>> i think we have used so many products i use it all the time. >> where, walter >> asbestos. >> walter, thank you >> that does it for us today make sure you join us tomorrow, right now it is time for "squawk on the street. ♪ good tuesday morning, welcome to "squawk on the street," i am carl quintanilla, with jim cramer and david faber, another test here, futures up about 202 after stocks closed at 14-month low on pace for the worst december since 31. the president tells jay powell to feel the market europe is mixed and asia was weak and oil was below 49. our road map begins with the

santa slump. dow and s&p on pace. >> plus, feel the market president trump calling on the fed not to make another mistake by raising interest rates when he they meet later today >> j & j's ceo telling jim, he believes his baby powder does not contain asbestos >> stocks is looking for a rebound. the president who has been critical of the fed, i hope people over at the fed read today's wall street edit before that make yet another missatake

>> there is no sign of an inflation break out. if they get the policy wrong, the president will be the least of their worries, jim. >> well, i think the president got androg agenda on tariffs if you are a n international company, this is why you voted for them if you believe the man, the man is antichina i interviewed him 2008 he's antichina the federal reserve raised points that people are concerned about. we took a little poll. business is slower and there is nothing you can do >> i think the president is maybe right, what do you do? do you keep on tightening when business is slower it is hard, that's why i felt

they should do one and wait. i don't think that -- the president has every right to be able to say non elected officials. i think the president recognize just like we voted for him he picked this man this man is for tighter money than janet yellen. >> the number of people he picked and he goes after them for quite some time. >> or sessions >> you want me to keep going here >> the guy is saying, employment and darden's report this morning. i think he wants to cool the economy. all you need to know with line border is everything is in a box and the number is so horrible. what you want the fed to do, there is a lot of article say what they look at.

they should look at what companies are doing and companies are not doing that well they were not doing well as well from the beginning >> it sounds weird coming off a quarter of 6%. >> it turned on october 3rd, when the famous woodruff interview, we'll use a malcolm x approach to break the economy of whatever it takes, three or four or let's over shoot. was he on fox news >> on the downside for seven years. >> the true, the economy has a lot of hikes i think the issue is not that it should not have more hikes i think it should wait to see. >> are you prepped for no cut? >> the guy has said over and over again if it does not raise, okay, there is something i don't know. the banks are doing worse than i

thought >> gundlach yesterday -- >> gundlach was a harsh -- >> how is gundlach doing in the stock market >> gundlach has not had a great record on commodities and on the stock market when it does come to have sometime out of consensus but generally right if you want to look at the bond market, i will go with the guy. >> i want people whether they follow the fed or not as be as fl influential as they like to be on stock >> i mean look, yes, periodically, you got to bow jax. most of the time you got michael jordan that mean it is clear to people. >> gundlach could not hit the curveball. >> if the economy were strong then i would not care. i am not saying there should be

no hikes i am saying the crazy world that's the federal reserve is it wrong to be prudent? how can you be wrong being prudent? >> we had this conversation. >> i kind of wished we done a week of it and move on >> people are sick of me i don't care my wife is sick on me and my dog is sick of me. >> people are sick of the stock market let's get back to that >> so. >> wednesday we get our hike and china trade keeps going and it is the end of the year, why would anybody want to put risk ongoing at the end of the year >> i got some answers to that. >> just wait for next year, right? >> should we wait for next year? >> i don't like this mark. don't put me in a fed box with a

ribbon, stocks going lower i think that there are things that come down so much look, i am not going say i think you have to buy apple here it did go from 230 to 160. i am not talking about the russians dominating facebook >> i hear you. i don't want to think about the banks. how can next year not be a better yo better year for the banks? >> i don't know. >> johnson & johnson, speak of the devils >> they're one of two companies that have aaa balance sheet. >> what's the other company? >> i know your viewers will help us out >> tilray. >> jim mentions j & j, it is

higher in the market the company is fighting back against reuters report the company knew many years that its baby powder contains asbest asbestos jim talked to gorsky who defe defended j & j >> our product does not have asbestos by the way, throughout this process, we also not only use the best testing methodology that's available but we continue to improve them over the years >> they reaffirmed, 5 billion buy back you just heard mark lanier on "squawk" moments ago >> i would have never said this

until he said it if you had asked me what's the big problem i have with mark lanier it is the business of suing and the business of trying to get money from a company some would say business is a shake down i was about to hit him with, this is not justice at all or business lives this is a business he admitted it is a business well, if it is a business, this business, he's in an attorney business and j & j is in the drug business. he did say this should not cost them that much i found that and i went to law school and i know what it is, it was interesting to hear hey, it is a business and we'll get paid >> it was interesting to hear him say the $40 billion was far more than what he thinks j&j would ever owe even in a negative scenario.

gorsky got a $4.6 billion if they are appealing he gave no quarter on your interview that their tout causes cancer >> these are fine articles. they're not joke articles. the new york times article talks about j & j. >> look, if we did not have people who were caring about this issue after the 1970s on the front page everyday, what kind of firm are we? there were people saying hey, we did this are there questions about biops. thinking of people at major companies. there are people at the company

who are using this >> unless they are tobacco companies. >> that's unfortunately the outlier. >> michael moore, of course, in mississippi. >> look, first of all, reuters admitted that current baby powder from china has no asbestos >> 15 years. >> and mark lanier says he won't use tout what i think matters was alex was very forceful in saying we didn't hide anything i asked directly how the fda did not talk about it. he said they weren't in the end, it comes down to the people in the courtroom. whether the plaintiff's part can afford to keep on suing j&j when they keep on winning these

cases. i think plaintiff's bargain got geared up on beasbestos it happens a long time ago >> those companies all did go bankrupt >> there is a memo, listen, guys, we are killing people on this >> that was actually asbestos. >> at law school, you learn that, here is whatnot to do. do not have a memo that says it kills people and ignore the memo lanier made it clear that it is a business judgment and we'll try to get as much money out of j&j as much as we can. i was shocked. >> this is what lanier said. the test from independent labs when the right testing

techniques are used demonstrate of asbestos but in little quantity there is a debate that we have with j&j and their experts of what is defined as asbestos and what is or what is not or does it meet the measurement. i believe it is a product that i won't let in my household. >> he's talking about a way being able to measure asbestos, the fda did not accept it and the fda has different way to look at it his way was not exact enough the current way is equivalent as and this is from a defense attorney, i would use a stadium full of green marbles where if there is three red marbles among the millions, they'll catch it the way that lanier testing is not standard you can say so what. the standard is from the fda and the fda is not trying to -- i do

think the last thing it is not going -- it is quite different with merck >> the lawsuits would mount and the heart attack victims would really -- yeah >> it was listed it and it costs him $5 billion and many, many years later and some significant finds, they maid ppaid for the of the drugs incorrectly >> if you are suing j&j, they have been winning cases. anybody have been in a big lawsuit knows you got to have some wins because it costs a fortune to fight them. he says he wanted to settle. by the way, it is not like apple or qualcomm. >> j&j >> stocks a buy is what you are

saying >> absolutely a buy. i think it is a buy because of earnings i think it is a buy because of a cash flow and buy back and dividend it is a buy because thelanier t it to a buy. he did say listen, i don't expect -- 12,000 times $4.6 billion no, you can't do that. lanier says you can't do that. this stock lost yesterday. that does seem in excess i can give you a bunch of stocks that's losing 55 billions. >> they make this and that and that because we are a bare market >> so you agree with gundlach. >> yes he's talking about a multi-year. he's talking about a nuclear

winter the nuclear winter buy back. no country for old books i think we are over sold i think we can bounce and i think there are a lot of companies that are doing well. i think if the feds were to say, we are going to put through one and we are going to wait a lot of multiple expansions >> jay powell neileds to say, listen, i made a mistake on october 3rd. >> he didn't do that already >> that's fed speak stuff. look, i made a mistake and the economy is weaker. >> have you ever heard i made a mistake? >> i said it last night. >> fed chair don't do that >> why not who are they they're people someone said i got to take a break. >> feel the market

>> i am feemiling the market. >> when we come back, oracle is joining the rally today. you will hear what mark hurd has to say we are 200 points looking to higher opening back in a minute

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14 months low, russell is back-to-back 1.5 decline we'll get cramer's "mad dash" and the opening bell in about 10 minutes. the future of technology investing

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welcome back, "squawk on the street," time for "mad dash" as we count down to the opening bell boeing had a big buy back. >> i want to call boeing, and say what the heck are you doing raising your dividend 20% and increase to 20 billion don't you know how bad things are? are you like clueless? but, you know what they have a lot of cash flow and they are doing quite well and they're not sitting there and saying well, the fed may tighten and chinese may have a navarro moment. do you think he's on defense this company is doing great, okay i know every time the president tweets about china, tariff man

>> he's tariff man >> anyway, that's off topic. tariff man geagainst goeboeing i think it is significant, it shows conferenidence there is a 20-year plan buying boeing there is a lot of company that's buying those changes >> many people said it is going to end up being a lot of buy backs and dividends. by the way, to be fair that cap ex has also gone up and apple makes a lot of the buy back. gundlach spent a lot of time talking about the huge deficits yesterday. the deficit of them buying fewer taxes going back to shareholders in the form of buy backs >> this morning he's talking about how cap ex internal cash is buried and you can't tell

that >> they clearly got a lot more to send back to shareholders >> there is been instances where people did not buy back. it would be more like autozone that's the best buy back i have ever seen. >> really incredible david, what was your poison that you want to take after gundlach? what was your preferred poison did you think i will swallow a bottle of xanax? were you thinking about taking a whole -- i don't know. >> i will clear my head. >> is there anything that you would want -- >> i don't even know these drugs. we have the opening bell, coming up

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futures is up 200. a few other stories. nasa story, they' a positive cash flow for the first time since 2011. >> a lot of people downgrading the trucking manufactures. the cycle is peaked. you keep on hearing the cycle is peaked >> can you talk yourself into a slow down? >> that happens. >> now, we got everybody talk about it >> yes, it becomes self fulfi fulfilling that's because the president is doing the tariffs which is

overwhelming for a lot of people jay powell says he's going to over shoot if he's going to over shoot, you should pull back you should not spend enough because if he's going to over shoot, you should save your money. that matters he's the fed reserve chair >> that's the opening bell and the s&p at the cnbc realtime exchange the big board, new york community bancorp.inc. and ecto connection. >> i don't know if you guys checked the rate ce is pretty good. 3.25 >> you have been recommending for certain parts of your audience >> i have no choice. >> if you need muni time in the next few years and you don't have the rest of your life to make it back because you are not 20 or 30 or 40, cd is better they are a good mix because it

is a treacherous market and there is nothing wrong if you are -- i am not close to retirement my father was working - he was 92 thanks to jay powell, you are making a lot of money on cd. jay powell is the savior's santa claus and the stock buyer's grinch >> what do you think of that >> i liked it. >> the economy is down shifting and what can i say >> you know why, david >> it strikes me we got half an hour. we have not mentioned china once, not this speech by xi. he says don't tell us what to do and reiterating some prior policy, initiatives and nothing new there. it feels like the market has moved on

tariff -- >> he's a nice man anyway. >> yes, you mentioned it >> i know mr. powell appreciates it >> peter navarro came out yesterday and he was talking about rate he did not talk aboutdeath by china. no one thinks has asbestos at 15 years now at j & j that book is amazing you would never buy anything chinese again. you would look to be sure it is not made in china. >> that's hard to do in this country. >> how about landfill? >> it is filled with things from china. >> we send those recycles back to china but it ends up in landfill >> 90% of what's in the ocean is from china that's not what they talk about.

tariffs -- the president does not talk about that at all you should focus pollution is from china they did not want to do that i asked him directly why are you guys not focusing on that that would imply that there is something wrong with the air >> the air in beijing is not good you do not want to breathe it. >> you guys have been there. >> did you wear a mask >> no, i did not it was notable >> my daughter wore a mask in oregon >> and in some city like india and we have the great pacific garbage pack and the amount of garbage in the ocean is going to out weigh fish in 20 years >> i think there are people who believe that plastic, the younger generation, plastic is the enemy of the earth that's the plastic straw

movement >> yeah. well, when we talked to the ceo, straws are a small part of the overall weight of the problem. one thing that plastic is made from, we have not talked about it yet which is oil. down again >> yeah. we saw 48 something. we are about 49. >> we are pumping so much and the world is slowed down a little >> never have so many and known so little. >> i like that >> do you think natural glass complete collapse. >> i heard someone last night, the widow maker. >> the widow maker, wow. >> 48.72 >> explain that to me. >> there is too much of it we are not opec or cutting back. we are producing the iranian embargo did not produce. >> a lot of waivers were given

out. >> how about canada having 30 billion barrels than it needs. natural gas, we are exporting huge amounts >> is there a positive story bringing down your break or technology >> carl, i said this morning, i tweeted only in our market could oil stocks be down and also the s&p down as if it did not matter that oil had just lost it is great that it is down. the oil food chain is responsible for a lot of inflation. yes, we have full employment no, jay powell does not seem to like full employment >> well, with money people save on gasoline, it is money they can spend to go to red lobster >> still not going to cheddar's, i love olive garden. you got to go with me to olive

garden never ending pastas and those rolls are so good. darden is a good quarter there is no slow down if it is domest domestic i heard people come on air and listen, all the problems are tariffs. if darden is really not involve in tariffs >> no, they're not those rolls are from china >> pots and pans, maybe they buy a lot of those >> how about sturarbucks? >> we have starbucks, kevin johnson, is holding well >> how about tilray, global collaboration with sandals and increasing availability of high quality of medical cannabis around the world >> oh, that's going to be a squeeze. >> cold brands of non combustible products here. >> new jersey just branded -- >> did you hear what cuomo said yesterday?

he's going to push q 1 next year of recreational. >> david, you have to emphasize to them that cuomo says they should be smoking pot. >> we already had conversations like this. >> how did it go >> we have not talked about edibles too much >> you know what i think you need to be careful of what you put in your body >> that's the basic lesson >> know what you put in your body >> i use tout for 40 years >> you think it has been anything -- do you have a problem? >> a name that we would not typically hit but it is a deal there are not many to follow they fall apart, rent a center they did get a second request from the trade commission. it had an effect in delaying the deal that of the private equity firm

didn't extend and did not send in their extension notice, we are done with you and see you later, by the way, it is 126 billion bucks. i have talked to a few people this morning, i have never seen anything quite like it >> it is amazing >> it did not show up in time or at all rent a center, instead of say wait, we are done with you i am not sure if it is a positive reflection of their view of the business right now or what. stock is down. it was a $15 deal. deal is off. vintage capital management apparently >> david, talk about why it is so rare because it did seem when i saw it >> it is not hard extending the deadline, all we have to do is say we are extending the deadline >> you tend to do that and

waiting for regulatory approvements a all the time. it is not difficult. they did not hey, you owe us 126 -- have not heard from advantage capital >> it is a small deal. >> tesla is not benefiting today. goldman reiterate their sale target 225 they talk about these credits, tax credits phasing out and pulling forward demand on the three. unlikely to be made in europe and q-1. >> yeah, this is -- the back and forth on tesla is that again people feel there is so much inventory. i do think that tgoldman does nt make sense 7500 tax credits how much will it mean for the

evangelists like the stock of tesla. the short interest is still really big that's why you would worry about it i want to know about inventory but, china, he's a winner in china. >> from 33.50 down to 29.25. is that a positive sign that we are starting to see big macro strategists coming down. >> i think miser who's a great technician taught by some fabulous people did say when dime is coming down and dollar -- i feel like yeah, we are starting to get, i would regard that maybe david would get on board to be a legitimate slow down thesis

>> okay. silence. you want me to get on board of what that there is legitimate slow down thesis. >> yes >> it is clearly a slow down but not necessarily consumer in the united states which is most of our economy, there is a slow down around the world. >> we are going to get our first full year of threes. >> that's okay everybody has every right to be wrong. it is in the first amendment madison backed it and jefferson thought it was a cool idea this is one of the great american companies why? construction, autoa and welding going badly. we have not talked oracle. i am glad that marx is going to be on. it is mixed here

>> talked about emerson. >> how about fortune brands. slow down in demand even though the company says -- cabinets, basic. >> it relates to housing and which we know. >> what's your strength? we don't have lending going down a little bit the banks recognize that if the feds over shoot, the last thing you do is -- i am tired of that term >> consumption is going on forced >> and oil is down i want a rate hike i want a rate hike >> you want one and done and you want him to admit he made a mistake

>> i love that that's a humbling thing. we have seen nfl coaches do it other than bill belichick. >> he has to get the job done. he should do his assignment. >> shares of goldman a's are dog something. >> don't tell me they are up >> yes, they are up. 34.5 decline for the last 12 months of shares for goldman sachs. >> the journal and the times today in terms of who knew what and when and why they allow this to continue to go forward in terms of the deals that goldman did. >> goldman has done it a lot of deals where emerging market deals that had similar price tags from mexico from mexico, they have done some and columbia

i don't know -- if they have done a bunch of deals that are similar around the globe, why should they be red flag the malasians. if there is never a deal that had that -- it is not the new jersey turnpike buy. >> okay, 10% >> mexico is higher and columbia is higher. i know i am supposed to move on. the fact that i am getting similar deals that were done this is not the new jersey dormitory authority. >> always a great -- >> thank you boeing, up 4% that's going to help the dow let's get to bob >> happy tuesday, much better

bounce today than yesterday. take a look at the sector. healthcare which was a mess yesterday on obamacare being declared unconstitutional is stabilized utilities got sold heavily yesterday and energy is down we have new lows and baker hughes and darden and exxon. that's a sector that's not going anywhere we are up today. why are we up exactly? we are dramatically over sold. ask the average trader who loves talking about this, today mattis 24 hours before the fed's announcement tomorrow, there is a tendency for the market to rise in the 24 hours period before the fed's decision. this is a well studied and well-known phenomenon. they profess to say we in the

hospital know wh don't know why it happens. speaking of the fed, what do we want from the fed? what does the market want right now? we have been seized up boo i the growth story of course, it relates to tariffs and what the fed has been doing. yesterday, spectacular failure at 2600. all of a sudden, no rewards for buying over sold stocks. we know these things are over sold, yet, they fail you keep trying and eventually you say why bother i am not getting rewards for buying stocks at stupid, low prices so everybody is hoping the fed will put a floor under stock the market seems to already believe that there is only going to be one rate hike in 2019. they were at three on the fed. the fed acknowledged that, is that going to help

g gundlach says they should not go on friday. they know something that we don't know there is no agreement on what would make the market go up or what's the good news verses the bad news or is it just the foigt going on it gives you an idea how confuse everybo ed everybody is. procter & gamble, they were 97 it was a new high on friday. it was 91 yesterday. american express was at a new high a week or so ago, 115 it was 100 yesterday united health to 287 the other day and walgreens was up $87 just a few days ago. these were new highs they're selling all the winners today a little bit stable. you heard from the guy from boeing johnson & ajohnson and all stat announced an accelerated buy back buy one billion dollars of our

stock back immediately put up all state for me. that's a sign that the company thinks the stock is too cheap. finally just want to note good side here. bank of america, extreme bearishness. big shift into bonds and only 9% think there will be a recession in 2019. guys, back to you. >> bob pisani, thank you rick santelli is at the cme group in chicago good morning to you, rick. >> good morning, carl, you know stock is up so strong, it gives suc credence to the counter trend on tuesday. traders are cognizant of the fact that we are going against the grain here in a bit. look at the one-week of two-year note yield and consider the fact that they have really slipped. they are hovering the zone that we have not seen about the first week in september, if you open

up the chart up for 10-yr, let's go back to the 6th of december on this intraday you can see how many times intraday that we touched the 282 level. that's a significant area and traders are highly cognizant of that if you open the 10-yr chart up in november, you can see it has been a fade in the long end. it has been in fade in every market since the last meeting except for the next one, the dollar index dollar index is highly sideways here and it is a good level even though it is melting a little bit. if you look at the last chart that it is since the last fed mo meeting, you can see what i am speaking of. as we get ready of rates moving up, the big antagonist with respect to the market, many stories are coming out that even a cause is going to fix anything

in a binary way and that certainly seems to be the case carl, jim, david, back to you. >> rick santelli, thank you very much dow is up 300. the best gain here since december 3rd or so about a third of this of this is coming from boeing alone we're back in just a minute.

dow up 300 now best gains for december. got to go back to november 28th as boeing is in the lead up 4% we'll get stock trading with jim in a minute. at&t provides edge-to-edge intelligence, covering virtually every part of your healthcare business. so that if she has a heart problem & the staff needs to know, they will & they'll drop everything can you take a look at her vitals? & share the data with other specialists yeah, i'm looking at them now. & they'll drop everything

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time for cramer and stock trading. >> he said it would be a better quarter and they really delivered a better quarter why does this matter they're being bought by ibm, and they don't have the acceleration in billings that red hat did if you want to take advantage of the 5%, red hat says you should buy it. >> tonight on "mad"? >> remember jet.com? jim cline, i don't know if you ever used their stuff, trex,

david, i don't know what kind of deck you have at your house there. marc lore is remarkable. i don't know if you saw the ads in the nfl, big super bowl ads i didn't know they did this stuff. same day this is the age of walmart/jet.com. >> all right yes, i did two of them. >> amazon, two walmarts. >> amazing. >> the guy is amazing. >> incredible. >> he's in a bunch. >> it's all good. >> mcdonald's. i like yours more than his. >> they were fun to do. >> when we did them, they were great. >> yours are old his are new. >> jim, we'll see you nit togh "mad money," 6:00 p.m. eastern time dow's hanging in there

♪ good tuesday morning welcome back to "squawk on the street." i'm carl quintanilla with david faber and sara eisen another run at 24k, up 300 points as boeing and j & j

helping the dow. >> the dow and s&p are still on pace for their worst december since the great depression. >> and, quote, feel the market the president calling on the fed not to raise interest rates as the two-day meeting gets under way. >> johnson & johnson standing by its denials that its baby powder does not contain asbestos. we'll hear from the ceo. best daily gains so far for the month. s&p pulling back from its lowest close in 2018 despite the rally. still on pace for their worst december performance since the great depression, as sara said pimco's vp and usa global ceo, thank you for joining us getting this meeting under way, obvious continued pressure from the president. what happens what happens tomorrow afternoon? >> alan greenspan described the fed as the most collegial

organization he ever witnessed he was already 62 years old so he had witnessed a lot of organizations. you could say about the federal reserve and all its members they're amongst the best civil servants in washington next to the military you should expect the fed to be highly independent and do what it thinks is right for the u.s. economy. what it thinks is right this week will be a rate hike after three years of interest rate hikes, the fed is clearly getting signals about where neutral is in terms of its policy right and getting closer to a pause and markets might be able to breathe a sigh of relief in 2019. >> so you think, what, march doesn't happen >> the fed will want, at this stage, to give as little guidance as possible and maintain so-called optionality, to do whatever it thinks is right. so a pause does seem more and more likely, but it's not a certainty. pausing without stopping something difficult to do, something ben bernanke describes in his recent book the fed will try to pause. what if it wants to restart?

then it gets back in this quandary again there is the availability of more communications next year. chair powell will have eight press conferences instead of four and other means of communications, perhaps, to make it clear. >> pimco's forecast for 19, growth will slow to less than two, right investors should stock up on lower risk, liquid assets. you mean buy uk banks? how would you describe your outlook for next year? >> cautious. like most people, we think -- we're not so sure there will be a recession. 2020 recession is probably the most widely anticipated recession in history they're predicting it because of the length of the expansion, which will be its longest ever dating to the mid 1800s some time next year, around june. we're cautious we would say that the best trade for 2019, the single best trade -- not in terms of overall portfolio construction, is one that maybe is not in a port ffoi

today because there's enough volatility to enable an investor to go into markets relative to the fundamental value. that single trade idea, we can't give you uk banks, the markets pricing in excessive fears about the brexit-related impacts and these banks can handle a lot of stress. >> so what's the -- >> we don't know meaning there could be a lot of dislocation. i could point out a number of them right now. >> it's waiting on the sideline. >> corporate bonds, for example, bond yields have moved up a lot relative to treasuries there's a lot of dislocation in markets and that's what you want to take advantage of with the dry powder in terms of your risk budget in 2019. >> mark, should the fed take a pause tomorrow >> well, i think as tony said, maybe to quote crosby, stills and nash or paraphrase them, we're looking for a rose in a fisted glove, for the hawk to fly with the dove.

maybe they hike but then they do pause. as tony said, the last thing they want to do is put themselves back in a box on saying when they would hike again because i felt like chairman powell kind of put us -- put the fed in a box in october with statements that were more hawkish than the market liked and they should get back to the data-dependent message and that would really help the markets. >> so if the fed does hike tomorrow, just to be clear, mark, and then sort of changes its tone and talks up data dependence more, do you think that's enough to put a bottom in this brutal sell-off >> well, to say that we're going to bottom, i think, absolutely takes two elements here. the fed is one component but also the trade policy is another. and i think the president has been talking about the fed's

role in this of course, we also know that the administration policy also has a role it is starting to show up a little bit in the numbers that the u.s. would like to see some of these supply chains, and that would take some time to work through the economy and that would slow growth a little bit so i think both of those elements are needed to make things improve, but keep in mind, both of them should be incentized the fed does not want to undo the work of three fed presidents and the president of the united states does not want to pursue a trade policy that throws the u.s. into recession at a time when he's trying to get re-elected. >> tony, yesterday scott wapner interviewed jeffrey gunloc, who spent a lot of time talking about the deficit and his concerns about it, even going so far at least to say or imply that the fed should be keeping in mind when it raises rates, it will increase the cost of debt

and therefore 140 billion in additional interest, so it's something that the fed should be worried about as well. that's not part of their mandate, right >> it's not. they should look at the budget outlook for the next ten years and see if the interest across the united states rise dramatically over this ten-year span it isn't the federal reserve's job, so to speak what would solve the debt problem is an increase in u.s. productivity because what can't solve it is a change in the demographics story. whereas in the past 30 years, we saw an increase of numbers of people to buy and produce services at 1% that's down to half a percent, likely to stay there the next 30 years. he's not going to see growth from that part unless there's immigration laws and that requires investment by the government or incentives by the government for companies to invest, to raise productivity, to raise incomes. >> that's supposed to be what the tax bill did >> we have other issues and what

this has shown, the recent experience is that it could be politics, not macro economics moving politics. it's brexit, china, italy in the first quarter of 2019, in fact, that markets worry about they have risks that markets can't fully measure. there are certain risks that can be measured relatively decently. think of an insurance company that can measure the uncertainty about automobile crashes today these are uncertainties that markets can't grapple with the likelihood is these become benign outcomes, but markets can't be sure. we can't be sure one wants to be prepared you will leave a little money on the table by derisking, but if these issues are solved, it's likely there would be enough momentum into 2020 that one could catch up. >> one final tactical -- on a tactical basis, earlier in the week, it was these flows, biggest flows into bond funds since data began

today it's the survey, largest ever shift into bonds, global net under weight falls 23 percentage point does that feel capitulatory to you, short term? >> i don't think we've seen the big kind of capitulation that, you know, we've had in other major sell-offs. certainly our clients are focused on their long-term financial plans and that helps them get through crises like this any kind of deep capitulation, i don't think we've seen in part because this is a different cycle where some of that political risk has bled into the markets but has these binary outcomes that tony talked about. >> tony, mark. first we have to see what binary outcome we get tomorrow. thank you so much. >> thanks again. >> see you both. >> lot of suspense putting their finger on what

is behind their most recent sell-off adjusting their forecast for the coming year. steve liesman joins us now with new results from the latest fed survey steve, what have you found >> we want to know the question of what is really bugging the market tariff concerns, weak global economies, the fed hiking rates. has this contributed a lot, somewhat, or not at all to the recent market sell-off 71% said tariffs were -- this does not add up to 100 because a perce percentage could answer for each of these, right? global weakness is contributing a lot to the sell-off followed by the fed and more rate hikes here, followed by earnings and the least concerned of all, the least contributor to the sell-off is weaker u.s. growth this is a survey of 43 economists, fund managers. 63% say the market is too mystic

of an outlook and only 7% say it's too optimistic, meaning there's more to go really, these guys follow the market up and then they follow it down. this is a pretty big drop. 2774 is the estimate for the s&p 500 for 2019 followed by 2836 for 2020 we've had this sell-off here there's still 7% upside for next year if you go to this number here i want to show you the outlook for bond yields and tell you why that's important not because these guys are right. notice they were looking for 3.5% ten-year yield through 2019 through most of this past year here now they've come way down. what's important here is the amount of easing that is now in the mind of the market they were looking for 3.5. now they're only looking for just above 3%. and the current ten-year yield is just north of 280 okay let me show you the top line results before we go here.

pretty good percentage now, looking for a rate hike in december 98%. that's up from our november survey look at what's happened. the easing in the mind of the market fewer rate hikes 1.8 is now the average of those, which tells you that pretty much everybody agrees on one and then more agreement toward two. look at what it was. it was a idea bait between two or three and now that debate has shifted and looking for less than one hike in 2020. carl, all of this is online, all the results, if you want to see the commentary and the detail results. ultimately, we're looking for a hike tomorrow and then for the fed, those forecast in the fed to come down for 2019 and beyond. >> 98%, even higher than the market odds at this point, steve. >> yeah. >> just quickly, it's related, but i'm curious to hear your thoughts on your former employer's op-ed page, lobbying the fed to take a pause, going against the market expectations and siding with the president. were you surprised to see that >> i was and it wasn't me but we

had stephen moore on "squawk box," a former member of the editorial page, who noted what a change that is i'm guessing they're thinking we're going to have stronger growth from the tax cuts and no inflation and that we are now at neutral. i will say that there was a large contingent of people who thought the way the op-ed page of the wall street journal thinks or used to think, which was that if you have nominal growth at 5% or real growth at 3%, that a zero real fed funds rate adjusted for inflation is still accommodated and that you have both inflationary risks and bubble risks from that too low of a rate. these are people who used to, it seemed to me, argue for removing that accommodation and now they seem to be somewhere on the other side sara >> yeah. >> indeed, steve thanks, steve liesman. >> sure. >> when we come back, the best year for global m & a. so what will next year bring for

deals? goldman's head of banking will join us in a moment. j & j. top performing names on the s&p. just off session highs w u26doisp 8. what do you look for when you trade? i want free access to research. yep, td ameritrade's got that. free access to every platform. yeah, that too. i don't want any trade minimums. yeah, i totally agree, they don't have any of those. i want to know what i'm paying upfront. yes, absolutely. do you just say yes to everything? hm. well i say no to kale. mm. yeah, they say if you blanch it it's better, but that seems like a lot of work. no hidden fees. no platform fees. no trade minimums. and yes, it's all at one low price. td ameritrade. ♪

johnson & johnson extending friday's losses following that bombshell.

the year isn't quite over yet. right now, if you are tracking things, we are having the best year for mergers and

acquisitions since 2015. global m & a volume sur passed $4 trillion. recently, my next guest says, sensing a bit of change in tone. gregg lemkau is the co-head of investment banking for goldman sachs and has helped to run m & a for a long time. lots of different things under your purview thanks for being here. >> thanks for having me. >> market volatility does tend to sort of affect confidence what are you hearing in board rooms right now in terms of the willingness to make the big decision when it comes to m & a? >> for all of 2018 we had the third best year on record and really hallmark by large transactions, 35 deals over $10 billion and we started the year with big consolidated transactions and tail winds from tax reform and strong earn iings growth and strong optimism and ceo confidence and for the first three quarters

of the year, we probably had a top and then we hit the fourth quarter and things slowed down a little bit it's interesting i'm out talking to ceos and boards, they're still quite confident in their own business, tail winds they got in the earnings growth. but they're also reactive to the markets in some of the political and geopolitical and there's a circumvented attitude. >> are they seeing things in their business, for example, wondering what the impact is going to be, ultimately, from the trade war with china or things like that that are making them say let's wait? >> a bit of a combination but more reactive to potential news events than it is to underline performance in the business. anxiety by china-backed u.s. trade and anxiety about interest rates and lots of market volatility that's caused people to take a little bit of a step back to the last four to six weeks, a little slowdown in activity not fully pens down, but backing away and looking to gear up as

we head into 2019. >> you've been through -- i've been through many of these kinds of cycles where it changes it a bit. is that an acquiesce in equity market >> there's a possibility of a routine a few more today in the equity market or few more hours like today could get that back and what are the strategic things they want to achieve over the course of the year >> tax reform will have been anniversaried. does that play a role at all >> it was a tailwind we saw this year for people but it's continuing to drive growth and business and i think that's part of what drove dollars of activity and also $1 trillion of buy back it will put work to growth if global or buying back stock especially as it dips down a little bit. >> m & a market the last few years has been dominated by strategics but there's a few things i've been tracking, nielsen, a number

of different large ibos that have been discussed lately are the pe guys acting late cycle here and going to really be as active as it eems? >> it's fascinating. for all the headlines, which have been big transactions driving the market, the pickup in activity broadly underlines the strength in market probably had 30% of transactions with private equity involvement one way or another, and that's without any major take private there's been no real big take private deals the course of the year activity is steady handful of funds in the high teens north of $20 billion and $700 billion in dry powder in private equity what's interesting this part of the cycle, they continue to invest through ups and downs of the cycle, putting capital to work the returns to the cycle have shown that it makes sense and that will continue into 2019 and

potentially pick up if the market correction holds. >> what about the credit markets themselves, can they finance large deals and/or strategic or otherwise at this point? because there does seem to be at least we bring everybody on. everyone is concerned about the credit markets but i haven't been able to tell if there should be concern. >> high yield markets have gotten softer, leverage loan market has picked up dramatically funded largely out of the leverage loan market if that stabilizes, and high-yield market stabilizings, we'll be able to -- >> we'll keep an eye on high yield. give me a sector next year that perhaps we should be focused on when it comes to consolidation. >> technology, in particular, natural resources broadly reasonably active. health care, which has driven m & a activity relatively slow with cvs, aetna. you haven't seen a big wave of

biotech like we have in the past continued activities through 2019. >> you think so? think of an amgen, activities with balance sheet capacity. things are changing so quickly gilead, for example, has suffered are these the kind of acquires that we should imagine >> biotech generally, an amazing amount of science and growth and there's a new way of unicorns that have come into biotech. you see big pharma historically, now you see the same thing, their growth is tapering big market companies to drive their pipeline. >> you're an old health care banker from a long time back are we ever going to see the likes of consolidation that we saw in the '90s? >> one or two big deals are left that could happen. i'm not sure they will happen.

the only headwind around m & a with all the transactions is regulatory and it's uncertainty around regulatory and this wave of nationalism and protectionism. big pharma companies that could consolidate, they have characteristics of nationalistic champions that i'm not sure you'll see what we saw in the '90s. >> pulling money out of the market in m & a, what about putting it in, as in ipos? you're not an m & a guy. a lot of chinese companies have gone public during the course of 2018 next year, some of our big u.s. companies that we know so well up to these markets? >> i think we turned the corner on that. great year for equities. these unicorns we've been talking about that have stayed private longer have started to come public. spotify did a direct listing, drop box went public far fetch, another european company, go public seven companies in china, technology companies greater

than $10 million market cap go public, half of them in the u.s. china companies access u.s. capital from u.s. investors to drive growth for these big chinese internet company. >> don't say it too loud the administration could be listening. >> they could be biotech unicorns and chinese companies in the pipeline behind that, too. notwithstanding the equity market volatility, it will be a big year for ipos. >> another company coming public here soon named dell. >> it's interesting. for all the returns to the public market, the great untold story is the return to the market of dell, scheduled to close the end of december. if you look at the transformation that michael dell and silver lakedid in its private incarnation, they did exactly what you're supposed to do, sold off slow-growth software business, bought vmware and have reconfigured the growth

of that business to be one of the most exciting new public companies again in 2019. >> gregg, finally, i would be remiss if i didn't ask you as a senior executive at goldman whether you're seeing any impact -- i know you can't comment broadly on the situation itself, but are you seeing an impact in terms of your business at this point, or pullback as a result of the coverage and of what's going on? >> the whole malaysia situation is distressing you have actions by individuals that were inconsistent with the culture of the firm that i worked at for 26 years, which is focused on excellence and integrity in serving clients small handful of people are focused on dealing with regulators and authorities and the rest of us are out with clients talking about their business, not ours the client franchise, they've been standing by us. we wanted to engage with our teams on their issues and we've continued to win some very high-profile mandates for high-profile companies going public, and mandates for

governments across the world doing business with us we feel quite strong about the resilience of the franchise but recognize there continue to be issues in terms until the malaysia situation is resolved. >> i can't help but notice your stock price is down 35% over the last 12 months. >> i noticed that, too. >> does that hurt morale as well >> i don't think people follow the stock day-to-day, they're focused externally on their clients. if you want to look at it as a glass half full we'll just get more shares. >> way to think about it thank you, gregg gregg lemkau back to you, sara. no payout, les moonves denied his massive exit package. we've got the details. another check at the major averages this hour looks like a rebound is happening. dow is up 266 points, s&p up .75%. everybody is up except consumer staples and energy industrials are in the lead. "squawk on the street" will be

right back

take a look at retail etf on pace for its worst quarter since 2008 can the sector turn things around with the holiday shopping season, heading into the homestretch here joining us now for etf spotlight, one of the best picks in retail of 2018, john kernan before we get to your pick, john, what's with the dismalperformance of retail? xrt. it's down more than 11% this month. what's it reflect about where the market thinks the consumer is >> sara, thanks for having me. there's been a big drawdown, in terms of the change in the space. people are worried about where we are in the business cycle, see the general market volatility, worry about how that might affect the consumer and they're worried about tariffs

particularly as it relates to retail. >> right if xi and trump don't make nice. what's your best idea, john, for 2019 >> our best idea in 2019 is lulu lemon. it's had a big drawdown in terms of valuation over its peak over the summer there's a couple positive catalysts for lulu in 2019 they'll be able to raise their q4 outlook we think that's a good outlook two goot catalysts a fairly cheap multiple for lulu if you've been patient and bought the stock at that valuation in the past you've done pretty well. >> only thing i would say, john, it doesn't sound too original. they just came out with their best idea for 2019 as lul lemon. the entire sale side love this is stock 70% of you guys have a buy, which is the highest amount

eve ever. >> it does feel more crowded and just the quality of the franchise. we've had a buy in it for a long time some others have joined us from the sell side. i think people look at the potential upside and just the valuation contraction and see a fairly attractive scenario across the rest of the space there's uncertainty as it relates to tariffs and where we are in the overall cycle. >> you cover nike. the company will be out with earnings thursday. it has broadly been a winner so far this year. can nike keep up the output performance? >> nike is an expensive stock. that's also a fairly consensus idea on the sell side. we're market performed on nike and have been for almost two years. we preferred adidas, which has performed better from a stock perspective than nike the last two years. the stock is still expensive

we would stay on the sidelines upside to the q2 numbers are pretty priced into the stock right now. and we would stay on the sidelines for that one. >> you also liked adidas, which has been a good call for two years. john kernen of cowan let's get an update. good morning, sue. >> good morning, carl. good morning, everyone former trump national security adviser michael flynn arriving for his sentencing hearing in washington federal prosecutors are not calling for jail time after flynn's cooperation in probing russian meddling in the 2016 election british prime minister theresa may holding a cabinet meeting to discuss preparations for a no-deal brexit a spokesman for may said the government will begin to put in place plans for an exit from the european union without any deal in place german police searching a mosque

in berlin in suspicion that he raised money to support an islamic fighter in syria no arrests were made as the raids were aimed at obtaining evidence. the great holland tunnel holiday decoration debate has been resolved, workers taking away one wreath from the letter "u" in tunnel and moving the tree to the "a" in who wihollanm the letter "n. got all that the wreath over the "o" stayed in place after conducting a poll of over 100,000 commuters who complained about theoriginal placement. that's the news update for this hour. >> there are no words, sue. >> there are no words. and how much did that cost the port authority because you know we're going to get higher tolls. >> i don't see you speechless too often. i like that. >> i was like, i can't believe i'm doing that in a news update. but back to you. >> when we come back, ubs floor

director art cashin weighs in on olily.rket vatit dow is up 305.

welcome back to "squawk on the street i'm sara eisen live with david faber and carl quintanilla a little over an hour into trading. turnaround tuesday continues with the dow up 271. at the high of the day, we were up 334 and this would be the first dow gain in three days, if it sticks. s&p 500 up 20. staples and energy are lower treasuries are up with yields lower and the dollar is weaker joining us here at post 9, art cashin, director of floor operations is this sort of trading, gaming out what the fed is going to do,

art? >> it's a bounce from an oversold condition it's celebratory if we had closed below 23,532. we might have gotten the dow theory sell signal they managed to close above that a little sigh of relief built into that. also the pushback is absolutely amazing. it's borderline historical, i would say. >> from the president? >> no. that's counterproductive the more he talks against it, the more he's pushing the fed toward doing it. but the idea that you have gunloc, editorials in "the wall street journal." it's pretty amazing stuff. i think that powell will have to go out of his way to try and make sure from now on every

meeting is a random event, that he doesn't want the markets to have too strong of an opinion. if he had wiggle room, i think he might pause but i don't think he has wiggle room in december. >> they give him an answer to the question about the president. >> right. >> that's also borderline historical. >> it is but the other thing is he can't look like he's yielding to the president and conversely, if they were to pause, then you would get the markets saying, wait a minute. what does he see that we don't see? is it much worse than we thought? we thought they could handle just one so this is really a rather strange meeting. so he has got to begin to disabuse the market from getting too heavily ahead of itself. that's where the trouble was the last time, talking about getting

back to neutral, that it was a long way to neutral. that meant many increases and then they had -- we're pretty close. >> what i don't get, art, is that the market has already priced out interest rate hikes for next year. so why wouldn't -- the bond market, that is. why wouldn't the stock market rally off of that? >> i think because the stock market has a concern that even the december hike may have unforeseen consequences built into it. the stock market is very nervous about the global economy seeming to pull back here. that you've got central banks all around the world looking at what's going on. the trade war still looms to some degree and, you know, they don't know how much built-in tolerance for rate hikes there are. so, this is more than a normal amount of nervousness. >> meanwhile, we're sitting

right above levels that you say should be intra-day resistant here >> yes 23,900 seems to be getting push back right around here it will be interesting, as sarah said, if it lasts. if they start to pull back here, i think you can see the market begin to accelerate. the natural bias they seem to have as they went into meeting or is it just the oversold if it's the oversold you can be on -- >> i'm on the 3:00 hour and i know now it's crazy to call the market at 10:40 a.m. >> okay. >> it's not good for the market to see a change in tone. we got one from president trump moderating on china and powell even moderating on the rate hikes. seems we need to see action on

both fronts. what are the expectations of the market at this point >> they're not terribly high they thought you might get in and get something rar quick. it does appear that the chinese economy is suffering a little bit. the perverse thing is that their exports are down, but not to the u.s. the exports are down to europe even when you're seeing results they're not necessarily for the reasons that you assume. so we certainly have to go into nut year and maybe a decent way into the new year before we see some progress here. >> art cashin, good to have you, especially to kick off the two-day fed meeting. art cashin johnson & johnson is fighting back against a reuters report that the company knew for decades that their baby powder contained asbestos.

>> we truly believe that our talc, our baby powder, does not contain asbestos, studies not only conducted by johnson & johnson but independent authorities, well-respected authorities where we work closely with regulators who are overlooking the methodology and, by the way, throughout this process, we also not only use the best testing methodologies that were available, but we continue to improve them through the years. >> company announced a $5 million share buyback after j & j shares fell 10% friday and another 3% yesterday got down to 126, david. >> a bit surprising that this bounce has not been more significant, i think, and speaking to jim earlier, who said he would absolutely buy the stock here, given what you heard from gorsky, to get less than a one move up. it is directly attributable. we don't know what j & j would have been in the market downdraft but certainly nothing

approaching that kind of number. there's nothing fundamental that we heard beyond this that would account for it we can see if it will hold in the green today. >> even the sell ciders are scratching their head. even if these liabilities started adding up to big numbers, it's not going to add up to -- >> no. and interestingly, mark linear, the plaintiffs attorneys, said he didn't think that the market cap loss would ever equate conceivably what he might get from the company in a settlement doesn't seem to be helping too much. >> yeah. >> let's move on to cbs. ousted ceo leslie moonves won't receive that $120 million exit package we told you about some months ago the board saying in a statement that was released yesterday afternoon there are grounds to terminate for cause, including his willful and material mis misfeasance, violation of employee policies as well as his willful failure to cooperate fully with the company's

investigation. he was forced out in september, as you recall, after multiple allegations of sexual misconduct he could still contest the board's ruling he's able to fight for his severance througha, according to his contract in a statement, his attorney said, quote, the conclusions of the cbs board were foreordained and are without merit, consistent with the pattern of leaks that have permeated this process. the press was informed of these baseless conclusions before mr. moonv moonves, further damaging his name, reputation, career and legacy cbs shares not doing much today. down half a percent. >> those headlines you couldn't have imagined a year ago, for example. >> no. >> as we go to break, take a look at shares of boeing off the highs, helping the dow, increasing the buyback oracle is the other one, the top and the bottom line. mark huchlt rd will join us on "squawk alley" in 15 minutes

you do not want to miss that gains eroding here dow is up 180. (baby crying) ♪ ♪hold on, i'm comin' ♪hold on, i'm comin' ♪hold on don't you worry,♪ ♪i'm comin' ♪here we come, hold on♪ ♪we're about to save you i'm comin', yeah♪ ♪hold on don't you worry,♪ ♪i'm comin'

a big rebound in the new year find out which names he's buying on trading nation.cnbc.com more "squawk on the street" after this break

let's get to the cme group in chicago and the santelli exchange. >> good morning, carl. i would like to welcome phil thank you for joining me. >> thank you. >> we all know that we've had eight increases of a quarter point since 2015 we're now at 2.25. so tomorrow will most likely be number nine but very little talk has been about the balance sheet, dripping anywhere from 40 to 50 billion a month, went from

4.5 at its peak to 4.1 trillion now. do you think the balance sheet tightening is going on stealth but having a bigger outsized impact on the u.s. economy >> you know, it's having a bigg expected, right? at the time they did qe 3, they said this will have impact, then they -- i think it does matter. the fed is going 50 billion a month. you have the ecb stopping their qe, then china and others kind of hesitating to buy u.s. treasury so i think it does matter. >> from a cumulative standpoint, starting to tip from easy to not easy money in october, my next issue is simpler many now think 3.5 trillion for the balance sheet could be a target does that mean balance sheet reduction stops all together in 2019, 2020

>> sure looks like that. the fed has the ability to pay interest on reserves, they have the ability to keep a large balance sheet, still have control of fed funds rate. they just need to explain to people we're going to pay banks not to lend and explain why they're doing that from the fed perspective, that's okay >> i guess to finish up, mr. powell and company may have an issue with communications, the president. i personally don't think so. in the end do you think in the near future there's going to be a statement out saying we may ease off rates and concentrate only on the other tightening of close to 50 billion a month as they try to lead the market to pay attention to the balance sheet? is that possible, phil >> i think that's possible looks like they're going to hike again, as you said, do it in a dovish way say we're done trying to give market certainty instead of leaving markets hanging another month, but at the same time say we're doing this kind of

tightening through the balance sheet. >> excellent phil, thank you for joining me today. i can't wait to speak to you when we do ultimately get a statement talking more about a balance sheet. david faber, back to you >> thank you very much, rick santelli hey, david oracle stock popped at the open after last night's earnings, particularly on the guide, it settled down quite a bit since then we have the ceo, mark herd, coming up on "squawk alley." 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.

welcome back to "squawk on the street." i am dominic chu stocks largely positive after yesterday's selloff, gotten back almost half the losses from yesterday. a lot of sectors, nine are trading higher one sector underperforming is the energy sector. that group is still off around 23% from recent highs, or what some traders call bear mashlrket territory. some names under pressure include hess this as oil continues to fall fairly sharply, touching a 15 month low in overnight trading amid rising u.s. and russian

output story west texas intermediate prices lost no more than 35% of value since october, that's a trade to watch the coming days as well. back downtown to you guys at the stock exchange >> thank you very much i will take it now time to ask sara, what is coming up on "closing bell? >> the final hour of trade has been so dramatic, swinging a few hundred points all over the place and to the down side lately we're going to track the markets, tell you how to position your portfolio, no matter what the fed decides in under 24 hours also, some earnings on tap, fedex and micron we have reaction, analysis, and all of that coming up at 3:00 p.m. eastern time, since you asked. >> thank you look forward to watching. >> this show is still more fun >> fun in a different way. love them both >> see you this afternoon, sara. when we come back, oracle's

mark hurd is with us on the results and future of the cloud. "squawk alley" starts in a minute

good morning it is 8:00 a.m. at oracle headquarters in redwood shores, california 11:00 a.m. on wall street. and "squawk alley" is live ♪ good morning i am carl quintanilla with morgan brennan and jon fortt full team market coverage today as "squawk alley" begins the major indexes rally back after the dow posted 2% losses s&p on pace for the worst december since the 1930s, while