field, move forward with more continuity of thought and purpose. >> we are going to leave it there. very special. special thanks to kelly evans. make sure you join us tomorrow. becky has great interviews coming up throughout the day. "squawk on the street" begins right now. ♪ good thursday morning. welcome to "squawk on the street." stocks are set to re-test critical levels, futures down more than 400 points as adp says job growth has likely peaked. attention on china trade as canadian authorities arrest the ceo of waway. we have an opec decision on deck. our road map begins with the stock nose dive. u.s. markets set to open lower

following the 800 point drop amid lingering anxieties over an economic slow down. >> the cfo of chinese tech giant arrested in canada. that is renewing periods of escalation in the tension between u.s. and china. >> new concerns that production cuts may be less than expected. market selloff is picking up where it left off on tuesday, worries about a growth slow down and u.s. china trade tensions are in the mix. the dow has fallen seven percent from the highs. s&p with an eight percent decline and nasdaq in so-called correction territory. we are on track for -- i had to do a double take. worst quarter for s&p in seven years. >> we have policy makers that are very not in sync. you have the president saying the economy is very strong.

you have j. powell looking to the future. i have a president who says it is strong. i see wage inflation. he said basically that the economy is going to be very strong. i don't really care about what the economy was. i'm looking at our screens and inverted yield curve and looking at china and oils and housing and oil and looking at retail. i'm saying it was good. nice to meet you. it was good. but the fed will stop at nothing to stop wage inflation. that's their game plan. they may do one -- if you have a big number or a lot of big fed apologies, they will say the economy is really good. the yield curve says it is not. i trust the yield curve. they are all kind of -- the big international companies are saying stop the madness. it's not where you want to hire

a lot of people. >> does it make you wonder why a couple of months ago powell said the economy is almost too good to be true >> he wasn't right. he didn't do enough homework. these guys -- these guys are not elected. they make decisions. they are now in the mandate of they don't like three percent. they don't like full employment. i had a fabulous guy on last night. he runs one of the largest concrete companies. they are doing a second chance program get out of prison. they hire them. does that scare people to me that is great. i think full employment is something i like to see in my lifetime with low inflation. oil. that thing looks like a really bad convention like the '68 convention in chicago. it's coming apart at the seams.

i think j. powell should say i have to do my one and done because people are saying it is great and fabulous and terrific. and then i want to wait. if putin is reacting, count me out. i don't have to talk. i can just hit it. >> it's the continued concern about the uncertainty. it seems to be increased tension after what was arrested after what seemingly was successful dinner last saturday night. it was followed by people wondering what really was agreed to or not. how much we can believe, the chinese did come out and say they sent it to the 90-day

deadline. >> it is seen as a significant impediment or reflection that china is seen as some elements of the administration. >> and its economic development which can and probably will regardless of what we do is seen as coming at our expense. i don't know how that changes. what i do know is if you are a ceo and planning on spending money and see what is going on here you may hold back a little bit. >> i would think -- i often referenced the apprentice as the way we got it. we have the kudlow group and the novaro group. one will get fired.

>> what happened december 1? >> we had a meet ing with xi. i think about the time there was a handshake someone was arrested. >> do we know that those -- >> some of the reporting suggests that -- >> that was a long day. >> there is -- just so we know, this is an act. at the same time that they are making nice they are arresting perhaps the -- the founder of the second largest cell phone company. >> it's an act of war.

>> it was the cfo of apple who was arrested. >> in the hostage mode of the trade war. >> we are thinking about the japanese officials walking down the steps while the engines were getting fired up. >> we always see the seats. the diplomats coming down from washington hoping there would be a deal while they were getting rid of -- >> it is a little early to know exactly who to what and when >> you have a commercial break just like that. are you like moving on >> while we give you the schematics. >> that was long before 5 g. >> david, the planes are 20 minutes out. >> help us understand how all of this is playing in china and any

color at all as to what we know regarding the timing of this arrest >> well, the canadian authorities have said that they have arrested huawei cfo. this was done at the behest of the u.s. government. u.s. officials have reportedly said they are interested in having her appear at her federal court in new york as part of their investigation into whether or not huawei has violated iranian sanctions. her bail hearing is tentatively set for friday. as for color from the chinese, most people here are viewing this as a political decision because the timing of it was really interesting. the arrest of meng happened on the same day as the trade talks between president trump and president xi. also meng isn't just any senior

executive. she is the daughter of huawei's founder. a lot of people have been talking about how the trump administration must have known this and would have done this purposefully in order to try to pressure china as a two-size head into negotiations. in terms of other comments and reactions, one expert known to be close to the commerce ministry posted on social media his take saying the arrest chose -- instead be fully prepared for a long term confrontation. the chinese government has expressed outrage over the arrest. the embassy in canada called it a serious violation of human rights and the foreign ministry has demanded her immediate release. huawei put a statement saying the company has been provided very little information regarding the charges. it is not aware of any wrong doing by ms. meng. some executives who i have been talking to here say if this is a pressure tactic, it might back

fire because meng is so high level in her status. they say that china is going to want her to have her come back. that president xi jinping will not want to appear weak. they are worried about tit for tat treatment as well as the impact on the negotiations because they see this as just going to make things that much harder for the two sides to see eye to eye. >> thank you for that. jim, are you looking for the possibility of american executive being arrested, as well >> no. i think it will be a lot of working. can someone be detained? >> they just literally agreed to be able to buy a lot of our goods. what a huge loss to face if they do that. all the elites say we are a

pitiful helpless giant versus china. they never seen anybody like trump. he is a different kind of crazy. >> indeed. what is to stop them from nodding politely at every summit, making vague promises and never following through on anything >> there are people within the administration who have said to me over and over again that as this year goes on, we will sacrifice profits of our companies on the alter of the strength of the american people. jim, get with the program. they are a lot more bearish. stop telling people everything will be fine. our goal is not to fulfill the mandate of making money. it is not about doing more business with someone as part of the white house. it is about stopping business so we can starve them because they generally believe that it is the $550 billion that we import that provides the money to have an

espionage company like huawei. >> i saw a special you did. >> many years ago at this point. >> it came true. >> we had a focus on huawei at the time particularly in what was a big canadian company. it was an equipment provider that went bankrupt and some people allege was a victim to a certain extent of chinese cyber espionage. this is a long time ago. >> you convinced me that that was within the realm. >> huawei has said we have never been a part of that. we sell all over the world. it would be not in our interest as a company trying to actually make money. >> you are not a company. you are part of the communist party. >> that has always been a

question. >> that is alleged. it is very murky in terms of the ownership structure of the company and the ties to the military. but much of that is not known. it's the reason why they don't do business here in the united states. >> it's a totalitarian country. >> i do wonder when you go on and talk this way whether or not china was a democracy that was also similarly challenging us economically in a world whether you would still feel the same way. >> fulfilled the mission of when they joined the world trade organization. they have gone the other way. president xi is heading towards the mauist way. >> if the white house has been priming us all for war -- >> economic war --

>> why does wilbur ross come on air and say no one will be too bothered why does the president say i have a great relationship with xi >> he is just as much of an actor as they are. do they impress you as someone who says we will do this and then do it everybody is doing the same thing. the fact is if you do a lot of business in china -- >> i would rather own yum than yum china. >> we will talk about yum as well as css and citi. we will stay on top of the extended sell off. take another look at the premarket as futures indicate sharply lower open in a moment.

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be sufficient. headlines flying on the various wires quoting various unnamed delegates. >> they are falling apart. any discipline that they have is gone. they is signaling that it can go from 45 to 43. you will see the oil drilling budgets down a lot. the stock is falling apart. that company is not falling apart. they have a good balance sheet. that is a proxy for long-time joy. what is amazing is that you have no real long-term joy. we will have canada pulling back. it says the worldwide economies are not using a lot of oil. some of it is environmental and some of it is demand. i have said the supply is

strong. at this point it is demand. i want to caution j. powell. the strongest part of the economy is texas. they shut down quickly. one of the great things is they learn how to shut down. >> deutsche has a chart saying lower oil prices creates upside risk to consumer spending, 70% of the economy today. >> upside risk to consumer despite the macy's downgrade today. >> can we understand i have been meeting with people at two different companies, amazon and wal-mart. if there is upside risk to places that are taking prices down, there is upside risk to nordstrom. there are forces keeping their deflationary where the older fed people are very out of touch with what is going on in silicon valley to keep prices down. it is not -- that is an old

model. that fellow has never been to the dollar tree in his life. maybe he doesn't understand amazon prime. prices are down. >> i find that hard to believe. >> are you paying more for things >> i have no idea. i'm not buying anything. >> i do all the finances. i just don't buy anything. i pay the bills. i don't buy anything. >> i had a cheese steak this morning. >> how cheap it was to get the cheese steak from philadelphia to new york, i'm saying we are misjudging what they are doing, what work day is doing. >> software is -- >> what they are doing is you bring them in and fire people.

these are seven plemployees at a time. now we are not able to expand the way you want to. dish washers cost $18 an hour now. if that is wage inflation that someone who is finally able to go to an emergency room for health care, that is not my worry. my worry is that the economy falls off a cliff. >> really? >> next slide. >> everything you say points to inflation. slowing economy. >> prices are coming down. used cars are a great value. new car prices have come down. houses are coming down. >> you are hoping for a weak wage number tomorrow >> no. it will be strong across the board. you have to do one hike. i think you have to wait to see if i'm right. trillions of dollars. trillions of dollars.

i have always been saying those are not telling the truth. >> the bond market is in charge. >> even though partial inversions have predicted 70 of the last recessions. >> in eight weeks, if we lose -- they do a two for one split. they won't split amazon but split oil. >> cramer's mad dash after a break. we will get the opening bell. later today christine lagarde. the future of technology investing

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we will open for trading in five minutes from now. bad day if you own stocks across the board. mcdonald's and bristol-myers, just buy them. >> i came up with a metaphor. do you think the president [ inaudible ]. >> i have no idea. >> this is what i'm talking about with consumer spend, hiring people.

one time you will go to costco or go to costco in neptune. you will see prices that will knock your gold toe socks off that i get at kohls. you do have an increase to spend. costco is a place that keeps -- you buy stuff that don't make that much money on the stuff because they make it on the card. >> they make it on the loyalty program. >> i happen to be just gold star. when you go there, what you realize is that you can spend more. the prices are not up except for the equipment that has big china tariff on it. a lot of stuff is made in china. you have man made increases in price. my wife likes to drill.

she drills really well. she likes the cord drill. she likes more power. if you have diesel it drives better. that stuff is made in china. all of that will go up in price. can stanley black and decker raise the price? i don't know. the reason why the numbers are where they are, we are like five below or dollar tree, bargain. what stocks are going down tiffany, ralph lauren. people who were spending money are pulling in the horns. i think a lot of that is state and local taxes. >> and the point that chinese consumers travel around the world. >> the president says the chinese pay the tariffs, that billions are floating in from the chinese. $7 billion are flowing in.

>> by the way, i have incorrectly stated about the cough coffers. it is paid by american consumers or companies. >> the mad dash is about i don't know how long. if you take how much the american debt is during that one period of mad dash, i think that the tariffs could almost offset the mad dash. >> it's just sitting at debt. >> do you think that j. powell isn't worried about that >> i think he should be worried about it. >> he is not a lunatic. >> this is a deficit we are generating during an economic growth period. why doesn't steve mnuchin do a trillion dollars >> you have been saying this for two years. >> secretary geithner would tell

me you can't issue longer term paper because the rate differential is so bad that it makes more sense to do short term. they can do a trillion dollar long bond. what they are doing is trying to get more to the chinese. >> you want that fed job. >> it is worth mentioning market structure in terms of the fact -- i'm talking about the fact that a lot of the computer generated are not setting up for unexpected holiday. at 6:00 yesterday you can start trading futures, you have the

5:00 news about the arrest. it was also the result about -- >> i said what happened is the most top ten chinese industrials was arrested in canada on what is espionage the equivalent of treason. how do you put that in context >> there is the opening bell and the s&p at the cnbc real time exchange. it is chinese online fashion market place making its ipo. >> i can't think of a stock i want to own more than a chinese fashion story.

doesn't that fulfill everything that you are thinking of isn't that what america is looking for? >> when can you start sorting it >> levels here, everyone is talking about the chop between 26/40. we are not quite there and where we were at 2,800. >> i expect the levels and all the technicians are panicking to me. let's take a look. let's talk about mcdonald's. that could be up a buck and a half. bristol-myers will have a huge day. what i'm saying is we have two markets. we have the market that is what everybody hates which is f.a.a.n.g. and visions of apple's demise. >> evidence lab today. >> the evidence lab. that is like csi.

move that. we'll get to that. >> iphone purchase intention down across the board. u.s. at a five-year low. >> i would have thrown this away, but i can't. it is hooked up to the watch which has ekg and saves my life. you have to stick with the thing. >> you did get your vix at 25. >> all i'm saying is when i see a bristol-myers upgraded because everyone says it is up doing better than expected, that is what is going to go up. bristol-myers has nothing to do with the ipo we just got. what a piece of business that is. it's chinese fashion. kroger basically cut numbers. kroger has nothing to do with china. so it's up today. someone get sarahizen. she is from cincinnati.

she is with that -- >> alibaba which is often used as a proxy is down over four percent. >> don't you want that online chinese infrastructure play? that works. >> ten cent music is getting ready to come public. >> we don't have chinese walgreens. that is good. walgreens is a major stock. that is not down. it's two markets. it's not one market. it is two markets. there is the market that is low because it is defensive and j. powell will throw us -- >> the verizon market.

>> walgreens and verizons are the only two that are down. >> downgraded verizon the other day. i wanted to tell him who do you think you are? you are an oaf. it came out oath. >> jim -- >> i flew in from california and my arms are tired. >> ten year below 2.87. we are beginning to see calls for the fed cutting by the end of '19. >> it's a strong economy. we keep hearing about that. everyone is very happy about the economy. he won't do that because then it is wage inflation. you see this is a five below. >> what does that tell you it means the economy is red hot. >> you are being sarcastic just

for people to understand. oil and the ten year are sending the signal. >> do you think that oil could be down as much as -- >> there is real incompetence. they are interviewing venezuela. the guy had a tie on. he is wearing a tie. that is pretty good. >> it is good. venezuela needs oil prices around $200 to have a budget. >> venezuela is a failed state. we will get unemployment number tomorrow. the trump bill is down. >> beige book where the new term is being ghosted, where a worker doesn't show up for work one day and then you never hear from them again in the beige book. >> i'm on a site called

poach.com every day. what does it mean that that stock is just going down it means loan demand. >> it is loan demand. >> it's not -- the signs i find are worrisome. i would love to check it at the door because i have to pay $18 for someone who makes pizza. >> you keep going back and forth between the things -- >> china town all over again. >> it can co-exist. >> the workers are making a little more money. >> there is a labor shortage. and then economy is slowing down. it's all bad. >> it's a bipolar situation. and i'm not talking about china/u.s. >> i like when we get you worked up like that. >> it is true that employment is strong.

that can go away. when the permian goes down it is just a huge job suck. the electricity rates are going down. is that phony? i have benchmarks. i know that j. has great benchmarks. the nice person from cleveland can come out perfectly when the market is down 500 and tell us that the fundamentals are fine. that would be her script. >> we will hear from williams today. powell will make brief remarks as a housing conference. we need to be gradual, patient. if there is a slow down the u.s. will not be immune, pretty dovish. >> i like kaplan. he kind of like watches the show. >> cisco did get added to the focus list. >> he is seeing customers.

that's something you can't live without. >> i am telling you. i was not yawning. i was -- remember i was eating. >> it is all about the edge of the internet. >> is there espionage. . >> i am saying there are a lot

of really rich people. >> a lot of them are having trouble getting the money out. there is not a lot of -- >> that's why you go to steve winn with the great system. what is the point about the chinese consumer you found out that he is a member of the communist party. >> he has been a member for a long time. it doesn't necessarily -- >> i think we have to bring you over to china and spend time at shanghai. >> i'm ready. >> i assume you saw fox chief saying the trade war would last five years. if they allow american express

in without a bogus joint venture and do claims and do things that they want. they will do it. that would democratize them and stop making it so they have whole areas that we understand are containment camps for muslims. nobody says anything. >> don't you think we put ourselves in a position that makes it more difficult for us to attain the kind of growth we want when we run enormous budget deficits and don't retrain the workforce and aren't focussed on certain things that people say would be at the heart of the new economy? where we are dealing with coal >> unable to get animmigration

deal. >> we need immigrants. there is coal usage down again. the president wants used coal. there are no utilities that want to be admitting to use coal. >> it's a whacky time. >> you saw apple is the weakest of the f.a.a.n.g. names. it wasn't just ubs cutting the target. >> the rumors of apple having a short fall -- there is not going to be short fall in the ecosystem. they are taking the longview. the longview when it was at 93 is when you had -- there will be a day when everybody cut the

price target that you can buy the stock. even morgan stanley may have to cut the price target. what do farmers do when they have money they buy tractors. >> it's really cool.

>> that's fair. >> there is a man who comes to play every day. >> i put a chipper shredder at sears once. >> here is the bad news. we are down big. we had a ten to one advance in the open. often that is associated with short term market bottoms. let's take a look at where we are. the trade-related stuff is getting hit the most. you have semi conductors down.

metals and mining get hit on trade issues. industrial names get hit. all the defense names are sitting. morgan stanley, all the regionals, comerica, sun trust. they are all sitting at 52-week lows. same with oil, not quite as large a group percentage wise. all of the oil service names, this has been every day for ages now. you want to watch the october lows. i believe we were 1460 something

on the october close. looks like we breached that. we dropped below the october lows. that is something a number of people were watching. let's review what matters at markets. we are talking about the three issues. first is the fed and rate hikes. you saw the interview this morning with dow's feds. we talked about the third issue. the s&p dropping below the 200-day moving average, the flatter yield curve. those are clear negatives. then we have a fourth issue to worry about, lower production expected. also a negative. three out of four issues that are really moving the markets.

it's no wonder things have been -- it's not a coincidence. these issues got started to get serious not this week but at the end of september, beginning of october. we have been dealing with this for 2 1/2 months now. the market has reacted. look at the quarter. the s&p is down seven percent. the vix has doubled. it was 12 october 1. it is 24 today. ten-year yield is down 20 basis points. oil is down 30%. the market has seen the big three things we have been talking about, the trade issues and the growth slow down and it is moving. you can say the machines make things trade faster and it certainly does. they are not the cause of the volatility. the cause of the volatility is the fact that the market is dealing with the change in the fundamentals. you want to watch something

today? how about an ipo we have a big one pricing tonight at the nasdaq. this is one of the big bio tech ipos. the companies allows the body cells to make antibodies. big potential technology, a lot of money behind it. i want to see if it happens tonight. i want to see if they don't cancel it due to market turmoil. this company, a lot of positive talk about it. let's keep an eye on that. i'm expecting news around 5:00, 6:30 or so. back to you. >> thank you. worst two-day drop for the nasdaq since february. we have more data coming at the top of the hour. rick santelli is at the cme. >> as you look at two-year note yields, they are the lowest levels since the 10th of september. you see the chart there. what is very fascinating is

let's start at the beginning of november for a ten-year. a lot of answers rest in the ten year. the double top and the fact that friday we settled briefly under three percent first time on this cycle for 2018. and then the yield curve inverted based on the five-year being out of whack with the threes. that occurred on monday. you see the way everything is escalated. the notion in the beginning of the year, could the stock market move higher with rising rates seems ironic because the dropping rates definitely is a catalyst for more inequities. if you look at the ten year note yield starting in february, what you want to pay attention to here on the february chart is how much work we have done this year between 280 and 290 and a very simple notion. get your pens out. 2.41 we settled last year. what is that spot in the middle

of the lows? 2.82. there is very little doubt among technicians that somewhere in the 2.80s the market is going to hold. if you look at the pound versus the dollar we are close to testing the august lows around 1.26. the dollar has done well and hasn't taken out key levels. that is important. one week of the dollar index you can see the 97 that proves illusive. you can say what you want about the dollar but it is up over four percent on the year. >> back to you. >> we'll see you in a little bit. dow down. nasdaq really the locust of the pain. we had four components in the green out of 100. back in a moment.

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watching shares of apple the november low right about 17020 and we are just about 70 cents ahead of that. one of the worst performing names onaa fng dow is down. we'll get stop trading with jim after a break. alpha seems more elusive today. is it because so many go after it the same way, chasing after short-term returns? instead if getting caught up with the crowd, the investment managers at pgim take a long term view. uncovering opportunities for alpha across public and private markets, while anticipating unforeseen risk, has powered our rise to a top ten global asset manager. partner with pgim. the global investment management businesses of prudential financial, inc.

dow briefly down 500 plus as we had stopped just shy of that level after the opening bell. >> it's oil, finance, the industrials that do a lot with china and those are going to carry the load of course with tech, i want to talk about lam research. it's one of the largest semiconductor equipment companies. tim archer is a terrific guy he's a -- lam research, he was -- he was novellus' guy after rick hill. he will do a great job i don't want to say all clear but if you look at the vast chip shortage, people haven't been spending i know d-rams are not going up and flash is going down but intel, amd, they've all

underinvested so it's time to start buying lam i wish martin well i think this new fellow is going to do a great job. >> interesting call. "mad money" tonight? >> u.s. concrete, talking about the trucker shortage, the big amazon job, greg creed yum is the stock you buy right here right now i'm focused on closeout retail, burlington -- when i get david to go to burlington, that's it david will be done, he'll stop swimming and join me in ollie's army. >> see you tonight "mad money," 6:00 p.m. back in a moment rebekkah: opioids has taken everything and everyone i've ever loved away from me. everything. i blew my ankle out and i got prescribed pain pills by my doctor.

if making my detox public is gonna help somebody i'm all for it. i just wish i would've had a warning.

welcome back to "squawk on the street." we have breaking news, our november read on non-manufacturing ism, expecting a number around 59 60.7 this is a powerful number. if we look at what's going on

with regard to manufacturing -- in the manufacturing area, that's important but the service sector a bigger swath to the economy. october factory orders down 2.1% that's in line with expectations we lost 0.5 on a revision from .7 to .2. more important, transportation up three-tenths. good number. last month we lost three-tenths on the revision from four-tenths to one-tenth durable goods. this is an october final meaning everything is replaced that replaced what was in there at 4.4 for the mid-month read. if we take out transportation, up 0.2 if we look at orders, non-defense ex-aircraft proxy for business spending that is unchanged. unchanged and that follows

unchanged. if you look at shipments versus orders, sequentially tied up three-tenths, last time up three-tenths in totality, the headline number on durables is weak, transportation removed it improved not a bad set of data points carl, back to you. >> rick, thank you very much rick santelli. welcome back to "squawk on the street," i'm carl quintinilla along with david neighb faber from the new york stock exchange, sara is in washington. the global selloff continues, anxiety over a possible economic slowdown, lingering murkiness about trade relations between the u.s. and china and this new element of the stock tumble and an arrest. the ceo of huawei arrested in canada and she faces extradition to the u.s we have full team coverage steve liesman is breaking down what's data signals about the state of the economy deirdre bosa following the

arrest of the cfo, brian sullivan at the opec meeting following the big moves and ylan mui joins us as the biggest names in tech head to the white house. we'll start with steve and the data. >> an ugly factory orders report and we watch the business investment numbers unchanged after a 0.6% decline what is the business investment but the ism number, the services number pretty good we haven't had a number like that since september mixed signals coming we are having a rethinking of the short and long-term outlook on trade and interest rates. here's how fed president in an interview on "squawk" answered the question on whether the fed would hike in december. >> we ought to be very gradual and patient here inflation in my judgment isn't running away from us there's a good possibility and i'm attuned to the possibility

if not the probability that the economy is going to look very different in the first half of 2019 than it does today because fiscal stimulus is waning. we've raised rates eight times over the last two and a half to three years. so that means we ought to shorten up on our assessments and be willing to be patient. >> so he didn't answer it directly but he did answer it indirectly kaplan had been dovish but it appears he's more cautious now about hiking rates we were down to 72% probability. 83% on monday and it had been higher than in the past. we can't get to 50% for june in the possibility of the first rate hike of 2019 and october or the second hike of the year is withering away towards zero. just 15% right now the concern over the economy is about the future so far the current data reasonably strong. we got some this morning and we'll get a big jobs report

tomorrow look at the outlook here 179 is a strong number we only need 100,000 to put people to work october payrolls were revised, addp says 225 and goods of 16. looking for 198 on friday with a 7.3% unchanged unemployment rate at 7.3%. so sara, a lot in motion here. i don't know how far the market is willing to back off that december rate hike we're going enter the blackout period so there is a few more days for the fed to redirect or surprise us when they meet. >> that's where i wanted to go, steve. on december everyone in the market assumed this was baked in the cake but those lowering odds you mentioned along with captain's comments to you today, does that mean december is a question mark as to whether they'll raise rates? >> i don't know where you would officially put the designation of in play in. we're still at a comfortable rate

one of the fed's options here is to hike in december and then send a more dovish message about the possibility of weighting in 2019, the idea of the global slowdown remember, we have a press conference here so powell can explain what's going on and he can direct the outlook so remember sara, it's worth pointing out we have press conferences every meeting after december so it's no big deal for powell to wade in december and do it again in january. >> all right, steve, we'll take it back here thank you. steve liesman from the nasdaq as you see behind him let's get over to deirdre bosa she's been following the latest developments of the cfo of huawei in canada it's a fast-moving story. >> silt, david, meng wanzhou is

the daughter of huawei's founder and seen as a possible successor so this could have major implications for china-u.s. trade talks. on december 1, meng was arrested in vancouver while in transit and she's being sought for extradition by the u.s the u.s. hasn't said what prompted the arrest, but reports say it's related to u.s. sanctions. on this same day, president trump and president xi jinping had dinner at g20 in argentina last night, we got the first report of the arrest, which was confirmed by canadian authorities and huawei the outrage from china was immediate. the chinese embassy in canada said it resolutely opposes meng's arrest and demanded her immediate release. the global times, a state-run tabloid, says china should be fully prepared for an escalation in the trade war with the u.s. and that meng's arrest is a vivid example that the lust not ease its stance on the country next key date is tomorrow, that's when a bail hearing is

schedule but this is not just a huawei story. markets are reflecting concerns that her arrest will complicate trade talks, sanctions could have a major impact on the global supply chain. huawei is the world's second biggest smartphone maker according to idc so note intel and qualcomm are major suppliers to the company we will continue to track developments throughout the day. >> -- is that right yet? >> i'm sorry >> no comment from the u.s. government on the arrest. >> not yet, we're asking not yet. >> deirdre bosa, thank you very much. let's get to the global market selloff partly on this news. the dow's two-day slide totaling more than 1,000 points with us on what to do next, keith parker head of u.s. equity strategy at ubs and jill hall. jill, you're productive, you like the markets into next year. does news like this and market

reactions that we've seen over the last few days give you pause on your optimistic outlook >> well, i think some of the biggest overhangs on the market are trade uncertainty which will have an impact on corporate profits and overall market sentiment if we don't see a resolution we are constructive on equities in the near term since we think there's still room for improvement in equities sentiment, the fundamental backdrop has been good corporate guidance and earnings have been strong and valuations have come down to more reasonable levels but we do see risks looking out into next year so we have a 2900 target on the s&p 500 for year end but we do see risks that the market peaks some time next year at around 3,000 and our highest conviction call is you want to position for more volatility so we haven't seen the level of volatility for much of this cycle that we're seeing recently you haven't seen this amount of

5% or 10% pullbacks so we think you want to position for higher volatility and our models, one of the best ways we found to forecast volatility is the yield curve which has been in the news this week, obviously but the flattening yield curve has a very good lead on the vix and that's suggesting the vix should double between now and 2021. >> where do you want knto be in that environment within equities >> you want to buy high-quality stocks, stocks that have stable earnings you want to buy companies that are generating cash and avoid credit-sensitive stocks, users of cash. it's one of the reasons we prefer large caps over small cap which is typically large caps fare better in higher volatility environments so those are the areas we think investors should want to focus their portfolios in the coming year. >> keith, this huawei news just the latest in terms of concerns after the tariff man comments or tweet from the president do you have to stay away from china-related stocks or u.s. businesses that do a lot of

activity and revenue growth in china? >> we'd say quite a lot is priced into the market and a big part is tariff and tariff-related stocks. if you think about it, s&p earnings per share will have been up over 23% this year and the market is flat so we've had a bear market in the multiple and one of the key overhangs has been trade risks and by our estimate, that further escalation scenario would be potentially 7% down side, toward 2550 on the s&p 500. obviously we've priced a big part of that out on monday and we've priced a lot of that back in by our estimates, china-related stocks are pricing about 6% to 10% relative risk or valuation discount on some of these fears and we see the potential if and as talks continue and certain agreements are reached that that risk can be priced out. >> keith, jill mentioned the inversion of the yield curve or

at least the flattening of the yield curve with some inversions there along the way. how big of a worry is that to you? she says it means volatility but doesn't mean get out of stocks do you agree >> we've done work on the yield curve and surprisingly we found that in the past going back to the 1960s if you have bought the s&p 500 on the day, the average return to the subsequent peak has been 29% so it's not been all that bad for squeets aequitd they tend to be more volatile but getting out of equities could leave a lot on the table. >> jill, how much of your optimistic forecast -- and you do expect it looks like the s&p to reach 3,000 by the first half of next year -- is predicated on what the fed does or does not do >> well, we are expecting the fed will continue to hike rates at a measured pace and more than the market is expecting so my

colleagues on the economics team are expecting we see four rate hikes next year. so that is our base case assumption but obviously if the -- we see a policy mistake by the fed, that's one way bull markets can sometimes end at the hands of the fed i think the fed and trade will be two of the key variables that are big drivers of equities next year. >> four rate hikes, keith, sounds aggressive given this current market volatility and the darkening outlook for the global economy what can the market handle in terms of more rate hikes >> i think we've heard from chair powell over the last week walking back some of the comments about the neutral rate and i think equity investors and investors in general pricing out that risk of overtightening and we hear comments from other various fed members. work we've done suggest the that rates go above the level of nominal growth is when we've gotten the signal for when the economy is starting to turn.

and that would be over 3.5, 4%, and we're still a long ways from that. >> in terms of high-quality names, jill, where do you put technology in there? that was the growth engine that's where we saw the earnings growth that's where the high-quality companies are but they also stand to lose if this trade war does intensify with news like this of the huawei cfo and founder's daughter's arrest. >> right it's interesting tech is one of the most globally exposed sectors, tech industrials, many areas will be at risk if we don't see a resolution on trade and see a further escalations. from a quality angle, tech looks good, especially given the sector change and you've seen the high growth secular growth internet companies come out of tech and move into communication services so the tech sector is for more mature tech companies, it looks good from a quality

angle. it has stable earnings these tech companies are increasing their cash payouts, becoming more attractive to income-oriented investors. it's the cleanest balance sheet sector within the s&p 500 so more cash than debt. we think -- we are overweight tech and we think the sector could hold up well in the environment. but trade is a risk there. >> tech over communications services with the dow down 455, keith and jill, thank you both for joining us. a quick programming note, the reason i'm here in d.c., we have an exclusive interview with imf managing director christine lagarde. perfect day to have her on she had a front row seat to these g20 trade talks over the weekend. we'll talk about the state of the global economy they warned, remember, several months ago that things would not be as good as originally forecast we'll get an update. you don't want to miss it during the half time report, noon eastern time carl, back to you in the meantime. >> sarah, thank you very much.

when we come back, oil is sliding. seeing cutting output less than expected we'll take you live to that opec meeting in vienna. all over this global selloff, all 30 dow stocks are down, 10 year below 285 now as we go to break, look at the big names performing on the s&p. "squawk on the street" will be right back place, the xfinity xfi gateway.

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oil prices tumbling close to 51 after comments from saudi arabia's energy minister that raised concerns a fresh round of production cuts from opec will not go far enough to tackle oversupply brian sullivan is live at the meeting in reason is with the latest brian? thanks very much 51 may sound optimistic if we don't get a deal and there's been some chatter there won't be a deal will we get a deal there's been talk about maybe it will be less than expected maybe anything under a million or even a million might disappoint the market which is perhaps why we are seeing this 5% drop in the price of oil and oil stocks right now if we get a million and a half, a little bit more bold than originally expected oil may not only find a floor but perhaps even reverse some of the losses

or even go higher in the session so opec, which has been battered around because qatar saying it's leaving, people saying they've lost their mojo over the last couple years, it's expected the statement itself from opec, guys, needs to be forceful and it needs to be clear and that might be just as important as the actual number for the cut. opec saying we're still here and we still matter. i think the broader question that you have been talking about all day on cnbc is really what is the donkey and what is the cart is the macroeconomic situation, the slowdown, is that pulling the cart or is it supply and demand remember, there are eight countries, guys, that have waivers from the u.s. government to buy iranian oil so we thought a couple months ago all this iranian oil will be taken off the market you can go to the government and you can request a waiver, eight countries is gotten those so there's a lot more iranian barrels out there than we thought. this decision could come down at any point, guys. 1.5 million could be the bold call we'll have to wait and see if

opec even makes a call today >> oh, boy, brian. we're glad you're there. we'll come back to you early enough and brian sullivan is in vienna meantime, the president weighing in on the opec meeting on twitter saying the world doesn't want to see or need higher oil prices and this the cartel should keep reduction as is. this as we continue watching energy stocks tied to oil's recent drop. the vector oil service is etf down again today, almost 4%, more than 30% so far this year joining us at post 9 in a cnbc exclusive is lord john brown, former chief executive of energy giant b.p. great to have you back when oil asks whether opec has lost its mojo, has it? >> i don't think so. if you look at all the things that are changing in the world, one of the surprising constants is opec. we've tried to write it off many times but it's around. right now it has a subproject called the cooperation of saudi

arabia and russia on oil pricing and supply but it will -- as it always does -- find its way through this because those in opec need higher prices to keep going. the rest of the world would like lower prices to keep. >> how high do they need it? >> they're happy around $70 a barrel i would think this is brent not witt -- wti. >> will it get them there? >> i think so will the changes in globalization, in supply chains affect demand so a lot of people who don't

have enough energy in the world and as they get richer they di man more. >> you mentioned how things change but opec has at least stayed steady. >> well, up until now the other shale basins have been responsive to price so they can turn up, turn down and they've actually limited the price rises by -- as the price goes up and vice versa but looking at this over the next three months, u.s. is a very big oil producer. the biggest in the world now, but it's just over 10% of world supply long term, we'll have to

figure out where the oil comes from other than from the shale that requires investment which is not forthcoming at the moment. >> investment in more shale? this is a brand new basin. >> is that why you here in mexico upstream? >> yes, we're going to make the

biggest independent oil producer -- oil and gas producer in europe it's just gone into mexico where we have to invest to get the oil out the president of mexico said he wants to see people invest to get production not speculating to make money. that's what we'll do we're investing to get production out of mexico. >> when you think about the long term, you're bullish on the commodity itself in terms of the need for it, the use for it, and the rising demand for it with the growing population that is going to have access to it i think the increase of demand for oil will moderate over time because there are other ways of getting automobiles around the streets and they will all come into play over time. we tend to overestimate the speed of impact to change things

like automobiles, generally the way which energy is used it takes time. but we'll be needing oil for a long time. >> reminds me of something written in the past week five years ago there were all kinds of promises of drone delivery we'd be seeing by now and that curve is longer than we thought then and you're saying the same thing about evs >> i think so. you can't rule it out but absolutely not rule it out because we improve technologies but technology takes time to be improved to the point where it's shrink wrapped you don't want to buy a car that's experimental. nobody wants to do that. we want to get in an automobile, turn in and move into places where we can fill it up with whatever we need and we don't want to hang around waiting while it fills and we want to be safe and secure. it's a great piece of technology but it's shrink wrapped. >> given how long you've operated in, there seems to be

more of a focus on esg as we call it. how important is it. how much in your current role do you think about your changing investor base in terms of the way they view investment and the world at large. >> certainly europe is taking more action in this area but it's only europe the rest of the board is in a very different place look at the co-2 statistics based on growth in china, india and the united states. >> more than ever this year again after last -- >> exactly so i think two things. we need to make sure that we don't when we produce gas and we'll be producing 70% of our production and gas we don't let it leak into the atmosphere. methane leakage is very damaging to the environment and most big oil companies are taking action. the second is recognizing we need oil and gas for the long term we have to do something, which

sounds a contradiction we have to take the carbon out of hydrocarbons and the way we do that is capture it and store it carbon capture storage and use the things we should be spending a lot of money on getting right and that will happen overtime. >> we've been cautioned to watch 50 as a price in which corporate credit risk gets interesting is that -- do you share that view >> i think we have to get lower than that. a lot of people's break even has come down because one of the most important things is in the oil and gas business it's not just price, it's cost and you have to get cost down to the lowest possible level. the industry generally has responded well so this is different from the price collapse of the past. >> please come back. we could use the help on this one. very difficult to read right

now. >> very difficult. >> thank you. >> pleasure. up next, the white house hosting a round table with some of the top names in technology we're going to take you there live and we'll look at the major averages in a day in which stocks are sliding significantly. though interestingly, the nasdaq comp holding up the best

good morning, i'm sue herera here's your cnbc news update at this hour. five marines are missing after two american military planes collided in midair and crashed off the coast of japan two marines were found, one has died the other is in stable condition. the u.s. ambassador to japan confirmed the accident happened during a refuelling exercise. >> i got tragic news that an air-to-air refuelling exercise off the coast of japan involving a c-130 cargo ship with fuel in

an f-18 have crash ed. >> affected lots of ibuprofen may have a higher concentration of ibuprofen and are being recalled and thousands of people pay their respect to george w. bush as he lay in repose at a houston church where his family worshipped about 1200 people will be at the church for his funeral sarah, i'll send it back down to you. >> we are watching a broad market selloff this morning. one stock getting hit particularly hard is signet jewelers the jeweler topping revenue estimates and same store sales

growth but the stock on price for its worst day since march of this year. i had the opportunity to talk to the fairly new ceo who has been trying to engineer a turn around she says she's done three quarters of a transformation but addressed the concerns that wall street has she says look, we're dealing with softer uk spending on the macro side of things, sales tax changes which they're still trying to get the right formula, accounting changes as well all blamed for i talked to her about the consumer environment and said wall street is worried right now about slowing growth are you seeing evidence of that? she said the company is seeing a bigger shift toward valor yen station. in other words, consumers are going for bargains and looking for promotions and at lower-priced products. remember, signet is the parent

company of kay jewelers, pagoda jewelers fourth quarter is very important for them obviously the holiday shopping season saying we are seeing a more competitive and promotional environment so just another reason for worry around signet which had been seeing improvement in the stores and in the results but the stock is down 25% with this big slide today so far for the year. >> indeed, sara. as we go to break. we're an hour into trading dow down 477 ibm the only component that's barely green "squawk on the street" is back in a minute. don't go away. the future of technology investing

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rick santelli is breaking down the economic data we have jonathan from credit suisse joining us as well and dominic chu is watching the hardest hit sectors but we'll begin with the broader markets and talk about this selloff. by the way, biggest two-day drop in the yield we've seen since may and the vix hit 25 which has been a favorite target of jim's if you're looking for a pivot. >> let's dig in more we're joined by the chief u.s. equity strategist. and lou pantadosi, the portfolio manager and head of eton vance growth team. jonathan in terms of your current read given the increase in tension, does it figure into

how you feel about stocks? >> i'm conflicted. i'm quite bullish on the backdrop on the other hand, i was surprised at the news out of the g20 meeting was that everyone was going to hug and put off more tensions. >> we had a one-day respite. >> it's a long-term issue here which is intellectual property and access to chinese markets and basically a lopsided agreement and i think it goes beyond are we going to tariff things over the near term rand we going to get to a point where this is a better situation and i think it won't be something solved in 90 days. we have to get used to. >> that how does that affect your overall view. >> in the near term, what you have is a lot of companies are

stockpiling inventories. even if things get uglier it's not as disruptive as you think but volatility probably stays higher. >> your general take heading into the fall has been earnings are great and likely to stay strong and your target has been aggressive as a result 3,000? >> my call was that next year we were going see a 7% to 8% eps number because this number is higher by taxes and stimulus and oil prices and the same thing with the economy so next year i think the deceleration is not properly characterized we're decelerating back towards a reasonable sustainable trend from something we knew was not sustainab

sustainable. i think stocks probably will be great on that. we're generate ago boat load of jo jobs there's more income than inflation and it's beginning to squeeze corporate margin bus it's not jet shown up as a problem. next year it will start to touch corporate margins but not yet. >> how do you run a growth portfolio in this environment? what do you find yourself thinking about on days like today? >> on days like today when you see the volatility up i think

the most important thing to remember is you need to have an extended investment horizon. we're playing big picture secular trends these are the companies with strong secular tail winds behind them. >> so are you using days like today and/or the ones we've seen lately as opportunities to buy more of what you own do you ever get scared out to the extent that this trade war continues to worsen and growth is impacted in terms of the ability of companies or desire to spend money does that scare you out of names? >> i think we take every case on a bottom-up fundamental basis. we don't think of tech as one monolithic space or faang as one monolithic space each company has its own

fundamentals and we base our decisions on our fundamental outlook for that company. >> all right that said, i see alphabet, amazon, visa, coca-cola is amongst your significant holdings again do you on weakness add to them or do you want to be in an environment where you raise more cash >> in this environment because we've had dislocations in the market, i think a basket approach -- sorry, a barbell approach makes sense you've had cyclical companies that particularly within housing, within autos that have had huge corrections, 30%, 40%, 50%. if you don't foresee a recession, those could be good opportunities. on the other side of the coin, areas that are a little bit mor stable, areas like health care, look attractive as well. but focusing on that secular bucket, that's the longer term

opportunity and where we tend to stay through thick and thin based on positive fundamentals, of course. >> david, i think the bigger issue here is not for a growth guy like lou, i think it's for a value manager because if we don't end up with escalation on trade, it's really cyclical companies in industrials and materials that will see a more -- a bigger impact on their business fundamentals portfolio. >> so you like growth better than value >> i do like growth better than value even though that's not the consensus call when you think the economy is going to weaken up a bit mind you, we've taken down our weights in materials and went from over to neutral on bank. >> jonathan, thank you, lou,

thanks to you as well. >> thank you as we go to break, look at apple. not too far from taking out its november lows of about 170 and change ubs does see its weakest purchase intent for the iphone in about five years. that's a proprietary study they cut their target to 210 rosenblatt cut its target from 200 to 165 dow down 480 about 100 of that is boeing alone. we're back in a moment

the flattening yield curve spooking investors this week how worried should you be about the prospects of a recession find out on tradingnation.cnbc.com more "squawk on the street" is coming up.

welcome back to "squawk on the street," live in washington where there's a lot happening on the business front including top executives from google, microsoft, ibm, oracle and

qualcomm all gathering here at the white house. ylan mui is there with more. ylan, what do we know about this meeting? >> sarah, we are waiting for those executives to arrive that should happen in the next hour, half hour or so. the white house is billing this as a listening session on industries of the future but, of course, underpinning all of those discussions are the renewed trade tensions after the u.s. arrested one of huawei's senior executives. also mounting pressure on big tech over issues like consumer protection, day privacy and broad concern that some of these companies have gotten too big. the white house says they want to keep the discussion narrowly focused on the areas in which this administration wants to establish american dominance that's 5g, ai, quantum and advanced manufacturing but both sides of the administration and industry are definitely trying to navigate a very rocky relationship here and you can tell by who the white

house is putting inside the room among the attendees on the administration side are ivanka trump and jared kushner, of course, but also robert lighthizer and the administration says that is intended to send a message to the message to the industry that this administration has a very different way of looking at foreign affairs, and at the u.s.'s relationship with trading partners we don't expect trump to attend for much of the meeting, but he could drop in toward the end back to you. >> continue to check in as soon as we see the executives ylan mui at the white house. let's get to rick santelli and the santelli exchange. good morning >> good morning. thank you, i want to welcome my guest. we had some data points today. trade deficit widened a bit, still at levels we haven't seen since '08. ism service sector over 60

we had soft headline on durables, factory orders, transportation, they were better summarize the general feeling in the marketplace. >> the u.s. economy is slowing, spillover from overgrowth weak nls. the market is trying to price a slowdown with a fed that continues to hike. the reality is u.s. data may show signs of slowing, but this is not excessive slowing, it will look like a soft landing. a lot of the financial markets are taking more extreme reaction to data than was merited. >> extreme reactions shocking markets have extreme reactions. look at all of the things dangling many believe the fed will not slow down, although the interest rate market is arguing they will we have gotten in the 280s in 10s. are they going to want to raise

to create big inversions >> this is the big dichotomy we think the markets are having volatility because it seems to believe the fed will keep hiking the bond market is following a different message. look at the outperformance of the five year that we talked about, it tells you that it is sensing out a fed pause and fed on hold awhile it is a little difficult to see i think the fed continuing an aggressive hiking cycle when commodity prices are going down and inflation breaking is going down, and seeing more evidence it is not recession but global growth slowdown. >> in january, i remember many saying the u.s. would turn the market and help global trade what we end up with is the exact opposite some of the slowness outside effecting the u.s. but you're right throwing the baby out with the bath water is something markets always do. would you be buying into this in the equity markets >> i tell you about the credit

space. i think we're seeing opportunities developing, bbb, u.s. credit, high yield. like you're saying, the baby is thrown out with the bath water seeing volatility in some things and dragging it wider. if we end up with a fed with a little slowdown in the hike cycle and growth stabilizes. credit should be a better environment. next year is about slowing growth definition of neutral is when you proactively make big inversions thanks so much carl quintanilla, back to you. >> i'll take it. carl somehow disappeared from the desk thank you. more coming up

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all right. sara eisen is in washington, d.c., she will be all over, has been the last hour, all over the selloff. and as well, a big day ahead in washington, d.c., don't you? >> yes, we're going to talk to managing director of the imf ex-chewsively. christine lagarde.

this backdrop will be important on what the market is signaling. they have been warning about slowdown in global growth, very concerned about trade tensions and frictions. but applauded the cease-fire reached in argentina during the g20 meetings between president trump and xi she was there. we'll talk about whether that trade truce was real, whether it will hold up, whether it is realistic to expect a deal in 90 days, and what the meaning of the new arrest of the cfo is in that context, as well as what's happening with bonds and the economy. see you at noon for that >> big story we don't fully understand yet we're all over the selloff dow wndo 585 "squawk alley" starts in a couple of minutes.

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it is midnight in china, 11:00 a.m. on wall street.