knocked way down on again on appeal or on a settlement you still have to wonder what it is going to mean for bayer that stock is down dramatically again on that revision >> revision but not enough >> i remember you did talk about it on the day it occurred. >> this is company's specific.

>> this is company's specific and not market specific. >> they hired a lot of people. i am not seeing the kind of panic. i am seeing panic and i am counting against panic mcdonald's is up five. that's a dow company verizon on fire. how about this in if you are the fed, wait a second, we talk top and oil is at 73 it looks like interest rates may have peaked for the year did you see the bond rally we talk tough and we are seeing plastics coming down in price and paper coming down in price we know a lot of the raw cost are in a trade war and tariffs we got to be mindful of that i am not saying that people should be nervous, i am saying the panic, if you sold verizon, oh boy because i got to raise

capital. well, that's not so smart. it is a long day i am not saying we could not go back down again. i am saying the vix i am looking at and i am looking at the panic, well, let's wait. everyone if y even if you don't like the more dp beg morgan, wait for balance i am against panic >> we did get a bit in some home builders pulte is up. >> i am sure the martin is not exactly that great again, what do we expect the 5%, i have been all over this 5% number when mortgages hit 5% that's really brutal that's what the fed has to worry. that came from the fed i think prices are coming down all over the place, perhaps. >> don't look at those >> jp morgan is down at 1.5.

>> did you have any sun glasses, david? >> no. >> jamie dimon reported a good quarter. >> the banks have been a horrible place to be this year >> goldman is going to be turning the corner and people can careless about that for haven's sake >> did he say something good object goldman turning the corner >> did he say something good about goldman? >> apparently. >> he has lost his mind. i am in charge here. >> again, we are down 1.5. >> we got to move on, david. >> almost half of the loss of the dow right now is just 3-m and cat. let's get to bob pisani. very good point. >> industrials and some of the tech sectors, 8-1.

at the open, carl, that's not quite 10-1 that's a good flusher to start out. we did get to the 2710 level we look at the sector, it is the sector that are hit. you have semiconductors and industrial name and staple like procter & gamble, they're aliena aliena alienaal all flat right now harley davidson remains their shipment forecast. caterpillar, they did not cut anything verizon of their full year guidance bear in mind about this, we are not seeing any dramatic cuts of any guidance here. one thing that's happening that's a little concerning stocks are not rising on good

earnings or raise fourth quarter guidance we have seen a number of companies have raised their guidance because of the comment the company made they're not going anywhere or doing anything united rental and citigroup and csx and vf corp. this is good news for the company and it is not. this is broader going on and broader concerns of individual earnings for these companies the debates very simple. do the positives out weigh the negatives or not remember the positives that we have seen earlier in the year. we had stocks rising on the strong economy and higher revenues and stocks rising on tax cuts and reduced regulations. all of this and what powered the stock market in the end of 2017 into the early part of 2018. thirn thir things are a little bit different now. we got head wings that are emerging and we got the tariffs and higher material cost and we

have china slowing down. we have a lot on the geopolitical situation here is the question overall that we are dealing with how much real contagent right now? it is confine today the way alook i look at the market i don't see a lot of credit disruption which bothered me a lot. when i look at the spread down here of the big stocks spreads are still pretty tight i know people voice concerns of liquidity but i don't see it daily in the stock market trading. meantime we gotten new lows and a number of sectors and a lot of the industrials and caterpillar, 3-m and united rentals and a

whole bunch of them are at a new lows the banks are doing nothing and you got citigroup at a new low you got the flat yield curve and concerns of loan growths it is going to be hard for them to move. you may get a little bit of balance many home builders a tough situation but we are well off the lows that was right at the opening bell. carl, back to you. >> bob, thank you for that as we said earlier the president will meet with chinese president xi at g-20 in argentina in november, jim. one of the catalysts we have to look forward to. post midterm >> look at what it has done for united technology stock. this is what i am talking about, about selling into united tech at the opening you got 125 and now you get 129.

listen, you want to go now this is a mark thatet that's reg to good news and it has not reacted to good news in days also, went up when gregg hayes talked about what some would appear to be the likelihood of potential split of that company once it completes it >> we had day after day. here is something -- split is a good thing and you can argue wait a second, that's new news i am coming back and saying i am seeing certain situations and stocks that have come down and come down and it is nothing new. what i feel is that people are saying wait a second, let the market rally i think that's reasonable. i am very, very negative about this mark. i am looking at mcdonald's up

six. hey, we talked about the idea. people are saying wait, plus five so good companies that report good numbers are having stocks that go higher and that's an important thing. verizon, david, there is no break up with verizon. look at that >> it is a strong wireless market >> bob is right. there is a lot of companies that are not doing that well. we come back from the lows and i feel that if you are going to make your decision based on 3-m which did a terrible job then i think that's wrong that may be an outlier technology is a little better and vix has not taken out my 25 level yet. >> the earnings calls go on. morgan brendan is watching that for us today >> the utx call ended a few m m

moments ago. t the stock is lower right now a lot of focus on the fate of this company and also the closing of the rockwell/collins deal gregg hayes addressed they have received doj approval and now loan approval being weighed in china. he addressed it. >> there is a lot going on and a lot of tension between the u.s. and china. we don't see it is impacting the deal we got a large presence in china and have been investing there for years and years. we are key part of the arrest space indust arrest -- aerospace econoindusty

>> so while the time line has been pushed back largely because of the doj, hayes is saying he does expect to get approval from china shortly. they from china they have to close the rockwell deal before the board can decide what to do in terms of that broader strategic portfolio. now in terms of the company itself on the call, talking about the geopolitical environment, remaining the biggest concern. also growth forecast for global economy strong through next year, aerospace the big standout that offset a drag in terms of growth and otis, china was better than expected in terms of otis. we have a ton of industrial calls and continue to monitor them we'll bring you the headlines. >> appreciate that washington paying attention to the sell-off as well. we have news regarding larry kudlow

e eamon? >> that's right. i said if we see a sell-off before the markets open, is that a healthy thing? he check this had morning and ultimately the stock market is down 5% from its peak earlier in the year he said that's not much. that's not much. i also asked him if he thought in any way the president's trade policies were responsible for the weakness in the markets. here is how he answered that question. >> i think the stock market is worried that congress will change and overturn these pro-growth laws. i really believe that. the self correction -- as i said before, these things come and go that correction has to overcome the uncertainty about this election. >> so larry kudlow there, putting it very much in political terms, saying that the

markets are worried about the upcoming election, just 14 days away from those midterms even if democrats take over the house and the senate, he did acknowledge they'll not be able to pass and get implemented a reversal of the tax cuts under the president because presumably the president wouldn't sign such a repeal and replace larry kudlow acknowledging, that's correct, the president wouldn't sign any bill to reverse his tax cuts but that the street might be jittery in anticipation of that election out 14 days. >> do you agree with that, your old partner, larry, that this is what the market is really worried about? >> look, i think the president is really hammering home a lot of very tough talk i think he is definitely worried about the midterms but i think the stock market itself is much more concerned about the fed. and i think that larry did not want to criticize the fed. worried about china. we're not so worried about the

midterms. >> there are those who, i think, would be concerned if the democrats prevail in congress. the likelihood of them prevailing in the senate seems to be very small. >> but the house is certainly up for grabs. >> the house is not going to change anything having to do with the ability to overturn tax law. >> no. look, the market likes gridlock. let's not forget that. the market itself has -- i won't say it's soured on president trump. it's obviously been incredible you have great employment. employment how people vote when you wake up every morning and see, geez, we have an aegis cruiser here it's beleaguering. you sell home depot 176 when it was at 220 what >> tesla at 5%. >> there you go, david way to nail it >> thank you. >> way to just drive it home. >> we'll stay on top of the sell-off dow down 330

cat and 3m is a lot of that. take a look at the movement in treasuries this morning, we're back in a moment you're still here?

we're voya! we stay with you to and through retirement. i get that voya is with me through retirement, i'm just surprised it means in my kitchen. so, that means no breakfast? voya. helping you to and through retirement. ignition sequence starts. 10... 9... guidance is internal. 6... 5... 4... 3... 2... 1... ♪

whenshe was pregnant,ter failed, in-laws were coming, a little bit of water, it really- it rocked our world. i had no idea the amount of damage that water could do. we called usaa. and they greeted me as they always do. sergeant baker, how are you? they were on it. it was unbelievable. having insurance is something everyone needs, but having usaa- now that's a privilege. we're the baker's and we're usaa members for life. usaa. get your insurance quote today.

what's on mad tonight? >> logitech, a big company and the cloud is where the battleground is. if it holds, we go higher. >> jim, thanks busy day dow down 340 back in a moment ss. 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...

good tuesday morning welcome back to "squawk on the street." i'm carl quintanilla with david faber. sara has the morning off we get very close to levels we last hit early october global stocks selling off.

dow diving 3m and caterpillar a big piece of this. >> there are bright spots as well where you may want to put your money to work in these volatile markets. kyle bass of hayman will join me exclusively. >> plus mark hurd of oracle. >> complete team coverage for you this morning morgan brennan is following the big industrial movers, cat and 3m and a big list of fed speakers today and what the street is looking to hear and bob pisani is taking a look at the path forward. we'll begin with the top story and that is morgan morgan >> whether companies can offset that with pricing, what all of this means for margins, margin pressure you're seeing that with 3m that call is wrapping up right now. comments on the call, selling

price benefits more than offset raw material and inflation for 2018, we now expect tariff impacts minus 15 cents a share you're seeing weakness and higher costs affecting 3m, the results and the full-year guidance united tech on the other hand, you actually saw that take place as well in their otis elevator segment, they've seen price increases but it's not been enough to offset higher costs associated with commodities, labor, et cetera foreign exchange, another big issue for these companies but overall what i would say the takeaway here thus far, there's still demand, there's still some growth all of these companies are still commenting on the state of the -- not just u.s. economy but the global economy at seeing signs of strength. it's these info costs and that's what investors are focused on right now. >> offsets to that global demand

picture, morgan. thank you very much. that's what the market is trying to sort out. let's get to ylan in washington. >> good morning. we have five fed presidents who will be speaking today minneapolis, dallas, chicago, kansas city. obviously, markets on edge, waiting for any whisper of a potential change in the fed's plan for rate hikes. keep an eye on raphael bostic of atlanta. a few days ago he said there were no significant dark clouds on the horizon, the u.s. economy is chugging along. but he was the first fed president to bring up the investigation into the murder of washington post journalist jamal khashoggi and what that could mean for our relationship with saudi arabia as a potential geopolitical risk that could derail the strong economic growth so far. he will be speaking this afternoon. we'll be keeping tabs on all the speakers and what they have to

say. >> ylan mui, thank you bob pisani has a key look at the stock drivers. >> the stocks hit by geopolitical concerns are the weakest today. semi conductor stocks weak, parallel in china a little bit china up monday, we're up. china down today, we're down "the biggest loser"s in the global wars we're seeing consumer staples stocks relatively flat. procter & gamble, coke, et cetera, down fractionally right now. on the guidance situation, i want to point out, 3m is a disappointment but we're not getting disappointing guidance from anyone else, even caterpillar, reiterating their full-year guidance, a little below expectations but they reiterated united technology raised their full-year guidance

verizon affirmed their revenue and earnings growth. it's not like all of a sudden a lot of companies are coming out and telling us we're not going to make the numbers. i'm talking about the fourth quarter. i'm not talking about the third quarter. there are a lot of companies that have seen their numbers raised for the fourth quarter and stocks are not going up. this is not normal i think it's a sign of the global issues that the market is facing right now so, remember, stronger economy, higher revenues and tax cuts but now we've got tariffs, higher rates, china slowing, populous government in italy and potential isolation in saudi arabia a lot of news for the markets to digest back to you. >> thank you for that bob pisani joining us this morning, chief investment strategist brian belke is with us and on the phone ed yardeni thank you both for the time. >> thank you. >> ed, you've been working hard to give the market the benefit of the doubt. >> right. >> that these tax cuts can raise productivity and keep growth

going while inflation remains subdued. does any of the action the past week or two give you pause >> certainly gives me some pause. i've been counting all the corrections and two or one-day selloffs, like the brexit. all together in this bull market i count 62 panic attacks this is number 62. the question is, is this just a panic attack or is it something more serious this, too, shall pass. as you guys pointed out, the outlook for the global economy still looks decent maybe not great in emerging economies but overall the feedback, we're still growing. the u.s. economy is still growing. i think we're seeing stocks have gotten cheaper and i think it got a lot cheaper because there is concerns about a potential global recession, maybe even a u.s. recession i think this will just turn out to be an opportunity. >> brian, talk a little bit about the inner play of the corporate fundamentals, decent

credit markets if we got effectively a flat performance in the s&p 500 right now with earnings up 20%, what does it mean for how the market is going to reward or not reward a slower pace of earnings growth next year or maybe a narrower group that is performing well fundamentally? >> it's a great point. earnings will be better than expected coming into 2019 as the majority of corporate america remains defensive. you see that in the earnings results, underpromised, overdelivered. individual stocks like 3m that did what they did. that's why it's important to know that we are a stock market of stocks and we firmly believe because of that, we're seeing firsthand on why investors should actually be more active and have larger positions, less stocks and react and rely less and less on macroand index data. it's provide iing opportunitiesn

what ed talked about in terms of this overreaction. beginning stages of this bullback, it was more of a buyer strike than it was a momentum, let's find a bottom. now it's out and out reaction and momentum to the downside in terms of being overreactive. these types of opportunities, when the market is on strong, fundamental footing like it is, like you put out, like multiples contracting, we got a better deal with respect to stocks becoming cheaper because of the sell-off. >> i hate to ask you about something as pedestrian as levels, but 2698 we were watching 2710 this morning. how much -- on pretty good volume, i should point out. >> right. >> how much of this is of concern to you today >> everybody gets very concerned when we go below 50-day movement averages and when we go below 200-day averages they get even more concerned is this still a bull market, then brian and i seem to agree

that's the case, then if you look at previous times when we dropped below the 200, that turned out to be a great time to buy. that's the way i'm looking at it. >> do you think -- are you in kudlowe's camp this morning, that a lot of this is worries about midterms or mutual funds selling? >> i don't know. i think the midterm concerns have been kind of overwhelmed by concerns about interest rates and, as you said, there's a lot of fed heads that are about to be talking here, all members of what i call the federal open mouths committee we're all going to focus on them i kind of agree with jim cramer. a lot of this is the fed suddenly talking about maybe they'll have to move toward restrictive policies i think that was a big mistake f they pull back on that or -- who knows. maybe the dow vigilantes are acting up here i talked about the bond

vigilantes in the past maybe this the dow vigilantes, trying to convince fed officials they're going too far here. >> brian, when chairman powell took office and started to communicate his approach to fed policy, there was a lot of talk that if there was a powell put, it was lower than perhaps it was with prior fed chairs. here we are, 8% below all-time highs in the s&p 500 we're already talking about why the fed has to pause here. is there a main street versus wall street problem here employment is looking good and potentially inflation, looking like they should continue to move yet the stock market is throwing a bit of a tantrum. >> that's a great point, mike. i think there is a bit of a disconnect between main street and wall street. investors remain very skittish and, let's say, defensive in their position, being very short sided. main street feels better than most people think.

i think the fed is going to be the most interesting play on this because i think the majority of wall street, not main street, understands that as interest rates go higher, that's a good thing because the economy is improving so many investors have ten years or less experience some people like ed and myself lived through these types of corrections in the 90s to me this feels more like a '97, '98, '99 type overreaction and the fundamental construct leading the rest of the world. i think that's the perspective that investors actually need to hear. >> but, brian, how much of your thesis is contingent on the fed stopping, talking about restrictive policy, maybe p putting accomodative back in how much depends on them blinking >> i think it depends more on growth, carl this is about growth, not about inflation or the fed this is about continued growth

and gdp growth if we continue to see very consistent growth and we get through this earnings period, when it's all said and done and earnings, once again, exceed to the upside, calmer heads will prevail. maybe the fed won't have to do anything the fed's language, i believe, is being too over analyzed and we have to understand we're still in an environment with not only respect of the economy but the stock market is in growth phase. we don't need the world as much as the world needs us. now it's the u.s.'s game in terms of providing leadership. we need to understand that and flourish within that. >> ed, that may be true in terms of the u.s. economy. the s&p 500 is a global animal right now. >> right. >> i wonder what you would be looking for right now, at least tactically, in terms of signs that the market has already discounted whatever it's trying

to price in right here banks have been very conspicuous leaders. down in the s&p financials as a group they're outperforming today. what are the kinds of things you would be looking for right now to let you know that this thing is running its course or we have more downside to go? >> i think you're making a very good point here. it's not just the global exposed stocks that have been causing problems for the market here but also some that are just focused on the domestic economy like the home builders and like regional banks. and i think they're all saying that, you know, after having ten years of zero interest rates, the fed has to proceed maybe even more gradually than it thought. here we are with mortgage rates close to 5%. you're getting lots of anectdotal evidence. housing isn't what it used to be

but still it has knock-on effects in other sectors of the economy. so i think brian is right. maybe we are spending too much time focusing on the fed speeches and all that. but the market tends to do that. i think we are going to have to see the fed back off that's when i think the market will start to show signs of relief. >> ed, what does it say that after all those years of asking what about savers, what about the elderly, who depend on fixed income why have negative yield rates nine years into recovery are we all overestimating the resolute nature of the recovery, are we underestimating its fragility? >> it's kind of like a -- i don't enjoy using this analogy it's kind of like a drug addict. we were on drugs for ten years with quantitative easing and the

withdrawal process has to be slow and maybe slower than the fed expected. >> ed, thank you good to see you guys dow down 472 mcdonald's bucking the trend as the stock rises on that good earnings beat. 13th consecutive quarter of positive same-sa store sales talk about these global comps, how they got there customer count versus check. are you impressed with the comps? >> it is better than the market. overall fast food market is up 1.5% or so this quarter. this recovery, we keep talking about is not really helping the fast food players that much. mcdonald's is doing better than that in the u.s. international is doing much better than that, up 5% to 6%. very strong international. there's a lot of change going on

in mcdonald's. you're seeing that in the margins. you see the headlines about the franchisees these days clearly the company stores showed that, a lot of reimaging, expenses on labor go along with that. >> what do we attribute the strength over these two specifically here? is it essentially a little more of a consumer cyclical tell overseas than it is here it seems defensive here. >> overseas, mcdonald's is really leading they've done a lot of stuff that they're hoping to do here already. plus we've seen multinationals putting up decent numbers, including the so-called developed markets. some of it is mcdonald's and some of it is that we may be, at this point, underestimating the consumer. >> what is it that they've done overseas that they're hoping to do here? >> digital front kiosks, reimaging of the restaurant in general.

there's a more aspirational feel up in canada, you see them there pretty close they have an analyst coming up to show us this. food is another part of this in the u.s. you also need value. some of the changes lately and the stresses and strains is that they've changed the way they've done value to more local approach to national and some of the national stuff like the 1, 2, 3 is not working as well as they hoped that's a change to come for 2019 hopefully. >> they did give capex numbers, right, for the year? >> yes. >> were those above or below >> in line to slightly above and you can see that's not an expense on the capex side but the labor front. >> food inflation. they said close to the high end of their range >> yes they nudged that guidance up a touch. food is not the big issue here

it's the churn associated with the reimaging they're doing. and they're having a lot more in their falloff. people think they're closed when they have all the cranes and construction stuff in the parking lot. >> really? >> typically get 30 to 40% decline in sales in a typical mcdonald's when they're going through these changes and they're doing 1,000 restaurants per quarter. massive amount of change. >> when will that workity way through the system >> the end of '19, tail into 2020 by then, by 2020, you'll start to see year-end changes in capex coming down and get the tailwind without the friction the beauty of this is that this could become a nice earnings story into 2020. >> really quick on the dollar, 5 cent negative impact >> yeah. we can track that pretty closely. that was in line clearly, things reversed there this year. that's been one of the bummers for these fast food stocks and that fast food trends have not

been that great. >> thank you. >> thanks, carl. well-known hedge fund manager kyle bass. on november 4th, the u.s. will begin its sanctions against iran there's much focus on the effect those sanctions will have. and must divest from sanctioned entities what does that mean? kyle bass will tell us the second largest endowment in the country. before we attack it, i want to get your reflection on this market move today. it's been a while since we saw it down in the s&p any thoughts about why we're having this down move or what may be causing it? >> clearly, this is not a monocausal event, david.

on this day back in 1929 was the beginning of the stock market crash. october 19, 1987, it seems to be bad days in october seem to happen regularly i think when you look at today, one of your other guests earlier this morning pointed to the fact that, you know, the ruling coalition in italy is essentially a donald trump and bernie sanders deciding to rule together so they're going to lower taxes and raise spending clearly, that's not going to work with the global economy. >> we'll talk specifically about china but first let's get to this specific news that i want to discuss with you. the university of texas, texas a & m investment management company, the office of foreign asset control compliance procedures you guys are putting this out

today, basically letting those you invest with understand what you are going to do as a result of the sanctions that are going to take effect on november 4th what is it that you are going to do and that other investment managers, kyle, need to be aware of >> i think it's really important to understand that, you know, most of the institutional community in the u.s. adheres to u.s. law and when -- whether it's treasury, whether it's the bis at commerce or state department sanctioning entities that are foreign entities, those are vested there's a fiduciary standard that u.s. consumers haven't paid attention to they're still invested in by the u.s. institutional investor community. we at the university of texas are going to lead the way in raising the fiduciary standard for investors in the u.s. saying if you're going to invest in

companies that basically continue to defy u.s. sanctions and break u.s. law, we're going to divest of you and we're not going to buy your stocks shall bonds, derivitives or allow our to do so. >> as one of the largest endowments in the country, i think that has an impact how do you communicate that to your external owners can they continue to own stakes in these companies but not for you or would you argue they need to divest across the board regardless of those funds? >> look, it's all going to be on the front end there's going to be a little bit of friction. all our capital is externally managed. we have 45 billion in total money invested around the world.

we would imagine that the investment manager has to make a decision whether or not they need to adhere to this fiduciary standard for all of their investors or just for some of them and we're willing to work with all our external managers on setting up separately managed accounts that might exclude theseinvestments or if they want to make more difficult decisions, our investment team, our investment staff at utimco is one of the best in the world and they're the ones doing the communicating. the board and investment staff together decided to enact this plan and the investment staff is working with our external managers on making sure they get into compliance with our new compliance plan. >> do you think other investment managers and, by that token as well, private equity firms, any of these large entities that have investments in what i would assume is an objectively

verifiable list of iran, will they all have to stop those investments? >> i would imagine that every institutional compliance manager and general counsel is going to have to be thinking about their fiduciary responsibilities, david. it's interesting that over time there's been a schism between the investment and operating community. the investment community keeps moving ahead and with investments and companies that directly defy u.s. laws. and i find that to be uncon unconscionable and so does the rest of our board. i think it's important for the rest of the investment community to start paying attention here. >> if you find that there's a u.s. government authorized or that one of the companies on the list -- you have, what, 180 days to wind down the position. is that right, kyle? >> yeah. look, the time limits are not that -- as important as the direction of where we're going

and, you know, we want to do thing things that are commercialally practical and we also want to not harm the corpus or cause losses in our portfolio. we want to parse through the list on the front end and think about these as sanctions get enacted going forward, we just want to be ahead of the curve. today, the u.s. has primary sanctions on syria, on cuba, south sudan. we're reimposing the iranian petroleum sanctions november 4th, probably going to impose myanmar and russian and north korean sanctions most of those don't matter but in a situation like iran i think it will matter materially across western europe, india, china as you know, david, two countries have come out and said they simply won't adhere to our iranian sanctions and that's turkey and china and this is going to have, i

think, some reverberations across the world. >> interesting we'll be following it closely, kyle you mentioned china. in the few minutes i have left with you this morning, let's talk about china of course, our deteriorating relationship, operformance of te chinese stock market and concerns about the economy are certainly spilling over here you've been following it closely. you talked to us previously about the current accounts going negative, the currency what do you see on the ground in china that may be concerning you? >> the chinese are in the worst financial situation they've been in, in the last 17 years because they operated domestic economy where they control the printing press, they control the press narrative. they control the price level and they control their people as we've seen them detain over a million of them for their religious preference they can change a lot of things

domestically, but the arbiter of the chinese plan is their cross rate or exchange rate with the rest of the world. china, inc.'s capital, running a deficit on the current account ie, their woshing capital, dollar balance whether it's dollars, euros, yen or pounds, it's mostly dollars. their dollar balance is headed south. the u.s. is in a very particularly interesting negotiating position today we are in our strongest negotiating position we've ever had against china. they've kind of leveled the playing field a little more with the their, say, sub version of rules, property theft and basically anything they've done to take advantage of the u.s. the past 15, 17 years. >> you and i discussed this in the last couple of interviews we've done specific to this topic of china

but it's not clear, kyle, that the chinese are going to back down from the asks, so to speak, whether it be intellectual property, whether it be on removing tariffs, u.s. goods i'm curious as to whether you think economic pressures -- and if you could explain what those might be -- will move the regime to a more cooperative stance. >> again, i know this is a little bit of an archean subject. the current account makes china desperately short dollars. china has been forcing their companies, state-owned enterprises or private enterprises in china, to borrow dollars. they go into the chinese central bank the more pressure you see, a, that they create for themselves by running big imbalances between their raw materials and whatever they can produce domestically, and also the u.s. pushing back on the enormous trade deficit, all it does is

add to, let's say, the intense economic negativity that they have today and their banking system is now four times their gdp. they've got $40 trillion worth of credit, somewhere between 40 and 50, no one knows, in a system with only a couple trillion dollars worth of equity and so china is running the largest financial experiment the world has ever seen. the economy tide turns negative for them if you notice the narrative amongst the united states, it's actually a bipartisan narrative whereby you're seeing both sides of the aisle pushing back on china taking advantage of the u.s. and i think the u.s. is in a great negotiating position in this administration needs to level the playing field a little more and it looks like they're doing so. >> well, right so, according to you then, they'll have to borrow more

dollars or figure out how to get more investors to invest in china? they need to attract more capital, right you don't seem to think they'll be able to do that, essential not in the near term >> that's right. david, back in november 2016, when they were trying to stop the outflows, elicit capital outflows, they took multinational corporations, a lot of them u.s. corporations, haven't been able to get their money out of china since november 2016. i would be willing to bet that the investment community that has enormous amounts of capital invested in china probably couldn't get that money out of china if they tried today. >> but they always seem to figure out a way to grow out of their problems, kyle, and/or just borrow even more money. by the way, we've seen that globally for how many years now, right? you and i could have had a conversation ten years ago that was worried about the growing number of cash and assets in the world and it's only gone up -- i don't even know what fold, but a

lot. why is now the time where you really believe, i guess, that they're on some sort of a pre p precipes >> that surplus has turned into a deficit. what happens when 4 million chinese people move to the middle class they travel abroad four years ago when crude oil collapsed, china was importing 40% less crude than they are today. now crude prices have come up from 35 to 70 or almost to 80. >> yeah. >> so their current account negativity is structural, not cyclical, in my opinion. therefore, their desperate need for dollars is ever increasing so you see them trying to open

up their capital markets to investors from the west. in fact, as you know, just this ye year, they said global financial institutions are now allowed to own more than 50% of their financial institutions right after they wrecked their banking system, they're now inviting us in to invest in their banks. it seems to me like it's beautifully premeditated and they're trying to desperately seek dollars the question is, should people begin investing? >> bringing the world's second largest economy to its knees, if you're correct, wouldn't necessarily seem to be a great recipe for success here as well and certainly wouldn't seem to presage a great time for our own equity markets. >> yeah. david, whether you look at the defense department or the u.s. trade reps reports, the reports are that they steal 200 to $300 billion a year in intellectual property from the u.s. we've exported 5 million jobs

since china ascended the wto in 2001 with the hopes one day they would open up their markets to us they haven't they haven't lived up to their promises to us while they've been stealing intellectual property from us every year. so, i don't know if the who w l hollowing out is a great idea either there's no easy solution here. >> it's worth taking the pain? that's basically what you're saying here? it would be worth taking the near-term pain for the long-term gain of reclaiming our intellectual property, reclaiming the rule of law and jobs >> that's right. >> okay. >> look at what the chinese do and not what they say. when the wealthy chinese get the chance, they invest over here. they love a rule of law. they love the fact that their money can't be taken from them and they love, you know, 350,000 chinese students in the u.s. but

only 10,000 u.s. students in china. so, you know, what just happened with jack ma as a great example. jack ma was forced to resign and had to sign over his ownership in alibaba to five unnamed individuals weeks ago. this isn't carried on the front pages of the news but i think the u.s. still has the best financial system in the world. >> as do many of us as well, kyle thank you. iran sanctions, china, our markets. we covered a lot kyle bass from hayman capital, always appreciate your time. >> thank you, david. let's send it over to scott wapner who has a cnbc news update for us. scott? >> thank you, david. tu turkish president erdogan telling party officials that saudi officials murder eed jamal khashoggi after plotting his death for several days he said they used a, quote, body double as a decoy.

turkish media airing a closed circuit image reportedly showing the body double wearing the journalist's clothes, making it appear that he left the consulate. turkey has been investigating the disappearance since october 2nd. his kingdom is hosting a summit, the brainchild of the crown prince mnuchin said he will not attend. low-lying areas, setting up shelters as hurricane willa reaches landfall that is your cnbc news update at this hour. carl, back to you. the dow down more than 500 points. >> thank you very much, scott. you are watching "squawk on the street." i'm carl quintanilla with david fab faber, mike santoli at post nine at the new york stock exchange dow is down 524.

s&p breaks below 2700 for the first time since july. dow and s&p within a stone's throw of going negative for the year once again. complete coverage on what is driving this global markets. dominic chu is taking a look at the key earnings, eamon javers is at the white house with reaction and seema mody is abroad and on set to break it all down we will begin with those industrials and dom chu. dom? >> three of the worst performers on s&p earnings season not going the way the bulls had planned. it's early in the season generally speaking, it has been positive that's curious, right? according to data, more than three-quarters of reports have beaten analyst estimates as for the revenue side, it's still positive but to a lesser degree therein lies the rub, 63% has

topped expectations. rbc strategist points out, that pace of beats has moderated, especially true on the revenue side, in the case of sales beats is sharper than earnings per share side also, this notion that traders are using these earnings reports to sell the news this investment group notes of the stocks reported so far this season around three-quarters have traded lower on a ne-day basis in reaction to that earnings release those average one-day declines also now on pace for their worst since 2011, something that was noted early this morning if these trends continue, markets could be due for even more volatility in the next few days because you've got industrials like boeing. also, consumer discretionary like ford. then you've got twitter, amazon and market many of these key momentum stocks and industrial stocks

could be, again, flash points for this kind of a market sell-off, mike. >> tough to please markets so far this earnings season, dom. chinese market selling off overnight. more on the impact from asia, let's get over to seema. hi, seema. >> we're looking to see if there is a correlation from the chinese stock market performance and impact on the u.s. stocks. u.s. stocks are lower, about 70% of the time in periods when there are big drops of 10% or more in the shanghai composite the main u.s. indexes like the s&p 500 typically lose about 5% when stocks in china fall 10% or more in a 30-day period. it's those big, blue chips that have exposure to international markets, like goldman sachs and caterpillar are among the losers but copper and oil also fall hard with chinese stocks underperform what's interesting about the move overnight, it comes as chinese officials have been j

using economic tools to support the economy and cut taxes for consumers to boost household consumption. you have to wonder, carl, what else they can do to stimulate the economy. >> seema, it's a big piece of the puzzle this morning. thank you. interplay between the u.s. and chinese market is a key issue for the white house. eamon javers has reaction to the selloff from d.c. today. >> reporter: good morning again, carl larry kudlow saying that the chinese side has not responded well to american asks in this overall trade war we've seen between the two countries the past several months. he also said, though, that the president and president xi jinping of china will have an opportunity to meet face to face for a bit, he said, at the end of november. st so look forward to that.

i asked larry kudlow if he believes that the president's trade policies are responsible for the weakness we've seen the last couple of weeks he said no larry's theory was that the market, what the market is really concerned about is the upcoming election and the prospect that democrats might win the house of representatives and somehow try to reverse the president's tax cuts i pointed out to larry that even if the democrats win the house won't be able to get the tax cuts reversed because the president wouldn't sign a repeal bill he agreed with that but said markets don't like uncertainty and this possibility of change of control represents some uncertainty for traders. back to you. >> thank you, eamon. very important oracle's open world this week and john is sitting down with a very special guest. john >> that's right, carl. i'm here with oracle ceo mark hurd mark, thanks for being with me we had larry ellison's key note

last night i want to dig into next generation cloud first, this market volatility. we heard from caterpillar about costs related to tariffs how is that affecting the environment for oracle a aacle oracle customers >> doesn't affect us much whatsoever but the numbers that do affect us, which again are a very small amount, i could see where it could affect a number of -- >> let's talk oracle cloud gen 2. larry ellison not pulling punches last night it would be news if he did, because he doesn't do that. >> despite coaching. >> i'm sure many at oracle try. >> yes. >> talk about security contrasting with amazon. i'm wondering, a lot of the cloud breaches i've seen have to do with user configuration

error, failure to use two-factor authentication are there specific instances you're looking at where aws has been breached where oracle technology would have prevented it >> it isn't just aws there's a broad number of breaches, the number ever increasing just as our capabilities to defend, so are the ability to attack security, security, security he really hit home the security side in addition to that, we focused on the evolution of our database technology, just as important in the context of the entire gen 2 approach this is the most exciting database release we've had in concert with gen 2 the autonomous self-driving. i know you know this, but not everybody, i think, does when we release a patch of

database, it typically gets six, eight months. you automatically get the protection with the push of a button the ability now to do this the ability now to autotune the database, these are huge improvements in the database we've never seen before, in concert with gen 2. >> you first started talking about autonomous database. cloud growth, harder to read in the numbers you're releasing in earnings you've had a year on autonomous database how will they noo numbers affect areas outside growth in application? that's about a third of the business cloudwise. >> right. >> will this push the rest of it >> good question you're right apps is about 25, 30% of the business, growing double digits. that's a holistic number across

oracle, support, sass, assses are driving all of that, plus some in tech, what we did in terms of q2 of last year, sort of this time last year, we introduced a concept bring your own license, byol that, in effect, makes a license portable, between whether you're using your data center or in the cloud. the impact of that was our license revenue actually went up and people decided to buy more of those licenses, the traditional way if you would and they can now bring these -- for a couple of reasons. one, our customers have a hard time predicting the workload will it change 4, 5% i don't know therefore i'll buy a traditional license. causing licenses to go up. our nonsass, platform revenue to actually not grow as fast as it was previously. >> i want to talk about saudi arabia back in february, you announced

you were going to do cloud data within saudi arabia. now with the news of the killing of jamal khashoggi, are you rethinking that? what's status that have data move >> the middle east is a very strong region for oracle, john we will have a data center in the middle east. whether that's in uae, in some other part of the middle east, we'll see. we will put a data center capability in the middle east. >> what is oracle's public message about the importance of rule of law or business environment, given that you're looking to operate in a region like that? >> first we like to have all the facts before we jump to a conclusion. >> not all the facts, though. >> we have a lot of the facts. if some of these things were true, obviously, that would be of great concern to us again, though, i'll stick with

it's an important region to us i don't want to take one action and paint a picture across the entire region. very good customers. again, to your original question, we'll have center capabilities in the middle east. >> talking about oracle again, your push in technology toward the cloud. thomas curian left a few weeks ago. initially oracle said he was coming back. >> right. >> reporter: he's not coming back. >> right. >> little unclarity there. what happened there? >> he decided to leave he has been with the company over 20 years, did a ton of work i wish him the absolute best i think he's looking for a new opportunity and we just wish him the best by the way, there's no other story behind it, john. there's no backstory or whatever else. >> there has to be some backstory. >> not really. >> you thought he was coming back and then he wasn't coming back. >> i hoped i really did i think thomas is very helpful he is a very good man. he's going to do great. >> okay. let's talk about the jedi

contract you guys have challenged the defense department's push to give this huge $10 billion cloud contract to a single company, essentially. we're about three weeks out from the government accountability office's final decision on how that's going to work out how do you feel about that and given larry ellison's message about how tightly integrated and secure oracle's next generation cloud is, doesn't that support the idea that if they were to pick oracle as a single source that would be a good idea? >> that's great. that was about eight questions at one time. >> i like to do that. >> terms in the first question, how do i feel? it's not important how i feel about it we look at the facts we want them to mac a fair decision, consider all the possibilities and open this up to fair competition. the context of dod is a huge customer of oracles. from an application perspective,

most of the services runs on oracle applications and run on the oracle database. so for us, just making sure that this san open, fully thought through. it's very important. it's a lot of money that the taxpayers are paying and we think it should be open and fair. >> finally when you look at this open market, for a big company like oracle with a lot of resources that could put things on sale. how are you feeling about the m & a environment and the possibility of whether it's application companies or pieces potentially picking some things up >> we're always looking, john. we never stop looking. whenever you ask me that question it's like, did you think of this, think of that we try to think of everything. that said, we're interested where the market is moving, not where the market has been. the likelihood that we'll take a cheap stock because it's cheap that may not have a role in where the industry is headed, very unlikely.

what we've seen us do, we've been very focused on new generation or next generation companies and that's what we'll stay focused on. >> internationally with the strong dollar, does that impact your thinking about investments or acquisitions outside the u.s. i mean, if they were good, does it make them a little better in an environment like this >> john, i think you know the answer we play long ball. we're not in this for currency fluctuation this week, next week if we find the right company to buy, we go out and buy t we're in this. everything you could say about oracle is we look for this thing. we get the benefit of we've got a founder at the hem whose chairman owns a third of the company, thinks about the world generationally, not from quarter to quarter, week to week that's my job. in the end we're thinking about long ball here if something made sense for us to do, we would do it. >> oracle ceo mark hurd, oracle world, thanks for being us with. >> thanks for coming

oracle shares outpecrforming down less than 1%. dow is down 386, actually up almost 200 points for its low of the day. art us here to break it down. art, seemed like coming into today, play book was out, how would you grade it >> it is interesting 2710 had been the low back. they came in, tested it on the first down then they rallied and failed they broke 2700. another area of interest what is beneficial, mike, is breaking theoretical support levels did not lead to trap door selling, so i think what you're seeing is a market that's testing itself here, as you note, back significantly back

off the lows there's always a chance to roll over the real matter that we'll be grappling with is what happens overnight in china and does something further spill out of the saudi arabia thing. oil is down. that's because people are comfortable that it has not spread further and reassured by saudi arabia's comments that they will make sure there's enough oil there the other side, they need the money. you'll have to watch for that. i think for today, the market will continue lacking any significant news, testing and retesting. but the real story will be overnight and what happens in china. >> how much are we dependent on macro and central bank issues versus corporate micro guidance. we have boeing and other names tomorrow and thursday. >> well, you're going to see

that one of the things that happened today, caterpillar is the poster child for international trade. when you get mmm and caterpillar with a hint that the strong dollar may be a bit of a problem, that some of the things coming up may be a bit of a problem, with all due respect to larry kudlow, i'm not entirely sure it is the election. i think it is about trade and trade wars today's selloff started when china did not defend their market andnumber two was kind of dismissive. we're not really worried about tariffs and trade wars and that says to the market uh-oh, that sounds like we're not going to cooperate and that means things might get worse. >> didn't defend in china. the plunge protection team didn't come out. can we draw any conclusions whether they show up tonight >> well, they may have to. i think they noticed it. it was more the commentary than

absence i would say. and that came kind of late enough in the session that we'll believe it will have a greater effect tonight overnight now i go back to an old arcane trader lore that october selling often ends with the first game of the world series. so that's tonight. let's see how the market reacts tomorrow >> is this your saying or one you inherited over the years >> oh, no, well over the years. >> used to be early october. i guess it moves later now >> september is the weakest month. that always used to carry over to october doing this over 50 years, i will tell you historically some of that goes back to basically crop rotation, money leaving the big city banks, going to the small country banks to pay for the

harvested crops and that would lead to shortages of money in big city banks temporarily so you get the september, october selloff. now that we have more smoke stacks than hay stacks, you would think it would end but the market continues to follow that pattern. >> what do you think of the way that the treasury market traded here it hasn't been some furious bid for safety in treasuries, but ten year yield is down from 323 down to 313. does it give you any signal? >> not quite yet i'm bearish on yields. i don't think we go tremendously higher i think the fed knows we get the ten year over 3.5, it will send a riveting message to the stock market so i would keep an eye on it you have a saloon full of fed speakers today, see if we pick anything up from them. >> all right thanks very much. >> my pleasure. back to headquarters this

morning. dominic chu look teg moves in commodities for us but he is not ready. we will get to him in a bit. i looked at the list of 52 week lows, mike, it has gotten longer in the past few days some of the newest additions include citi, pnc, raymond james, pvh >> the banks down 2% yesterday some follow through today, it is not leading the market down but not across the board remains to be wucone of the thi that's a yellow flashing a lot of fixation on volatility index. the vix topped 28 when we had the 800 point flush down, and haven't approached it now. it seems contained i don't know if traders assume the market is bumping along the bottom of a short term range or what, but worth keeping an eye on as well

>> that's a painful group. in contrast to what you might have expected with rates trending higher through the course of the year. >> exactly and earnings were fine >> right decent earnings. >> so part of the market bracing for something else, big slowdown, something. or banks are not leveraged to good domestic economy as much as they used to be. and also, europe is not helping. >> asset managers, too people pointing to blackrock as an interesting signal of where we are headed, where we are. we continue our coverage on this global selloff, obviously started in asia. europe follows suit. the dow is down 413. "squawk alley" begins in a few moments.

♪ ♪ daddy, mommy's on the phone! hi! how are you guys? ♪

ignition sequence starts. 10... 9... guidance is internal. 6... 5... 4... 3... 2... 1... ♪ life was tough in cuba my mom was fired from her job, so she started making cakes to support us.

the first account that we opened was with bank of america. since then, we have grown exponentially. to me, food is love. and i think food brings people together. everything in life is about giving back. you're only as good as what you leave behind, when you leave this world. ♪ good morning it is 11:00 a.m. on wall street. "squawk alley" is live ♪ ♪

♪ ♪ good tuesday morning welcome to "squawk alley." i am carl quintanilla with morgan brennan at post 9 of the new york stock exchange. jon fortt joins us from oracle's open world in san francisco. we'll get right to the story of the day, and that is market selloff. complete team coverage this morning. bob pisani is on the floor, looking at the key driver for stocks morgan following cat and 3 m ylan mui in washington watching the fed speakers, and mike santoli looking at the broader themes in the markets. let's begin with bob pisani and earnings we have gotten so far. >> the important thing, we are waiting for europe to close.