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♪ good wednesday morning, welcome to "squawk alley." jon fortt is in san francisco once again we're going to jump right into the markets again. full team coverage of the volatility today as the dow reverses hard to the downside. dom chu joins us with the earnings outlook driving stocks today. phil lebeau on boeing and bob pisani looking at what could possibly calm the markets. let's begin with dom and get a check on the week's earnings so far. >> earnings season continues to be that positive theme that's developing that hasn't exactly translated into constructive market moves today's price action reinforces that feel a bit. it's something that jeffreys equity strategist steve desantis said 63% of large cap companies have beaten earnings estimates, 65% have beaten sales estimates, but only 48% have managed to beat both top and bottom lines

now, the thesis he's talking about here about what's shaking the market is concern over whether last quarter, the second quarter, may have represented peak earnings growth still a little early to tell there. but data still has s&p 500 earnings growth at 22% for the quarter if all other reports come in as expected. we're also going to see top line revenue growth of 7.3% a couple of key hot spots to watch that have been in medium to longer term downtrends and certainly recent earnings catalysts this week, regional banks, especially yesterday. we look at the etf, the ticker kre. it got a big bounce off the lows yesterday but has set a new 52-week low again today, so below yesterday's low levels also the home builders as represented by the usi shares, home construction etf, again, a bounce thanks to positive earnings sentiment yesterday but again lower in today's trading as we talk about the moves, this is stuff we'll be watching to

see if these themes continue back over to you >> now bob pisani is at the nyse looking at what could calm the current market turmoil bob. >> hello, jon. strong earnings may not be enough to calm the markets until this whole yield issue story is resolved we've had 80% of companies beating earnings growth at 22% it's expected to continue into the fourth quarter all this is good news but markets have shifted the focus to rates and slowing growth in china. so the main risk to the markets is rising rates on the back of strong u.s. economic data. therefore, the markets aren't going to calm down until it comes to believe that first 10-year yields will not rise too much more, say 3.5% is some limit, and secondly, they have to believe that the fed is not as hawkish as some traders are trying to argue, that taking out the word "accommodative" for

example does not mean the fed will keep hiking into infinity and will not accelerate their path to rate hikes bulls are pushing back, arguing that outside of housing, these modestly higher rates are not a huge drag on the u.s. economy. we've seen attempts to buy beaten up housing stocks and even the bank stocks yesterday rates are rising, the bulls argue, but the financial conditions are not tight, not in any classic sense. the economy is also strong, but it's not overheating and, carl, i would take a lot of solace in robert kaplan's comments today he was talking about 2.75 to 3% as the fed neutral rate. that implies three more rate hikes this year going into next year that's the kind of belief that traders have to have, that that's not a terribly aggressive path if the fed states that, i think the markets will calm down guys, back to you.

>> stocks near session lows. the dow is now down 190. we'll get an update from phil lebeau on boeing shortly, but for the time being brian leavitt joins us guys, good morning. >> good morning. >> torson, yesterday some said they tried to argue the action in the home builders, that the market was trying to sniff out maybe a fed that would change its tune a bit are you seeing that? >> no. home building as such, residential investment is accounting for a small share of gdp, only 3% or 4% so it may be a volatile component and sensitive to interest rates, but remember that we have 95% of the rest of the economy doing relatively well >> so is it asset prices what would get their attention >> i do think worries are at what level will interest rates get up to before things cool

down one thing that's been getting a lot of attention is cap ex and the tax cuts have been doing a lot for companies, but generally speaking if we have to see a slowdown, it has to be much more broad based than just a small segment of the market. the consensus doesn't see that the fed forecast itself is also -- the gdp growth is sensitive the next three months. >> brian, there's been a lot of focus on the strength of the u.s. economy as the rest of the world begins to soften a bit you have china beginning to stimulate their economy. is that something the fed needs to keep a closer eye on? >> i think the big news of this year has been the divergence in growth between the united states and china. i think maybe a surprise to investors next year will be the u.s. moderates some. we've already seen a persistently strong dollar, fed interest rate hikes and stimulus out of china i don't think that that's something that the fed needs to be concerned about i actually think a slowdown in u.s. economic activity and some

stimulus out of china would actually be a healthy thing this part of the cycle. what the fed needs to be worried about is getting too tight and tightening financial conditions when we still have a reasonably flat yield curve in the united states >> how does the fed do that, say, in december when the president has put him in a box >> it's a bit of a challenge the underlying pushing interest rates higher are three things. an economy that's strong, a significant amount of supply of treasuries and the hedging cost for foreigners who are buying u.s. fixed income are quite elevated and poised to continue to go up as the fed continues to raise rates and the bank of japan does very little there's a lot of headwinds for u.s. rates specifically and i think that's the fear that you're sensing a little bit in equity markets that maybe rates are under more pressure but the speed with which they're going up is very important but it feels very controlled. >> do you see any change in net

foreign purchases over the next 12 months? >> if you look at the statistics, that has shown some less appetite among foreigners for credit and also for u.s. rates and u.s. treasuries. generally speaking, it's been picked up and rates have been going up but it's been picked up by domestic investors. generally speaking, we still think interest rates will slowly move higher and 10-year rates will be 3.5. so that's not a dramatic move higher it's a bit higher from where we are but not something to derail the recovery given how strong the data has been recently. >> brian, i have to get your thoughts on earnings, especially when you see a company like -- and i'll just use this as an example out of several, northrop grum an. it raised its full-year guidance to $19 a share what it implies is q4 will be 329 to 344 analysts expectations are 447. are wall street analysts just too bullish? are they unrealistic in terms of their expectations is that part of what we're

seeing in terms of the pressure on stocks right now? >> i think the pressure that we're seeing on stocks is really more around uncertainty with regards to policy, whether that's trade, whether that's the federal reserve and obviously the midterm elections in a few weeks. yeah, we did get maybe -- the analysts maybe got a little bit too excited, but i wouldn't look at this volatility as this is the end. i mean we have these types of bouts in the markets and volatility comes up when there's policy uncertainty, but the forces in the economy are still good even if the u.s. economy moderates some in 2019, this is still a good environment for corporate earnings so yeah, earnings growth are going to slow. i don't think investors should look at this as an end of a cycle or anything bigger than what it is, which is just a correction in equities right now. >> we'll keep that in mind it is the slowing in corporate earnings growth, thank you, guys we're watching this intraday

action here. some of the sell programs making themselves heard dow is down 274. took out the overnight lows pretty easily. >> yeah, and we're back below 25,000 on the dow as well. when we come back, cannabis stocks face volatility just one week after legalization in canada pot stocks are taking a hit amid the market sell-off. we'll speak to the ceo of public cannabis company canopy growth we've got that and so much more when "squawk alley" returns. 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. you'll only pay $4.95. whooo!

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be some high profile names like nvidia, but broadening out a bit here, again, session high was up 114, morgan. >> in terms of those chip stocks, you see both the nasdaq and the nasdaq 100, the worst performers on the day, each down more than 1.5% right now it's really more of a risk off tone in the markets. you've got utilities and real estate, consumer staples are the sectors that are positive in terms of the s&p as we've seen the yield on the that 10-year treasury move back down to 3.119. meantime watching some developments out of riyadh today, as the saudi conference moves on

>> reporter: hey, guys well, it's standing room only here as crown prince mohammed bin salman took to the stage and said in response to questions about jamal khashoggi, this was a painful incident not just to the world but to all saudis. he said folks were trying to drive a wedge between saudi arabia and turkey as well. lots of questions remain about what exactly happened to mr. khashoggi, but the crown prince was showing that he seemingly has nothing to hide by responding to this question and saying that essentially saudis were working in conjunction with turkish authorities as well. now, of course all of this in response to what we've heard from the trump administration over the last 24 hours essentially the president saying that there hasn't been enough done in this investigation, that he's still looking for answers and that the saudi response to mr. khashoggi's death has been utter chaos. guys >> hadley gamble, thank you.

cannabis stocks continuing to see a decline as companies are all down more than 20% over the past week. aditi roy joins us from san francisco with a closer look at why pot stocks are going, well, up in smoke. aditi. >> this morning those stocks appear to continue their decline and they took a beating the first couple of days of this week, which has weighed them down canopy growth down 14.5% for the month on pace for its worst month since february kronos down 21% since march, those shocks along with tilray aphria and aurora off. one exchange traded fund that tracks some of these pot stocks fell 2.8%. the etfmg alternative harvest

etf is relatively small but has seen high volume over the past month. it fell six straight days through yesterday's close. so what's the reason behind the sell-off some analysts say it's a bit of profit taking. others believe that many of these stocks have been overheated the valuations of some of these companies need to be reset, they say. they still add there's tangible long-term value in these companies. as far as how sales are doing in canada, the first days of legalized recreational sales found online stores for five provinces were sold out of 46% of products. the report found 56% of canopy growth's products sold out within the first five days of legal adult use compared to 64% of tilray's products being sold out. though tilray doesn't have the licenses to sell in three of the provinces. the other companies from aurora to aphria also had high sellout numbers, ranging from 30% to 60%.

morgan, back to you. >> thank you let's get to a primary player now, canopy growth, the first cannabis company to trade on the new york stock exchange we are joined by the chairman and ceo, bruce linton. thanks for joining us today. >> thank you good intro, aditi. >> in terms of what aditi just had to say, the fact that we have seen this selloff more broadly, canopy is down another 2.5% right now, what would you attribute that to? >> well, let's play what the intro said our products are selling out we're having to ship more continuously across the whole country because after 90 plus years of prohibition people are buying the product so we're fully engaged in pushing everything we have out to every jurisdiction in the country, while we're also growing rapidly internationally. so i think that tangible value thing is true and that probably the selloff is the stocks have gone up and people took profits and there's probably a transition from retail holders to institutional holders,

because i think institutional is thinking this could be a global outcome and canada has the best structural program, which is being adopted in many other countries around the world. >> does the volatility we've seen in the stock, does it concern you at all i mean not in terms of fundamentals of the company because obviously you just laid out the strength there, but in terms of what it means for investors and the perception, especially when you hear comparisons to the crypto craze we saw take root last year >> i'm still looking for use of crypto but i think a lot of people figured out a good use of cannabis and it's going to be medically relevant on a global basis and those will happen. i'm making sure that what we do is we presenting to institutional potential investors and current ones on a continuous basis so i'm moving from the west coast of the u.s. over to australia tonight. you know, two weeks ago it was the uk and france. so i think what we'd love to see is a shift to our institutional holdings because one of the things that i would say was a big indication of the marijuana

stocks two years ago and a year ago was it was all retail. now we're a quarter or more institutional. i think there's quite a lot of institutional eyes on it maybe they'll see this as a good buying opportunity >> yeah, bruce, when you get -- i'm just curious at this point, given that we've seen wholesale change in laws in very large countries, what is the pushback from institutions now? is it on some kind of moral basis or do they not believe that legislation will be replicated, something else >> i think for a long time they just said it's marijuana, we can't look at it as it went from a couple of cup trees, canada, uruguay, israel, now i go to the uk, i go to paris, belgium, around the u.s., i now meet with the tier 1 institutions who have some people working on what is our thesis on this but they see it as a global disruptor. institutions of substantial size, we're still almost what they would call a small midcap

in their world, so this is not -- i don't see it as a symptom of anything other than this is a new sector and they have got to be right rather than wrong but i like the fact their frequency of analysis and who they're sending up to see our shop appears to be legit. >> bruce, you just rattled off quite a number of countries. and i realize it's been so far a state-by-state basis here in the u.s. but when you look at the u.s. through that global lens, are we falling behind in terms of potential regulations or updated regulations, i should say, around cannabis? >> i think when there's no federal structural way for it to be legal, it really does curtail the opportunity. and so when i'm in the u.s., i don't conduct business here because it's not federally legal. but it means that things like -- everybody talks about the banking instruments. those are great, but what about research facilities that have federal funding? if you can't access those, creating intellectual property is a challenge so i would say that this current mixed model in the u.s. really isn't working to the advantage

of the u.s. and it means that significant operators can't come to play here so we're off in germany more than we would otherwise be, or the uk as they're changing their model and pushing the eu or australia later this week. >> bruce linton, thank you for joining us >> thank you. obviously watching the markets closely on the right side of your screen. the dow is one part of the story, but bob pisani, back below 2710, people watching that too? >> we had another one of those little sell programs come through. there's been a lot of them in the last couple of weeks most people look at these as these funds that are rebalancing their funds, their relationship between bonds and stocks and commodities. put up the spy if you can. just a flutter all of a sudden the volume spikes up and you quickly move down that's an obvious selling pressure that we've got. there's been two sectors that i highlighted yesterday that are under a lot of pressure today. the banks and the semis. yesterday we had some decent

earnings reports from the regional banks and they went up for a change that's sort of reversed today and we have these crazy numbers. all of a sudden you're up 3% one day and the same stocks are down 3% the next day. there you go, your standard big cap regional banks of course we've got a fundamental reason with texas instruments really implying weaker guidance. it's one of the companies that clearly implies weaker guidance and that sector just right across the board, including intel, a big dow component, has been weak right across the board. but if you just look at it, even like an apple that doesn't have any particular news out or just about 11:00 apple drooped in line with the rest of the market even the consumer staples names droopd a litt drooped a little johnson and johnson drooped a little coca-cola drooped a little it's back up but it moved down that's the sign of a fairly broad program that comes through and draupops the overall market they're looking through the

earnings, the positive earnings, focusing on the two biggest macro issues out there, china slowing/tariffs and rate hikes and what that means for the attractiveness of stocks versus bonds. everybody is trying to thrash out exactly what those two issues mean for the markets. >> bob, thanks for that. mike santoli here at post 9 with us we mentioned 2710, but a revisit of 2691 would be a third lower low in the past few weeks. >> exactly that was our low from yesterday, right? so this would be a constant testing process. there's no real script to it, but it could theoretically soften up those levels it just sort of shows a very unsettled tape still so there wasn't any particular headline, as bob was saying, it was just kind of a little bit of bearish flow the banks continue not to have any relief, and i think that's something that will be hard to generate a sustainable rally if you don't get that jpmorgan down another 1% plus today. so you have the high quality banks and it seems like flow out

of that. you do have a little bit of a risk off bid of treasury yields taking a small leg lower, so this is where we're there's not a particular place that seems like it feels like it's gathering up any kind of spring-loaded momentum, but sometimes that's how it feels before we bottom out by the way, at&t down more than 6% you know, this is a stock that's already been weak. bad numbers, down more. >> and going back to the point that bob just made about looking at these earnings and the fact that even good earnings, investors seem to be reading through to find the negatives right now, we've been focused on the fact that you have a third of the companies that reported so far have missed on revenues, but for many of those companies, the revenues are still growing i'm seeing that in the industrials, case in point today. ups, general dynamics, both missed in terms of expectations but you're still seeing growth and this is a more cyclical sector is this being overlooked >> i don't know if it's being overlooked i think the market is very sensitive to deceleration of any

kind right now, because that's been the whole narrative is what is the first half of next year going to look like is it going to be a steep fall-off in growth do we lose a lot of the tailwinds, have any positive offsets, and i think that's why the numbers are really being received that way. the one thing i'll say, once we're through maybe today and tomorrow, earnings season seems to go in these two halves. the first half has one particular type of reaction and then all the related stocks get beaten down or up, and then maybe you have a little bit of a reversal effect because you've priced in that muscle memory oh, they're selling the news that's the way it's going to go in the first half of earnings season and maybe finally you get expectations low enough. who knows if that's going to happen. >> bob, i want to get your thoughts on this too because i know you've been talking about it the last couple of days. >> more clarity from the fed is going to be the most important and the market coming to believe that there's clarity from the fed. i thought kaplan was very important. steve talked to him this morning. he talked about 2.75 to 3% as

the fed neutral rate so right now we're at 2.25%. that implies three more rate hikes, maybe one in december and two more next year if the market comes to believe that that is in fact the consensus at the fed, i think that will go a long way towards calming some of the rate fears down obviously the market is not sure about that right now there are people arguing that the fed will be much more hawkish. i personally would follow kaplan and listen to what he had to say. >> curious, mike, what you think needs to lead at this point. does it have to be banks does it have to be industrials >> the banks have to stop going down they have to find some kind of a footing there in that sector deutsche bank down another 4% today on earnings, so it seems to be a global phenomenon right now with the financials. i do thinkthat honestly -- unfortunately, i think it's the same old leadership probably has to assert itself get reminded of what microsoft is able to do on an organic basis or maybe alphabet when they come around i don't think it's going to be the kind of a market where one

name rescues the tape, it's just kind of we get sold out and then you can start reacting on a one-by-one basis to the companies as they come out >> all right always great to get both of your thoughts bob pisani and mike santoli. jon? all right. we are continuing to follow this market volatility in the tech sector over the last couple of months, reversing gains earlier in the year. we're wondering if this could get ugly brent bill is a senior tech analyst at jeffreys and eric lipoe is a managing partner. are they with us >> good morning. >> they are. gentlemen, good to see you brent, i want to start with you. we're seeing this volatility in the tech sector, but things are still overall, they have been pretty good for this year.

so how should investors position themselves we talk a long about faang, but there are smaller stocks and companies that have had some decent consistency in this market what looks good to you >> right now i think the concern over growth slowing multiples, obviously faang has led us up, it's outperformed the nasdaq year-to-date as a group still so there's still performance that can come out these stocks are coming down from an overweight to a neutral or underweight so i think ultimately for us whenever we talk about faang, we talk about mig ic has been a great consistent story. godaddy is another story that we liked that did very well during the last downturn, so we don't know exactly what the next year holds. we do know things will slow. you can see it in amazon's growth going from mid-30% growth

down to low 20s by the end of the fourth quarter and into next year the growth rate will decelerate and expenses are coming higher. i think there's a lot of concern around large cap tech and that's going to push some of the investment decisions to look at some of these other names outside of faang >> eric, tim cook is trying to draw people's attention to the data industrial complex. he didn't name names, but it makes everybody think about alphabet, facebook clearly is he a lone voice in the wilderness on this one, or is there any kind of mounting danger that these business models based around aggregating data is under any risk >> he's definitely the louder voice in the industry and somewhat of a lone voice for the time being i think the biggest issue is that the actual model of just capturing all this data and then using it to target people for

advertising is going to some degree fall by its own weight. the scandals that we have seen in the past few months, just the abuses and the breaches and the hacking and all of that has got to be limited. it's got to come to some sort of a head and i think that if the industry doesn't self-regulate, then you're going to see as you have seen now in europe, you're going to see the government step in. the state of california has already enacted a law that will come in effect in 2020 it's got to be a federal situation. so i think that there will be a natural limitation of how much data people can capture in the future >> eric, is it affecting how you invest at all? is your assumption that there is something that has to change in the relatively near term or is it just a possibility that you're open to >> well, i'm a venture

capitalist so i have a very long-term view of everything and i do pay a lot of attention to the companies that we invest in as to what their data policies are, their privacy policies i want to make sure that over the next five to ten years that we believe that those policies are sustainable. >> and brent, i know that godaddy is a company that you're watching interesting to me their model is very much tilted toward subscription, toward offering a service that's not so much involved in the advertising business is that something that has grown more attractive to you as a model in general and are there other companies, if so, that you have your eye on that follow that mode? >> yeah, the beauty of godaddy's story is that it doesn't flare up or flare down, it's just consistent it's $130 for a small business

to get started today there's over 800 million global small businesses and there's north of 18 million on the godaddy platform today, so there's a long way to go in terms of penetration they are a leader. they have an incredibly high quality management team that worked at private equity kkr we really admire that whole team so i think there are other stories, you know, like match, which are an element of subscription around dating and they dominate that category. we like that story a lot it's the fourth most profitable name in internet, so it's high growth plus great profitability. so i think what we're looking for are stories that have predictability as well as profitability and those would be two stories that we'd highlight. there are other small cap names in the mind, body and health wellness sector. and when you look at amazon and netflix around subscription versus the ad names, facebook and google, which are underperforming massively, so i

think there's definitely a gravity towards future subscription models. we think that you're seeing that play out in the performance of these stocks many of the midcap names we cover are still up 40% to 50% year-to-date because of these characteristics of the model >> eric, are there particular types of subscription models that have your attention at this point? we've seen these reports about apple readying a content subscription offering, for example, finally starting to aggregate channels the way amazon has being based in new york, content and content delivery is a big business there is that someplace where you have attention or when you look at subscription possibilities that haven't been fully exploited, are you looking at other industries as well >> we look at pretty much any industry, which is we believe that subscription models,

software is a service, platform is a service, all of that has a potential pretty much across the board. in a world where every 23-year-old is now disrupting every segment of the economy with some form of technology, we believe there's a lot of opportunities. about half of our portfolio is in fact sass or sass-like models. >> all right, brent, phil, thank you. >> thank you well, let's send it back over to hq now for a news update with sue herera. >> morgan, thank you very much here's what's happening at this hour, everyone cnn's headquarters in new york city have been evacuated this morning because of a suspicious package. law enforcement officials saying it was a pipe bomb earlier today the secret service says it intercepted packages containing possible explosive devices that were addressed to both hillary clinton and barack obama. another child who was

hospitalized due to the edino virus has passed away. that is the seventh death in new jersey the patient was one of the 18 confirmed cases of that virus among medically fragile children at that facility and one person was killed when scaffolding collapsed into the street in belgium. that's amateur video from the scene. of course it shows the wreckage there. police say at least one other person was injured no word on what caused that clam collapse. and prince harry laying a wreath at the fiji war memorial. he is the first british royal to visit the nation since a military coup 12 years ago he and his wife, meghan, will travel to tonga on thursday. you are up to date that's the news update this hour i will sending it back downtown to you, carl we're watching that situation as it develops in new york city for you. >> all right, sue, thank you for that continue to watch the markets here the dow is down 254 after

yesterday's selloff and then the recovery we've got full team coverage for you this morning seema modey, bertha coombs joining us, phil lebeau in chicago and eamon javers at the white house with the president's reaction let's begin with seema >> hey, carl, european markets closing mostly lower, now hovering at their lowest level since 2016 we did get a bout of recent disappointing data out of germany where business activity growth hit its slowest rate in three and a half years meanwhile, in france its manufacturing reports show that they're seeing their slowest output in more than two years, blaming weakness in the auto sector in response, the euro is slipping that's coming ahead of tomorrow's european central bank policy meeting earnings continue. deutsche bank falling more than 4% after posting its lowest third quarter revenue since 2010 and that stock is down nearly

5% a different story for barclays which fared a bit better thanks to strength in equities trading. that stock up about 3% but weakness in tech continues sd micro dropping more than 9%. texas instrument issued a similar weak forecast so continue to watch that sector. one bright spot, gucci parent company offering some relief over mounting concerns over a slowdown with the chinese consumer with a stronger than expected third quarter sales let's take a step back ubs putting out a disappointing read on flows in and out of european equities underlining investor concerns around the threats of brexit an those italian budget woes. u.s. investors according to the survey have now been selling out of european equities for eight months in a row, more than fully wiping out 2017's buying pspree.

let's get over to bertha coombs for a look at tech stocks at the nasdaq. bertha. >> yeah, morgan, seema talked about sd micro, and then you get texas instrument disappointing outlook as well. that is casting a lot of collateral damage in the chip sector and underscoring the recent pessimism that we've seen about sector demand. the semi conductor index is down 20% and is on pace for its worst monthly decline since the 2008 financial crisis t.i.'s analog chip shipments were one of the real weak spots in the sector and they see slowing demands in markets like autos, raising uncertainty about how much of this is a sector-specific issue or a reflection of bigger economic problems remember last month we had micron warning about clients' bloated chip inventory so that was going to reduce demand both texas instruments and amd among nearly a dozen chips in the semi conductor index with new lows

we've got amd and microsoft due up this afternoon and alphabet and amazon reporting tomorrow. amazon's wage increases to $15 an hour has already raised concerns about margins there so folks will be watching that on the conference call but despite raising a red flag about slowing demand from cloud clients is bucking the trend its outlook is more in line with expectations here too there is concern as they are talking about what the end demand is there from those cloud clients and whether we're just seeing some softening in tech and whether tariffs are going to have an impact on firms like juniper that make gear. back to you. >> bertha coombs, thank you. let's bring in phil lebeau for a look at earnings this morning starting with boeing and its blowout report phil. >> morgan, not surprising that we're seeing plenty of confidence on the boeing conference call which continues right now. when you look at the third quarter, these guys did just about everything that you were

supposed to expect from them and then some. they were beating on the top and bottom line in the third quarter. their free cash flow coming in at $4.1 billion, better than expected, also raising their full-year guidance both in terms of earnings and revenue. here's the ceo on the conference call talking about his view of the market right now. >> we remain confident that we'll hit our total delivery target for the year. as a result, in the fourth quarter as a composite, you should expect to see deliveries exceeding the 52-month production rate. >> and that production rate is for the 737. remember, they had some issues with the supply chain earlier in the third quarter. they have cleared most of those up again, they expect to hit the higher production rate by the end of the fourth quarter. the backlog now standing at $491 billion. basically, guys, if you were to order a new plane from boeing, you're not getting it until 2023, 2024 guys, back to you. >> phil, commercial is definitely the right spot and

what powered the earnings for boeing this quarter but they also did take some charges related to some of these new defense contracts that they just won as well. what's been the commentary around that as they look to build out some of that new business >> a fair number of questions from analysts asking if they believe that this charge that they're taking, which was a hefty charge, a 93 cents per share noncash charge, if that means that they are confident, because these contracts are fixed costs, that they are going to be able to meet the expectation. the reason i'm bringing this up, morgan, when you look at the tanker contract, which is the same way, they took another charge this quarter and haven't even delivered the first one and they have had $3.6 billion in charges so far with that contract >> phil lebeau, thank you. i'd also just note before we continue to move on with our markets coverage that general dynamics is down 6% today, carl, on mixed earnings. also northrop grumman is also

down 2% and lockheed martin as well boeing is the soul aerospace and defense company in the s&p trading higher. >> gdp not tolerating any misses on the top line. eamon javers is in washington with a look at how the capital is reacting to the market turmoil in this month of october. >> reporter: that's right. the president sitting down with "the wall street journal" late yesterday afternoon continuing to heap criticism on the federal reserve amid this market weakness that we're seeing here's what the president said yesterday about jay powell he said that every time we do something great, he raises the interest rates powell almost looks like he's happy raising interest rates the president very critical there of his fed chief, saying that he thought he was going to be a low interest guy. turns out he's not a low interest rate guy. the president very frustrated in that interview i talked to a white hous official a short time ago who reiterated what the president said before, no indication from this white house that the president wants to take any kind

of steps to try to remove powell it's not really clear that the president could do that under the law. the white house official i spoke to this morning not weighing in on this debate of whether or not the president has the authority to remove powell if he doesn't like what he's doing you remember larry kudlow earlier in the week suggesting that some of the market selloff was due to uncertainty surrounding the election that's something that we've heard here from the white house, that markets, they suggest, are worried that democrats might take over at least one of the chambers up on capitol hill and that might have an impact on the low tax deregulatory agenda. larry kudlow agreeing when i pointed out to him that even if the democrats take the house this november, they won't be able to pass any legislation that would be signed by the president to repeal the president's tax cuts so those tax cuts are likely to be safe for the next two years because the president certainly isn't going to sign any democratic attempt to repeal his tax cuts, even if the democrats do have some success in november, carl >> yeah, interesting kudlow's

comments it's hard to envision how those worries would actually come to fruition we'll watch that closely eamon javers at the white house. getting some news on some management shifts at snap. let's get to julia boorstin on this. >> snap announcing two new executives to replace an outgoing officer there was an e-mail just sent out announcing the appointment of jeremy gorman, a woman, who will be the chief business officer. she comes from amazon where she has been the head of global advertising sales, been at amazon six years at snap she'll oversee global business solutions, global online sales and the advertising and revenue side of the business the second hire is jared grust he's joining as chief strategy officer overseeing content global strategy, partnerships and corporate development. he previously had been ceo of huffington post, also held positions at spotify, google and

oath he said in his e-mail to employees, we have an immense amount of running room to grow globally of people that do not yoz snap it will be key in the coming months and years so we see two new appointments there and this comes ahead of snap's earnings, which are tomorrow afternoon back over to you. >> julia boorstin watching snap. thank you for that. when we come back, a lot more on the current market volatility and earnings as we continue with the busiest week of earnings. we're going to be joined by former wells fargo ceo and get his take on the market turmoil and financials the nasdaq once again 10% below its august high and the s&p inyes.ues its worst month back in a moment and i'm going to tell you about exciting plans available to anyone with medicare. many plans provide broad coverage and still may save you money on monthly premiums and prescription drugs. these are affordable, all-in-one plans that help pay for doctor visits, hospital stays and emergency care. but they also

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he's what's coming up top of the hour on "the halftime report." we'll discuss the most ominous sign about this correction and why you need to check it out before you buy the dip. plus mike mayo is with us on why he upgraded morgan stanley. and pete najarian has unusual activity on a stock the options market says is about to move big-time. all at noon. carl, we're about ten minutes or so away. we will see you then. >> all right, scott, thanks. you already know the financials have taken a hit over the past month underperforming the s&p, trading in correction territory action down more than 10%. meantime the president continuing his attack on fed chair jerome powell and his rate hike strategy. weighing in on all of this is former wells fargo chairman and

ceo. it's good to have you back, welcome. >> good morning. >> just making a list of things that have gone right for the sector credit quality is pretty good. some signs loan growth is improving. r.o.e. is beyond what people thought was ever possible. we got this upgrade from mike mayo today >> i think there's global concern, particularly that impacts banks because the economy is very important to their success. we've got saudi arabia, we've got italy, we've got tariffs, and that uncertainty isn't good for financial institutions i think there is concern about loan growth, but i think people are forgetting that a very major thing occurred that affects loans by banks, and that is the reduction in the corporate tax rate, which obviously puts more cash in the corporate bank, if you will, in the corporation, and also bringing back the

overseas deposits that were tax related. that needs to be used before you're going to see a big jump in loans i think that will occur next year, as all of these things are being used for capital goods, for acquisitions, for dividend buybacks that's a one-time 2018 issue that has reduced what would be better lending because the economy is doing so well >> it's a little strange, isn't it we're so flushed with cash that we don't need to take out credit, and as a result, i mean, it's probably not a trade people saw through at the beginning -- the end of last year >> correct but it's also good it's good that people are making more money and so on, and that will add to their investments and capital goods and jobs and so on. it's a one-time negative for the banking industry but will be

more than made up for if we continue to grow the economy and people buy home and buy cars and corporations invest. >> so, dick, it sounds like you're saying broader economy wise there's plenty of dry powder in 2019 because there will be capital available for those who want to try to grow. >> no question about it. both capital markets and banks banks are highly liquid and it's there. at still relatively low rates. we have the president complaining about rates, these rates are still remarkably low from a historical perspective and i think he's wrong we need to get to a neutral rate the fed is doing an excellent job. >> comments from chair mcwilliams earlier this week suggesting as we've seen more regulation on the banks the risk has shifted from banks to mortgage servicers and nonbank

lenders. do you think that's true >> iy n't know that but it wouldn't surprise me because the nonbank lenders are gaining market sharon because they don't have the regulations of banks and i think someone should be looking at that because, in my opinion, if there is an issue relative to the financial side it's much more likely to occur on the nonbank side than on the banking side which has lots of capital and has been used to this regulation. the banks are losing market share because the nonbanks are not regulated as much. >> as you look over ten years, track jpmorgan shares, they have taken some share over there, right? >> no question about it. european banks are struggling mainly because the economy isn't nearly as good in europe as it

is and you have greece, you have italy, there's much more issues the european banks are facing. they're strong globally and domestically >> we'll see if shares reflect that in the near future. dick, thanks for the time as always >> my pleasure >> as we head to break, a quick check on the markets we're off lows of the morning, the dow is back above 25,000 the s&p is down 26 and the nasdaq is down 100

market's getting a bid, the dow down 63 points the session low close to 300 points post 9 this morning, art cashin with us. we did dip below 2710. didn't take out yesterday's low. >> no, you didn't. you had two good things working for you. number one the follow-up with china. you didn't have free fall selling, you didn't have the same kind of anxiety you had the day before that gave us a little hope

you got some decent earnings and that put a little bit of a bid under the market this is really not unlike a patient who has had a heart attack the market is feeling around, is it healthy enough to go three blocks, four blocks? and i think that's what you're seeing in this kind of internal testing and retesting and it will probably go on for a couple of days here i would keep my eye on the s&p more than the dow. the dow is going to show some signs of strength. the s&p will be right down the middle of where the markets were >> how closely should we be watching the russell 2000 small caps and the dow transports? both are in correction territory and they did seem to lead the way in terms of the latest nose dive >> the action in the nasdaq is disturbing as well as the transports

i would say you have to keep an eye on them, too as you aptly point out, not only did they go down with the other markets, they led it by a little see if it still has that indicative role to play. >> you mentioned needing to watch both the dow and the s&p particularly the s&p we've seen this big reversal in the dow, but nvidia still down nearly 4%. amd nearly down about five texas instruments still down nearly 4%. it doesn't seem to match the turnaround in the dow. why would you say that is? >> the techs are suffering more, particularly the ones you pointed out. i think the dow has some hope

for offshore trade and what not. i agree with that. i think the dow is more volatile but not as indicative as the other indices. i think the nasdaq is overly weak, to a degree, and that's why i suggested homing in on the s&p. >> you've been historically dovish on rates, i would say >> mm-hmm. >> maybe to a fault. do you think that powell is going to either acknowledge a policymistake or say we've don some good wood shopping here and we can change our tone in december >> well, i think that if they didn't have a concern where rates are, the president is certainly giving them concern. then they would have to -- if he acts up and walks away, it looks

like interference. it's next year i've worried about. >> art, thank you. we'll keep an eye on this. tonight it's microsoft, tesla, visa, ford, amd, whirlpool -- a ton to watch after the bell. let's get to the judge i'm scott wapner stocks off their lows this hour. is there another troubling sign for investors to keep their eye on why good news can no longer lift stocks and what that says about the state of the correction. it's 12:00, noon, and this is "the halftime report." is the bottom in is now a time to buy we're talking risk and reward. banking analyst mike mayo makes a big call he's here live and the next round of big earnings, ford, microsoft and tesla are up tonight "the halftime report" starts right now.