cambridge analytica. >> i just reviewed budgets across 40 budgets, they will use 15% more of facebook in q 1. >> mr. wonderful, thank you. happy holidays. thank you for hanging out. >> we'll be here -- >> "squawk on the street" begins right now. ♪ good morning and welcome to "squawk on the street." we are live from the new york stock exchange. let's give you a look at futures a half hour from when we open here for trading. you can see when i walked in an hour and a half ago or so we

were sort of flat on the dow. european markets have been open for quite sometime. it has been negative. this doesn't show japan where the nikkei was down almost two percent. you can see across the board losses after our big turn around yesterday after we heard from the fed. ten year note yield, higher rates not there. take a look at it. 2.751. crude we will spend a good amount of time on again this morning because why wouldn't you? 46 had the 51 46.51. stocks sharply lower after the central bank raised rates and signaled perhaps as many as two more to come next year. stock futures to a muted open.

>> it's not just about oversupply, but about demand, as well. tobacco giant altria making a big bet on vaping. 35% stake in jewel. what does it say about altria's business we will talk a lot about that. let's start with the global markets selling off after the fed raised interest rates signaling more hikes are coming. futures are pairing their losses this morning. here is fed chairman jerome powell. >> i think from this point forward we are going to be letting the data speak to us and inform the outlook and inform our understanding of what would be appropriate policy. so there is a fairly high degree of uncertainty about the path

and the ultimate destination of any further increases. >> the dow and the s&p 500 are having the worst month since february of 2009. remember that. that's amazing. u.s. stocks overall on track for what would be the biggest yearly loss since 2008. it was a lot bigger back then. march is when we hit the lows in the s&p. it has been painful sblm. >> i think there is the opposite world almost as if the fed is saying we have a big budget deficit problem. we have a big discipline problem in the country. we have overstimulated the economy. now forget the stock market. i thought it was interesting, if you parse what he said, from now on we will let the data inform us. what was informal them before? what was informing you at the

beginning of october when the vix spiked what was informing him when he said we may have to do one did he speak to economists that never made a dollar? i'm not saying it was -- i said before we started it was disspirited because i know that they're wrong. the record is not that good to begin with. we have to play it out and accept the fact that it is better to be a short seller. >> what really was wrong was seven years and not making this move a long time ago and not reducing the balance sheet, trying to get back to some idea of normal. >> i have been saying that they should be selling the bonds. that's been my view. just sell your bonds.

the market actually needs liquidity. >> it's hard to say what tipped it because during the press conference the market was not that bad. >> there were two waves of optimism that were wrong, the run up into what he said. that was betting that he was going to do one and wait. that turned out not to be true. then there was this surge in the futures right before he started the press conference as if somebody was going to get what he just did. people in the futures are really stupid. i agree that we have had seven years. we had seven years where the rich got really rich. just now some people were starting to get wage increases that they haven't had in the decade of lost earnings versus health care and student tuition where student tuition was dramatically lower.

so now the working person is going to catch up. it is interesting that rich people can go buy cds. you get 3.5. i feel pretty good. i'm older now. i'm not trying to hit it out of the park. rich people, municipal bonds are up. the regular people, the 318 other people were big losers yesterday because they didn't make the money during the period when you can make money. they didn't. do i think that is a shame i can be completely heartless and say did you look at the dots it's like in the third man when you are looking down, they all look like ants. >> you said yesterday that you thought he would get fired if he did this. i believe that was -- >> the funny thing is he fired

trump. there is no way trump can win the election. he says in a year you'll be fired. he must really dislike trump. he must personally dislike him. >> what about where we have to have something to actually cut for when times really do get tougher? >> we have to burn down the village so we can build up the village man. let's go -- did i not want a rate hike? i said i wanted a rate hike. did i want to see what happened after he did the rate hike yeah. did he say -- we only need two. gdp is declining from our expectations. most of the corporate earnings we have seen have tailed off. we need two more hikes.

i thought that was reckless. i didn't do -- that didn't work last time. i'm trying to come up. i will figure out a little something more clever. >> you spent a good amount of time talking about all of the people they speak to at the fed, all of the nonprofits. across the board, how many hundreds of different entities they speak to on a regular basis. >> i speak to more than they do per person. >> i speak to too many ceos. >> we both speak to a lot of ceos. they're not necessarily seeing weakness in their own business as much as they are worried about it and pulling back from doing something not because of weakness in their business. >> i know one of the things,

that is the kind of theory they gave you. hiezenburg does mean breaking bad with this guy. i had micron on. there is a guy, the ceo of micron. in the new economy that is the building block. now, what he said is the basic building blocks of the modern economy has declined from what i thought it was going to be, rather big percent. i think that is an amazing tell of how the economy is. fred smith, that was a really horrible conference call. so i'm going to give -- i will

put trump in charge of how fed ex missed. i'll make trump the villain. micron is harder because that is just a downshift of what we thought. i will blame powell for that. how is that? >> sounds good. who are you blaming lower oil prices >> the oil -- >> oil prices are hitting the lowest level they have seen in more than a year. we said that earlier, as well. worries over supply. also, you are starting to hear about energy demand. wti crude is down 40%. >> i think that everybody ramped up because we thought it would be taken out of the equation. >> it wasn't enough. >> there was a big financial

trade going on. you sold futures, you did well. that is not working. what do you want me to say >> this is not your fault. >> let me give you a real -- >> almost every single prognosticator did get it wrong. >> core labs and slumberjay was so wrong. >> the high yield bond market and will that seize it up to some extent -- any broader moves in oil or is it just about the commodity itself >> we were growing at a rate higher than normal which is like

1.5%. and now i think we are down shift to about one percent. the oil market was not ready. it's not like anyone is cutting back. a lot of people are saying now that prices are low they are not going to drill like they did. that's not happening. they drill no matter what. the oil guys are not like guys who make fashion sweaters. they just pump. they don't know anything other than to drill because they are oil guys. it is supply and demand. you feel like you've gotten had? >> yeah. >> by whom >> that's right i'm rich.

excuse me for saying that. my wife would kill me. wealthy did well. i was worried about the other people. dollar sign represented by a man. the working person was a big loser yesterday. >> when we come back, we are going to be talking about altria. giving the e-cigarette company a staggering valuation. >> is oxycontin next [leaf blower]

you should be mad at leaf blowers. [beep] you should be mad your neighbor always wants to hang out. and you should be mad your smart fridge is unnecessarily complicated. but you're not mad, because you have e*trade which isn't complicated. their tools make trading quicker and simpler. so you can take on the markets with confidence. don't get mad. get e*trade and start trading today.

altria taking a 35% stake in jewel labs, the board approving a nearly $13 billion investment. company has been around a couple of years. that is more than double the

valuation jewel had in july. let me give you some sort of -- where is the press release let me give you some of the highlights from this because it really is amazing. first of all, altria doesn't have a path control. they pay $12.8 million for a company. they have done the deal. when they get trust approval it will become a 35% voting stake. they'll have a third of the board members. they can't sell their shares for six years. there is a stand still that is in place period end of story. when you see a deal like this you would think there would be a path to control for altria because they are losing their usage of their customers as they switch to jewel.

so what this really is is an equity investment in which they are extending all of these other opportunities to jewel in terms of shelf space to appear next to their cigarettes. they are going to pack inserts in mailings to adult smokers from altria's database. logistics and distribution assistance, as well. they are going to help jewel amazingly. jewel gets to stay a private company. that's all the growth capital they will ever need. it's not like they need to go public. they make money already, $2 billion in sales on a tracking basis right now. 75% margins. by the way, if you are one of their 1,250 employees, they all own stock. they are paying them a $2 billion dividend overall. >> they are good guys. >> i don't know if they are good

guys, but it is quite a story. >> cigarette volumes fell 6% in the first quarter which is the entire disruption. what's really important -- i'm not being cynical, you know where it has been losing the student population. this is a good attempt to get the students to smoke. >> you know jewel has gone very public saying they pulled all their things from retail that would appeal to students, all the flavored products. they say the age should be 21. >> feels so much better. >> it's rampant at my kids' high school. >> it's such a great gateway to nicotine. >> it is a nicotine replacement system without tobacco or tar. they say it is better and

healthier. six months after everybody starts juul they no longer smoke. there are a billion smokers in the world. if you get any number of them to switch you can understand why these firms have taken stakes in juul previously in the round we mentioned and why altria might be willing to do the equity investment. >> it's such powerful competition. it would be better if they didn't close. i have relativ tatives who diedf lung cancer. he was on 45 minutes yesterday. >> we should mention altria announced a cost reduction program between 500 million and 600 million in annualized cost savings. >> how bad is their business

if you walk by they throw money at you that was already -- it shows you how poorly their business is handled. it's all about getting the young people in. >>juul says that's not what we are about. >> when they went from 18 to 21 that was it. it got cool. juul is cool. kool is not cool. >> no. we got a break and we got jim's mad dash coming up as we count down to the opening bell.

your digestive system has billions of bacteria, but life can throw them off balance. re-align yourself, with align probiotic. and try align gummies, with prebiotics and probiotics to help support digestive health

here is a look at futures as we begin trading here in 6 1/2 minutes on this thursday one day after fed chairman powell has spoken. we're back after this. you always pay your insurance on time.

tap one little bumper and up go your rates. what good is having insurance if you get punished for using it? news flash: nobody's perfect.

for drivers with accident forgiveness, liberty mutual won't raise your rates due to your first accident. switch and you could save $782 on home and auto insurance. call for a free quote today. liberty mutual insurance. ♪ liberty. liberty. liberty. liberty. ♪ ♪ acan echo throughout ane entire community.nge that's why we proudly support, invest and volunteer in communities like yours. because the changes we make today... can you hear me? ...shape the possibilities of tomorrow.

u.s. bank the power of possible. the opening bell is sponsored by u.s. bank, the power of possible. >> we have three minutes before we get started with trading here. time for a mad dash and then right into the market open. what are you doing >> disturbing numbers today. guys i really like. that stock had been down a lot. a lot of people thought maybe this is a moment where we are getting better from packaged foods. their organic growth they didn't have any. i'm kind of surprised -- i'm kind of caught by this one. i thought they would have had good growth. they bought pinnacle and they are in their documents in what they put out.

they admit that pinnacle is doing much worse. you have really subpar numbers. you have good synergies. i'm kind of gob smacked how bad it is. >> i'm looking at a research report here. the poor guidance on pinnacle foods is disturbing. >> they call it the virtuist cycle. >> it likely will keep under performing. >> organic sales is down 1.6. they find things that they like. the premiumization, the frozen single -- millennials love frozen food. i question -- pinnacle does not seem that good of an acquisition at the moment. it's hard in an environment

where the center of the store is not that good. they are really good operators. i'm not saying that they screwed up. i'm saying that unless you have premium snacks, people just can't figure out what the millennials want other than take out. there is such -- this thing is shifting so quickly, not as quick as altria and juul. i didn't like the fact that they won't acknowledge that their core business wasn't that great. they did acknowledge that pinnacle is awful. it has all the things that they did wrong. >> broader market. what do you do now >> you just have to wait. we are really oversold. the keys to the market are apple

and facebook and both are bad. >> we have apple and quaalcomm related news after we get the opening bell. >> there are things that are happening that aren't that bad carnival is not great. they have been saying things are turning and then boom it's a knicks game. 30 years is enough. >> it is enough. >> i don't know what this means. here at the big board -- university of notre dame 1988 national championship football team. that's why they are all so

excited. >> is that a gildan? >> we are talking carnival. >> what did carnival do? they guided first quarter 44 to 44. people were looking for 44. the cruise industry is saying do not worry about supply coming on. joining the concept that maybe things won't hold on. i know they will say that 2019 is looking good. i think people are saying this is part of the slow down theory. cruises got a little expensive. there is still a relative bargain. if that is going to be not in sync with what powell is saying.

here is a metaphor. cruises are starting -- the numbers are starting to come down. when they are really down a lot i may discuss the idea that the people were concerned about it are people i have to start talking to because when they get to where the rates are bad i'm going to have to start thinking about that because it is time to start thinking about data. that is a perfect interpretation. >> something we haven't mentioned so far today it's something we talk about virtually every day when we talk about the broader market, quaalcomm is a part of it. a press conference will be held to announce a national security law enforcement action. it says i should go to eamon

javers. i didn't know you were going to appear in our television. i'm glad you're there. >> so what we are working on is this report by the washington post just within the past couple of minutes. the headline, u.s. and more than a dozen allies to condemn china for economic espionage. they are expected to simultaneously condemn china for the thefts of intellectual property. that expected to come within the next couple of hours. it is something we have not seen before on the international stage. i can tell you that i spoke to a white house official inside the west wing who would not wave me off this story. that means that the white house is not denying or disputing the accuracy of the story from the washington post. they are reporting that this represents a -- the "washington post" is reporting this

represents a growing consensus. also expected now are indictments from the united states side. that may relate to the department of justice activity that we will see later this morning, possible indictments looming of the kpactual ministr of state employees in china. the united states potentially getting ready to indict by name some of the officials who were involved in stealing american technology and presumably those would provide a lot more information in terms of what actually the united states believes it can prove the chinese did to steal technology. all of this as you guys point out coming against the back drop here of the negotiations between the united states and china over international trade and tariffs. remember, we've got that 90-day clock that is ticking right now. this is coming right in the

middle of that. some people i can tell you inside this administration are not pleased with the chinese response to the negotiations so far. purchases of soybeans, additional dollars being spent on united states goods. they feel that is not good enough. they want to get to the heart of stealing of intellectual property. this could be designed to address that. >> i have to tell you, when you mentioned that there are allies involved, the market ticked up. the reason is because anything that makes it so we are not alone will do much more to force the chinese hand and us. it just looks like an angry match between one country and the other. china might have to change his ways. we have no ability to go after them. maybe this is kind of a radical shift by our government. >> as you know, jim, companies have complained for years that

they are sort of fighting an unfair fight. the nation state is always going to win. companies have been looking for some back stop from the united states government and from other governments internationally. so presumably some of those companies will look favorably upon this. we have not seen this type of united front before. we have seen pieces of this. the obama administration indicted a number of people in china for corporate espionage a number of years ago. so there have been efforts like this. we have not seen all of these countries coming together, more than a dozen countries coming together at the same time to do this on the global stage. i think that will have resonance here this morning. >> important story. we will be watching. thank you. eamon javers in d.c. for us. back to the market itself. s&p is down about a third of a percent right now. nasdaq showing signs of life including apple despite what is

more news on another country and another injunction. we can tell you this morning that in germany quaalcomm won a case this morning. i haven't heard from apple. i haven't gotten their response as of yet. i'm looking for my notes here. pardon me for one moment. i'm trying to find my notes -- >> made a very strong case that all of his buying of stock is helping. he didn't sell a lot of stock. they continue to be very aggressive buyers. they are not losing money. >> quaalcomm, this had to do with a judge. the injunction applies to all of germany. the envelope tracking patent has to do with regulating the power.

obviously important in terms of battery life. they have issued an injunction on all models of iphones that use this patent. so while they said it would be 7 through 10, apparently if the latest models use it, it would apply to that. quaalcomm needs to post a bond. when they do post that bond then the injunction will take force and that's where it stands. it's another potential win for quaalcomm. we know it happened in china which is they thought they had a nice big win there. >> it's business as usual for us. >> i think there is a growing drum beat. there is some sort of slowing. it may be in general. maybe we can get rid of the quaalco quaalcomm. share shlders thinking apple why

don't you sell the narrative has made it that it feels like we are incircling you. now we are starting to win. it's not like -- there was no appeal won. it was trying to go to the judge and say please reverse your ruling. i definitely think that people who own apple are concerned that this thing is going to -- they are going to lose because how many jurisdiction ss? >> it is interesting. i think for apple it's still not -- for quaalcomm this is a ten out of ten in terms of importance to the company. where do you think it is for apple? >> i think what matters is the communist party controlled that court. now apple is appealing. who are they appealing to? it's the court of opinion.

china doesn't like us. we are indicting like high level officials in china. do you think china is going to -- >> they are backing one u.s. company against another. apple does employ on high position. >> do you think that they watch the stock market they watch our stock market, the chinese. we are oversold. any news like the good news that we are not alone, that is big. that's big. >> not that it's ratcheting up tension with china, but that we might have participation beyond our own country. >> i have always felt that the way to do this is to be globalest in terms of everybody with their jobs taken away. the idea that we went alone was almost as if because no one would go with us. in a very bad thing which is cyber theft, we have other countries going with us. you need china to feel threatened. they are not threatened by us.

they are threatened by the world. >> that becomes the question. how threatened do they feel? how do they respond when feeling that way some say that is not the appropriate way to conduct these negotiations. you are going to begin -- we are going to do real negative stuff in this country where we are going to demand that stores not have chinese goods. >> that would go down a very bad road because if we do that here they are going to do that there. how is your friend kj going to be feeling about it at starbucks or any number of other companies that have significant operations in china could find themselves into some sort of weird boycott. >> i think the president committed himself to a course not unlike powell which says everybody has to take pain. the problem is that we're in the stock market. let's say you have --

>> you don't seem to take pain, either. now we have the s&p down and you -- >> do you think -- >> you turned showing you are -- >> i think most of our viewers have pension plans and 401 ks. i care about that them. don't ask me why. i like to think i'm the most sincerely insincere man in north america. i care. >> i love that guy jay. i like jay. >> i would like him to come talk to me at night and put me to sleep. facebook. i want you to get you going even more. only down one percent. the drum beat of stories and facebook coming out and saying we did get your permission for

some of these other large entities to actually use your information. but the drum beat doesn't lead to action on the regulatory front becomes the key question. >> twitter saying some accounts may have ties to state sponsored actors. one thing i find funny is the idea that some clown on social media made you feel more pro-soviet and pro-russian. voter suppression -- >> spreading different things that make you feel negatively. >> if you trust social media to do anything for you like that, that's a real down tick. >> understood. >> facebook -- >> what do you do with the stock here >> i think it's cheap, but you know that they have it in their hands to have someone on that board saying we have to bring in

someone from the outside like fox did. i never thought fox was going to bring in an independent arbter come in and clean house. >> you are talking about report after the -- >> you need to let the chips fall. we need to find out who is behind this. you see anybody being fired? i would love -- what did he see? he's the man to see. what do you think he knew? he is the man who knew too much. >> judging from your track record you will get him for an interview. before we hand it off to bob, we have walgreensnot great. >> it wasn't that bad. it wasn't that bad, doing a restructuring. it wasn't that bad. it is a bear market.

they could have said we are raising this and boosting that. they had to like have a bid last night to have it go up. they need to be juul. >> altria is down three percent fascinating deal. that is a real valuation. u.s. population growth slows.

when you close your borders you don't have a lot of immigration. >> you have to make it political. >> if only politics would stay out of the markets. here is the setup. basically two year note yields hovering in areas we haven't seen since june of '08. fresh lows going back to about may 29 of this year. so not for the cycle, but for this particular move. as you move down the curve, things change a bit. april for ten-year note yields and the dollar index hovering. these are based on a closing basis should they close here november of 19 roughly for the dollar index. look at two-day charts to see how yesterday's fed action and today lineup. you can see the two-year note yield definitely just side ways

for the most part although the drift is for lower yields. the short end is on change. as you go to the long end you will see the flattening. ten year note yields are down a bit. so of course let's look at tens minus twos. it is trading under ten. these are fresh flags going back to the summer of 2007 and the credit markets on the security side reflecting this. although the investment grade etf isn't doing badly as it continues to drift up a bit and this under scores paeb tmaybe t connection. if you look at the dollar index, this one is a bit odd. it had no issue with the fed tightening. it has reversed course significantly since then. this is very significant. a couple of things on that ten year. yesterday's close under 281 is a

definite technical breach. the week has a big asterisk and all of that. we settled below the mid point of the year which is right around 2.81, a significant technical level and maybe that is the best place to end. double tops in treasuries should be respected. i had no idea it would take you this far below three percent. for the first time in seven years raised rates. the bank of england is frightened about what could happen with brexit. back to you. >> thank you, rick santelli. as we head to break, we will give you a look at this morning's top performers. there are still some on the s&p 500. >> the gold.

> nt,e ve>>upex wha stop trading with jim as you look at the current performance of the broader averages "squawk on the street" will be right back i don't know what's going on. i've done all sorts of research, read earnings reports, looked at chart patterns. i've even built my own historic trading model. and you're still not sure if you want to make the trade? exactly. sounds like a case of analysis paralysis. is there a cure? td ameritrade's trade desk. they can help gut check your strategies and answer all your toughest questions. sounds perfect. see, your stress level was here and i got you down to here, i've done my job. call for a strategy gut check with td ameritrade. ♪

time for the last stop trading of the year because you're leaving then i'm leaving. >> i have always believed people should own a stake in some gold for moments like this is where gold -- i haven't talked about it enough. gold is doing well and if you want to own individual gold stocks, there's only one that i like and that is mark bristow's which is rand gold if symbol is "gold." it's got a 3% yield. he's always returned money to shareholders he's a great engineer miner type there's always question questions about governments will expropriate. >> he's very well versed in how to deal with that. best miner in the world so you want to own a gold stock you should do randgold that company comes on almost every quarter and it's a company that feels like other companies,

dave david den dividend, so hand gold. >> what do you have on "mad money." >> i have paychex and then i have the acreage they're all going to get bids or stakes because we haven't heard from bacardi when they going to do something. >> cannabis? >> yes think about it, some beer companies will have a strategy and not others i think that -- i go back to what constellation brands rob sands told me. greatest growth market, we have to be there. so i have to see what they're going to do. they'll be left behind if they don't do something cannabis remains very exciting roe cronos, remember oh, kronos, altria

students, david. they don't want students to do it students want to do what they're told not to do and that's why it's so brilliant. a whole campaign. >> have a great, great -- >> jay wrecked it. i want to get this clear i fortunately am lucky to dump wealth and i do think that someone in my situation should do a -- percentage of cds. my situation, my age and how i've done. i was hoping to make it so it was easier for more people to make money people are saying oh he finally cares about people i've been devoting most of my career to help people make money. he made it harder but that's not his job to make it easier or hard and he's a nice man. >> as are you. up next, t lesheatt batch of breaking economic data leading economic indicators are out at 10:00 a.m we'll see how it impact this is morning's trading.

(john foley) i was there in chicago when bob barnett made the first commercial wireless phone call in 1983. yes, this is bob barnett in chicago. (john) we were both working on that first network that would eventually become verizon's. back then, the idea of a nationwide wireless network was completely unreasonable. but think about how important that first call was to our lives. it opened the door to the billions of mobile calls that we've all made in the last 34 years. sometimes being first means being unreasonable. i'm proud i was part of that first call, and i'm proud that i'm here now as we build america's first and only 5g ultra wideband network with unprecedented wireless capacity that will not only allow for phones to be connected, but almost everything-- transforming how we all live, once again. (bob barnett) as you know, this call today

is the first call that we've made on the cellular system. and everyone i've ever opioloved away from me.thing everything. i blew my ankle out and i got prescribed pain pills by my doctor. if making my detox public is gonna help somebody i'm all for it. i just wish i would've had a warning.

welcome back to "squawk on the street." breaking news, our november read on leading economic indicators we're expecting unchanged. we have a bit more

up 0.2 following an unrevised up 0.1. 0.1 last month and in may equals the low levels of the year, as a matter of fact low levels going back to september of last year as i spoke there was a late revision to last month minus .3 that changes everything. minus.3 for last month becomes the weakest number in quite a while. that's the weakest number going all the way back to june of 2012 so up 0.2% reverses that trend a b bit. there's some technical damage done to the long end of the u.s. treasury market.

sara, back to you i'm sara eisen at post 9 of the new york stock exchange. carl has the morning off our road map begins with the fed decision, raising rates, lowering its 2019 projection of interest rate hikes. robert schiller weighs in this hour. >> the major indices are taking a dive after yesterday's announcement and they are lower again this morning we'll give you full analysis of the market reaction and the trump administration targeting china over hacking and economic espionage as part of a coordinated international effort new saks sanctions expected thu first, let's start with steve liesman with the market's response to the fed raising interest rates does the fed have a credibility problem? >> i think it's an issue whether it's the decision by the fed, the policy decision by the fed or whether it's the strong

selloff -- hang on one second. the fed policy or bad communication or whether fed chairman jay powell lost the trust of the markets it could be there's no convincing markets on the value of anything but a forecast for no rate hikes and an immediate halt to reducing the balance sheet is the right policy but the fed is failing to convince markets that the outlook is brighter than the market seems to believe second that higher rates are best for the economy in that context and, third two rate hikes are a data-dependent forecast, not a promise. >> i think from this point forward we're going to be letting the data speak to us and inform the outlook and inform our understanding of what would be appropriate poll issy so there's a fairly high degree of uncertainty about the path and destination of further increases. >> powell took pains to describe that uncertainty you can see in the chart, the

number of fed rate hikes it forecast four in 2016, the economy ended up weak. in 2017 the economy came in as expected, it did three three in '18 then four because the economy ended up going faster than it had forecast and then there's the two for next year and we'll see what happens. another problem the powell fed seems to have. setting expectations markets expected a more dovish outcome than it got. here's what the markets seemed to want. they wanted one or no rate hikes. that was never going to happen the fed moved from three to two. the fed wanted more flexibility on the balance sheet, the fed is insisting all along it would not do -- it would not adjust the balance sheet unless it was extreme situation. it wanted more concern about the economy saying it was a modest gdp downgrade and some in the markets forecast the fed would

remove the language calling for gradual rate hikes that was modified to say some further gradual rate hikes the inescapable and worrisome son collusion is that the powell fed lost the trust of the market the fed lost it before, remember the taper tantrum in 2013? the fed regrouped and got the trust back but it was rough sledding then as it is now when markets and the fed are talking past each other. >> i would add one more to your list and that was the way he characterized market volatility. a 10% slide during the month of december alone he said a little volatility shouldn't hurt the economy and i'm wondering if that was off base. >> i guess he could have spoken with more sensitivity but i think he's trying to focus on the macro economy and suggested he won't be reacting to every change in the market as i pointed out several times,

october 3 all-time high in the dow and now a couple months later we're off 10% so you tell me what the right indicator of the future was, the market on october 3 or the market today? >> market today if you're looking forward, especially you factor in commodities and credit. >> i understand. but i'm saying the market can say one thing one month and the next thing the next month. you have to set a policy for six to 12 months when policy takes effect. >> it was a difficult call, steve, thank you for analyzinan. we'll talk what to do. powell reiterated he doesn't see the fed changing its balance sheet saying it's not a tool the fed would adjust with a changing outlook. that seemed to spook the markets. listen >> we came to view that we would have had the balance sheet

runo runoff and i think that's been a good decision the writtenoff runoff of the ba has been smooth. i don't see us changing that. >> we are joined by the director of global macro at fidelity investments and brian levitt, oppenheim oppenheimer's senior investment strategies what are you telling investors to do this morning >> the market is grappling with a slowdown in earnings growth. we know where the fed is at. the fed is saying if the economy is going to grow 2.3% then we're inclined to hike two more times. but we don't see inflation going north of two any time soon so i think the fed did what it was supposed to do the fed can't overreact to every

10% decline. we're asking steve, the odds of a 10% decline 1-3, so they happen all the time. it's part of the noise factor in the markets so i'm thinking we'll get 5% earnings growth next year. the fed is nearly done and the forward piece trading at a 14 handle i think that's a good value proposition for long term investors. but when the market faces uncertainty, pe comes down and that's what is happening. >> brian, are you also telling investors to buy stocks and that earnings go up next year >> absolutely. we believe this cycle will last far longer than most investors expect but we need to -- we need clari clarity. so the market has a right to be concerned with the fed message because in a low-inflation world and slowing growth world, to

continue to raise interest rates is inherently deflationary and could end this cycle that isn't our base case, we believe the fed will back down from its tightening stance but until we get to that point there will be volatility in markets so, yeah, markets look good from a long-term perspective, valuations are reasonable, growth should be okay unless there is a policy mistake so i would tell investors stay the course but be mindful if the fed goes too far. >> jurrien, this market has reacted with selling to almost every potential positive catalyst in the last three months but it seems like the reaction does show how many other things the market was contending with besides the fed and wanted the fed to rescue it from them. what interrupts that process of this market essentially looking on the dark side, being afraid, frankly, that a soft landing is not something that can be engineered as we slow down into 2019.

>> ultimately the cycle ends for two reasons. one is the fed has to chase inflation and commit a policy error. at this point the fed is telling us that that's very unlikely the fed is very open to taking a more nuanced view and going off autopilot. and the other is, you know, bubbles or excessive lev r.j.ern the system and other than the government balance sheets there is not the kind of excessive leverage that we saw in '08 so i don't see either of the two ingredient at this point ending the cycle and we have had soft landings before. it doesn't happen often, we talked about 1994, but it has happened and usually it's inflation that inverts the curve and we know what happens next. >> it sounds like what you're saying is the fed indicated flexibility and they'll react to the data, if they need to pause

they'll pause. i don't think that is the worry. the worry is they are tightening into what is a sharper slowdown and that could be more damaging to the overall global economy. >> so i think the two ways the fed could -- >> i mean it's too late. >> i don't think it's too late the fed is committing a policy error -- if it's committing a policy error, which i don't think it is, but that's because neutral is not at 2.5% to 3.5% and the fed overshot or that quantitative tightening, the balance shout run off is having a far bigger negative impact on liquidity than we think and quantitative tightening is hard to quantify. nobody knows what it means so that's where we have to look to say the fed has gone too far. >> let me jump in here with two points. >> all right, brian, go ahead.

>> the first is we've seen this play out before. we saw the fed get too tight in 2015 and 2016. the dollar got strong, oil prices fell, high yield spreads blew out, emerging markets underperformed the fed backed down, the dollar stabilized, oil prices went up, high yield performed better, emerging market and international assets outperformed i would expect to see that play out in early 2019 as the fed backs away the second point i want to make, this idea about excess in corporate balance sheets we hear that in different places i want to remind viewers that when you're near the end of a cycle, corporate credit growth tends to be 10%, 11%, 12% year over year for a long period of time that's the danger zone right now corporate credit growth year over year is 6.2%, so this is not the end of the cycle unless you go too far on monetary policy tightening or

too far down the path with a trade war. if not, the dollar moderates and this cycle goes on. >> finally, if you're bullish, what will be the next catalyst the if i had didnfed didn't do t >> obviously we've had a huge earnings boom, earnings growth is 24% year over year. the estimates were 12, they're down to nine if you apply the typical downward drift to estimates we'll be at five but trade plays a role in that and it's the juxtaposition of earnings growth and pe that ultimately matters so as we get into 2019 and the market gets a sense of where earnings growth will sustainably settle in i think the market will have more clarity and by then china will have hopefully reflated further, we'll have more clarity on trade and it's where the pe trades.

where the pe goes is powerful. if you take 5% earnings growth, you get a 7% return plus dividends. if the pe goes up 10%, you get a 20% return and so that's really where the variability comes in. >> got it, guys, thank you for joining us on this post-fed reaction still to come, a big show for you on "squawk on the street," robert shiller will be with us to weigh in on yesterday's fed decision and next, a deeper dive into financials which have not been a strong performer the impact of a rate hike on the big banks is one thing to consider as they are up this morning.

♪ ♪ put your data to work on the cloud that drives business. the ibm cloud. the cloud for smarter business.

now for our etf spotlight, we continue to watch financials trade deeper into the red post-fed although trying to bounce today the group down more than 20% from the recent 52-week high in january, s&p panels, that is the kre on pace for its worst year since 2009. joining us to talk about the sector, gerard cassidy good morning, gerard. >> good morning, how are you >> pretty good i wonder what you say now at the end of a year where the bullish case for banks was laid out. fed hiking, economies pretty go

good. >> it's been a difficult year the last eight weeks for bank stocks it reminds me of 2011. when you think back to 2011 from february to october the bank stocks fell 40% and the reason they fell that much was, you might recall, european union was in a recession, everybody thought the u.s. was going to double dip and enter a recession. credit was going to be a problem for the banks. that didn't happen from october lows through the end of 2012 the stocks are up 52%. i think we're setting up for something similar so for next year because of the fears of rising rates, the economic slowdown, the global slowdown, i think it's over done in bank stocks, valuations are cheap and that's why people should look to guy bank stocks today. >> whether it's a driving factor in bank performance it seems

like the flatter yield curve is smothering bullish psychology in the group. how can stocks work? >> that's another good point the flatter yield curve works against the banks but let's imagine if we're sitting here a year from now. i bet you a year from now the fed will be finished the short end of the curve and they'll be talking about cutting short rates. when you look at the last three tight ng cycles, '94, '99, and '04, '06, six months prior to the last feds fund rate increase bank stocks go up and the reason they go up is people because realize the flattening of the curve will end and that the fed will cut rates, helping net interest margin so if you think the fed will be finished by june of next year, this could be the bottom for the banks >> gerard, it's david. do bank stocks for the big guys in particular, the ones that rely on the capital markets a

lot, do they already reflect what is clearly not going to be a great quarter? whether it's fixed income or equity capital markets this has been a tough quarter. >> i think the two particular investment banks, morgan stanley and goldman sachs do this is a tough quarter. i mean when you think about ecm, dcm very weak, trading won't be good the universal banks have come down but they have more diverse revenue sources so obviously the pain won't be as severe but the two investment banks its reflects it but we have to wait until january to see the fourth and a quarterer results and the question is when will the markets turn there seems to be a building up of the iepy peepline in the first quarter of next year. >> and finally, gerard, there

seems to be punishment of the bank stocks because of the generalized fear of corporate credit risks, whether it's leveraged loans or other areas is that even an isolated worry in these banks at this point >> the credit outlook is very strong for the banks and it's appropriate to be concerned because we know from past this is going to be a problem area in the next credit downturn and that downturn will be linked to the recession wherever that comes but when you look at leveraged lending, the vast majority is being done outside the banking system that doesn't mean the banks are immune there will be a second derivative issue but the direct linkage to most leveraged lending is outside the banking industry and the shadow banking industry that's where the problems will be most severe so for the bank there is will be some challenges, no doubt about it when that leverage lending turns south but we don't see any

evidence of that happening yet we need to see an economic downturn for that to be a problem. >> gerard, thanks for running through that, appreciate it. >> you're welcome, thank you. when we return, more fallout for facebook that stock down more than 8% just this week alone after that report from the "new york times" on data misuse we'll have the latest on that saga when we come back but first, look at the wors worst-performing stocks in the dow. walgreens after earnings today, unitedhealth and walmart dragging down the dow. more "squawk on the street" still to come.

shares of facebook have gotten crushed after a "new york times" report on the company's misuse of customer data. julia boorstin is with us now talking to us from l.a. looking at the decline and cost of facebook's failures. the cost of facebook's scale

yours around data privacy as well as manipulation on the platform the stock rally to an all time high but the stock is down at 30% and down 20% for the year. that bring's mark zuckerberg's net worth down by $20 billion next year. then there's the potential cost of the district of "columbia's" lawsuit filed by the d.c. residents whose data was exposed to cambridge analytica if facebook loses the suit, it could pay $1.7 billion in fines. the ftc is looking to see if facebook is found in violation of their agreement fines cub in the billions of dollars. then there are reputational issues the top result for facebook on twitter yields a "new york times" article on how to quit the platform and the naacp and other civil rights groups are urging a boycott this week

we'll see if these issues impact big brand tiesers suadvertisers netflix. as for further damage to the restock, facebook's problems were called a death by one thousand cuts. despite the fact there that he says there's no end to the bad news bank of america also saying the range of penalties are an ongoing concern for facebook stock but potential fines and settlements won't have a material impact so a lot of factors into next year back to you. >> julia boorstin, thank you very much with a little bounce for facebook stock after a tough week out of l.a. let's go to eamon javers in washington as we await more on the doj event charging china with espionage. >> sarah, that's right we're going to see rod rosenstein at the department of justice, we've obtained charging documents from the department of

justice and these lay out a case that the united states government is making against two individuals. their names are xu ha who went by the alias god killer and jiang xi long. these two men, the u.s. government is asserting, were part of a long running cyber intrusion scheme dating back to 2006 designed to steal technology and secrets from a wide range of american corporations and corporations around the world and u.s. government agencies including information on u.s. navy personnel. the government is saying the defendants here, these two men worked for a science and technology development company and acted in association with the chinese ministry of skate securities so the government is alleging these two hackers were

involved with a private company in china that was working for the chinese ministry of state security so those this goes to the top, so to speak, in china in terms of this conspiracy which they're saying began as early as 2006. the group stole hundreds of gigabytes of sensitive data, they say, targeting sensitive technology and industrial components including, they say, aviation, space and satellite technology, manufacturing technology, pharmaceutical technology, oil and gas exploration technology, communications technology, computer processor technology and maritime technology so a lot of details in here that the government is alleging in indicting these two figures but the question is whether they will ever see the inside of a federal courtroom given they live in china. you can expect the chinese government may not want to turn

these individual overs to face justice for these charges. the chinese government insisted it hasn't been part of any cyber scheme to be involved in cyber intrusions into companies around the world and all of this coming as the united states and china from r engaged in sensitive negotiation over tariffs and trade. this theft ofly lech which you will property has been core. this event we'll see underscores the united states side says it has the evidence the chinese has been participating to steal sensitive technology from american companies, they have been doing it at scale for years involving companies involving companies across several industrial sectors, sara. >> you've both covered this for years as well and it's important to put in the perspective because there was a lull there was a period after which i believe president then obama had approached xi jinpingand there

did seem to be a backing off for some period of time after what had been aggressive tactics for a long period of time as well and then more recently they seem to have started up is that your read as well they say in or about 2014 members of the a. p.t. 10 group, that's an identifier for the hacking group including these two men engaged in an intrusion campaign to obtain unauthorized access to computer networks of managed service providers for businesses and governments around the world so an expansion in 2014 is what the government is alleging that effort included what they're saying compromising more than 40 computers in order to steal confidential data from systems belonging to the united

states navy. there's personal information of more than 100,000 united states navy personnel so extensive hacking of the u.s. navy. >> so we've seen public denouncements like this before is there any action that could back china into a corner and put added pressure on xi jinping >> this is action, this is the united states department of justice saying we have the goods, we have the receipts in terms of who the officials who were were involved in this behavior, the companies, entities they worked for inside china, we know this was authorized by the chinese government and if we get our hands on these people will will try them in a court of law so for the two people charged here today, this means they won't travel outside china any time soon because there will be an interpol warrant out for their ar vote the second they leave chinese borders, if they want to go on vacation or travel

internationally, they won't be able to do that, that might seem like a minor inconvenience but ultimately the chinese are being outed by the u.s. department of justice which is laying out its case and we'll see according to the "washington post" similar protestations from governments, allied -- u.s.-allied governments around the world tod today. the white house not waving us off of that report so other allied governments will be engaged in a simultaneous denunciation of chinese behavior over the years. >> we did this before. we indicted chinese nationals a couple years ago and didn't see much come from it except headlines. >> well, experts say there was a pause in activity and then it ramped up again so not clear whether there's cause and effect

there but clearly this one comes at a more sensitive time because there is this trump administration pressure. a lot of people feel that the chinese buying more soybeans and buying more american products is simply not good enough they need to knock off this campaign which is elaborate and going on for years of stealing technology from america's most sensitive corporations so they're saying they want a knockoff to this intellectual property theft because they argue that this is america's technological and economic future >> eamon, we're going to take you live to the event happening at the doj in washington now. >> we're joined by the fbi direct director chris wray, united states attorney jeff berman from the southern district of new york today the department of justice is announcing a criminal indictment of two hackers

associated with the chinese government the charges include conspiracy to commit computer intrusions in the united states and around the world. as with all american criminal charges, individual defendants are presumed independent unless and until proven guilty in court in case is significant because of compromising managed service providers or msps. msps are firms that are trusted to store, process and protect commercial data including intellectual property and other confidential business information. it gives competitors an unfair advantage. the indictment alleges the defendants worked for a group known to cyber security experts

as a.p.t. 10 they use malware to gain access to computer networks and to exfiltrate or steal data over an extended period of time. these defendants allegedly compromised msp clients in at least a dozen countries. the united states and 11 other countries. they include telecommunications and consumer electronics, medical equipment, packaging, manufacturing, consulting, health care, biotechnology, automotive oil and gas exploration and mining the defendants allegedly committed these crimes in association with a chinese intelligence agency known as the ministry of state security this is not the first time that the department of justice has accused chinese state actors of stealing commercial information. since the indictment of five

uniformed members of the people's liberation army in 2 4 2014, the light has been repeatedly cast on china for targeting american corporations. more than 90% of the department's cases allege an economic espionage over the past seven years involve china. more than two-thirds of the department's cases involving thefts of trade secrets are connected to china in the last few months of this year alone, our departments has announced charges in three separate cases alleging crimes committed at the behest of a branch of the chinese ministry of state security. we must continue to uncover cyber crime committed by china against america and other nation

nations. china had the intent of providing competitive advantage to the companies in commercial sector but the activity alleged in this indictment violates the commitment china made. that was a commitment they made to members of the international community, to the united states and the g20 and apec they want china to cease its illegal activities and honor the communitiment to the international community but the evidence suggests china may not intend to abide by its promises. for example, chinese industrial policy known as made in china 2025 lists strategic advanced manufacturing industries that the nation has targeted for promotion and development. many of the companies allegedly targeted recently by chinese defendants operate in sectors identified in that official chinese policy whether through computer hackers operating through china or

chinese nationals recruited to steal trade secrets from companies in other countries, the goal is the same -- to dominate production and strategically important industries by stealing ideas from other nations it's just as if they've broken into american companies and taken the data information out physically they're doing it through cyber means. today's charges mark an important step of revealing to the world china's continued practice of stealing commercial data responding to that conduct requires a strategic whole-of-government approach to the threats china poses. that is why the department of justice announced an initiative to address a full range of threats. mr. demers has been a leader in that effort. one tactic is to conduct foreign investment reviews to protect against china acquiring a sense of information through

acquisition of american companies. a third is to find ways to better protect our telecommunications infrastructure choirn stands accused of engaging in criminal activity that victimizes individuals and companies in the united states, violates our laws and departs from international norms of responsible state behavior exposing these actions through the criminal justice system is a valuable tool in the department of justice arsenal faced with the detailed factual allegations today and the corroborating statements not just from the united states but from other victimized nations, china will find it difficult to pretend that it is not responsible for these action america and its ma m allies know what china is doing, why they're doing and in some cases we know exactly who is sitting at the keyboard perpetrating these crimes

the alleged criminals in this case are named xua and jiang xulong we hope the day will come when they face justice under a court of justice in an american courtroom. until then, they and other hackers who steal from our companies for the apparent benefit of chinese industry should remember there is no free pass to violate american laws because they do so under the protection of the foreign state. the department of justice and the fbi will continue to use all available tools to respond to china's economic aggression. i want to introduce chris wray, the director of the fbi, to make remarks followed by jeff berman, our u.s. attorney from southern

new york u.s. deputy attorney general rod rosenstein announcing their charges and condemning china along with our allies including britain and other countries against china for hacking, stealing trade secrets, company secrets, sensitive technologies. our eamonjavers has been listening in give us a sense of the size and scope of how big of a deal this is. >> what you heard rod rosenstein say is that the united states not only knows what china is doing in terms of stealing intellectual property and technology from american companies, it knows in many cases the exact individuals and their names, the people behind the keyboard who are doing the theft. in this case the united states putting the finger on two individuals and saying they're responsible along with and at the direction of chinese ministry of state security for stealing from a host of american corporations in a range, a wide range of industrial areas.

saying china stands accused of engaging in criminal activities that victimizes people in the united states. china will find it difficult to pretend it's not responsible and saying there's no free pass to violate american laws nearly because they do so under the protection of a foreign state so now we'll see what the chinese official response to this is and whether or not this has any impact of ongoing trade nations between president xi jinping of china and president donald trump of the united states. >> eamon, i think one important point here to make is in the years we've been following this, six and a half years ago i did a documentary on it, u.s. corporations have become a lot more sophisticated and aware of the threat itself and boards of directors are aware of it as swollen to at least the threat to the extend it exists is being taken with a lot more gravity and perhaps being rappelled at a

higher rate as well. >> sure. there's a cat-and-mouse element to this. as the attackers get more sophisticated, defenders get more sophisticated and that continues to spiral. but they lay out here in these indictments some of the technology -- some of the techniques hackers used here basic old-fashioned spear fishing where they're sending e-mails to people inside these companies and the e-mails appear to come from somebody as the recipient you would trust. the document that is attached to it is -- the file name is something you might have been working on so it's hard for individual workers to avoid clicking on these things, especially if it comes in an excel document from your boss saying please take a look at these revenue projections. the minute you click on, that bang, the malware is inside your company's system so as much as you want to defend, these attacks can be subtle and you're defending a whole range of employees who are all receiving this kind of inbound threat

material all the time. >> we will await a chinese response let's bring in ubs director of floor operations art cashin now. does this hurt market sentiment, which was already pretty wobbly? >> it could. the initial response, same old thing, this is not a new shock and we'll have to see. i think what could affect the market is any chinese response to it. whether it dims the trade talks and makes aggressive that tariff stuff all over. >> what is the market's level of worry about the china trade fight? as we look forward to talks in january, does this add another wrinkle? >> there are some cynics who are suspicious about the talks in january that the treasur secretary very conveniently brought those up when the market was at a vulnerable point and

they rallied back. so we'd like to see things progress further, get more detail, find out what the date of the meetings will be, where will they take place and i think that will aid the market somewhat. >> a lot of investors wouldn't mind if the market could rally up to that point when it seems so vulnerable. it seems that the reaction to the fed is -- does it just tell us what traders' appetite was for how much help they were thinking they might get? because it isn't necessarily the case to me that in another market that decision and statement would have been so terrible. >> you had some very prominent people saying the fed should not act so that raised the anxiety level if you would a bit there's a feeling that inflation isn't a threat, the price of oil isn't coming down and with those

trade talks international economies would slow down. and when the fed -- what they were hoping for that the felde would say, all right, we're on target now wily l now begin to watch on a daily basis. we'll go data dependent and we don't have anything in the hopper right now instead they said we're reducing it from three to two and that certainly didn't make anybody feel better so that's why you've got that little bit of an overreaction the other thing is the balance sheet. he's got that on autopilot. >> art, stick around, if you would, for us. we have more breaking news to get to out of washington let's get to ylan mui for that ylan >> more d.c. drama over the shutdown it's unclear if republicans will be able to move forward with a short term spending bill to keep the government open through february 8

republicans have been meeting this morning to talk about the path forward nbc news reporting house speaker paul ryan had to step out to taken a emergency phone call from president trump that lasted about 20 or 30 minutes. president trump tweeting shortly afterward that he is upset that he does not have money for his border wall yet. that he signed a spending bill earlier in the year with assurances from republicans that he would have that money by now and he does not so republicans left that meeting without any firm decisions on whether to move forward with this we talked to a member of republican leadership, steve scalise on his way out from that meeting. he said there is a strong desire to give the president the money he needs and the tools he needs to secure the border and build the wall he said they are still in conversations with members and with the white house over what exactly needs to be in the spending bill for them to have assurances that the president will sign it, guys, so right now

the house still has not scheduled a vote on this temporary spending measure as we are just about a day away from a government shutdown. back over to you >> ylan mui, thank you very much more budget drama here, art, facing up against this deadline. how much risk is priced into the market around a possible shutdown. >> >> well, first of all, the shutdown itself probably won't do damage to the government. we've been through this process before, too, so they'll know but what could hurt the markets is the tone of conversation around a possible shutdown. what will be the president's posture? i mean, he had that little show-and-tell meeting outside the oval office the other day and he said he would be willing to take all the blame or responsibility for it going on if that gets into a hostile give-and-take, that could have some impact on the market. >> art, thanks. >> my pleasure.

>> art cashin. all right, back to the fed and the markets. we're joined by nobel laureate, co-creator of the case-shiller price index robert shiller give me your take on jerome powell and the fed's decision to rais >> well, powell seemed to me a level headed man who is doing his job. he's not intimidated we've had very low federal funds rates. they've been negative for years. it's about the time they come up to zero or something like that when the economy is showing signs of strength. so i'm impressed with what he's doing, and seems to me shouldn't stir the markets a whole lot >> it seems to be stirring the markets a lot. you disagree with market reaction >> yeah. well, i think the market does have an immediate reaction to news but the volatility that we have

seen in the market precedes us, goes back to the beginning of january, february, of 2018 so it has something else to do it's not -- i think we have a reasonable fed doing their job, and it doesn't look out of bounds at all. >> i mean, i get it. the fed shouldn't be responsible for putting a floor under the market, shouldn't have to have the markets back all the time. that's the whole idea, we have to take the medicine the bigger worry is that the fed is missing something, and while economic data is okay, it is showing signs of a slowdown worse globally and we're starting to feel it here, and the fed is tightening into that environment. >> well, i am worried about the slowdown we've had a highly priced stock market and housing market and

bond market and we had a recovery that's almost in terms of nber expansion, almost setting a record people are starting to phase onto that, think about that, so i am worried about these markets and about a recession, but this step is -- the step the fed took is so reasonable on the basics, and it is such a small step. they also pulled back from three to two projected increases in the coming year. i think the turmoil in the markets has some other -- it's more of the theory we are hearing about some correction is overdue than any specific action of the fed >> one of the points some that believe the fed maybe should slow down morris that the housing market in this country is slowing so much, and you've

seen activity decline and price declines and markets from your perspective, seems like it will continue, will housing be a dragon the economy from your view. >> it could be there's a lot of indicators showing softening. seattle, home prices are falling. so it is worrisome the housing market by the way is more forecastable than the stock market because obviously it's ordinary people that can't trade on a dime. so this is something concerning. i don't know the small rate increase they did is given the fact that we have virtually zero real interest rates, even 3.7 unemployment rate, it is a reasonable sounding step. shouldn't be harming the market

so dramatically. >> so robert, given all of that and your indicators in terms of whether the market is overpriced or not, where are you given we pulled back 13% in the last few weeks. >> the cape ratio i am using, cyclically adjusted price earnings ratio put us back to 1929 levels. but now it is.net to something like 28 -- down to something like 28. the market is not looking so overpriced any more. but it is still highly priced, the stock market so there's still a concern >> bob, given that you take that ten year window in terms of trying to figure out cyclically

adjusted price earnings, when we loose the '08, '09 out of that span, does it make valuations better or is it not a dramatic effect >> we have done a study of that, my colleagues at barclays. it will drop to something like 26 after the 2009 low earnings drop out of the moving average that's not a big thing compared to the normal movements in the cape ratio >> professor, thank you. i appreciate your time as always >> my pleasure >> robert shillor joining us sara, what's coming up on cloem closing bell >> nike earnings are out after the bell, a company i cover. always a good economic indicator hurting as a result of the

strong dollar. we'll see if they continue double digit growth in china, given the slowdown there and carnival out with earnings the stock being hit hard we sit down with the ceo, arnold donald, find out whether he is experiencing a slowdown or sees one ahead for a very discretionary kind of consumer company which is the cruise industry we'll see you then also, larry summers on the fed i think summers is critical of the fed decision, says why risk a hike there was nothing telling you you need to do so. what he would have done as fed chairman, he has been critical of trump, not powell >> i will be there, too. >> and mike santoliwill be there as a bonus for two hours. >> really? >> really. >> thank you see you later.

coming up on "squawk alley," we take a closer look at facebook after another alleged misuse of data by the social network. and we're going to keep a close eye on markets, following the interest rate hike yesterday we are down on major averages, off lows of the morning. "squawk alley" cinupomg at&t provides edge-to-edge intelligence, covering virtually every part of your retail business. so that if your customer needs shoes, & he's got wide feet. & with edge-to-edge intelligence you've got near real time inventory updates. & he'll find the same shoes in your store that he found online he'll be one happy, very forgetful wide footed customer. at&t provides edge to edge intelligence. it can do so much for your business, the list goes on and on. that's the power of &. & if your customer also forgets socks! & you could send him a coupon for that item. 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.

good morning it is 8:00 a.m. in california, 11:00 a.m. here on wall street "squawk alley" is live. ♪ ♪ good thursday morning, welcome to "squawk alley." i am jon fortt, with me, morgan brennan, and david faber for now, let's start off with the market flash, shares of twitter taking a dramatic move