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 under pressure

there and the 10-yr falls below. sharper on the hill of some disappointing results. the nasdaq in the midst of the worst month since the crisis >> alphabet leading fang stock lower. strong consumer spending giving the economy a boost last quarter. gdp coming in better than expected we'll get the first white house reaction with nick muhaney at this hour. >> we are set to a big decline open thanks to a double whammy in tech. >> amazon issuing some holiday quarter guidance that was below forecast and nasdaq is on track for the worse monthly

performance since 20208 we knew going into the post market last night how much is writing on those two names >> yes, it looks like a trap it was a relief bound. i don't think anybody decided that all of a sudden that microsoft is going to carry through the entire season. it is vulnerable for the negative reaction. it reflects an unsteady, vulnerable tape in general to where basically people are shooting first you have the unwhine of the conviction trade that's ongoing yesterday's rally really impress that much in terms of being the change >> seems like one of the theories of the week is the economy is strong and gdp shows that and earnings are strong people taking leverage off their bets and we are going back and forth on those two fronts. i do think that gdp number coming in today is good and stronger than expected i think the market wanted that reassurance.

>> it is about a bonus and inflation is not a big problem pric price is cool. 1.6% both of those numbers represent a moderation from 2% or 2% plus the quarter before that signal to the fed that the economy is doing okay and they don't have to get too anti to raise rates super fast because inflation ace b inflation is a big problem that's an anxiety in the market because the fed is moving too quickly. >> it does not answer it next year for now i think they'll address some of the more sensitive concerns there >> investors are looking at amazon's report last night not just for reflection of tech but also consumer because it sort of hits that one as people noel it was not the number itself but the guidance that certainly seems to concern some people

they're talking about guidance of 10% or 20% growth rate. this is the company saying it is an 80 basis point on foreign exchange there was also some disappointment of their international revenue growth they did address it a bit on the conference call in terms of well we launched turkey in the quarter and now we have 17 amazon websites globally we are pleased with the international sbbusiness for this quart, reports that gave some concerns and a lesson expected a very wide and they everyone say on the call as well, guys, you know we have very high error bars on the quarter. i guess meaning there is a wide range of possibility and amazon does this all the time they typically do tend to give a fairly wide guidance frame and lower to some have hoped only to beat it. >> i challenge you to find a

resource note this morning that says this changes the story on amazon the analysts are as bull issishs ever and given the cloud and retail and everything else the. >> sun trust actually raised their targets to 22.50 after last night for a closer look at all of this let's bring mark may and our internet analyst, happy friday, good to see you both >> streets is coming to the defense of both, why >> i am one of them. one thing is reservenue accountg there is an accounting issue that's clouding what's happening under lining the company the street sees a 1% revenue mess in 29% growth year on year, what i see is growth of 40% and a

beat on growth profit. there are two accounting issues that influence growth for the quarter and hard for analysts to model out. the other thing i am focusing on is earnings. this company put up 3.7 billion in gaap earnings to get income i don't think any of us would thought we would be able to value gaap earnings. $50 a share in gaap earnings in 2020 only two years away. >> i actually think the under line dynamics of amazon are quite strong >> anthony, our aws units are slowing, is that not true? online stores decelerating, ar those things not accurate? >> i agree with mark that gross profits are performing well. it is hard to value amazon on

earnings or free cash flow because it takes a couple of years out. if you are a stock picker, you want to earn a name where earnings and free cash flow are higher i think there were some deceleration from 49% to 6%. we would have liked aws to have a greater quarter given the softer revenue guide i think your question is good call about what is the revenue guidance implied for ecommerce businesses i think when you look at the operating income of the third quarter, when you look at the gross profit performance, i wish they would sort of guide it. i wish they would highlight that kind of metric i think you have a story where you can look of earnings of free cash flow. the issue is it seems that it may come in the category of a shift on focusing on revenue

growth and earnings of free cash that shift for investors can be a little bit disrupt activiived. we are still a couple of years out on value on amazon >> mark, the company does seem to be taking pain and talk about controlling cost and talking about 13% increase in head count for example verses previous years. 38% last year not including whole foods. do you expect that to continue and if so what does it do to your margin view >> we have a line of site over the next year that we feel confident that'll continue amazon, waves of investing heavily in their infrastructure and fiulfillment operation we have iline of site through next year where we'll see it coming out of leverage beyond that we are optimistic

because they are doing changes to their operations to make it more efficient some of the things they are doing is out sourcing some of the warehousing to third party sellers. there are a lot of other things they are doing to be more efficient with the infrastructure that they built over the next year we feel good of the margin trajectory the other thing is the move from 1 p to 3-p that's a far higher margin business that's what changed in the quarter. 53%. that's the reason why the streak got the quarter revenue wrong on the downside but they got the upside because there is an accounting difference in the way they booked out revenue. >> anthony, we are talking a lot about the presentation of the numbers and maybe the metrics are changing from what investors are used to. maybe we'll get as much notice in terms of the stock reaction instead of going up to 2050 and

the last $300, who knows where it came from and back to now what does it mean for r how investors are position in the stock and we see it unwhine for all the big popular fang names >> i have heard from investors that there is an inclination to selling winners. we have seen that with netflix recently and i do agree on amazon that the thesis for some time for a few years was strong reserve new growth on organic bases. that thesis shifting to one of margin expansion you know people will say oh you guys complain to that and amazon was not profitable enough when they're putting up great revenue numbers. maybe because the stock is appreciated and tripled over a couple of years period of time you are right in that and these higher levels, i think for all tech and internet the markets discriminating as a stock you need to raise at

some reasonable valuations, number one, number two, you need to be beating estimates. number three, you need to kind of not have decelerating key metrics and you mention some of the accounting and revenue presentation, it is not as clean as it has been in the past and in a market like this and a choppy discriminating demand like this, that's a recipe for volatility we are basically what you say is it is an opportunity to own or own more of great companies that you want to own for a long time and when they go on sale and i do think amazon is one of those companies. i don't know if this is the exact level right here but i think ultimately, you know when the dust settles let's say, maybe that's pretty soon and maybe that's later today it is an opportunity to step in. >> that is not easy to pick it i will ask you in a question along the way. amazon represented the stunning rally we have seen in growth and

technology stocks surpassing a trillion dollar. stock is set to open down to 7%. is that an opportunity or because some of these misses or vulnerable and we'll continue to see this unwhine of this amazing growth >> these companies are generating meaningful earnings and free cash flow amazon is going to build free cash this year and double that we are on a path of 30 billion and free cash 2020 the same with alphabet it is based on gap earnings and we have not had that for a long time these companies are growing 20% in the case of alphabet and 30% or 40% in my view if you look at growth profit for amazon i think these also have a lot of support on the upside. so i i realreally like the set p here these are the kinds of stocks

that you want to own >> you have a great call of netflix. you called it an opportunity it looks good for 48 hours are you second guessing yourself now? >> no, this is a jog and not a sprint all these companies have tremendous opportunities especially internationally look at net flikflix and amazon. this company enters international markets in the last three or four years, market penetration rates of 5% and a lot of these markets outside of the u.s., canada and the u.k., long runway to grow. now we are seeing that the business models actually work. they're generating significant free cash flows and earnings and netflix is not there yet they'll be there soon. we a we have not loss its peak. >> anthony, can we get alphabet quickly with you given its importance as well

>> yes >> give me your take overall, it seems to be some disappointments, maybe 100 points missed. i am not sure how people are feeling of the guidance, what do you think? > . >> i want to say that market is making me wish that i sahaved an put on a tie this morning. >> yes, we like that from you next time, anthony >> on alphabet, i thought the revenue growth is really good and strong and above 20% u.s. growth is 20% at this scale of that business and the other regions in the high 20s in a lot of cases i don't think revenue was weak i think it was really a matter of the operating income and very modestly missed our expectations and for alphabet, the theme is continuing to be investment. they are spending their hardware and investing in cloud and i asked the question on the earnings call. if we were to see a macro slow

down or revenue slow down, would there be opportunities for trade offs in order to optimize operating income growth and profitability. the company basically says we are investing for the long-term. sort of the push or the thing that people kind of push back on for alphabet is the cost but, i think near term right now in this sort of market, it is the name that's currently throwing off massive amount of free cash flow that you can value the stock on today for that reason, i think alphabet offers relative safety and compelling value on an earning free cash flow bases right now. there is less of terminal value dreaming that you have to do on alphabet >> yeah. and carl, the numbers are shocking when you look at them $5.3 billion for cap for the

quarter. these numbers are unreal when you think about it and $106 billion cap in the market >> that's something that netflix does not have. mark and anthony, guys, thanks >> coming up on the show, the growth picture we got a inupikture with gdp out. we'll talk to mick mulvaney and taking another look at futures they did improve a little after we got the stronger gdp number consumption, looking especially good at 4% they're still under pressure dow and futures ardoe wn 237 more "squawk on the street" on post nine when we come right back with full service brokerage firms...again. and online equity trades are only $4.95... i mean you can't have low cost

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taking a look at futures, heading into the open, still under pressure on a mix of negative reaction to some of the earnings reports, especially some of the big tech names, amazon and alphabet. dow and futures down 263 with about ten minutes to until the opening bell heading for a fourth week of decline for the nasdaq looks like it is going to open sharp liloer tech has been at the heart of the sell-off in october which is looking like the first month since financial crisis this morning, third quarter gdp report is the focus.

let's head to rick santelli in chicago. how are they taking it, rick >> treasury complex once again is continuing to melt but not in a big way, we did get a nice bottom on those numbers of gdp look at one week of 10-yr, the high yield closed up to about four weeks ago was 311 if you look at that, you can see we with held that zone until today. it is going to be a key close. you can see on the left side of the top i am talking about they're holding on the right side, bund yield, they have gotten devastated there is a lot of moving parts in europe right now whether it is brexit or the stronghold of the political class like the merkel starting to -- tens and

bund never been this wide. that's a 25 year chart you are looking at on the day or the week look at the chart starting in june of 2017 we are almost there. we are about ready to take out that spike on the right hand side and go back to jean 17 where the euro was the weakest of the dollar. the the dollar index is hovering the best level since june of 2017 tens are down on the week. they have suffered the dollar index is over a penny on the week right now, back to the game highest level for 17 months. there is a huge debate of what the fed is doing next. everybody is expecting to raise rates in december.

the question is what then? should it take a pause the president pressure is not making it any easier we are starting to hear more from the individuals loretta gets a vote when it comes to the policy. here is what she says based on what's happening with the stock market >> it is a trading orderly or is the market functioning they are second, is everyone rushing out? is it a panic or pessimistic does not seem to be -- third is everyone is doing their reassess m ment of the outlook and we'll be doing our reassessment as well as we go into the meeting the next couple of months. we are trying to see where the economy is going >> mester is making the point

that they're taking the data and market action as they are coming in i don't think she's spooked by what we are seeing the last couple of weeks. >> credit markets have held up fine it does not seem like there is pronounced economics greatly i also think they think there is enough kind of leeway in their existing 2019 projected plans. they don't have to move fast right now to adjust it she did make some comments yesterday about building a capital buffer for the big banks which kind of raise people's eye brows at this stage of the game. >> we'll watch that. intel really the bright side today bucking the down trend after earnings last night. we'll have the company's interim

ceo. we'll be back in a minute.

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minutes opening bell best back-to-back gdp numbers since 2014 and then again offset by weakness snap and some others. >> housing and autos, not much release there in terms of the new slow i do think it is nice and we got a little bit of reassurance and nothing weaken too badly at the end of summer. it is all about the project. given to the nasdaq of downside leadership right now, that's not an economic mess we did that with beating down the banks and housing stuff and autos. the nasdaq is getting unwound. it is a sloppy market and we are still in the process of chopping around and figuring out when we are sold out >> here is a good stat for you from david rosenberg in his note in the last 22 corrections with the stock markets have seen

since world war ii the average pull back was 13.8%. we are not near that that's not a garden variety correction at this point obviously it is impossible to find a bottom. he also makes the point that we have seen a lot of angst in the market and we have not seen an all panic. bottoms are usually born out of panic. >> if you had enough damage on enough pain. it has been broad pain in terms of the stock performance you had 70% of stocks that are well below our 10% loss right now. thi i think the market of itself is over sold in 2015. all those historical numbers on average numbers, that's all kind of built up pre1-1990. the older cycle sort of had a boom box >> it is prequantitative

>> it is telling you the market is just really having a painful valuation adjustment >> well, there is a lot of pain on the other end of the phone when i talked to my hedge fund managers all of them are down and wonderful group. by selling a lot of their winners and/or just the names we watched moved up substantially which then move down as a result, well, i got to get uout. i got to take off risk >> some people are trying to buy the dip. >> there were net in flows it is definitely a bit of ambiguous picture. i think people are confused that the economy seems good in the market >> confusion does not equal an all out get me out of this >> the opt-ed journals today

saying the feds should take their foot off the brakes. does it surprise you >> that's one of the perspective. >> there ises the opening bell s&p and cnbc realtime exchange the big board is tech gc and pintec, a platform in china. amazon and alphabet will be the ones to watch. >> without a doubt amazon, i keep on saying it went from around 1600 or 1700 lev tating to that level you have undone that i think you are at the point where i think people are reacting maybe we should take -

take -- investors should look at the gross margins and what investors lack is the confidence that amazon management is in that mode maximizing of forward quarters we don't know if everyone is on the same page with the quarter of the realm is. >> they did say there is no message embedded in their guidance meaning no narrative they're trying to spin with the cue for guidance others say you got online retails moving ten as oppose to 14 last quarter and we got walmart ecommerce kissing 40 the easiest game out of the san box in the cost. >> what are the cost >> 46% growth, disappointment for aws. still the profitability was a lot better and investors are riding that off. all the analysts are leading with that this morning second quarter in a row. we have now seen a pretty consistent streak in a year from

amazon >> we have a clear path of $50 a share of earnings. >> 2020. it is 33 times 2020 earnings. >> now it is a very rich gross stock. >> 40 or 50 times and it is interesting that the narrative did not change from revenue growth to profit growth. the analysts always find something they can be positive on >> revenue growth is 29% >> it is slowing down. aws is incredible and the margins we know are far higher 46% growth is asastounding it is not as much and it is decelerating the last quarter. it accelerated the last three quarters previous to this one. amazon is down about 9%. you can see alphabet is down a little bit we have not talked about intel it is fascinating because they talk about explosive pc growth of 16, data center of 22

>> i don't know if it is that or now kind of you know prove it is going to last kind of moment you know all these semiconductors they got traded as a group but they have different drivers. microsoft's numbers are out performed on the traditional pcs. seems like you have a little bit of a speed up and verses expectations in the area >> they do expect modest growth from pc, a total adjustable market this year at intel. we did not talk a lot about microsoft moving up. it is up over 6% yesterday >> yes, it was given back to some of the amount of it. >> only 2% of it >> yeah. moving onto a couple of other areas, guys. this is the name that we talk about often. gulliad.

this is $150 billion market cap company not that long ago. remember on the drug drugs -- something happens when you actually have a drug that cures the disease which is people are not taking it i i know it sounds funny and there is a lot of debate of how expensive it was for gilead. their sales decline of $900 billion to $2.2 billion a year ago you have a smaller market as a result of curing the disease that's why it is a great thing as you take it everyday for the rest of your life. >> people saw it was a declining franchise oddly enough even though it is so powerful >> for a while and that pharmacy deal that they did they do have $31 billion in cash

and they do generate a lot of cash sort of a name we don't focus on as much. just wanted to give a quick look on earnings as you can see it is down >> i have another earnings loser for you. colga colgate. it is doing better this week but disappointing report from colgate. organic sales growth is down half a percent and the market was looking for a number that's higher than 1% they're losing share of oral care and tooth pace and tste an national trends. household product companies are facing a triple whammy a stronger u.s. dollar that's only getting stronger and higher commodity. they're taking price of mixed results which colgate have done.

generally sluggish brand performance which we can continue that's why pg&e is such an outlier. that's also a big threat to some of the big competition like colgate which is going to be a loser today. the group that did best isra re estate and utilities >> treasury comes in it took like an 8% or 10% drop in the broad stock market to get treasury yields from 320 down below or around. >> which did not appear to give the equity market relief >> nobody had the confidence that's now the new level >> yeah. >> first reading of third quarter of gdp is showing better than expected growth of 3.5% of the reading. it comes in market volatility. growing concerns of rising

interest rates and the slowing economy. with us now with the reaction, mick mulvaney. i am sure you are happy with 3.5. the president putting out the numbers which may have the effect of disappointing people >> the 3.5 coming on the hill of 4.2 and getting us right at three. it is very well resoceived here. it is exactly what we told people we are shooting for of the sustained 3% growth. it is nice to see the trump administration putting into place paying dividend for the american people. >> given that kind of growth, mick, why is the president demanding jay powell stop raising rates? it seems that we have a strong economy and would expect the fed to continue on its course >> sure, we have this discussion about demand driven growth verses supply driven growth.

one of this i thinngs you see, n is ticking down a little bit we are seeing this sustained level of growth without what the fedmay typically expect to see with inflation that's what we told people to expect in a supply driven market which is where we think we are the president is absolutely right to raise the issue a lot of economists are talking about it as well we do not see the inflation and therefore a little bit of a surprise and pushing as if we are in a demand driven cycle >> mick, speaking of supply driven growth, i mean that's supply driven and even though consumption is good. you have to hope those goods get bought >> absolutely, not only the consumption side but getting deeper in the data the income is up and gdp per

person is going up the fundamentals are all there we watch those inventory levels. they dramatically hurt gdp about 90 basis points in the last quarter. it is volatile and we do watch that all fundamentals pointing it to be sustainable >> director mulvaney, you told us the tax cuts are going to pay themselves through economic growth we are seeing a higher economic growth but we are seeing a budget defendant sit that's swell by $800 billion. why is it not happening? >> a couple of things are happening. revenues are up. we took in record revenues last quarter, number one. we have also seen that the long-term trends on our growth line is going to help us with

our deficit. the deficit everyon though it is higher it is $70 billion less than expected in july the revenue numbers for the government is there. it is the spending side that we think it is driving a lot of the deficit. discretionary decisions that we made aside from the taxes that are hurting on the spending side it is one of the reasons you heard the president talked about last week to get discretionary spending under control the deficit is important and the president is aware of it he's going to do everything we can from our side of town here to get spending under control. >> well, there was a significant increase as well defense budget which is contributed to that as well. i love to get back to the sustainability question because you heard it and i am sure you watched our air and many of our economists coming onto talk about the sugar high and tax cuts and this much larger budget we got last year we'll anniversary it and get back to the 2% roughly gdp

growth we came accustom to give us a little bit of granularity. at the end of the out going administration, they're the folks to say that's the new normal and you can never get to 3% we can make him complete dictator of the country and he could not get us of a couple of a percent of gdp we reduce rates and bonuses and wages helping people the way we have changed the way we tax capital in this country, not only lowering the corporate rate but giving detuductiblilit for cap expenses when we say the fundamental is strong, that's what we are talking about. >> yesterday mick, green span goes on mpr and says the impact

of the tax cut has largely runs its course voting members say higher long-term and growth rate from physical policies unlikely what are they missing? >> i think they're missing the grande granularity of the tax cut we fundamentally change the way we tax wealth creations and by encouraging business to reinvest in themselves. if you make $100, we tax you on the $100 and you have the available to invest in your business take that and invest in your business we won't tax you at all. that's why we think the capital numbers are a little bit flat this quarter which we were surprise to see. business confidence at all times high businesses are investing in themselves again if that's the long-term pay off, yougot a short term month gdp

when that machine comes online and starts producing something >> although director mulvaney, the market is down 7% in the fro month of october is there any discussion of changing policy or posture around trade which is a source of anxiety for the market. >> a couple of things on that. october is a rough month for the stock market you all did a special on that. we are not concerned about that. the fundamentals are strong and we think that's ultimately going to drive long ste-term valuatios and eck tquity. everything points to more stainability of the growth market we don't use it as an indicator of where we are headed >> director mulvaney, thank you. appreciate you joining us this morning. >> thank you y'all. >> mick mulvaney >> i want to get to a couple of names before we get to bob and

wrap up our hour here. one is athena health, it is a name that i have been following, totally separate from the market i want to update our viewers we have talked about it as a potential sales candidate. they have been running the process for quite some time. eliot have been pushing them more or less to that a number of different conversations and the situation indicates this thing is a couple of weeks ago from potentially getting done several bids have been received. there is confidence among those who are close to the situation that they'll get a deal done they have been benefited by the declining stock price. you can see moving up now but we are talking about a stock that's far higher than it is currently is they're in a position to potentially having some sort of premium offer and does not appear that the board would go ahead. still a couple of weeks to go i am told. there is confidence given the bids they receive that they are going to be successful in reaching the deal. did not want to share that and

we'll give specifics as i know exactly who it is in the lead position there as athena health is moved up by 4%. >> mohawk is getting destroyed obviously and makes presidential commercial flooring. >> similar story >> the kind of edges of housing. williams talking about unrelife-threatening unrelent unrelenti unrelenting. so much on inflation rising costs and rising prices in consumers. it is not showing up in the data >> the market can't pass it on the companies are absorbing on some lefvel. >> just hurting margins. >> finally, i got into one of my charter communications

there seems to be some concerns of the free cash flow numbers verses consensus i have been trying to monitor the call for you they did lose 66,000 in the quarter which was better than last year. they added more overall residential customer relationships and have been anticipated. comcast though one of the rare winners this morning so far up almost 1%. >> dow is down 219, microsoft has passed amazonand market cap. let's get to bob pisani. happy friday everybody good news for the gdp. the numbers were good and inflation numbers were muted that helped a little bit but still open 7-1 declining to an advancing stock. that goes earnings to a certain extent take a look at the sector, you can see this this is not macro. this is earnings here. amazon and matell were disappointing and google and

netflix and facebook is down 2% or 3%. you got western digitalis digital and that's down 15%. some of the semis are down 3%. consumer staple are moving up a little bit better and general mills and walgreens and walmart are up earlier that's an outlier here this is a lot about revenue disappointment i was kind of surprise to see some of the misses today mattel and mohawk is a mess and colgate-palmolive and alphabet and western digitals in the news it has been difficult overall. the guy mentioned mohawk they had just about anything you want t they talked about import cost and less pricing power and they go on and on they had a whole quarter there

if you take a look at mohawk, it is all of these home building and home related companies and home builders are all down dramatically in the last several months one thing that may help are buy backs that includes some priorization and that buy back is about 2% of the shares outstanding. mohawk is buying back 5% or 6% that's a big buy back. 10% buy back, 10% of the shares, that's huge. the question is whether buy backs or now that we get earnings season will be a sources support. we have been telling you there is huge amount of purchasing there is an estimate of its highest of $350 billion in dry powder these are all authorized but not executed that's a lot of money that potentially could support the market one other thing that's odd the fund flows which i watched

carefully. we had notable in flows into our stock of etfs. $8 billion and largest s&p 500 funds and the russell 2000 mutual funds out flows remember that's bigger than etfs and notable out flows in some of the taxable bond fund. why did we get such notable inflows into stock funds it is noticeable that a lot of people coming into buy the shares to sort them. i would like to look more into that it is a curious number overall we are lifting a little bit 200 points of the downside on the dow. sara, back to you. >> we are staying on top of this morning's sell-off for you the nasdaq is getting hit the hardest right now all week and down almost 2%

fourth down week in a row. as bob mentioned, off the lows of the sessions, dow is still down 200 all sectors of the s&p 500 are red. red. we'll be right back.o. schwab does it. next question. do you offer a satisfaction guarantee? a what now? a satisfaction guarantee. like schwab does. man: (scoffing) what are you teaching these kids? ask your broker if they offer award-winning full service and low costs, backed by a satisfaction guarantee. if you don't like their answer, ask again at schwab. takes more than just investment advice. from insurance to savings to retirement, it takes someone with experience and knowledge who can help me build a complete plan. brian, my certified financial planner™ professional, is committed to working in my best interest. i call it my "comfortable future plan,"

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obviously some weakness here at the open. about 40 of the s&p 500 are in the green so we're down 39 points or so dow down 235 and really the market once again rewarding those who had a good quarter -- expedia, intel are ahead and the mohawks, the western digitals are red. >> it's not an indiscriminate washout. some companies are picked up if they were priced right going into a good number and all of the rest of it also not a particularly heavy high-pressure selloff. we're still fighting this battle if you look at the s&p 500 around the year-to-date flatline mark, we're in the vicinity of the lows two days ago. so this is, i think, the kind of cadence we're in, just like february or march of this year where you have these real quick rallies and they don't necessarily follow through and we have to figure out what the right levels are i was looking at banks and they popped yesterday and they're giving most of it back again.

>> if you're trying to figure out whether this is just a correction from overvalued levels or something more ominous, a bear market, one place you'd look is economic numbers to see if they're turning. we got a great gdp report. 4% consumption growth is nothing to sneeze at and as mick mulvaney said, we couldn't get to 3% growth, they couldn't average this on this rate for 2018 because they've had strong numbers so the question is how does that filter to the market and the expectations around the federal reserve? >> and whether or not wealth effects out of stocks actually crimp that consumption number later on. >> and consumption seemed to be almost too high last quarter in other words, well higher than income so it should probably come back down i think global soft patch is kind of a story in the market's head i don't know if that's legitimate, but that is the story. global soft patch in growth at the same time you're having financial tightening and trade frictions so i think that's the whole push/pull. >> and that's why credit markets

aren't acting up it's not about u.s. cash flows threatened right now therefore it doesn't seem like it's anything systemic. >> by the way, snap within a dime of a five-handle. that hasn't happened before. evan spiegel talked last night about strategy changes potentially going after an older demographic. take a listen to that. >> we're thinking about dau growth in two ways the first is broade ering our 1 to include 34 plus is a marketing challenge. but then we're thinking about all the people outside of the u.s. in europe who are predominantly on android devices, often times in low connectivity environments and how we can improve the product to better serve those customers. >> low for the session, by the way, was 580 in march it was almost 30 bucks. >> under an $8 billion valuation. what was his last private market valuation? well above that.

>> remember when the numbers came out we thought it was a good quarter because stocks spiked on the news that, okay, daily average users declined, but they are monetizing that the loss was -- they aren't losing money but it looked better. >> the market isn't convinced there's any real economic relevance to the business. >> the sequential user decline is a problem. >> a big market cap for that. >> i'm told the last big round valuation was $20 billion. we'll see. by the way, next week ge, facebook, apple, gm, we're nowhere near done. >> doesn't let up very much. then jobs next friday. >> jobs next friday along with cpa and some eurozone numbers. >> and it's hard to extrapolate. amazon is having its worst day since 2016. >> the day isn't over, by the way, i wouldn't be surprised. >> we have seen wild twists and turns. with that, dow down 244. s&p down almost 40 we'll watch this selloff and see what the day ahead brings. what the day ahead brings. back in a moment

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back to "squawk on the street. i'll carl quintinilla with sara eisen, david faber will join us in just a moment, we're here at the new york stock exchange. amazon and google have revenue misses but off of early session lows, nasdaq was down 2.8% at the open, now down 1.8%, now here comes final october read on yumish. >> well, the old read was 99 we toss that out and replace it with a lower read. 98.6% becomes the october read for university of michigan and the one year inflation expectation moved up one-tenth from 2.8 mid-month to the final read at 2 pn2.9. so especially at one-year outlook on the warm side, and how does 98.6, its new read, compare? well, 98.6 is the lowest since just august when it was 96.2,

the high watermark for the year. march at 101.4, that was the highest read going back to 2004 so a little bit of a mess on university of michigan and resee it reflected almost instantly in the equity markets and yields dipping just a smidge. sara, back to you. >> dollar going negative, too. rick, thanks. our road map for the hour starts with stocks tumbling again this morning the s&p 500 on the cusp of correction the nasdaq in the middle of its worst month since the financial crisis. earnings from amazon and alphabet are overshadowing the strong gdp data. companies top estimates but revenues fell short. >> and a brewing battle between the s.e.c. and exchanges over market data fees are investors being shortchanged we'll talk to former nasdaq ceo bob grayfield about this topic. stocks down as the selloff accelerates. we have full coverage on what's affecting this market. steve liesman looking at third

quarter gdp, job lipton has results from alphabet. we'll begin with steve and the strong consumption number that gave the economy a boost last quarter. >> it was stronger-than-expected number for the third quarter but in the words of oxford economics, it contains some, quote, spooky details. there's going to be a lot of noise from tax cuts and tariffs that may not mean slower growth but could mean different growth if some of these distortions work their way through the system pantheon said strong gdp growth hides soft capital spending and massive trade deterioration. there's the 3.5% number at the top. 4% for consumer spending that's very strong, probably propelled by tax cuts, stronger wages but business investment, a curious 0.8% we had a strong second quarter so maybe that's a bounceback from that. hopefully we'll get rebound in the fourth quarter government spending continued to add to growth in the economy, both federal and state, and

there's net exports with a plus nine on imports. maybe companies getting on in underneath and minus 3.5 on exports and 2.1% all of that import is stuck ending up in inventories. and the inflation number was tame, leading bank of tokyo mitsubishi to write "the economy isn't overheating so fed policy doesn't need to go overboard with rate hikes and risk throwing the economy's engines into reverse." what does the fed say? well, we talked to the cleveland fed president who told us on "squawk box" she sees slowing growth ahead but not necessarily slow growth. >> i have a forecast a tad over 3% for the year, for this year, and i have it slowing a bit next year, about 2.75% so there is a slowing but my long run growth rate for the economy, potential growth rate, is 2% so we'll

still be above trend growth at this point >> reporter: she says at the current funds rate, the fed needs to think about taking the stimulus away. 2.75% next year, i'd take it, over a point above potential gdp. >> i'm wondering if you see clues in the gdp report about the current quarter. that was the last three months and some folks are saying let's watch what companies are saying. and the guidance has been a little shaky on factors like the strong dollar and tariffs and what they see for demand so what are the clues for the future >> can i give you one clue for the present, sara? you talked about just leading into me these tech companies that are out there, and they're not reporting the best results you see in the the business -- it was not a strong quarter for business and cap ex. i think that has to turn around. i think you're going to get more cap ex i think the consumer number may be overstated.

i don't think we sustain 3.5% but i think we can do three in the fourth quarter so that would be a huge increase for the economy based on a potential gret rate that is still just 1.8%. >> fairly optimistic, steve, thank you. steve liesman. technology driving the selloff this morning let's get out to josh lipton in san francisco looking at google parent alphabet result which is appear to be disappointing the street, josh >> the top line, a different story. overall, total revenue there did climb 21% to more than $33 billion. that's slower than 24% growth a year ago sales from google's own properties, search, youtube, that also rose at a modestly slower pace.

the cfo telling cnbc in an interview that the company suffered pressure from currency movements, that fx went from tail wind to head wind i also caught up with brent till at jeffries. there is a broader worry for alphabet and the market in general that growth is slowing and this report did play into that worry, he told me though he emphasizes as a guy who covers the company that what we saw here is a tapping of the brakes, in his words, not a cliff dive though that stock which was already under pressure month to date heading lower in today's trade. other metrics to watch, traffic costs or what google pays partners to direct traffic to its properties that clocked in at $6.6 billion. that was 23% of ad revenue, the same as last quarter so analysts say it looks stable and this company, though, it's still spending a lot of money. check out capital expenditures they surged 49% to$5.2 billion in the quarter i did catch up, though, with key

bank's andy hargraves. he said listen, those are investments the company has to make if it does intend to lead and grow in these new markets like cloud, ai and machine learning back to you. >> josh, thank you. alphabet is not the only tech stock getting hit amazon down after reporting results and sales outlook also missing targets. deer deirdre bosa is watching that for us. >> investors may be considering a new kind of amazon, a more profitable but a slower revenue growing internet giant shares falling on amazon's holiday quarter outlook as projections came in below what the street was expecting and that's on the back of slowing growth quarter over quarter in online store sales for four straight periods some investors are wondering whether amazon has reached saturation in its core u.s. e-commerce market. but on the other side, there's amazon's other and fastest-growing businesses, they are aws, cloud computing, advertising and subscription services they continue to perform and that helped the company achieve

record high margins and a record profit now amazon has been profitable for 14 straight quarters, the last four of which notched over a billion dollars in earnings. some analysts, like those at jpm, guggenheim and canaccord could be a good buying opportunity. remember, this is the stock that's up 40% year to date and has a forward pe of 70 that's bigger than that of apple, alphabet and microsoft. guys >> thank you very much, deirdre bosa watching amazon for us as josh watches alphabet. for a closer look at today's selloff, steven parker is here and we also have john stoltzfuss we could use some solutions at this point what are some? >> the play book as we get late intercycle but not end of cycle is expect more volatility and have a shopping list of things you want to be you have to be more selective.

rising tide lifts all boats. now you want to be more targeted we've had disdispersion across sectors this year. that continues third, stay disciplined. investing is not an on/off switch but a series of dimmers so you want to make slight adjustments. we're looking at a targeted sector based approach within our allocations in the u.s we like tech, health care, balance with energy. >> so you're not looking for defensive names, value names to continue >> i think we're seeing some of the value names beginning to come back. i think that energy is a place where later in the cycle we've seen this huge disconnect between oil prices and energy stocks historically, every late cycle period energy has outperformed and i think that that's a place where on the value side there's a good opportunity. >> it's down 13.5% this month and the worst-performing sector this week. not happening yet. >> i think people are looking at the headlines around the macro data, around the pullback in oil prices and they're punishing

without looking at the fundamentals of the space. energy companies are for the first time in a long time finding a bit of capital discipline even with higher oil prices and the stocks have lagged the oil prices by 50%, 60% so this is an opportunity. and of parts of the market that people are looking at, energy remains very much unloved by investors, even with the rally we saw earlier this year. >> john, what about you? do you go for unloved sectors or safety >> we've got to go for the unloved sectors here we continue to like technology we think the multiples are becoming more attractive and when you think of technology, technology is right now we believe in a place where the automobile was where it to replace the horse.an to to replace the horse so we like industrials we continue to like that, very much the new technology. and we continue to like as value plays we'd say consider

financials and health care as the defensive we'd like. >> we talked about the buying list earlier one of the things we've been buying with intech specifically is software. and if you look today at the capex spending in the gdp report, it was uninspiring except when you look at the software with labor markets getting tight, companies are forced to find productivity. they're spending that on software upgrades rather than factories. >> do you think tactically your buying opportunity lasts into year-end or do you fear missing a year-end run-up. >> i think expectations at this point and the sentiment indicators we look at have come down meaningfully. stocks look oversold so we could be positioned for a bounce into year end, especially if we settle down a little bit in terms of the trade rhetoric we get through midterm elections. i think we're set up to move higher but markets are going to

be choppy. >> people have been arguing whether the buy the dip mentality got broken this month. >> i don't think it's been broken if anything -- you know, the tech reck statement, we've heard that time and again and it's because tech gets ahead of itself sometimes so it has -- it trips over its own self and then the longer term values recognized within it so we'd have to consider here, you know, we're a little worried about the strength of the dollar we wish we could get a deal with china because we think the dollar would fall on that, foreign currencies would rise and the negative overhang on global economic growth would lessen that would be good for u.s. multinationals so we're sticking with market capping a gnostic, by large, mid-s and smalls agno

large, mid-s and smalls. remain mildly underweight international. >> it feels like the market needs something from the fed it feels like the fed is a big part of the anxiety, whether it's the jump in rate or the jump in the dollar or some of these corporations is that the case >> i think that's the thing investors are looking at right now. i mean, the fact that we could be hiking into what is a maturing cycle and the worry is that we move too far and that's the thing that ends the cycles markets are pricing in still a 75% chance we'll get a hike in december i think if we hear from the fed, if we see this slowdown that they are going to remain data dependent, they're going to remain open in their communication, that cowl uld reassure investors -- >> you think if the fed pauses the market would rally

>> i think they would. >> but wouldn't that be a signal that the president is having an impact on the fed's independence >> i don't think so, sara. >> that clearly complicated matters. i don't think investors want the fed to stop hiking investors want the fed to acknowledge they are going react and they won't be so doctrinal that they have to hike every meeting. >> john, go ahead. >> the fed, sara has shown through this whole last nine and a half years extraordinary capability at recognizing both strengths as well as vulnerabilities between economy. we think it continues to practice that. we think the big problem is we've got a new fed chair. it takes the market years to get over a new fed chair it was just getting used to janet yellen it took years to get used to bernanke and so now they've got jerome powell but so far he looks like

he's right on course he's his own guy he's got a good handle on it normalization, sensitivity to growth and -- both strength and vulnerabilities between economy, but we think that's a risk that the market is going to play here, but investors need to be real patient >> you're a long way from neutral, doesn't leave you room to massage it later on we will see. steve and john, thank you, good to see you. when we come back, the tech selloff extending. dow down almost 400 points amazon and alphabet leading fang lower. s&p briefly in correction territory, down 10% from the all-time highs former nasdaq chief bob gryfield is with us and is intel bucking the tech trend? we'll have interim ceo bob swan with us in the next hour take a look at the top performing names on the s&p, some have been rewarded because of earnings, expedia and intel not far from the top of the list therth a, e eyreroper, cabot and

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take a look at the fang names all getting hammered this morning. amazon in particular down 8.5% on pace for its worst day since january, 2016. alphabet also down 5% after disappointing on the top line.

the nasdaq composite down almost 3%, on pace for its worst month since the financial crisis back in 2008. joining us now is former nasdaq ceo and cnbc contributor bob greifield. welcome back, bob. tech is ground zero in this selloff. does it remind you of any other periods? the crisis, perhaps, or any historical context you can give us to tell where you say to go next. >> i would not say it reminds me of the crisis, but we have to recognize now with the fed pulling back support and, in fact, trying to get to neutral, markets will have the opportunity to behave as markets will and markets are day by day by definition choppy. so we've lived through a period of less volatile times based upon the underlying support to the marketplace. so i predict we'll see increased volatility in the quarters that come, but it's also very important to keep it in perspective. dow is not at 3,000, dow is over

20,000 so a 300 point move is not that significant. >> i get your point about the adjustment period as we go into maybe a more normal interest rate cycle what about the fundamentals of fang has anything changed or do you still see them as a leadership group in terms of earnings and sales growth and markets >> sure. one thing i learned through the years, if you have a high pe multiple, you will be more volatile so the stocks you're talking about generally have very high multiples so that environment in a normal market environment any high multiple stock will definitely have increased level volatility >> do you think that the economy is slowing, bob? >> it doesn't seem that way at this point in time but clear ly it's hard to see that growth rate persisting over a long period of time. certainly economy is doing well by any historical measure and is

growing faster than what will be the long-term projection. >> so what do you expect in terms of the interest rate policy and i guess the question for investors just to come back to tech is how vulnerable this group is given their expanded pe multiples, given the fact that they have been the biggest winners of the bull market. >> one is you have to understand they have the high multiples for very valid reasons these are the companies that a growing. these are the companies that are driving the economy. so they deserve the multiple but any time you have it, people, investors get nervous about that i certainly feel very good about their prospects over the long term and myself as an investor clearly quarter by quarter you cannot pay that much attention to >> bob, how are executives thinking about corporate debt overall right now? we saw some early example this is week of companies that are highly levered, having to make some decisions between addressing that leverage and, say, making capital returns.

is this on people's radar or not? >> certainly everybody's aware when the tide goes out you don't want to be caught in an overleveraged situation. so you have a moderation of enthusiasm with respect to desire to take on leverage i think it will see more conservatism going forward we are at a latter part of the cycle so that has to be counted in so as compared to the ebulience you saw a few years ago, the rates are higher. >> does that count on companies that are raising debt or equity over the last couple years to fund either operations or growth >> you're going north of six times leverage that marketplace has to be quite concerned and certainly more limited than it was in the past.

it's been real for the last couple years and any time you're at that high leverage level, this is the time to be nervous >> what about fiscal policy, bob? i know you attributed some of this to the fed normalizing policy but there's a debate about whether the administration is as friendly to this market as we saw post-election we used to call it the trump rally. do you blame the administration policies where we used to talk about tax cuts and deregulation and now it's tariffs and deficits having an impact here >> i think the administration is keenly aware that the whole tariff debate is not a positive for the markets but i believe they are recognizing that now in our strong economic footing is as good as it's going get with respect to bringing on the tariff debate. there's never a great time to do it this is probably as good as you can and i certainly think a lot of the tariff discussions at the end of the day will work out well -- like we saw with the

conclusion of the nafta debate. >> fill us in on this s.e.c. event that you participated in on market transparency "squawk box" hit this this morning. how it will impact fees and who is right on this because as former chairman of the nasdaq, i would assume you're on a different side than your current position so who is right and how does the individual investor get affected >> it allows me to see both perspectives clearly and i would say this, both sides will have very valid points. my dominant comment on this discussion is it's really small beer and the s.e.c. has larger and more pressing issues to attend to. so let's say that the banks are right, that if market data fees came down and your average retail trade went from, say, costing $5 to $4.98. that could be positive to the

market, but it's not meaningful with respect to what else can be done as ceo of nasdaq, i got to meet more ceos than anybody and i saw a lot of them fail and i said why do they fail because they're hardworking and smart. and they fail because they choose the wrong things to work on so my advice, if anybody was asking, is respect to the limited calendar the s.e.c. has to get things done, this is small beer there's more important things they should be focused on. i have a couple in mind. >> all right, well, there's still a big fight between the brokers banks against the exchanges over those fees. we'll leave it there, bob and have you back on go ahead, final word did you have something >> it's a long going fight it's been going on it's between the banks and the exchanges and that's the constant tension the investors, i think, are doing very well in the marketplace today. it's never been more efficient to trade in our equity markets that invest on the planet. >> bob greifield, always good to have you here. >> thank you. >> former ceo of nasdaq.

as we go to break, keep an eye on snap today. big hit after reporting a miss in daus. was near 30 in march of last year as for the major averages, the worst october for stocks in a decade continues dow off the lows down 281 and the s&p down almost 48 300 miles an hour, that's where i feel normal.

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dow is down 321. time for our etf spotlight today we're looking at the major selloff in technology. dom chu joining us for a run through of the biggest movers. good morning we know given the action in the nasdaq and the nasdaq 100 that the qs, the invesco -- the nasdaq qqq trust, if we look at those shares, of course they'll be down, driven by amazon and alphabet although we should point out these are off the lows we saw in the pre-market session when amazon was down by 10% and alphabet by 6% as you look at the places that we are seeing this kind of playout, we know on a year to date basis, amazon shares have reached the key technical level,

that 200 day moving average around 1667. right now we're at 1632. we'll see if that level holds around here for it with regard to alphabet, same thing playing out, though we've seen a down trend in volatile trading for these shares as opposed to the straight upward move we saw out of amazon.com for the better part of the last couple years now, where we are seeing this play out in the etf side of things is traditionally in those sector-based etfs we talk about. the select sector spdrs. but this is the vanguard consumer discretionary oriented etf, amazon makes up around 23% in terms of weighting of this particular etf that's going to be one to watch. it's an outside mover. also one to watch is a $9 billion etf called the first trust dow jones u.s. internet etf, that ticker, fdn, if you look at that, amazon represents about 10% of this and google with both the a and c shares together represents 10% as well.

so a 20% weighting for amazon and alphabet for those particular shares and this etf carl, these the movers we'll be watching in those broader sector-based etfs as well because of the tech earnings reck we've seen so far back to you. >> dom, thanks for keeping us honest. let's get an update from sue herera good morning, everyone, here's what's happening that the hour two more suspect packages have been found. the 11th and 12th this week. in midtown new york city a police bomb squad responding to a post office to check out a package addressed to former director of national intelligence james clapper officials say it closely resembled parcels sent to other critics of president trump a bit earlier, a package addressed to cory booker was recovered at a florida mail sorting facility near miami. it was similar in appearance to other ones received this week. authorities calling those packages an act of terrorism the white house has invited

russian president vladimir putin to washington. the announcement coming from national security adviser john bolton who was in tbilisi, georgia. he said the visit would come after the first of the year. and a plane scare for prince harry and wife meghan. their aircraft had to abort its first landing attempt at sydney australia airport. another aircraft was on the runway and failed to get out of the way. the pilot performed what's called a go-around, pulling out of a landing and making another after circling the airport scary moments there. that's the news update david, i'll send it back to you. >> okay, thank you, sue. when we come back, don't sell into the selloff? pulitzer prize winning "new york times" columnist jim stewart is with us to explain when "squawk on the street" comes back. i am a family man.

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welcome back to "squawk on the street." i'm sara eisen with carl quintinilla and david faber at post 9 on the new york stock exchange s about -- the averagesstand lower again today. the dow down 400 points, 1.5%. so the worst october for stocks since 2008 continues and it looks like another brutal week with all the major averages down sharply. fourth week in a row for the nasdaq, four out of the last five weeks for the s&p and the dow. technology bearing the brunt of the selling after disappointing earnings from amazon and google but it's a pretty broad selloff with all the s&p sectors, carl, lower on the session >> we are covering the selloff in tech. the big names, of course, driving the dive today alphabet, google's parent reported revenues that missed expectations even though it was a 21% jump from the same time last year and a similar picture over at amazon, investors focusing on revenue that came in below forecast as well as

disappointing guidance for the fourth quarter snap falling after reporting a drop in daily active users and says it expects to continue that during the current quarter then there's intel on the other hand made more money than ever. revenue was up 19 year on year and it reported better-than-expected q3 earnings and full year guidance we are going to talk to bob swan on "squawk alley" in the next hour. a new list out from jeffries taking a look at the cheapest names in stocks and the near term catalyst that could help drive their prices to the upside leslie picker looking at what they are and whether you should be buying them leslie. >> the question among investors these days is when will value be in vogue again as the market turmoil continues, that's the question among many fundamental stock pickers out there. in a recent note by jeffries, they list several companies they believe you can swoop up on the cheap. in the retail space, jeffries likes names like foot locker,

gap and michakchael corps ke mi. they like general stores despite a move to the upside thanks to the rollout of juul and a slight easing of gas prices high profile industrials have been beaten down over higher input costs related to tariffs but jeffries likes the name t timken steel they say they've been able to capture better pricing from their customers. others seem to be opportunistic plays. jeffries says broadcom and hca health care fit that bill and some names may benefit from closing recently announced deals. the firm puts invesco in that camp because of its recent acquisition of oppenheimer funds. same with marriott vacations worldwide and the expected synergies it could get with fellow timeshare provider ilg. to round out jeffries' suggestions, santander consumer

and amjet. but broadly speaking stocks underperformance versus growth is one that's poised to flip jeffries says thanks to technicals, a rising interest rate environment and the potential for a better-than-expected earnings season. >> they've been waiting for that transition for a long time thank you, leslie. leslie picker. amazon is on pace for what would be its worst day since january of 2016 and that drop is putting a nasdaq on pace for its worst month since the financial crisis by the way, it would be the fourth straight week of losses but should investors be selling into this selloff? joining us at post 9, "new york times" columnist jim stewart it's been a while since we've just talked markets. >> and this is a great time to do it because my phone has been ringing off the hook with people saying should i sell i mean, no one has asked me should i buy which is really the right question my rule of thumb is -- and particularly for people who

are -- tend to get panicky at moments like this -- never sell on a down day. maybe you'll miss a bit here and there but at least you will never give in to panicked feelings and my rule is never sell when there's panic the market. >> of course, that's not the rule hedge funds are taking right now who may be tin cementcement -- the incremental bid. >> i'm glad you brought up heads funds. look at their track record over the last ten years we're not hedge funds and i don't want to be a hedge fund and i don't want to be a trader. i'm not trying to dart in and out of the market. i take a long-term view, i have an asset allocation and i stick to it, which is what i recommend everyone else do by the way, if you have an asset allocation, look at it today the stock portion of it hasn't gone up. i bet it's time to rebalance you get a 10% decline like this, typically that is exactly the time to rebalance. >> so you're saying you would

consider buying stocks now. >> absolutely. >> or is there something else you're waiting for when you feel like it's a better time? >> i'm not waiting if it goes down 10% i look at my asset allocation, if it's moved out of line by 5% or more i rebalance. i don't care what is going on. you mentioned the financial crisis, i did that in 2008 i can remember being in groups of people in october of 2008 and they're all saying, oh, i sold, i sold i said well i did some buying and they looked at me like i was from another planet. >> because your time horizon was ten years? 20 years >> exactly or however long i'm lucky enough to be around if you need the money today, it shouldn't be in stocks at all. but anyway, i bought then, in october, sure i bought several more times as the year went on, constantly rebalancing and that really paid off in this year but you had to take a long term view. >> you didn't see panic yet, have you >> i wouldn't call it panic. but i've been surprised. people have gotten complacent

over the last -- really since 2009 it's been a pretty steady rise and so they're not used to this. they haven't experienced this again and it's painful to look at your stock portfolio and see it go down 3% in one day which, by the way, if it's that painful, don't look. look a few days later. it's not going away. >> but you know that story, people who don't look and don't pay attention, that can also be a dangerous proposition. >> that's true because i mean i feel you should rebalance when things get out of line that's the whole point of an asset allocation but i know there are people who get so upset that i say just don't look if it's going to ruin your day, why? just go on with your life. >> you raise an interesting point which is when you need the money. i don't know when that case will be for you or for anybody, but how should people view the long-term needs that they potentially will have when you're talking long term here in terms of how they should invest? >> i think periodically everybody whether they're doing

it on their own with some trusted friend, they should look down and see does the asset allocation make sense. 80/20 is probably good if you're in your 20s as you get older and you'll need a fixed amount of none retirement or something typically people do scale down the equity percentage of that. but again, i think percentages are meaningless. depends on how much you have if you're really comfortable, you can still afford to have quite a bit of money in equities even when n yoin your 60s and 7. the questions are do you have to fund college education do you have a big purchase coming up? put the money in a safe place. >> shouldn't we mention the fundamentals at all? the fed, higher interest rate, stronger dollar, trade war, global growth slowing. all of these factors right now, i get that your time horizon is long and in the long term you see stocks eventually going back up but do you see any of these warning signs as potentially serious changing the tide of

what has been one of the longest bull markets we've seen? >> well, look, these factors are always out there the minute we start changing allocation because of this and we're engaging in market timing and it's very hard to do that. because, yes, it's logical to say the bull market has been going on too long or we have the potential of tariff wars but the markets don't necessarily move on logic. they're trying to predict the future which is an inherently very difficult thing to do why hedge funds haven't done so well there are a lot of people who spend full time analyzing these big fact roe factomacro factors judge whether stocks are fairly priced and nobody has found the magic bullet so i don't recommend people try to do that. look at the allocation and stick to it. >> it's not that easy. >> it's hard. >> you mentioned the financial crisis, the s&p is below 700, you're down 40% and you're saying buy >> this sounds simple, it is not. it's not simple. >> and i remember the time that was panic. >> i'm impressed we're down 65

s&p points and we're just sitting here talking about long-term friends. that would not have been the case earlier in the year. >> look at the amazon and alphabet earnings. amazon in particular, i thought, you don't buy amazon because of one quarter and i frankly didn't see anything particularly worrisome in there yes maybe growth slowed a bit but if you look at the addressable market that amazon is moving into, even digital advertising, retail, groceries, look at the grocery thing. everybody loves these startups that are going to be delivering groceries. they're talking about billion-dollar ipos for some of these companies. well, amazon is getting into that with the whole foods thing. that's a big addressable market. now the hot money is getting out, no doubt about it but if you're a long-term investor, that's a buying opportunity. >> so you're a slow growth stock buy more than value? >> it depends on the story it depends on the story. but i feel the amazon story is

very intact. alphabet, i'm not quite so sure. their share of the digital advertising market dipped a bit. it looks like a more mature company but i look at -- i'm not a value growth per se but i just look at the company, what's the story rand they delivering on it. >> alphabet trades at a low multiple, though >> it's down so much already there's a lot of risk taken out of that. >> thanks for the calm, steady advice. >> thank you thank you. i'm following it myself. >> good. that's important. as we go to break, getting another check on the markets session lows, dow is down 462. s&p down almost 70 points and it's down a full 10% from that september 20 closing high. quk t see iba"sawonhetrt"s ck quk t see iba"sawonhetrt"s ck in a moment.and that we leave t, is train.

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amid all the market volatility, where can investors find value

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what a friday it's been. let's get to santelli exchange in chicago hey, rick. >> hello, carl, and thank you. i'd like to welcome my gdp day guest, professor darwan. professor, 3.5%, our first look at third-quarter gdp wasn't too bad. but there were certain aspects, whether it was inventories or earnings where the horsepower wasn't quite there why don't you tell me your impression >> okay. i would say the consumers came out to play after the tax cuts and that's clear in the consumption number inventories were built up and that's been getting ready for the christmas season and the government was spending money both on the defense and the state and local so that was good because they have the money. the only problem was that the businesses did not come out to play they held back on the

investment if you look at these structures, both the interest rate affect was there on the commercial building and the industrial buildings and, of course, oil was a lot of investments that took a breather but even then investment was weak. >> so that contributed in your opinion to the notion that one of the big missing greenlts for many years now has been productivity and all of those areas aren't boosting productivity with respect to this number. would that be correct? >> yes, because one ingredient, key ingredient to productivity is people work with machines which is investment, if we don't do it, we're not going to get productivity down the road skilled labor is involved too, but you still have to invest. >> you know, professor, we had cleveland fed president on earlier today. she made a comment that 3.5% is wonderful but the real sustained

growth number is closer to 2%. do you agree with that >> i would say that the fed thinking is 2% is the potential. i would say since the last election and the way i have seen the investment go with tax cuts, i am willing to go to 2.5% on a sustained basis. i don't see investment to make me go to higher than people were thinking that is where the disconnect is between what people are thinking and how the reality is coming out. >> you know, pursuant to that exact notion, we also have budget director mulvaney on today and he said that the tax cuts really weren't tax cuts there was much reform. some of the reform should continue to help in weak areas you just described to raise the sustained growth rate. but even the difference between 2 and 2.5% is a lot of money within the economy, is it not? >> yes, but you take the

difference between 2, 2.5 and project it over four or five years, it becomes a big difference now, tax reforms were there and the corporations were already investing quite a bit even before tax reform. the problem now is the business cycle is mature. so low-hanging fruit is gone if you want to do more investment, you are getting into a little more risky areas and that's where the talk on the trade and tariffs is not helping. >> i got you professor, that's likely what the stock market is grappling with most of the week. thank you for your thoughts and time, greatly appreciated. david, back to you >> thank you, rick let's send it over to jon fortt who has a look at what's coming up on "squawk alley." >> hey, david. well one of the few bright spots anywhere, but particularly in tech, intel. after earnings last night, the stockup. the interim ceo is on with us

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and it's strengthened by xfi pods, which plug in to extend the wifi even farther, past anything that stands in its way. ...well almost anything. leave no room behind with xfi pods. simple. easy. awesome. click or visit a retail store today. welcome back to "squawk on the street." stocks accelerating to the down side, down 10% from recent

highs. all 11 sectors trading in negative territory, seven poised to close in correction territory down by 10% or more. consumer discretionary stocks are the worst next performing group. look at the other names going to the down side. whirlpool, royal caribbean, wynn resorts, under armour. and mohawk down more than 20%, on pace for the worst day since 1994 after a revenue miss, citing weaker demand particularly in north america. more pain for housing related stocks may be ahead given mohawk back to you, sara. >> it is getting ugly out there. thank you. coming up, coverage of the sell off, particularly the last hour of trade has been volatile we watch the nasdaq down 3%. and we talk to jerry storch to talk about amazon, state of the

economy, whether amazon is warning anything about the holiday season with the conservative forecast below estimates. that's coming up see you at 3:00 p.m. eastern. >> your hands full at 3:00 and 4:00, sara. the dow is down 500 points s&p down 72. amazon, alphabet, snap taking it on the chin. intel is the rare bright spot. le ia mesqwkob swan on "ua aly"n mont

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