dow component. how far the mighty fall. it's tuesday, october 30, 2018 "squawk box" begins right now. ♪ live from new york where business never sleeps, this is "squawk box. good morning 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 off today. joining us is mike santoli great to have you here >> great to be here. >> we have a lot to talk about with the markets let's start with yesterday's wild ride. at the high, the dow was up 352 points at its low the dow was down by 566 points that's a 918-point range that's the biggest we've seen since february at the end of the day, a decline of 245 points. looking at the futures this

morning, things are in the green. dow futures up by 90 points. s&p up by 10 points. the nasdaq up by 30 points stocks in shanghai rising on positive comments from china's securities regulator pledging to improve liquidity, guide more long-term capital into the market and encourage share buybacks into m&a. that was enough to prop things up by 1% that was a lot of work to keep things propped up because of the concerns about tariffs the hang seng closed down by close to 1%. the nikkei was up by 1.5%. looking at the early trading in europe, right now mostly red arrows across the board. ftse is the one up market. up by a tenth of a percentage point. the cac is off by 0.30, as is the dax.

ten-year note, 3.119. >> causation and correlation not always the same. up at the open, looked heavy up above 200, then up 110 or so. then barely up then the china tariff stuff hit. then it went down. >> the context is the big nasdaq stocks were down all day they went into free fall in the afternoon. huge variation in terms of performance in parts of the market the s&p 500 was flat you know -- boeing was down. >> so many stocks are in bear market territory, the high fliers have been the lone holdouts, we have been asking what happens when those big technology names give way, this is it. >> this is it. and the question is is that a later phase of this whole correction policy. >> when it covered by the end it was another test

didn't go to new lows. >> not quite >> intraday the dow was down in correction mode. we'll have a morgan stanley guy who says sell on the strength. we're in a bear market >> the question becomes if the leadership stocks are giving up, where does the new leadership come from? >> there's no good answer in terms of a chunk of market value. financials were up yesterday i don't know if you want to see a lot of hope in there, picking up the wreckage just yet maybe if you need some kind of a real all-out flush, we didn't get it put it that way. boeing yesterday, especially after -- >> let's get -- i didn't need to stall, but i wanted to set this up because it was about china yesterday. trade war worries resurfaced yesterday. a new report said the u.s. could announce tariffs on all remaining chinese imports as early as december.

that's what happened sparked yesterday's selling. boeing among the hardest hit companies. president trump talked about the potential for a deal last night on some other network. >> china has been really hurting our country economically you'll see we'll win that one. >> how confident are you about the deal >> ithey're not ready. 2$250 million i have 2$267 billion waiting to go if we can't make a deal >> that would not be true. i do watch that other network occasionally you ever watch it santoli? >> i come across it. >> we all channel surf >> we do >> i do. >> i must get stuck surfing. >> i wouldn't say i'm surprised. eunice yoon joins us from beijing with more.

that covers the range of things does it not? i don't think that will happen what do you think? >> you know, this is what i don't understand because from the chinese perspective the chinese repeatedly say they will not negotiate with a gun to their heads. then whenever it looks like the two sides will get together and have a negotiation, president trump pulls out a bigger gun from the chinese perspective this is all confusing. the foreign ministry said that the communications had been ongoing, and wouldn't go into detail about the g20 meeting that's supposed to happen next month, where the two presidents were supposed to be sitting down and having a discussion. he did say on the tariffs themselves that the u.s. noise won't intimidate china of course there's a lot of concern that all this noise will affect the stock market which is seen a lot of pressure as of late and there's an interesting

survey about u.s. companies that are operating here who are also concerned about this noise this survey is making the rounds by the american chamber of commerce in south china. it found that 64% of u.s. companies polled were considering relocating production lines to outside of china because the trade war was hurting profits. more than 70% of american firms polled were thinking of delaying further investment so this is adding to a growing feeling in china circles that the long sh der term goal is noo tackle trade but to do something else, to get america less dependent on china overall guys >> all right, eunice you hear anything, you have my e-mail, right? i think we need to watch this closely. so i'll leave that page open here on my -- we have computers

down here. you never notice, because it looks like i'm looking down at something, that's what i'm looking at i'll be watching this is something we need to -- that everything is keying off of right now, in addition to sentiment. it has a bit to do with both >> i'll be sure to e-mail you if i see anything >> if you see anything, hear anything, even body language, any of that stuff going on over there. i'll do the same for you >> got it. >> you follow trump on your twitter feed >> yeah. well, yeah, sometimes. >> you got to. all right. thank you. >> exactly right now it's time for the "squawk" planner here's what could move the market s&p case-shiller home price data at 9:00 a.m. consumer confidence numbers at 10:00 a.m. we'll hear from general electric, aetna, pfizer, coca-cola, under armour and

tapestry after the bell, facebook, t mobile, baidu, electronic arts >> how long do you say tapestry formerly known as coach? >> i agree every time i hear it, i'm confused >> every time you say it you think about carole king and that album. >> no, i don't >> well, maybe it's an age thing. a generational thing joining us now is david leibovitz and ed campbell. let's start with you, ed it's been pretty unanimous from everyone we have on that this is a correction and an ongoing bull we'll have a morgan stanley guy on later saying this is a cyclical bear, it will hit bear

market territory because most stocks have. you're in the camp that the sharp pull back in stocks in october is another correction in an ongoing bull market, u.s. equity markets are likely to rebound. you sticking with that >> absolutely. you having mike wilson on from morgan stanley >> you read his stuff or do you get our notes? >> i do read his stuff >> mike wilson will be on. i'm glad he's on to get someone to say t righshg it, right, san? >> he's been consistent on this. >> for how long? >> several months. >> far so good yet someone taking that side or else it can't happen. >> i think the macro fundamentals are sound we got a gdp print of 3.5% consumer spending at close to 4% we did have some scattered disappointments in the earnings

season in general. we have half the companies reporting so far 82% of the companies are beating expectations that's above the historic average. valuation improved significantly since january. we had the s&p multiple at 8.5 we're down to 15 there are a lot of things to worry about we've built in some pretty big risk premiums in order to have a margin to safety there. >> david, another one of this gentleman's points, he'll be on -- be good for a promo. people have to wait to see him he says we need to recalibrate 2019 earnings growth the market is telling us that. and the profit margins will be one of the issues. you say -- you point that out in your note as well. it's happening at the same time that the fed is tightening >> exactly i think there are a number of cross currents now

you have the fact that the macro picture will begin to come under a bit of pressure coming into focus, beginning to crystalize for investors. at the same time you have concerns that the federal reserve will keep hiking rates that's what they've said they'll do i want to key in on something you said earlier, that is confidence you have seen future expectations roll over, and that's what we need to watch if business confidence and consumer confidence continue to deteriorate, we could find ourselves in almost the beginnings of a psychological bear market. once confidence begins to go, oftentimes it doesn't matter what the fundamentals do so i'm not sure we get in to a full-on correction fundamentals can look g bood, bt if people don't feel good,

that's a different thing >> that's a fine line to walk. people need to feel confident because business investment will help productive and help us hit 3%, that's question mark here. >> right now the market is overreacting a bit earnings in our view will come under pressure next year, but earnings growth won't stop so you'll see stabilization in confidence but we need to let things stabilize it's been quite a couple of weeks for the market people are still trying to find out if the path of least resistance is up or down >> i wonder how much of a difference there is in what we call this. the majority of all stocks were down almost 20%. >> he called it a 20% correction >> setting semantics aside, somebody came up with it at the "wall street journal" 25 years ago, it's into the thing in the real world, most global markets are in a bear market >> right >> whatever you call that thing

from 2015 into 2016, maybe that's what we end up calling this the distinction is is it a big devastating bear market associated with a recession that cuts the market down by 20%, 40%? that's the call right now. >> right i don't think we see a recession in the next 6, 12 months equity markets are typically reacting to a recession six months before. when you see the yield curve positive, initial unemployment claims down to historic lows, when you see the lei still in an uptrend. high yield spreads have not reacted that much. it has not been risk off across the board. >> do you think you get 20%, 40% pull back if there's not a recession? >> no. that's the distinction that's important. >> that's the key thing. if you look at the majority of the bear markets we've seen over the past 75 years, they tend to

coincide with economic recessions barring an idiosyncratic shock, i'm not sure how we get there given the outlook i think we both share for the fundamentals which is it's not necessarily going to be as good as it's been the past couple of quarters, but it's not about to roll over. >> in simplistic terms, the market is 20% cheaper or maybe cheaper than that given earnings are up 22% and the stock is down 10%, 15% if you liked it six months ago, you got to love it here, right >> i grant you that if you believe this earning s level ca be maintained or improved. in 2007, the forecast was for earnings growth in 2000. the consensus won't get you there. >> if we're up 22% this quarter, if we were flat next year, the third quarter, is that up 22%? is that the new thing or is it flat how do you look at that?

>> the market looks at it as rate of change >> that's not good enough. >> parts of the market will be up a good deal, parts will not >> it's about expectations and the change in expectations, not about the change in actual earnings a year ago we were having a conversation saying is the market going to care that the market was up in 2018. >> plit mattered then >> and now the market is looking at 2019. profit growth will begin to slow due to lower margins it's not the end of the world or the end of the cycle but it means a shift in the outlook it's just a choppier, more normal environment that we'll have to navigate going forward >> okay. thank you david leibovitz and ed campbell we're having that guy from morgan stanley on later.

you take morgan keagan, jpmorgan -- there he is. >> morgan keagan has been gone a long time. >> that's sad. we used to have an analyst on from there i can't call him currently unavailable. >> somewhere within one of those southern regional banks. >> i worked at e.f. hutton smith barney >> creative destruction. >> is it >> all right we have corporate news mon mondelez shares trading higher they posted better-than-expected earnings in organic revenue growth results were helped by higher prices and cost cuts texas roadhouse shares are getting punished after earnings fell short of analysts estimates. higher labor costs they say are continuing to effect performance. and akamai getting a boost this morning earnings and revenue topping

forecast driven by its cloud security business. the company announcing a $1.1 billion share buyback plan when we come back, forget pap paperbacks and e-readers, author james patterson is releasing his new book on facebook messenger he's going to tell us why he decided to embrace the app and why it could be a game changer as we go to break a look at the premarket winners and losers in the dow.

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into the 21st century. james patterson's new title out today on facebook messenger is called "the chef." he is holding the guinness world record for most best selling books on the "new york times" list, more than 380 million copies -- >> at 6:20 in the morning, you people are crazy, you people watching are crazy, president trump you need more sleep, but if you want to tweet about this book, that's fine, too >> is tweeting, is that what's behind this play >> for me, it's drawing attention to publishing, to bucks. we're trying new things. what this is and what's exciting to me, you read the book, it goes to film you read the book, it goes to film so it's kind of like a bookie, a book meets a movie it's free on facebook messenger.

>> you are somebody who -- >> why would i do that >> why are you doing that? you've bemoaned the idea that people don't read the way they used to. >> that's a piece of it. it's to draw more attention to books. publishers need to do more of that that's what we'll do it's a good story. it is -- you've never seen anything like this it's so different. >> if you're giving it away for free, how do you judge its success? >> i think a lot of people go on to messenger it's about a three-hour experience, the whole thing. we'll put it out as a book in book form in february. >> charge people >> charge 100 -- no, it's regular price. >> when you say goes to a movie, what's the interaction >> you're reading text, then all of a sudden you see film of what you were reading >> prompted? >> you have to push it it will come back, then maybe go

to photography or newspaper headlines. it's different you will see sometimes with a news story in the "new york times," you'll read, they'll put a piece of film up there this goes on for three hours you can watch it on your form and computer >> you try a lot of different things, but what brought this about? >> i love the idea of combining film and photography and books and text we went to facebook they said we're in they thought it was an exciting thing to do. it was different they need content. i shouldn't say what they need that's for mark and sheryl, i don't know, but i think they need context so here we are. >> you are somebody who stands alone with being able to knock out best sellers >> i think it's a mixed bag. i think independent book stores are doing better look, the whole retail business

is in flux because so much is done online. hopefully barnes and noble will rebound, which i think they will we miss borders. right now -- 20 years from now, who knows. maybe it will all be done online for the moment, this country needs literature that can't be done online right now. so right now we need publishers, we need good publishers, we need publishers willing to experiment and do things that are unusual >> so i would have to join facebook to read your book >> yeah. >> you can't e-mail it to outlook? >> you have to go to the messenger app. it's simple, you go on there you search for -- >> i would have to join facebook what if i'm morally owe poetz l facebook >> you would have to buy the book >> then i could not read the book and watch it.

so you don't have an answer? >> you're out of luck. >> can i go on someone else's facebook >> sure. depends on your relationship, but probably >> she would have to give me her password >> she might have to tell you some things, and she might not like your attitude >> you don't >> i do like your attitude rebel. >> you have been outspoken about amazon how you think it's impacting the book selling industry. >> especially the way -- i think they lightened up, which i think is great they're in a position to do a lot of good. initially the back and forth between them and publishers i didn't think was healthy i think we need strong publishers and we need book stores out in the world. that may change. >> but you changed your attitude on amazon? >> little bit. they're doing a better job now there isn't that back and forth thing they were having with

publishers i like that jeff is giving away a lot of money that's good. this is a full on embrace of technology >> you know, we're trying to be nice not bigoted. >> you're so prolific. that's something i don't understand >> i don't either. >> have you ever had -- have you ever gotten frustrated and you needed something, like you needed a laxative to get you going again in terms of writing? >> writing, he means >> no. >> all work and no play -- >> no, because i have writing diarrhea not to go too far into this metaphor >> you never had writers block >> no. i think partly because i do a lot of projects. if i'm stuck, i go on to the next project even when i'm writing a draft, if a chapter is not coming, i do

tbd. >> jam thes, thank you very muc. coming up, several big earnings reports >> you're hopeless >> i'm hopeless. i'm hopeless as far as facebook.

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♪ welcome back you're watching "squawk box" live from the nasdaq market site in times square. good morning welcome back we have a lot of stories including the trump administration reportedly planning new tariffs against all remaining chinese imports if

takes between washington and beijing break down here's what volkswagen's cfo said on cnbc earlier this morning talking trade tension and the impact of business and investors. >> nervousness in the market is partly a reflection on the discussion some people call it a war on trade terms between the united states and europe and china. i think it's important that we come back to the negotiation table, that we find mutually acceptable solutions but it is a difficult situation and all those rumors and speculations are certainly making it very hard on investors to stay focused in our industry. but i think we still believe that all parties are very clear about the consequences of rising tariffs and therefore it is important that we come to fair solutions. bp shares are rising in europe this morning. the oil giant's quarterly profit more than doubling beating expectations

results were driven by higher energy prices. bp's cfo telling cnbc that oil prices may soften a little but he thinks they will probably stay above $70 a barrel in the short to medium term. walmart is getting ready for the holiday shopping seaso with a focus on speed. the retailer has been testing a check out on me option that will roll out to all the stores on black friday we'll talk more about that in a second. have earnings from ge. >> ge adjusted earnings at 14 cents. quarterly dividend cut from 12 cents a share to 1 cent a share starting in 2019 that change will allow ge to retain 3$3.9 billion of cash per year compared to the prior payout level mike, if you totally get rid of the dividend, do you have to do something to bring it back why keep a penny >> some investors have a rule. >> they can only hold it --

>> non-cash goodwill impairment charge of $22 billion before tax related to ge power. actual orders were up 13%. equipment up 22. services up 5. organic revenue up 1%. larry culp said after the first few weeks on the job it's clear to me ge is a fundamentally strong company with a talented team, but our results are far from our full potential. we will increase accountabilities across the organization to deliver better results. we are on the right path to provide a more focus the portfolio and strength in balance sheet. my priorities are positioning our businesses to win starting with power and accelerating deleveraging, we're moving with speed to improve financial positions starting with the

actions announced today. i look forward to updating you further on our progress in early 2019 we pointed out this is a $96 billion company now. $97 billion company. 600 billion at one point for one brief moment -- >> look at that. the first tick is higher >> one brief moment i thought about -- where i was reading his excepts, i looked at this company and i thought about saying something like in jest, but it's just not funny anymore what larry culp is dealing with, what shareholders are dealing with what can we do? speaking of, a long-time shareholder, jack degan joins us so many times you said, well, this is finally it i don't know we got another new ceo, another

kitchen sink quarter what are your thoughts on ge at this point? i guess if you were counting on the dividend that won't be there anymore. is that a good thing >> good morning, joe i think it is from the perspective of institutional investors. the problem for ge shareholders is many of them are individuals. there are very large percentage of the shares that are owned by retired employees and individuals. and those folks, a lot of them, were relying on the dividend so though i agree with the decision to eliminate the dividend because they certainly need that extra cash for restructuring and dealing with liabilities like a dramatically underfunded pension this will be painful for those individual shareholders who live on their dividends. >> maybe for long-term, is this

right? do you feel -- i don't know if we spoke since the latest ceo transition, does it long-term this gentleman, is he the right man for the job to bring ge back to some of its prior glory >> i think larry culp is the right man for the job. being an outsider, he can take bold action, which is difficult for an insider to do this reduction of the dividend down to a penny is a token just to keep the portfolios that can only buy dividend shares holding them that's bold action maybe on the conference call and probably more likely in a couple of weeks or months when he's had more time to look at it, i think we'll see more bold action with the portfolio. the street is not going to wait for two, three years for mr.

flannery's plan to unfold. that's too long of a horizon for most investors to be patient >> what does larry culp have to do right now what is the next order of business if you cut the dividend, you say you're turning power around, how much patience does he get from the street and what do you want to see next as an investor >> well, he's not going to get a whole lot of patience. as you saw, john flannery got a year he was -- what he was doing was good it just wasn't fast enough and possibly not bold enough and what larry culp has to do is explain to us how he's going to fix power. in the current iteration of the restructuring plan, power is 50% of revenues after medical is spun off and oil and gas is sold so 50% of revenues is his poorest performing business in

an industry that i think i can argue is in secular decline. he needs to tell us how he's going to fix that. >> there's a book to be written here, santoli. you can go back to the final days of welch, the selection of jeff immelt over nardelli, and then i remember all the -- jack, you remember had to sell nbc i thought we restructured this portfolio so many times to prepare for the future, then fast forward to flannery, he had a couple of kitchen sink quarters so many things he had to immediately exit then culp comes in and looks around he says after my first few weeks on the job it's clear to me -- fill in the blanks clear to me this is just a excrement show

unbelievable what happened over the years to this great company. >> jack, i wonder -- the company has never performed at the top level since it didn't have a big finance arm with a triple "a" rating it's been a different world for ge for a while where does it stand now? aviation is doing well it was carrying the company to the extent it's doing anything at all you said it will be tough once it's power and aviation for the most part, transportation. in that portfolio, what do you think he ought to be doing >> that's what i don't have an answer to. how do you fix power when it is so large, has such poor margins, and represents such a big piece of the portfolio in an industry that's in decline? i don't have an answer to that i hope mr. culp can give us one that is acceptable the shares are cheap on a price

to sales basis that's the only way we can look at it because of the lack of confidence in earnings and book value. it's half of what united technology sells for and a third of honeywell it is getting cheap. if he can give us a convincing -- >> jack, do you still own the shares you're not sounding like somebody who has a lot of faith. >> i don't we sold it 13 months ago, a little above 20. we just got tired of defending management decisions to our clients. it was pretty hard to do >> jack, business writer, october 23rd biline, william cohen writing a book on ge, decline. he has already a narrative about a company described as apple, amazon and google all at the same time. in his previous book he had a

book about goldman sachs and its rise to power. you could write that book. >> we've both been watching this for over 20 years. >> you're damaged. you're damaged from watching it and owning it. i guess we all are thanks, jack >> thanks, joe when we come back, pfizer is set to report in the next few minutes. we'll bring you those results and reaction on wall street. we'll get you ready for a f.a.n.g. report after the bell facebook shares down nearly 8% in the last week we'll talk about what analysts are expecting. and later chipotle's turnaround plan. the company's stock rising 30% since the new ceo brian niccol arok over in mch he'll join us in the next hour stay tuned, you're watching "squawk box" on cnbc

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time for the executive edge. the october tech wreck taking a toll on some prominent hedge funds. that was the buzz at the sohn conference in sfaens laan francs

night. leslie picker joins us now what did you hear? >> that's right. against this back drop of the tech selloff and market swings, hedge funds with a focus on the tech sector gathered in san francisco for the sohn context and they presented their ideas highland capital touted marvell technology light street capital was bullish on far fetch and mercato discussed extended stay. amid these stock picks was a more bearish undertone that's why gil simon said he did not choose a tech stock but a media name, the "new york tim " times. instead of being bullish on technology he said he is shorting some prominent tech names and that's been a profit for him lately >> we don't try to time shorting

high-growth companies for the sake of trying to call a market. but we have had a phenomenal few weeks shorting stocks because there were a lot of companies that, you know, we didn't necessarily like that people are perceiving to be winners and a lot of those are down 30% 40%. it's been a good period for short selling. >> now, simon declined to say which names specifically he was short, he did talk about those in the f.a.n.g. names that he liked on the long side still he likes netflix, and says that he recently added to his position, guys >> thank you, leslie picker. pfizer is out. first number is okay 78 cents above expectations. >> revenue is better than expected >> really? >> just below. >> i thought they were below, and also the guidance is below where the street is. they're looking for 53 to 53.7,

it's 54.1. they did 13.3, it's 13.5 what the street is looking for. 2.98 to 3.08 is the estimate for adjusted they will barely hit that number down 37 cents. not a huge miss. they expect to repurchase $12 billion worth of shares in 2019. they repurchased 1.1 billion in the third quarter. some of these other revenues innovative health revenue up 4%. essential health revenue down 4% that's a little bit mixed at this point they have a 69 cent number as well but adjusted, what you compared to the 75 cents, is the 78 now it's at -- we'll see we'll check later. i think that's a good quote there.

it was up earlier. that is a revenue miss in the current quarter and for the year actually -- okay they mnarrowed their revenue range. analysts came in at 51.53 -- >> narrowing it to the lower end. >> coming up headwinds for facebook the stock is down nearly 20% in the last two months. we'll see what to expect when facebook reports after the closing bell at&t provides edge-to-edge intelligence, covering virtually every part of your finance business. and so if someone tries to breach your firewall in london & you start to panic... don't. because your cto says we've got allies on the outside... ...& security algorithms on the inside... ...& that way you can focus on expanding into eastern europe... ...& that makes the branch managers happy & yes, that's the branch managers happy.

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♪ welcome back, everybody. facebook reporting at the bell today. joining us with what to watch is porter bibb from media tech capital partners a lot of people on edge for the stocks of so many of these faangs down significantly. and if you're looking since the july 25th number, you're talking about a decline of about 25% >> and if you go back 52 weeks,

more than that >> is it growth and users? >> of course you have to have growth but you're not going to hear growth today their advertising is going to be modestly down beneath predictions because this is a advertising ord quarter. they are losing younger viewers. they're going to instagram facebook has serious, serious problems with regulatory and more importantly, they're doing damage right now around the world. not just in the united states, but there's clear evidence that the brazilian presidential election was influenced by facebook misinformation that was put out telling people the wrong places to go to vote and so-and-so forth. miramar another example where

7,000 rohingyas had been evacuated from the country mainly through misinformation on facebook it's a serious, serious problem. they haven't done anything to abate that >> so what do you expect to hear today that could potentially move the stock one way or the other? >> you're going to see a boost in instagram younger viewers, a slight decline in profit and the number of facebook users it's static right now, butt' s under so much pressure and it really needs to have grownups coming in and running the company. move mark zuckerberg to chairman and bring some serious -- >> i thought that's sheryl sandberg's role. >> she's been out promoting books and politics and everything else. not paying that much attention

to facebook. they brought in the prime minister from the uk as their policy officer he is not a technician they think that ai is going to solve the problem. >> do you think the relationship between sheryl sandberg and mark zuckerberg which has always been very close -- >> it's very close still yeah and she's a wonderful leader and a very, very intelligent lady, but she's not the person to solve the problem they're facing right now. the technology problem look the man who invented the internet is launching enrupt it's a new messenger service that can't be hacked and is going to disrupt facebook. >> coca-cola just out with earnings sara eisen is here she has the numbers. >> it's a strong quarter just to recap here coca-cola beat on the bottom line beat on the top line reporting -- here's the revenue beat

$8.245 billion the main highlight here is organic revenue growth which is the industry metric, up 6% for coca-cola. that was better than the 4% that analysts were looking for. and if you break that down by region, very strong in europe, the middle east and africa up 9% latin america, it's double digit growth north america was one of the weaker spots coke did grow its revenues in every area that it sells in north america. up 2%. asia up 4% they are maintaining their guidance which is also really important given the strong dollar which is going to hurt even more. they're seeing growth in diet coke james quincey just told me millennials are coming to diet coke and coke zero sugar and that's a new thing >> all right sara eisen, thank you for that also porter bibb, he's out of here we're going to talk about the late volatility in yesterday's

session and what sparked the selling and what you can expect in the trading day ahead our market team coverage continues after a quick break. you can't always predict them, but you can game plan for them. for 150 years, generations of families have chosen pacific life for retirement and life insurance solutions to help them reach their goals. being ready for wherever life leads. that's the power of pacific. ask a financial advisor about pacific life.

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earnings, tariff talk, and jobs take center stage we'll break down the trading day ahead and tell you what you can expect the largest auto dealership reporting results. we'll get a look at how rising interest rates are affecting sales. and where will jeff bezos build amazon's second headquarters we'll see who's in the running as the second how were of "squawk box" begins right now. ♪ live from the beating heart

of business, new york, this is "squawk box." >> good morning, everybody welcome back to "squawk box" here on cnbc we are live in times square. i'm becky quick along with james kernen and mike santoli in for andrew today with us we have steve grasso he is director of institutional sales and a cnbc market analyst. he's here as our guest host. thanks for coming in let's check out the u.s. equity futures at this hour after big declines yesterday, after a wild swing of almost 920 points for the dow you're going to see this morning things have flattened out a bit. dow futures up by only about 78 points the close yesterday was down 1%. the s&p 500 indicated up about 11 points and the nasdaq indicated up by 31 in our news this morning, general electric has slashed its dividend to 1 cent a share from 12 cents that news coming in its report

in which they reported profit of 16 cents a share that was less than the street was expecting. dow component pfizer reporting a mixed quarter. the drug maker coming in 3 cents better with a quarterly profit of 78 cents a share. but revenue was below what they had been anticipating. right now it looks like pfizer shares are down by 0.8%. and as we just reported a few minutes ago, coca-cola earning 58 cents a share for the quarter, 3 cents above expectations revenue beating as well with organic growth rising. earnings taking center stage despite a lingering trade war with china dom chu joins us now with more on the markets morning, dom >> good morning, mike. as we talk about the long-term trends that we've been seeing in the morkt place, one of the

things we've been seeing is the long-term trend for the overall market we want to put it in perspective again where we are we've been bouncing along. we are now below the level we've been watching there. one of the other things to look at is how many are above or below their respective long-term trend lines. one indicator to the health or momentum of the overall market now, with the 200-day moving average, each stock has its own. the number of stocks with the s&p 500 that are above the trend line for the trend day is 169 right now. that means stocks are below their trend lines. it's something we'll keep an eye on on an intraday basis, it's still young. but some of the moves we've seen represent some of the biggest kind of momentum moves in the market place you look at moves we've seen, amazon shares did fall yesterday by around 11% before recovering

a bit to where they were that's something to watch there. they caught a bid there. also if you look at one other stock out there, two others are indicative you see a bounce here, but at the lows of the day, it was around 9% as well before recovering dragged a lot of the market down with it. those boeing shares at one point down about 9% at its lows on an intraday basis before recovering at the end of the day. boeing dragged down many of their aerospace stocks lockheed martin, many of those names got hit the hardest in yesterday's trade. so as we watch market stability develop this morning, the question is whether or not we see some of these momentum names and the draw downs from yesterday at least hold up a bit or whether that exacerbated selling continues. back over to you >> thanks a lot, dom chu joining us now to talk more

about this is erin gibb. she is from s&p global market. and this morning steve grasso, a cnbc "fast money" trader watching boeing yesterday, that was because of the tariffs news and the concern about that how big of an issue is it at this point and how much of that has been priced into the market? >> we feel as long as we keep seeing new news and tariffs, we can't see how much we'll price in and i think a lot of that happened, it was really all about that last tweet and additional tariffs so it's difficult to say how much it's going to scare the market it's not just industrials or any specific industry. it's the whole market that was completely switched. so what we're looking at more is -- and for the entire month of october, there has definitely been a change in leadership. and investors are definitely re-evaluating what they're willing to pay for stocks. what are these new evaluations going forward with these types

of risks in a rising rate environment? and we've seen a big shift from growth into value and value starting to be a leader. value was up yesterday >> and that's concern about what happens from here. >> yeah. >> let me ask you, steve with the tariffs, that seemed to me like it was designed to put the most pressure possible on the chinese. if we don't see something coming from this meeting with xi, then the rest of this is going to come by the way, it might happen during the lunar new year holiday. >> it was all posturing. it was him trying to show his biggest bazooka coming out, telling the world i'm not going to back down to china right now. and they better be ready to deal once these meetings take place >> so posturing but we don't know what the chinese reaction will be. how do you play it out in the market >> you've seen it play out you see china large cap tech get hit. you've seen the trade stocks get hit. >> do you think they're pricing the worst case scenario at this

point? >> i think they're pretty close to pricing the worst case scenario you never want to say it's all priced in until it happens but it's pretty close. >> you know, erin, not just to focus in on boeing, but it was an expensive stock based on industrials and its history. that premium is being bled out of it. a year ago we were talking about how no headlines bother this market it was just they just grind higher so it's just a revaluation of the stocks in a skittish market. >> and actually we're not even looking at earnings news you can have a great day and it's right now stocks are so highly correlated. when you're in this type of negative volatility environment. individual reports really don't matter it's just about what people feel and this sentiment about the market overall not so much about individual companies. and yeah, any hype valuation companies are going to get hit the hardest. >> how much of that was an

afterglow of the faang stocks? in relationship to a relative relationship to boeing when you look at amazon, boeing looked really cheap now a faang falls apart, then everyone starts to look at where's the over-value in the other spaces. >> to that point if you're trying to keep a clear head, where do you value the market right now? does it look cheap to you? does it look expensive >> it's always going to look expensive when you have the run-up on it on a real basis, it's not that expensive. but when you look at home builders thathave been beaten up autos have been beaten up. those are your value stocks. >> value stocks you'd feel comfortable jumping into at this point? >> i said it last week i would be a buyer of autos and homes. and they rallied in a week people are looking for that beta play >> to answer your question, what makes them value stocks, devalue stocks, is you don't feel comfortable going into them. they're cheap because people are worried about something. >> how do you tell a value stock

from a value trap? >> a lot of times you don't know until you've checked your bank account. you see you lost money, it was a trap >> right >> just boeing -- so it got to $380 now where is it? >> $335. >> you remember the night of the election 2016? guess? bueller? bueller? >> the price >> $140. >> yeah. had this crazy ramp, yeah. >> $140. $145 i mean, $390, $140 and here we are. >> and they'reall buckling right now. i was saying yesterday this market at this stage in its pullback is hunting where there's accumulative profits in stocks if you have a lot of air under those stocks, it's just taking it out >> erin, if you're worried about forward looking growth and that's certainly what the market seems to be indicating right now, what do you do in that environment? do you buy into the scenario that things are going to be scary from a growth perspective

starting next year that's what the market seems to be indicating right now. >> first of all, i don't think that 9% growth is scary. that's still a really good -- we're talking almost 10% earnings >> down from 22% or whatever >> 6% revenue growth so in any other normal year, that's a really good year. any time you are close to 10%. especially revenue growth. any year you're looking for revenue growth over 5%, that's solid. >> is the market just not paying attention to that? >> i think they're just getting used to going from 22% to 9% it is getting cut in half. it is decelerating growth. and there is a shift in leadership of where the growth is coming from tech is not going to be one of the out-performers next year we're actually looking at it's going to come from energy. there are other industrials, health care. these are going to be the leaders when it comes to profit growth and revenue growth. >> if only it wasn't a pe multiple that ruins everything. what's the multiple at bare market lows?

well, just take -- when it can range from 8% to 24%, that gives you no idea -- earnings are totally meaningless. >> in the past ten years, 15 times forward earnings tends to be an area where investors jump in >> it can overshoot on both sides. >> it can. >> so where are we now >> we're 15.8. >> then we ought to do 9% next year in a perfect world. >> we can drop another 5%. >> i think the market is looking that the 9% is on a slope going down we don't know. but you have a normal tendency, in october the year ahead, you have earnings cuts >> unlike 1999, you have something to base your bullishness on you know what i mean if you get multiples down to a reasonable level and earnings are growing, it doesn't seem you're stepping off into the void of an air pocket. >> everyone's worried about the fed. >> that's how it affects

multiples though >> right so you don't know when the fed is going to put on the brakes. >> if it was only earnings, we'd be fine. but when it can go between 8% and 25%, that makes it hard to decide doesn't it >> i would say so. >> erin, thank you for coming in today. erin gibbs steve is with us as our guest host when we come back, pfizer reporting just a short time ago. the dow component reporting a mixed quarter. we'll take a closer look at the numbers and big pharma's reaction after the break and later, autonation ceo mike jackson is our special guest we'll get his take on the nation's economy, the auto sector, and interest rates stay tuned you are watching "squawk box" right here on cnbc

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this is coach. it's not carol king's company or album. beat on the revenue side results were helped by a 4% increase and comparable sales at coach stores okay now i know what that is. all right. dow component pfizer posting an earnings beat revenue, though, missed expectations for more on the information, meg tirrell joins us >> we just reported on the sort of mixed quarter we saw on the top and bottom line. company also lowered its full year forecast for revenue citing continued product shortages for its sterile injectables they purchased a couple years ago for $17 billion. that's been a continuing problem. it's affecting the full-year guidance they also cited foreign exchange, some weakening currencies in the markets and the euro between mid-october for lowering that forecast they did narrow their earnings

per share, but kept the same midpoint there you are seeing pfizer shares down on the sort of mixed result for the quarter and the lowering of the forecast for the year it's going to be interesting to hear this company on the call today. it's the first call we're going to get with the incoming ceo who has just announced he's going to take over january 1st. he's been with the company for a long time. but in this new role and of course remember, pfizer was the company that president trump called over the summer to get them to reverse their price hikes. now, that reversal has a timeline and it goes until the end of the year. or until significant progress was made not totally clear what progress means there. so we're going to be listening for a lot more to hear about that and really quickly, i'll just point you guys to allergan which also reported this morning beat and raise for allergan. we'll have brent saunders on "squawk on the street" today tune in for that for more on what's going on in drug pricing and politics.

>> thank you, meg. joining us now is mike bailey, director of research at fbb capital partners mike, when you hear from trump and you just -- just the general environment we're in right now doesn't seem like a great pricing environment for pharmaceuticals. as a general rule would you say be cautious or watch where you step in this arena right now >> i don't know if i'd quite go in that direction. so, yeah as you mentioned, trump called pfizer directly and said cut your prices. guess what pfizer just beat on earnings >> they missed on revenue. they had to lower the top end of their guidance >> that's true. >> they missed on the current quarter. i mean that -- are you long pfizer or something? >> we are. it is. it's one of our top. pfizer's in good shape it's the tan minivan these days. in some ways that's a good thing. >> ooh, no it's not a good thing.

that's what becky drives >> it's good so we're getting closer to a recession. pfizer basically has a pothole in terms of drugs going generic. once pfizer gets through that pothole, i think as the recession starts to kick in, pfizer's growth kicks in that could be an interesting story in one or two years. >> so the industry is fragmented, though, huh? >> it's still fragmented you're going to see deals. you know, certainly allergan beating and raising. pfizer was looking at companies like that. i think for the moment they've hit the pause button on deals. going to get a new ceo coming in in a couple months maybe he'll have a different view of acquisitions i expect pfizer to continue doing what they're doing it's been a good thing for them. i don't think there's a need to fix it may take a look at the consumer business maybe that's something to spin off. i think it's in fairly good shape for the moment >> do you think pfizer needs to do more deals? you mentioned they were looking at -- they tried to find

companies like allergan. maybe look at some bioteches as you see their valuations coming down so much recently. >> that's a great point. i would expect pfizer to do some tuck in deals, maybe smaller things you look at more recent large acquisitions it's been a little bumpy you look at gilead and celgene if pfizer looks at that track record, they may say let's hold off a bit or scoop up a billion dollar deal and tuck them in from there i wouldn't expect a major acquisition. >> how did this finally work itself out with what kind of regulatory problems we might have in terms of importing the price controls in europe that makes no sense. but do they understand that in this administration? nobody will have innovation. >> i think that's a little tricky you're getting into a hornet's net in terms of making u.s.

prices the same as international prices there are a lot of regulatory issues there that to me seems like something during the campaign season that may make some sense. but i think afterwards, that's probably going to die. we've seen tons of drug pricing, regulatory ideas out there and a lot of times they die. and i would expect the same thing here >> companies are still reacting to competition which is not like a normal free market either. i'm not singling out pfizer. if the generics play along with the majors and don't undercut the prices, they still can charge whatever they want. how do you charge $60, $70 for a pill when you developed it 10, 15, 20 years ago it's already off patent. how do normal markets come to bear they're just setting themselves up for, you know, people -- we got midterms coming up

a lot of people talking about, you know, with a target on the back of the drug companies they're tone deaf. >> you could argue that. pfizer stepped into the problem taking up drug prices in the summer at a bad time i think in general they're sort of getting the message allergan, they've done maybe a better job than average in terms of just setting a bar in terms of where their drug prices will go but i think the industry is finally getting the message that they can't do these outrageous 20% price hikes. the one point i would mention is that the drug business is definitely -- the economics are a little funky so companies can raise their prices on one hand but on the other hand they get smacked with a generic drug and their prices come down 90% so i think it's maybe more extreme than your typical market for, you know, whatever milk or eggs, something like that. market forces are still out

there. >> you live by the story or die by the story the pharmaceutical companies, it costs a lot of money we understand that takes years and there's no guarantee of success but i don't know you don't need to milk it. i guess you do for maximizing profits, but it just puts a target on their back in this environment right now. so i don't know. you need to talk to all your clients, mike. not your clients, but the people that you follow. >> okay. >> will you do that? you, too, meg. >> i'll talk to them about the cost of your pills >> i don't really think i ever said -- i never said it was related to my lipitor. >> it's not. >> no. because i don't take lipitor what are you looking at? >> meg, thank you. >> thank you, meg. when we come back, jobs, jobs, jobs we'll speak to the ceo of

paychex. that interview is straight ahead. "squawk box" will be right back. tomorrow on "squawk box," tricks or treats from equity group investments chairman sam zell. will rising rates spook real estate investments what will haunt investors in the fourth quarter calling all witches, goblins, and ghosts make sure you watch "squawk box. sam zell will be our guest host. making my dreams a reality 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.

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coming up, the ceo of paychex on the nation's labor force. and then mike jackson joining us to discuss the auto sector, the fed, and anything else we can think of take a look at u.s. equity futures just under triple digits there they are see? my voice, now up 102

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good morning and welcome back to "squawk box" here on cnbc among the stories front and center this morning, investor carl icahn has increased his stake in dell technologies he's increased his stake in dvmt shares icahn is opposed to the idea of buying out dvmt. third point wants campbell soup to explore a breakup of the company. they're currently waging a proxy fight trying to replace the food maker's entire board of directors. we'll get fresh housing data in about 90 minutes. out at 9:00 eastern time july home prices had jumped 5.9% from a year earlier. the results are out for the october paychex small business employment watch that's the monthly index of small business jobs activity and wage growth. joining us now to break down the numbers with us is marty musy.

he is president and ceo of paychex. all we here from businesses is they are having a hard time finding qualified employees to fill their needs is that what you hear too? >> yes, it s, becky. it's the constant thing that you hear is there's a lot of good business sentiment that they feel more positive consumer confidence is up. but the toughest thing is i can't find the right people to fill the jobs. and we're anecdotally hearing that some businesses are not taking on additional work. some of the home builders, et cetera, because they can't find then people to do the work job growth is down the month of december it's down about 0.8% from last year hourly earnings up about 2.4%. so that's good >> hourly earnings headed up, right? a gain of 2.4% >> yeah. 2.4% >> that's the next thing that we always hear is that snord to find candidates or find employees, that they have to pay

out. that's what employers say. 2.4% doesn't sound like a lot if you think of it from the hourly average paycheck but what does that mean overall for businesses and how does that rate with what we've seen over the last decade? >> yeah, i think it's still on the low side you're exactly right we'd expect closer to 3% in a tight labor market but what you're finding is small businesses didn't gain quite as much from tax reform they're having a harder time to raise wages to get those people. they also don't have as much flexibility on raising benefits and putting effort into recruiting they have a tougher time, the businesses under 50 employees than the larger businesses attracting in a tough market >> the regions you're seeing the tough growth still in the south and west >> yeah. the south and the west are still the best construction is very steady. even though home -- you know, new home sales have come down a little bit year over year, we're still seeing construction overall is the strongest that's going to be in the south

and the west you're seeing places like arizona as well. the weaker markets continue to be the northeast and the midwest seeing the biggest dropoff over last year. >> marty, you've been doing this how long >> the jobs index for about four or five years now. and, you know, paychex, about 16 years. pretty good sense of the small business market. >> just kind of getting a feel for what this means for small business owners right now. how would you describe the economy from their perspective and how would you describe the outlook? >> yeah. you know, we just did a separate sentiment, you know, how they're feeling about business it's up over the last quarter. they're feeling good about the fact there's high consumer confidence consumer spending is up. they're feeling like the demand is there i think the struggle is, hey, i can't get the people to do some of the additional work to make the sales that are out there for me so they're feeling pretty good about the demand, but they're a

little concerned about in a tight labor market, can i get the people to produce the sales. and they didn't get as much from tax reform so their profits are a little tighter. while they're feeling good, they don't have as much flexibility to raise prices and raise wages. >> hey, marty. is there a disconnect when you look at the economy when people say things are so great? when you dig through these numbers on a regular basis, do you see any disconnect or a head scratcher data point >> the only thing that we see that drives some concern is whether it's a leading indicator is leisure and hospitality and some of those jobs we're seeing quite a decrease in the growth rate of jobs for, like, leisure and hospitality. other services where discretionary income is spent. and when that drops off a little bit, it could mean that people are holding onto discretionary income a little more and is that a leading indicator that the income is not there and are we feeling the bit of a

recession? on the other hand it could be that jobs are tough to fill. we're trying to break that down as much as possible. but that's the only thing. other than that, you know, i think small businesses generally are feeling pretty good about the demand out there for their services >> all right thanks for joining us. it's good talking to you marty mucci of paychex good to see you. steve grasso is here he's our guest host today. steve, you take that and think what if you're trying to figure out where you're going to be valuing stocks, where you put this in terms of business confidence >> business confidence is still off the charts i think the major thing is when you're perplexed with inflation, it's not runaway inflation in august saying they are still a little perplexed with the lack of inflation so i always key in on that >> you wonder what the fed's reaction will be if it's beneath expectations that's really what's underlying many of the big concerns in the market will the fed move too far too fast >> the fed needs a data point

that's six the fed needs some bearish points so it could say it wasn't the trump pressure that made them skip a cycle. so they need something that actually falls off counterintuitive, i get it >> at this point the fed is in the zone of saying not that inflation is running away, but it's near our target if you're near your target and unemployment is near your target, we want to get to something called neutral the debate is really around what is neutral and how do you get there? that's what the markets are comfortable with if the fed says neutral is four more hikes next year, that seems stiff. >> steve grasso is our guest host when we come back, where will amazon build its second headquarters we are expecting an announcement soon scott cohn will tell us who's still in the running after the break. meanwhile, check out the futures this morning we're back in triple digit gains for the dow. up 121 points after hearing from

several dow components today pfizer was a little weaker, but coca-cola was a little stronger. nasdaq up by 47. "squawk box" will be right back. sfx: [phone ringing] you still have service? call the insurance company it's them, calling us. it's going to be a week before they can get through on these roads shhh, sorry, i didn't catch that. i said ask how soon they can be here not you. right now? what's now? he says they're surveying our property now they're probably at the wrong house i don't see any hovering his name is hovering? look up? by using machine learning and analytics to automate claims, cognizant is helping insurance companies advance how they serve even the hardest-to-reach customers. cool ♪

let's take a look at some of the stocks to watch this morning. mondelez international reported a profit of 62 cents a share 1 cent above estimates organic revenue growth of the snack maker was stronger than expected the bakamai beating estimates earned 94 cents a share for the quarter with a 37% jump in cloud security revenue it also announced a $1.1 billion stock buyback. and bp reported its highest profit in five years helped by those higher oil prices. thanks to those increased profits, it said it could fund its acquisition of the bhp shale business it previously planned a rights issue.

amazon expecting to announce the location of the second headquarters scott cohn has been touring all 20 finalists today we find him in nashville how is this whirlwind tour going? >> it's going fine we didn't know we'd be able to get through as many cities as we have, but it sounds like amazon is taking it down to the wire here still no word on when they're going to make that decision. nashville is the second smallest of the 20 finalist after raleigh with a metro population of less than 2 million and that may explain why it hasn't really been in the thick of the popular conversation about hq-2 but of course the real conversation, the only one that matters is the one that amazon is having as recently as a couple of weeks ago. tennessee governor bill haslem says they're still in talks with amazon and the people who put the bid together here are feeling confident. >> we're a stable economic environment.

we're low cost we have, you know, our government entities are business friendly whether it's the state or local governments >> reporter: the numbers bear that out tennessee finishes a respectable 13th in our 2018 america top business states rankings with a solid infrastructure and a friendly business climate. and in our amazon race report card where we take that top states data along with other government data and put it up against amazon's stated criteria, nashville does pretty well turning in a solid b plus overall. the biggest weakness is a c minus for talent the ability to retain top technical talent they have the slowest concentration of stem workers among the finalist and inclusiveness could make it hard for amazon to attract the talent it would need the 50,000 jobs that ultimately would be created here. later on "power lunch," we'll ask bill haslem about that

and some comments he made not too long ago that he wonders if it could handle hq-2 guys >> scott, that's kind of shocking he actually wondered if they could handle it if they caught the bus? >> reporter: you know, if -- probably any of the cities are honest about it, look what's happened in seattle where amazon transformed the -- its original headquarters with all of the employees, all of the increases in housing costs every city is going to have to deal with that if this project is what amazon says it's going to be. 50,000 jobs. and presumably a location kind of in the heart of an err ban area it's going to be transformative. and in a city that's small on the small side of the finalists like nashville, that really does have an effect and, you know, so maybe the governor was just being honest >> honesty in politics

yeah not something you always anticipate and particularly when you're in a bake-off trying to lure them that way thank you, scott all right. coming up, autonation ceo mike jackson when we come back. tomorrow on "squawk box," tricks or treats from equity group investment's chairman sam zell will rising rates spook real estate investments what will haunt investors in the fourth quarter calling all swichtwitches, gobl and ghosts make sure you watch "squawk x. m zell will be our guest host. we're voya! we stay with you to and through retirement.

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this isn't just any moving day. this is moving day with the best in-home wifi experience

and millions of wifi hotspots to help you stay connected. and this is moving day with reliable service appointments in a two-hour window so you're up and running in no time. show me decorating shows. this is staying connected with xfinity to make moving... simple. easy. awesome. stay connected while you move with the best wifi experience and two-hour appointment windows. click, call or visit a store today. ♪ autonation results out this morning. the automotive retailer reporting earnings in line with expectations but missing on revenues joining us with the numbers, autonation ceo mike jackson. still one of the best quarters in history, though, for the

company, was it not? >> absolutely an excellent quarter. that's a 24% increase in earnings per share and of course i have to say the administration's tax reform, without that, this number would not have been possible and as a u.s.-based company, a retail-based company without all the multinational taxes available to others, we were in a penalty box unfairly on tax. so tax reform was a big part of this and i should call that every quarter our associates are grateful for that. as far as the business brand extension, it was excellent throughout the quarter hour pre-owned business was up and in our customer care business, across the board from precision parts to collision

parts, that business was up 7% difficulties in the quarter were the new vehicle business we had some difficult comparisons with the snapback from the hurricanes last year. but still there's head winds in the new vehicle business to contend with it's been a worthwhile investment and our peak investment period is almost over and going into next year we'll see a normalization of sg&a. but we'll have the benefit of the brand extension. >> that's something we've talked about a lot. it was mostly about -- >> yeah. it was a high margin recurring business that we uniquely have the capability to go into because of our scale and our brand. we've seen that our customers

trust our brand. it stands for value, great service, and they're willing to buy products that have the autonation brand and we have the scale to be able to -- >> how many quarters, mike we've been talking about it for awhile when you initiated, how much -- and it did cost money to build that out and now you say it's going to be -- it's not recuring from here on out. right? it's over. you passed the point of investments at this point? >> the brand launch was back in late 2014. and we've had elevated spending in marketing communications to build the brand. and the brand is in a very good place. so we will be able to maintain the brand without the same level of investment we've had in past. and we've had on other capabilities, we had to retrain our workforce throughout the country to go to one price on all pre-owned. which of course the customers have embraced and they very much enjoy. and on the parts business, we

had to build a logistical supply chain from around the world bringing parts in from the best suppliers and vendors. and all that infrastructure is almost built out we still have something in the fourth quarter but our sg&a will normalize in 2019. >> so mike, i have two questions for you and they both lead into each other have we reached peak auto at this point and where is the country on autonomous drive is the country ready for that? you see pockets of it across the country, but what does that do to peak auto does that rush it? is the country really ready for autonomous >> i call peak auto on your show i think it was in january of 2016 something like that where i said we're entering a stage of plateau on the retail side of the business the fleet side of the business is still strong. but the retail portion of the business plateaued back then and we've been on plateau since then

at a very good level but i do see affordability as an issue around the level of equipment that the -- and the type of vehicles the customers want to buy. combine that with rising interest rates now, the interest rates are still very attractive in historical sense but it's interesting from a consumer point of view, they're just evaluating the change from what was before. and you have an american consumer that's been used to free money for seven, eight years. so on relative terms, it's a bit more so. that's why we see the cannibalization over preowned away from new because there are affordable choices there >> mike, let me ask you just broadly about the economy. you've talked to us for years and years at this point about how you can kind of see what's happening, what's percolating in the economy based on sales you see. and for awhile, truck sales have been strong. it was led by sales of -- to contractors in construction guys is that the situation today or

when we start hearing about this trouble on the construction front, on the home building front, does that show up in autosales too? >> well, the way i look at it, becky, again, money is very affordable so it's a bit of a head scratcher to a lot of people but not to me. the consumer is -- all they know is what was available before and what is now. and we now have higher rates and so that means housing and autos, those are the two -- where everything is financed every house is financed and almost every vehicle is financed so you raise rates, that's where you're going to see it and we definitely see the consumer come in and have a certain shock about what the price boost is since the last time they were in the market place and how they look for and talking about more affordable alternatives. so i am not surprised at all to the see the housing issues that you're talking about

autos also the consumer is adjusting to a new price point, looking for more affordable choices. and you better be ready to adapt to that, because the tip of this is new vehicles at retail. now, i'm not saying the sky is falling or anything like that, but we'll still be at a nice high rate. but it'll probably be several percentage points lower next year than it was this year >> we talk about that all the time whether it's the absolute level of rates or a change as you're a guy on the front lines of that it's the second derivative, mike when they stop going down or just tighten a little. doesn't matter people don't say, wow. ten years ago, it was this it's still good compared to that >> exactly, joe. exactly how they think we had another very positive step in the quarter. we made a $50 million investment in the leading online automotive retailer room. and for the $50 million we got 7% of the company. what i like about the room is

they have exceptional leadership team, very capable in the digital space led by paul hennessey, the ceo who had an outstanding career at priceline and at booking so we think it's a good investment as a first step and we'll see where it leads but that was an exciting development in the quarter >> so have you been watching -- do you tweet like elon musk, mike i looked for some of your crazy tweets just not nearly as entertaining as elon musk have you been watching this is a ga at tesla? any comments on that just off the top of your head? >> well, my tweets are much calmer because, you know, i don't smoke marijuana and -- >> oh, that's good you quick that, mike >> yeah i gave it up i found i really calmed down once off the pot and i've given up following and

dissecting elon's tweets i mean, you just can't make it up >> okay. all right. we'll leave it at that >> mike, we do love you. >> all right you guys are the best. good to talk to you this morning. >> okay, mike. we'll talk to you in a quarter or so if not sooner. thanks appreciate it. mike jackson, ceo of autonation. when we come back, will the u.s. announce new tariffs on all remaining chinese imports? we're going to get the latest out of washington and what it means for your portfolio

earnings, earnings, and more earnings the numbers you need to know straight ahead new this morning, general electric slashing its dividend and announcing it is splitting its power division plus a roar from wall street why morgan stanley warning this selloff is morphing into a bear market the final hour of "squawk box" begins right now ♪ live from the most powerful city in the world, new york, this is "squawk box.

>> good morning and welcome back to "squawk box" here on cnbc live from the nasdaq market site in times square. i'm joe kernen along with becky quick and mike santoli andrew has got bigger fish to fry. off today. when does that start is that today? >> no i think so it's wednesday. thursday >> thursday. big deal at one of his other jobs at "the new york times. big deal for dealbook. they have big guests who do they have this year >> i don't know. we'll ask him. >> i guess we can promo it we can do that but he's not here. so it doesn't really help us anyway, that's okay. up 116 points on the dow this morning. s&p up 15 and the nasdaq indicated up 48 right now. we're watching three big stories this morning one, the markets and earnings. it was another wild ride on wall street yesterday the dow whip sawing more than 900 points at its high it was up 352.

at it low, it was down 566 today it's all about earnings. and, well, if it ever is and whatever else comes out after 9:30 could be china, could be the fed. who knows. complete roundup of the biggest movers we will have that next number two, we have general electric, the former dow component slashing its dividend. what do you think? slash 11 cents out of 12 for a quarter, what do you think >> decimate it >> no. that's only a tenth. you only lose one out of ten of your troops when you decimate something. they cut their dividend 92%. i guess it makes sense to leave something there for people that have a mandate to own stocks that pay a dividend. but it's basically -- if it was yielding 4%, i quickly deduced it's yielding something like -- i mean, 4 cents a year on an $11 stock. >> yeah.

basically trivial. >> a conference call is just beginning. we'll bring you the headlines as they happen. working up new talks on chinese goods. eamon javers is standing by in d.c. with the latest we'll have him in a second but let's begin with earnings. one of the benefits of sorkin being out is santoli is in how's that >> i try to make up. >> and the ground swell, of course, here you go. >> let me read coca-cola beating on the top and bottom lines 3 cents above estimates. organic growth up by 6%. that helped revenue beat expectations as well pfizer reporting a mixed quarter. dow component reported 87 cents

per share. however, company did miss sales expectations and stock indicated lowish there underarmour reporting in the latest report. earned 25 cents a share versus expectations of 12 cents revenue beat estimates as well on the strength of stronger overseas sales that stock is poised to pop. mastercard earnings just hitting the tape check it out quarterly profit at $1.78 a share. that's 10 cents better than the street was expecting now that stock is up by more than $4. that's a gain of more than 2%. ge will be slashing by 92% and just far little historical context on this, remember during the great recession, the financial crisis, they slashed but they only went to 10 cents a share. so 10 cents a share at that

point, the dividend was sacred and that's why they kept it at 10 cents >> it was a big cut to ten >> let me look that back up. with 31 cents down to 10 it happened in february of 2009. 12 cents right now is where it had stood until this morning, and a year ago it was double that at 24 cents we'll continue to watch this today. right now general electric shares up by 2 cents >> that's half a year's dividend right there. >> six months. from wall street to washington, trade continues to dominate the u.s. could announce tariffs on all remaining chinese imports as early as december eamon javers has put together a little dialogue here i wish i could just talk to you, eamon. because i don't know which way to look at this. the half empty, half full way. the half full way is that

remember canada was oh, no, no, no we hate them we hate their representative then sunday night there they are in the new nafta 2.0 china, i'm not sure. we've got people saying this is -- you know, we used to think they're going to work something out. they're going to do something. we're going to figure something. now there's a true consensus that maybe this takes years and years and years and is a new cold war >> the expectation in washington has been that the chinese wouldn't do anything until the midterm elections because they want to see how the president fairs, how his party fairs up on capitol hill whether he's politically weakened then they can make a deal based on those results so the possibility is that november, late november is the time for this to come to a head. particularly when you've got the president and xi jingping meeting in argentina at the g20 end of november, beginning of december time frame. the president with all this focus on tariffs and trade, the

president gave a new interview to fox news last night with laura ingraham in which he said he does want a deal with the chinese, but he is prepared and reiterated this threat to impose the tariffs on all of the rest of chinese imports he has not already put a tariff on. here's what he said. >> china has been really hurting our country economically you see we're going to win that one. it's going to happen >> how confident are you >> i'd like to make a deal right now. i say they're not ready. >> $250 billion additional tariffs if that doesn't take place? >> $250 billion and $276 billion waiting to go if we can't make a deal >> the president has been making that threat since at least july when you talked to him he made the same threat to put those tariffs on the rest of imports if he doesn't get a deal so there was this headline on bloomberg yesterday that got a lot of attention on wall street. and spooked the markets a little

bit. when i talked to white house officials, they say there's nothing new here in the president's thinking there's no change. that's a live threat it has been a live threat since the summer continues to be if the president doesn't get what he wants from the chinese. what's unclear here is what the chinese could offer the president to get him to back off of these tariffs this seems to be well baked into the expectation that tariffs are coming unless the chinese can do something dra mat nick a negotiation. it's not clear what that would be the white house and the president have left that a little bit vague >> we'll be through the election and you said the tariffs don't go on until december >> they don't even get announced until december just a waiting period. >> so you get through the election and you get through that meeting down in south america to see whether it happens. >> right so yesterday was not the day to panic about tariffs. and today is probably not

either but, you know, keep an eye on this story, right? because the president's determine fire department he doesn't get something he feels is a significant concession that's going to change the relationship president's determined to do this >> eamon, stay with us we're going to bring in our guest host this morning, too, steve grasso he's the director of institutional sales and also a cnbc "fast money" trader what do you think about that yesterday not the day to panic today not the day to panic but we are gradually seeing this go from a negotiation to one that puts this in a cold war >> if we all think collectively that trump barks a lot worse than he bites, what do you think china thinks >> i agree >> so they're doing the same thing. >> so i think they're not necessarily going to respond to pressure because to them it's so important to save face i don't see how both sides -- >> how do they gauge saving face they're very prideful. and as most nations are. and they want an economy that is

flourishing. and they want a stock market that is moving higher, not lower. >> don't want to cut off your nose to spite -- staying with the face analogy that is a good expression. >> we seem willing to do that right now. because we think we have a shorter nose, i don't know >> it's a bipartisan issue we've been talking about this for years now both democrats and republicans and this is the first president who's ever tried to do something like this. and there's never going to be a good time to do something like this >> you know, the markets are speaking too a little bit maybe it has nothing to do with it but people pay attention to it i guarantee larry and other people in the white house know what's going on. >> i think -- >> there would be a breaking point there. wouldn't there >> when you asked the president about this in july, you asked him what if the dow goes down, what if the markets respond negatively he said if it does, it does. that's his attitude towards the stock market right now >> he said he's playing with house money. >> he feels the market's been

hitting all time highs and there's room to negotiate now because the united states is in a strong position because the market has been so high. he doesn't necessarily care about short-term impact. by short-term i mean a couple of quarters maybe he thinks ultimately he could get a deal here better for the united states for decades to come so he's willing to take that if you believe that story, it's bullish for the u.s. economy if you don't think it's o going to come to a deal, then buckle up >> let's say the -- just since we have an election in exactly a week from today so if we go with the probabilities where they are and i have no idea whether nate silver is going to do any better this time than last time >> i've given up forecasting since 2016. >> just for argument's sake, let's say the -- i think the average now is that the house gains 23 plus 5. something like that. let's say they gain 30 seats

nancy pelosi's speaker again what actually happens to the economy. what does that mean? there'd be investigations, tax returns would be subpoenaed or something? i don't know what other -- they go after kavanaugh. what kind of things happen >> i think you're looking at a lot of what they're calling aggressive oversight on capitol hill similar to what they did to president obama late in his terms. i don't think it moves the markets at all able to uncover the smoking gun on the tax returns or other things that somehow threaten the presidency herself i think the market and everybody's going to be sta ktu q quo. there's nothing that pelosi and house democrats and senate democrats could pass that the president's going to sign to impact the economy >> just get an executive order on deregulation, maybe but no more legislation.

>> no more legislation no more tax cuts this idea of tax cut 2.0 would be a post-election fantasy as well and we'll get deregulation that's what you can expect from next year anyway republicans or democrats there's not a whole lot of legislation sitting on the shelf ready to g here. >> you want to hear my fantasy >> no, i really don't. >> you should be able to predict. >> they're playing the music >> chipotle gets into the nachos business that's my fantasy. we have the ceo -- >> not what i expected >> you don't know me that well anyway, the new ceo of chipotle is in house. we'll talk to him about the turnaround plan about the chain where they're opening right near my house i want them to have something that i want. couple stock's up nearly 30% as he took over he's from taco bell. we're right back

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this is moving day with the best in-home wifi experience and millions of wifi hotspots to help you stay connected. and this is moving day with reliable service appointments in a two-hour window so you're up and running in no time. show me decorating shows. this is staying connected with xfinity to make moving... simple. easy. awesome. stay connected while you move with the best wifi experience and two-hour appointment windows. click, call or visit a store today.

welcome back to "squawk box," everybody. we've been watching the futures this morning and after the wild ride we saw in the markets yesterday with a swing of over 900 points for the session for the dow, looks like this morning we're up by 130 points yesterday the dow closed down by 1% s&p now up by 16 clicks and the nasdaq up by about 50. >> all right chipotle is serving up a new digital strategy brian niccols is here. your last quarter was good the stock responded positively to it. i wanted to talk to you mainly about menu stuff, which we can but that's not what your biggest interest or push is right now. it's digital it's less friction for the people who like chipotle whether they order it online or they drive by and hand it to them out the window. these are all your initiatives and they're bearing fruit. >> really what we're trying to

do is remove any friction and give people more access. and we're having a lot of success with that. you know, you probably saw on our most recent results, our digital business is up to 11%. up 48% what's really exciting is we're seeing people continue to adopt the utilization of the app and all the new access channels we're creating whether it's the digital pick up shelves or delivery we're getting tremendous response from our customers. >> so you have the buffet in the front but also in the back to fill all the delivery orders >> one of the things that is really powerful for our company, we've got a digital make line. and it is completely separate from the customer facing line. when you come into the restaurant and you go down that customer facing line, if you placed a digital order, it doesn't get in the way of that experience and then we're putting in place these pick up shelves. so when you order ahead, you can walk in, grab your food, go. completely frictionless experience. >> what does that mean in terms of what you need staffingwise? more people or less people to do

that i ask just because of the environment for hiring right now. >> so our digital line requires fewer people to run it versus the front line and the thing that's great is what we've seen is this digital business is highly incremental so the additional labor necessary to support the incremental sales, it works really well for us >> how is the environment for hiring right now what do you have to pay? >> chipotle has got one of the best, i think, employee value propositions out there we pay i think ahead of the norm in most markets. and then when i look at all the benefits and the opportunities that we provide, the growth opportunities are tremendous so people can come in as a crew member and they can find themselves being an aparen dison their way to running a restaurant in less than 18 months because of the combination of the units we're building as well as the growth in the business of the restaurant they're in. >> when chipotle brought you on from your last place, and i do think there's kind of two people -- two kinds of people in the world.

there's taco bell people and chipotle people. i think we could come together that was my hope when they brought you on board or did they bring you on board to make it frictionless and just do chipotle better or do you have any remnants of your taco bell days to bring to chipotle at this point? >> look. chipotle has got a very different approach to its menu and its operating model. so, you know, one of the things that's great about chipotle is it's real ingredients and real cooking. frankly i think it's changing food culture for the good. and the thing that's really unique about it is when you walk into that restaurant, you see all of the cooking happening in front of you then you can move down that line and get customization at an unbelievable speed. >> but you will do nachos for me >> we're actually testing nachos >> they're testing them. >> you've got a new place near my house and the taco bell left. >> eventually maybe those nachos will make it in there. right now they're in minneapolis.

>> are you sure you want me to come you're obsessed to millennials so i'm going to turn it over to kate here. >> well, i'm sure we can get you in >> i'm feeling millennial-like i hang out in my basement. pretend i'm in my parents' house. >> let's talk about accessibility. one of your big pushes as ceo. you have the mobile pick up lanes in stores, tell us how those are testing and what other initiatives are coming down the pike >> this new mobile pick up window we've got it in four restaurants right now. the way it works is you order ahead and pick your time then you come right by the restaurant we've got a window, your food comes out the window and off you go we're seeing tremendous response to that. and it's in, you know, a market in ohio, a market in texas and we're going to start adding more restaurants in 2019 so you're going to see us building more restaurants that have the capability for that pick up. the thing that's happening right now on a broad scale basis are

the second lines we've digitized them we're in about 750 restaurants we'll have all 2500 restaurants done by the end of 2019. then to accompany that, we're putting in these digital shelves so you can skip the whole process. >> so you've worked with bill ackman as an activist in chipotle you took a stake in starbucks, another player in the restaurant business any advice on working with mr. ackman >> my experience with bill has been a positive relationship he's hugely passionate about chipotle and we tend to talk about the food and what we like about the business hopefully the same can be said for all those other portfolio companies. >> it should be able to grow to the sky. it should. i could eat mexican food three times a day. i could really >> that'd be good. >> you got to work with me though >> we're coming your way the nachos will make its way

there. >> maybe the bulls of some so-- some sort. you've got good burrito bowls. >> when we open, we'll get you -- >> do you have a card? >> i can get you a card. maybe even a gift card >> what's your e-mail? >> joe brings up a great point though the old management team seemed a little elitist and snobbish, if you will and you needed sort of a breath of fresh air >> just a little bit >> is that where you're going? >> look, one of the things we're doing with the brabd nd is makig it more visible and getting people to understand what is the purpose of chipotle. talking about the good things we're doing and talk about the experiences you'll get instead of pointing out what others aren't doing i think that's resonated well. most recently we launched our for real campaign. got great billboards here in new york that's resonating with people

talking about what we're doing positively for food culture opposed to pointing out what others aren't doing. >> i'm telling you, you're putting it in a place i'm going to be able to go then i'm going to talk about it here you don't even have to pay for this >> if you ever get into breakfast, i'm sure. >> we have breakfast at one restaurant in washington dulles airport. but right now that's not on the -- >> all right go slow. >> there's hope, joe >> go slow all right. well, hopefully you'll be back and update us on "squawk box." was this a good experience for you? >> this was great. love to do it again. >> okay. >> after you've had some chipotle. >> and if you're watching, i'll talk about it. thanks, brian. thank you for bringing this, kate when we come back, we have this morning's stocks to watch stay tuned you arwahi "ua b" e tcngsqwkox right here on cnbc alpha seems more elusive today.

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our thanks to steve grasso you've got more to do today, don't you? >> got a little more to do little more digging. >> yeah, all right then we'll see you tonight >> thanks. coming up, ge posting a miss the conference call under way right now. the headlines and the market reaction are coming up next. i'm april kennedy and i'm an arborist

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earnings after today's closing bell company's expected to post a 33% jump in revenue. but analysts are looking for earnings to decline by 7.5% as the company spends more on data security and other measures. the company has also previously warned about some slowing growth mastercard just reported the shares are rising in premarket trading. the company beat estimates by 10 cents. like rival visa, mastercard's results were boosted by rising u.s. consumer spending and americans are holding onto their smartphones for longer than ever. that's according to new data from hyla mobile consumers are now waiting an average of 2.83 years to upgrade due in part to higher prices for phones apple iphone users hold onto their phones for slightly longer than their android counterparts at this point. and among the other stocks to watch today, general electric

the company announcing it's cutting its dividend dividend. earnings and revenue falling short of estimates they are now holding a conference call. morgan brennan joining us with the headlines. morning, morgan. >> hey, mike that's right two big things out of this conference call so far the first public comments from new ceo and chairman larry culp out of the gate on this call he addressed the plans to change its portfolio to exit health care, exit baker hughes oil and gas over the next couple of years. discussed that strategy right off the gate take a listen. >> i know there's been renewed speculation on our future strategic direction. the strategy we announce on june 26th to create a more focused portfolio, it sets up our businesses to win. and strengthening our balance sheet is today the right plan going forward. >> now, he announced two plans today to basically accelerate

the process of generating more cash and turning around ge the first, that dividend cut down to 1 cent to drum up more cash starting in 2019. that would directly report to him. while shares had been trading higher premarket shares are actually now trading lower premarket. and this is because jamie miller, ge's cfo on the call disclosed they have expanded to include that good will charge in power that was recorded today. that $22 billion non-cash charge and also saying that the doj is investigating that charge and the other areas that had been previously part of the s.e.c.'s investigation. now, the call's still going on we don't have any more guidance in terms of full-year guidance no comments on trade yet other things people are watching around this company.

but we'll continue to monitor and bring those to you as we get them >> let's switch gears here in volatility and broader markets joining us from the charles schwab conference is joe duran i wish we had one more duran on today. you know what i mean, joe? >> duran duran that's so lame >> totally lame. >> i prefer that reference to the no mas. >> that's right. you could have gotten neither one. you have been, joe, a little bit skeptical since august have you not i know you were on cnbc at that point. so is this sort of -- is this what you were foreshadowing on that appearance? >> at that time i said we're going to have a 10% to 15% decline before year end. i think at the time there's a lot of skepticism about that

but there are a couple things happening that we have to adjust to the first is there's a fundamental change in the market and that it was a little bit too much optimism priced in. the second thing that we see happening is that there's a technical shift that's occurring. things that had been working really well, large cap growth, technology that that was pivoting to more value based investing. and so the thing we're looking at is it's not that the bull market's over. it's that we are now in a technical adjustment phase and you need to invest in different things now than we were for the last three or four years >> you know, joe, for people that -- i took calculus, luckily. so i understand the difference between velocity and derivative. that can be reflected in valuations and it's exactly what we're

seeing, right? >> it is and you also have the adjustment of higher sb eer int rates which makes equity investment a little less attractive then you have if the administration could take off the table, which is these tariffs, if they can address that, i think you'll see the market really find its footing and do well. but more than anything , what im looking for is a panic selling peak to occur. and i'm not sure that we're there yet. it's been very orderly what you want to see is the vix get to 30, 35. everybody sell everything, then i think you'll find we're at a stable place and we can start to recover. >> joe, i don't know whether the president was watching you and said, you know, i'm going to respond to this joe duran character. but he did tweet two minutes ago. he said the stock market is up massively since the election but is now taking a little pause people want to see what happens

with the midterms. if you want your stocks to go down, i strongly suggest voting democrat they like the venezuela financial model. high taxes and open borders. so what do you think if you were to press that little thing about replying, what would you reply back to president trump on that tweet? >> i would reply that it's quite possible that we have a buyers strike until the election. and then i would suggest it doesn't matter who wins. that, in fact, as soon as you remove uncertainty, everyone does fine. the democrats do fine. we're not going to be venezuela. i don't think it really matters. we'll just have more of a stalemate. and reality is nothing will get done we're all slightly better off when the government doesn't get too involved in our lives. >> that's a -- i bet a lot of people would push back on you for that comment

yeah, you're not going to -- >> i think he's right about the fact that the main thing investors want is for it to be passed that's what happened in previous midterm years. >> i don't know if losing both houses would be a big boom for the markets, though, joe do you if they lost the senate, that wouldn't be so great >> yeah, i don't think that's likely to occur. and i don't think that's priced in candidly, honestly what you'll find is people do not really move the market based on who's in power we know and have seen we're going to spend more money. they might deregulate which is helpful. they'll do something on the other side that's not so helpful. create a tariff war. so the reality is that the government more than anything gets in the way of business succeeding and i'm not sure it's going to make a huge difference what we care about more is, you know, we're taking care at united capital of our clients'

entire wealth. and so it's really thinking about what can you do as a consumer and investor to manage what you can control how much you have in your portfolio, where it's invested, do you have not cash put aside to ride out a bear market? that's what people should worry about. >> do you think this is a typical bear market potential? or the economy is truly turning down, facing recession, and you're talking about a much more severe crush what is more likely in your view >> i see nothing on the road map that suggests we have a real bear market. and by the way, because for the last 20 years we've had two 50% declines on the s&p, that is highly unorthodox and unusual. and unlikely to occur. you know, that happened in the '70s it happened in the last 20 years. and after that, you typically see 20 to 30-year bull markets with 15% to 20% declines along the way. i think you might see that, but

not that bad. >> so you're not running with the bulls now. but you have run with the bulls in pamplona ten times. you've never gotten gored. >> 11, yeah. 11 and once close. i fell on the floor, but they ran around me. >> and in general electric you did get gored. >> i didn't take stock >> you didn't. that was smart december of '01 you sold to general electric you did not take stock >> that is correct >> never mind then so you're okay joe duran, thank you >> i'm all right thank you. >> joe duran, duran of united capital. lame was that really lame >> yes this is the song that was popular. >> should have done no mas >> you don't always have to make a play on somebody's name. >> what? what then what do we do at the end? it would be like every other

show okay, fine we could get andrew back. still have some stocks to watch this morning speaking of names you like, tapestry earnings. kate spade handbags and a 4% increase in comparable sales at coach stores carl icahn increasing his stake in dell technologies to 9.3% from 8.3% icahn is opposing the deal for the computer maker to buy out dvmt shares which tracks dell's investment in vm ware. and mondelez topping estimates bottom line helped by higher pric prices >> i like mike with a little bite we approve >> all right next time i'm not going to do anything we'll be fine. >> liar. >> there won't be any music. >> no, i can't help myself i know >> liar. when we come back, morgan stanley thinks this selloff is morphing into a bear market. mike wilson will make his case

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welcome back to "squawk box. the futures indicated up 100 on the dow jones this morning nasdaq indicated up 31 s&p indicated up about 13 points so far tech stocks leading the markets loader yesterday and among the biggest losers, you've got take two, nvidia, and

amazon faang storms this morning, some are leading the way. amazon is down 1.3%. our next guest believes this could be the beginning of a cyclical bear market joining us is mike wilson chief equity strategist at morgan stanley management we've had investors conditioned to buy every dip you're saying sell every rally what tells you that? >> first of all, let's go back we don't think we're entering a bear market. we think we're in one. we look at global asset markets. you can go back to basically january is the peak of euphoria and really peaking last december the ultimate speck assets down 80%. and that rolled into emerging markets, rolled into cyclical stocks i mean, banks have traded terribly all year. people didn't feel this in the u.s. until this downgraded growth stocks.

anticipating that finally the rolling bear would get to these areas of safety. that's what is happening now we're getting to the last part of the market that people have been hiding out in that's why tech is taking the brunt of the pain now. that's the bad news. the good news is we're probably 80% of the way done with this. so just as people were kind of in the moment or recognition, most of the pain is done a bear market doesn't have to go down 20% it's a market that's hard to make money in which is basically what we go very few people are making money this year anywhere in the world. >> you say we may be 80% of the way through, but this is still not a buying signal at this point. you think the outlooks for next year are still far too high in terms of earnings? >> yeah. two things the reason we were probably less constructed than most coming in, the first one is liquidity is drying up more than people think. we're not as focused on the fed rate hikes we called that a tip l point in

october when both became constraints. we're worried about next year's earnings we think expectations are too high so we think there's a pretty good chance we could have a modest earnings recession next year even if we don't have an economic one that's what the market's been telling us all year. >> so then, mike, where do we reach some kind of point of recognition which is lot of this stuff is reflected in the markets. you said 80% whether that's in how much of the decline is already happened or in time or whatever it might be what gets you to that point where the market says, okay. we've pretty much priced it in is it going to have to also require the fed to step back a little bit or some other catalyst like that >> we've discussed this as well. we think there's three things that are more constructive one would be if the fed were to back off and actually acknowledge that financial conditions are too tight and they need to stop, that would be a strong positive catalyst we don't anticipate that any time soon because the data is too strong other thing would be valuation

we think 2450 on the s&p that would be a place where you kind of really have to think of stepping in. even if you had an earnings recession next year, you'd be trading at a lower multiple. either valuation or you get the fed to back off. those would be two positive catalysts from our perspective >> hey, mike just in terms of looking at stocks, if you want to talk about this rolling bear market, you've got the value stocks that started picking up a little bit. you've got something like 50% of the s&p 500 that's down 20% or more and that's the technical term, i guess "the wall street journal" set to a bear market what do you start -- actually, i take it back 78% of those are in correction territory. more than half down 20%. where do you look in value are there places you think are actually good value positions? or do you worry about value traps in some of those areas a reason for why you've seen so much carnage >> that's right. we're looking at areas that have already taken the pain

we made a shift in july as well a little early we thought growth would start to out-perform. we suggested that value would basically go down less in this last part and then out-perform we are looking at some of the value areas. we rotated more defensively in june that's worked pretty well. they're getting expensive now. we would look at some of the financials again things like home builders, maybe some of the semiconductors we've got to understand in this last sort of move lower, those things are going to get hit too. but those are the areas we'd be looking to first really the bear market rolling in reverse if the fed were to back off, i think the market would start to buy the junkier stuff first, the more cyclical areas as opposed to the growth stocks so i do not anticipate that the growth stocks are going to lead even when the thing stops. you'll get bounces along the way, but the rotation towards value could be more durable than people are thinking about. >> what do you do right now if this is reliant on the fed easing off do you buy some of those nams

like the home builders or wait and keep cash until you see the whites of their eyes >> our recommendation to our clients have been if you've got cash coming in, be patient here. we don't think we're there yet to go all in if you're averaging in, this is a time to be patient let the market come to patienpa. >> we got great market that everybody wants to buy the dip buying it the last six month us do us -- months does not work >> that's the area where you can get aggressive this is a market move and you got to be careful. >> all right, mike, just tactically speaking if we do gate rally there is oflt talks of the last two days of the month after the big down move, those things are going to delay the reckoning

process that you see happening >> i think that's right. like yesterday's action was terrible you come in t markhe market ral were up. it rallies in the last 30 minutes and giving people hope as they go home. that's a different price action that we experienced that lasted two or three years until you see that change in behavior, you start to see the market rally in the middle part of the day, you got to be weary of when these rallies should be told sold. >> mike, thank you, great to see you today. >> mike will cson with morgan stanley. >> let's get down to jim cramer. this first d ge looks like almot a 10-yr loan and the sec expanding the scope of the

investigation. >> people are doing a good job he inherit tough days and got to do with hours. he had people who are not contributing to the company. i am not anxious to buy. i thought that wilson was fabulous i agree with him you got to buy - we got to buy a decline and not in advance i am not crazy about you i am crazy about colts i think it is terrific >> yesterday was pretty bad. it matters again today that it is opening higher. you don't like that again? you think we'll trade lower today at some point? >> i have seen big stocks like apple and look we are not going to get any sort of bottom until we come in and we open really bad down and we rally. i agree with previous element.

that action yesterday was so horrible i was thinking of close down 500, please. get some people that would be really scared. we go down this morning and get some good earnings it is just horrendous activity >> it is just, there is a couple of pockets of sprints and take two of the best weekend ever and you go crazy of activists and blizzar blizzards and some total of things are miserable right now >> jimbo, we'll tuned in at 9:00 >> coming up, at the top of the hour, brent saunders stay tuned see, now we got -- if i did not do it, we would not do it. >> aaron would still be in business if you would have done

a few of these things. >> minus day stay tuned, you are watching "squawk box" on cnbc really want to be there,

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huge stock to watch this morning, documents released ahead of the fda advisory committee pointing out problems with data for the depression drugs. akima hitting estimates at the top and bottom line, alkermes. that was 11 cents higher than street expectations. the company announced the quart. >> under armour shares are higher >> street's estimate was 12 cents. >> how the athletic company is resulting. that stock is up by 13%. >> a gain of more than $2.35

cents in 2055. and tapestry, revenue fore the company known as coach also beat estimates. results were held by a 4% increase tapestry shares are at 4.1 this morning. m >> let's get you set up of what's happening for the day it is 54 right now where he seeing the dow pulling back some of its best levels s&p a little below over seven and we had 90 plus points swing we took about half certainly not anything that the bull is taking satisfaction yesterday. we'll see what happens this morning. nobody knows europe and check oil and 10-yr to get you caught up there as

our small office is in europe. oil one of the few silver lining of all the market weakness we had in stocks. remember we were worried about 80 >> yeah. >> seems like a couple of weeks ago. >> and the 10-yr yield now we are down to 3.1 >> what are you watching tonight? >> start with the yield. there has not been a strong one. that's the indication of the new world. i think we are looking at the market during the day. it is been negative from open to close. also, 27 straight days without two straight up days of the s&p 500. very rare. at some point you will get some relief and it is not clear if it is the kind that you want. >> if you are looking at

streaks, how long do we go of the 1% decline this is just make good of what we have been dealing with. >> we got control of the mark. >> mike, i want to thank you so much with us you are here back here tomorrow. >> yes i am here tomorrow >> right now it is time for "squawk on the street. good tuesday morning, i am carl quintanilla and jim cramer who is back from london and david faber is here. the question is what do they do after yesterday's ugly downward reversal and a miserable quarter for ge europe is mixed 10-yr near 312 we got conference board in about an hour. wall street is looking to prepare its losses stocks are higher than