final check on the markets right about where we have been throughout the premarket session, down 325 on the dow. s&p down 36. thank you. should we wait until next year to make big decisions? >> i think be patient. >> melissa we'll be here. set your alarms. "squawk on the street" is coming up right now. i think cramer's back. ♪ good thursday morning. welcome to "squawk on the street." david's off today. cramer will join us by phone in a few moments. futures are red. china, hong kong, europe have been unable to follow with rallies of their own. oil is red which has become a key driver for equities. our road map begins with the

stock roller coaster, after a record breaking post christmas rally, future pointing to sharp declines at the open. >> jim will join us to talk about the rally, what the latest data means for stocks and why he thinks now is the time to play art of the trade deal with china. >> there was more pain lingering for 2019. we'll start with the market. stocks reversing course following this morning after yesterday's monster rally which saw the dow post the largest single day gain in history. all of that on the back drop of day six of the government shutdown and news on the trade front. a u.s. trade delegation will travel to bay ying to hold talks with chinese officials. most of the discussion is about yesterday trying to run some historical patterns. what happens when you get 90% up days and a four percent gain

it is a little mixed. >> you have to actually i think be able to capture two possible interpretations of it. one does check boxes for a short term low. 96% of volume is to the upside. you did close out of the highs and did ramp from the open to the close. i think mostly it's also just a measure of how sold out the market had gotten beforehand. i was thinking we were oversold enough to have a day like that or something like it a week ago. >> i don't think you can understa understate -- yesterday was crazy. the magnitude of the gains. the first time the dow closed above 1,000 points, biggest daily gains since 2009. when you get the superlatives and statistics it takes you back to dark places in history. maybe be careful because bear markets can produce very large gains. in fact, bloomberg did a great analysis piece in eight of the previous bear markets s&p 500

had one-day climes more than 120 times. the bigger the declines you get when you talk about almost being 20% off the highs which is where we were on the s&p, the bigger the snapbacks you get. it doesn't mean we can't be seeing the bottom. it means be careful. you are getting a lot of funky, very abnormal trading action and it is the end of the year. you have pension buying and all of these other quirks out there. if you come back to the fundamentals, questions around the fed and the china trade war certainly remain front and center and how much the u.s. economy is slowing. >> a lot of looking back. between lehman and the march '09 low, the number of four percent gains, 13 of days like yesterday. >> on the way to getting cut in half in the s&p or almost that. that is where it brings you but it gets you back to areas like clusters of days in 2011 or the late summer when you were closer

to a low than not. so there is no v in bottoming process. that's what you kind of have to be in the best case scenario. by the way, the futures decline at this hour. it's giving back all of the half hour's worth of yesterday's gains. it is spilling back. >> today's action going to be fascinating. cramer is joining us on the cnbc news line and has a lot of thoughts about the rally yesterday. i think i was more struck by your piece on the street about the weak fed data and what that says about where we are. >> i love what you said you are bringing in. i think the fed data allows you to say wait a second, this is very strong and now it is weak. we have great christmas sales but we have to stick with the fed. we kind of analyzed this.

when i look at the period of october 2011 it was kind of bad. [ inaudible ] that's the most important thing with the trade. i think the president is able to do the trade. i think that is one of the reasons why we have a genuine rally. bi i think you want to buy, not sell. >> you said yesterday on twitter all of these are keys off of oil right now. >> oil peaked october 3. october 4 there were comments about the trade war with china.

oil would have bottomed at 43.4 and hold not just that trade which has been so great. it goes off and maybe that is possible because it is at a level where a lot of oil -- we won't be drilling that much in 2019 if prices are here. it's really to the october 3 and 4. it's been what all the machines are keen on. >> what we are talking about feels really short term in nature. what would you tell someone if they are trying to think long term into 2019 with so much uncertainty around how the fed is going to respond to all of this, now that they are semi flexible around the balance sheet and how the trade talks are going to go with china? >> i'm optimistic about the trade talks at this point.

i don't think they look so great. look, i got to tell you, over the last few days, a lot about long term versus short term. you wake up and you are worried about it. we have had just horrendous sell off. we have stocks down so much. it just seems wrong to tell people to sell. the financials reflect the fact that they don't have closings in banks. i think a lot of companies that are connected, if the stocks traded down into levels where they would have a bad christmas. if it pulls back, right before

the recapitalization. we were oversold and it went down. i have had a couple of days that were bad to buy. and then i had a lot of days that have worked. >> jim, past few days have been about mattis and mnuchin and powell and the shutdown. there are some pieces asking whether the real crisis of confidence is not in the banking system but in washington. do you agree with that >> i think the mnuchin phone call was a -- it would have been better if you called five small banks that are paying cds. what a remarkable amateur tact.

i think the scare came from the idea that maybe we didn't know something mnuchin knows. >> jim, signs of life in your f.a.a.n.g. group, is that going to be key to sentiment here if we are looking for a turn around >> totally agree. apple and amazon really were the last two stocks that stayed up during the period before the collapse. amazon -- i thought that stock should be up. in apple, i don't know. i wish apple were to probably go higher. facebook is a big supporter. it has become something people don't want to own. i would not sell any of those

stocks. i think that is a good one to buy if you get a decent pullback. >> jim, on the fed side of things, is it enough that the bond market has all but priced out a hike for next year you have the likes of scott miter talking about raising odds of a cut. do you need the fed to signal something more for you >> i need the fed to shut up. i don't trust powell at all. you have to start recognizing how powerful his words are. he took the president by surprise in a way that was really brutal. he today congress by surprise. he has to start thinking i have these monthly meetings, a great time to talk about -- not about the forecast. i think he has to start thinking about how powerful his words

are. they are much more powerful than in real life. >> a couple more questions from me. the fed said it will be data dependent. we are supposed to get new home sales today and we won't because of the shutdown. what is this going to be like if the shutdown lasts to what degree are we going to the dark side of the moon here >> i think we are okay. i do think that the housing numbers don't really matter. you need to start recognizing we are in an unchartered territory. i think being quiet and being sensible and not speculating about how many rate hikes you have, those are important things. the fed is confusing. it's an extraordinary time. let's wait to see.

we are feeling okay. we are not doing okay. we want to find out how we are doing. let's be prudent. >> jim, you are missed, but at least lisa gets you for a few days. you'll tell her hi for us? >> absolutely. she is very happy that i'm doing this this. i'll talk to you guys soon. >> not tuned out on vacation. >> jim cramer calling in on this incredible week. financials coming off their best day in seven years, still down nearly 23% since the end of january. what's in store for that sector in '19 coming off as you know the best day since '09. only one name closed down. that was newmont mining.

we're back in just a minute.

wild swings continuing. equity futures slumping. with us now is john rutledge. joe, what are you telling your clients this morning after we saw such a stunning rally but still a pretty dismal performance for the month? >> to me the end of the year is

technical, a lot of portfolio rebalancing probably among pension funds. the thing that scares me the most is the potential for the sell off to become self-feeding and self-sustaining especially with the fed kind of clueless on the outlook. i'm worried quantitative tightening could push tightening lower and a negative self-reinforcing feedback loop. >> it doesn't sound like you are too optimistic. do you agree do you think this is the fed's fault? >> i think it is more the result of open mouth operations over the weekend. the idea of telling people that the world is not going to end and i talked to all the banks, that is the stupidest thing i heard a cabinet member do and i have been doing this a long time. the economy is basically okay, a

little soft. monetary policy is doing what it is supposed to do, maybe a little aggressively. basically, this is the net worth economy still driving the ship. one of the fed's weaknesses is that it always looks at the economy in terms of the gdp tables. the real issue is what is happening in the asset markets. the asset markets aren't liking what they are seeing during the last several months. >> joe, shipments take you back to the '09 low. empire was a 19-month low. we will get consumer confidence numbers in about 42 minutes. how important is it that those two hold up? >> it is important. my fear is that december as of yesterday was the worst on record or before yesterday. you're going to see sentiment weaken further. god forbid the numbers turn out to be weaker now. only imagine what they will look like next month after they fully

reflect the equity volatility. john is right. we are an asset economy. this behavior really began when powell gave a hawkish speech in october y. thought he did a good job at the end of november kind of walking it back. it was almost like he forgot everything in december. i think the balance sheet totalled 600 billion next year to me is a phenomenal amount of liquidity coming out of the market. if market goes lower sentiment will go with it and will lead to less production and ultimately less hiring. >> john, how is the market supposed to price in what we already know is a slowing global picture and vast deceleration in corporate earnings we are 15% off all-time highs. do we have to look for huge errors to explain something like that or is that the ebb and flow to the markets responding?

>> remember the deceleration and earnings growth is because last year we had a huge bump in earnings growth caused by a one-time big tax policy change. ten percent of last year's earnings growth was driven directly by the tax policy. so earnings aren't all that bad. revenues are growing pretty strongly if you look at the s&p revenues. what you worry about in this kind of economy is that the asset prices changing themselves across trip wires. by trip wires i mean things like basically margin calls. in the corporate level a margin call is what happens if you have collateralized assets to take on debt. it's a bigger issue in china. i would be watching bankruptcy and credit market issues. credit marketvise tigs have tigd very sharply in recent weeks. it's not just the bond market or

the junk. >> john makes a great point. that's the thing is that we're looking a lot of equity move in some sense isolation. global equity marketvise been horrible. you know we have had weak data, negative gdp bat. this makes it a global story. that to me is really troubling. the one thing we need the fed is to back away from the hikes. >> intermeeting cut? you don't think that would shake some confidence? >> look what has happened already? the credit markets are totally seizing up and it is global. they probably won't. they will probably go at some later point and trip us into a recession. a classic monetary policy mistake. >> i want to ask you what the calculus is on trade because as joe said industrial profits in

china down for the first time in three years. we got word of the talks in mid january. but then we got reports of this executive order being ready to ban zte. every step forward is met with a step back. >> absolutely. i think this hand to hand combat between the u.s. and china is not going to end. we'll see good days and good weeks when they announce some progress. basically these two societies are getting in each other's face right now and the tip of the spear is the zte story because the roll out of 5 g technology across the emerging market world is what china is doing in order to advance its technology for its next 50 years and not its next 50 days. i think this story will go on for a very long time. as joe said, you've got do we or don't we raise the rates or do we and don't we sell a ton of

bonds from the fed's portfolio this will be the first year that the central banks of the world all together have been huge net sellers. when you sell something its price goes down. its price goes down or liquidity goes down. that's not a very good sign for 2019 monetary policy or asset prices. i don't really buy the ones you love in little bits. >> joe, just to clear up, there are two strong narratives going around wall street right now. i think we are hearing them both. they don't necessarily make sense together whmpt y-- one is there is a major disconnect between the economy and the markets. the economy's fundamental data looks down. consumer spending. it doesn't make sense to see a market pull back 20%. the fed is making a mistake, another thing we are hearing, talking about hikes next year which should happen if the

economy looks solid. so can you square those two things who is wrong who is right >> the markets are right. the fed is wrong. if you look at the originally reported data back in '07 we had two quarters in a row with gdp averaging nearly four percent. the economy is strong, but the economy is where we are and where we have been. it's not where we are going. sentiment indicators tend to be the most forward looking. they respond to risk taking and my fear is the fed has really no idea what it is doing and letting the balance sheet run off at the rate it is running off at and raising rates when the rest of the world isn't. you get a situation where one central bank moving and the rest of the world isn't. i argued that creates massive dislocations. unlessthe fed relents quickly

this will be bad. >> thank you for weighing in this morning. >> when we come back later on squawk on the street roger altman is with us. good to get his take on what has happened so far this week. another check on the futures as we do remain weak to the tune of about 300 dow points. more squawk on the street straight ahead. duncan just protected his family

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three minutes or so. busy thursday morning after the biggest point gain in dow history. day six of the shutdown. we continue to watch headlines regarding powell and his relationship with the white house. let's get to ubs director art cashin. we mentioned powell told the white house he would be up for a meeting. in kudlow's words the relationship between powell and the president is like a stock looking for a bottom. there is only upside. >> a little bit different than yesterday. the president was behind him 100%. that may be a reason you are having second thoughts in the market here. it's in line with what sarah pointed out earlier from the fall of lehman to the bottom in march of 2009, the s&p had 13 four percent one day rallies.

yesterday could have been very important if it had been more coming out of capitulation, a stampede to the upside reversal. the volume is up but not that much. i'm a little is suspect. if they manage to close down more than 500 points today i think that virtually wipes out yesterday. >> cramer's point was we are not in lehman-type scenarios. we are not in a recession. things are looking a bit better. there is a lot of concern about the fed making a mistake and the direction that the economy is going, but if you don't think we are in a recession or crisis, art, should we buy >> i think you can -- i'm a big fan of dollar cost averaging. figure out how much you want to risk and put the same amount of money in, a portion at a restricted time that way if

prices dp s go down you are buyg more shares of stock and if prices go up you are buying less shares of stock. i think you can dabble in here a little. this market is in no way comfortable or sure with itself. >> i have been trying to incorporate the time of year that we are in, in both directions. air pockets above and below. do you have to essentially wait until we have a quorum next year as new flows come in and people are back at work or can we take this on face value in terms of where the levels are >> i think you did right. if you look at the buses and the trains and they are not fully crowded then it is not there. we have a thing that volume equals validity. >> stick with us through the bell here. let's get to the s&p at the real

time exchange and the opening bell of the big board. city harvest celebrating 35 years of service. they do some amazing work especially this time of the year. over at the nasdaq the coalition for the homeless. one thing about the internals yesterday, art, was the degree to which they jumped to the adobes and the microsofts. your point is that they especially in the last part of trading ran to the most heavily shorted names. >> absolutely. that to some degree is to be expected. look what happened yesterday. it happened in two levels. after they sold off you had a nearly vertical upspike. then they went into about an hour and a half of consolidation as the panicky took a step back. i'm not going to chase them.

they never came in. and then as oil pressed the button on its rally for a second time, they began to panic again. and when the new buyers came back, the guys standing on the side went into a new panic. it was a two-level move. the first part by the comments and second i think more on the fact that oil was up nearly eight percent. >> all the chartists are at work today. one of them argues that 2611 is the 20-day moving average and that is where resistance should lie. do you have thoughts >> i think it's going to take several days to possibly clear out new levels. as i said, if they were to close down more than 500 points in the dow i think you would write off what happened yesterday. they closed down 300, the jury is out. so we'll have to watch how the movement goes here.

how did they show respect to things like moving averages. >> it closed higher today. what would that do >> a close higher would heavily under score the idea that you had upside reversal and higher volume. it wouldn't prove the case kmeetly, but it would get a lot of people thinking that way. i think it would encourage some people to come up the sidelines and buy on opportunities. >> i have to point out the german d.a.x. some of the european markets, the d.a.x. is down more than two percent. there is a lot of blame, policy blame to go around when talking about u.s. stocks. look at what is happening with brexit, with italy, the political questions in germany and in france. this is a much broader policy question i think than the united states. i wonder how much that is

impacting our market what is happening in europe and the chaos there. >> europe is a big factor and china continues to be a factor. you saw that there was basically no spillover of our rally into china. hong kong exports surprised everybody by being lower. industrial profits in china are not big. so i agree whole heartedly with joe that we're at a spot where things are difficult and deskaldes domestically the big problem is the fed has tobe clearer. they are not getting a lot of help from the white house on that. so it is important that they speak that way. again, the kudlow comments don't seem to fit with the hassett comments so you can see why the markets remain nervous. >> all of that did come right after the wall street journal report about how former economic

advisers go to the president. it seems like there is a group trying to shepherd the message more in terps of don't be counter productive in terms of tweeting at the fed or at this market at this stage. i don't know if that feeds into actual policy moves or negotiating stance on china. it seems like that was in the air yesterday. >> you have to imagine that mnuchin and/or some others are saying you have set the stock market up as your criteria. that's how you are being judged. yet by sending out these tweets or making these surprises, you making the market vulnerable and weaker so you are setting up the thing and it looks like your own failure. back off. whether that sticks or not, i don't know. >> what did you make of his argument for an intermeeting rate cut would you be okay with that? >> it's earlier than i thought. i thought we might get a cut towards the end of the year. i think we may have seen the

highs in the ten year yield for this year. we'll see where we go. >> what is stunning about this price action and we saw this yesterday and monday on christmas eve is that how broad it's been. all 30 dow stocks closed lower monday and closed higher yesterday. that is kind of the situation. all s&p sectors are red. it's broad. >> it's watching over the indexes and moving things along. it's a nice start friday had a shot at being this kind of comprehensive high volume real liquidation day. if you are really trying to reduce exposure if you are a big institution wouldn't you want to have it done by friday and then monday was this weird, half day, very sloppy action in response to the head lines. i don't know where that leaves the net positioning of the money, i don't know. >> then again we have several banks putting out pieces that were seeing some major

rebalancing in the wings. that's kind of disrupting what is going on. this has been a very unusual christmas season for us. the other thing to sarah's point, when you look at things like the d.a.x. you have to be careful. they were closed christmas eve. so you have several days in a row where they weren't trading. which day of ours are they catching up to >> we are only back to last thursday. >> the nikkei has been wild in japan. it was open. overnight it gained 3.8%. >> following the five percent -- >> some pronounced weakness in heavy industrials today. they are leading the way lower. i wanted to ask you about deutsche, new low this morning in german trade. to what degree do they represent any kind of systemic risk right now? >> i don't know about a full

systemic risk, but there is a great deal of puzzlement in europe about the banking system. where are there spillovers from italy? we certainly never resolved greece and spain and any of those groups. i think there is more if you would financial concern around europeans than we are seeing over here. >> euro bank stocks down 34% which is not as bad as kbw. it is the worst year for bank performance since the debt crisis. >> that puts the deutsche bank right in line with what is going on around them. it's almost like sectors getting infected by some kind of disease and people just want to -- >> this is the year that global central banks are starting to tighten and trim their balance sheet which you think would be really great especially for the european banks which have been

strangled by this zero negative interest rate policy in europe. i guess it tells you that there is a lot of concern about the real economy in those places that they are not getting relief off of the tightening. >> it tells you they may not be able to follow through with the policies. they may not be able to walk away. >> do you think sentiment truly changes with the flip of the calendar when we come into trading next wednesday >> i think it will be -- we will have some people coming back. understand one thing, when the guys in the corner office go on a christmas vacation, they don't leave it as cart blanche do nothing until i get back. they make the phone calls. how much exposure do we have to that let's cut back. you will get some change. i think i want to see more importantly what happens with the things like trade talks.

they are talking now about a january meeting with china. let's see if that comes off. >> you talk about it being an unusual christmas season. i'm looking at the volatility index around 32. it plunged yesterday from the highs but still above 30. it shows you there is this kind of built in anxiety layer in prices here. i mean, i think aside from the weird spike we got in february because of the blowup in the v.i.x. prices you never had the high v.i.x being in december. this is finishing up in a tensed up market. >> that's why it looks like we are a long way from all clear. >> thanks for the extended remix. art cashin with us -- >> thanks for staying awake. >> solid 15 minutes with art. dow down 280. let's get to bob pisani. >> happy thursday, everybody. seven to one declining to advancing stocks but has

improved in the last 1r5 minutes. the important thing is banks and energy were leading on the down side. banks have come off of their lows. tech is a little weaker. consumer staples also has been weak. utilities down 0.7%. dow movers here, if you look at global industrial names, united technologies. goldman sachs and chevron, as well. relative outperformers, some of the more defensive names. so the question is, do we get anymore of a year end rally? we have been debating this. everybody wants to get out of december. but the hopes here is to include a pension rebalancing. there is still significant money floating around for a rebalancing from pension funds. we noted buybacks. we had 80 of them over the last couple of weeks and there is still a lot of fresh money that is floating around.

we talk about end of tax loss selling. and short covering. yesterday we got some new data on short covering. a lot of the names that float around that are among most heavily shorted did bounce the most yesterday. chesapeake, caesars, bed bath and beyond. they significantly outperformed the market. i think it is reasonable to conclude that short covering might have played at least a part in the rally yesterday, not the whole thing but at least a part of it at least among some of the names that are most shorted out there. the worst -- let me talk about tax loss selling. this is difficult to get your hands around. basically the worst performing names going into december were even worse through december. here are big names, newfield, western, l. brands. these all dropped notably in december even worse than they were before.

this lends kreens to the idea that there was tax loss selling having influence at least on some individual stocks. the hope, of course, is that abates a little bit. you can see the drop is not as bad. obviously people have been selling general electric well before that. if you throw on the effects of heavily shorted stocks on top of the tax loss selling we saw in the first half of december, i think there is unfortunately a lot of year end gyrations going on and positioning for year end performance that makes it complicated to get to the underlying fundamentals. that's why everyone wants to get out and go into december. if you look at technical internals here, yesterday we had a 90% upside day. 95% of the volume was stocks to the upside. it often signals a short term bottom. we don't have a string of them. it's been horrible in the month of december.

five of the prior trading sessions we had 80% down side days. that is a lot of selling to go through the marblth. you use these internal indicators to try to figure out when there might be seller exhaustion. we don't quite know. they'll be studying december for many years in the technical analysis school. bottom line is we are still looking for some kind of clear bottom, but the tax loss selling exhausting itself and some of the short selling perhaps contributing to yesterday's rally, i think definitely at least somewhat optimistic signs for the market. we are off the lows but still down 3 115 points. >> i appreciate the analysis, the anatomy of a big rally like we saw yesterday. bob pisani with the dow down 300 points. let's go to the bond pits in chicago, rick santelli at the cme group. >> good morning. if you look at a two day of twos

and a two day of thirds you can see we are giving back a chunk of yesterday, very shar to a two-day chart of the dow or nasdaq or s&p. in the lightened times especially yesterday where big economies weren't open for trade, the equity markets seemed to be the biggest fundamental for dollar index and fixed income sovereign market. maturities are down about a handful of basis points right back towards the lows experienced after creating the double top in tens. there is one notable exception, the five year down by about half as many. it is the new guy we auction. today will be the final. year to date chart of ten year gives you a lot of information, maybe where we close the year. we are bouncing off the low 280s because 281 is the mid point of the range for the year. that is significant especially

if the volume remains on the light side. let's pick a mid 2016 chart of bunds. the reason i pick this chart, the left side are negative bund yields. the zone we spent so much time after they went positive in the first half of 2016, they were negative second half and moved into positive, it was a lot of action between 19 and 27 basis points. we want to pay particularly close attention to this zone. can't imagine how happy mario draghi would be to revisit negative territory before normalization gets underway in a big way. one week of the dollar index, as you can see on this chart, we are not very far from 97 handle. going back darn close to 18, 19 months. sarah, back to you. >> thank you. we want tocheck in at the nasdaq now.

let's get to jackie. >> you can see the nasdaq composite down about one.1.25%. all stocks but one were in green territory. today the reverse is true. that gives you a sense of the wild swings and the directional moves of this market. it's kind of a polar market, if you will, going into opposite directions. stocks having the most down side, at the moment we are looking at microsoft, amazon and apple, the usual suspects there. it's not really individual tech story names that are moving the market today. it is pretty much selling across the board, as i mentioned. also, the nasdaq 100 leading losers. they are having the most impact. american airlines, wynn resorts, tesla are seeing big percentage declines. i'll touch on the f.a.a.n.g. stocks.

very, very sharp gains yesterday. today the losses seem to be relatively less, one to two percent. you can see facebook shares turned into the green. watching very closely what is happening here at the nasdaq early on in the session. >> watching facebook teeter-totter. as we go to break, take a look at laggards on the s&p. we talked about the 90 plus percent up day yesterday. currently right now out of the s&p 500 names number that are green, about eight. we are back in a minute.

financials are lower after coming off their best day since 2011 yesterday the sector still traiting in correction territory in a big way. big banks down again today, all down more than double digits in 2018 so will these names rebound next year joining us to talk about that is jeffrey hart, banking analyst at sandler o'neil partners. jeff, good morning. >> good morning. >> so it seems like you had a good bullish setup, earnings

okay, valuations, buybacks, stock didn't perform along those lines in terms of the bullish case what changes next year when incrementally maybe you don't have those tail winds? >> i think we saw the back half, more specifically the fourth quarter. but even with the green we're down 20% with the big financials and big banks. i think what happened is two things banks are -- they finance the economy, so they're a proxy and there's concerns about the economy next year. secondly they're the most sensitive group out there. there's concerns about interest rates with the curve coming close to flattening -- or i should say inverting i get those concerns those are valid concerns but i look to 2019, the correction we see in these stocks is as though we're going into another great depression or great recession. there's going to be a tremendous

amount of down side next year. as i look to next year, all the indicators fundamentally we can look at suggest there's still going to be economic growth. maybe not as much but still economic growth so i think the correction we've seen is way out of proportion for fundamentals the stocks come back to what i think a more normal level for a good economic environment. >> i wonder, though, jeff, in the back of investors minds it's like okay, fine, maybe we saw peak profitability for cycle we saw peak returns on equity. it wasn't all that exciting in the broader context. we won't pay up for kind of looking across the valley or waiting until the cycle ends here. >> i think it east interesting you said we've seen peak earnings and people r. o.es, i disagree with that we've seen peak growth mow then tum but i fully expect thanks to

more last year than this year, i don't think we've hit that poin point. >> and a name or two quickly >> i like larger cap names i think you have a lot of advantages from being in capital markets. lessening interest rate tail winds but strong economy help there is scale matters. so i'd be looking to citi, bank of america, even goldman sachs though you may have to suffer volatility while you're waiting there. >> jeff, have to leave it there, thanks very much jeff harte. >> sell program in progress. dow down 426 new mining the only s&per that's up back in a minute

when we come back, stock picker david herro is with us. plus, former deputy treasury secretary roger altman is with us consumer confidence is after the break. from capital one. i earn unlimited 2% cash back on everything i buy. and last year, i earned $36,000 in cash back. which i used to offer health insurance to my employees. what's in your wallet?

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good thursday morning. welcome back to "squawk on the street." i'm carl quintinilla the dow gave about a third back this morning session low down about 450 or

so busy morning as we've gotten claims not bad. 216k but we're about to get consumer confidence which is a key number given the volatility we've seen. >> unemployment prices remain near lows. that's a good sign there's not a lot of firing going on in this economy we don't get home sales data because the government is partially shut down. looks like we're giving back a third of the gains we saw yesterday on the dow feels like it's not a lot of fundamental news moving it. >> let's get to rick santelli. rick >> 128.1 is our december read on consumer confidence from the conversation board we're expecting a number over 130. last look at 135.7 we have had five numbers for from the conference board in 2018 that had a 130 handle or higher five really unusual and even though 128.1 is a setback, it's still a lofty

number and that's the weakest since july when it was 127.9 so if we look at the present situation 171.6, a bit lower than our last look, expectations 99.1, that is about 10 points lower than our last look and something to pay attention to possibly as the future at least by these respondent is starting to come down a bit carl, back to you. we'll begin the hour with a look at the markets. we'll see if stocks respond to the confidence numbers just now but coming off the best day in nearly a decade. dow, s&p, nasdaq still down more than 10% for december. joining us to talk about year-end volatility, we're joined by evan brown and david zervos good to see you both, welcome. >> good to be here. >> richmond fed, empire fed, now. is it adding up, david

the fact that the fed didn't acknowledge it was a problem but i'm not jumping on this big slowdown story i think the market is getting confused with supply-side disinflation and slowing economic activity. i don't think nose two are as correlated -- >> well, either tunnel market y markets or you believe the economy. what is right? >> i think there's a confused message from the federal reserve system it started in october, got fixed in november and then screwed up pretty badly in december i don't know how easy it will be to come back i thought john williams did a great job with you guys the day after the fed meeting and i think john and rich clarida are probably going to be two guys to clean up the mess a little bit i don't know how long that will take and what we see from jay will matter in the coming months but this was not what the market

was expecting, a kind of -- it reeked a little too much of politics and lines in the sand and then to have the president come on afterwards and fight it out, it has people people questioning the force of the d fed. >> because of internal dysfunction or external pressures or what? >> i think it's a mix of the fed taking its independence very serious seriously. and jay showed stubbornness. there was more hue tillty from john williams and that's what the market wants to see. i don't think the economy is hon a precipice like people do but you want to know that the fed is there if it is. >> evan, do you agree.

you can talk about president trump and the tweets but you can talk about other things we've seen including comments from the fed chair. has the fed become politicized >> i don't think so. and i think that came through strongly in the rate hike. this is a fed that is data dependent and it's not going to suddenly adjust. we can't expect them to suddenly back off rate hiking this setup for a pause is a process rather than an event and we saw the first step in that event in december. we'll see further steps and we're starting to see the economy cool a bit i agree with david that we're not falling off a cliff but that moderation and day will give the fed room to become less hawkish and i think that will ultimately support the market. >> to the degree we see data that's marginally down or softer, does that clear a path

to a march -- skipping march and is that why maybe we can rally a tiny beat on weak numbers? >> i think so. strong numbers might be more complicated for the market because it there l thrwill throw questioning into everything. it won't be what you want. particularly if those are on the inflation side i don't see that and this year we've seen an unbelievable turn in the inflation data since the summer it's been extremely weak the oil markets is weak but even the internals down significantly in decelerating. i think the fed had every reason to part a hard pause into the marketplace. i think politics got in the way and their ego got in the way and that's what we're fighting. >> you think they were trying to make a statement against the president? >> i think there was something in there and that is somewhat problematic for the market to see. >> i agree, david, but if that

were true, if the dollar is up over the last three months, the last six months, for the quarter on this brutal equity market you really think you would have money flowing in and confidence in the u.s. dollar if there were serious questions about the fed institution and credibility? >> real rates are headed higher, sara inflation expectations are dropping, break evens are down the support for the dollar is real interest rates and real interest rate deferentials are pointing to dollar strength. i get the credibility argument, i get the confidence argument. i also think the market is probably looking through it and knowing that if there is a battle between the fed and the president, if you go back in history and look at lyndon johnson and bill martin, arthur burns and richard nixon, even at what paul volcker was saying with ronald reagan after his recent book came out, the president usually wins these things they're pretty powerful. it's a hard fight. and i'm not -- what i'm not sure is why does the fed want to fight this battle? inflation is going down not up you would want to fight this battle if the pce was at 2.5.

>> i think what jay powell was doing was justifying his rate hike, mentioning the economy and a number of the indicators i think he was trying to represent his board. he was not the only one expecting two interest rate hikes and he had to speak to the consensus on the committee they were trying to justify in the the data. >> but you could be more flexible with more openness to this could go either direction as opposed to the rigid we're not touching qt, we think there's two more rate hikes, everything looks great, everything is wonderful. the market wants to hear you know what? maybe everything is wonderful and that's your view but if you're wrong, we need to know you're in the backseat making sure this is going to work out like you have been for the last ten years and you didn't get that feeling on wednesday last week. >> you agree with this if so, does it lead you into a tradable rally

>> i think -- i see the fed as less politicized i think than david does the fed really wanted to get to the bottom of their range of what they view as neutral. they wanted to get there and with this hike they did get there and so now that gives them the space to look around, see how the economy does, do i agree it could be communicated more effectively? sure, but look they're at the bottom range of neutral, the data will cool, they have time and we will see them come in a little bit more dovishly and that should support the market. >> you know what's incredible? we're having a conversation about the fed and specifically disinflation we're not talking about u.s. and china and tim pact he impact ofs has that gone away >> i think that uncertainty is still with us. not just trade but tech. we heard trump is considering executive orders on export controls to huawei and the like

and even if we get a tariff deal, this concern about national security and regulatory issues in the tech sector is definitely a head wind and something weighing on multiple so it's not all the fed. we have genuine geopolitical concerns the market is grappling with. >> but not higher price deuce to tari -- prices due to tariffs right now? >> definitely not. we're talking about almost lower prices, grains and everything like that. anyone who put a phillips curve based model out there and told you 3.7% unemployment rate, we have to be vigilant, we have to be raising rates, this is almost a joke now we have massive deceleration in inflation. the core pc is running at 1.2% annualized rate. >> but if tariffs go to 25, you'll be back and we might be having a different diszmugs. >> the global slowdown that

comes from that, the aggregate demand slowdown will be disinflationary so you won't get me to jump up and down about tariffs being super inflationary either. >> thanks, guys. >> the world wants to know when you're going to cut your hair. >> fed rate cuts, dave cuts. >> come back before then amid this market volatility, what specific names should investors be looking to for value right now? with us on the phone, david herro. what are you doing amid this volatility >> well, this volatility has provided a lot of opportunity. as you know, i manage international funds and global funds and i think specifically when you look to europe this is a place that has provided extremely attractive valuation due to dismal share price

movement euro stocks, is 15 u.s. dollar terms is down over 20%. most of the european stock markets are down over 20% and there are certain sectors in europe in particular that have been clobbered they're selling at anywhere -- the financials are selling well below book value and mid-single digits pes and the same thing with the industrials so this is one area in the global equity markets that to me is just screaming value and today was the perfect indication, the u.s. market closes up almost 5% yesterday and europe opens down this morning it's been a dismal market but these valuations are unsustainable. >> so you're talking european stocks, specifically financials and industrials. even with the policy uncertainty

and the fact that the economy appears to be taking a leg lower at a time where the ecb is looking to end its stimulus program? >> this is exactly what has dragged on share prices of these sectors is that all this top-down macro stuff which is providing a very high degree of feel-bad factor. but the truth is that despite the feel bad factor company's earnings are doing just fine, the global gdp will be 3.7% and in this type of environment companies can earn decent profits so yes the big picture looks spooky and all the stuff with italy versus the eu and brexit all these things weigh on share prices but this is exactly what provides opportunity for the investor we are investing in businesses which generate cash flow streams, which have healthy cash flow streams and because of the

top down negativity, we have this opportunity and this is where the dichotomy is all this political blur rarely reflects in long-term value destruction and this is where the opportunity exists. >> david, there has been talk about institutional al ownership jpm says there's signs of capitulation on that front among institutional holdings you look at fund flows you feel like we're getting close to something >> we've experienced outflows in the last quarter of this year after having a strong in flow period and i have to say it's my experience of running mutual funds, there tends to be a very inverse correlation between one that outflows pick up and when the bottom of the market and the future performance is so if the

past is any indication of the future, we're getting close to a bottom here. and exactly when prices have been the weakest and the retail investor and even some of the managers, whether some of it be tax-related selling or what have you. you tend to have this type of behavior so when you see in kind of price dislocation, what i mean by this is extremely low prices and robust earnings meaning you have a derating going on in these sectors and stocks to me it spells opportunity more times than not. >> i've had quite a number of family and friends ask me about volatility and what it means i suspect there's a lot of retail investors tuning in given the big market swings we've seen what would your message be if

they are looking to be long-term investors. >> the message is that volatility is your friend and you have to be able to weather it it's basically some -- it's basically a noise. you have traders trading on mow mon momentum there was a good article in the paper yesterday about this and there have been a few others and this becomes an opportunity because people blindly sell irrespective of what's happening within the fundamentals of a business, for someone who has a two, three, four, five year time horizon, which is a chance to buy a company which is an economic entity which generates cash for its owners. this is a chance to buy that business that stream of cash at a much lower price but you have to have the discipline to be able to accept the fact that volatility is here it's accelerated and it creates

discomfort but also opportunity so it should be viewed upon as your friend and you shouldn't knee jerk react to it. >> so, david, you told your shareholders in your september 30 letter i think you were going to hang on to ge despite the fact that it's been frustrating for you and your funds are you still in there >> yes, we still have it in our global and domestic accounts because we believe especially again at this price that when you look at the various businesses around you add it up and even when you can look at liabilities, we still believe there's good value in general electric. >> down almost 60% in the last 12 months. we'll leave it there thanks for joining us. >> thank you for having me. >> david herro, oakmark funds portfolio manager. the dow selling off after coming off the largest point gain in its history. down 14%

investors should be watching next but first, look at wti and brent crude. yesterday's rally up as much as 8% energy is the worst-performing sector we have a breakdown of what to expect from oil straight ahead r, but everywhere else... there are performers, dancers, designers the dads and the drivers. there are doers of good and bringers of glee. this time of the year is so much more than a bow and a tree. (morgan vo) those who give their best, deserve the best. get up to a $1,250 credit on select models now during the season of audi sales event. ♪

dow down 450 why etfs and mutual funds are seeing a sudden drop in the amount of money coming in.

it's the subject of our etf spotlight next first, look at the worst-performing stocks in the dow in today's session united technologies, boeing and apple leading us lower resquawk on the street" still ahead. still ahead. don't go anywhere. still ahead. don't go anywhere. (clock ticking) (bell ringing) it's time. time for a new kind of cloud.

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lepts let's get to our etf spotlight with bob pisani. >> there's a lot of interest in watching fund flows with all the volatility so good and bad news for trends this year let me show you the december estimates, obviously december isn't over we don't have the full numbers here last week the mutual funds are continuing to see outflows, $117 billion for this month and etfs are continuing to see inflows. this has been the trend all year long for 2018, for example, mutual funds had seen outflowsov ss an inflows and assets under management has been stagnant at $3.4 trillion or so. there's good news and bad news

about these fund flows you have to be careful about interpreting this. the good news is etfs continue to see in-flows and a good part of that is due to outflows from mutual funds that's benefitting the etf business the bad news is that the rates of growth in etf inflows is 40% lower than it was last year. that's a slowdown. outflows continue from mutual funds and given the decline in asset values for assets under management for etfs we've not seen growth in asset undermanagement. not what we've seen in the last few years. the other bad news is total amount of outflows from mutual funds are larger than inflows. what does that mean? it means people are continuing to take money out of mutual funds, some of that money is flowing into etfs but some is not. obviously some people are keeping money in cash or finding other uses for that. the other thing is very important here, guys, and morgan, is we are continuing to see the fee wars

lowering fees for etfs, that's benefitting consumers, they're getting lower price to etfs. on the other hand, it's putting pressure on the financial industry it's getting more difficult to manage this kind of money when the fees keep dropping that's why you zero bow ase see out there. i think fund managers are trying to figure out ways to keep a business running and charge very, very small fees. back to you. >> such a key theme, bob i'm sure we'll continue to talk about that thank you, bob pisani from the floor of the pink that. -- new york stock exchange oil prices falling over a glut in supply and market volatility with us now, rbc global head of commodity strategy helima croft. good morning to you, helima, where are prices headed for 2019 >> we think higher there are fears about the supply

glut but opec cuts haven't taken effect yet it's 1.2 million coming off the market and we have seens from opec ministers, the saudis that they're prepared to do more. fears about a global slowdown will weigh on the market but we think the supply picture should be improving heading into next year. >> john. i think it's a key point have the oversupply concerns -- as this narrative been overblown? i ask because potential opec cuts but because those waivers involving iranian crude are temporary. they're only for six months. >> that's right. and those waivers tricked the main supplier, saudi arabia and russia, into rushing a burst of supply on to the market that has tripped us into this temporary oversupply i would point out that crude oil prices held an important level, down 4250. >> 42 is the number that i've been watching, a lot of us have been watching. so now around this 45/50 area that has held previous support so prices have settled down from

the selloff here and i have to give russia and opec the benefit of the doubt right now going into next year because of the solid job they did for most of last year before the iran sanctions sort of hoodwinked them. >> but none of this is moving oil, helima. what is moving the price of oil up 5%? down 8%? up 9%? i don't see any headlines. >> it's basically following the market and oil has been dragged down by broader macro concerns so now i think this market should tighten up and administration officials have said, look, we're not looking to grant waivers for iran purchases next year so i don't think we'll have the same degree of waivers that were granted in november and i think the market is not focusing on that right now. >> so production cuts you think would start to be -- inventory

numbers would start to change the first week of the year. >> it will take thyme. the key decision we have to watch is to lower exports into the ufl the u.s. >> john, the correlation between equities and crude certainly seems to have heightened this year how should traders think about that >> well, you have do abide the macro elements that are affecting the stock market being soft next year one other thing to watch for crude oil to go its own way, maybe go higher as stocks continue to fall is the exiting of secretary of defense mattis and that now installs a hard right wing group led by john bolton in the white house and president trump won't be sort of walked back from some of the militia harsher decisions if you will regarding the middle east and the setup there.

his trip to iraq highlighted that it didn't go well vis-a-vis the iraqi leader shship the middle east game board has been upended with secretary mattis' exit and what it portends going forward next year so there's other things that will start driving this oil market beyond the macro concerns affecting the stock market. >> i'm not sure i would consider patrick han shan a security hawk or defense hawk per se but how does this affect crude. >> it's a a question of who will drive the policy will you have a bolton driving it pompeo driving it? does that mean the u.s. signing up for a more confrontational approach to iran mattis was the one walking president trump back from doing a severe strike on sir so we have -- syria. so does president trump focus more at home or what we have to see how it plays out. >> but it makes the argument for

imposing sanctions on buyers of iranian crude oil. >> i wanted to comment on how everybody seems to have gotten the oil trade wrong. didn't you expect oil to -- if you look at the geopolitical landscape, it would argue for higher oilprices it feels like one of the biggest trades that was wrong in 2018. >> you know what i feel like i missed was i didn't realize the degree to which the saudis would front load the iranian decision and you talk to saudi officials, they really believed there would be few exemptions given by the white house so i think they misjudged the market themselves. they drew down inventories in advance of that decision so i missed how quick the saudis would be to respond to president trump's demands that they put more oil on the market. >> we'll leave the conversation there. thank you for joining us today let's get to brian sullivan for a news update. brian? i am brian sullivan, here's your cnbc news update at this

hour. president trump is back in the united states after making a surprise visit to troops overseas he and the first lady arriving at joint base andrews this morning. he met with troop this is ooerk on wednesday on his way home, he and the first lady met with air force leaders and troops also based in germany at ramstein air base the president posed with service members at the base. saudi arabia's king salman issued a wide-ranging overhaul of top government posts including naming a new foreign minister, ra minister, ibrahim al asaf. a frenchman is on a voyage across the atlantic ocean in a specially designed barrel capsule. yes, a barrel. 71-year-old jean-john kelly savant set off from the canary islands on thursday. he aims to complete the journey three months

that's your cnbc news update for this hour. back to you. not in a bairl >> brian, thank you very much.rl >> brian, thank you very much. >> investors try to navigate through the market volatility. dow down about 500 we're back to 2417 on the s&p. only three names on the s&p are higher back in a moment shield℠ annuities from brighthouse financial

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welcome back to "squawk on the street," i'm sara eisen. a little over an hour into the trading session and things have been deteriorating rapidly s&p 500 down 1.8 giving back a big chunk of yesterday's gains, now down 420 points all s&p sectors lower led by

energy with oil prices down 2%. >> i think the dow is lower on the week meantime the government shutdown entering its sixth day ylan mui has the latest on the negotiations ylan, has there been negotiations >> well, the president is back in washington, morgan, and he is become on twitter. here is what he put out on twitter this morning he wrote "have the democrats finally realized that we desperately need border security and a wall on the southern border?" that tweet comes after president trump was in iraq making a surprise visit to the troops he spoke with reporters while he was on the ground. he defended the timing of his trip which came during the middle of the government shutdown and he talked about the possibilities that this shutdown could last a long time. >> reporter: how long do you think the shutdown will last, mr. president? >> whatever it takes we're going to have a wall we're going to have safety we need safety for our country.

>> the president deflected questions about how much money he would need to get for his border wall. previously he had been looking for $35 billion. >> one source tells me the number has come down to $2.5 billion but certainly that number is still in dispute we have not been getting a daily schedule for the president while the shutdown has been going on but the white house does tell us the president is not expected to make news and we're not expected to see him on camera before 1:00 p.m. on capitol hill, the senate isn't reconvening until 4:00 p.m. but, guys, we are not expecting any substantive progress today because the house has been told not to expect votes to happen. that means nothing can move forward at this time back to you. >> ylan, that was my question. assuming a deal gets hammered out, how much time needs to pass before we can get a vote scheduled? >> once they have a deal they can move fast but the house has

been told they will get a 24-hour heads up before calling members back in so you're looking to at least one more day best case scenario and that's why we're on day six of a government shutdown. it's clear we'll see a day seven as well. >> ylan, thank you for the update from the white house this morning. ylan mui. the shutdown the backdrop to the recent volatility we're seeing across all major stock indices. this morning lower across the board after the dow's 1,000 point gain yesterday how should investors be looking to navigate these choppy waters? this volatile market and the news from washington with us by phone is former deputy treasury secretary roger altman good to talk to you again. do you think the shutdown in six days -- in itself sixth day is having an impact on the market >> hard to tell but i don't think that is one of the major impacts. it seems to me that the biggest

question -- and you touched on this a few minutes ago yourself is whether or not markets are signaling a slower 2019 than we would have expected two months ago, four months ago i myself think the answer to that question is yes especially second half of 2019 and i think so because we're seeing softness in consumer confidence, much lower commodity price which is singh five slower global growth, bond spreads are wider, treasury yields, the ten year lower than two months ago, about 50 basis points lower and consumer financeslikely will be weaker next year if nothing else because of lower marketings so this is the big issue together with washington dysfunction. i don't think the slow down -- the shutdown is the biggest element of the dysfunction i think the trade war, the overall paralysis, the battle the fed, the investigations are

all bigger factors because it probably gets resolved relatively soon but it's a difficult environment and we're seeing that in the market. >> nobody has been able to give a straight answer when it comes to how much the trade war is impacting company earnings we're not seeing a spike of inflation. is there a way to analyze what kind of an impact the trade war is having on the u.s. and how much it's negating the better corporate tax rate we got from the administration down to 20% >> well, i haven't seen a good analysis of that although maybe there is one that i just missed it's hard to do because the exports of the economy is relatively low at 15%. the bigger impact is likely

outside the u.s. and china being a factor and that is affecting things like commodity prices and affecting things like bond yields i don't know how one would precisely calculate that in terms of the tax cut versus the trade war although keep in mind that the full trade war if you take everything president trump has signalled he may do, if that's the beginning so i think the impact of the trade war so far is more psychological and negative than it is flowing through the data but that's my sense of it. >> roger you talked about the potential for slowing economic growth economic growth slowing is different than a recession but do you see the risk of recession rising or is that overblown?

>> i don't see a recession next year a couple months ago the forecasts for 2019 were centering from 2.5% growth to 3% from 2018. mostly reflecting the disappearing impacts of the tax c cut. now i think we're probably looking at -- and i don't want to be too scientific because it's way too early -- a figure like 2% for next year so not a recession. in fact, not close to a recession but somewhat slower and whosk the whole narrative -- and we talked about this a couple days ago -- of synchronized global growth driving everything two, three, four months ago is in effect gone because the rest of the world is clearly slowing, china is slower, europe is slower than expected and so forth and so that narrative which was a big

reason why equities were so consistently higher is no longer applicab applicable. >> deal making and ipos. we have a piece on our web site saying these unicorns are rushing to market because the back half of '19 and 2020 look more tremp rouse than the first half is that what you're seeing >> well if i was one of those companies i would want to go sooner rather than later so i'd want to take advantage of that rather than take my chances six to 12 months from now. that is just what i think you would think if you were they of course every company and ipo is different but what you would advise them to do, yes. >> do you predict jay powell

will be in the same job this time next year >> yes, i think he will. there hasn't been a lot of discussion about that in a precise way. the fed chairman can only be dismissed, quote, for cause, unquote. and that would generally be related as some form of malfeasance so the president of the united states, whoever he or she is not k not remove the fed chairman because he doesn't like the monetary policy that the fed is is pursuing cannot do that and if trump tried to -- if he called for the removal of jay powell and asked him to step down, i'm sure powell would resist and i'm sure that there would be a huge lawsuit and the president would lose that. because the language in the statute is clear so the president cannot dismiss chairman powell. i don't think he's going to be foolish enough to attempt it.

>> but where do you think this goes into next year? so many people on wall street are criticizing the fed chairman saying he struck wrong tone, he made a mistake, they're being too stubborn when it comes to rate hikes and on a pre-determined path instead of interpreting the markets and the granular data which is suggesting inflation is not running hot and the economy is slowing. >> yeah, but sara, that's a whole different question i can remember many periods when there was heavy criticism of the fed. and those things -- that happens. it's part of the job of the fed, it's part of the overlay around monetary policy. that's a different question whether you agree with the fed's

policies than weather the chairman should be removed if the chairman were removed it would be hugely destabilizing from a confidence and financial market point of view now you can disagree with the way the fed has handled this most recent rate increase, both the fact of the increase and the messaging around it and it's arguable maybe the rate increase might have been deferred that would have been my view but i don't think that has anything to do with whether the fed chairman should be removed i can remember very vividly when paul volcker took control of the fed and imposed an extraordinarily tight monetary policy and generated massive criticism, turned out to be the right thing to do as we look at it years later but we can't on raitt like that and i think mr. powell will be in a job a year from now, yes. >> is roger altman, thank you for weighing in.

very valuable to have your insight. roger altman, former treasury secretary. "squawk on the street" continues after a quick break.

veteran market watchers say the current market is getting flashbacks to the 1980s. find out what that means on traigt tradingnation.cnbc.com more "squawk on the street" coming up.

let's get to rick santelli in chicago. >> hi, carl, thank you i'd like to welcome the deputy chief economist of goshe bank. thank you for joining me this morning. >> good morning. >> good morning. all right, here's theway i see it 2017 was really a wildeer for markets to the upside, globalized synchronized growth started to give way as we entered the third section of 2018 right after of the big january rally. next we know it's diverging.

then we get a whole lot of market volatility. it's straight and now we go to must be a recession that has to follow do you agree that logic, brett if you do tell me why and if you don't tell me why. >> well, i don't think a slow down is being conflated with recession the two are very distinct things we and most of the economic forecasting community have anticipated a slowdown for the u.s. going from 2018 to 2019 because like most economic forecasters, we anticipate bump from tax cuts and extra spending from washington would provide only a transitory improvement in growth you're seeing that come off now for 2018 and heading to 2019 the real concern now is that that slowdown from what we're projecting at 2.9% growth for the u.s. in 2018 to 2.4% in 2019 could be enhanced further by the

uncertainty on policy coming out of washington. markets do a really good job of pricing risk, and they do a much tougher job of trying to price uncertainty. and we're in uncertain times on the policy front when you have a lot of volatility on foreign policy, unnecessary trade war being launched, and unprecedented criticism of the fed chair >> you know what, and it is hard to disagree with that. i know that on the trade war, there's a variety of opinions, and it sounds like you're not of the positive opinion there i continue to think as the policies start to clear up, does that not offer another avenue where some of the downgraded growth due to what you say are one time bumps in policy at the end of '17 and early '18, you don't see an aisle to ramp up a bit, so it is all downhill from here >> yeah, i do. i think in many ways the impact of the trade war is being overpriced right now

we see the impact of tariffs launched by the white house to this point,only shaving growth in the u.s. a couple tenths percentage points at most. we don't anticipate intensification of tariffs with china going through. if you look at the first trade that was effected by the tariffs on china, there was only about 1% of 50 billion in china trade consisted of consumer goods. when you look at the second 200 billion in goods, nearly 27% or so was consumer goods. it's almost a third, we don't see him going through with the tariffs. >> we're just about out of time. i have to leave it there but i thank you. as we move through the year and see some growth numbers, i would like to have you back for comment. thank you, brett house sara, back to you. 363. we're back in a few minutes. shield℠ annuities from brighthouse financial

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welcome back to "squawk on the street." leslie picker. stocks are off session lows, giving back a sizable chunk of wall street's biggest one day rally since 2009 all 11 sectors are trading in

negative territory let's focus on one of the notable underperformers. energy stocks. it snapped a seven day losing streak yesterday but down sharply again today as oil prices slip back to 18 month lows amid renewed concerns over supply among those leading to the down side, apache, marathon, and halliburton. despite the rally today, all 30 stocks in theenergy sector are trading in bear market territory or worse the sector as a whole is also the worst performing group during a tur bulent month of december >> thank you for that, leslie picker sara, what's coming up on "closing bell? >> we're talking to scott blatt from delphi asset management the single reason he says the market is selling off and where he sees value.

noted buffett disciple lot of people are buzzing about the confidence number from the board. and the expectations component that saw a drop. one, is it self perpetuating from recent drop in markets or is it an early signal things are softening with the consumer. that's the debate today. >> some historic drops in the board number. more on the selloff after the dow thousand point jump and how to position your portfolio in final days of 2018.

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which i used to offer health insurance to my employees. what's in your wallet? good morning it is 8:00 a.m. at apple headquarters in california, 11:00 a.m. on wall street. "squawk alley" is live.