> and we'll get some earnings. we'll get dow dupont also spotify will come this hour it's thursday, november 1st, 2018, "squawk box" begins now! ♪ live from new york where business never sleeping, this is "squawk box. >> good morning, everybody welcome to "squawk box" on cnbc. we are live from the nasdaq market site in times square. let you in on this, some shows walk a lot we don't >> if you're not going to -- how can you report business news if you're not walking >> this is true. it adds to what you're seeing. the context. i don't know >> all right >> we have a lot -- we have eight floors we could work with here >> we'll experiment with stuff you can come along >> no, we're not >> i'm becky quick along with

joe kernen andrew will join us in the 8:00 hour to talk about his guest rock lineup, including larry fink, mary barra, investor peter thiel. joining us for the hour is ian shepherdson. great to have you here >> thanks for having me. >> ready to walk >> ready to go >> he volunteered. >> we will start with the october selloff. the dow gaining 241 points yesterday but finishing the month down by 5.1% the s&p was down by 6.9% the nasdaq had the roughest month. it was down by 9.2% at the end of the month u.s. equity futures at this hour for the first trading day of november, dow futures indicated up by 110 points s&p futures up by 11 nasdaq up by 27. we do we head from here? october is gone, does that mean the market volatility is let's look at overnight in asia.

you will see at the close the nikkei was down by 1%. hang seng closed up by 1.75% then the shanghai composite was up by a tenth of a percent in europe where some of the equities markets are open, they're all open and ready for trading. dax up by 0.9% ftse is flat the cac up by 0.4% markets in italy and spain higher look at treasury yields. you will see at least now the ten-year is yielding 3.166%. let's talk about yesterday in a moment, earnings from dow-dupont have arrived 74 cents a share 3 cents above estimates. did you watch yesterday? up over 400 into about the 3:00 hour actually right when they started

walking. the day before was a big day solid session. at one point yesterday they were up 800 points in two days. i don't know how to read this. maybe some profit taking in the last hour or so. it struggled to hold on to the big gains. again, even at 500 points, we're still talking 2% or less than 2% so the swings seemed significant on a point basis, but have we hit bottom now a couple of back-to-back days to end out the month which pared the losses a bit for a while on monday or tuesday the dow was down 10% what are you doing? what's going on? are you -- is this important >> mm-hmm. >> okay. big story from the uk, theresa may reportedly striking a tentative brexit deal with the eu that will give uk financial services companies continued ak tess to european markets of

brexit the pound at 1.29. goiogle, there's a walkout. employees around the world are set to walk out today in protest on how the company deals with sexual harassment and gender discrimination they have a list of demands including an end to forced arbitration and a commitment to ending pay and opportunity disparity. the walkout comes after a "new york times" investigation that detailed years of sexual harassment investigations, payouts for accused executives and a lack of general transparency the google ceo says he supports the staff's right to walk out. google has the high-minded rep never do evil -- >> do no -- >> do no evil. i had no idea this happened. it took a "new york times" piece

to highlight it? >> yep >> all right >> there you go. it's another big day for earnings you can look for results from spotify and teva pharmaceuticals before the bell. after the close, sptarbucks, cv and shake shack. we want to wish tim cook a happy 58th birthday. >> day after halloween >> yeah. on the economic front we'll get weekly jobless claims and the latest read on product tvity at 8:30 a.m. eastern time. u.s. automakers will roll out monthly sales. overseas the bank of england will announce its latest interest rate decision around 8:00 a.m. eastern time this morning. no change in rates is expected but investors will pay attention to the boe quarterly inflation report. apple is considering a tie-up with iheart media the talks are at a preliminary

stage and no deal has within worked out iheart media filed for bankruptcy earlier this year stocks to watch, shares of fitbit are surging the company posting a surprise third quarter profit driven by its smart watch business fitbit sold 3.5 million devices in the quarter, the average selling price rose 3%. allstate reporting higher third quarter profit earnings were well short of forecasts even as revenue topped expectations aig posting third quarter losses of more than $1 billion as it was weighed down by claims from asian typhoons, mud slides in california and hurricane florence the loss was less than expected. the company showed progress in its goal to turn profit in its property an casualty business. dominic chu is here. you were watching yesterday. i was hoping for an

acceleration october was a brutal month i was hoping to go up 500, 600 by the end of the day. >> all of us were. petered out into the close don't know if that meant anything >> first, i should say this. we've been talking about this idea we've addressed mean reversion before the idea that you could have a market move as sharply as it did to the down side way below the averages, and then maybe get a bounce so, maybe not a surprise for some folks out there that he can did have two pretty decent up days but again, off of a very long stretch of down moves and a pretty marked move to the down side in terms of percentages that's something to keep in mind let's look at where the action was, maybe why some folks are taking a bit of a more positive tilt towards the action. the moves in points were not as

good as they were at the peaks the leadership that we saw yesterday was. the reason why is we saw technology, communications services and consumer discretionary. that's pretty much f.a.n.g facebook, apple, netflix, those stocks were the ones that showed some move higher towards the latter part of the week. that may bode well because that was leadership in the past the other ones we'll watch here in terms of sectors are the ones that underperformed. that could be a reason why you're more optimistic it was the defensive names, the less economically sensitive ones like real estate and spdr, the utilities, those tailed off a bit towards the end of the week. that's why some investors are feeling a little less defensive and a bit more cyclical. more bullish on what's happening now. as we talk about the market action, you referenced the fact it was a bad october

one to forget. the reason why is we did have the worst month for the dow since january of 2016. it was the worst month overall for the s&p 500 since september of 2011. and the worst month for the nasdaq since november of 2008. for the s&p 500 and specifically one thing to keep in mind, we had a volatile month in terms of the overall movements. we had 10 trading days out of 23 that had 1% plus moves that's up or down. that's something also to keep in mind if you're looking for what the future might hold, there's a reason why some analysts and strategists are feeling more bullish about the overall picture for the rest of the year, because in midterm election years, we talked about this before, we typically see a nice move higher for the nasdaq. up 11% of the time the s&p 8.5% 8.5% gains there they're generally positive 78%, 80% of the time they're positive if we were to get to those

numbers it would take heavy lifting from november and december that's why some folks may be thinking we're good for that really good santa claus rally by the time this is all done. >> i'm back to garden variety correction, which i don't like to say >> is there a garden variety anything >> it's just something we've seen nothing worse than that. the dow never had to close down 10%. supposedly we need a 10% correction once in a while >> we do but we talk about this idea that it could have been really bad if we didn't get a bounce yesterday only because ryan dietrich at lpl financial told us if we didn't get one back-to-back gain through the month of october it would have been the first october in market history for the s&p 500 that the market did not have a back-to-back gain. >> we avoided another distinction, seeing 17 down days of trading for the s&p in the

month of october that would have been the first time we had seen that in almost 50 years. you have to go back to 1970 to see that >> that's why a lot of folks are saying with this move down, it may be a flush >> we have the jobs number tomorrow a famous economist here will explain some stuff to us >> i'll be listening intently. i want to hear their take on it. >> this is a weird inflation story. it's a big headline, lead story. just everywhere. inflation is everywhere. hitting home in fact, it's almost gotten up to 2%. >> almost. but i would say this -- >> when i think, you know -- we have seen inflation -- i understand prices are starting to go up there's tariffs. there's commodity inflation. it will be passed along. >> though yesterday we were having the conversation about

whether inflation would peter out. >> because of a stronger dollar. i don't know >> on the cusp of a lot of weird things >> it's just headlines you never know >> the s&p 500 according to s&p dow jones industries lost around 1.65 trillion. 1.65 trillion. >> i get it. trump talks about it's up 5 trillion, 6 trillion >> since the election it's up markedly we know this the markets are still markedly higher from the election when you put dollar amounts to a move in a month when the s&p 500 shaves anything with a "t" behind t trillishgs "t" behind that gets attention. >> it does i saw you so late, dom -- >> i'm tired, joe. i will say that.

i'm here for you >> you would never know it you bring it, dom. >> i appreciate it i do it for you. >> when was your last hit? >> my last hit was probably in the 4:00 hour yesterday. >> did they make you walk? >> i did not walk. i stayed in front of a touchscreen. that was okay. >> that's another trick. >> mike santoli, i think -- he might have been on "fast money." he's like the -- >> last week there was a day when they did the market special, he was here at 8:00 at night still and back the next morning for us he said he slept in the makeup room >> dedication. good for those other people. thanks, dom. i appreciate it. for more on the markets, let's bring in ryan payne of payne capital management and our guest host is ian hepherdson guys, welcome to both of you ryan, let's talk about november.

new slate, first trading day of the month. what do you think happens from here do we put october behind us? are these wobbles around to stay for good reason? >> i think correction typically has a bottoming process. we've seen a lot of days up. a lot of days down so antidotally my retail clients last week did panic a bit. >> is that a good thing or a bad thing? >> that's a good sign. i would think that could mark the bottom because when people get panicky, that's usually a bullish sign >> you think that the reason you're optimistic about things is because of earnings and because of the economy, correct? >> i like to keep it simple. i'm from philadelphia, we keep it simple there. earnings, if you look at it, we had a great quarter for earnings almost 8 out of 10 companies beat expectations. looking at forward earnings for next year, they look great it's like the economy and profits are on a silver platter now and you have a market

correction if i'm a buyer it's like you have gotten a gift from the gods >> the big problem is the market is forward trading and we're worried about what's to come in the next year. what do you think are the worrying signs you see or signs of reassurance >> growth is strong, but the 3.5 we just had probably can't be sustained. earnings this year for the s&p, we won't get anything like that next 10, 12, 14 >> 10, 12, 14 on a normal year sounds good. >> over two years the s&p has risen by 40% it's hard to be a bear on a market when you look at a 40% uplift in earnings >> or if you think the markets are overpriced at a pe of 15. >> people think that's now priced in. what about after that? after that people are thinking second half of '19, '20, the fed is still raising rates they seem determined to keep going.

maybe the edge will come off of this growth. not as much fiscal stimulus. maybe it's time to take something off the table. >> are you preparing for something like the late 1920s? >> no. definitely not my idea of the end of the cycle is a mild bump rather than a nasty recession. i keep hearing we can't take another recession like 2008. the next up with won't be like 2008 there's not imbalances like that it will be manageable. the market has to look over the hill and see it coming >> can you tell me why adp has a different measurement that overstated yesterday's number because of the hurricanes? >> yes >> adp measures peoples names on payrolls, the official data which we get tomorrow only measures people who get paid if you're a part-timer and the storm hit on your days at work, you drop off the official numbers. >> do people know that

the market went up yesterday on that strong adp number even if it's not real. >> people say you wanted a weaker jobs number, then the fed stays at bay >> good news is good news yesterday. >> good news is good news. and do antidotally talking to business owners, they're trying to find people to hire that's the indication of a strong economy i have all these jobs that need to get done and i can't find people, the jobs number should be good. >> the two things that worry me are tariffs and labor costs. not hitting earnings yet but people are thinking about what it will do earnings for next year >> you're talking 2020 we're going so far ahead, we can't enjoy the fact we have a great multiple on the market now. things are so good we have to get a magnifying glass out and find something two years from now. >> the good news is priced in.

that's the issue it's 16 times earnings, that's average, right >> not expensive >> not expensive i think from that standpoint, i think if anything multiples usually get way overvalued i think we're so far from that we're not seeing exuberance. that's more indicative of the top, right >> we have not seen much exuberance the past couple of weeks. not a lot of exuberance, no >> does the market want weaker data now what do traders wanted to hear if the concern is what the fed continues to do if the economy weakens, there's been a thought out there that a few disappointing numbers wouldn't be a bad thing from the markets perspective. give them a reason to pause. >> i think we've given them a reason not to pause when the markets paused this past month i'm surprised we have the numbers we have. >> tell me that again? i'm confused you're surprised what happened >> that the markets sold off as

much as it did caterpillar is a great example >> those numbers were surprising >> awesome numbers, a $40 million charge >> they said they could handle higher numbers coming their way or higher costs coming their way. they would be fine with that i was surprised by that reaction >> you would think 46% better in profits would be a phenomenal number the markets completely ignored that and found a reason to sell off. the other thing is there's so much money on the sidelines now. we have 10% less stock ownership than a decade ago. i talk about this all the time we have a lot of millennial clients, they're coming in in the droves with hundreds of thousands of dollars to invest this is a whole new generation coming to the market that has not been there before. that's an exciting thing >> ryan, thank you for coming in >> thank you >> ian will be with us for the

next hour. >> we need a lot more interpretation of what's going on what's the number going to be tomorrow >> payroll >> yeah. >> 200,000, plus or minus 150,000. >> two hurricanes in the last two months, it's chaos it's a forecaster's worst nightmare. >> we should keep that in mind regardless of the number >> my response will be wait until next month hurricanes in the survey weeks in two months, it's never happened before. takeover deal announced, canadian oil and gas producer arcana is buying newfield exploration. v the deal when concluded will raise the dividend by 25% and

expand the share buyback program. it suspected to close in the first quarter of next year coming up, a lot to talk about. elon musk making news with another late-night tweet this time he says tesla owners will soon be able to remotely pilot their cars like one of those remote control cars. that sounds dangerous. i don't know as we head to break a look at the biggest premarket winners and losers in the dow.

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i am a techie dad.n. i believe the best technology should feel effortless. like magic. at comcast, it's my job to develop, apps and tools that simplify your experience. my name is mike, i'm in product development at comcast. we're working to make things simple, easy and awesome. ♪ welcome back, everybody. got a lot going on today elon musk making news on twitter again overnight. the tesla ceo says an upgrade to

the summon auto parking feature will be ready within six weeks that will allow vehicles to drive around a parking lot, find an empty spot and park all by itself the feature can also read parking signs supposedly that upgrade will be compatible in all tesla cars made in the next two years can't wait to see this in parking lots >> isis is so excited. >> musk tweeted -- >> my gosh >> that had not occurred to me car will drive to your location and follow you like a pet if you hold down a button -- if you hold down summon button on tesla app. then he tweeted also you can drive it from your phone remotely like a big remote car if in line of sight. >> we're already worried about drones, how that could -- >> had not thought of that nkt th >> this doesn't sound like that. but if it's within sight

but it begs the question, all these things -- what's the -- i don't know can't you run someone over >> the idea that they can -- there was news this week that w waymo got approval to drive on california roads a lot of these autonomous features have been like break things, ask questions later. elon musk is asking for forgiveness after the fact regulators have not gotten their heads around this. have there been tests? i'm sure there's been tests at tesla on whether it can read the parking signs, has that been checked out by a government authority? we talk about the dangers of regulatory oversight and slowing things down, but this is a situation of public safety >> these are two ton pieces of

metal that will be flying around parking lots what happens the first time one hits somebody or something >> those are the questions having said that we also said the reason the united states has gotten ahead and is so superior when it comes to technology is because we have not slowed people down. >> yeah. when you are building an app compared to building a car driving around the parking lot >> everybody will talk about this i'm sure it will be litigated on media and social media >> i remember when i got my license. my mom said you're handling a weapon when you're driving a car. you need to be careful >> i know, but your mother -- becky's out on the road. that's what it sounds like >> drive carefully >> everyone be warned. >> you're 16 years old, don't take this lightly. >> believe me, i know. when we come back, big

changes for chinese consumers. the country facing a struggling economy, falling stocks and a trade war. a live report from beijing. we'll talk to matt shay, he just got back from hong kong where he was assessing the impact of tariffs on suppliers and businesses as we head to break, let's look at yesterday's s&p 500 winners and losers and losers ♪ when i was shopping fothe choice was easy. i switched to geico and saved hundreds. excuse me... geico has licensed agents who i can reach 24/7. great savings and round the clock service? now that's a win-win. winner. winner.

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welcome back you're watching "squawk box" live from the nasdaq market site in times square. good morning among the stories front and center, david einhorn' green light capital posting a small gain of 1% in october amid the big declines in the stock market that's according to what an investor told reuters late yesterday. shares of fitbit are surging. the company with a surprise third quarter profit thanks to its smart watch business which accounted for nearly half the revenue. google employees around the world are set to walk out today in protest with how the company deals with sexual harassment and gender discrimination. the employees have a list of demands including an end to forced arbitration and the end to pay disparity futures are up dow up by 120 points

the s&p up by 12 and the nasdaq up by 31 consumption in china is changing and quickly how quickly things can change, eunice >> absolutely. the chinese government has been hoping that during this trade fight the consumer could help hold up the economy. there are indications now that all of that bad news is weighing on peoples minds and scaring them into saving rather than spending son tsunami verse been holding back on big ticket items like cars. sales in september dropped 11.6% from a year ago. smartphone sales have been softening all year with third quarter china shipments down 10% from a year ago. we spoke to one worried

consumer a corporate lawyer who said he was cutting back on his monthly spending by 25%. and that doesn't bode well for foreign brands which tend to price higher in this market. this is what he said >> translator: as a veteran apple fan i would buy all the newly released products every year this year i only got myself an iphone xs max. in the past i would spend a lot on foreign brands, this year due to the weakening renminbi and the trade war, i switched to domestic brands. i used to go to starbucks all the time >> if this consumption downgrade holds, there could be two potential outcomes first, policymakers will hav a bigger headache trying to reach their own growth targets, and also this could be a problem for u.s. markets investors are already concerned about a china slowdown, and if there is a widespread pullback

on consumption, that would potentially hurt a lot of american companies that have operations here and rely on this market guys >> right trying to figure things out. i wonder what is -- we'll have a gentleman on from the retail federation he doesn't like these tariffs, it's hurting everyone. i want to ask -- shouldn't tell you what i'm going to ask him. i want to ask him if he could go to -- if he could go to president trump and lighthizer, navarro and say here is what i want you to do here's how i wanted you to bring this situation with china to a conclusion here's what i wanted you to do i wonder what it would be. i wonder at this point how you back down from either side how this finally gets resolved, or whether it just -- i don't know we're no closer to being able to see the end game now than we were two, three, four -- we're probably further away. do you have a suggestion

>> no. it's -- it's difficult to say. it's kind of like what we were talking about before, was it just yesterday, talking about -- no, two days ago it looks as though you have the two sides coming together. the expectation here has been that president xi and president trump will sit down at the g20 then right when that happens and people are talking about building communications, the exchanges, suddenly president trump says that if this doesn't work out i'll hit china with a bunch of tariffs on the rest of their goods. that just sets from a chinese perspective, it sets things back then they feel as though they're under pressure there's a gun to their head, they have to make a decision then the way they would want to behave is they don't want to be pushed into a corner they want to be seen as the ones opening up the economy on their own volition today again president xi was meeting with private companies

and he was talking about the importance of the role of private companies and the economy and how china is opening it up. next week, we expect a huge imporlt faii import fair. even though it's read as a wi president xi can say hey, we're responding to the trade war, the leadership here wants to be seen as doing things on their own time it's difficult to see how the two resolve it if you have president trump saying that we're going to make you do something, when the chinese say no, we don't want to be seen as being forced into doing something. we'll do something on our own. very difficult one i hope to hear what the -- >> he's coming up. >> what your guest has to say. >> he's coming up. >> i'll see if he has something better to say. he's been sitting there going damn, what will i say? let's see. for more on the impact of the

trade war, there he is, matt shea, president and ceo of the national retail fedfederation. it's not good for you, matt. you probably heard what i said you don't like it. you want it to end how would you end it now if you could call the president and say here's what i wanted you you to what would you tell him? >> thanks for the open book test i did hear the question in advance. we took about a dozen ceos to see secretary mnuchin at the department of treasury had a long conversation with him about the strength of the consumer economy, the benefits of tax and regulatory reform that was enacted last year how much that helped us grow the economy. thanked him for that effort and their leadership there we did also talk about trade and expressed concerns about the impact of tariffs. we're only three quarters of the way through of putting tariffs

on all the imports from china if we go the next 2$260 million and if we extend that to the full 25% limit that these goods might be tariffed, then we think there will be potential negative consequences for consumers our conversation was to encourage a dialogue certainly understanding that, you know, the chinese president and the president of the united states have political considerations it's a bit like tectonic plates shifting you have earthquakes when those two things come together, tsunamis you have to handle it delicately we need to find an off-ramp. we would suggest a couple of things certainly the dialogue between the two presidents is very kr constructive building a coalition, including our trading partners in the eu, the new canada, u.s., mexico

agreement partners the message is it's not good for either economy, for the consumers in either place. when there's wars, there's collateral damage. the economy is strong now, we shouldn't put it in jeopardy >> jamie dimon said yesterday we shouldn't call it a trade war, it's a trade skirmish. it hasn't ridden sen to the warl yet. do you agree >> i know different people use different degrees of conflict description to talk about this certainly we hit the trip wires, we know shots are being fired, we know harm is being done we launched a coalition a few weeks ago. we have several hundred organizations participating. we have a campaign in the midwest and across the country called tariffs hurt the heartland. harm is being done now this is no a theoretical, hypothetical there is harm being done ian has talked about using one small example, what happened --

>> ian is here yeah >> and washing machines got tariffed at a low level compared to what could happen if we go further. we've seen the negative consequences there that's a microcosm of what could happen >> the washing machine one is interesting. i kept hearing that suppliers will absorb it, margins will get squeezed, consumers won't feel it but looking at it, washing machines went from minus 5% to plus 15% overnight for washing machines maybe something like t-shirts, something quick and easy to make but i'm worried about the whole idea of an easy transformation in walking away there chinese suppliers? is that what retail members are saying >> the trip last week was to brussels for a couple of days on privacy and data security with the european commission. the commissioners there, then on

to hong kong on the other big global issue of the moment which is the tariff conversation and i think you just summ emed t up nicely. i had some meetings with retail manufacturers, partners. one thing they said over and over again that seems to be lost by the people in this town and walk around in the building behind me and other buildings in washington, there's not this slig light switch you can flip on and off and say if supply doesn't exist here, we'll get it somewhere else people don't recognize there is no new china >> i read all that i'm just trying to figure out what you want us to do just -- just say it we should throw in the towel and say, gosh, china, we need you, do whatever you want. we need to back off, pull off the tariffs go back to business as usual and say you win, china? is that what you're suggesting >> no. to go back to the open book

test that's not what i said >> get together with our allies, blah, blah, blah >> blah, blah, blah, but blah, blah, blah is bigger than a war. >> i miss nafta what did you call it? >> usmica. >> usmica? i know you're trying to help out your clients i understand how these things work what should we do? what should we do to get this done to get china to come to the table and change some things that they've been -- the egregious actions of the past 20 years. >> which no one argues with. i think we'll inflict pain on china and unfortunately inflict pain on ourselves. >> so stop yuunilaterally >> no. we can't negotiate unless we have a partner that wants to

have a conversation with us. i don't think the tariffs are the right tactic. >> ian what do you suggest >> i agree china's behavior -- >> what do you suggest do we back off now >> the threat has to go away it's hard for xi jinping to negotiate under the threat, with a gun to his head. >> okay. do we say okay, let's go back to business as ushl you guys are mean. but we'll keep dealing with you? >> china has a strongman, trump wants to be a strongman. they need to dial the rhetoric down >> we can't control what they want to do >> we should give them a bit of space. >> all right, matt next time -- next time it's a closed-book test you will have no notes no idea what coming up i still think you didn't get better than "b" minus on the answer >> you're a tough grader, but i'll take that from you.

>> it's on the curve, too. no it's an intractable issue. i have no answers either >> it will be a great holiday season i look forward to coming back and talking about that >> thanks. when we come back, tom lee is ready to call a bottom. he will be our guest host at the top of the hour and 'lhel make his case for why he thinks this selloff is over. cal: we saved our money and now, we get to spend it - our way.

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time for the executive edge we want to show you some stats from the month of october which we finally saw some volatility look at some of the wild point swings for the dow the blue chip index finished the month more than 5% lower wall street's fear gauge, the vix, was up 75% in the month look at the big market cap losses since september 20th. 164 billion of value was wiped out of amazon. nearly 70 billion from alphabet. 45 billion from microsoft. let's look at how we're set up for the first trading day of november u.s. equity futures right now

are continuing the solid gains we saw on tuesday and wednesday. i like looking at market cap moves, but i always think back to any given day you will never see everyone buying or selling the outstanding shares so you're basing the price of the overall entity by how many shares trade on that day and change on a given level. if you watch a startup, first round of financing is 3 billion. a year later, 50 billion that was created was that really created? could you sell everything at 50? all these things -- >> when it disappears, where does it go >> where is money heaven created from i don't know it illustrated a point to look at market cap moves, but on any gi e given day i'm not sure the money

is ever there for these companies. it's illustrative. >> it falls so deeply into our psyche if you fell like your flush versus if you feel like you lost a ton of money. the f.a.n.g. stocks shed $3 billion since late september those investors have felt some pain month? was it a situation that the stocks got their knees chopped out from under them or maybe too sharp of a lineup? what do you think? >> right i think it was profitmaking, nervousness around china yield curve, and lots of reasons for the month of october which is a difficult month for people to reassess.

we used the opportunity to trade out of stocks like apple which held up really well down into 3% into netflix, amazon, nvidia >> you think the oversell was overdone >> oh, yes, very much so very much so we're very concerned about disruptive generation generally at ark, we're seeing escort-like movements here in streaming media. so, netflix, you know, roughly 20% of streaming video is streaming now. that's the s-curve there will be, we think, continued changes on the high side of expectations >> apple, are there concerns or simply a valuation that i can make more from these stocks? >> it's held up really well. there are all kinds of good reasons it should hold up really well we are concerned that -- it was protected by the privacy

concerns you know, it has a reputation for guarding, safe guarding, privacy. there is a regulatory issue, potentially, or a legal issue potentially coming out on november 26th. the supreme court is going to hear an antitrust case against apple and its commissions. 15%, 30% commissions on apps so this will be the first time in a while that apple is in the rela regulatory or legal spot light so, we think there will be maybe a little changing of the guard back to those hit hard by the privacy things >> beyond apple, do you consider them a disrupter it seems like it was, could you put it in some of the categories the others? >> yes we think it has a great opportunity in the mobile space

really is nowhere in asia. and compared to nmo and paypal, that could square very quickly when it gets going we're also seeing it very active in the health care space particularly, when it comes to devic devices, monitoring and collecting data. and we do think services generally are rising as a share. >> but that is a different story. they have a service of business. >> yes >> that is a built-in runway for them warren buffett got into the stock because he sees it as a consumer stock, not as a technology stock >> yes and that is why i raised the supreme court case that will be heard on november 26th it's just now really moving into the investors' sites and so we like apple, we think, from a long-term point of view, we think it's a solid holding. but it held up only down 3% versus down 20%, for these other

stocks, which brought them into some interestinging valuations >> kracathie, if you think thiss a buying opportunity, what have you seen that making you think the volatility is not over >> right well, we're not worried about interest rates going up. because if you look at treasury bill rates relative to the fed's rate, they are at a level we haven't seen in a while. that means, the economy is leading the fed. the fed is not trying to cut the economy off. what would concern us, is if this trade situation spirals out of control we don't think it will we know both sides know there's a lot to lose. and we actually think it could turn into a good news thing. these increased tariffs, we could turn around and see tariffs cut around the world which would be a big -- >> if there's a negotiation that comes up >> yes, and we think there could

be we know larry kudlow are behind the scenes working it. >> so is peter navarro >> absolutely. >> we're going to talk about about it, saying i don't think tariffs can add 0.2 valuation. he said to ask your guests what do you think? >> as we've seen with washing machines, it's an alternative supplier and consumer goods in klechina, clothing, gadgets, tvs it's about 10% of the cpi. if you put a 10% tariff on this stuff, china's currency will drop to compensate there will be margin absorption along the supply chains. margin compression i would think you put 1% on the

cpi, you take it from 1% to 2% overnight which puts the fed in an awkward position. remember, over time, the 25% tax on $570 billion. >> ian, thank you for being with us this hour appreciate it. >> thank you >> cathie, thank you for joining us >> pleasure. coming up tom lee is going to take the chair away from ian. >> ian is coming back soon >> yes our guest in the next two hours, reading the market qes and ready to call the bottom joining us. and later, andrew will be inter viewing some -- >> wait, wait, wait. you can stay -- can you stay to talk to us about this. >> i can say peter thiel. >> i drive pink.

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stocks surging to cap off a wild october what could be in store for markets as we kick off a new month? guest host tom lee is here with a bold call. >> sectornomics. october the worst month since 9/11 we break down the losers and see if there could be a bounceback plus, we walk you through this morning's earnings as the second hour of "squawk box" begins right now ♪ >> announcer: 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 at the nasdaq market site in times square

i'm becky quick along with joe kernin u.s. equity futures on this 1st day of november are trading high we'll see if we've left the october mess behind us the dow futures indicated up by 126 points s&p by 12. nasdaq up by 31. >> and we're watching three big stories this morning number one, the rally in equities the bounceback we've got two days under you're belt so far for a winning streak for the first time what feels like forever october was the worst month for the s&p 500 since september 2011 and we'll get to the markets in just a minute. but the other big story for the day, some earnings that are still trickling in at this point. spotify reporting. biggie after the close is apple. also stark bucks and kraft time. big names to watch dow due point, kraft times

the s&p 250. cbs and shake shack, also report and a crude correlation, the s&p peaking in early october when crude did. it's a rare move and could suggest the possibility of an economic slowdown. we're going to discuss that in just a bit as well some corporate headlines for you as well, dow component, dow dupont out with quarterly flubs. reporting earnings at 73 cents a share, that was three cents better than the street was expecting. revenue did fall slightly because of the low forecast. dow due point announcing a buyback progress >> cigna coming in at $3.84 a share. revenue above estimates, too, when the company benefited in a drop for medical costs for cigna's government health plans. and we have some key economic data coming up in 90 minutes' time economists looks for a 2.3%

annual rate increase we'll also see figures on initial jobless claims some stocks on the move we want to tell you about number one, fitbit, shares soaring as much as 13% now up 11. $5 stock after the company beat earnings and revenue expectations for the third quarter. fitbit also gave guidance for the fourth quarter and revenue exceeded the estimates. checking out the market cap on this baby. stock's up nearly 9% this morning. $1 billion anyway, fitbit ceo james park will be on "squawk alley" and 11:00 a.m. eastern everybody knows the company is a consumer, but that's a small cap basically. music streaming service spotify out with quarterly

earnings, revenue also topping forecasts. we should note the figures on the screen are in euros. monthly average grew 28% from $191 million let's get to the markets at this hour joining us is david joy. at ameriprise financial. and guest host is tom lee managing partner at global advisers tom, i don't think you sick slated this through all of your people yet, you made a big call on the market exclusively to us on "squawk box." and the call it bullish or bearish? >> it's bullish. >> okay. >> call we're making the market internals in terms of stocks have reached a level that have normally signaled real panic and it marked the bottom so, we believe the selloff is behind us. >> do you think that this, in

terms of technical damage and percentage moves is commensurate from where we've seen bottoms in the past or do we not need as much because the numbers are bigger, but the percentages aren't >> well, it's -- one way to measure that is how often have the percentage stocks fallen to 11%, which is what happened on friday and the percent below it >> so -- i'm sorry to interrupt, it's the breadth of the decline, not the depth of the decline >> yeah. >> and it's been a long one that we maybe didn't notice right at the beginning. it's stealth >> yeah, it means 90% of stocks have broken down which means they've broken down trend. when you look at the s&p, it's happened nine times since 1990, of which, three of them we were more than one year into a bear market which has not happened -- you know, we're not one year into a bear market so we could look at the other six instances, those were,

almost to the day, the bottom of the correction so march 2009, late january 2016, and the recovery tends to be quite violence because what you have is a panic that brought the markets to that level. and it looks like we're going to rally more than 13% over the next three months. >> just because people feel like they're missing out on an opportunity to buy >> yeah. what happens is everyone looks around and sees selling and and the way hedge funds manage risk saying we've got to get out at any price, that type of imbalance of selling has sort of crushed the internal market. >> well, that is certainly the case where you needed to buy the depth. but we've been talking about whether that strategy has changed at some point because we're later in the cycle i guess that's the question. >> yeah, the late cycle is unknown at the moment. a couple things to keep in mind. first of all, this is worse internally than the january

selloff. this is what we haven't seen since 2015 but in january, the yield curve was flattening so we could have worried about being late cycle this time, the yield curve steepened. interest rates have, you know, actually backed up a little bit. and investment rate in high yield have outperformed. high yield have a similar what they call z-square move and it hasn't happened. >> all right david, i hope you brought it today, david joy, because tom just gave us an exclusive call i mean,if you're just going to come on and give us the average stuff, we'll stay with tom do you have something big for us, david? >> well, i'm basically of the same mind as tom i do think that maybe we put in, at least in near term bottom i think it's primarily on pricing of chairman powell's remarks being too far from neutral back on october 3rd. from that point, you had say

reprising downward almost across the board. so i think that process has more or less run its course however, i'm not willing to say that that means the upside is open ended i think we're going to be in a trading range that's bounded by the lows that we've witnessed over the last couple weeks but also now bound on the upside by the previous high roughly 2900 ordered a breakthrough there i think we're going to see some progress on either the china situation or some softer economic data that gives the fed a little reason, maybe, to pause. and gives wall street some optimism to pause. so, we're basically of the same mind, i would say. >> so, david, when powell made those comments what was it that was different about the way they were received? do you think that the vesting public didn't believe the dot block charts or did he extend it further and say we're actually going to be more aggressive than

what's indicated in the expectations it really that major what he said because we've all been waiting for rates to go up for like five years. >> we have been. but i do think that the market was somewhat skeptical that the fed was serious about where they had plotted the dots and basically, he said, look, you need to pay attention here we are serious about this. we are a long way from neutral they think neutral is not 3% maybe dipping, 3, 4, the market, still, if you look at futures is a little skeptical that we're going to get four rate hikes between now and the end of next year so there was still some reconciliation that needs to go, i believe. but this corrective action, i believe, of the last two weeks washed most of that out. but this fed seems serious about getting the overnight rate close to 3% to 3.5%. >> was it jaw-dropping for you,

ian? when you heard powell? did you know this was not consensus? how did you react? >> i thought, thank goodness, he's actually telling the truth and saying it in plain english because i thought for a while the market wasn't really hearing what the fed was saying. i was happy to hear him put it plainly. unemployment is 3.7 and falling. and interest rates, zero that's not sustainable the markets wanted to hear it and now they're finally getting a message. i'm not panicking where the market is going but i think you have to take the fed seriously this year -- well, with the exports by the end of the year, they said they will do three at the start of the year. they will end up doing more at the start of the year. >> you don't think that the market is overreacting to some extent with this >> well, if the markets are absorbing something which i think is pretty clear if you've been watching. 26% earnings growth that covers a lot of cracks. >> a lot of the components that you talk about in the market had already moved before powell.

so, i don't know whether, you know, in that sense, it doesn't -- it doesn't line up with, you know, causation doesn't mean necessarily correlation. before powell, a lot of the market had already corrected, right? >> yeah. >> you can't blame it on powell. do you agree, is this all powell it has to happen eventually? >> well, i think it became a mounting worry we had trade and that makes your earnings comp slowing. and now the fed which caused financial conditions to tighten has made people even more nervous. >> but then if you do take a step back, you come back to 3.7% unemployment 3.5% on the latest gdp number. inflation, you know, headed higher but still at 2%. there still is a lot of goldilocks things happening. deregulation >> yes, i think ceo confidence

has a lot of room to grow. if you look at the consumer confidence surveys, the percentage of people expecting wage increases is 23%. it usually peaks at 35 people aren't that optimistic yet. there's a lot of people in the workforce. >> david, you didn't make me real excited, i'm not ready to mortgage my house and put everything in the s&p for 2019 what did you say we may not go much further, but you didn't sound like we're going to 3500 on the s&p next year, are we >> well, once we get into the 2019 calendar year, we'll have a better sense of whether or not this standoff with china is going to persist and begin to hit the economy a little bit harder at the same time, earnings expectations have held up for 10% for 2019 that may have to come down as well, if the standoff is still in place now, if we get a little bit of good news, we don't need a

resolution, in my view, on this issue. what i do think we need is some progress some off-ramp that says, look, we're going to maybe delay going to 25% tariffs while we negotiate. something like that would be enough to get this market moving higher but if we get into next year and nothing like that has happened, i think the 10% earnings expectations may have to come down the economy is going to be fine for a while. we've got a lot of stimulus in the pipeline that will slow down towards the end of the year as the federal fiscal winds down. there's potential good news for next year. but we've got issues to get through in order to get through 2900 on the upside >> if we do 10% next year, between 2017 and 2019, is that a 33% increase in earnings >> i mean, it's extraordinary. >> yeah, i'll take 10. if we did 23 this year, that's a third higher earnings in a

two-year period. >> yeah, but the question is how much of those are -- >> and the other aspect, even at a 10% earnings growth next year, you're looking at a forward pe multiple of 15 that's reasonable, but it's not cheap. >> well, we never got 33% on the multiple, right? >> no. right. >> if it grew 33% in two years -- all right i don't know it just seems like there's a lot to -- >> i think the bull market is still only celebrating middle age, you know? >> middle age. is 60 the new 30 middle age under our now way of looking at middle age? >> i think in some ways if you look at how long markets last it could last through 2028. >> and bull markets are like us, they live longer

>> yeah. >> and i'm just in awe of abraham lincoln. you know how old he was? five days after lee surrendered. and five days later, the idiot, the booth character -- anyway, 59, 59 >> from what he had lived through? >> exactly after the decisions he had to make sense anyway, history is free, david joy, you probably knew that way, it's been a while. i'm just discovering these things anyway, tom lee is sticking around and, ian, you're going to argue with jan >> i am, if he wants me. >> he's tough. you have seen this guy before? >> i've seen him now >> you got to write your points down get ready. coming up, pay raises go in effect for amazon workers. and will the move cause other retailers to rethink their scale?

we're going to talk wages as we head to the break, here's a look stay tuneded you're watching "squawk box" on cnbc tomorrow, computers and caffeine reaction to apple and starbucks' quarterly reports. plus, jobs, jobs, jobs >> did you see the memo about that >> yeah, i have the memo right here i just forgot. >> bold coverage of the october jobs report, predictions, reaction, and what you should be doing with your money. that's tomorrow right here on that's tomorrow right here on "squawk box. (bicycle bell sound) ♪ ♪ explore more with a guaranteed 4pm checkout at over 1,000 fine hotels and resorts.

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leave no room behind with xfi pods. simple. easy. awesome. click or visit a retail store today. welcome back, everybody, hirer wages have arrived for amazon's u.s. employees. today, the tech giants raised its minimum wage to $15 an hour. joining me now is jan nippen ceo of jan nippen wwe. jan, we've seen amazon upping their game and target also moving higher. what does this mean? >> walmart was first saying we have a new minimum wage of $11. now, we have a new minimum wage of $15 given the fact that we're trying to hire almost 1 temporarily for the holiday season, we would have never gotten them higher than $12 an hour and people are already

falling short of their goals when i walk the stores in july, when we don't have any business, we don't need any people, every store already had a help wanted sign out the real question is where does it go? because i contend passing it through can't happen we got to have it more efficient. >> you're not going to pay enough money to get that many bodies in the stores >> no, meaning you can't price your goods for it. when i was at walmart, two weeks ago, robots were everywhere they were showing us the boss a bosanova, with the machines, and all of that. that takes time. the other thing you're going to see, the most efficient players, the people who are maximum tax players to pass the tax through. to the guys that are not maximum taxpayers. so, the big guys are going to

crush the little guys. if you can afford the technology and you're a maximum taxpayer and you're not highly leverered, you win. if you reverse a lot of those, you lose >> the other issue facing retailers for higher costs that they will either have to absorb or pass on to the consumers is the tariff factor. your thoughts on, just because we've been discussing that this morning, what that means for inflation. you don't think it's nearly as inflationary as we've been talking about this morning >> i'm the least worried about tariffs. i'm certainly more worried about wages than tariffs do i think tariffs are a negative from the point of view from the retailer, yes am i supporting the fact that we need a better deal with china? i am but do i think this is a big deal for this holiday season or the next selling season, i really don't i think with china, this will accelerate it. i think it's supply worldwide.

it's not a big cost increase but whatever cost comes through is more likely to be absorbed. i don't think it has a big effect on cpi. >> ian >> the worry is 25% on consumer business which right now is a threat, not a reality. january 1, is goes through, and plus the threat, which trump said if there's any reaction from kleichina, we can impose t. that's the furniture, the tvs, the gadgets. so if you stick 25% on that, and we see a response like on washing machines that rocketed back in february then you've got a big inflation hit. right now, this is a sword hanging over the market. >> i also think that washing machines are one of the least oversupplied things. and we have really only one domestic manufacturer of that. and the ability to work through that supply chain is much

harder but when it comes to apparel and all of the other things we import, we're already moving out of china on low-value items you're going to see tha dramatically, it's going to vietnam and slri lanka >> we just heard from the national federation that this new china thing is a myth. it's not as big a source of supply given the speed that tariffs could be imposed to take it on. in the immediate term, yeah, we could find a reaction to it. >> i'm a big fan of the sheikh because he adopted my hairdo i also know his job is to tell them that you're hurting the retail part of the world you're right it hurts. and i think it will happen faster but i also given the worldwide oversupply of goods

that it's going to have a very low impact on the consumer so if i were matt, and i were worrying about it, i'd worry about the same as he is, it hurts the gross margin of the supply chain and it depends where you can put the pain that will be the first thing you see. the second thing you'll see is transference picking up. and most of us have spent our lives trying to figure out the supply chain and get it to a more efficient place that will happen more than people think it will happen. this holiday is not the first holiday. >> do you think there's a mixture? do you think it drives people towards discounters? >> of course there's all kinds of ability to substitute so, if you come through and say the new suit is 600 bucks but you've still got a $400 suit, people trade down. that's the problem from the top line of sales. it can be a problem on margin, but it's probably not a margin

on cpi >> it's disinflationary. >> jan, thank you for coming in. good to see you. >> 56. alexander hamilton was 47 or 49. we don't know. i'm going down a couple years, i think. i'm not sure -- >> come on, joe. >> alexander the great the other alexander. 32 alexander the great, 32.

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the books. equities shedding nearly $2 trillion in market value for the month. could have been worse, though. but it was the worst month since 2008 anyway, we'll find out which sectors could rebound in november, after the break. take a look at u.s. equity futures tathis hour, up strong again after a couple of solid sessions

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good morning, everybody. welcome back to "squawk box" here on cnbc we're live from the nasdaq market site in times square. among the stories front and center, shares of teva

pharmaceutical jumping 58 cents a share beating estimates by 14 cents. teva also raising its ratings forecast as it sees strong growth in key drugs up by 5% apple is said to be in talks to strike a deal by radio station iheart media apple source says it could buy a part of $10 million. and the nation automatic ss out by this morning. expecting that industry sales down by 1.2% compared to the same month a year ago. and he's back, dom chu, this time, we don't want to hear what you said last time, dom. you got a whole new thing to do now, right >> i do. >> i'm going to let you do it then this is about sectors. >> this is about sectors and industries that have been the hardest hit because as we look at the premarket action we could

be setting up for the third straight day of gains. and the gains that we've seen over the last couple of days and into today as well have been in some of the hardest hit parts of markets. that could be a sign that shows that trade and perhaps winning bets against the market. three of the places, the hot spots that we're going to watch because they have been hot over the last couple of days, is the semiconductor space. computer chips over the course of the last month, the vaneck, one of the broader ways to invest down 12%. from its highs, this particular etf going all the way back over here is down about 18% in that time frame so, could that be a value trade there. also watching what's happening with another hot spot. this particular etf tracks what's happening with the

housing market the dow jones etf. another bad month, up about 12%. that uptick we've seen in the last couple days again for this etf, the home builders in the home construction stocks for their peak over here over the last 52 weeks is now down 33% during that time frame. so, that's another thing to watch there. and one more i would key on as an example ofthe beaten up places in the market is regional banks. this tick dollparticular one, t uptrend for the next couple of days and if you look over the last year, again, this particular etf on its highs down around 18% as well if you look for the beaten-up sectors, joe, becky, guys, one of the places we'll be looking to see whether or not the buying continues in some of these beaten-up sectors. back to you.

>> we'll continue along these lines, dom let's talk about maybe how you do position your portfolio with the new climate. high volatility, high valuations greg fisher is a portfolio manager of fisher funds. he manages over $3 million and so much more you're the co-founder, and the other guy. >> absolutely. my uncle, absolutely thanks to him. >> 1983, you used quantitative and technical analysis to figure this stuff out >> we've been doing this factor investing that i know everybody is talking about we actually trademarked that term about ten years ago in the muse of mutual funds before anybody knew what that meant basically what we do, we look at baskets of securities around the world and we weight securities based on certain characteristics. i think one of the interesting things today, to talk about growth stocks which we're all wondering about and what happened in october.

we're thinking about characteristics amongst growth stocks research, and intangibles, the people that work there, they don't really show up in book value the way accounting standards work these assets are underappreciated so, imagine, searching through a group of growth stocks, looking for companies that have a lot of intangibles versus price to book measures >> so, it doesn't sound like something an individual could under take how you can help individuals what do you find using that approach what should we do? >> well, what we do find, in growth stocks, companies that have huge amounts of r & d over time tend to outperform companies that don't the health care sector consumer discretionary, information technology, these are examples of sectors where you really have to think about their intangible assets because they have, on average, higher

amounts of these things. and some of the companies that have more of this than others are likely to show up as very expensive, if you just look at their price to book. out ultimate but ultimately, they may be cheaper than you think when you consider intangibles as an important aspect of this business you might just think of sectors where this could benefit them. i think health care and technology are two examples of that and it tells a different story than valuation measures. >> tom, are you okay with that >> well, yes and no. i'm a former accountant, so r & d is expensed. whereas, if a company bought a building they get to put it on the balance sheet. if you're saying hey, this r & d disappears because it shows up as an expense. i agree. i think a lot of technology companies that don't monopoly platforms, that platform doesn't show up on a balance sheet because it's an r & d funded

endeavor i think amazon is an asset company. people should say the asset is worth this minus the liability and the equity and you realize equity is really cheap. so, i think there's a way to look at tech as actually a value sector because there is this perpetual asset value. >> i think in stocks in general -- certainly, we all have owned growth stocks certainly, they've outperformed over the long term, recently, anyway i think people are questioning that but imagine this idea, you have to think about how can i create some kind of value tilt within my growth securities and the one way to do that is to think carefully about the intangibles. and there's been a fair amount of research done on this especially if you look at companies like amazon, is a good example. you it look at their intangibles, it tells a very different story. could amazon be found as a value stock, in a sense. >> i just don't see, you say you

use a scientific, quantitative research-based approach, i don't see how you can look at intangibles like management and all of these things in a scientific, quantitative way it's just words to me. >> well, actually, it isn't. >> how do you know management, how do you do that scientifically >> well, management quality is probably a different animal. i think i'd stay focused on things you can measure like r & d and other things along those lines. >> but does that happen without jeff bezos in there? >> well, there's lots of research how important is a leader to its future business. i think it's very important. >> with somebody like a jeff bezos? >> i agree you can look at that there's all sorts of research of founders and businesses that are not their founders you can search data like that. >> reason you call it an intangible is because it can't

be measured by quantitative example. >> yes >> i have an example, i used to cover stocks, customers sign a two-year contract for service. the value of that contract is worth 50 bucks a month times 24 months, right, a lot of money. a wireless company never capitalized that contract. >> now, you sound like an accountant >> yeah. >> what do you mean? >> if you look at the income balance sheet of a cellular company, you never know the people under contract. so that's the kind of hidden asset. if you said, oh, suddenly, there's actually all this value there. like the licenses would go up in value, but you never get to see that because they always carry it at the original cost. >> i do think we have to be careful of this. it reminds me of the late '90s where everybody was trying to convince us that only price to sales count and price to earnings didn't. it's interesting, 10% of russell 3,000 stocks are now trading at greater than 10 times sales.

that's, i think, more than we've ever had or something close to a peak so when we think about markets investing today, particularly growth stocks, you have to come up with other ways to think about how to weight your securities for valuation, because, look, we've just gone through a decade where the market is up over 300% we're all thinking about this. so, i think that it's time to reconsider how we classify these securities that's one of many things to consider >> so, do you, at this point, think that tina has turns into tiara. there is a realistic alternative? do you like two year paper or something? are you less bullish about equities at this point >> actually, the two-year treasury at 2% looks attractive. >> there is a realistic alternative. okay thank you, gregg fisher, thank you and tom. and ian, it's like you're in limbo, we don't know >> he's sticking around for the

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welcome back tck to sx skwx "squawk box" everybody the dow futures are indicated up right now, dow futures up by 222 points s&p by 12. nasdaq up by 28. oil prices sink by more than 10% in october that was the worst loss since 2016 u.s., saudi and record oil production at record highs joining me is michael cohen, head of energy research at barclays thank you for being here

>> thank you >> michael -- middle name? >> david >> let's just make sure we know exactly who you are. >> you've never been to czechoslovakia >> no. >> michael, let's talk about what happened. watching energy prices collapse like that. at the same time, things that push stocks higher, oil level prices higher was a real surprise for people anticipating that we'd see oil pushing past $80. >> right, we were going through august and september, and the trump administration was saying we're going to go to zero in terms of the amount of exports that iran was allowed to push out into the market. and in reality, the decline in exports from iran and venezuela was more than offset by the increase in exports by other opec countries and then at the same time, we've seen sentiments sour over the course of october. we've seen crude inventories, especially in the united states start to build demand at $80 to $85 oil prices

have started to slow overall, we're looking at a balance for next year that actually flips back into surplus. and so the question now is whether opec is going to let that happen. and we're not going to know until really that first week of december where they have their next meeting >> all of this attention in saudi arabia, because of the killing of the journalist, that also had people thinking as they were issuing threats to potentially weaponize oil that that would push oil prices more. in fact, we're seeing them produce more i wonder if that's a reaction to keep the u.s. assuaged on these issues >> well, yeah, there's this key symbiotic relationship between the united states and saudi arabia the u.s. needs the production high to implement the iran policy and the saudis need the united states to implement that iran policy to check their neighbor, and check their behavior in the region so, as we move forward here into the next year, it's a key

question whether we're going to see record saudi output of 11 million barrels a day that they say they're going to actually push out in the market or whether they're going to pull back and i think this recent event is important because in the long term, we are bullish on the oil prices and this is one of the reasons why. because the saudis are going to need a higher break-even price in order to continue to keep their country stable in order to continue to fund their neighbors, those that they have a strong relationship with, to buy alternative weapons so, all of this is going to take more money so, that's a concern >> do you at barclays need to really be in the lead on political events in saudi arabia will nbs urvive? i hear there's a challenge from his uncle at this point, do you have an opinion whether he will be next, he's in line? >> yeah, i mean, obviously, these are sensitive topics

and we at barclays are constantly watching the geopolitical landscape >> so, what do you think >> so, we think -- yeah, i think that look, he has the confidence of his father. he's booked key relationships with u.s. policymakers there's not many other alternatives within the kingdom. but i think it's important to understand that who else in the country is able to implement these reforms. it's going to create complications. >> definitely at this point. >> with oil barely holding on, wti barely holding ton $65, what price do you think the saudis need what are you thinking long term, you're bullish long term because you think they need what price >> well, just to clarify we in beginning of october guided prices to go down we guided that it would

afternooaverage 77 >> for wti -- >> for brent >> for brent, okay >> what we saw the prices tick lower by quarter but we have a few that $75 for 2020 and up to $80 for 2025 >> for brent >> for brent >> so, not much higher than what it is now. michael, i want to thank you for your time. when we come back, some stocks ahead of the opening bell on wall street dow up by 21 s&p by 11. tomorrow, computers and caffeine reaction to apple and starbucks' quarterly reports. plus, jobs, jobs, jobs >> did you see the memo about this >> yeah, yeah, i have the memo right here i just forgot. >> full coverage of the october jobs report. predictions, reaction, and what you shoulde in bdog with your money. that's tomorrow right here on

that's tomorrow right here on "squawk box. open an e*trade premium savings account

that's tomorrow right here on "squawk box. i am a techie dad.n. i believe the best technology should feel effortless. like magic. at comcast, it's my job to develop, apps and tools that simplify your experience. my name is mike, i'm in product development at comcast. we're working to make things simple, easy and awesome. welcome back, everybody. let's take a look at some stocks to watch this morning. mattress make temperatu ur sealey met with 16% short than what the street was expecting. and hanes brands seeing its

stocks matched forecast with adjusted earnings of 55 cents a share. revenue came in shy of what the street was looking at. definitely down by 1%. and we're watching shares of allstate $1.93 a share. shy of what the consumer estimate was, $2.21. the company did announce a buyback stock program. but that stock is off by more than 3%. ian shepherdson has been with us for the last two hours it's been great to have you this morning. what should we be watching today? what tick would you give justice. >> with productivity in the third quarter, it's going to beat the consensus, 2.3, unlike 2.6, 2.7 the trend isn't that strong, but the trend is picking up and this is a really big deal because productivity has been a major deal for so long it's been trending down. >> why it picking up now

>> it's picking up now because finally we're spending some money on capx. companies have a ton of cash to do it. it's raising product sift growt growth the stronger the productivity growth the higher the rates need to be at any given time. we're not quite sure whether the fed is moving up its forecast but they're starting to talk about it >> tom, what do you think about investor perspective productivity moving up and the fed not making a move, how do you add it up? >> well, i agree i think productivity could i think what jan was saying there's not enough people to stocks the stores, but robots. that's productivity. the idea that's going to raise the rates, i think it's starting -- it would make wall street very uncomfortable.

i think right now, the markets don't like the pace now. raising it to the neutral rate would not be welcome by the street >> tom's staying with us for the rest of the show ian, i want to thank you for being with us for two hours. >> certainly coming up, president stacy cunningham on market volatility. and the s.e.c.'s concerns about market fees. as we head to break, here are the biggest premarket winners and losers in the dow. we'll be right back.

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closing the book on october. wild ride, nyse president stacy cunningham on market volatility and the impact on trading behavior plus, breaking economic news key reads on the nation's job force, productivity and labor costs. the final hour of "squawk box" begins now ♪ >> announcer: live from the most powerful city in the world,

new york this is "squawk box. good morning, welcome back to "squawk box" here on cnbc, live from the nasdaq market site in times square. i'm joe kernin along with becky quick. andrew is at the deal conference we're actually going to check with him later this hour tom lee, from fund strat, he did very well in the first hour. he's moved closer to the center. it was an audition fine colors, fine colors futures right now responding, maybe, to tom's big call really bullish you've been -- and you got a little less bullish, i've got to hand it to you, a couple months ago. >> yeah, i guess there's degrees of bullishness, right? >> yes >> and on a scale of 1 to 10, where are you two months ago, a 6 and now you're an 8 or 9

>> yeah, i would say right now, we should almost be like spinal tap. past 10, 11. >> 11. >> yeah, on a scale of 1 to 10 >> yeah, it's asymmetric now the market panicked. and you always want to buy panic. and you want to buy when everyone's scared. i still think people who backed away from the idea at 3,000 before the end of the year, i think it's very possible now to break 3,000. treasury yields, we'll take a quick look at those as well. where do you want those to register the waters safe againy could we go to 3.25 or 3.30, or got to put it back in the soup >> yeah, 3.25 appear to be the kryptonite for the markets right now. because markets want to see interest rates flatten down. the curve is steepening which means we're not talking business cycle. some breaking news

bank of england breaking key rates on change. let's talk about other stories dow dupont reporting mixed third quarter reports. the earnings beat. but falling below estimates. dow due point announcing a $3 billion buyback stock program. that stock up by 3.4%. the company's ceo will join "squawk on the street. and apple is reportedly in talks to buy a share of iheartmedia. apple is slated to report fourth quarter results after the bell today. and that stock ahead of that up by 0.5%. it's also a busy morning for economic data. it also starts with initial jobless claims and productivity at the bottom of the hour. analysts thought productivity close after a second quarter of 2.9% but you just heard from ian shepherdson, he's looking for a stronger number and thinks it

could be a sneak surprise. and good news for long awaited productivity growth but maybe bad news if the february raises rates faster jobless rates 211,000 for the week teva pharmaceutical reported and beat expectations. a third quarter report adjusted earnings came in at 68 cents and the estimates were 54 cents which is what analysts were looking for, so well above. revenue also beat forecasts as the company raised its full-year outlook. key drugs continuing to post strong sales, according to teva. cigna also reporting third quarter results better than expectation. the insurance company earned $3.84 a share. that was well above, 40 cents above revenue forecasts as well. in this case, helped by a drop in medical costs for cigna's government health care plan. after all now of october's stomach-turning sessions, the

s&p 500 wound up finishing down just about 7%. joining to us discuss what's next, brad mcmillan, chief investment officer at commonwealth financial manager and our guest host, tom lee is continuing managing partner at fund strat global advisers. it's hard to get too short term. i know that. let's talk about 2019, whether we continue to see, you know, a payoff, in taking a risk by going into the stock market. or do you at this point see maybe it's more attractive since two and three year and shorter paper is a little better, maybe it's time to take some money off the table. what should we do for next year? >> i think next year is looking a lot tougher than this year i think what we've seen over the past couple of weeks is a preview of what could happen in rates go up. if we see economic growth continue the way it has, rates are going to keep going up i think we have to recognize that the market is going to have to adjust in 2019.

looks like the year. >> so, quantify that for me. so, what type of -- it's going to be a downengineyear for the k market a midsingle digit year for most stocks what's it look like? >> at this point, i think flat is most likely and i think the way to look at that is to see what happens as to valuations versus earnings growth we're looking at earnings growth maybe in the 10% to 15% range. if we look at valuations to what they've been historically, that would offset the growth. i think flat plus 5 or 10%, but i don't think we'll see a lot of growth >> do you think the deregulation that we've seen since the election and the lower corporate taxes, repatriation, do you think that's all been paid forward? we've already gotten the benefit of that?

>> i think when you look at valuations, certainly, we're valuing the market at 100% and then some on expected earnings growth we're seeing the earnings growth drop off we're starting to see the economy turn you look at housing, for example, that's rolling over we're not going to have super growth to back this up >> why not rates are still low. you've got corporate confidence. you've got maybe business investment ready, although maybe it wasn't in the last gdp. when you unleash the private sector, or at least make it friendlier, in terms of corporate taxation and regulation, why don't you get more than one year of better business activity? i guess you don't think we're going to grow at 3% for very long >> i don't and the reason i say that is when you look at business investment, you actually see, even though you see business confidence up, over the past several quarters and that includes the post tax cut period, you're actually seeing

business investment growth track down i'm not saying it won't grow i'm just saying it won't grow with the rates that everyone's expected unless we get a substantial reversal and even fl, whthere, when you a consumer confidence we're at the highest in eight years >> what if it doesn't go down? all we get is one year of decent gdp growth all we get is one year -- we've already seen it in the stock market we went through eight years where you didn't get a lot of paro pro-growth, i know we had cast or clunkers. other than that cast or clunkers, what pro-growth did you see in the last administration >> you didn't see much the administration was basically occupied by managing the post crisis environment and now conceivably, we could get more of a bounce >> after three years how are they still managing -- how did

obamacare, in the first two years, after the crisis, how did that manage the crisis by putting obamacare through? >> well, we can talk about obamacare, that certainly didn't help in fact, if you look at government spending, it was down and that's actually one of the big reasons why growth was as well as it was if you look at private sector growth, it wasn't nearly that bad. so from a private sector perspective, we've actually done okay and that's continued. and that's likely to continue. but from a governmental perspective, we're going to see the stimulus from the tax cuts expire it's a one-year percentage increase we're going to see the government's spending growth and that's going to flatten out year on year. >> why don't the corporate tax cuts -- why don't they expire when you get the same tax cuts in 2019 as well? >> they don't expire but when you look at earnings growth, the effects of that are going to show up on a year-to-year basis we're still going to have higher earnings but it's priced in.

>> okay. i would see no reason then to hold stocks all. i don't know why i should take any risks, given your outlook, unless you think it's going to get better in 2020 >> i think we need to have an add just perio adjustment period. and i could be wrong if you're not going to see significant growth why would you hold it? well, first of all, we're going to see the market continue to adjust we're going to continue to see dividend payment i think that's one of reasons we start to see the market look a little harder at dividends payers bus that's a large percentage of the return and it's going to be much more of an active stock pickers market than aine index market. >> so, is there anything, if you were advising policymakers and you could get something through congress and signed by the president, what would you do to try to improve our prospects for

3% growth? it's impossible? >> no, i think if we get productivity up, that can help a lot. we need education. we need training we need focused attention to making u.s. industry more competitive. right now, the strong dollar is not helping. >> yeah. >> we need policies that are actually going to help exports because that's been a significant weakness there are opportunities to improve this >> okay. all right. brad, tom, are you able to talk me down from the ledge now brad, i'm depressed now. i just feel like we're back to 2% we're going back to 1.9% after all of this, that's where we're headed for 40 years we grew at 2.5% to 3% we outpaced -- we were exceptional here there's no exceptionalism left

i didn't build this? there's nothing we can do? we're not exceptional. >> we're certainly exceptional, and we can do better but we also have to deal with the fact that population growth is declining >> it's my fault because i'm a baby boomer. you're right there, brad it's your fault, too >> here we go. >> anyway -- we need more kids what do we need? who said that, leisman >> yes >> you know the number of millennials is surging i think growth rate is surging >> millennials, they're going to eventually enter the workforce they're 35, it's about time. >> yesterday, sam our guest host sitting in this seat, his concern is that he's never seen this many headlines in his lifetime, i think he said. this many things out there on the horizon. and he's been around >> yes >> and he's an incredibly smart investor what do you say to that?

>> well, this is something we point out to our clients, environmentally, it looks like the '50s it means people in business 50 years may not have experienced it you have to be 95 today to be trading money in 1950. >> i just -- we got to go to break. >> no, you don't warren buffett was playing stocks when he was 12 in the '40s he's an exception. >> he is >> richest man in the world. >> he maybe did something a little different than i did. but i love what you said, we've got a whole pool of workers ready to go, millennials none of them have worked now, eventually, they will become part of the workforce what about that, leisman the millennials, the millennials could start working and then we wouldn't have such a shortage of workers. >> i would say that the millennials are working, joe >> oh, okay. >> plus, joe, i would say we

welcome millennials as viewers in their particular demographic, we would love for them to watch and not insult them on national vision >> we can't measure them because they're streaming anyway >> but we want them to watch and talk about cnbc. >> we do maybe they don't want to work so they can watch cnbc all day long >> you can tweet the them @joesquawk. we're just an hour away from finding out if volatility breeds november we're going to get reaction from the month that was from the president of the new york stock exchange ayuned you're watching "squawk box" on cnbc when you retire will you act or feel different? or will you just be you, without the constraints of a full time job? you can grow your retirement savings with pacific life

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unstopand it's strengthenedting place, the by xfi pods,gateway. which plug in to extend the wifi even farther, past anything that stands in its way. ...well almost anything. leave no room behind with xfi pods. simple. easy. awesome. click or visit a retail store today. welcome back, everybody, you know this, volatility was the word of the month on wall street take a look at the vix that's the chart for the vix in the month of october you can check that out and see how things spike joining us right now is nyse president stacy cunningham stacy, thank you for being here. a lot of investors have questions about what's been

happening. the month of october certainly, a frightening one. what do you think happened in october in terms of volatility, what caused it >> frankly, i'm more surprised about how subdued volatility has been for so long i suspect we will see a lot more volatility throughout 2018 and the markets have been so calm, they haven't reacted to any global events unraveling and it's surprising because markets don't like uncertainty typically, they do respond to that really for quite a long period of time they've been very qualm. seeing that volatility come back is not surprising. >> is that a message for investors, get used to it, buckle up? >> yeah, i don't think it's going to to go away right away i'm surprise wed haven't seend t sooner >> president trump tweeted he

thought it was about uncertainty ahead of midterm elections what do you think is causing that >> yeah, looking back to 2016, we did see some up certainty around the brexit and presidential election. but we did see the market absorbs news much more quickly than it ever did before. and information travels faster and we saw a lot of things that were happening last year that normally, the market would have reacted and it hadn't. i do think we'll see a little bit over the next few weeks. >> stacey, what are your biggest concerns when you think through things, kind of looking through the horizon over the next year or two >> well, frankly, we're concerned about the number of public companies if i'm just looking at providing a number of investors with opportunities to invest in growth companies and the most dynamic and exciting companies out there. many are waiting to come public. so that is something that we're focused on we want to make sure it's all about balance. making sure that investors needs

are balanced in the market and that manifests itself in a number of different places and a lot of issues we talk about get back to that driving principle. are we balancing risks and opportunities? >> we spoke to dina freeman last week and she had the same concerns about why ipos haven't gone public. and the answer is they haven't had to go public because there are investors who reacted early on what sparked that, do you think and more importantly to retail investors? >> well, i think the second part is the more important part, what it means for investors there's access to private capital. when i sit here saand look at what's my vision for the noew york stock exchange, i could explore what it looks like i don't think it's a good thing to miss out on those opportunities.

making sure that investors, small and midsize companies, chairman clayton has shared this view and he wants to make sure the markets are welcome to small and midsize companies. the periods of growth before a company becomes public before being very large is missed out on the investor. but there is a lot of value. the u.s. companies are the most liquid in the world. we've seen that, spotify today, they are a company that didn't need to raise capital at all but saw the value of being a public company and decided to take that path anyway. we need to make sure that message is out there and that companies as they're growing recognize the value that the public markets provide and one of the messages that i deliver to companies that are considering whether or not they want to access the public markets that kind of in that pre-ipo stage, that's a service, too, right you want to make sure the everyday investor has those

opportunities. our mission for the past 226 years has been to help companies raise money so they want to change the world but we want investors to share in that success. >> stacey, we want to thank you your time. we appreciate it >> thanks for having me. >> stacey cunningham joins us from the new york stock exchange she's actually in washington, but she's the president of the new york stock exchange. coming up, andrew ross sorkin live from the next neighborhood over. we're going to check in with andrew, ahead of today's dealbook conference. i like the combo there, andrew i do the tie, the shirt, the suit >> thank you, sir. we'll talk about it in a little bit. >> those are superficial things. we've got the latest read on jobless claims coming up at the bottom of the hour stay tuned, all you millennials. "squawk box" will be right back.

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welcome back, everybody. futures have been higher this morning. although we're down a bit. we were up triple digits now the dow is indicated to be up 89 points s&p up by 8, nasdaq up by 15 a big day for andrew, "the new york times" dealbook conference starts later this hour, right here in new york i'm not sure you needed to take a whole week off to prepare for this, sorkin

anyway, andrew ross sorkin is the roast. joining us with a look of what's coming up. you got to be well rested at this point >> you know, i'd been sick for so long. i had that terrible cold anyway, i miss you guys. and i look forward to seeing you tomorrow and look forward to seeing our viewers today on air we're dipping into so many of these conversations. we have a huge lineup. let me tell you what's on tap today because we've really assembled some of the biggest business leaders and names around larry fink is joining us later this morning steve ballmer is going to be here arguably, the most powerful woman in business, mary barra is going to spend sometime with us. and a conversation with nancy dd debuick. and loughlin murdoch ken frazier from merck

and pat mulachy, an important conversation about the me too movement and mark raber is going to be here and showing off robots and the conversation that we're looking forward to, sanhar pichai, the ceo of google. we will have a conversation. and then the final two conversations, the one with lloyd blankfein, the outgoing ceo and now chairman of goldman sachs. and one of the most interesting people i think in the world peter thiel, talking about silicon valley and, yes, his support for donald trump all of that coming up starting around 9:00, 9:15 this morning

>> exactly what time is peter on, sorkin >> you should mark the calendar, probably during "closing bell," around 4:30, we're probably be dipping in to hear what peter thiel has to say what he thinks of silicon valley and midterms >> have you cleared this with -- they're not all of a sudden going to pull the plug on this like some campus, right? >> right we are here. cnbc is sheer. the cameras are here by the way, you'll seear mk thompson, "the new york times" with earnings. he's going to be here. i'm told there's a lot of things coming up >> all right, man.

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from around the world. ( ♪ ) we even have live sports and news channels. ( ♪ ) and your free wi-fi will start shortly. enjoy your flight mr. jones. world's best inflight entertainment. fly emirates. fly better. welcome back to "squawk box. breaking news. initial jobless claims, they are down 2,000 from 216 to 214,000. 216 is actually 1,000 higher than originally released last week at 250. continuing claims moved from 1.638. to 1.631 million so, not a big change there let's get to the third quarter preliminary productivity productivity up 2.2% that's a little better than we're expecting.

we know the magic is all in productivity but it follows 3%. so it a dropoff from there but the 3% was upgraded from 2.9. so, in the rear view mirror, looks pretty good. this preliminary data can firm up a bit and the labor costs down 2%. a little different changes there. i guess the big news isn't the fact that interest rates are firm, maybe it isn't the fact the first day of a new month that stocks are firm a surprise today, dollar index giving some back but it has been on a strong run. becky, back to you >> steve liesman joins us with more steve, what are your takeaways >> good productivity number.

a little lower than -- i'm looking at an expectation -- better than average. >> ian schephephershepherdson tt was higher because of companies spending money on capx. and because -- >> -- they don't have the workers. >> -- they don't have the workers. >> if you could hold that thought about productivity i want to talk about the other side of the equation which is the jobless claims and the wages raising shown in yesterday's employment cost. if we raise gdp to 3%. we talk about that all the time here, looks like we're going to need more workers. according to math i've done with rdq, we're going to need as much as 1 million additional workers every year to add a half a point of potential i want to walk you through the

math, the workforce growth, 0.5% productivity, 1.4%, that's why i wanted becky to stop there because we're a little hotter. and that's where we get the gdp 1.9% economists are anti-math let's look at the numbers, labor force, 162 million we are growing lotter. if we want to grow by another half a point to get to 2%. half comes from productivity we're going to need 800,000 to 1 million workers. and conrad said it's difficult because of the ageing of the population the prime age workers to the peaks of the last expansion, that only gets you about 2 million workers. okay where do you find 1 million workers? let's look around. we can get prime age participation up

particularly women, our participation rate for women is lower than canada, europe, and j japan, and we used to be higher. he says that's a place to find more workers we can bring down the unemployment rate lower. >> it's not women. i thought it was men aged 18 to -- >> there's that one particular thing where we were the exceptional, and now we're not exceptional when it comes to women working. he thinks it has to do with a bunch of things like programs that make it easier for the woman to work rather than just stay at home and one thing i want to talk about which is the unemployment rate which is the next chart right now unemployment is growing by putting the unemployed back to work with people in the workforce who have dropped out. economists say it can't last and presents the fed with a major dilemma. how low do you let the unemployment rate go the question for the fed, how low they let it go and i thought you were going to say -- >> just in terms of the missing

work tom and a bunch of us had a conversation >> i heard that. >> about opioid use. and the millions of americans getting sucked into that >> iphone use in the basement. >> and that part of structural unemployment, or is that a problem we can fix >> what about productivity why can't we get 100% or more from productivity? >> of it, right, joe >> two to three. >> i think innovation in america means businesses with labor shortage will actually innovate through automation companies find ways to produce without workers. >> did you hear that -- economists, like we're supposed to start believes them because they're pro-math not -- what was that ridiculous -- >> they're not anti-growth >> they're not anti-growth they're pro-math that's why it's been effective

and reliable with the forecasts in the past. they're ro-math. >> there was a structural labor shortage from 1948 to 'extend. t '67 the response was tech went parabolic. it was tripling in gdp >> how are we going to get to 3, tom, and stay there? >> i think we're going to see what jan was saying, in retail, you start automating and those folks can be deployed in -- >> uh-oh, i forgot, michael, are you stricting speaking economist. >> i'm strictly speaking -- >> but you're teaching. >> but i'm an economist that uses math. >> joining us michael geathers, fuzzy math or new math >> real math >> how are we going to do it or we're stuck >> it's possible, it's hard. steve's point i think is correct.

>> for population growth >> you can repeat that, steve point is -- >> for goals to get to 3, you're extremely unlikely to get it from population -- >> i want it from productivity >> if you want to get it from productivity the history says it's hard we did rough by 2.5 for a decade around 1990, it's more than around 1.5, 1.7. to get that, you need an economy that's flexible, competitive and open, right? i think a lot of the data suggests labor markets are less flexible than they've been in the past there's not as much movement >> more in their head then >> i would argue there's an industry concentration issue some of these tech companies that used to be innovative are now so domestic nantinance and we don't get the innovation out of these firms

and the last front i would argue, we're not getting as much out of the trade front andassociated with trade. >> if something happened on the trade front, instead of it being, you know, tamped down by tariffs, if we get some positive outcome to negotiations then possibly this could be -- >> right this is an additive. in general, what you want is that flexible competitive and open and you could argue we don't have those things going for us right now. an improvement in productivity i think is what most people look for. the question is, do you go from roughly 1% in the year where we've been in the recovery to something 1.5, 1.7, call it the pre-tech boom average. to get to 2.25, maybe, as your numbers were suggesting. historically, to say you need a burst of innovation to get above that >> which is possible, because we've seen that. the time between major -- i

mean, when did we figure out penicillin >> predicting -- >> that's one of the -- he sees it getting shorter and shorter of what the next thing is going to bring >> right >> we needed that technology boom that i.t. boom >> what happens when machines start thinking even more than they're thinking now >> they'll think they're very productive with productivity >> maybe i'll settle for 2.5, steve. >> i've been saying that forever. how long have i been saying that >> you know how you get to 2.5. >> if you have eight year at 1.9, you need about eight years at 2.5 >> you need to play catch-up ian shepardson said this time next year, we could be an unemployment rate of 3% and falling. >> yeah. >> that the household survey shows we're adding 70,000

workers a year -- i'm sorry, a month. the demand side for labor, if you look at the jolt survey, the nfib, some of these other things, is as much as 300,000. >> right >> that's a beautiful thing in an economy with an unemployment rate of 8% it's a thorny issue for a fed with an unemployment rate of 3.7% what's the tolerance for the federal reserve here to bring the unemployment rate down before, for lack of a better term, but to use the technical monetary policy term before they freak out? >> so, i think the forecast would tell you they don't want it to go below 3.5 3.5 is the line. i agree with ian's forecast, we see it heading towards 3 >> this time next year so, where's the fed at a 3% unemployment rate and falling, what happens to the funds rate at that point? >> i think they keep going gradually. i don't think it means they have to go faster it may ultimately mean they go further but that will depend on -- >> well, you you've got three

rate hikes pencilled in for next year >> i've got four >> four. >> you could add 23 rate hikes and still be well below where we are for most of our career here. >> absolutely. >> i agree here's the thing though -- >> they're not raising the rates as much. >> here's the thing, you get to 3%, your income inequality will start to goal away we'll have wage gains. >> it's your income inequality, too, joe >> i know. >> we're part of the same society. >> do you want the wage gain or not? >> i do. >> but conflicted by this notion of bringing that unemployment rate down to a place we've never been before. and what the appropriate policy is >> only an economist would worry about too many jobs. >> don't worry, president trump will take care of the fed later. >> yeah. >> who knows what -- >> did we get the wink on tv >> we got 25 hikes before where you're back to -- >> you're right. you're right

the combination of the unemployment drifting lower and wages moving higher, that's what the fed would say. >> don't be afraid of prosperity, michael. >> think of how the millennials would freak out. >> the millennials, they're watching they love the show >> they all have pretty good sense of humors. >> a lot of them are saying funny things one of the great ones said i've been watching cnbc for years, my favorite network, but all i did was lost money thanks a lot because of last year we had -- >> i like the other one about thinking about getting into the worker force >> yeah, yeah, yeah. you can convince me of the upside >> yeah. >> hard working, smart educated. >> they are. >> creative. >> i got generations, ian. >> thank you >> michael pleasure . when we come back, it is apple day, the tech giant ready to report fourth quarter results but before you obsess about

iphone or ipad sales, we'll tell you why growth in the company's warranty program could be key. stay tuned here on "squawk box" on cnbc.

welcome back to "squawk box. the futures right now are indicated for another positive session, less so than they were probably an hour ago or so after two solid days of triple-digit gains the dow is now indicated up 66. the s&p up 5 nasdaq indicated up 6. apple is set to release

fourth quarter earnings after the bell and our guest says that the street is underestimating growth when it comes to apple care. chris caso is analyst at raymond james. and chris, this is a story that's gotten overlooked in so many different places. that they've built this ecosphere, and now they own these people and they it turn it up and make a lot of money >> right, i think the case on apple right now, and we're less bullish on that, is that you've got a very installed base and how can i extract a couple dollars a month on that user where we differ from the street in that case, we think a bigger portion than perhaps people realize is related to warranty and apple care we think that's 30% or so of the total sales revenue. >> which would be what dollar, it's a big number? >> yeah, it's a big number and the -- the issue is that is

obviously tied to handset sales. there's two parts to services. one part of it is what's tied to ongoing handset sales. therefore, if handset sales slow down, then that growth would slow down and how many extra dollars can i get from the user. then again, the reason why apple care has grown is because the pricing has gone up. it used to be you get apple care for $100 on the phone. the new phone is $99 it's $299 if you want step and walk insurance you can get that from apple. >> it makes sense when you consider how expensive the phones are getting >> that's correct. but also the buying the phone, if you buy the 10x max with all of the care, you're walking out of the store more than $1500 we think over time that expends the replacement rate i think eventually, we're getting to the point we're on a

two-year plus cadence. i think the price of the phone has to move to a three-year plus cadence. >> which means what for the stock? >> eventually if that's the case with the extension rates, you have to see sales decline on iphone sales for some period of time if that were the case i think that would call into question, if my install base would actually shrink for some of them, that would make it for difficult for both pieces. >> we just look at the apple chart for the month of october, and it's down. but it escaped some of the viciousness that hit the other faang stocks and high-tech names. was it warranted for apple to have escaped some of that route? >> well, i'd say in part, right now because of valuation a lot of the faang stocks are trading at a much higher valuation than apple was certainly, multiples have come down on the market as a whole.

apple's market was really low. certainly, i can't dispute the cash flow. the cash flow from apple and the cash return is a function of the tax policy and the fact that they're buying back stock. >> quick, is still apple below or above >> below >> impressive. >> what is your price target, do you have one >> we have mutual rates. i'd say generally, in the near term, i think the sales of the iphone this quarter, we're fine. it's the first quarter for the phone. as we look into the december quarter, we're a little below the street on units. a little higher on asp because of the max pricing where i've got more concerns as we go into next year and again, from right now, the enthusiasm for the new phones were perhaps not as strong as you've seen in the past, you

know, for the x, you could have gotten the phone for launch day, no problem there were no lines at the stores that leads me to reason the question, what happens when we go into a weaker march quarter, as the early adopters have already gotten the phone and then i look at next year, the other, i guess, burden for apple, given the high price of the phones that they are going to need features to justify that high price and thus far, you know, sort of the rumor mill, in terms of what's going into the new phone isn't very rich at the moment. it doesn't mean there's not something. exchange, kind of an honorary

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cramer joins us now.

is there any worry that we could see something in apple's numbers that really throw us for a loop in terms of china? >> if you saw any real slow down in the app store that is related to china, that could be bad news. if you heard any commentary about the idea that the chinese sales is off or concerns about tariffs is bad news. it's a really important quarter because we had a revival of f.a.n.g. and apple could bring the etfs down that are related to that. i'm concerned. it is the most important quarter of the season. it can tear down what we just had for the last two days. >> that's what that would mean. there has been some good base building, tests, that have been

positive. >> totally agree. >> it is getting more bullish, as well. in one fail swoop apple could potentially -- jim, in engaging sentiment, what do you think people are expecting for 2019 for market gains what do you think most people are expecting so we can figure out how they are going to be wrong? >> it is almost that 2019 has to be a bad year because the fed will want to throw us into recession. there are other people saying the economy is so strong or this is the consequences of full employment. i don't believe any of that. i think we have every right to try to seek 3% to 4% growth. i think we are a great country to do that. i feel overwhelmed by people who say all of this is preposterous.

if the fed blinks then 2019 is not going to be a bad year. the fed has people telling you everything is so good. they have seen a slowing in their districts. they are looking directly at electricity numbers. i'm almost overwhelmed by people who say the fed can do whatever they want. i have heard that before. it seems like only you and i see it through. sometimes i think maybe you have one of the back to the future betting books. remember he goes into the future and has all the racetrack like results and world series results and brings it back that is sometimes how i feel with you. >> i think you speak common sense about this and where our

country can be and everybody else has some sort of play book that doesn't exist. they're using cleveland browns, buffalo bill play book. i like the new england play book. >> thanks, jim. coming up on "squawk on the street," don't miss ed breen. we'll be right back.

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facebook jumped about five percent on wednesday. with the stock under performing two weeks later. we want to thank our guest host today, tom lee. thank you very much. that does it for us today. make sure you join us tomorrow. right now it is time for "squawk on the street." ♪ good thursday morning, welcome to "squawk on the street." november begins with the bulls aiming for a third gain in a row. dow futures up. claims, productivity, auto sales and apple starbucks earnings tonight. we did get the best back-to-back numbers on productivity in about three years.