one last look at the market before we head off to "squawk on the street." you can see the dow and futures now. down by about 100 points we start off with markets barely buzz in any direction. now you can see down 160 for the dow and down by 32 for the nasdaq that does it for us today, make sure you join us tomorrow, right now it is time for "squawk on the street." ♪ good morning, welcome to "squawk on the street," i am david quintanilla with david faber and jim cramer at the new york stock exchange. >> down at 150 on the dow. europe is down about a percent 10-yr 288. our road map begins with the missing santa rally.

the worse december for stocks since 1980 all three u.s. indices are in u.s. -- >> j & j is still under pressure >> goldman sachs is under scrutiny malaysia is filing charges in connection of money laundering involving with the state-run funds. we are heading into the final week of trading of the year. mean time, the sell-off on friday resulted in all three major indices this month, the dow and s&p and nasdaq are down 5.5% making their worst start to december since 1980 although there has been a lot of tacti tactical call for a 5% or 10% move in the next one or six

months >> yes, look, this was a soul searching for many of us on friday, we were disbelief that the market -- it is not just by growth it is basically exhaustion i think there is a lot of people say i got to get out because everybody else is getting out. the market is coming down and the analysts also, pretty much bullish. the metaphor for this market is apple. apple is not saying anything it did not matter if tvs, oh, there is a propensity to believe the worse for everything after the closing on friday, we got a ruling on aca, one of the last group that has held up which is health insurance i can tell you that the exposure

is minimal and i believe it will over turn on appeal, that means nothing. so there is a lot of thing that goldman sachs talked about let's wait until it plays out. >> j&j >> if you wait, you will pay higher prices. we are at year end, i don't know if you run it of the disclosure holding where most people at the cuts own j&j or apple. >> you think it was j&j that blocked off the space on friday? >> j&j and merck i have been looking at the stocks and until friday you felt that you really are protected

and you did not get hit by facebook or cyclicals because of china. if the only place to go is american electric power is diminion, it is not a safe market, it is as treacherous market it is the treacherous market that i have seen in many years >> we talked about the under performance of many hedge funds. is this the time of year and you expect that many are also making sure they have what they need on hands for expected redemptions which leads to squaring things up before year end >> well, i have to tell you david, someone you know and knew the time i had for redemption of 1998 people knew my position and they knew i had a big position in connecticut bank and california

bank i had gone up to 19.9 in a montana bank that ted krasinki counted. putting me over 10%. so i had massive redemptions i think david is right if you have not been a hedge fund, getting those letters, i love you so much wire it. it is very bill belichick-like love you or the amazing piece of journal about ge this weekend. i got a lot of love you and miss you numbers, yes, you are seeing that, david. >> now we got this piece in the journal today on the fed, titl d is "fed tightening not now.

we belie the fed is ceased for now, double-barrelled and blitz are higher the time to be more hawkish was earlier in the decade. >> to be fair when people say that but where were you? >> he's been talking for some time now also, the generational concern is one of the big themes of entitlement program that's being inherited by younger generati s generations. >> i am waiting for people to say you know what, maybe he should not make this the world is divided between those who say if he does not raise, he knows something we don't know maybe that's why the feds will roll over everyday if he does raise then what does it mean for the remaining companies who have not been hurt

by lower multiples and worries about earnings we are out there he's in real jam i think that he has to do one and then say our work is done for now. we raise and raise and raise, we are not going to need to raise the yield curve in the stock market is telling us that i think he's reluctant to rely on market forces and i think what he's looking at and all they're looking at is employment that's a lagging indicator >> it is it is a very thoughtful opt-ed piece that's been saying everything we have been saying every singling day >> if the president chose to communicate anything longer than 140 characters, we how old be the writer on this he's out again this morning saying the fed got to not move

>> we got tom freedman and china's policies anyone has read peter navarro's death by china you fiend it hard to believe tht he was at the table where china was. basically the book, they have been with war with us forever and we have been trying to sell them a lot of coca-cola. it is cyclical we got china, the fed, we have slowing earnings and we have so many head winds and tariffs. against that too many people were hired >> too many people were hired. you got 7 million jobs opening going unfilled >> the consequences of full employment is that i think jay powell feels we can't have full employment full employment is dangerous i am a believer that we seem to find work every single month

i recognize that if he plays the paradigm of when we have this kind of full employment, we are going to have inflation, you will see it today. just the time, we are going to lose, this mark was up the eagles is flat and now there is no cause and effect you probably think there is but it is not. >> that's one thing i can cross off my list. >> that's the only levity that i will allow myself today. you want to join the party it is like the donner's party >> yes >> a quick update on j&j of the 10% decline on friday, largest since '02. the company knew for years their baby powder sometimes contain

contained -- they were dancing around the issues of what reuters alleges. >> alex gorsky >> looking forward to that it is an important sit down for them >> i don't want to say just reuters. it was "the new york times." >> it was certainly quite large and had clearly been reported over a long period of time the attorney that i remember dealing with him many years ago. >> have you raise issue about the way he presents his story.

>> j&j got themselves together in presenting a strong response. science and not sensationallism. the title of what they put out ovarian cancer study, and nurses health study and women's health initiative study >> david, it is a lot of studies. they tested them and they found no asbestos. and the process is important for them the $4.6 million judgment they

did receive in july and the stock went down, what 2% or 3% was backup quickly >> well mo moved on. yesterday's hit was so much more force. they got five cases pending. they seem to believe that they have prevailed j&j on appeal and including the $4.6 billion on all of them, jim, it is interesting, i went back and looked at merck. i remember merck sitting there with joe kernen. that stock was getting on the concerns of whether it causes heart attacks essentially. they settle for $4.8 billion 27,000 different cases, i believe it was

>> i remember during the period where, my wife takes it and are you kidding me then i stop and think about it no, because the reuters' reporter on friday interviewed with kelly and melissa we stipulated the last 15 years, there is no way. there was no asbestos. t merck traded down. i think it is a very good example, david >> it faces a tremendous blow back and lost a lot of suits if you read the web of the new york times and reuters it is pretty simple. one, j & j knew it caused cancer because of asbestos.

everyone stipulates that asbestos caused cancer >> my work this weekend which was to the point where i was not able to visit the hospital with my dog but, during this whole weekend, i spent on this thing it was kind of a lost weekend i come back and again, i will have gorsky tonight and i think there were many studies that shows it is safe >> i think that what you just talked about, david, with merck which was far worse. that's a very good analog. >> i can remember we had board members. one of them was our guest host frequently on "squawk box," that

stock got hammered as he points out. they also had other issues with the marking of viox. i do wonder, jim, i wonder this company had a lot of manufact e manufacturing issues >> j&j is important manifesto almost of how it treats its customers and employees. do you this i the company's credibility took a hit with all those manufacturing issues that went through with welden? >> i think gorsky at the beginning of every call says here is where we are and we are trying to get our reputation back and we are trying to get the sales back the conference call was front

and center, this is what we are doing which ill thoug thought wo the hallmark of am lex gorsky. i don't think any of us disadprdisagree with that. a level of certainty that's rarely found but based on facts. i think that j&j, the glow, of the tylenol recall was never undone by the sloppy nature of pennsylvania -- the focus was on new information. david, it is all available everything that came out from reuters was available. the new york times story was damming, i admit >> they ancxiecited an executiv 1991 >> reminding china that our

product does not have any asbestos >> i won't rub arsenic in my eyes come on. no one is saying that the chinese minds contain it is there an issue that i want to hear from alex gorsky, was there any evidence that people were concerned internally memos came out from this litigation and now we know now, when you have one of these case, people, do you they did not look at the memos? they were worried about it because they're conscientious. >> i think we'll find out tonight when we speak to alex. >> that's a big interview with alex gorsky. we'll look at goldman falling into the bear market

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we got 6.5 minutes before we start with trading at this new york stock exchange.

em m emerson electric >> oil related sell-off don't worry. >> china related sell-off, don't worry. you have the end of cycle story. meaning that if you take a look, this is where jay powell says we need to over shoot we are going to need three hikes in addition to december. right there is the vocal moment of what's happening in the market it has been down ever since and no one has been able to refute the end of cycle i picked this company bus it is o is -- because it is the greatest of cyclical. its got oil trying to stabilize it and its got china and the fed and the end of cycle this is the head wind you are fighting if they are in an industrial this sickening decline, david,

this is all about people getting out because they think we are going to have a severe slow down in 2019. so my question is does jay powell know what emerson electric is about and two, can you understand the metaphor? i am looking for the pristine fabulous one where stock is going to say we are going to take, it is emerson. >> that says it all. i am picking a neutral situation that shows you what's happening. >> in the last two months. all right, we got opening bell, five minutes away. stay with us the future of technology investing

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♪he global investment management ♪ each day, brings new possibilities. that's why you need a partner dedicated to helping your company reach its goals. u.s. bank -- the power of possible. you are watching cnbc, "squawk on the street," live from the capitol of the world. busy week, we have the fed to watch on wednesday and still processing the j & j news on friday and gorsky is with jim

tonight. oracle and darden and some other names will be reporting this week >> oracle has not had any volatility they are behind in the cloud they stop breaking out some people say exactly what they are doing with the clouds we like to see it come back. i don't think that there is, we had so many tech companies with good numbers in the meantime, we have micron to speak later maybe that's what's going on the entire tech sector is under siege. the only thing that i thought it is interesting was there was an article today in the times it talks about the initiative that facebook is doing, making content. it was the first article indicated that facebook is not an outlier it was what you ironically might decide is the place to go. tech is under assault

everywhere it is done apple obviously in litigation with qualcomm. >> hard to see right now that's when everything sort of turn and they finally gave it up after what many would have said speculative excess during the course of much of the year but they kept ongoing up and the momentum >> right >> i think it is very sobering because obviously apple comes down a large deal. we have not heard much from alphabet and amazon. the story continues positive i still think apple is the key.

>> that's just wrong i will have gorsky tonight i think that we'll find that j&j will be higher in part, i feel this turns out to be a way to get a lot of people to sue obviously, it is not what reuters intention was. bu now everybody who used it like to create a class action suit that j&j has to pay. j&j has a huge amount of cash flow, it is highly emotional and hard to bottom but it is over done >> at the big board today, subsidiary subsidiary of the --

>> did carson change his name to nick foles >> what a game you mentioned the bb white downgrade of bma, they do site apple. apple products which we estimate of 10% of sales. we see head winds related to the iphone as they had a prior downgrade of that stock not too long ago gaming is 8% >> talk about another situation where the fed, you can say well, wait a second, i don't give a darn that best buy is not selling things well. have you seen those reports? look again, full employment means some wage. you don't think that everything is on sale at best buy should we think of electronics i thought this was one of the

most important upgrades. it really just said, if you look at the raw cost, jp morga morgan -- the actual cost. we had a lot of companies that raise price because of commodities and they peaked. procter & gamble, they do not have to lower, they're going to be able to lower their costs and raise their growth margins because they did not and will not lower the price of what they raise. so your bottle that j&j uses to be able to put its towel which i believe is safe and reuters did agree that the cost of that bottle are more costly than the towel. the narrative that we had against the non-cyclical is one, the dollar,which is atrocious. two, the raw cost.

the raw costs are coming down. >> it is the same logic that you apply to clorox. >> i love that stock >> is the j&j thing equivalent to clorox? no did they go -- don't laugh when you are trying to clean something with clorox and you are worried about it splashing, it is not regulated by the drug company but there are always worries of products that you put out, clorox i think what matters is the raw cost is coming down the supplement business is made in america is on fire. this may be the safest stock unless the news organization goes to work and says that clorox or chlorine >> the multiples is higher than that of many of the so-called growth stock that we follow

here it is arguably triple at this point. >> i don't think apple is a growth stock >> it is eight multiple turns better than facebook intel is cheap >> we should talk -- there is a look at apple. >> it went up. >> apple is not allowed to go up in december. >> christmas falls when? >> there is today's google google that. >> they were traded at lower multiples. >> not unlike proctor. >> what do you think of the ge piece this weekend >> i thought it was fascinating. d >> i wonder if gregg hayes knew

that that was interesting, right? >> they chose to double down on engineering construction by getting -- he put his money behind the weaker. the information and accounting shows you how fundable accounting is. barely notice, there is a facebook, i should have mention t ed of that he noticed of the change in orders >> kpmg. >> when the heck are they going to do that >> we should talk about goldman sachs. we mentioned it at the top of the show the stock is down 2% let's call it another percent or so at least more of the overall group, bigger and larger cap ex. $63 billion market value the latest news is malasian

authorities -- the goldmgoldmand about $6.5 million of bonds and enormous fund. the guy that stole $2.7 billion is in china and nowhere to be found. >> what's interesting is a few things malaysia authorities are saying they're not going to go after goldman for $600 million fee who gets a 10% fee on a bond >> i did a lot of work on that fee. it is obvious that should have been a red flag. although there were man many -- that's a lot of points so to speak that they took is goldman bottoming today >> when you see an enindictmein

could the malaysia company >> it can't. >> these are the concerns that you raise exactly that is there a way that asian authorities can prevent them doing business in malaysia and other countries. >> i believe other countries but people will not do business. that becomes a concern these are the things that you are getting out. the stock trading is 40 bucks below book now >> arguably 180. some people say 7? >> not quite >> it will be 183 right now but when they report it will go 187. if you close the bank, you will have that amount, the government to some degree restraining them from doing a buy back. they do not have a natural defense. i just continue to believe that their compliance was good. you can't have fraud is goldman bottoming today, it

is hard to bottom on this day. i do believe the united states will be solved you know why they are really ham strung i don't think the justice department is willing to let them defend themselves goldman seems silent >> i have no idea. >> what would be the rational behind that? >> keep silent >> because they're the justice department >> the justice department is going to be involved in this they already are >> sorry >> until they take action? i think they'll settle one of the problems goldman has here is you want to write a check to somebody. i don't like the maxwell litigation >> if it is just a check and

that's all it amounts to you can quantify, writing a check then i think there are many who say this is an under valued security here when you read things like this, me malaysia considers the accusations and they're going to seek fines well in excess of the $2.6 billion misappropriated and the profits that goldman made, whether or not it is going to go beyond that. what the justice of department, what if they'll do anything here >> the justice department knows where they were the accountants for enron that if you endiindic you would close. i believe that david raised an interesting point. is it over done? you have to do a lot of work before you are on vinconvinced

over done. what you would need is a warren buffett to say i have been buying the stock and i am going to step up my buy back because i believe that this did not go any higher the writer for the wall street journal money who has done fantastic work how high did it go all right, i guess it is real high that's good for those of us. >> wow audio is giving us some massive feedback >> that was fascinating. >> yeah. definitely >> solomon is not doing the music here >> down eight days and now nine days in a row. >> i work there. wow. do i think their compliance was good i think it is as good as

anybody. do i think you can defraud anybody? yes. let's get out of here and get to rick santelli while they fix this issue out good morning rick. >> yes, it is all good here. this morning we had the weakest empire read since may of 2017. it may be that caught some off guards the market is definitely paying attention. although the paying attention was definitely more of an equity fund treasury continues to take things in stride look at the one week of twos you can see the volatility did not get too crazy around 8:30 eastern, two days of 10-yr, you see the same thing and opening the chart up to november this is fascinating whether you look at t2-yr or 5-yr or 30-yr. if you open it up to august 1st, clearly see what i mean. the left side is from february through august had a lot of work

in the 280s and around the 270s that many traders think it is not only substantial but the intraday lows, many days in a row were not able to get close to that level. dollar index, it is down of a third of a paeercent today it is 97 -- it is 97.50 for a high close going back to summer of 2017. it did not manage to get that close friday and it is down a bit. as you see on the november 1st chart, it is trading very firm that should be something we pay attention to also, at 10:40 eastern today, china continues to loom larger, we'll speak to peter navarro of all the relevant issues regarding trade, china and extension of tariffs and how this may fallout david, jim, carl, back to you.

>> it will be fascinating. death by china >> oh yes. >> the coming china wars >> we are on pace of the lowest close of the year. dow is down at 311 let's get to bob pisani. >> good morning carl down 300 points. not a good start to the week last week of deteriorating technicals we have a pattern of the s&p 500 of lower lows and lower highs that really started in the beginning o f the quarter. one reason technicians are not terribly happy sectors today, defensive, anything that's slightly off, consumer stables on the defensive side energy is lower and healthcare is lower and of course, the banks and most of the big banks are down again today here. i want to point out. the healthcare i lows lower bec of the ruling on the affordable

act. you can see centene and united he would and johnson & johnson >> banks, new lows everyday all the major ones, bb&t and sun trust banks is there any chance for a rally? the one this week everyone is talking about may come from federal reserve. remember it is just the rate hikes. september, there were three rate hikes expected for 2019. everyone is expecting to sound like one or possibly zero, we'll see how the opinions go on that. that seems to be the biggest chance that we got for a rally in the middle of the week. what's moving markets now? we told you the big three things, it is trade, tariffs and the fed and slower growth. two of them are largely

positive trade negotiations are ongoing most of the headlines are on the positive side on the last week and a half or so there is two out of three positives. right now the markets seem to be gripped by the slower growth narrative. at this point, convince is going to be some kind of slow growth out there. we are talking about 8% or 10% earnings growth next year. there is no big drop in the numbers. the market is aking like it is going to be zero to a couple of percent. this has happened in the past and it has influenced the market remember back in 2015, if you look at the numbers there, we went into 2015 after a good 2014 with slow earnings growth and in the middle of 2015, it went negative you see that we went negative and the market did react to those kinds of slower earnings growth numbers there in 2015, that's when the mark, the only down year that we had in ten years, the s&p was down

7% in 2015 what we called then the earnings recession. that was the word we have not used in a long time. s&p 500 performance in the last few years, 2015 was the only down year that we have seen the last 10 years. 2018 so far, we are down 2.5%. mark is a discounting mechanism. earnings growth expectations will be lower for 2018 dow is down 280 points >> bob pisani looking at the dow down at 269. all indices are down for the year anything below 25.81 is the lowest close for 2018. we'll be back in a moment.

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for amazon, it's not just all about pushing for growth

according the journal today, they're focusing more on the bottom line by targeting products they see as unprofitable inside amazon, the items are known as crap, short for can't realize a profit products are sold directly by amazon and they're heavy and bulky and costly to ship, characteristics that make for thin or non-existent margins. >> very interesting if you run a supermarket, kroger, they probably are the best single product you sell, snack foods because they turn over each month and you have to pay pepsico once a month soda moves fast it so's amazing amazon recognizes they can't compete but they'll compete anyway and i think that that is one of the reasons why the stock is down. that's not a good reason to sell it but no one cares remember, go back to the moment we find ourselves in time. this is not a good reason to sell amazon.

there's a piece today about weak liner board prices you could easily attribute that to a slowdown in amazon but the reality is so many plants opened because they wanted to cater to an amazon. i reiterate amazon is a great story because of amazon web services which is vastly superior to everybody else and because the advertising which is coming on very strong so they have a loss leader one of the great things about walmart, they've almost always has loss leaders that is loss leader. i don't know why suddenly this is so shocking >> even some commercials on tv for aws. did you notice that? >> yes and obviously amazon documents there's a 26% chance of that pass being bought and i love that. >> next-gen stats. >> at the same time, how about walmart adds talking about food? another weakness for amazon. the long knives are out for

amazon. >> we're going to get stop trading in a minute. dow is down 286. 2570

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time for jim and stop trading. >> i want to point out a salient fact that should make you want to buy goldman the government of malaysia, the one going after goldman, gave them assurances that that money would be used for legitimate investment the government suing them gave them written assurances. the government lied to them so those who want to keep selling be my guess. i think goldman wins this one. >> fascinating story overall there's a great book out and it's worth reading >> it's rather odd, let's say the u.s. government made assurances that that money would be used for good purposes and the u.s. government sues you, we would say that sounds trumped. oh, geez, i used trump. >> you have gorsky tonight, jim. >> yeah, blew up my show to speak to him. >> how much does it matter we've fallen out of this 2600 box. >> i think market is a

nightmare. and i think that nightmares don't last forever like the nightmare i have when my stupid damn dog ate whole coffee beans it -- >> wasn't pleasant >> our rug is all charcoal you could have a barbecue on our rug. >> jim, see you tonight, big show, "mad money" 6:00 p.m. eastern time when we come back, white house trade advisor peter navarro th thdodo 2wi when it might be time to buy or sell? with fidelity's real-time analytics, you'll get clear, actionable alerts about potential investment opportunities in real time. fidelity. open an account today.

welcome back to "squawk on the street," i'm diana olick with breaking news home builder sentiment dropped four points in december to 56, the lowest level since may of 2015 and a steep drop from 74 one year ago this according to the national association of home builders, wells fargo housing market index. anything above 50 is considered positive sentiment but this is a big miss it's about affordability even though mortgage rates pulled back slightly chairman randy knoll said in the release we are hearing consumer demand exists but customers are hesitating to make a purchase because of rising home costs of the index's three component,

current sales conditions fell six points, sales expectations in the next six months dropped four points to 61 and buyer traffic fell two points to 43. regionally on a three-month average builder sentiment in the midwest dropped two points to 55 the west and south fell three points to 68 and 65 and the northeast plunge eight points to 50 back to you guys. >> diana, thank you very much. welcome back to "squawk on the street." i'm carl quintinilla with sara eisen and david faber at the new york stock exchange. dow is down 200 off initial lows but we are on pace for the lowest close of the year rull goes in russell goes into a bear market. >> our road map starts with another rate hike coming investors keeping a close eye on the fed ahead of this week's all-important meeting. and continuing signs of progress from u.s./china trade talks. peter navarro will join with us an update. plus malaysia is filing criminal charges against goldman

sachs over its sovereign wealth fund scandal we'll give you the details stocks extending the selloff on friday. their worst pace since 1980. the dow, s&p and nasdaq are sitting in correction territory. joining us, ali mccartney, managing director at ubs wealth management and larry glaser at may flower advisers. what do we make of this action following friday's price action? >> i think a lot of us hoped we would see something a little more exciting this morning but i think nothing has changed. we have a fed meeting that we're hoping to see some dovish sentiment from we have more talks on china until we have some sort of more positive deliverance or rhetoric around that i don't see the market settling we seem to have no bottom and we can't seem to stay with a run here so i think we've got to look at trade, the fed policy and we have to get

back to fundamentals and get away from negative sentiment keeping us down. >> are you part of the group that sees a big air pocket here until -- i don't know, 2400 gets mentioned a lot. >> yes i think what we have seen is a correction at the end or near the end of a bull market not the end of a bull market so i think one of the things happening right now, the fed said they see a 20% chance of a recession in six months. ubs is on bar with that. we still see a lot of value and growth we see 25% earnings expansion this year. we're looking for five next year but there are heavy things from geopolitics to trade to china weighing on the market and until we have clarity around these things i don't think we'll sustain anything. >> let's talk about clarity this week, larry. the president is out tweeting again about the fed that they shouldn't raise interest rates with a strong dollar and the global economy how it is

if the fed goes against what the market expects and does raise interest rates, how would the market take that >> it's fourth and goal. fed chair powell has the ball. this whole market comes down to what play does he run here but we need to acknowledge the elephant in the room they're clearly that the conspiracy theorists are in full force. the doomsday profits are out in full force even ron paul, the world is going to come to an end here and what's important when we think about the fed and how this weekends up, think about how we got here we got here because of the death of fundamental analysis. the death of fundamental analysis, we have lost our willey loman on wall street right now. no one wants to do hard work everybody wants an easy answer from the fed and everyone else it doesn't work that way this is when investors need to focus on what they can control. they need to do that hard work

and bank stocks won't solve your problems here. small caps aren't a place to hide from the global recession you need to do the work. that's what is refreshing is the fed is going to give us a moment to take a deep breath and realize main street and wall street are on two totally different planets. main street doesn't care about an inverted yield curve. everything is sold out at the malls, you can't get a parking space and they're working. >> there's a lot going on in that answer, larry. >> that was a rant that didn't answer my question. >> i like the death of a salesman reference, though attention must be paid, larry, but i don't know where to pay it given what you just told me. it was all over the map. >> my question is what would the market do if the fed doesn't hike rates >> it comes down to the fed and i think the fed chairman will do the right thing. this is what legends are made of it's the tone, not the action, i think the tone is critical the market discounts these items well in advance, it doesn't

matter what happens in december. it matters what happens next year and listen, the bond bubblistas have misled people to think the fed were the problem they said treasuries were the problem. treasuries may outperform the s&p so treasuries are not the problem. the fed isn't the problem. the fed isn't the one that drove up the deficits, it's congress and washington so i think we should realize the fed won't solve -- >> that leads us to a discussion of the shuddown deadline at midnight on saturday how important is that? >> the issue that we're finding right now is that the market seems to think everything is important but not important enough to make things actually move forward so i think as was alluded to, the rhetoric that comes out on the 19th and whether or not we have a move will be important but what happens in 2019 will be more important so the market is

pricing in one head hike in 2019 we have two at ubs there are some organizations that are thinking three, four, and five before a 2020 move backwards so anything we get in the next couple years, whether it's around trade -- we have a lot of stuff going on. for example, if you think about our clients, they're investing mostly long term they're going to be individual nova scotiaors so they'll -- ins mutual funds have had a bad year but are passing through gains to a lot of clients clients are figuring out what the ramifications of the tax package means for next year so there is a lot of unknown on the individual level it's unclear to me i've heard on this show and others it's the institutions moving the market. some people say it's the individuals moving the market. i'm not sure who is. everybody is moving it down, just not clear who's moving it up and as we get into a week before the holidays, there's nothing to tell me that will change.

>> you surprised the chinese have resumed their soybean purchases? they said they'd consider changes to made in positive. >> all positive. >> they suspended the retaliatory tariffs. didn't get us anywhere. >> and that's what all of us have been talking about. there seems to be a momentum that takes this down in a second and nothing that makes us happy or complacent enough to take it forward. >> we'll watch, it will be a big decision out of the fed. talk to you soon. >> thank you. >> we are watching shares of goldman sax. malaysia has filed criminal charges against the firm and two employees. wilfred frost joins us now it goes from bad to worst. >> malaysia prosecutors have filed criminal charges against goldman sachs saying they committed gross violations of securities laws in relation to the 1mdb scandal

the attorney general said goldman sachs had fallen far short of any standard and they have to be held accountable. they've filed against two former goldman sachs employees. malaysia is seeking more than $3 billion worth of fines that's more than the $600 million goldman sachs made from the bond issuance that they oversaw for 1mdb of that original $600 million fee, the attorney general said it was several times higher than the prevailing market and industry norms goldman sachs responded and said, quote, we believe the charges are misdirect eedmisdir. the stock is off more than 2% today. a fresh 26-month low why? this highlights goldman sachs is a long way from settling the issue and has two international authorities to negotiate with. they're being accused of

criminal wrongdoing for the first time however not intentional wrong doing at the highest levels stock down 27% since early november it's lost nearly $15 billion in market cap since then. >> and wilfred, it's lost more than the rest of the group banks overall, as you know better than most, have suffered in general of late we were having a conversation earlier with jim cramer about the risk in terms of the justice department where's the focus here beyond a settlement that costs money? what else is the risk? >> absolutely fair question and i've talked to lots of analysts on this. not one of them thinks the fine will be higher than the market cap they've lost so the question goes on the why is the market discounting things so much

it's twofold do they lose business because of this is that from zosovereign wealth funds or just southeast asia they've taken a big hit, they were number two or three ranked in 2012 and 2013 this year they were seven in that region. do costs rise significantly going forward? whether that's self-imposed internal compliance reviews or enforced compliance review, sort of administration costs and there we can think of comparison with wells fargo two years on still facing lots of costs that they're trying to shake off. big difference one company admitted wrongdoing. goldman sachs haven't. >> good story, thank you for that, wilfred frost at the floor of the new york stock exchange when we come back, shares of j&j down again after the report on friday said the company new for decades about asbestos in its baby powder. don't miss alex gorsky with jim

at 6:00 p.m. eastern time on "mad money." white house trade advisor peter navarro will talk to rick santelli later in the hour as we go to break, look at the top laggards of the s&p which is on pace for i wsttsor close of the year. the future of technology investing lies beyond the tech sector. it's about technology transforming every sector. ♪ at pgim, our bottom-up approach uses a technology lens to identify long-term winners. from energy... to real estate... to retail. finding such opportunities for alpha is the true value of active investing. and around the world, you have a partner in that pursuit. pgim: the global investment management businesses of prudential.

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welcome back to "squawk on the street." time for our etf spotlight mike santoli is back looking at financials falling deeper into bear market territory. >> carl, that's right. the overall sector down more than 20% from early year highs if you look on a year to date basis, xlf down 13% to 14% the kce is one i like, that's the capital markets etf, asset managers, investment banks, things like that, they have been hurt a lot but the pure banks are also at the center of this i think this selloff has gone beyond trying to explain it with oh, it's a flat yield curve, it will be a slowdown next year in terms of the overall economy into asking what else might the performance of the banks be telling us whether it's concerns about corporate loans, that is

feeding in you're hearing people saying tax laws look cheap but unwilling to find a positive catalyst so this chart shows the flow into and out of the xlf, the s&p spdr financial sector etf from renaissance macro showing we've dipped into a heavy liquidation phase. it shows you money coming out of the eat jeff similar to previous periods when you've seen the xlf getter sold. the market has been relentless, we're start if people are overdoing it flow wise but so far not a lot of relief with the sector feels like a lot will rest on the fed decision and the accompanying tone and statement with banks and other sectors

shares of johnson & johnson down after the reuters investigation into its talc products stock has lost $40 billion in market value clearly it's still lower joining us is senior associate dean for leadership studies and cnbc contributor jeff sonnenfeld welcome back you have studied so many corporate crises, where does this fall? judging by the stock price it looks severe, how would you characterize it? >>. >> i think it's an overreaction and a gross distortion you called it a bombshell investigation. it's a bombshell all right but there's no investigation it's a stapling together of the plaintiff's half-truths woven together in a misleading tapestry that doesn't tell the story. as you know, i've been partially critical of anybody from tesla to dennis kozlovski and the

earliest days of enron, you name the scandal, theranos, i never mince words, i have no relationship with johnson & johnson, they've never offered me a dollar, they don't even appear at my events yet they are being badly treated here. >> what is so unfair >> what's so unsurface-to-air a mischaracterization of the research there's no researchi tal to ovarian cancer or mesothelioma any case where there's been a jury it's been overturned on appeal there's a newer case from this systemer, the reuters article talks about a sad situation of a victim dying of such cancer and yet she had a form of asbestos that was linked to her cancer that has no relationship whatsoever with talc and even

her own can of johnson & johnson baby powder shows no asbestos in it the company has voluminous research from scores of universities and government agencies showing there is no link but they put in stuff from a half century ago of internal ruminations where a company was asking do we want to make sure there's no connection. they don't put in the article that they went off and research and found out they could critique any such research, there is no problem and they can validate for the last 15 years this is a safe product ironically, the period of time that they are drawing on these internal memos is -- it was the period of time where jimberg of johns johnson & johnson was the ceo. he said the high watermark we know in the tylenol recall at that time with the product tampering challenge.

he stood for the paragon of institutional trust. the pillar of integrity, public health being -- public health company but this is the most valuable resource that any company has is institutional trust and of all companies to attack, this company and i think it's a gross -- i'm a -- the lesson here is what does management do to respond in this era of fast moving social media? >> well, they are responding and doing so forcefully this weekend. they released a long response to the reuters story, although to be fair there is the "new york times" story that came out december 14 as well. here's part of it talking about the safety of baby powder and the houses of women who have been -- there have been studies in terms of the safety of talc and their sources and the processing of the talc for regulators, they have gone about trying to combat them this weekend but the "new york times"

says executives at j&j war worried about its quality control of talc. that they did raise red flags. there's always the imprint of the plaintiff's bar here a judgment last july but you're talking about the '70s and i'll take you back to not that many years ago with the manufacturing issues that j&j had. those are serious. >> i agree and you asked this to jim cramer whether or not that has in any way diluted their reputation from the jim burke era and i agree with you on that one. i think bill weldon did them no great service for enhancing the reputation that they had but they have had i think a great comeback from that period of missteps. i think alex gorsky has done a terrific job i wish they'd come out with the ceo and chief medical officer

the way the legendary jim burke and his team did and i'm glad gorsky is going on with cramer tonight. but you mentioned the other studies, even that the "times" has focused on, but it's half the story. it's going back half a century where people used the language clumsily about all fibrous materials were asbestos, which they weren't but further more the purification in the cosmetical sk different than the questions about other commercial talc. >> jeff i want to bring up my own anecdote we are in a place where we can debate the legality here, we can debate whether they knew, whether there was real medical data and science behind this, but the bottom line is these stories keep coming and coming and johnson & johnson is one of the most trusted brands for babies guess what there are other choices on the

market right now that are advertising chemical free, paraben free, theyal thphthalate how much of a bigger halo effect does this have -- i bess that's too positive of a word -- when it comes to johnson & johnson, one of the most trusted brands for babies. >> i would use the word cloud or shadow instead of hail low. >> yes, that's more appropriate but you're right this creates a cloud of confusion the company has created a line based on corn starch and what the reuters article misleadingly does is they try to create the illusion that they've created the alternative as the healthier and safer one. the corn starch is for people with allergies to the talc and it's more absorbent. what's interesting here is that

if this is the scientific issue the company claimed you would have millions of cases of people coming down with these diseases and not these unproven cases that they come up with what we learned from the america battle is when you go to individual health on case by case basis you realize in most cases the lawyers have come up with somebody who has problems with other fronts and that's the lesson from vioxx and ken frazier fighting that so ferocious ferociously. where are the millions of cases we would have if this were true. how about the other talc makers? how come the other baby powder companies aren't mixing here it's because the plaintiff is going where the cash is. like the argument about big bank robber, why do you rob banks that's where the money is. so they're not going where there's scientific risk. you see the competitors not hit.

this is seen as a shakedown scheme if they weren't, all these lawyers involved i wouldn't use the term extortion however that's part of what was going on with johnson and job son in the tylenol real there was a guy in chicago threatening that unless they paid him a million dollars he would continue to poison tylenol capsules so the plaintiff comes with their own version of a shakedown scheme and they go after successful companies working in public interest and activists have their own version of doing this kind of thing. >> true, jeff. talcum powder is in a lot of koz medics, thank you for joining us and sharing your opinions on this high-profile scandal.cosmeg us and sharing your opinions on this high-profile scandal. and don't miss the interview with alex gorsky joining cramer 6:00 p.m. eastern time. >> when we come back, crude

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jg wut co well come back to "squawk on the street." session low is down 315 on the dough so you can see down 170. s&p back above 2581, the lowest close for 2018 let's get to sue herera. good morning, sue. >> good morning, carl, good morning, everyone, here's what's happening at this hour. president trump criticizing jerome powell and the federal reserve for raising interest rates just days before the central bank considers hiking rates again. he tweeted that, quote, it's incredible the fed is considering hiking rates when there's no inflation and the outside world is blowing up. end quote.

a powerful bomb exploding outside a private greek tv station in athens causing extensive damage but no injuries the blast occurred in the early morning hours after telephone warnings prompted authorities to evacuate the building. no one has claimed responsibility the israeli military partially demolishing the home of a palestinian accused of killing two israelis in a west bank attack two months ago protesters arrived at the military carried out its work and clashes between the two sides erupted shortly thereafter and here at home, goolg gles spending $1 billion to expand operations in new york city, creating a new campus along the hudson river that will allow it to double the 7,000 employees that already work in the city. the campus will exceed 1.7 million square feet. it should be completed by 2020 which mean there is will be more traffic on the west side highway. that's the news update this hour sarah, back down to you.

a federal judge ruled the affordable care act as unconstitutional in a case that's likely to go all the way to the supreme court and an hour into trading stocks off big lows of the session, still every sect knorr the s&p is down. financials doing the least worst. consumer discretionary at the bottom of the list "squawk on the street" will be right back

with us now, bank of america's head of global commodity and derivatives research francisco, nice to have you. is this where we're going to stay, towards and through year end in terms of price? >> yeah, i think we've seen obviously opec plus coming in and curtailing the down side risk on oil prices for now and once the opec plus put has been

set up, we are waiting for the powell put if we get a powell put this week, we'll start to see prices higher and our view is that heading into next year prices will trend toward $70 a barrel on brent, towards $59 uti as long as global growth stays around trend we see global growth around 2.6% that should get us to that level of round 5970 wti brent respectively. >> we had so many people come on during the course of the period that oil was around the high 60s or low 70s thinking we would go as high as 100 and since then we've caught up with the story, whether it's the number of waivers for iran or saudi production or our own producers

here of shale. do you have a lot of confidence at this point in your forecast. >> well, the four largest producers in the world, russia, the u.s., saudi arabia and of course iran are going through an extremely volatile six month window in terms of production and obviously that's made things very confusing for a market. obviously we have a president who likes to tweet so that's also created a new layer of uncertain any price direction but on the whole the supply-side has been fixed and the demand side is of greatest concern right now although, again, i think that unless the fed tightens dramatically over the next few months and keeps letting the balance sheet roll down and we'll get a lot of guidance this week we should get a better 2019. the dollar has been very strong.

that's been another factor holding oil prices back. the dollar is a big important factor linked to that situation so i think all the eyes are on the demand side. >> on the demand side, you have president trump who repeatedly says he wants to see lower oil prices and then you have opec which now looking to cut wants to see higher oil prices who has more of an influence on the market >> well, i think it's clear that the $80 number for brent, $75 wti number are maybe too high for trump to accept. we've never seen the saud dispump i dispumping 11.3 million barrels a day so we've had record levels historically the highest level was 10.6 so the saudis put an extra $700, how barrels of oil

in the market. so i think that's clear that president trump doesn't want higher prices and he's managed to achieve that. on the other hand, remember, saudi arabia cannot live with $60 oil and much less so with $50 brent. it comes in the form of the very same military equipment president trump spoke about so they need the money to buy it back so -- if you know what i mean there's a certain level to which way prices can go. >> what about production in our country. budgets are being set, i would assume, based on a certain price. are you expecting more production out of the shale -- and this coming year or will we

stay flat? >> well, we're going to get more production it's in terms of the growth rate. we think growth rate is going to slow down so we won't grow at 1.8 million barrels a day of crude oil. we'll grow around 1.2, 1.3 and if we stay at this level around $50 a barrel wti, we'll grow sub one million barrels a day. so that will encourage players in shale to reduce their budgets and some of the weaker hands will probably cut them even d p deeper i wouldn't expect exxons and chevrons to bring down their budgets but the weaker hands will and ultimately we will get growth, just slower rate of growth to your earlier comments, i think we are adjusting and this is part of the process, my sense is the pipeline issues that we have in the summer are going to

come back in the first half of next year so that will limit the rate of growth in the first six months and into the second half of '19 we have the rollup of the run sanctions. will those waivers expire and can the u.s. supply growth continue into that window and my answer is heading into year end heading into 2019 and 2020 we'll see growth because pipeline problems will be cleared out so we are productive into 2020, not so much in the half of 2019 which is why we're constructive price wise in the next six months >> francisco, thank you, appreciate your time today. >> thank you. when we come back, white house tried adviser peter navarro will join santelli plus, wapner will sit down exclusively with jeff gundlach at noon eastern time dow is down 242. "squawk on the street" is back in a moment.

the best performing sector this year catching a cold in the last few weeks find out what that is and why some are calling it a buying opportunity on tradingnation.cnbc.com more "squawk on the street" coming up. at fidelity, our online u.s. equity trades are just $4.95. so no matter what you trade, or where you trade,

you'll only pay $4.95. fidelity. open an account today. rick san telly a special edition of the santelli exchang exchange. >> i'd like to welcome white house trade policy director peter navarro. >> thank you. >> when you and your boss donald trump look at the way the stock markets have been behaving since october, all three indices doing better than their counterparts but down on the year, what do you see is the order of culprits that are giving us this volatility and questioning what had been the recovery and a solid stock market backed up by

a solid economy. >> i don't know if you can call it a culprit but i think the predominant factor hands down and at the top of the list is federal reserve policy donald trump's instincts are always right on this and months ago he pointed out the fed was going too far too fast and the problem is as an excellent op-ed in today's "wall street journal" notes, you have a pinscher movement the fed is engaging with quantity tate iive tighteng and it'sperplexing we have a tremendously booming economy driven by three supply-side positive shocks there plu which push inflation down. it's making us the envy of the world in terms of that and you

have this deregulation movement that mick mulvaney has been doing. those things are sled us to a world where we have zero inflation for all practical purposes so on wednesday the only hearing for the fed to raise rates is that somehow they have to exert their independence from the white house now, this is a bad argument. what the fed should do is simply do what it says it's going to do which is look at the data. it's moved to data ependence look at the data if they just looked at the data -- >> i agree and i think most market participants would agree. certainly the fed tightening people not now agree but jay powell is new to the job and many think that he will make the necessary turns and pauses, many

believe the president's dialogue wasn't to his benefit. lots of volatility regarding the fed tlchlgt's also a "washington post" article that says it's not a trade war, it's a tech war and i think if you're in an industrial company or any major company looking to increase, spend capital, try to add more to the bottom line, more production, they have to put some of that on hold as we try to navigate what the trade policy will be and not even trade so much is i.t. and tech and tech information specifically. >> we're at a historic place a that president donald j. trump has had the courage to bring us t to. >> rick, for a decade china has been stealing the tech properties of the world. this has been beneficial for

some tech companies, but overall if the price of entering the chinese market is to surrender your technology, that's a fool's game it's bad for the global economy and the balance sheets so president trump has taken a stand on this. we have negotiations with the chinese that there's much talk about. what

to the expense of everybody else again, traders here, if you're trying to trade this, that's a tools game the only person making money is a short seller we need to calmly look at the chess board and understand some things first of ale, this trade dispute

with china has a very small impact on the u.s. economy the billions that are discussed -- >> peter, once again, i agree with you there, but capital spending is one of these things, whether it was repatriation, tied up supply chains. vote for economic security and

national security. we have seen investment here any investor should have faith in trump-nomics, and sound trade policies >> what about specifically investment in china? i understand that. but there are many circumstances like the after markets like boeing in "the wall street journal. there's certain finishing touches they like to do in china. what about investing in china. any final thought on that investment svia the u.s. and others >> rick, that question underlines the goals if we can get to a place american companies can be in china without losing intellectual property and technology and selling to that market, that would be a beautiful place to be. it's going to be a very hard place to get to.

that's why you have to put your faith in president trump and robert lighthizer. either way, whatever happens this president will have policies that grow the economy and defend this country. and people should be bullish about that that's why last word is that the reason the fed shouldn't raise interest rates on wednesday, not because the economy is slowing down, because the economy is growing without inflation. >> peter, thank you for your time one thing i will tell you, traders are never calm and never hold their breath and think i'm going to be calm and see what holds for the future they're a nervous bunch. thank you for your time and thoughts. >> and that's how they lose money, rick, being too nervous. >> i understand. thank you. >> you're welcome. >> thanks to rick santelli let's send it to jon fortt with a look at what's coming up on "squawk alley.."

david, speaking of intellectual property in china, i talked to intel incident rim ceo bob swan about exactly that. interesting to hear his thoughts and about the ceo search at intel, some color on that as well all of that is coming up on "squawk alley.

welcome back to "squawk on the street." stocks off the worst levels of the morning. most sectors in the red, led by declines in consumer discretionary sector as worries of an economic slowdown pressure the consumer facing names, even in the middle of the holiday shopping season, that sector remains in what traders call correction territory, off more than 10% from recent highs among the biggest laggards, darden, amazon, target, down but the worst performer, mattel hitting the lowest level since 2009 with those shares to watch, guys back to you. >> dom, thank you very much on the movers. coming up, the final key hour of trading all over the market volatility.

also, we look at the question of whether you should be buying growth outside the u.s. with the fed expected to raise interest rates this week. oracle earnings are out after the bell, bringing instant reaction and analysis as always. guys, see you 3:00 p.m. eastern. meantime, "squawk alley" is up next don't go away.

good morning it is 8:00 a.m. at intel headquarters in santa clara, california, 11:00 a.m. on wall street, and "squawk alley" is live ♪ ♪ good monday morning. welcome to "squawk alley." i am carl quintanilla with morgan brennan and jon fortt major averages are falling deeper into correction territory.