making it's friday october 26, 2018, "squawk box" begins right now. ♪ live from new york where business never sleeps, this is "squawk box. good morning, everybody. welcome to "squawk box" here on cnbc we are live from the nasdaq market site in times square. i'm becky quick along with joe kernen, andrew is out today. we have a big lineup here today. mike santoli is in for andrew. he will talk about what he's been seeing this crazy week. ed lee joins us today as guest host on amazon, we have eric sheridan, and on alphabet, victor anthony u.s. futures at this hour are under pressure the dow futures are down by 327. that would undo what we saw yesterday. yesterday the dow was up by 401

points zap futures down by 53 the real carnage comes in the nasdaq, indicated down by 272 points this is all because of two big losses, a decline of 3.9% that we would be seeing now for the nasdaq the s&p off by 1.9%. the dow off by 1.25% some depressing numbers, earnings estimates not on the bottom line, but the top line missed expectations. at this point it's all but certain that the nasdaq will post its fourth straight weekly loss the dow and the s&p 500 will have their fourth losing week out of five. let's look at what's happening with treasury yields you can see now the ten-year is yielding 3.085%. back below 3.1%. >> this is a bid for safety. it's been reluctant to go below

3.1 3.10 >> i think some who shorted amazon may have gone long, maybe yesterday, the day before. that should have been maybe a signal i'm not sure checking global markets overnight in asia. check out what happened. yesterday they were trying to respond to the 400 points. it's very red this morning shanghai is not. that's one we watch closely now to see what's happening. >> shanghai is down more than 25%. >> it is it's been bumping along. >> catching up >> catching down >> yeah, catching down european equities all red. i don't like this on fridays

historically there's been fridays that turn nasty. >> you can find a number of exceptions to that >> you can >> like in february of this year bad opening. big selloff in february. big reversal you know -- >> was there a reason. was there news over the weekend that changed that? >> not really. the market gets technically extended sells out. that's the process we're trying to figure out. how much is enough on the downside for the short-term. >> the real trouble -- not like '99. i know that. when you have a series of these hot fliers, some of them near $1 trillion market cap. they led the market up the good cheer does come out of the markets. you figure it might be in these

stocks if we go back to new highs, do they go back to new highs? >> they can be involved in the process. they don't have to be the exclusive leaders. >> a lot of other ones were already in bear market territory. they could provide the lion's share of the move. >> the math gets tough when you talk about how much of the index they make up you would almost rather see the inflated, crowded, big tech names selling off if you're worried about the market sending an economic signal >> i don't want to be six months from now looking back and say that was obvious >> amazon went from 12,200 to 2,000 in eight months. >> there are some concerns now with the higher cost structure that amazon is facing.

>> facebook, netflix, move on to -- every one has their own individual story that soured funny the way that works why google >> it's more the investor willingness to put an ever higher multiple on the good stuff. >> it's a quarter point more on the cost of money. >> partly. >> that makes no sense either. >> as the fed raises rates it gives another alternative. you called it t.i.a.r.a. there is a real alternative? >> yeah. >> we'll find out from loretta mester -- >> did she promise to tell us? >> she's a voting member of the fomc, what she says matters. so we'll hear from her and get part of the debate that will happen in that room. amazon out with mixed third

quarter results. they posted better-than-expected earnings but revenue missed the street's estimates joining us is eric sheridan. i keep saying mixed quarter. this was a spectacular quarter when you look just at the bottom line it's the concern about the fourth quarter that is dragging things >> this is a debate about revenue growth revenue growth is decelerating at amazon. the rate to which is decelerates is the question. we've seen this happen before in tech when you go from hype every growth to more modest growth, profits kick in, there's a transition that happens as you move from trading on revenue multiples to ebita and ebit multiples. so you're seeing profit beats, slowdown in revenue, but nothing really has changed for the long-term for amazon all the drivers for growth is

still there, it's just a well-owned stock with a bit of a negative surprise. >> you sound like you think it was overdone or do you think it was overdone to get to the heights it reached >> our price target was in the 2,000 to 2,150 range for the past few months. when it got there the risk/reward was getting worse on the name now it's 1,600 plus or minus in the premarket this morning now the risk/reward is better. if you look at the numbers, my revenue came down by 1.2%, profit came up 20. so this transition is going on people have to get to a high teens revenue growth number instead of plus 20 number. and people have to look further down the pnl that's not what people have gotten used to doing the last ten years. >> especially with a company like amazon where they have not

liked profits. they wanted to grow the top line at the expense of that if you were an investor, that's the thesis you brought into. now it's the reverse are you buying into the profits or are you looking for that revenue growth coming back to the way it used to be. >> there's two factors the core e-commerce business is massive. you will slow down from the law of large numbers you have businesses like aws and advertising that are surprising to the upside on growth, also at higher profit margins and they're contributing more gross profit dollars you have faster growing, more profitable businesses as the profitable business starts to slow so investors need to reeducate themselves about that dynamic and understand what they're paying you're paying a mid teens ebita multiple for amazon which could come bound ebita 30% plus.

>> to ed's point do you think investors need to get some kind of reassurance from the company itself that it's in the mode of realizing and harvesting profits and cash flow? >> it's a great point. understanding the cadence of how we're going to move to slower revenue growth and, you know, not waking up one quarter and finding out there's no profits because they decided to accelerate something, we've seen over 20 years of amazon periods of time where they harvest profits, they pull that back if they were to pull profits back at a time of slower growth, that would be a material negative shock that's really the risk people are pricing in >> you would see that as a buying opportunity it sounds like >> i would they are the leader in cloud computing. the fastest growing bit of digital advertising in the market now, taking share from some other players it's still a very large fast growing e-commerce company

>> we heard evidence of ceos who say there's no a boardroom in america that doesn't talk about amazon and how they might get cannibalized by amazon at some point. where are they on their march towards world domination >> you think about some areas they're looking to grow, cloud xult i computing, amazon prime, whole foods. wh >> what about healthcare >> very little information from amazon about that looking out, but those are addressable markets that have not been disrupted really by amazon's scale and scope. >> is there ever a threat of regulatory oversight on amazon saying they have gotten too big? what we said on regulatory with amazon is there's no one part of a market where they're the dominant player per se

you would have to define the market by incremental growth of e-commerce e-commerce is a low double digit mid teens percentage of america -- >> i remember when walmart was a 10% of all retail sales. you thought the regulators would move in. >> i think right now that's more noise than reality >> great, stick around let's get to alphabet, and the third quarter results. joining us is victor anthony from e fwshgs gis capital. if i didn't note havenknow the history of the stock price, i would have seen those results from alphabet and taken it as an

indication to sell the stock what is disappointing? is it costs? is it costing more for the core search business? what is it that you see that accounts for a 6% selloff after those numbers? >> yes so the numbers last night weren't terrible they only missed the revenue number by 1% part of that could be explained away by fx google is probably the more difficult f.a.n.g. to model. if you look at individual line items, the core google business still grew 22% a slight deceleration from the second quarter that's off a tough comp. solid growth from the core google website business. the cloud, the hardware, the play store growing 36% year over

year, in line with the first two quarters so solid growth out of google. i think the profit beat was partly a tax benefit overall i think it was a good solid result out of google i look at alphabet as more of the defensive play on the fangs. good, solid multiple for the stock. several levels from a growth perspective. you have search which is resilient. if it's social media, advertising, amazon with their advertising. youtube is growing strongly. you have the cloud business growing strongly and is a formidable competitor to aws, and you have -- >> you have not said anything bad yet. this is a f.a.n.g. related selloff or an alphabet related selloff? what is it. >> it's a volatile market.

>> the line items on both these businesses -- for google, it's the cloud thing that is getting into amazon's aws. for amazon, it's the advertising business which is getting into google they are small relative to each other, but i feel like we're in an area where is the growth going to come from each business is getting into other areas saying where can i steal share. >> when the numbers came out yesterday -- >> i was surprised by the top line misses by both of these guys >> you were not surprised by what the stocks did needily after? >> they were look for these guys to pull the markets up it didn't happen >> it's a wounded market right now. >> that's my point you have the backdrop of an extremely volatile market, so any miss from any one of the f.a.n.g.s could take down the

group. >> the issue is there was enough of an overshoot on the upside with f.a.n.g. where it was a one-decision stock, there was no incorrect price if you paid more for it if you have to overshoot to the do downside, this is what it looks like >> market sentiment has changed here >> nothing has changed from a fundamental perspective. >> my point is amazon going from 1600 to 2,000 in that final run, nothing much changed there either it was good stuff. >> today we care about tariffs today we care about china. today we care about global slowdown >> i totally agree it works both ways it's not like, wow, this is a psychological move when markets are going down it's psychological on the upside, too. >> fundamentally i'm harping on this top line miss for both these guys how much of

it was international cutting into these estimates as growth slows down, are they having a tougher time fining growth overseas? in the u.s., it's getting to the saturation point for how they operate. are you seeing anything internationally that is affecting them >> i would say fx was a headwind in the quarter google's revenue mishaped in the other revenue line didn't happen anything core to the business google is down today because amazon is down today we still talk about f.a.n.g. as an etf so i would say over the last three, four months we have become much less constructive on f.a.n.g. as an etf as we downgraded stocks like netflix and facebook there will be a transition to look at each name as more

individual stocks as opposed to a growth etf that it's become the last couple of years >> a lot of investors take solace -- i'm thinking about apple, others are valued much higher apple was a trillion dollars, but it's not expensive you've been hearing that for years. it's a trillion, but still undervalued based on multiples so we felt better about 1,999. >> you hear it for years, then earnings have gone up and up >> we feel better than when we were all participating in excite.com >> apple is a single digit grower it's not a fast growing business but they're buying back an enormous amount of stock >> a lot of cash >> it's a market thing it is. it's that eight basis point rise in the ten-year. >> the f.a.n.g. stocks are still

underpenetrated versus traditional businesses there's a lot of runway ahead. >> you're whistling past the graveyard. everything is fine >> we do have a volatile market. possibly an economy that may be slowing down from all the economic data i'm looking at >> are we closer to the bottom or halfway to where these finally make a stand what do you think? >> google, i think we're right there. google has 106 billion in cash on the balance sheet >> how about amazon? >> amazon is a trickier call it's about q1 and q2 revenue growth amazon is the trickier call today than google over the short-term >> netflix has its own issues in terms of the cash burn, which has kept me on the side lines for netflix for the past year. >> okay. all right. thanks, gentlemen.

today's other big earnings movers include intel reporting better than expected third quarter results. results topping expectations by $1 billion the company upped its guidance for the year shares looked like they would pick up last night but waffling now. >> tough >> very tough day to report into snap shares hitting an all-time low the company beating on the bottom and top lines they're down today. and chipotle reporting mixed results. the burrito chain beating earnings estimates by 12 cents, but the same-store sales came in weaker than expected there is slight relief in that stock right now. coming up, a global market selloff. tech stocks leading everything lower. we'll talk strategy after the

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welcome back to "squawk box. yesterday we were up big today we are looking down. >> the s&p as it is set to open

now would be above wednesday's lows above wed'nesday's close >> it helps if people stop saying, you know -- >> garden variety. i banned garden variety correction >> we don't know where the bottom is. >> joining us now, as we said for years, you know -- >> not good to pick bottoms. >> it's gross. joining us is steven whiting i knew you would jump in there jay kinnehan i wish the vix would cooperate and go to 35 no matter how bad it gets, it's

having overhead resistance does it need to or is 25 enough. >> i don't know if we're at the flushing process now >> how will we know? >> you'll know when the market is down 3% or down 7%, 8%. that's when the vix will get to 35 >> is that coming? >> i think that's what we're testing now to see if it will come it's a readjusting of expectations we're adjusting what we expected on earnings. you can see with positive guidance, stocks are suffering if you have negative gipuidance, you will get hammered. how we are re-evaluating stocks is what's going on now i think the process will continue throughout the earnings season all the news coming out between now and the end of the year, people have to adjust to what they think will be ramifications of that as we head into next

year >> it's not the 308 on the ten-year, it's the short end and that stupid dot plot >> vix is returning to more historical normalized levels >> 27 is normal today. it will have its 15s again where will the market be when we're there? you know -- >> fundamentally nothing has changed. >> something has changed the federal reserve is getting tighter and tighter. >> 308 is not different than 295 on the ten-year. >> it's taken a drop in stocks to get from 3.25 to 3.10 that's a big price to pay for 10 basis points in the treasury market you'll get slowing in the economy. we won't have another big corporate tax cut. to see if amazon is going 10% or 20% in the quarter you only drop for so long. that's growth, that's not decline. we know decline is a different thing. >> but it's growth relative to those expectations

especially when you think about amazon >> you will get expectations, but broadly speaking >> a year ago it was interesting, this is when the narrative of synchronized global growth was picking up steam. you had this one moment in time where all the regions were working together what's now developing, is it soft patch global soft landing? >> or does dichotomy work or can we have divergence >> in the third quarter, none of this will hurt the united states corporate profits won't be harmed by tariffs. you heard a bit of that. if you look, there's not a single region of the world that's in outright contraction 2016, we were there. we had the middle east, latin america outright contracting so we're slowing i think we should expect more of that

i do want to again take advantage of higher quality. we want to take advantage of the front end of the yield curve if you can get 6% in municipal bonds -- >> where can you do that >> you can >> 6%? >> if you get a taxable equivalent yield >> you said 6% >> taxable equivalent. >> so 2.5% >> i care about aftertax returns. >> 6% is low quality corporates trading. if you're getting safer -- >> you can't sell it that way. 2.5% coupon on a muni bond call me with the 6%. >> you almost leapt over the table there. >> when i started in the business we had 13%. real not equivalent and all my clients said no, i want floating rate they did they bought floating rate. >> but their mortgages were 17%?

>> 21 1/2. we had a misery index of 25% or something. that's why when people talk about the last financial crisis was so much worse than anything we are seeing. >> also the s&p traded at 11 times earnings that's why the stock market didn't get hit >> for ten years the stock market hit 1,000 in '69 and didn't get back to 1,000 until '82. that was a secular bear. of course we had jimmy carter, who i voted for. >> hold on you voted for jimmy carter >> that explains a lot, doesn't it >> yeah. >> that explains a lot i still have a scarlet letter on my shoulder. i got a tattoo so i would never do anything like that again. i didn't like what you said. >> you want me to say vix will trade 35 -- >> no, i don't like you saying we'll get there when the market is down 8% in one day.

did you do the math on that? that's like 2,000 points >> i was thinking -- s&p points. the vix is trading off the s&p i'm like hold on >> again this has been orderly >> i know. >> there's only one panic, that was in the last half hour. it's been very, very orderly it's just a matter of changing expectations nobody is like i have to sell everything and get out now it's more i'll sell some things and see what happens you are seeing patches of green every single day so that's very healthy maybe it is a bottoming process but it's also a readjusting of expectations process >> i'm just trying to figure out, you know, a one-day call is futile do you think we add to our

losses or that it recovers a little bit through the day i think google and alphabet are as bad as it will get, right they won't double their losses from here, are they? >> the only reason we may recover a bit today is because it's friday, quite honestly. >> some fridays are bad. >> that tells you trader mentality. if you're worried about being on the wrong side of the trade heading into the weekend, maybe that means you have gotten oversold >> there will be -- end of the month is coming up in a few days you have a strong period around the end of october there will be that game theory at work. >> once the election is over the system is working. the market is figuring out where does the money go in you are pulling it out, where does it go in? >> dividend paying stocks, not

paying as much, but people are looking for it where they can find it. we had trouble holding 3.2 on a ten-year, until we hold that, people will look for it. >> the markets are working thanks to the incredible professionals at the new york stock exchange and the nasdaq doing what they do for so well >> thank you steven whiting and j.j. kinnehan. joe kinnehan, j.j. >> whatever you like when we come back, if the wild volatility in the markets what you worried about your accounts, you're not alone we'll talk about rising anxiety

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♪ welcome back you're watching "squawk box" live from the nasdaq market site in times square.

good morning if you're just waking up, check out u.s. equity futures. there's a lot of red this was all generated after the bell by some f.a.n.g. stocks reporting, notably alphabet and amazon dow jones down 305 the nasdaq down 254. did they do a percentage basis comparison >> yesterday at the highs of the afternoon rally in the nasdaq, it was the best day since august 26, 2015 where was that that was closer to the beginning of the downturn than the end so you have the biggest pops in markets that have been weak. >> my mother's birthday. part of the reason for the selloff, a tech wreck. amazon shares sharply lower. earnings beat estimates but

revenues fell short of estimates. alphabet shares are lower. the company's earnings beat but revenue fell short google cited the strength of the u.s. dollar as part of the revenue miss >> why is that a surprise to people >> we published exchange rates every day. here's the rest of the f.a.n.g. stocks it's a broad decline but being led by alphabet and amazon time for the squawk planner. we have more earnings rolling in, colgate-palmolive, phillips 66 and good year and we have the first read on third quarter gdp at 8:30 eastern, and consumer sentiment at 10:00 a.m. eastern. the fed is a hot topic for markets as president trump

continues to take shot at interest rate hikes. cleveland fed president loretta mester will join us on set in a cnbc exclusive interview at 8:00 a.m. eastern time. our next guest says the recent market volatility has parked a surge in retirement anxiety. let's welcome janet grier. thanks for being here today. >> my pleasure >> when you see volatility like this, moves to the down side that come swiftly what does that mean for clients that you talk to how nervous do they get? >> right now their fear factor is incredibly hire throughout the year, aig does various surveys. we found that about 79% of retirees and pre-retirees are saying they're concerned or very concerned about a market decline. quite frankly they should be for investors near retirement or in retirement that sequence of returns risk is important to

them if they retire right at the wrong time when the market goes down, and they have to take withdrawals, that can be, you know, a game changer for the rest of their retirement >> you've done studies on this if you're younger, you don't worry about it for decades, let it go. but if you have to live off this, what does the difference ma make >> it can be huge. we looked over a 15-year period, you take two exactly the same investors, they invest the same amount of money, they take 5% withdrawals. the only difference between the two of them is that one retires two years earlier than the other. they happen to do it during a significant market downturn. the other one on an upturn in the market 15 years later, if you look at what the results are to have for the rest of their retirement, that person who retired and took withdrawals during that early

period could have two-thirds less for the rest of their retirement to those numbers are significant. we tell people all the time. that's high it's important you have other sources of protected lifetime income. things that you can rely on that are stable, that will give you a monthly check for life so that you can cover your expenses, then you don't have to do the ithdrawals. >> pension or annuity if you don't have it. >> exactly otherwise you have to withdraw at the wrong time. >> i wonder if one thing that maybe heighteningxiety now i people planning for the fact they'll live a long time in retirement i was looking at the target term asset allocation funds i will retire in a given year. 2020 right now, it's like 55% in equities that's two years from now. these models are keeping you more than half in equities is that something that makes sense to you do you have to plan around the

possibility that in the next two years that 55% will be risky >> when you look at asset allocation at any given point in time, we encourage people to be meeting with their financial planners now looking at those allocations is important. but actually the real source of anxiety for people -- when we study it at aig and in the marketplace, 61% of people say their greatest feefr fear is outliving retirement savings >> that's a legitimate concern >> that's a huge concern in this country we're facing three major tidal waves. each one on their own are daunting you put them together we have the perfect storm. you start with the fact that we have the aging of the u.s. population in a short amount of time 1 out of every 4 adults will be retirement age in this country it's the fastest growing segment

of the market. if you add to that the decline in the pension plans in this country and defined benefit plans, between the period of 1985 and last year, we lost about 79% of the private pension plans in the united states so we've done a good job as a nation trying to supplement that with savings plans w 401(k)s, but we missed the elephant in the room the elephant in the voom replro replacing that income piece. >> thank you for coming in today. a huge concern and we'll have you back again >> terrific. my pleasure. when we come back, chipotle's earnings beating the street we'll dig through the numbers behind this comeback story. and later robert jackson taking aim at stock exchanges accusing them of raising costs and short changing investors there was an argument at a

heated roundtable event yesterday and we'll hear a response to the claims

time for the executive edge. we startwith a few big earning movers to watch for. ak steel deep in the red after missing earnings estimates this despite a 25% tariff on imported steel from canada, mexico and the eu shares of ak hitting a 52-week low. mattel reported a beat on the top and bottom lines they grew in north america shares are down just a little under a percent. >> expedia reporting a profit beat but it missed on revenue. the company pointing to strong growth in its home away unit coming up, chipotle's comeback story the stock is up 30% since brian niccol took over in march.

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test . 3 ski net broadband in the quarter, the best in 10 years. >> that's what we're focused on. >> we just added almost $900 billion more in volume in '18 over '17 >> we're still quite confident next year looks like a growth year for us on the top line. >> we're all bullish

these numbers are incredibly bullish. chipotle with an earnings beat initially it was a little weak i guess on the comp store sales. i don't know, revenue wasn't as flush as people had hoped. now up, up more than 45% year-to-date joining us now, steven anderson, senior restaurant at maxim group. >> you had a nice price chart. >> 510 >> and we actually had 530 it doesn't have to go to the

summer highs we have decent upside. this report is a step in the right direction. certainly, the comp story made a little light the earnings story is well under way. the thing of this story, too, also, margins were significantly better than expected it wasn't just food costs we were talking about avocados, pretty broad-based in prices restaurant level margins, keeping level costs under control even with wages up significantly across the industry hats off to brian niccol >> innovative offerings. what's he changed. the queso offering was underwhelming. >> actually, that was a year ago. it was a year ago this quarter lapping the launch of queso. we see four pillars for revenue

growth in the next 12-18 months, focused on digital, focused on off premise, focused on having extending the number of hours you offer chipotle, having late afternoon snacks or late evening snacks the other thing, they're testing a loyalty program. think what happened with pinera two years ago with pin neera 2., this is chipotle 2.0 >> what is that ordering it digitally? >> that's from your mobile device or pc that accounts for 11% of total sales, growing 1% per quarter, a really astounding growth rate. we note the core audience for

chipotle gen y, gen z, the ones most tied to technology. >> guys like joe >> i'm a taco -- they need to get less millennial for me i need stuff more unhealthy, tastes better. weren't they going to introduce quesadillas? >> if you go south to a test kitchen you see different items they're testing. they're testing nachos you might be interested in that. nachos, they don't have nachos you're pointing at me like there's something wrong with my thinking they don't have nachos brian niccol was a godsend, i might -- they had salmonella but not nachos >> interesting you mention that, they did have a health scare -- >> in ohio >> in ohio if you look at the story, they

grew past that pretty quickly. they had a more responsive >> have they recovered from the broader issues >> it's going do be some time, remember, taco bell, too, had their own food safety a decade ago and taking that experience to chipotle. >> in terms of centralized coursing of food and they can control it better? >> you see it on your phone -- >> taco bell left a couple years ago, there is a brand new chipotle >> chipotle is less healthy than people think. >> that does make me feel better >> thanks, stephen anderson. chipotle, iabrn niccol, will join us tuesday, 7:00 p.m. in

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once bit in, twice shy fang stocks getting slammed after amazon lowers its outlook for the most important quarter of this season alphabet mix straight ahead. >> and market changes for data fees are investors being shortchanged a ward from commissioner robert jackson coming up plus, trash talk the ceo of waste management talks earnings in the second

year of recycling. live from the beating heart of business, new york, this is "squawkbox." >> good morning, everybody, welcome back to "squawkbox" on cnbc we're live from time square. i'm becky quick. look out you thought things were clear yesterday with earnings ah saw up sharply, giving it back dow futures down 303 points this morning and s&p down by 48 and the big decliner is nasdaq, down by 150 points, we are a little light on revenue and concerns about guidance on the stocks

>> a runoff on the biggest movers who better than dom chu. like one day you're talking everything, we're up 400, and you quickly transform yourself into doomsday the very next day. >> i try to shift, move. >> you have to adapt >> you're data dependent >> just like that, i'm data dependent. >> that's the problem. >> i don't know. we have to see what happens in december we will see if maybe the guy gyrations play a part. with the amazon trade, 1617 is an interesting level to be at only because 1677 represented the two day moving average for that particular stock. you look at the past year to day

period, it's still a massively performing stock even with the declines we're seeing. year to day basis, 38% moves to the downside. fau falling below that is key. the last time amazon took a dive below that average was 2016 during that turmoil, something to watch with google, this is one we will watch closely as well. it has been showing signs of weakness relative to its other fang cousins hasn't been reporting well the past few months. with that in mind, we took a look at some of the etfs with exposure to a couple of these names. we looked at the amazon story, is the vanguard discretionary etf, the ticker, vcr

spider has a lot of wait here. this has around a 20% weighting to amazon. expect this etf to take a pretty big-sized hit with the others tracking the stocks. the other is dow jones etf this is a 9.5% etf they have a 10% weighting to google and 10% weighting to amazon 10% in those two stocks in this particular fund. when it starts trading outside the queues and services, this could be among those that feel the most pain. back to you. >> that's a little frightening we will continue to crack a lot of those things.

as dom is pointing out, markets could be in nor a rough start this -- in for a rough start this morning joining us is chief equity strategist and from usb global wealth management, i want to thank both of you for being here today. bob, as usual when you sit down with us, you have a huge list of buys or sells you want to make this morning you have buys or sells on that list >> i have both healthcare names, my favorite, humana healthcare, if you want products biogen, consumer expedia, comcast, good results, i would own that stock best buy, bucking the trend. want refiners, marathon, financials, dfs and cof, we like

both of those. some tech, intuit, mid-app, francisco. >> you don't like the high flyers or fang stocks? >> i think they're overowns, overbelieved, overhyped and not particularly cheap google is expensive. >> even after the decline? >> amazon after the decline is still expensive. google is not so expensive and we own a little of google. >> what you've seen, all this carnage playing out because of the technology names you don't think there's more of an opportunity because of it? >> i would be patient and wait too many like we just saw, 10%, 10%, 20%, huge waitings that will come down >> whenever you get these corrective periods, these are

market assailants. you had tech selling off and disappointment with earnings there seems to be concerned about duration of this cycle in the u.s., global markets upset and you had the treasury yields. how does it all come together for you in terms of what the market is most attuned to right now and what gets us out of this phase? >> you go with earnings, disappointed a little bit. talk about rates and trade concerns it rolls up to the question, where are we on the cycle and is growth slowing until we get comfort growth isn't slowing and gdpa that is backward looking this is not the end of the cycle, on china's record, they're the only company with significant policy tools they announced some measures last week and we need to see more in china, acceleration.

ultimately, it takes a gross scare, it's not growing strong that's effectively what it is. we need to get past that stage not unusual when the fed raises rates, you get turbulence, can the market handle it >> the gdp is backwards looking. is that enough to soothe markets or more realistic real-time data >> more real-time data we want to see the cycle of supply and demand. do companies continue to spend on cap x, if we get those continuously, that's good for the cycle. i look for those details >> bob, you're always concerned about price and value. how much does the fed, potential for higher interest rates weigh into that? >> it's definitely a problem for pes. financial repression is over

the zero interest rates to keep us out of the depression a decade ago is no longer here rates are doing well and rates moving up and pes moving down. to pick up on jason's point, investors are worried the double digit earnings growth isn't going to last federorever we all knew that >> which gets you back to the fed and what they will be doing next we have loretta a member, will be voting. what else do you look for. >> talk about where the economy is in her mind, inflation, where is it? wage rates moving up, at a snail's pace, thank goodness are they worried about that picking up steam, what's nominal growth in her mind >> if she says growth is weaker

than anticipated >> i don't think that's good for the stock market, having been through a period of the economy over heating, the economy is good and the cycle will last long recession is nowhere >> if it's too much, will they step in and say, once we get to neutral, will they pause and step back where powell spoke spooked the markets. >> the mark is bracing for three hikes. if that's assessed, they maybe will go slower than feared >> slower than what powell suggested in the press conference saying we don't know where neutral is, we have a ways to go and go past it >> you have heard from the fed

members. none have made an effort to dial back that. but none have repeated the construction none said, the chairman is right, we have a long way to go. the market is fixated on it but not as though the official projections is that draconian. >> but if it's getting away from them there will be coordinated efforts, not so much december but into next year >> what would the gdp be today a two handle oh, that's what happened >> i don't think so. i think a consensus, 3-3, would be higher or 3-5 >> no one cares because it's the last three months. >> exactly, where are we going from here.

>> they don't care if it's weaker >> they care if it is a stronger >> i think you can explain away. >> we will do 3% for the year. >> it's a wonderful gdp both real and nominal, why earnings have been so good. the problem is the consensus is double digit earnings growth next year and to do that you need marginal improvement. >> that's purely a comparison estimate, you can't do it every year if it's double digits next year and compare it to double digits last year, still double digits but it's not >> that's right. >> multiple adjustments are coming >> we have been on for so long i don't know how many years, 20 years you've been coming on? are you optimistically cautious

or cautiously optimistic >> cautious as i have been this bull market. >> optimistic. >> you're not optimistic >> it's not a beta world it's not where the market is going. >> you know where another one you can use is barely bullish. b-a-e-r. who is that olson? >> we just had that last week. >> you get a seesaw with the bear on one side and bull on the other. you've seen that >> the bear has been eating. >> we're barely bullish. >> all right >> thank you for coming on, great to see you bob, nuvian asset management >> thank you campbell soup is escalating. third point is suing campbell claiming it's been distributing

misleading and incomplete information to shareholders. they are trying to replace the food maker's entire board. campbell says it will vigorously defend the lawsuit i don't know what you do with campbell soup now, so many upstart brands >> probably have to buy more brands >> they have a lot of debt and have to pay some down with that asset. >> we will be looking at the gdp debt no kidding the economists say it went up 3.4% in the third quarter and that will be out at 3:00 p.m. eastern time a two handle would be bad, probably four handle, probably where the consensus is the retailers at sears reportedly hired investment bank

ever core to scrutinize various deals by eddie lampert they are claiming they stripped sears of valuable assets before filing when we come back, amazon stock dropping more than 9% this morning after the outlet fell short of expectations. more on the tech after the break. and trash talk with waste management, the big business of garbage and recycling. "squawkbox" is sponsored by franklin templeton investments reach for better do you hear that?

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xfinity home. simple. easy. awesome. xfinity customers, add xfinity home and get a great offer. plus, ask how to get free installation. call, go online, or demo in an xfinity store today. welcome back to "squawkbox," futures right now pointing to a sharply lower open, giving a portion of yesterday's bounce. it was up about 200 points yesterday after that big sell-off on wednesday. dow index looking down 273 or so and the s&p 500 is indicated lower by 44 points or just under 2% amazon street earnings beats expectations but its fourth quarter outlook was short.

it's the biggest sales period for amazon because of the holiday season charlie o'shea is retail analyst from moody's and joins us to discuss this guidance. anyone who has followed this stock for 20 years, it's like "war and peace," like a novel. we finally believe everything. we didn't care about profits and concerns in the past howjeff bezos was building things. is it a surprise when everyone got on that side of the ledger and loved everything about it we were due for a pullback? it is based on the fundamentals that came out or more technical? >> the fundamental story is more interesting to me. that's what we focused on. looking at longer term trends. for amazon, you look at amazon as a retailer, the best days may be in the past because the

competition is better. walmart is doubling down showing it will not be killed, target investing heavily. you have competition for folks focusing on line doing really well amazon is leading the pack and no one will catch them online. that's only one part of their business >> there are other places that are reaching their -- >> amazon will still be the revenue ep gin the other part of the business are the profit. we've seen that with aws since they started splitting it out. i think aws continues rolling with heavy revenue growth and expanding margins and interesting phenomenon you look at the retail business growing as much as anybody at the expense of profit.

the thing that will continue to hurt amazon looking at operation income, the international income is losing money and you have aws and the delta and wild card is the north american retail business >> i can remember barrons, i don't think they were split, at 80, they were like this is just insane, right? remember all the naysayers what is this stock worth now, taking it into account >> i keep getting into stock discussions. i've always struggled with that valuation from the basis of being a fundamental analyst looking at outcome there was focus on revenue growth and nobody cared about profits. now, the company flipped a switch and have what we consider impressive profitability

the equity markets don't like it the push me pull you from dr. doolittle, i don't understand that >> has the company flipped a switch the answer was the company was kind of accidental flipping a switch at the end of the quarter. >> i don't think that was a joke >> sometimes that's right. has it changed before? >> it's hard i've said this before on this program, i don't know how you can forecast amazon. >> amazon can't do it. a massive range. >> a billion five swing on investment income. we don't know and no one knows outside seattle what the return the sis will be. i feel fortunate we take a longer term view at moody's we

don't get caught up in the next quarter and use the microscope technology and it's easier for us >> i think those are the shareholders bezos always want, telegraphed it with a letter to shareholders. >> exactly there's a traditional opportunity while they're not focused on the segment i feel that window is closing put i don't think it ever closes as to amazon online. brick and mortar has upped it only and we have to get used to it in the fourth quarter >> i didn't look at you when i said that about barrons. >> totally fair game >> amazon.bomb was the headline, in '99 >> before -- naw, naw, that wasn't the only time there were other times, all the way up, was it ableson

>> you have to remember. it was a cover story >> that wasn't the only time again and again. >> that chart there, it was down 90% once in '02. >> the people always shorting it are never in it at the right time to do it. >> ableson's cohorts and everybody else and eventually have no money to manage and i think they just talk at that point. >> i'm still looking for the article that said, "will anyone catch k-mart," a cover story when i was in college and i've been looking for it and i can't find it. >> thanks. >> thanks. >> you're not moody's. you don't have a buy on it with a target >> no, we don't do buys. >> major changes from the sec and first we hear from commissioner robert jackson and

adeena friedman will respond teier the top of the hour, ou inrvw with the fed president. stay tuned ♪ ♪ ♪ comfort. what we deliver by delivering.

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good morning, everybody. welcome back to "squawkbox" on cnbc we are live from the necessary marketsite in time square. shares of colgate-palmolive are taking a hit in the premarket training they matched estimates of quarterly profits of 72 cents per share. colgate is noticing a higher cost in market revenue and doesn't go without saying this is a down tape shares down by 3.6%. we'll be getting our first read

on gdp in about an hour's time anticipating a growth rate for the economy. we will be talking about the economy and interest rate next hour when steve liesman interviews fed president loretta mo mester she is a vote on the board and what she says really matters crude has an equity market sell-off a warning from saudi arabia about oversupply wti down 1.1% at 5659. >> cash in the trash waste management reporting earnings yesterday it's a down market, off about three-quarter of a percent and joined by jim fish of waste management people want to know what the

core business is i know what it is. that's where the real core business is. >> i've said this before, after your doctor and lawyer, is your trash collector. all you need to do is see when there's a strike or event or something there's no trash collector, you see pretty quickly who's important in your life that's what your main business is, those dumpsters? >> we talked about how strong solid waste is >> strong. because we're generating waste in the economy >> part is pricing and we're able to raise prices >> what controls that? >> prices is somewhat of an andy dote for inflation the fact we can offset inflation with price increases is part of the use of it. part is great customer service if you're differentiated you can

raise prices and part you do not. >> do you remember, wayne, becky, you do, the founder, bought one truck when he was 22 years old and quickly realized if you own those dumpsters, every week or every month someone has to pay you to rented that dumpster. he did it with blockbuster that is an annuity business never going away >> i never met him but he was brilliant. >> he opened up a lot of different businesses with that same model >> we touched about every segment of the economy we were asked what woe think '19 looks like for us it looks quite good our commercial business wayne, those dumpsters were the brilliance of that business. >> still >> those were the original proxy

how small business is doing, seems to be doing well based on that the industrial side for proxy. that's doing well, too >> you have kids >> two girls >> when they tell their friends my dad is in waste management, do they really mean waste management >> when they talk about waste management, our girls think more of the recycling side of the business >> how big is that at this point? there are times it's overplayed. >> it's 10% of our business, a down year for recycling. >> that's what they say to their friends? >> we talked about recycling in the past it's much more problematic >> you think of what comes in the front door of those plants, a piece of it is not recyclable. 10 years ago, 10% was trash in the back door process.

it's 10% today china has come back and said, look, we don't like the fact what you and all the recyclers import to us has a big trash component to it. they shut it down and requiring we take the trash out of the cycle stream some is education to our customers and the other is fees. long term we will change processing plants and put a new processing plant in that ultimately changes the whole business >> you are in waste energy >> the last guy sold out, i remember we used to talk to him about it natural gas. >> there was a lot of volatility to it. >> is it economically doable down the road or -- natural gas and fracking sort of made it less -- >> doable. >> we couldn't grow it well in the united states. >> a great idea, everybody wants

to turn trash into energy, why can't we do it a renewable idea sounds so good but in practice -- >> maybe some opportunity down the road >> why did you get out >> it was hugely volatile and every quarter i had to answer a question >> you still own some? >> we don't own any at all the solid waste business doesn't have the same volatility business >> we've always looked at the waste business as a good real-time read at what's happening with the economy in good economies, more trash, consumption, a lot going through. we're concerned about the gdp numbers, what's happening in the economy, what do you see >> early indicators are the economy is still strong. i mentioned the commercial business, a good barometer for small businesses that is very small

the construction piece is forward-looking, seems to be very strong as well. to the extent they're a temperature gage for the overall economy, i think they are, we're seeing a good 2019 >> how fragmented is the industry >> it's still pretty fragmented. waste management, the big three players make up 45% of the collection and 15% of disposal pretty fragmented. room for m&a >> are you going to continue with the dumpsters talking to each other >> we might. we like it >> it can make a difference. >> i'm the wrong guy to ask about that, i'm not very creative >> you farm that out to somebody way more creative. >> you still talk to steiner

i haven't talked to him in a while. >> he plays like gary. but he looks like him. robert jackson joins us to talk about the sec's decision to block higher fees for certain stock market data. the commissioner says boosts profits while raising investors' costs. and then we will talk to adeena friedman, her take on commissioners. straight ahead time now for aflac trivia question how much did americans spend on their pets' halloween costumes last year? the answer when cnbc squawk continues. no-good break. gooood. i'm so sorry we can't make your barbecue. i'm just sick about it. aflac!?

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welcome back to "squawkbox." futures now have a three handle on the downside. 303, nasdaq ugly 303, a much bigger percentage loss than dow jones or s&p the s&p has made an historic decision to reject fees. it created a huge debate at the roundtable this week joining me is sec commissioner robert jackson we will have another commissioner here. we are in the weeds. the nasdaqs are asking wore what

data feed? >> thank you for having me they have been asking permission for an increase in charges they put on investors to trade in today's stock market at the speed today's stock market has, if you don't have the best data you can't trade in our markets. the exchanges eshave been investing those fees many years. >> these are data streams and if you pay more you get faster information? >> absolutely. we have a two-tiered data in our markets, first public data and private data sold for market exchanges. the exchanges run the public feed like letting barnes & noble at the library you wouldn't have it if there weren't too many books >> the data offered publicly for free, you're saying it's not sufficient >> what's clear, not only is it not sufficient it's slow there have been changes made since michael lewis published

the book "flash boys" but there is no incentive for a public fee and they have a private one so why make it robust >> you said it is the for profit side of the exchange they're supposed to maximize profits unless there's mon nop poistic practices going on, this is how they make money >> i'm sure she will explain >> you're not going to put on price controls and not let a private entity decide what the information is worth >> no, sir i want to make them prove they're doing it competitively >> is everybody going to have to prove -- >> competitively, yes, sir >> do you think they're gougers, they're gouging with mal intent? >> i think they host proved competition is leading to price increases. i want to make sure investors

only pay competitive price increases. >> people think it's not investors, goldman sachs and jpmorgan, you think of the cost for investors, it has gone down year after year and you look at the total prices they have to make it somewhere. >> there is no better way to hide the prices is monopoly. >> the guys and gals republicans just said there's been not enough information provided by the exchanges to show it's not monopolistic, is that what you're looking for >> it makes no sense the reason is there's no free lurch in the stock market, you know this, talk about it everyday for data exchange and connectivity the end of the day mom and pop pay for that because goldman sachs never give them a break. >> it's even cheaper, like long distance phone calls, they're

basically free >> it is about long distance phone calls, how did that turn out? >> if you have fidelity they're saying it eventually gets passed to the consumer. the argument you're making is not allow them to raise fees, not these two different streams, should there be public and private data and provide access? >> we had a debate including exchanges what to do we had a whole bunch of ideas continuing in washington here's my hope there's a conversation between exchanges and investors to do this better. >> where does it meet in the middle >> is it okay to charge $5 but not $10? is it okay to charge $100 but not $1,000 is this a utility that needs to be regulated heavily or a for

profit competition >> i can't set it, the market should set the price the exchanges are coming to us again and again and asking for price increases without proving there's competition. that's their burden. >> you have a low view of these people running exchanges >> no, sir i have a high opinion. they're trying to make money i'm trying to protect investors. >> you have the mercedes drivers at goldman and rang-over at exchanges and who will cut up the pie, you're making it sound like the chevy cruise people are in the public. you're arguing between the two >> we have to believe goldman doesn't pass on the costs to mom and pop and you know they don't give them a break. at the end of the day, mom and pop are paying for it. >> i don't know. you have a negative view

i hope everybody has to prove price increases. the sec is supposed to be catching charlie sheen working with gordon gecko. >> i think we should make clear the reason they have to ask you is they are a regulated national exchange >> when things go wrong on the exchanges we shouldn't be liable, we're immune because we're a regulator. if they want our protection. >> wage and price controls let the markets decide work on the monopoly side of things if you're convinced there's true competition, will you let them do it? this reminds me of net neutrality, companies making tens of billions of dollars not able to prove it >> if they can prove competition is driving the price increases, we will permit them. the law requires it. >> what will they have to show >> when they're making

competition, they are making choices and people don't have to worry about data fees. what worries me about this, in a world connectivity gets cheaper everyday, the exchanges have raised prices -- >> overall trading has gone down and the cost of trading has gone down snow that's a great price for extra fees to connect to the exchanges. >> is this an argument of net neutrality or a different situation. >> if you make it a utility. make comcast an at&t utility >> let's be clear, we didn't make them a utility. what happened the ex-changes have taken on massive amounts of power and using them to increase prices my commitment the end of the day and the law requires, if competition leads to price increases, i have no problem with that. >> i want to see competition out there but want to know on a down

day in the market, there are one or two places ican say i know they will handle this and be responsible for this, not 5,000 competing exchanges where things slip between the crack and nobody is responsible. >> that's a fine line. we have 13 equities in the united states, 12 owned by three conglomerates. how many businesses do you know that acquired the same businesses and instead of putting them on economy of scale they operate them separately the exchanges are the shame. if we ever have a problem in the market we will have fragmentedifragmented markets. >> you want less competition you want them all together >> i want real competition, not 12 places owned by three people. >> is it a red herring to say the types with their lobbyists

make $25 billion and you're talking about $25 million here >> if you believe in banks >> you're in bed with sifma, aren't you >> i'm a guy who made the trade. that's the wrong thing to say to me >> how many republicans are on now? two or three >> i have two republican colleagues, terrific commissioners. >> doesn't matter to me. >> was it universal? >> different argument. >> in the next stages we find out what happens next. >> unfortunately about the opinion. the opinion speaks for itself and they have chosen to litigate that so i can't answer more. what we're doing about the

two-tiers exchange i'm hoping we we be able to see it moving forward. >> robert jackson, commissioner. >> coming up, adeena friedman and her thoughts coming up the top of the hour, exclusive interview with loretta mester and the rates straight ahead the futures at this this hour, 323 on the dow "squawkbox" will be right back ♪ ♪

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take a look at some stocks to watch this morning. expedia shares are higher. a quarterly profit of $3.65 a share reported well above the consensus estimate of 3.12 earnings werehelped by an 11% jump in booking volume a big loss this morning in the shares of data storage company, western digital revenue missed estimates and the company warned of a decline in flash memory, in the pricing shares of computer hardware maker melanox. that was a little bound up yesterday. >> that's melamucil. >> oh. i did not take it. sources say -- are you sure?

mellanox >> technology. >> it's this milky mellanox received interests -- good name -- that it's working with a potential advisor >> mike, i want to thank you for being here i forgot you're leaving. >> i'm otherwise engaged downtown >> mike, great to have you here. when we come back, food for thought. cleveland president mester is here, right after this

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market sell-off, futures pointing to triple digit drops at the open for the dow and nasdaq >> faang fumble. the broader investors straight ahead. >> first quarter read on gdp just 30 minutes away first, cleveland fed president ceo loretta mester will join us live in the studio as "squawk box" begins right now. live from the most powerful city in the world, new york.

this is "squawk box. ♪ >> i like the -- talking about the browns good morning the browns are back, sort of welcome back either that or cincinnati. back to "squawk box" here on cnbc live from the market square i'm joe and becky quick is here. is joe off today if you're jones'ing for andrew, bad news. >> he has a deal book going on >> things going on he will be really prepared >> whetting their appetites. >> yes, i am teasing, promoing futures are indicated sharply lower. down 300 points on dow jones 244 on nasdaq, from the sell-off the day before from the bounce

back >> the bounce-back >> sell off last week. >> all time high october 3rd >> the all time high bank stocks today, looking for solid earnings or revenue growth to bail usout, it did not happen from amazon or alphabet >> the big story this hour is gdp, a first read on third quarter growth due at 8:30 eastern time the economy probably grew at 3.4% the previous time around was 4.2% we will be watching it closely 3.3% is what we had been saying, did that tick up >> it's a read update, folks who take the current estimate and change it as the quarter goes by it ends up closer the end of the

month. >> 3.3, 3.4. >> if you're over 3, check the victory box. >> yields increasing pressure, yield at 3.087 after hitting 3 1/2% in very recent history. right now, let's get to steve. >> thank you, becky. loretta mester joins us. >> thank you for having me >> we're talking about the market, down one day and then up do you look at it being down and say, my god, i have to stop raising rates and then it goes up, i have to hike rates these are not small things, big things on the market >> i look at three things. first, is the trading orderly, are the markets trading? they are is it a rush out or overly

pessimistic, doesn't seem to be, they're buying and selling everyone is doing a reassessment of their out look. we will be doing reassessment over the next couple of months, evaluating risk and return and seeing where the economy is going. for the fed, we have a median horizon and try to focus on the economy over the median run and focus on dual mandate goals. there's risk out there and see how strong momentum in the economy is and re-evaluating things >> is it enough so far to change your median market outlook >> not so far. it get your attention and we monitor it right now, it is a risk to my out look but not my mode dal

outlook. >> a lot of investors see growth slowing. housing for example seems to be taking it pretty hard on the chin, especially rise in interest rates, autos as well? >> i have a forecast a tad over 3% for the year. i have it slowing a bit next year, 2 3/4 to maybe 3 there is a slowing but my long term growth rate for the economy is above 2% but still above the trend in my view there is slowing and earnings are a bit down in certain companies, we're slowing but still above -- >> is it jay's fed completely and everybody gets in line with their opinions and you do what you want to do

>> you come into the meeting and bring information from your district and models and forecast of the national economy. there's a good discussion at the meetings around the table. everybody brings in diverse views. >> nobody knows what they will vote when they walk in your vote can be swayed and anybody's can be swayed. >> you know what your forecast is for the economy but listen to what other people are hearing. whether they are seeing the same thing in their portion of the country. >> when powell spoke a few weeks ago now a pretty famous speech it's gotten that way it didn't seem apparent. >> i was not here. >> in hindsight, it's taken on all this import. seemed to say we're so far below

neutral, some people assumed he meant it didn't matter what the data did between now and where the pots go we're so far behind. some people tie the turbulence to being so strident called it rookie mistake when ow heard it did you think it could be interpreted in an incendiary way >> we all are careful in our communications >> did he err? >> what we think of and where we're going with the policy and our views. >> we should assume that >> i think you had to look at the whole paloply of communications the press conference is one of them the reason -- >> it's his fed. >> all of those things you talk about are orchestrated a little

more closely this was a response to to a question in an interview, maybe that's what he's telling us on the inside and maybe people are panicking. >> i would look at all the communications as a set. we're trying to give our rationale. >> my first question is whether it's his fed and i don't listen to anybody else, i just listen to him >> i think you should listen to the group. >> it hasn't worked in the past, ben bernanke's fed and adam greenspan. >> do you think we're a long way from neutral >> you like to hike when you go to jackson hole. when you're hiking, you go out and have a destination >> you're not talking hiking rates. >> yeah. that's what i thought, too, oh, my god >> you have a destination in

mind the conditions on the path will tell you whether you get there or not you may slow down a little bit if the conditions are genetxwke diabetic diabetbltz -- if there is debris on the trail and you use the economy that comes in to inform our out look that's where we're going we all put in a long term growth rate for the economy and seps. >> long run growth rate in the economy. >> we use it to where we are relative to our goals. >> i have to come back to this question maybe you don't want to answer, which is fine. we're at 2.2 1/4 now, where is neutral in your opinion and what do we need to get there? >> my long run fed fund rate is 3% but the neutral rate will vary

over time. it's not a one time number if there's headwinds in the economy as there was in the financial crisis, we went slower, right, because the short neutral rate was lower if there's tailwinds, right, the short run neutral rate is above. we have to use what's going on in the economy to inform us where the policy should be >> no one knows what is going to happen when he said it, we already knew about the trade issues should that have been more part of his -- >> what do you mean the trade? >> the headwinds of where we are in trade is already something i would have put into my data set in terms of a calculus to make sure we're not so far behind >> that's fine we do that the majority of firms in my

district, we have a heavier manufacturing district than some places in the country. people aren't concerned about trade. they talk about it >> steve is very concerned you've been concerned for a while. very concerned >> it's not disruptive supply changes that is in the calculus of risk. you look at the minutes of the meeting, they say that trade and tariffs follow up on the forecast >> you said everyone walks into that meeting with their own ideas what they're seeing in the districts. what we're trying to find out in the markets how quickly the economy is changing and economic growth is impacted from what you're hearing from everyone, what you're taking from everyone we hear, is this slowdown for real? >> i think the economy is

slowing from what we had earlier. it's still an above trend growth rate we see it slowing down we're always continually assessing the risks of the forecasts. there's upside and downside risks, balanced risks we haven't had in a long time business sentiment is very high, a tailwind we have fiscal policy, a tailwind on the down side, the global economy is slowing affects the appreciation of the dollar ander of a news. we have trade on tariff uncertainty, even if you think about the effects, it's the tariff and policy. there's downside and upside risks. >> your colleague takes account of all that uncertainty. the conclusion he comes to, it's

time to stop hiking rates and take a look at the effective trade, look at the effective fiscal policy and look at the effective global weakness. do you join him in that sentiment. >> he's been saying that a long time, not a new view for neil. >> he said it this morning >> that's the point we come to, different views of the economy financial conditions are still accomodative the employment rate is at its lowest level since the late '60s and inflation is at our target that's a strong outlook and we need to gradually be thinking more taking back some of the accommodation. i don't think we can say where we're getting to, assess the conditions on the ground and use those conditions to inform our outlook. >> we had rick on this weaker

and his concern with what he's been seeing in the markets, it's a game of brick by brick and hope you won't topple the tower. the fed is pulling back from rates and liquidity and the treasury is selling more bonds to finance the needs of the government he thinks it will be okay, the tower will not topple, it will be safe because the fed will stop >> i think we will keep our focus on the economy, what's going on with inflation and maximum employment that's what we're focused on, always when we're thinking about calibrating our policy with the economy. if conditions change and forecast changes, we will try to set policy appropriately to keep those goals in mind.

again, he could be right in terms of we could move faster or slower but we're always focused on dual mandated goals and what will happen on the out look. >> i thought when joe asked you what there was at the meeting, there was bacon at the meeting i will do that for you is there bacon at the meeting? >> there probably is i don't eat pay cbacon. >> it had to be asked. >> i want wages to go up, where the populist rage comes from and no society can continue on this path i see the fed watching so closely for the slightest wage pressure to turn the screw to see the slightest accomplishment to happen. >> i don't interpret it that way at all >> is it wage pressure behind then curve and isn't that what

we want? >> there isn't that much pass-through from wages to price inflation, right we see firms are telling us they're raising wages, it is hard to find labor we are focused on price inflation, that's our goal wages could be going unbecause productivity is going up >> good. unbelievable because productivity is going up on the two goals, i agree wages going up is a good thing. >> we worry about hit. the wage number got too hot. the feds -- >> the market does and worries a reaction what the fed is going to do. we're kind of out of time but i have to ask you one question the president has criticized the federal reserve. i have two questions about that. first, from your standpoint, is it appropriate for the president

to comment on the federal reserve and comment on policy. the first is the fed is moving too fast and is moving under president trump and didn't move under president obama, only once >> we focused on policy, focused on the two goals congress gave us that's how we do policy, come in the room, bring our views on the economy and forecast on the economy. that's how we set policy anyone can say anything they want about our policy, right when we go into that room we bring our views and focus on the two dual mandates congress gave us i've been going to sec meetings since the end of 2000. i've been with multiple chairs and that's how we woke we look at the economy and forecast and dual mandated

goals. >> alan was here last week and said the fed has to put earmuffs on to do it. is that true >> we focus on the goals we want to be an apolitical organization and that's what we do >> sounds great. >> thank you >> thank you >> thank you so much nor beifor here >> thank you >> thank you, president mester here >> gotten better in cleveland, hasn't it? >> on sundays. >> it's a great place. >> and they could have a couple more wins. >> it has a positive outlook >> did you get bacon or beer >> i don't like beer >> and wednesday night it opened up when it finally opened. >> i do, i like beer anyway, coming up -- >> run away, loretta >> you knew this was coming. >> i thought i was going to get

a bengals question or the opera >> ask me how that -- you know, i blame you, that's paul brown's son running things down there -- used to be -- anyway, breaking economic news, nasdaq ceo friedman fights back and they had to be separated. i hope they didn't pass each other in the nasdaq. she'll be here ready to respond next watch "squawk box" on cnbc

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xfinity customers, add xfinity home and get a great offer. plus, ask how to get free installation. call, go online, or demo in an xfinity store today. all right. welcome back to "squawk box," everybody. we're looking at the futures this morning and have been under pressure dow futures down by 288 points and nasdaq from guidance from amazon and alphabet, 244 points. >> and talking about the fees at exchanges. >> if the exchanges are charging investors money at the end of the day, mom and pop pay for that the end of the day, exchanges are paying for it.mom and pop

>> let's hear more on the other side dana friedman, ceo just start where you want to start and i will ask you specific questions about things the commissioner said. >> the first thing we all have to recognize i think the sec recognizes as well we are the best equity markets in the world. they're a product of incredible competition and it has been created by the sec itself. the sec framework we operate under is tremendous competition. you know we compete for every listing but every order in our market we have 20% share in the u.s. stocks and compete with other exchange groups and broker dealers for order flow on the back of it we innovate to make sure the systems are resilient and create market value on the back of that and

charge for that market data and trading fees >> if you made this case to the republicans at the sec, their argument is the case hasn't been made you do these things if you gave that same answer to them, do you think they would have voted differently >> we have to recognize the sec is comprised of five commissioners, democrats and republicans. most of them are new this debate allows the commissioners to get a better understanding how the markets work and make sure they understand the factor behind these arguments. >> i said it sounded like price controls to the commissioner he said it's not price controls, competition controls and mon nopistic practices >> i think it does not constitute a monopoly. >> there are 15 different exchanges, 12 owned by three

different groups >> we have four exchange groups that compete with each other and 40 other pools that compete for the same flow. the sec doesn't allow us to segment customers and don't allow us to have market models within one exchange. in order to launch consumer choice we have to market different exchanges and market models that's the only way they allow us to market different models. >> you want to call it a monopoly, i pointed out to the commissioner, is this a situation are you pushing not to be allowed to charge for different data streams should all have the same access and not charge higher prices for information. >> information is available to every investor the average market charges nothing for market data. they pay on average 17 cents per

customer per month for the core data they offer their customers. you say, we could add another 3 to 5 cents per client for that, incredibly cheap data offering the same information as professionals. >> what are professionals willing to pay more for? >> recognize professional investors represent retail investors. we do pay them a little bit more >> they pay you a little bit more >> the top five banks generated $25 billion in equity trading revenue so far this year the revenue we generated constituted less than 1/2 a percent, very affordable >> the sec said it's an issue they're looking at, should you be able to charge more money for better faster information. as a private company, you

should, where does the private company and utility factor -- i'm coming at it with two minds to make sure our trauced are safe and don't have to worry about a meltdown >> we are incredibly resilient everyone gets access to fast data our trades >> it's about the same if not a little bit more on private feeds. everyone is getting access to fast data, everyone. for private companies that come into the market and we charge them for more -- >> what's that >> they want to process more orders as fast as they can they buy bigger pipes and those bigger pipes will cost more money. that allows everyone to have the choices they need to compete with themselves and allow us to make exchanges with dark tools >> you make it sound like it's a commodore computer rather

than iphone. did you hear the barnes and noble analogy. they're controlling the library. of course they put their books there, they want you to buy their books. >> we provide a spectacular job. it's 16 seconds of latency we had 500 million messages go through that feed just last week in one tapday. it is incredibly resilient technology and we use the same for private as public feed on the private side we have more choices. we make all of that extremehy -- extremely available. we processed 26 billion messages last week. our systems are incredibly resilient and strong that gives investors confidence

so they know when they want to trade stock we will be here for them that takes a lot of investment snow i was just asking whether human nature causes decent people to gouge on purpose i guess the real question is, in the pursuit of profits, maximizing profits, do you need to be reined in bay more competition so you do what you're supposed to do. >> we are a public company owned by investors and serve investors. we are entirely consistent we make sure our investors get access to a great company. i think that that's really important to recognize being a public company does not mean we're suddenly not going to take care of the investors we serve. we're incredibly client focused and oriented and has a lot to do with the profits

>> we have to go >> thank you for being here. we appreciate your time and look forward to what's coming snow thank you very much we're a few seconds away from the first read of the third quarter gdp. it's still moving. dow jones down 313 rick is in chicago take it away >> our third quarter gdp is better than expected up 3 1/2%. 3.5, follows our last quarter, up 3.2 the in terms, consumption jumps 4%, the pricing index lays low at 1.7%. personal expenditure consumption eased up a bit, too. personal side eased up, con stumgs ramped up and we --

consumption ramped up and we ended with more horsepower on the top line it's going to the up side even though it's negative, a lot less negative on the dow. today is a big day for treasury yields 311. the previous high yield close of the year before we ramped up higher in the 320s, we haven't settled below that we're trading below at 308, 309. it is superer important for you technical analysts out there to pay close attention to which previous high we settle at becky, back to you >> wait. i had somebody yapping in my ear. what technical levels to pay attention to >> the previous may to high yield close before we zoomed up about four weeks ago the fact we've been able to virtually hold that on a closing basis, with all the volatility

and equities considering the relationship that yields usually give up ground when stocks are up and stocks have been surrendering ground. we want to pay attention we were flirting with all the gains for the s&p and the dow diminished, and we settled and the treasury moved and been holding and that's been a stalwart aspect of treasury for 2018 very few givebacks for the down side >> i want to apologize that he said you were yapping. >> i had one in this ear and you yapping. >> aurs ststin, i apologize. >> joining us is steve liesman rick was talking about what was happening in treasury, if you were watching what was happening with the futures, you did still

see a pull-up in futures still down 250, but up from these numbers. down 256 and s&p, 41 maybe it's good news is bad news austan goolsbee, ne professor at the university of chicago's school of business and chairman of the council of economic advisors sn >> yapper. >> yapper in chief >> becky gets away with that >> steve, what do you think? >> i want to do a deal on this one. you have to like the top line number, 3.5% the strongest two quarter average growth we had since 2012, the strongest three-quarter average growth since 2014 these are good numbers coming

after the 4-2. some in terms i don't love about this we got there mostly through the consumer that's good because it may show jobs, wages, helping the consumer spending. we had a fall off or decline in growth rate of business investment, just 0.8 structures down big but equipment up 0.4%. i don't know if the better investment or cap ex is in the future or leveling off, initial rush then you had housing investment down an kerfuffling about trade, and exports and imports maybe tells you there was a surge of imports coming in to try to get ahead of the tariffs. there was a little bit of noise in the data. i love the consumer part of it

i don't understand the cap x party of it and surge in government spending. >> 2014, what quarters were those? >> i'll tell you exactly to the two quarter average >> the three-quarter average >> three-quarter >> this high and what was the fourth one you're adding into, they have it well below 3% >> that three-quarter average, 5.1, 3.9 and 1.9 in the fourth quarter averaged 3.97. >> what killed that move to 3% full year because we never did that it must have been an awful -- one of those terrible first quarters you talked about so many times, maybe? >> the first quarter of that year was minus 1 >> it had to be. >> good thinking, joe. >> i didn't understand >> joe's always the matt guh gu.

>> the math guy. >> austan? >> a good number there's been this undercurrent because of defense spending and the government side that will be an artificial boost. the customer spending part of that looks very good i think the uncertainty, let's call it, euphemism we've seen in the market, down, fear, the fed, if they're charging ahead to raise rates when there's all the sth stuff going on with trade, a lot of uncertainty with corporate earnings that, you think, would trade on negative capital investment, that's scary >> i will get back to you on what we heard from loretta

>> i want to get to phil, what it means and what the response might mean when they put it into the whole world they're looking at >> i saw two pieces of good news that will affect the fed inflation data, as steve said, there's nothing in the inflation data that leads the fed to say, we have to hike in december. and the household saving rate, ticked down an a little bit. the economy is going on consumption and people are still saving and winds in the sales for consumption going forward. >> can i say, there was a big part in spending, contributed a half a point, the highest in several quarters you had a story in the journal >> the second cloud. >> no, it's not.

>> the tax code in the government, both as you go into 20th 19 thought they will contribute less. >> i don't want to get down, as you know, what's appropriate and spent, there's a goodly amount of time there. there's a lot appropriated and through 2019 this continues. >> these are the weeds >> for sure the tax cut we can agree. if it was juicing things this year, that contribution will phase away >> no wonder you didn't fit into the obama administration you're down on government spending do you remember how -- they drummed you out of there, they rode you out of there on a rail. this is why. this is why, though. i know you'd never know it. >> how many years later, he's still blasting me about the stimulus it was like what stimulus, the

greatest thing that ever happened >> you did cash for clunkers >> that's what's still up there now. >> i'm still waiting for my thank you note, joe. >> you loosened the lid on the jar. >> you did >> you talk about how the fed is charging ahead to raise rates. we just had loretta mester here. that's not the sense i got from her. >> you did i was going more from, let's call the public statement and powell certainly gave the impression they thought the economy is gangbusters and they can afford to keep raising rates at this accelerated rate that feels true to me. i agree, it feels true to me i think overall the fed is thinking that and powell is thinking it.

their comments were different and reiterating how different they would publish i think that's appropriate it's not appropriate in my view what the president is saying about the fed, he shouldn't be saying that, on some of his content, i don't disagree, if the fed raises too fast it has been one of the causes of the recession in the united states, at least half the recessions caused by that >> i don't think it's right to expect the consumer to keep spending at a 4% annual rate if it was 3, it would be huge. i don't expect the business side to be 0.8. you can see a giveback, the customer goes down a bit but you expect business to come up, don't you. >> >> that shift would be very positive

the key is deal with their tariffs, the housing market, steel, aluminum. get the uncertainty o the table and the economy can keep growing. >> the only thing i would say about it, the first quarter, when they first passed the tax cut, rush out and say, we have a big slug of money, let's spend it as quick as we can. if they accelerated things forward you would not necessarily see that big of a rebound. >> i agree around the questions among the tax cut, was there a whole bunch of investment out there companies wanted to do but the price in terms of taxation was too high, they didn't do it and now that the price is lower, they will do it. coming into the number, the cnbc

forecast not tracking but a strong number, 3.4%. i consider that strong if you do it above gdp and inflation what does this tell you about quarterings, this year and next year quarters >> i agree the economy has the ability to step up and that is good we need the investments to kick in and tax cut to work and that's the key going forward >> i want to thank you very much for joining us, phil >> thank you >> steve, thank you very much for talking to you austan is with us. >> that has to drop off. >> i have it here, i run the numbers. >> when that drops off, it will be 3 you will call in sick. >> why would i call in sick?

>> aufs stan won't be available. coming up -- >> exactly i would say, i hate coming in here austan -- >> i will say one man's weeds are another man's garden >> yapping here. >> you're the yapper >> economic growth and tax cuts relief around the corner we will ask the chief tax reiter, ways and means, kevin brady. futures have improved a little we'll be right back.

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economic growth, the name of the game this morning, third quarter gdp coming in stronger than expected annual rate of 3.5% joining us now ways and means chairman, kevin brady. i say this, kevin, there was a question on jeopardy last night, it's the oldest committee. did you know that? the oldest, ways and means the poor person didn't get it right because she said the department of ways and means, didn't give it to her. >> thank you >> you're maybe the oldest and most important as chairman what have we got on tap? we have this nebulous. this is 3.0. we had a tax cut, 2.0. this is an additional one the

president is talking about can you fill in the details on this >> some. first, i want to know why you forgot i was coming on this morning. >> it's bad. >> apparently my 15 minutes of fame are up. no "squawk box." >> i was happy to have you here because we have a non-believer on the set, too, austan goolsbee >> i see austan is there >> go ahead. >> so, look, numbers today very encouraging. it means better than expected. looks like the growth this year is 3.3% or higher, a far cry from the 2% predictions before the tax changes. we know that law is working. the best is to come because so many decisions being made to locate new facilities, research, manufacturing, new headquarters in the united states that takes a while to manifest itself in the economy. i think there will be stronger

growth over the long term in the tax law. the president is looking at a cut focused on middle class workers and families for this reason he still believes middle class families are the ones always in the squeeze. they make too much to get government health, as many do and don't make enough to grow the way they want and thinks we should do more what a contrast from the new report repealing the tax cuts could cost $27,000 in higher taxes and lost pay to a middle class family versus a president who wants to, like president reagan, have a series of cuts focused on growth and focused on the middle class >> austan, that made sense to me about -- in terms of corporate spending, it doesn't happen immediately. you say you want to be positive and hopeful. >> i hope that's true. i wish they had paid for the tax cut when they passed it.

i hope the chairman is correct i guess my qualm still lingering question, you remember when the administration passed this tax cut they predicted it would raise wages for average workers by $4,000. i'm still #where'smy4,000? i haven't seen it. >> it's all about austan he hasn't gotten his $4,000. >> austan has -- i appreciate his leadership didn't always agree with it. i know it was there for the right reasons. as you know, those wage increases don't snap your fingers and happen overnight because the tax law businesses are investing more and that drives activity and wage growth and strengthening the core of this economy this new tax law is

designed to do it does take some time to see that occur we're on the right trajectory to see that happen. >> austan. >> if we do another tax reform, 3.0, 9.0, whatever you think it is, would be a different approach in congress to maybe paying for it or do you think would be again tax cut without any pay force? >> so there could be -- as you know the $1.5 trillion was a modest investment over decades in a much better way long-term for us as we look at future tax relief and tax cuts, you know i am sure we'll have that debate about are there areas of the government frankly that are not important are there improper payment their tax cuts going to people that don't exist and phantom doctor and are there some areas that frankly could cover that. we'll have that debate but right now we are working closely with

the president and have for several months on the 10% tax cut that's focused on them as republicans retaining the house in the senate, that's our goal and that's what we are working for. when that happens, you will see us move in advance >> just going back on this for several months you have been working on the 10% tax cut for the middle class >> yeah, it was. i wish the media would call once in a while to ask about these things yes, the president has been having these discussions he's focused on the middle class. there is some good ones. we expect to advance in the new session of congress. if republicans maintain the

control in the house in the senate >> we'll see, i don't kno know -- trying to figure out what the odds of that are. you don't look at 5:38 do we care about any of these probabilities that we see mr. chairman >> there is no question. republicans have an up field battle there is no question about that. traveling the country in these races looking at what's going on in these races and now i think the momentum on the republican side, you know i think there is a good chance that we can maintain the house it is no guarantee and no doubt, early voting started in many states including ours and i am encouraged by what we are seeing the markets. when i ask you anything other than what you always focus on. i know it is not where you want to go. the market says at least correct it a little bit from what we have seen with a lot of it of the initiative of the republicans and the trump

administration what do you describe maybe it is a front sugar high and the feds are raising too quickly. are you concerned of what we are seeing before the elections in the financial markets? >> look, i think the sugar high came from the stimulus, more government spending and quantitative easing. this is on the supply side and more investment and productivity and locating a business and investing research in the united states every challenge we are facing right now is because of growth the fed is normalizing its rates as they should because our economy is stronger. we have a big problem finding the workers we need all across the country because of the new growth opportunity we are seeing i would rather we have an economy facing challenges because of growth than facing challenges of contraction or

antigrowth policy. i think we do have, every economy has some challenges. >> you think the fed is raising rates and you would like to continue to see them do that >> it is important that the fed normalizes rates overtime. i don't want them to prematurely hit the brakes on this economic growth it is important for us to have inflation check and a sound dollar going forward the feds have been trying to do too much for too long. it really is time i think gradually overtime to move back over those normal rates. in our economy we are seeing some of the impact of those eras raises in the house. overtime we are stronger >> mr. chairman, joe is getting nervous because of the tax plan have been in place since january 1st and the full looking stock market which he likes is down since the tax plan has been in

business he's wanting you to come up with a different explanation than the tax plan for why that's happening. >> that's not the way i would characterize it. >> now, give me a second, austin let joe debate that spin on the approach >> 10% >> did you just hear that? >> 10%, correct it is happening. >> when you are up 50% >> hey, kevaustin did not like t 50% move of the nasdaq as predicted by november 9th on 2016 a paid tax cut is not a tax cut, it is a tax redistribution a tax cut can mean a cut >> throuere you go >> the government has to do with less >> did you invent that >> no. this guy is smart, he should be an economist

thank you chairman brady >> thank you, becky, austin. >> we'll always have our time together and this time was awesome, made it more interesting. thank you. >> when we return the count down to the opening bell and a lot of pressure on the futures right n now. don't miss mark mahaney, stay tuned, you are watching "squawk box.

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all right, we want to thank our guest at this hour, austin, come back. >> thank you, becky. >> thank you everybody, have a fantastic weekend. make sure you jioin us >> oh, i thought we are rushing to get out >> i agree comment with austin we can't get out early austin, you get the last word. >> look the gdp if we can maintain above 3% for this year or next year, that will be great and me and you and joe are going to come in and have champagne and rejoice. if it wears off and the gdp starts slowing down and the market goes down like this and

the president keeps pushing tariffs then it can be an indegestion year >> we are still 8% or 9% >> corrections are something that's happening from time to time >> "squawk on the street" is going to talk about all that austin, thank you again. have a great weekend, we'll see you monday right now it is time for "squawk on the street. ♪ good friday morning, welcome to "squawk on the street," i am carl quintanilla with david faber and sara eisen and mike. jim cramer is off today. europe is right across the board. we got some banks unde