earnings beat. the china trade war has not hurt its business the stock soaring this morning is that a dow component? i knew that. friday, december 21st, 2018. "squawk box" begins right now. ♪ live from new york where business never sleeps, this is "squawk box. good morning, everybody. welcome to "squawk box" here on cnbc we are live from the nasdaq market site in times square. let's take a look at the u.s. equity futures at this hour on this friday morning and, guess what, a little bit of green. we haven't seen much of that lately we'll see if this lasts through the morning and, even more importantly, into the day and through the closing session. we're up by 45 points for the dow and just under six points for the s&p and up by about 30

points for the nasdaq. let's listen to the damage recap on this. dow was down another 464 points yesterday. that was a decline of 2% s&p was down another 6.1% and the nasdaq off by 1.6% if you're looking at this, these are the lowest closes for october 12th of 2007 for the dow. october 2nd of 2017 for the nasdaq and september 8th of 2007 -- that has to be wrong number '17 we must be talking about since last year for these numbers. major averages are down more than 5% for this week. we are on pace for the worst week since march and the third straight weekly decline and i think i saw somewhere that for these numbers, you're talking about down 10% or more for the month and that would make this the worst december or the worst month we've seen the worst month we've seen in a decade. >> remember that year we started off really badly after a good close and then it

was down 13% about three, four months later >> end of the year >> but right before the panic. but, yeah, 800 points in two days no, it's really -- >> 1,700 points. >> more like 1,200 because we were up 400, 500 on, what's today friday it was wednesday we were up 400, 500. the first down 400, down 400 yesterday. to me, that's like 1,200 >> right >> gut wrenching watching it >> rough watching some of these things let's take a look at what happened overnight in asia the nikkei ended the session down by about 1.1% and the shanghai composite was down by 0.8% in europe this morning, you're talking about numbers across the board here where everybody is in the red at this point. looks like the cac is the major decliner of the major averages

the dax is off by 0.4% and stocks in italy and spain also down. they're each down by more than 1% finally, if you take a look at treasury yields, you'll see that the ten year right now is yielding 2.792%. all those calls for people who expected that we'd be at potentially 3.5% in the not too distant future check this out, now below 2.8% andrew nike shares are moving higher after the company reported a big earnings beat world's largest sports wear maker beating estimates for revenue and earnings, as well. saw double-digit growth. sales in north america, the company's largest market there doing quite well they were up 8% in europe. and the biggest gains were in china where nike posted a 26% growth on the conference call nike executives say they remain bullish about growth in china, despite the headwinds there.

we should, do we have some sound to play? i think we do. >> well, there's been uncertainty of late regarding u.s./china relations we have not seen any impact on our business nike continues to win with the consumer in china. for over three decades, nike has been a brand of china for china. >> let's take a look at those shares this morning. you see nike shares this morning up by about 8% 72.92. >> it was in bear market territory prior to this. see down 21% or something. >> not unique. >> no, no. a long list. also new this morning, former nissan chairman carlos ghosn rearrested prosecutors say the move was based on suspicions that ghosn shifted more than $16 million in personal investment losses to

nissan back in 2008. he also allegedly ordered the company to deposit millions of dollars into a related bank account on four separate occasions. ghosn was ousted from nissan last month and in jail ever since on allegations of financial misconduct and learned how the japanese system works because he has not had access to his american lawyers and not been able to talk to his family on any of these counts and we haven't had that much clarity other than what we heard from japanese authorities on this >> a rearrest. >> i think we should get out the -- >> rerest. just, no, that's not common. i mean, it's not a word we use all the time >> we don't usually cover japanese fallout within the trump white house. jim mattis is stepping down at the end of february. in his resignation letter he signaled differences over the handling of russia and china

secretary mattis wrote that president trump has a right to have a secretary of defense user better aligned with his and the move is basically in the same time frame after the president said he would withdraw american troops from syria. maybe looking at afghanistan, as well president trump tweeted a new defense secretary would be named shortly. okay our other big story of the morning at the intersection of business and politics and weighing on the markets, as well the countdown is on without a spending bill in place by midnight some key agencies, including homeland security and the state department will face partial shutdowns. the house and senate have each passed bills setting up a showdown over funding for president trump's border wall. want to get over to washington this morning with more on this developing story good morning >> drew, the deadline to fund the government is tonight and right now no compromise in sight. just 24 hours ago, it seemed that lawmakers in the senate

thought they had a deal that would keep the government open through february 8th and then president trump threatened to veto the bill also it included money for a border wall. one of his signature campaign promises and a rallying cry for his base and republicans decided it is now or never the house voted to attach $5 billion to the wall to that stop gap spending bill. >> the house has passed the bill and the senate passed the bill >> don't know if you could hear it there, but he said they want to find where common ground lies but, guys, i'm not sure there is any right now. democrats are totally opposed to any money for this wall, which means that there is a strong chance that we will head into another government shutdown. >> but president trump wants one. he asked for one 25 times. and he said in front of us, he'd be proud to shut down the government it is nothing to be proud of the bottom line is simple, the

trump temper tantrum will shut down the government, but it will not get him his wall >> the senate is supposed to take up the spending bill with the border wall funding this afternoon. it is expected to fail and, so, no one is really sure what the end game is here, guys back over to you >> okay. ylan so many questions. >> where to begin. >> where to begin. any timeline today that we should be thinking specifically about in terms of the way the markets and investors are going to think about this? >> so, the senate reconvenes at noon so, we would look for that vote for that spending bill to come up again in the senate some time this afternoon right now, senators are flying back to washington, many of them had left town because they thought they were done they thought they had this deal and they thought they could go home and enjoy their christmas holidays so, now senators are trying to make their way back to washington they're hopping on flights they want to make sure there are enough lawmakers in town to vote

on this in order to see what happens next one of the things that really made a difference in the house yesterday, there had been a lot of questions over whether the house would even be able to pass that $5 billion for the border wall funding you remember just about a week ago nancy pelosi said to president trump, you don't have the votes to do this well, it turns out, actually, they did part of that was because they put a lot of pressure on members who are leaving the house either retiring or perhaps who lost their seats or who were just going to leave washington altogether they made sure they stayed and they voted they were able to get this through the house last night with a very comfortable margin majority leader kevin mccarthy saying the house has no plans to vote on a so-called clean spending bill. there is no chance even if this bill fails in the senate, the house would go back and vote on just that simple, straight forward stop gap spending measure. so, we are looking at, we are

staring down the barrel of a government shutdown here with just hours to go and just a few days before the holidays >> where do we think the president really is? >> it's ugly because it's not christmassy at all right now and, you know, there are people on the right telling mcconnell to go, it's christmastime. can't we get some bipartisan -- i mean, $5 billion i know that is a lot of money and all. but we spend $800 billion pretty quickly. what about the disaster stuff in there. no wildfire or hurricane relief in the clean bill to put it in this bill. >> but hasn't overspending money on border security if you do a virtual wall with technology and actual slats and beyond >> you don't think this is a function, even rush limbaugh is talking about him screaming at the president. >> i don't think they'll give him a dime i don't think that is necessarily anything other than politics no way they're giving him a win.

and the border wall, if you look at quinnipiac or other polls, the number is going up on a secure border. the latest ones that have come out. >> a secure border and a border wall there is a difference. >> border security but, yeah, are democrats for border security in some shape and what does that look like >> but it's not -- >> i think it depends on which democrats. they're talking about technology and drones and finding way to electronic >> however you want to do it you need money to end up doing it and you have to do this you know, i just think it's an ugly testament and both sides are using it as a political football >> the bigger problem is, anything from the market's perspective. anything you thought was a done deal is not. people never anticipated he would push it right before the

holidays that we would put this to february and be fighting about >> but yesterday, this came out about midday i saw on "washington post" it rattled the markets. i don't know, maybe the last 200 points out of 1,200. >> this made me think, but this made me think that the trade war we could have a real issue when that 90 days is up just because you don't know what he is going to do. that has been part of his strength as a negotiator because the other side of the table doesn't know what he is going to do the markets have finally realized they don't know what he was going to do. >> you actually talked to a lot of people, investors yesterday, that is what they were talking about. he was one of the few people that both sides agreed with. >> finally initially it was, i saw all the headlines from when he was appointed from the left. oh, my god, it's another general. this guy is called mad dog look who we have as secretary.

only until they leave they like the guy. >> a month ago the republicans even thought >> okay. he's a great guy he guard rails and all that stuff. but a month ago i think trump said, yeah, i don't know how long he is going to stay he's kind of a democrat. mattis said, yeah, he'll be here forever. this was not a total surprise. >> and the pentagon and the white house hadn't been really talking for a while because they had disagreed on all the issues. >> they had. >> it wasn't a total >> they already knew >> we had plenty going on for the last month and a half based on whatever you want to call it. oil, slow down, fed. to call the last 200 points. >> but if you think that we're smooth sailing from here, that's the concern. >> i think if a government shutdown included the fed, we'd shut those clowns down for a while, i think the market action might rally, right, andrew, if they were part of the shutdown >> let's get back to the market.

actually, i saw, dom said this isn't powell's fault it goes back to the guys that just let it. >> they're left holding the bag. >> even went back to greenspan in terms of letting things get totally out of control this guy comes in to mop up the mess after the toilet overflows. >> there is a good picture >> it hand to me, not me, but something i had to deal with recently >> i bet who are you blaming in your house if not you >> there's someone to blame and it was not me. i'm not going to say anything. anyway, let's get back to the markets' response to the central bank joining us now two cios who have different takes on how to steer the economy. steve smyth and stephanie lang

and, hank, you probably were as i was talk about the fed, it's interesting your thoughts, though you think they're going to get this right you think that the fears are probably unwarranted, but in getting it right and orchestrating a safe landing you say they're only going to raise once next year and it is going to be at the end of the year so, if he had said that, maybe we wouldn't be in where we are right now. you don't think he will be as hawkish as he was talking. >> that's right. this fed has been so underestimated over the past ten years. qe1, 2, 3, 4 we have never done any of this before everyone railed against fed policy for the better part of seven years. and now that we're starting to unwind it, again, we've never been innen a positi ea positione doing it and it's creating anxiety. we think the fed is going to get it and they're not going to

overshoot and they're not going to intentionally invert the yield curve. that suggests to us a much slower pace in 2019. very similar makeup to three years ago when the fed first increased its rates in december of '15 with suggesting four more hikes in '16 and we only got one at the end of the year in '16. i think you'll have a very similar set up to that >> a big leap of faith, frank. don't pay attention to what he said end up doing the right thing in the end. is that paraphrasing it correctly? >> well, yes i mean, look >> why did he have to talk so tough? to show trump is not his master and he's independent is that why? >> certainly a credibility factor there, joe, no question

about that but look at the change in language from december from early october. that's a pretty dramatic change when in early october he said we're no where near a neutral late and we might have to shoot above it kind of gotten a little more >> no, go ahead. i'm sorry. >> they have gotten a little more dovish in their commentary and i expect that to continue into 2019. >> three steps forward, two steps back he walked it back a little but then i thought he got a little more hawkish in the market unless the market misinterpreted what do you think about powell and, i mean, hope springs ete eternal that the fed gets things right. but a lot of times in the past the policy mistake is that they get too tight too quickly. >> i think there was a big misstep with the communication with the market on wednesday we saw a huge selloff. similar to his comments back in

october. the good news is we saw how moderate his stance. he went from three to two and ultimately we think he is going to go one and we think there is a good chance he could be done at this point. powell iskeenly aware that he has to be very careful going forward. he has a slippery slope. there is some policy missteps that could happen. there have been 13 fed tightenin tightenings since world war ii and he has to be very careful going forward. he also mentioned now we're at the lower end of the estimates for the neutral rate he is going to be cautious going forward. i think actually at this point we're one and done or possibly we won't see any more fed rate hikes from here. if the market is any indication of what is going on. >> it's, i'm not sure to be happy or sad with what you're

saying almost like both you and hank are saying that the market is going to convince the fed or the market is going to convince the fed not to do any more, which doesn't sound very positive about the economy, stephanie >> i think, you know, that's why he didn't go from three to zero this last time i think that would have lowered the market i think he was weighing both sides of it. should he indicate that he's worried about economic growth. he's actually quite positive on it but i think he didn't want to go too soft because that would have been a warning but, unfortunately, he didn't go soft enough and that was a big indicator to the market that there could be a policy misstep coming up. >> i think the super bowl is down in atlanta this year, isn't it, stephanie? are you excited? do you have a ticket are you going to go? >> are you going to get me one because right now i don't have a ticket. >> i can work on it. that reuben character, do you think he can get us tickets? >> i don't know. >> it would be a great game.

>> reuben fanatics >> yes, yes, yes i'm thinking robert. >> robert rubin. you're pining for him to help with this. i don't think he could help. citigroup stock certificates >> yeah, exactly >> he could definitely stubhub us what was he making $10 million a year thank you, hank smith from citigro citigroup. thank you, appreciate it still to come this morning, if you haven't finished your christmas shopping, it's not too late, believe it or not. show you some last-minute gift ideas right after this break as we head to that break, here is a look at the biggest premarket winners and losers in the dow. big ones nike. it's up by more than 8% this morning.

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welcome back, everybody. it is not too late for you last-minute shoppers out there in fact, to help you out a little bit we have someone joining us right now with the best gifts you can get in time for the holiday. style director for "good housekeeping" and laurie, thank you for coming in. >> thank you for having me happy holidays >> happy holidays. you have some stuff that people need to know about last-minute gifts. anybody who is not caught up yet. >> gifts that everybody will likely have. >> does that mean that they're not good >> no, it means that the market knew to stock up, okay we're going to start here with the apple watch series 4 while i'm talking, i'm going to show you guys what it can do you may have heard about this. it came out about two weeks ago. the ecg app.

right now while i'm talking i'm getting an electrocardiogram it's measuring the electrical currents in my chest and great for people who care about their health the apple watch is constantly keeping us active, healthy and you can see it counting down and in one second i'll find out. there it is. my heart rate is over 120 because i'm excited to be here with you guys. i'm a little nervous but amazing. what it does, it will send a pdf right to my phone secure and encrypted and if you want to share that with your doctor, you can. it does everything all the apple watches can do slightly bigger face beautiful design >> this is a big deal, too they actually caught people who have heart issues with these things it's not supposed to replace your doctor, but has found problems that should be pointed out. >> what else does it say gives you an actual ekg or just your pulse >> the actual ekg. the rhythm or if you're in afib

it will let you know that. which could lead to stroke it's really amazing for anybody. it also does fall detection if you fall down or your paper falls down does everything else all the apple watches can do starts at $399 >> those are all things, sounds like would be better for seniors but seniors arant we s ars aras. >> you would be surprised. >> i'm actually convinced in the next three years, everyone will wear one of these watches. >> this is the first thing that made me think, maybe i want one of these >> it is addictive i have taken ten of them in the last two days. >> just like brave new world all marching in lock step with my apple watch >> let me show you the jacket that everybody is going to have. this is tie on and available, great annual gift guide.

>> gwyneth paltrow >> it is a self-heating jacket >> what do you mean? >> this little button here you press it and it starts to warm up it was charged on a usb. >> you charge it >> you charge it >> the other thing is -- >> but where is the battery? comes normally in here >> this is the usb wire. charge it into any usb and then it heats up. you press. >> feel it getting hot already >> i want this >> the other great thing, what is the price tag >> the price is 270. it is really three jackets in one. long sleeves, short sleeves or a puffer vest. amazing if you're on the slopes. >> how much is it? >> $270. >> i have to get to the furreal ricky. if you will, clap your hands

>> eat your treat. >> come on >> is he not doing it? >> he's a good boy >> of course, this happens there he goes. all right. so, this is so fun from hasbro everybody loves these and our good housekeeping toy award. >> he wants you to play with him, joe >> do you want to feed him he does over 100 animations. he can eat you have to put it in his mouth, though >> he has another function andrew, do you mind being my demo >> depends what's happening. >> it is just going to pea tbe e pellet kids really love it. i don't know if andrew does. we do toy awards every year at "good housekeeping." this was highly rated.

>> what is the price tag >> usually $129 and under 100 right now. amazon.com still in stock >> the furreal that we saw last year, the tiger. >> also a self-cleaning water bottle >> this i like, too. >> under $100. turns on >> self-cleaning i never have to wash it. >> see how the light goes on, takes out viruss and bacteria and also goes into adventure mode if you go camping or hiking >> is there a battery in there >> i charged the cap that is the trend in gifts a robotic puppy, self-cleaning water bottles and self-heating jacket and the self ekg. this is the trend that we're seeing and really great gifts. really fun stuff >> thank you >> thank you, guys >> i wish my dogs didn't do that if you want to come over and watch that it happens all the time. you don't even have to ask them. >> he does a paw shake

maybe that is the feature you like >> does it do a paw shake? >> you don't have a dog yet, right? >> this will work for new york city >> and my kids want a puppy. this is what they'll be getting. not a real one >> thanks so much. >> thanks, guys. coming up when we return tech trends for your portfolio in the new year. we'll talk to an investor who got in early on big companies. he'll show us the companies he's backing right now. that interview is next. plus, talk much more about the dow component nike that stock soring after blockbuster reports. as we take a break, look at yesterday's s&p 500 winners and losers back in a minute >> it was wonderful. >> bravo >> it was great. it was pretty good >> it was pretty terrible.

♪ welcome back you're watching "squawk box" live from the nasdaq market site in times square. good morning, everybody. welcome back among the stories that are front and center today, flights into and out of london's gatwick airport have resumed this morning after drones sparked 36 hours of travel chaos. drones were first spotted wednesday evening sparking concerns of a deadly collision hundreds of thousands of travelers have been affected by delays and cancellations the airport is warning travelers to check their flight status before they leave for the

airport. former nissan chairman carlos ghosn has been arrested in japan expected to be released on bail as early as this week. today's move comes amid new allegations that ghosn shifted investment to nissan. the last full trading day before christmas a lot of economic data to sort through today. durable goods and personal income and spending and the final estimate on the third quarter gdp. all out at 8:30 a.m. eastern time take a look at the u.s. equity futures at this hour. up by about 66 points for the dow. not saying much given losses we've seen given that 164 points yesterday. s&p futures up over 7. nasdaq up over 31. for a look at tech investing trends in the new year, deven parech and twitter, tumblr and

you've done well over the years, but tell me what you think is happening over the year. i imagine the public markets will have an impact. >> a lot of volatility inside and outside of tech. if you look at the portfolio and operating performance of the companies, we're not seeing any slow down or any volatility or underlying performance the stocks that we have that have seen anywhere from 20% to 45% reduction in value >> to the extent that you look at your own portfolio and say the markets are right or wrong, you think the markets are wrong right now? >> i don't think the markets are pricing where they are because of underlying performance. they are pricing where they are. >> do you see any weakness in the sort of future economic prospects of some of the companies you've been talking about? >> we don't see it right now we spend a lot of time looking

at it. we don't see actually any underlying slow down when i talk to friends who focus on industrials and other areas, they're not seeing it either, other than maybe a couple things in oil where there's very clear impact on the commodity price. >> what about just issues like housing. the economic numbers we watch. things like housing, auto loans and any issues that are interest rate sensitive have shown some weakness recently. >> absolutely. we look at that. if you go back to 2008 and you go back to prior economic, we saw, we started to see things in the underlying performers of the companies. deals start slowing down and consumer companies you start seeing growth slow down. >> what is your expectation unterm us on the tarmac to get off, the question is, do they actually make it to the air >> the question is going to be, as it relates to companies with scale like uber, what has happened in the tech market companies are waiting a lot longer to get public and waiting to a larger scale before they

go companies like that, if they decide to get out will go. what valuation their comps have traded down and that will be the challenge for them >> in terms of trends you're looking at in terms of putting money to work in the tech world, what is the big idea at the moment >> the big idea is probably conversions of ai machine learning for software. everybody has access to lots of data the question is, how do you make smart decisions and what ai machine learning has shown if you get the right algorithms and trade them over time relative comparable to a human being. >> data as being the new oil in that for ai to work, you actually need huge amounts of data to process effectively. can a kid in the garage, right, with this, whatever that fabulous new idea. does he ever or she ever have a chance of competing the big guys who have the data, who have that

oil? >> you need the data to make it work >> does that change the competitive dynamic with which startp up and innovation technology has merged? >> changed as it relates to countries. china, we value our privacy, which is why there is a lot of noise around facebook right now. other countries don't have the same views as it relates to privacy. if you look at kind of what is happening in china right now, they are racing ahead on ai. part of the reason is because their access to oil, in this case, data, is at a different place than ours. >> but as a result of that, when you're looking at sort of new investments in this space, who are the people who you're looking at because if they don't have the access to the oil in the same way, how will they ever have a shot? >> the way we think about this, vertically focused so, you think about that person who is thinking about it now we have the one we're looking at right now in the insurance

space. theidate the data, the oil and clients are wanting to make better decisions. we'll provide you the data and we'll bring you the algorithm. >> they're outsourcing their data >> we're basically taking an algorithm and put it on top of their data. >> do you get access to their data >> we do, but we don't own it. >> for an application, facebook is allowing other companies to have access to the data that i offered them in this case, we're not giving that the last thing i'll say on that topic. if i'm an insurance company and i can get better by looking at other data and don't have access to a competitor's data, okay with that. >> are there customers who are okay with that if there are data breaches >> well, i think that becomes more challenging i think back to marriott >> that's a different, now we're talking about another trend that

we're spending time on which is cyber security >> one of the trend words we talked about in '17, '18 block chain came in tandem with bitcoin. >> i try not to look atmy bitcoin these days. >> do you own some >> only a little bit for fun >> so the promise of block chain. myth or reality? >> probably closer to myth than reality. and here's what i mean by that actually, i think it is a very powerful, it's a powerful tool just people think it can be applied to everything. every company would come in and say we're this on the block chain. 95% of applications block chain is not necessary for tha application. what is necessary for that application is the market participants and that market actually work together and take the supply chain application and somebody says well this block chain supply chain is your problem the supply chain or the problem everybody on the supply chain does not want to provide you in 95% of the cases,

it is the latter certain applications and title insurance is an example. margins extraordinarily high and should be extraordinarily low. we're a block chain-type application. single repository of that data powerful application >> so, you're hearing it in the pitches coming to you. >> bitcoin hits $3,000 miraculously block chain applications coming in the door right now. >> final question. we have to go. you mentioned cyber security what is the new idea in that space? is it just more because we need more of it >> the reality is it is more and the other thing i would say the problem today, look at our own firm the biggest problem is not some super sophisticated hacker, it is a fishing attack. the fishing attacks are getting a lot more sophisticated our biggest challenge is changing the behavior of people. i gota all paranoid and sent it

to our tech group. and they spend a lot of time saying is this real. >> they set us up here just opening it, i knew it was crap but i didn't answer or do anything and how do you know before you open it up that you shouldn't open it up >> we do a test internally and just to see how many people click on the link. >> of course you're going to look at it >> but there is a link do you click on the link you'll be surprised how many people click on the link >> i got in trouble for opening it and not reporting it. i had to change my password. i get attached to my passwords i work so hard >>i can't remember them. >> that's a whole problem. >> thank you happy holidays >> thanks for coming in. coming up, nike shares on

the rise the retailer posting revenue growth in nearly every category and we'll dig through the numbers. yik yikes. there are some charters who say it's not over. at the top of the hour, our guest host mohammad elle-erian he is here to talk about the fed, the market selloff and multi-speed economies around the std. ay tuned, you're watching "squawk box" on cnbc

welcome back to "squawk box. the government in malaysia is seeking $7.5 billion for goldman sachs over the imdb scandal. the money laundering scheme. goldman denied wrongdoing and stead wasn't involved and former members of the government and state fund lied to the bank about the proceeds of that bond sale so, a lot more as that soap opera continues. shares overnight over a chinese regulatory official said some new video games were cleared for sale the agency that regulates video

games halted new approvals back in march amid an overhaul at the agency that was sparked by criticism of the violence in some of the games, as well as fears of addiction and eye problems no new game releases in china have been allowed since then but in a speech overnight a senior official said the first batch of game approvals has been completed now and that pushed stock higher by 4.5%. when we return, nike shares soaring after the company posted strong quarterly earnings. we'll dig through the numbers, next that stock, that dow component up by 7.8% this morning. let's take a quick check on what is happening in the european markets this morning. red arrows across the board. dax down by 4% this morning.

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♪ nike shares soaring up the quarter. posting earnings of 52 cents a share beating estimates of 46 cents. revenues rose 6.9% from a year ago also topping estimates joining us to talk about nike -- i want to start, really, with this season's -- just the environment in retail. evan clark at wwd women's waear daily. many times in the past we've talked about when housing is weak, people don't feel as flush because of their home equity lines. you've noticed at women's wear daily that the market's a little bit shaky. do you expect any consumer

confidence to be effected by the result of what we've been witnessing do people that go out for christmas shopping, are they aware of what's happening in the stock market at all? >> i think that tends to hit the higher end crowd quickest. they're the closest to their stock portfolios i think santa's going to come this year. presents will be under the tree. i don't think when people are kind of coming out for super saturday this weekend, they're going to -- i don't think so >> are we too close to it? >> i think christmas -- the blood lust is upon us. >> i'm getting margin calls left and right. nobody gets anything. >> by and large the christmas season is pushing on sales expected to be up 4%, 5% going in there's been a longer lull between black friday coming up until just recently. so retailers are hoping to make up a bit of lost ground this

weekend. but by and large this weekend -- >> is it going to be weaker than we thought at the beginning though >> i don't know about that the question is on the margins >> how about raincoats aren't they spiking? do you believe what's happening out here right now >> skyrocketing, yes >> how about nike? were you surprised at that >> it's one of the strongest brands out there they're doing a lot of innovation in their product. they've got big flagships. >> what do you make about the china comments whistling past the graveyard i would think if anyone would be a canary in the coal mine, that china -- >> apple >> wouldn't you expect to see -- for them to have had some

concerns more than what they expressed or no? >> i think china is just a big "x" factor all around. with everything how that economy is performing to the tariffs and everything it's hard to read. so i think retailers are, you know, kind of keeping stiff upper lip with problems of china coming up. they say, you know, it's always the long-term game so -- >> how many of these places are going to truly move their manufacturing facilities elsewhere? that's the other piece of this >> there's been a lot of shifting from, you know, to vietnam for different things and that it's not outrageously mobile i mean, you can move over a series of yeerz. >> and it's not coming back here >> if you listen to the high-tech world of 3d printing and on demand and all of that, that's more of it poised to come back here. but certainly i would expect the majority of apparel to be made in the east. >> so $110 billion according to adobe analytics.

up 18% >> online, yes >> that's a good number. >> yes >> amazon or walmart >> both. >> amazon versus walmart who's winning? >> that's the battle to watch. i think it's happening walmart is really the only company of scale and savvy to really compete with amazon on a level playing field. at least in the u.s. and they're squaring off in stores, online, globally they fought over flipkart and walmart won. i think it's going to continue to be tit for tat. >> do you have notes on it >> yeah. >> so you write the notes and then on the other side you have wwd. so you're advertising. >> advertising at the same time. >> this is like an nyt you know what i mean can you cross promote? "new york times," something like that more appropriate >> i just -- >> do you have it? >> no. this is what i do. i just sit here and go --

>> no. go to the opinion pages. that's where you're getting all your info. >> yeah. got the business and the -- see that okay >> i'm not going to be shamed. all right? >> no. i'm not shaming you. i like it. coming up when we return, our guest host for the rest of the show mohamed el-erian, he is here to talk about the fed and the market selloff he has made it through what may be a bear market and the rain. back in a moment

breaking news. the shutdown clock is ticking. the house passing a spending bill with money for a border wall setting up a stalemate with the senate and congress only has until midnight to figure it out. "squawk" goes shopping >> how much money you got today for clothes? >> retailers are in holiday crunch mode. we'll bring you the winners and the losers >> plus wall street's wish list.

mohamed el-erian is going to join us with a look at what the bulls and bears want before 2018 comes to an end. the second hour of "squawk box" begins right now ♪ live from the beating heart of business, new york, this is "squawk box. >> good morning. welcome back to "squawk box" here on cnbc i'm andrew ross sorkin along with joe kernen and becky quick. our guest host this morning mohamed el-erian from allianz. brings us a little bit -- i don't know is it a stocking stuffer is it coal we'll get to that. u.s. equity futures at this hour after what was -- what a day yesterday. but right now looks like we will have some green on the board potentially. we'll see. two hours.

nasdaq would open about 29 points higher. s&p 500 would open about 6.5 points higher. >> more on the markets in a moment, but first let's give you what's making headlines at this hour a government shutdown is looming tonight at midnight. unless president trump and lawmakers can come up with an agreement. yesterday the president said he would not sign an already passed bill that does not provide funding for the border wall that he wants the house then passed a new version that did include that funding, but it's all but certain to fail in the senate. moments ago president trump tweeting that senate majority leader mitch mcconnell should fight for the border wall and it would be a democratic shutdown if no agreement is reached by the deadline today is the busiest day of the week for economic data three reports out in just about 90 minutes' time with the government issuing durable goods for november the final reading of the third quarter gdp and personal income spending later this morning the university of michigan will be release its december consumer

sentiment index. also shares of nike are rising the athletic apparel maker -- nike saw a strong demand globally and said so far the trade dispute has not affected its china business that stock is up about 8%. other stocks making some news or moves this morning, campbell's soup naming the former head of pinnacle foods as the new ceo. he has the backing of third point which has been pushing for campbell to put itself up. shares of scintas reporting quarterly results that beat forecasts. also raising its guidance for the year and for the year, a tough couple of months, that's a welcome 5% gain for shareholders today, i guess. also new data this morning on what investors are doing with their money.

$34 was pulled from stock funds. mutual funds and etfs are on pace for their worst month of withdrawals on record. >> i feel like we've felt every billion of that. our guest host this morning mohamed el-erian, chief economic adviser at allianz i've frozen spending i have a spending problem in my household. i don't have a revenue problem just like the government i have a spending problem. so are you really freezing christmas spending you were kidding about that? >> i haven't started christmas shopping >> that's a problem. >> people love me as a shopper i'm a last-minute shopper. i end up getting more stuff than i should. >> and you'll pay any price because you need it right now. >> correct >> you know, you've been enjoying -- not you -- but the prosperity in the last year and a half in the market gains that's made you sort of sanguine and happy about our prospects. are you shaken at all by the last month and a half, two

months >> joe, for years we talked about this notion of going up while the fundamentals were sluggish predictable and ample. now even though the fundamentals are improving because the gap is so large, the reaction is excessive to central bank withdrawal of ample and predictive -- >> overshooting where it should be, do you think >> look. let me tell you the good, bad, the ugly the bad is prices are terrible even good names get thrown out with bad names this is very unsettling. the bad is if we're not careful and this is a message to washington, if we're not careful, bad market technicals can become bad economics >> a lot of people in washington who are you talking about? jay powell, donald trump anybody? >> this is important because the rest of the world is slowing but the good is this was going to happen at some point.

it would have been better if it happened a little bit earlier. but it's going to create value and a more sustainable basis going forward. >> you know all these guys on the fed. and you're familiar. there are some people on the fed kashkari and bullard, others that i'm sure were arguing with jay powell about not only the action a couple of days ago, but sort of the commentary that came out. did he make -- was that a mistake or is he on the right track in your view >> i think the actions weren't the problem. i think it was the communication of the actions that were a problem. and part of that is because you don't have people on the fed like you did in the past kevin walsh, or like you did with dudley who have lived through markets. >> wait. i thought jay powell was the one who had sensitivity to -- he's the guy who is the markets expert >> he's a private equity guy i have huge respect for him. but he didn't live on the trade floor. he hasn't seen how technicals can dominate markets and

completely ignore fundamentals so they said three things that made total sense economically but the market didn't want to hear >> but maybe that was intentional. maybe they're trying to break the temper tantrum >> they're trying to break the codependence and the fact the markets have held -- >> it's not going to go easily >> kwhawhat was wrong with the communication? first, it was too oriented two, it was too economic and the third, i think the most important that people haven't quite realized, is that they inherited for no fault of their own a balance sheet tool that's on automatic pilot when your balance sheet tool that was important, the interest rate signaling mechanism causes undue fluxuations in markets he should have said and i suspect he will in the future that nothing is off the table. >> the wind down of the balance

sheet at some point. >> if it turns out we are more vulnerable to the outside world that's weakening and if bad market technicals become bad economics. >> i know for a fact that warsh got close to getting that job. after reading that editorial, i don't think he would be doing what powell is doing right now >> he wouldn't be raising rates. >> as hawkish as we thought he was last year, the year before him and druckenmiller in terms of being behind the curve -- >> in terms of winding down the balance sheet. >> maybe not >> you should ask him. but he might be much more -- given that editorial, he may be much more dovish not everyone would have raised rates here >> so you've heard me say this over and over again. the big mistake was to signal four hikes this year the minute they signal four hikes -- >> they were already backed into

a corner >> the market expected -- if they -- >> that's a weird reason to do it when the entire world is depending on you to do the right things >> my article is tuesday's ft was even a dovish hike would calm the markets >>. >> well, i don't know. i think chairman powell went out of his way to say data dependent. >> that's what i expected, but it's not what the market wanted. >> i think it's a balance sheet issue. we're going to focus more on that >> even liesman admitted i was -- if i had false teeth, they would have fallen right out. he even said that powell made a mistake in the way he communicated with the markets. i think steve conceded that yesterday. >> do you think that he thinks that he did? >> i think he looks at this and says two things. one is the economic argument for what i did is solid. rock solid that's the first thing he'll say.

the second is it's about time that the markets start standing on their own feet. this notion that the federal reserve is our best friend ever -- >> but what about -- oil and copper, what if there's no inflation? you don't just look in the face. wages are -- people are finally getting a raise. you don't just cut off growth for the sake of cutting off growth if there's no inflation do you >> for you to argue that a 25 basis points -- >> nine of them. >> no. not nine of them from december -- >> i know. but so was everyone else maybe the reason is because we were staying there too long. >> i think the big surprise they have to do a lot more work on is the rest of the world is slowing significantly. look at the numbers out of france >> look at what the fed always does

all they do is -- so they're living in the past with where unemployment is. when we had this discussion, it has become a tradition that new fed chairs get challenged in a major way. we will live through this. the economy is solid >> when we do usher in a recession, it's a fed policy mistake by going up too much or not realizing that something's coming and they tighten too much they just can't believe that we're too tight at these levels. they can't believe it. >> so what does the economy look like 3% growth rate and we're going to do 2.5% to 3% next year >> how's copper look how's the stock market look? >> last time i was here, i told you be careful oil is in the perfect storm. the loss of credibility in opec's plus price function

>> mohamed is arguing the same point you are saying these market conditions could eventually lead to economic weakness and be a signal of that >> i think the fed could correct themselves by simply saying, okay we are very sensitive to what's happening in the rest of the world and we will continue to assess spillbacks. and second, to hint that balance sheet policy is not off the table. >> i think that would have made the difference if they had said that but i also think jay powell wanted to make a statement and wanted the markets to realize they're not going to be there. >> okay. we got a lot more from mohamed el-erian throughout the program. when we return, jeff lewis is going to join us on the set we're going to talk pot, ipos, and much more. he's making his way over here right now. as we head to a break, take a look at the biggest premarket winners and losers in the dow. stay tuned you're watching "squawk box"

right here on cnbc on a very rainy friday happy holidays

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crystal ball of what 2019 might bring, geoff lewis he was part on lyft, a company that potentially to go public. we were trying to understand all morning about what 2019 may bring given the volatility in the markets. how worried are you about these tech companies able to get a true exit and what that means for the valuations of so many private companies you're involved in? >> ultimately not terribly worried. the way i always think about these private company valuations is you always want to think about them as a discount on the future versus a premium on the pass this thing i learned from peter thiel i worked with for many years. and the best companies have very bright futures you think about something like lyft, for example, only half of the rides in -- half a percent of the rides in the u.s. today are shared rides the entire remainder of rides in the u.s. are normal rides. so there's a lot of room for a company like lyft in the u.s.

alone to grow just by capturing, if they could even capture 2% of rides in the u.s., that's tremendous room to grow. i think that's a good future ffr the tech companies and there are some dogs that are going to go out this year and not do well. but ultimately, the great thing about technology is the macro tends to matter less in the long-term for the really enduring tech companies. >> how do you distinguish the dogs that's what people are trying to figure out right now >>@really hard you have to come at it from all of these different angles. ultimately you want to find it that have these durable revenue models that are going to be able to grow for many years going forward. it's a hard thing to figure out. >> i know it's not your business but i was going to say facebook looked like a very durable business may still be a durable business itself but you look in the public markets the way that company's being treated and the way a lot

of social media companies are being treated. how do you look at that space? >> i think the social media sector is ripe for disruption. there's always a look between privacy and communications we want as users to be able to communicate with our friends, be connected. then there's this question of does the privacy thing ever get shifted too far to a point where people revolt? they haven't seen any sort of mass user revolt a lot of the noise has been in the markets. >> today if i came to you which i need to share your information? >> i actually think it's a very -- it's a narrative violation to be in social med media -- i think the idea of investing in a social media

business today of venture capitalists. very unfashionable we have been looking at new companies in that sector >> the watch word, catch word of the last few years, do you think that's overhyped, underhyped >> you've got to distinguish between blockchain and the currencies themselves. i would say blockchain the technology continues to be somewhat overhyped lots of scaleability challenges to be figured out there. on the currency side, i would say this time last year, extraordinarily overhyped. last year i had an electric in my life that said i was a bitcoin millionaire. at this point i think bitcoin is underhyped if you think a year ago versus

today, i personally have less confidence in global governments. less confidence that we're going to be in a stable long-term global future. you should be long bitcoin >> can we talk about pot joe rogan got elon musk to smoke pot on his set would you smoke some pot in our set? >> it's not legal in new york. >> but you're investing in it? >> the creators of tillray i didn't think they used the product. i spent time whether i thought the team was actually using it and they weren't the reason i cared is not because i have something against it but it was illegal at the time the company was based at the time in washington state was not legal in washington state. at this point i think the trend has dramatically shifted from back when we invested in tillray in 2014.

you know, there are only a few countries in the world where there was a medically legal framework. now there are over 30 countries. >> you knew it was going to be this big >> well, we didn't know the ipo was going to be as successful as it was that was a pleasant surprise but we didbelieve that regulation ultimately follows what society wants we thought back in 2014 when we made the investment that most people in most countries believe it should be at least medically legal. and the regular -- >> it waxes and wanes. does it matter if it's recreationally legal >> i think there's big business to be built just on the medical side then i do strongly believe the trend is toward recreational legalization certainly in many of the western european countries quite honestly, the u.s. is

behind other countries on that score. tbd here >> okay. give us the big idea for 2019. anything like that where you said, okay there's either a regulation or a trend in society that's moving in a direction that i'm seeing and i'm not sure everybody else is seeing right now. >> i'm personally very interested in new approaches to financing education and new approaches to actually getting an education i think the university, the college system is very broke and there are new financial instruments out there that can really help folks through education. there was some exciting stuff we've been working on. we'll be talking about in 2019 beyond that i'd say the trend for 2019 is the end of trends. i think we've gone through so many hype cycles in technology and i really think we're in an environment you have to find one-of-a-kind things that don't fit into categories. i think that makes the job of being an investor a lot harder >> all right

bedrock's geoff lewis. >> thanks a lot. all right. coming up, storms with heavy rain this can cause some major trouble for people a live report from atlanta's at nt.ly busy aior rpt. rpt. th'sex this is a tomato you can track from farm, to pot, to jar, to table. and serve with confidence that it's safe. this is a diamond you can follow from mine to finger, and trust it never fell into the wrong hands. ♪ ♪ this is a shipment transferred two hundred times, transparently tracked from port to port. this is the ibm blockchain, built for smarter business. built to run on the ibm cloud.

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welcome back to "squawk box," everybody. east coast storms are threatening to cause major travel trouble today nbc's gabe gutierrez joins us live from the atlanta airport. you travel more than just about anybody i know what's it like today versus the normal travel patterns >> reporter: hi, becky good morning it is busy here in atlanta, but thankfully the lines are moving smoothly so far. the biggest disruptions we're seeing are in the northeast as is to be expected. newark airport, la guardia yesterday there were more than 7,000 delays and some 250 cancellations across the country. already today, we're starting to see several hundred delays and more than a hundred cancellations. tsa says it plans to screen close to 2.7 million travelers every day through tomorrow now, here in atlanta, again,

looking at this big board. all the flights here are on time we should mention the major airlines this time around are now offering to waive change fees except for jetblue. but this massive storm moving to the northeast. thankfully the worst of it seems to be over by tonight. that means air travel will improve through the weekend. back to you. >> they're not offering the waive fair fees because things are already so booked for the holidays or what's the reasoning behind that >> reporter: well, it appears that so far things aren't quite that bad for this particular storm. you know, you had that trickle effect where so many flights are canceled these airlines try to get ahead of it. here in atlanta, we notice that lot because of a plane getting delayed, doesn't get here in time delta and other airlines often try to get ahead of that they waived those change fees. this time around, they're hoping it's short lived

that way things get back to normal tonight >> gabe gutierrez from nbc coming up when we return, this morning's top stories including nike getting a pop sus.r better than expected stay tuned you're watching "squawk box" here on cnbc at&t provides edge-to-edge intelligence, covering virtually every part of your finance business.

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♪ good morning welcome back to "squawk box" here on cnbc we are watching three big stories this morning let's go through them for you. number one, a government shutdown could happen and it could happen at midnight that's unless president trump and lawmakers can come up with an agreement and president trump is awake and he is tweeting this morning. the democrats whose votes we need in the senate will probably vote against border security and the wall even though they know it is desperately needed the dems vote no, there will be a shutdown that will last for a very long time people don't want open borders and crime, he writes and number two on our list this morning, futures are -- take a look right there they're in the green for now dow looks it would open about 35 points higher. nasdaq up about 21 points.

s&p up four points that's come down a little bit from where we started the morning. this follows a steep two-day selloff. then three on our stories, nike shares trading higher right now. posting better than expected earnings and revenue nike benefitting improving digital business among stories front and center, ousted nissan chairman carlos ghosn has been rerested >> rearrested. >> but why not make it rerested? >> because i promise you he's not resting. >> but there is not a word for rearrested i think we should invent one you didn't like misunderestimate with "w. that should have been one. what was the sarah palin one she had a great one too. i'll come up with it in a bit. but you can make up words. it can happen. this time he faces charges he made the automaker cover $16.6

million in personal investment losses in the last week no that could have happened, though, with this market that's in addition to allegations of financial misconduct last month that originally landed ghosn in jail. london's gatwick airport oops reopens after about 36 hours after reporting drone flights. there will still be delays and cancellations. the government is using military technology to guard against interference by drones that could endanger passenger aircraft no word on what i worry about. those canada geese they're just as bad or worse than drones. >> that's an issue except the drones are being piloted by somebody. and malaysia is reportedly seeking a $7.5 billion investment -- or $7.5 billion penalty from goldman sachs in connection with the firm's

involvement with 1 mdb according to financial times, goldman has denied any wrong doing in connection with its dealings with the fund which is suspected by authorities of engaging in a money laundering scheme the consumer is front and center right now holiday shopping rapping up. dom chu now with the latest. >> let's talk about the terms in terms of value it is interesting to see that the consumer discretionary trade still trades as a premium to the overall market a little bit of confusion on the line heers but the red line you're looking at is the discretionary earned price ratio. that's how much you're paying in price today for next year's anticipated earnings forget the color of the line

it should be yellow, but consumer discretionary is a sector that trades around 18 times forward earnings now, let's put into the other line here, the orange line which should be the s&p 500 trades at around 14 times. so consumer discretionary already trading at a premium not exactly a value trade. however, if you take a look at a broader measure of retail on a more equal weighted basis, that is to say every market cap weighted the same. not one large cap company outweighing all of the others. if you look at this etf, a more balanced view of the retail space, you're actually trading it closer to 13.5 times expected earnings so as we talk about consumer discretionary in this all-important fourth quarter of the year on a valuation basis, one stock in particular and you only need one guess as to who it is is by far an overwhelming force in terms of the price and

valuation and index weight for many of these. it's the biggest online retailer in america if you take that out, retail trades at a discount back over to you >> but maybe it should, dom. >> maybe it should so here's what i would say on a forward basis, we know that amazon has been just decimated in the recent turmoil. that pullback has amazon shares trading at around 40 times for the first half this year, it was trading over a hundred times next year's anticipated earnings so as we talk about the overlying overweighting factors for some of these indices, that's the reason why you're seeing retail or the discretionary sector trading at more of a premium to the overall market but if you strip out of the effects of amazon. that sector very much at least a value play compared to the rest of the market. >> so let me put you on the spot would you go short amazon versus the rest >> that's interesting.

because i no longer have to trade and get pnl for a living but here's what i would say. on a relative basis, the consumer is going to be a front and center key to the overall market in the first half of the year the reason why is because consumer sentiment and consumer spending drives more than two-thirds of the u.s. economy we have relatively high levels of consumer confidence right now. that's arguably what's helping keep things from going totally haywire in the marketplace whether or not the hard economic data on consumer spending starts to justify some of that perhaps spending out there in terms of sentiment, that remains to be seen but if we see consumer sentiment dip, maybe we see other indicators fall behind it. >> dom, thank you. dom chu. joining us right now to talk more about the markets is james lou. he is the founder at clearnomics. also eric knudsson

eric, i want to start with you and get your feeling about what's happening with this market because it's been hit after hit after hit. you think we are getting to the end of that? or would you just be sitting on the sidelines at this point? >> so we are moving towards being overweight global equities we want to do that earlier in the new year we're looking selectively at this point, but there's so much technically driven and sentiment driven selling going on right now and lack of liquidity that we want to be cautious between now and the end of the year. >> when you say global, does that include -- -- everything else was down. guess what you know, some of the other areas overseas that actually kind of caught up to the u.s. on the debt side. we're now including the u.s. as being part of the opportunity

set because we think markets have gone too far in rerating global growth and reassessing global liquidity >> so you are right now neutral? on your way to overweight or underweight? >> we've been neutral in the u.s. select emerging markets. we are moving to an overweight broadly with the exception of europe where we're remaining neutral. just when we work through the near term political risks. >> mohamed, i want to go back to something you talked about at the top of the 7:00 hour your idea this has been done to some extent based on a re-evaluation. it's kind of what tepper told you yesterday, joe at this point, the tide's going out. all this liquidity, the reason it was going up was because it was coming in. is this an overweight situation? >> i believe this is a tech

technically driven selloff what seems irrational to people out there is not at all irrational it's money coming out of the asset class. it's people repositioning. so first thing is don't underestimate the extent to which technicals can dislocate markets. the second is, this is really interesting. the big risk is that technicals contaminate markets. it goes through consumer sentiment. don't underestimate. having said that, i worry about the trade the rest of the world versus the u.s i think that in a downturn, the u.s. has much better shock absorbers. and em, really so one has to be really careful about how to navigate this the big question i would ask is what are clients telling you are clients saying i'm

confident, give you more money or are they saying i don't know. let me take some money out that is going to be important from here. >> on the institutional side, investors are thinking longer term they're able to take a longer view it's a lot of questions. and the key question is where are we in the cycle and what's the probability of recession in the next 12 months if you condition corrections like we're in the midst of right now -- whether it's looking at pmis or going into recession, that toggle switch leads to different outcomes if we do not go into recession in the next 12 to 18 months if pmi stays above 53 for example in the u.s the most recent data looks more concerning you know, historically markets have rebounded and i think in our view, that's our base case. we're not going to go into recession in the next 12 to 18 months but the technicals kind of become prophecy because they

lead to a self-fulfilling lack of confidence. but when we look at our expectations of growth in the u.s. going from 3.5% to 2% china's going to spend at least a couple percent of their gdp to stimulate there if the fed is going to be truly data driven on their next steps, they'll pause for a significant period of time that means normalization >> james, what does the economy really look like right now and is it a kwrn of yours the market creates prophecy? >> we think some of the volatility we're seeing creates opportunity. ichk the perspective to take here is over the last two years we've in some sense seen this mini cycle last year the markets were trading as if nothing could go wrong. you had economic growth chugging on all cylinders across the world. you had earnings growth that was spectacular last year and this year coming out of recession

this year the market is trading as if nothing will be right again. clearly it's going to be somewhere in the middle. over the long run, the market we already know can only sustain about 5% to 7% long run returns on average per year because of the way economic growth looks and the way earnings growth looks. so we think the market is somewhat too pessimistic here. we're not being dismissive like mohamed said, technicals can overshoot. the trouble right now is simply that, you know, over the long run, especially over the next 12 to 24 months, we think that the market has probably very far overshot already where the fundamentals are >> overshot to the upside? >> downside, absolutely. yeah you look at -- the indicators that people are talking about, things like the yield curve slightly inverting typically there's a process before you get to the end of the cycle. ultimately earnings growth will not be negative.

that could still drive returns >> james, thank you so much for coming in. james lou and also eric knudsson and mohamed el-erian is our guest host for the remainder of the hour >> president trump tweeted many times in the last hour one is if the dems vote no on this border security wall, there will be a shutdown that will last far very long time. >> what is he doing? >> he's saying there's a shutdown that will last for a long time. so the market was up about 80 or so it's still up a little but there it is. last for a very long time. just one last thing -- you laugh at me about rerest listen to me hold on. the palin word was refuteiate. they said from a interpretation of the different context used, we concluded that neither refute

or repudiate is precise. there for refudiate stands on its own. it became a word if you can come up with a really good word, sorkin, you could -- you know how people want to name a comet or star? you're a word smith. you're mr. "new york times." wouldn't you like to have your own word >> no. no >> you have it already it's ultimately i think might be your own word, actually. coming up this morning, stocks to watch. stay tuned you're watching "squawk box" on cnbc

when we return, a new survey finding a quarter of americans say they will finish their christmas shopping this weekend. i got to do some look at retail winners and losers, we will do that next and so much more back in a moment

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well, this is supposed to be the most wonderful time of the year for the nation's retailers. but is it this year? courtney reagan joins us from the queens center mall in new york courtney, good morning >> reporter: good morning, becky. we still have one very big weekend to go before christmas of course it's quiet here now at the queens center mall because it's yet to open, but it's going to be very busy here today and tomorrow tomorrow is called super saturday many forecast it will be the busiest saturday of the entire year for the nation's retailers. the national retail federation estimates a quarter of americans still have some shopping to do to check off those lists and a number of retailers are extending their hours. kohl's is open at 7:00 a.m. today and it is staying open for 83 straight hours until 6:00 p.m. on christmas eve. most macy's stores will open at 8:00 a.m. until midnight and

stay open until midnight on saturday and sunday. unless you want to pay for rush shipping, you're out of time for the online orders. but buy online, pick up in store is something shoppers have been using increasingly as the days get closer to christmas. for buy online pickup in store, up 47% this holiday season by order volume according to adobe. and retailers say those click and collect orders are spiking in these final days. dick's sporting goods expects their number to triple as it gets closer to christmas target says during the year half of all web orders are either picked up or shipped from store. in the final days before christmas, that surges to 80%. target expects the holiday season order volume to be three times last year's levels macy's store pickup sales have nearly doubled this season compared to last year. and tomorrow old navy is actually partnering with lyft to offer free rides to and from the

store to pick up your online order. so retailers are doing whatever they can to squeeze out those final dollars as shoppers finish their lists. becky, back over to you guys >> i think mohamed was listening intently he still has all of his shopping to do. >> all a-l-l. steve, good morning. we've been talking about a crazy selloff in the markets i wonder whether you think that's going to have any impact on the amount of money spent in these final days before christmas. >> i don't think so. i think the numbers are coming in very strongly if you look at the master card spending data up until a day ago, we were seeing 5% growth overall for the consumer that compares to two years ago at 3% and a year ago at 4% so we're having a healthy consumer season. we're on a glide path, but as courtney said this past weekend,

the next five days are make or break it for the retailers we're looking at a healthy holiday season and this buy online, pick up in store onmni channel is going well >> one, it does feel the consumer has stayed consistent in terms of buying despite whatever you think the wealth effect of the markets or not over the past week or two have had. and we'll see whether there's any effect there the second piece is it feels that retailers have done a much better job in terms of stopping the right or the right amount of items. it doesn't feel overdone this year why do you think that is >> i think the retailers are doing a much better job with the use of analytics they're using their omni channel capabilities, buy online, pick up in store, understanding the consumer better. they came in with their inventories in line. i would expect margins to be holding up pretty well >> who -- is there a big upside

surprise i mean, is there one or two retailers that say, they're doing something clever over there? underappreciated right now >> i think the major players, the walmarts, targets of the world, are tracking quite nicely i think that macy's, for example, with the department store sector they've all made the investments to be able to compete in this sector >> do you think they're taking -- not taking share, but slowing the share that amazon's taking >> well, look. amazon represents half of the internet and they are going to continue to do well they're setting the standard in terms of performance, in terms of capability, that what you have to deliver for the consumer all of these other players, i think the big ones are doing quite well also. they're also top ten internet retailers. so i'd expect to see them continue to win. i don't know that it's going to be amazon versus the others. i see a convergence going on walmart playing more in the

digital space. so they're all moving to the middle i'd expect to see most of those big guys to be winners and a lot of ovethers to be the losers >> you want to name some names >> no. you can pick at them in terms of the ones that haven't made the omni channels. so those are the kinds that are going to be losing but you'll see others as well. >> we're going to leave the conversation there we're going to wish you a happy holidays, steve. thank you. >> good to see you >> looks warmer where he is. i kind of want to be there >> not raining either. coming up, shutdown showdown the clock is ticking in washington later today, don't miss new york feted. john williams in a cnbc

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shares of the dow component getting a pop. we'll tell you why as the final hour of "squawk box" begins right now. ♪ live from the most powerful city in the world, new york, this is "squawk box. good morning and welcome back to "squawk box" here on cnbc from the nasdaq market site in times square. i'm joe kernen along with becky quick and andrew ross sorkin our guest host this morning, mohamed el-erian of allianz. the futures up 57 right now. somewhere between -- i saw 80. i saw 20 now 65 kind of in the middle we'll see. interesting thats it's all about fair value seeing any green at all.

santoli is here. percentagewise, it's -- >> you have widened out your bands. >> so we shouldn't scream? >> you can scream. might not do much good >> i saw 2.80% earlier today taking a look at the 10-year 10-year is now 2.78% so the world might make it to christmas, right >> i think we'll still make it to christmas >> one day at a time, becky. we are watching three big stories. one, the countdown to a government shutdown.

there is still no agreement in place between democrats and republicans on funding the house last night passing the government for the border wall but that is probably dead on arrival when it hits the senate. tweeting that if democrats vote no on the funding for the wall, the government will shutdown tonight. number two, markets limping to the finish line. futures are higher at the moment but just barely. it comes after yesterday's big selloff. the dow, s&p 500, and nasdaq all dropping more than 1.5% and now are on pace for their worst week in nine months december has never been the worst month of the year for the s&p 500. never. ever ever but we're on track for that right now. also, number three a tidal wave of economic data in 30 minutes bottom of the hour we'll get the latest read on durable goods

we'll also get personal income data the forecast calls for a 0.3% increase for last month. and the third quarter reading on third quarter -- the third reading on third quarter gdp that's expected to show the same 3.5% annual growth rate reported last month okay few stocks to watch that we got going this morning we got nike beating estimates on the top and bottom lines mark parker also saying the athletic wear and shoe maker not seeing an impact from the trade dispute. we've got carmax beating estimates by 9 cents however, revenue slightly short of wall street's forecast. same store sales climbed from a year ago that shortfall has helped send the shares lower in the premarket this morning down close to 4% as we just mentioned, it's been a volatile december for the markets. let's get to our panel commentator mike santoli, steven

reese from jpmorgan private bank, and steven desantis from jeffries mike, do you get -- no one knows. i just wonder what would have happened if powell had maybe not in the question and answer period if it had been more market friendly. do you think we'd be in a different place right now? >> i think you would have had a probably rally attempt interest in people trying to step in. >> there were stocks for sale after that happened. were the stocks for sale either way? >> as you said, probably could have slowed it down. maybe you would have had a rally for a week or something like that but i don't know it changed the overall picture enough to say that was the trigger because look at all the other things the past three months

>> a lot of it seems related to the original long way from neutral comment. >> i mean, what we were also saying before powell was you still haven't seen on a short-term tactical basis that big flush. you haven't really seen indications of panic yesterday we got a lot of that more than 52-week lows it's a plausible one i think it basically, every indicator you look at whether it's fund flows or sentiment, it goes back either to near the lows of 2016 to 2011 or to the crisis you're in the range of pricing in relatively bad stuff. you can rally and hope you don't get to a level you fell down to. that's how fast we have gone to. >> where do you see this going >> yeah.

it's a good question i think end of year really complicates that it's this air pocket the market is only going to be open a half day in the next four days are you going to say this is the time i want to slide a lot of cash to the middle of the table? also mohamed, i don't know if corporate debt the way it trades is the tail of the dog it's the listed corporate debt funds you're seeing. that's not to me the bond market and all of its wisdom deciding what solvency looks like next year >> we've got two steves. desantis, what do you think investors ought to be doing right now? is it cheap enough to go back into the water now >> i think the lack of liquidity over the next several days to couple weeks is going to be really very hard to get in there. i think you really need some sort of catalyst you know, you look for reporting season for 4q numbers being the

catalyst where we start to see the numbers come out, may not be as bad as people have anticipated. you look for guidance. and so unfortunately we probably get to the second week of january before we start to make real investment decisions. and i think the other thing would be, you know, i think people are very skeptical about 2019 what earnings look like and growth looks like. and so i think the first step that people are going to take are going to be back to the growth stuff what we would call the secular growth things where you have a feeling for what revenue and earnings growth are going to be we may not know what the multiple is going to be on those stocks, but at least you feel comfortable about earnings growth the easiest way to combat volatility in the market is really buying higher quality companies, better balance sheets where you feel good about it not necessarily buying the bond proxies, but again, buying those companies you have earnings growth you have r.o.e

you know what revenue growth is going to be. then you decide what the multiple is going to be for these stocks >> where's the s&p the end of next year? >> higher. we've seen a 20% derating in multiples. there's been about 20 times over the last hundred years that that's happened. 15 of those 20 times the market was higher in 12 months. >> i like there was no pause with that answer just boom. >> and most of them happened in the 1930s. so i don't see a catalyst in the short-term we're actually quite cautious, but looking out over the next months, i see value in the market i have the privilege of working with large families and institutions in switzerland. whether it's just high quality companies paying a dividend. >> you know, it's really interesting though that's a very positive outlook on it. but it doesn't sound to me like anybody around the table is worried about missing thebotto here

that if you don't buy now, you're going to miss your opportunity to hit these low levels. >> that's good. >> there's also the issue that the psychological of the market has changed. in the old days it was buy every single dip now sell every rally we may well get a pop. in fact, the lack of liquidity means we're more likely to get a pop. do you still get a sense that people will fade that pop quickly? >> it does feel as if the first one -- i don't think the first pop determines much of anything. >> there's a psychological impact everyone in the market today was around ten years ago i actually think we're in a bottoming process much earlier than the typical six to nine months in front of a recession we think next year is okay i think a recession comes in 2020, but the bottom might be happening now. >> but if the recession is coming 2020, you might get out of the way >> that to me -- i don't know if there's an escape from the late cycle dilemma. at least in people's minds

>> that's either dead money for two years at the rate you're talking about at minimum right? >> not necessarily two years we don't think the recession is going to be what we saw last night. we think it's going to be a modest recession even if you cut earnings in 2020, the multiple moves to 15 times. we're not trading at huge levels but it does inform how we want to be through next year. rotate towards protection and take advantage of the selloffs and secular growth >> you know, i'm stunned by all this talk of recession it's really hard to get a recession when the labor market is strong, wages are going up, business investment is going up, government spending is going up. and we've got to be careful because we can talk ourselves into a recession that's how bad technicals become bad economics. the rest of the world has got -- really has got to slow down dramatically >> it would have to be more than just china, probably it'd have to be europe, germany. >> a lot higher on the news that china is going to increase

spending and cut taxes next year normally that would have made us pop. >> i think the thing that's amazing is all of a sudden we came back from the summer and all of a sudden the economy just fell out of bed. or at least that's the perception of where the market is >> it hasn't fallen out. >> exactly right the perception is numbers have come down, the stocks have fallen out of bed. however, when's the last time we had a recession that sort of just dropped out of nowhere? where '07 and '08 was like this slow moving train? you saw it coming. you saw it coming. andrew, i watched your show twice already. like, it started in '07 the highlight. the recession coming out of 2000, 2001 9/11 was the trigger, but we are already in a slide for over a year and so for us to just feel like it's dropped out of bed, we're going to have a recession.

the data doesn't tell you that and the earnings growth, i think the perception for investors that earnings are going to be zero for 2019. i think that's a little irrational >> and to your point, a year ago right now what was the dominant theme? globally synchronized growth maybe it's going to be an overheat problem right now the problem is the pendulum -- >> so average of two years last year was exceptional. we had high returns, no volatility average the two years, it doesn't look that bad. we forgot how special last year was. >> don't you think 2017 was more of the aberration where we had no volatility? where you felt like you should have volatility given some of the policy issues that we were facing so now we're just getting back to more normal levels. obviously the market can't handle more normal levels. but this is what the market feels like vix at 2025. i think '17 was just such a

great time with the market climbing higher every day. that's just not reality. >> if najarian, pete, gets down here, can we squeeze him in? he mentioned he might be around. we don't have room at this desk. what if we all move over >> he can stand behind us. >> do we have another mike >> we always have ood mike. >> he's right. we do have a lot of -- i think we saw a lot of market issues here >> you notice it's the red side versus the blue side ties >> how appropriate >> how appropriate >> how appropriate that is what is that that's kind of purple, isn't it? >> it's red. >> okay. welcome. >> at least it's not skins versus shirts. >> exactly welcome. thanks to steven reese of jpmorgan, steven desantis of jeffries, thanks to mike santoli, and pete najarian for watching andrew coming up when we return, countdown to the shutdown. i can't believe we're already -- it's happening with just hours left until the

government closes its doors -- >> you're shaken like nancy >> the market is shaking over this, folks. we're going to talk with the incoming house of the budget we'll talk what's happening in the next few hours and the next congress we'll have that conversation after this break you don't want to miss it. ♪ 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.

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to one-touch conference calls. beyond traditional tv. to tv on any device. beyond low-res surveillance video. to crystal clear hd video monitoring from anywhere. gig-fueled apps that exceed expectations. comcast business. beyond fast. welcome back to "squawk box" this morning let's look at futures right now. dow 72 points higher nasdaq looking 32 points higher. s&p 500 looking to open about nine points higher ahead of what may or may not be a government shutdown, joe. >> in fact, the latest tweet is that the president is urging o'connell to go nuclear in terms of the 60 versus simple majority in the senate. i don't know what the chances of

that are we're ticking closer to a government shutdown which would happen tonight without a funding deal in congress that president trump would sign ylan mui joins us with more. you're monitoring those tweets part of our job now. >> that's right. the president has been tweeting a lot over the past hour he's made it clear that to sign a spending bill, he needs to see money for the border wall. he wrote, the democrats whose votes we need in the senate will probably vote against border security and the wall even though they know it is desperately needed if the dems vote no, there will be a shutdown that will last for a very long time people don't want open borders and crime. and in case he didn't make his point in that tweet, he followed up with this shutdown today if democrats do not vote for border security now, the senate is scheduled to vote on this this afternoon. they'll be taking up a short-term spending bill that includes roughly $5 billion for the border wall, about $8

billion for disaster relief. chuck schumer in the senate said last night that there is no way the democrats will pay for a wall >> it is a shame that this president who is plunging the nation into chaos is throwing another temper tantrum and going to hurt lots of innocent people. the trump temper tantrum may produce a government shutdown. it will not get him his wall. >> so guys, president trump sees a solution to all of this as the option that joe just mentioned earlier. get rid of the filibuster so they can pass this with only republican votes but there is a reason they call this the nuclear option. that would be highly unprecedented. over to you. >> thank you very much let's welcome congressman john yarmuth he was elected committee chairman for the next congress which begins in january. congressman, thank you for being

with us. >> good to be with you. >> let's talk about what's at stake immediately, the potential shutdown for the government. i want to go back to a tweet ylan just mentioned. this came out from president trump saying shutdown today if the dems do not vote for border security is there any room for maneuvering between the two sides with that? >> there's always room for maneuvering. but i think our leadership has made it clear there is not going to be any money specified for building a wall. the absurdity of this is there was money in the last budget that was provided to the administration to work on border security they haven't spent any of it another $5 billion, if it were allocated to them, they wouldn't spend it anyway. this is about placating donald trump's media supporters it's not even about implicating his base this is about limbaugh, laura ingraham, and those he's afraid of offending >> how big of a problem is it if

the government does shut down tonight? >> it's always a question of how long it lasts and it's a question of who you are. if you're one of the 400,000 federal employees that would be furloughed and going without pay for the period of time, it's a significant effect it won't be as cataclysmic for the economy since the 2013 two week shutdown was. this is only a short portion of the government this is about 20% of federal spending, discretionary spending again, for those people including ironically the homeland security department so there'll be 54,000 customs and border protection employees who will be working without pay. so the irony is, of course, the president is shutting the government down over border security he's hurting border security >> even if the deal were done, the deal that we thought was on the table before, that was the one that was going to get us funded until february 8th. why have we gotten to this

situation we are living month to month as a federal government? it's been so long in the making. i don't understand why we're here or how we get out of it >> it's incomprehensible the trj i did of this is that this was actually -- this was an agreement made on a bipartisan basis for spending for all of these departments. and it was one of those examples of where those sides came together and did something effective. then the president messed it up. you had a lot of people taking sides on what amounts to a 95% agreement on spending. it makes absolutely no sense and again, this money wouldn't be spend -- spent in this fiscal year it's not something virtually anyone looks at border security thinks is effective. this is just political posturing on the president's part. and it's dangerous what he's doing. he clearly undermined an agreement that mitch mcconnell had with him, that kevin

mccarthy and paul ryan had with him. he said he would accept the compromise that was working on a a continuing resolution. he becomes a totally unreliable negotiator if this is the way we wrote it meant he has mastered the art of the deal, it's pretty much not convincing to me >> what do you do about it then? >> well, you know, i didn't vote for president trump. unfortunately, he's the president right now. and unless somebody prevailed on him, my friend mick mulvaney i hope he can explain to him how the congress works and how he's going to have to work if he expects to get anything out of a congress particularly with democrats in control of the house. >> what was your reaction to jim mattis' resignation letter yesterday? >> it was an extremely powerful letter and a scare ji scenario the idea that the secretary of defense could not support the

policies of the president who hired him should frighten everybody. i don't know where we go from here, but again all of the supposedly stable influencers in the white house had left clearly there's nobody there to listen to now. mike pompeo is basically a sycophant, won't tell him no i'm not sure who's there to provide stability for this very stable genius. >> congressman, yarmouth, thank you for your time today. congressman john yarmuth coming up, key gdp and durable goods data coming up don't miss an exclusive interview on "squawk on the street" later this morning steve liesman sitting down with new york fed president john nhlliams right here in maattan. stay tuned "squawk box" will be right back.

coming up, a wave of economic data just minutes away including the final revision to gdp. we've got all the numbers and instant action when "squawk box" returns in a minute. (whispers) with the capital one venture card...

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the final revision to third quarter d gdp, also the reserve numbers and more futures have just picked up. they're 107 points above fair value. s&p up by 12 and the nasdaq by 43 10-year we've also been keeping track. let's get down to rick santelli. >> here we go. 3.4% we were expecting 3.5% 3.4% isthe number on consumption. 3.5%, that's actually a wee bit light. so we're a tenth light so far. price expenditure. a tenth heavy here rearview mirror was 1.7% matching expectations as well. quarter over quarter, 1.6% on pce core now let's go to durable goods. durable goods up 0.8%. this is preliminary.

it is half of expectations, unfortunately, but it's a whole lot better than our last look which was down 4.3%. if you take transportation away, it really goes down. minus 0.3% minus 0.6% on nondefense ex-aircraft. a proxy for capital spending so that's a disappointment and finally if we look at shipments versus durables, that is down 0.6% excuse me. that is down 0.1%. the orders was down 0.6%, shipments. now, none of these are good. there are positive revisions something that latter series is most important last look was unchanged. ramped up to 0.5%. that's a nice jump and on shipments we ramped up from 0.3% to 0.8%. also a half point. when you factor those in, the misses become much smaller not a lot of movement on the

fixed income side. we're still hovering around -- the dow future did trim some of their losses just looking at the raw futures data joe, back to you >> all right thanks, rick steve liesman joins us now with more we ticked up a little bit. >> these are sort of good. we've been reporting on these numbers as far back as i can remember, two decades. you're lucky to get them on the same side of the zero line but it's a big story because we all want to know what's happening with capital spending in the wake of the tax cuts if you look at the fed's description of the economy, the one thing they say has been moderating has been business spending the administration kevin hast

hassett was out today showing that over the course of the period of the tax cut, business spending is way up the problem is that the last several months, it's been down >> that's the old story. we're looking for any data point about the economy. aren't we? >> we're holding on by our pinky. >> aren't we happy durable goods are at least positive? >> so i think the numbers, if i'm not mistaken, i'll get an e-mail from my econ buddies in a minute will flatter fourth quarter gdp depending what was built in. because of the upgrade that feeds into gdp on the shipments of new orders for business spending manufacturing and business spending so we're not -- i think the bottom line and i think powell has said this and even mohamed is saying this we're not falling off a cliff. and it's really hard to go -- it's not a porsche in reverse.

you don't go from 60 to zero i don't think the fed's doing a very good job of two things. guiding the market and convincing the market. right? they have an attitude out there which is we're going to slow but not stop and they also have an attitude which is that the right policy action in this context is to hike rates and the market has basically given a series of, you know, what's the right word? sort of italian insults that you can't say on television in any language at all to the fed right? >> so the way i think of this is the market is reacting to the realization that they no longer have the support of central banks. let's not forget the ecb is stopping even though the economy there is in a bigger mess, much

bigger mess. the first thing is the market is realizing without ample and predictable liquidity, it's a different volatility regime. in terms of the fed, i wouldn't have done anything different in terms of action. but i would have communicated different. >> how >> two things. i said it earlier -- >> chairman mohamed, take the floor. >> two things. one, i would have said we're very sensitive to what's happening outside the world because we worry about spillbacks >> didn't feel the market's pain enough >> then the second thing is you cannot confirm that qt that balance sheet is on automatic pilot. >> ki point out that -- >> hold on i would have said nothing is off the table. because if you don't, you put so much burden on the interest rate tool that whatever you signal, interest rates get amplified >> i'm so proud of what i did in september of 2017 that i want to run it again i don't have the tape. >> what's that >> i raised my hand when i announced this policy and said madam chair to janet yellen, are

you telling me that if the economy turns down, if there's a big change in the stock market, that you guys are not going to change your balance sheet policy and i envisioned this exact scenario i was a little incredulous when they announced it. she said, no, we're not. they've asked powell this. not me but someone said are you telling me -- and they said no the reason why they're not changing it to me is the opposite of what it should be. they say they're not changing it because they're not that familiar with the effects of the balance sheet reduction on the market that should be a reason to change it. rather than not change it. >> to go cautiously and try to figure out what happens. i understand the argument that a lot of people have made is if it was so -- such a big deal on the way up when you were building up the balance sheet, if it had so many effects when you're winding it down. >> what i've been told by some

fed people about that very issue, they argue to me that a dollar of qe bought in a panic has a much bigger effect than the dollar of qt sold in too liquid markets >> but it's not nothing. >> you could argue for qe 1, qe 2, and qe 2.5, people forget what's on the way up, qe was variable responsive i understand why they did that because they looked at an economy which was doing fine synchronized pickup. likelihood of a stimulus and they said, you know what let's anchor this policy but the world has changed. >> here's the problem. we can't even agree on the past. i'm pretty sure if you asked ben bernanke which qe worked, he would say three. he said the economy did not stabilize until the fed created an unlimited open ended commitment on qe and he would also argue that it was the

limitations on qe 1 and qe 2 that kept the -- geithner would say the same thing you've talked to these guys, andrew they say it was qe 3 that worked >> isn't it the point when you don't know, you build in some flexibility? i'm not saying they should completely change their plan i'm saying they should hint to the market that it is not given forever. that this is not going to be on a preset course forever. >> but one of the things that made qe work was the sense that it was forever or was at least open ended which goes to your point. >> qe infinity >> right >> here's what i think i think that there will be books written about the concern over inflation during the early parts of quantitative easing that turned out to not be accurate. >> steve -- >> and that that was something that was like running in a thoroughbred race and the jockey is leaning back the entire time

on the reins and i bid on horses like this, by the way, and i wonder why they're leaning back and i've lost money on that. >> for the weekend you need to tell us how concerned are you that bad technicals are contaminating the economy. >> i'm there right now i believe the market is going to create -- it's like it's own microclimate >> are we talking to steve about shopping you think literally over this weekend people are going to spend less money consumers. >> talk to mohamed we have some tried and true formulas on this every hundred dollars of extra equity value creates 5 bucks of extra spending those are the ratios >> what's your first question going to be at 10:00 >> i'm going to ask him about -- >> he was coming on months ago, right? >> that's right. we planned this -- >> you aren't playing any close encounters music or "star wars." for john williams.

>> no, joe my time with john is very limited. >> okay. you wouldn't notice. you've got to play something coming in. >> i don't have a three-hour show where i can joke around like that. if i had a three-hour show -- >> but what's t going to be about? >> what message are you getting from the market and do you have this wrong >> and do you care what the market says. >> steve, stay where you are here to help break this down is scott anderson i want to hear your take on the data i also want to hear your take on the debate we've been having at this very table. you've been waiting patiently, scott. >> thank you well, the data, no real big surprises there. a little bit of disappointment in the gdp and the durable goods orders but we knew the economy is slowing down this really won't have a huge impact on our economic outlook i have heard what people have been talking about i think the u.s. economy is

performing better than the stock market right now you don't go from 60 to zero overnight. and the data is softening but we're not falling off a cliff. and looking at around 2% for the first half of 2019 i do think the fed should look at their monetary policy right now. and i do think quantitative tightening is part of that i work for a bank and we see this tightening our liquidity, a lot of banks are seeing that and so this is something i think the fed should look at do we need to make an adjustment. >> how concerned are you that fed policy is actually going to seep into the economy in a meaningful way, or what's happening in the market seeping into the economy in a meaningful way? >> i think it is already

i see the sensitive rates slowing down, the housing market, auto sales so we're definitely seeing a tighter monetary environment it is slowing the economy down but there's still a lot of momentum the labor market is strong initial jobless claims at 39 year lows. and, you know, we're still creating close to 200,000 jobs a month. it's going to take awhile for that to slow the train down. but i think i'd be cautious here you know, i think the fed did the right thing. >> you think it did? >> yeah. >> did the right thing in terms of raising the rate or how they explained what they're going to do next year that's where i think the debate really lands >> i do think they have a communication issue. i mean, i think they're way too bullish in september when they're coming off two quarters of 3%-plus gdp growth. but they're trimming their growth expectations a bit. they scaled back their dot plot. so they're making some moves in the right direction here

i still have two rate hikes in the fed forecast for next year i don't know if it's going to be march and june, but i wouldn't be surprised if the fed at least pulls the trigger one more time on the fed funds rate. >> scott, do you find it weird -- and i will say at the outset i do. when the fed has a forecast, there's half a dozen guys with men and women on the street who not only great with the fed' forecast but they arrived at that forecast before the fed did. it's part of a well synchronized what's called in the business a reaction function. where everything moves along together there are outliars out there there are those that say the fed is wrong but there's a core of people, of forecasters out there who have the same idea as the fed it's very hard right now to find those folks. some of them, by the way, feel like they've been hung out to dry by the fed they were sitting there where four hikes

now these are well paid big time economists that have to dial back do you think the fed made a mistake of not communicating to the market or was it wrong to begin with? >> i agree with you. i'm not one of them who had four rate hikes in their forecast but i think there was a head fake that big speech jerome powell made in i think it was october when he said we're a long way from neutral and we're going to see further rate hikes next year i think that really threw economists far loop. i mean, i had one rate hike forecast and after i heard that speech, i moved to two because i thought, hey, they're getting more hawkish here. they've dialed that back now but i think that created a lot of optimism. well into 2019 >> then they dialed it back up most people were at one and done

after -- okay. you had judy woodruff that came and a lot of people got to one and done hopeful or at least one and data dependent. and then wednesday we're back to at least one, two, maybe not three. >> that's the problem. they were never going to go. >> that's what you said. hope springs eternal >> but how does the market get out of sync with that? >> because they're -- wait for some inflation or something, please can't you? what about copper and oil? don't you look at those things >> what about the great growth boom that's going to happen from the tax cuts have you completely lost faith in that? >> no. but let people have their wage increase don't look at wage increase as a negative do you listen to cramer at all >> i do. >> do you disagree with him on everything >> not everything. some things. in the context of a booming economy, 3% gdp growth, 5% nominal, i just don't understand how anybody justifies a zero

real fed funds rate. >> why don't you wait until ip -- inflation? >> because you're late almost all the time >> you're either too late or make the mistake one or the other you know how many times they've made the mistake >> but ten times they -- >> only beating out the other one. >> ten times when they raise, there's a recession. >> scott anderson, thank you for waking up early. >> thank you important interview with john williams at 10:00 eastern time when we come back, it's been a cruel year for crude oil which ask down 25% since january 1st when we come back, we'll talk to the ceo of canary and find out what is in store for 2019. and as we mentioned, don't miss steve's exclusive interview with new york fed president john

williams that's coming up at 10:00 a.m. senior time. the markets will be listening. stay tuned you're watching "squawk box" here on cnbc

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welcome back to "squawk box," everybody. oil prices hitting a 17-month low on thursday. in fact, check it out. wti crude right now trading at $45.48, down another 40 cents. joining us right now to talk about the energy markets is dan

eberhart of canary >> thanks for having me. >> the top story is it's not just zplie at this point it is also demand. how much is demand demand outlo is playing here? >> demand is what led oil lower the last two or three uniquweek. opec didn't answer the ballot. slowing worldwide growth is going to equal less demand growth for oil >> what do you think opec will do next or will do next? >> two different things. first of all, if p it is opwpeos goal, they got to come out another cut of a million or two

barrels. 1.2 is an appetizer. >> what will they do >> the rest of opec is furious of saudi arabia. they think that saudi arabia is what led the supply by over producing the last three or four months i think that they're going to under we under whelm the market and russia is going to be lower demand growth. russia is going to be slower than should be >> last time we did not have a spring producer. what happens now >> i don't think we go that low. what happens is saudi arabia and russia end up having to come back and make two or three more cuts in 2019 >> we were talking about it before of the economic and saudi arabia the whole country's future relies on this if it goes lower, they got

problems now >>s the intere it is really interesting they just came out with their budget of the biggest budget of saudi arabia >> i think if it based on the 1.2 opec plus cut, they're being naive. you got three more pipelines coming on next year. there is big financial and what producers are able to get. when those pipelines come on, there will be more supply. >> it is sensitive to prices at some poichbnt >> absolutely. there is a tail wind that's going to happen with shell of the increase and infrastructure. i also think, the market is missing in the oil and gas in the u.s. and shell stuff this is a big shadow inventory and a big smoothing effect if we go into it downturn.

we'll see production continue to rise, three, six, or nine months >> you are sure oil prices going down from here everything you said lead us to the same conclusion. >> i think they go lower for two or three months and a sharp rebound in group prices -- >> spur by >> because of demand or supply >> some demand growth, the market is presuming that oil demand growth, it is going to be closer to a million barrels a day. you will see opec country will follow through with their cuts and increase them. i think they'll have to. >> dan, thank you so much. dna ebehart. >> when we return, final thoughts on our guests take a look at the future right now. ahead of the big open. we'll show you there

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coming up more with guest host -- be sure to not miss our interview with john wiiallms live from the new york fed

reserve. stay tuned, this is "squawk box," we'll be right back. [leaf blower] you should be mad at leaf blowers.

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our guest host this morning, we have been thrilled to see you, you have a holiday message for us in the 20 seconds we have left >> most mistakes are a behavioral mistake and people over react take away two things for next year we ended a volatile phase and bonds will no longer allow you

to hedge stock portfolios. make sure you that you are consistent with the fact that you don't have as much hedging tool >> mohamed, always great to see you. hap happy holiday to you >> thank you, to you >> we'll see you over the weekend, right now it is ""squawk on the street." >> good friday morning, welcome to "squawk on the street," i am carl quintanilla with david faber and sara eisen jim cramer is off. we'll walk u.s. fed chief john williams on our air in the next hour dana, we got a miss gdp and consumption. our road map begin