>> watch you on "halftime rep t report" and "closing bell". >> happy new year, we'll be back here on monday "squawk on the street" is next ♪ >> good morning, i am carl quintanilla, i am with sara eisen and wilfred frost. david is off cramer is going to join us by the phone. europe is up 1.2%. japan closes the year down 12. they are closed on monday. oil is back about 45 our road maps begi begins with

street futures is foipointing to a higr open >> cramer says the recent volatility is about as bad as he has seen cramer joins us. why he says jay powell is getting schooled >> stocks are poised to open higher this morning. the rise of all three major averages recovered to post some ol l solid games. if we are going to erase the whole 1931 thing, we got to get about another 4.4%. >> yesterday, 2:17 p.m., the dow

is down 611 points and 200 gain in the last hour so at 3:00 p.m. and it was a straight line up going positive the last half hours. to gain back almost 900 points, biggest dow and nasdaq rehearsal in ten years does that mean we are still in a bear market or does it mean it could be the making of abbott. we did have the two back-to-back games. there is some following through. this is the end of the year buy or is this over done and this is it >> it got extremely over done and all you are doing the last couple of days is feeding off of those conditions being so extensive to the downside. yes, the end of your stuff matters. it feels like on friday, a week ago, the people who needed to

sell and had redemptions and all of that gotten throne wn in. now you have long-term money or whatever it is you have to mention you have to go up 4.5% to distinguish the word december. going up 4.5% from here only gets you back to a level of the s&p where three weeks ago, people were panicking and brickibric breaking the law that tells you how much damage is done in a short period of time and why this kind of a move up 6% in two days you are only getting back to where you are a week or so ago >> you have to keep it all in perspective and it really is just about fear is rally fuel. a lot of fear is built up. i think you can say people look around, well, look, the yield curve is back to 20 base points. >> valuations are at three-year

lows if you believe earnings you kind of make your case in reverse. >> there are fundamental pieces of good news if trade war is one of the main concerns, that's over night, china is allowing u.s. rights imports into the country for the first time ever. according to china daily confirming the talks in january with the u.s. and also confirming they're working on this foreign investment law to protect investors and sort of get more protection around intellectual property and not forced technology and making it a little more open and caving into some of the concessions with the u.s. administration demanding. >> yes it is draft language for the time being maybe some positive talks. let's bring in cramer on the cnbc's news line jim, the action for the full week because there is a great quote going around, do wetrust the message of the market this week we trusted about as much

>> i think sara is onto something. r we are not like that at all. that's obviously the safest part of the market. i look at china and i say they -- i look at our hard liners and i would say they want to do a deal they don't know how. if we dpget a trade deal, i thi people will say why did i buy a lot of international company >> united technology, it is a really good company. it got a lot of exposures to carriers of china. it is huge in china.

and so the company is splitting up and a lot of great management. i think their providers does not care how it extends out in ten days >> do you think this action in december, is this abnormal or do you buy the argument that it is actually the last anyone years that have been abnormal and this is what stocks are about this is the price of add many i many -- admission for the yield that you get overtime. >> i hear that >> 1987, i heard what happened, '81 to '87 i turns out to be a great place to buy i don't like to look at the market, it is not the bible. what it is it is a lot of facets

coming down and a lot of etfs. when you look at individual stocks, it is so hard and even consider these days. how does that get down there >> i am so glad you brought it up >> you know we talked to jim about the valuations, he was citing pe levels for all sorts of stocks and semiconductor and yet he says he's not buying anything >> you should be cautious on this market until it stabilizes. it is like an earthquake initial one is 7.8 but there are after shocks it is better to wait and be cautious because the after shock

is disrupt activitive. >> it does not matter. even of the nine multiples and ten multiple stocks. they all went down systemically. >> his key, he wanted to see resolution on trade. world trade is growing again and we can make some sort of deal like you said with china >> there is optimism there, he would change his mind. >> okay, right now does not matter here is something that could happen i think of peter navarro they don't want to put the economy in a recession they view the economy strong enough to withstand two rate hikes. i think the economy -- observer of the dollar. they don't do anything >> i think we'll look back and

say why did we bottom? we all want to be perfect. a lot of people to say, i am willing to buy the second tremor i can't time it. there is a lot mo mormore risk because of volatility. just buy something, don't buy a lot. recognize that if we go down today, it may be another chance. let's take a pass. >> on the shutdown, we went into the shutdown reminding viewers that stocks are traded up to shutdoth shutdown today the president threatens to close the board entirely unless if he gets it funded

>> something is coming out and -- i hope it is a bit of a hyperbole. i think there is some hyperbole of what he wants to do i don't want to lose sight of the track when i look at the stocks are coming down >> there are some areas in technology there were some nedestiny. is there any way i can get that monday price >> jim, looking at some of the individuals, looking on a week to basis, paypal and adobe and mastercard, facebook and aluminous. you had people reaching for these. is that is something where you feel it is a great company at a better price or is that the character of this market going into next year of growth again >> great question. what i think happen is those were the ones that did add up.

they are oriented ecommerce channel. it was an omni channel those are rich i have been saying pick one. too many people picked etfs. i am hoping 2019 will be bigger. we literally even on air, okay, these are portraiters. people think brokers are using as diversification >> jim, you were using the word bear market to describe the action way ahead of gundlach

four or five s, six weeks ago. where are you right now on the prospect of recession and earnings recession and goldman calls it liquidity >> i like goldman just because everybody is keeping up with it. >> look, i think there is no recession, i think it is where 2011 was over sold where you are dealing with the october and november period. i think that we'll have a slow down to paper and athletes and all sorts of data and pricing. all stuff that powell has to start using instead of these models and realizing they are

relevant there is some reason to think you know what why did i pull the trigger? oil is going backup. that's the best seller >> yes >> and oil is up today >> indeed. >> jim, try to rest a little bit over the weekend >> just tell them it is a bunch of people talking. >> i want to catch some of this. >> okay. we are off there tomorrow. >> yes >> you are >> okay. >> jim, thank you. >> thank you, guys, appreciate it >> a couple of new names over in tesla, we'll at ttell you who t

are. and robert greifeld will weigh in on stocks the biggest dow gained ever and more ""squawk on the street" in a moment

stocks looking to add to yesterday's rally with all major indices. stocks are still on pace for the

worse december and the volatility continues chris ailman is joining us >> the volatile that we saw in october and november and i went onto say i thought that's going to be expected and that's typical when you have a bull market that's so old and so late in the economic stage. the last few days i think oare abnormal because our machines are picking up more than human beings >> joining us now, our jeff saw, our strategist at ramon james. we have to look at the short term and long-term is that how you see it >> that has been our views we. >> reporter: early in that assessment a week or so ago to be honest. we are looking at multiples on

the s&p of 14.5 and trailing multiples a little higher. markets that are over sold can get more over sold we are pricing a bad scenario for 2019, relative to our more sort of bearish 2019 the credit market sort of lost their luster if you will and now we are seeing the corporate loan market start to take some knicks and the corporate bond market. high yield are closing in on 500. they'll pull back a touch the past oum coucouple of days we get a little bit of a rally short term rally but long-term 2019 bearish >> yes, europe is an issue we had a repricing of sovereign yields in europe and mostly of italian catalyst u.s. housing have started to

weaken the corporate loan markets here in the u.s. are going to have difficulty earnings revisions, we come in from at the end of october for up 10% and now we are at 7.5%. we have been talking about peak earnings and growth force for some time and now we are starting to see that happen. >> jeff, you have an interesting characterizing of what we are in right now. is this just a bull market reset? are we in a bear market environment where it is happening to the downside. >> secular bull market nine years into this one, the 1949 to '66 lasted 17 years -- excuse me, to 2000s lasted 18 years. i spoke to tom at the washington post yesterday, he says you are the only person i can get in touch with all the people i speak to are on

the holidays don't stand up against it if the market wants to go down, let it go down. don't stand up against it. you are getting the wild swings. on top of that you got tax law selling and mutual fund r redemptio redemptions. >> although jeff, that may be true this is normally the time of the year where the second command is at the desk and the market drifts higher there is some reason that the market feels as if there is across current that has to price things on. >> you got tax loss and mutual fund liquidation and letter to investors on november 15th

they give them to december 31st to liquidate and redeem money from hedge funds i think you are selling into a vacuum where nobody is around. i don't think you will know the destiny of the market until you get into mid january i think we are in a secular market that has years to to run. >> i know some pros that got called back to the desk in the middle of the week >> i came back early >> i believe you >> are we going to kickoff of the next four weeks of trade talks and end of the shutdown and i am trying to read more ted tea leaves into january. >> i disagree with jeff. the secular bowl has come to an end. we have to look at cycles. we have an unusual situation where the fed and i think i mentioned it to sara yesterday when i spoke to you guys are simultaneously pulling back

liquidity from lowball markets i think that has a big effect. sort of historical and psychoanalysis is lift now the analogy is not quite as adorable as they used to be. fed tea leaves are the most important. trade is also important. i think the news on trade is actually completely sort of washed over by the market volatility but fed and liquidity are most important >> trade tea leaves are a little positive lately. >> peter and jeff. thank you. >> futures is still holding in there. more "squawk on the street" from the nyc, straight ahead, don't go away. i'm ken jacobus and i switched to the spark cash card 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?

from capital one.nd i switched to the spark cash card 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?

oil is going to help out at 1% opening bell is five minutes away

♪ ♪ ♪ each day, brings new possibilities. that's why you need a partner dedicated to helping your company reach its goals.

u.s. bank -- the power of possible. you are watching "squawk on the street" live from the financial capitol of tl worhe wd the opening bell is under two-minutes tapping after a crazy week of the downside the president tweets there of the shutdown, day seven of that. japan closes its year since they are closed on monday and non e f the days there are good. industrial output missed >> this is the story of the year u.s. stocks are down for the year around the globe it is a bigger

pi picture. nikkei is down 10% and germany and hong con is down 15% the u.s. is down 7%. the story has really been object the international leap all yearlong the u.s. took a little longer to catch up to the weakness of the global economic slow down. >> yes, for the year to date down 7% really would change to close the gap call you mention getting up a few percent from there traders are saying if e wiwe use other day as a tactical low. it is kind of an interesting back and forth dynamic where it is not really giving you a lot of information day-to-day but except how people are positioned >> we never got down to 20% closing of the highs of s&p. >>triplet's get to the opening l

at the cnbc exchange she's the first. a business development company celebrating its anniversary. newtek, tesla is on the wire as they name two new dependent directors. katherine thompson and larry ellison. oracle fame who have said in the past must know quite well. >> he has been a fan and big shareholder of tesla >> he went off script at the oracle not too long ago, he praised elon musk, we have that. >> my second largest investment,

i am very close friends with elon musk and i am a big investment in tesla. >> crazy that was a year in which elon musk trying to get his company private. >> it is well off its highs but it is off nice you are seeing some criticisms at this point. as an independent director to oversees -- not only he thinks he has a friendship with musk and his own company, it is not one to submit to broader over sight necessarily, he has maintained some control. i think obviously i think other choices are interesting as well as somebody operated in a majority -- >> kellogg's before walgreens.

>> board structure, leaving facebook the only public company where which he is a board member could there be a world where he takes some kind of executive chair role and later facebook says he'll remain in that capacity he raised a lot of eye brows and discussions yesterday. >> i could imagine it is not as if he just said i am kind of done with board work. it seems to be something here. >> whether it may happen or not. >> it is hard to conclude on that >> i think he's on the board of air bnb. >> yes >> interesting to hear from farley on "squawk" saying some of these companies have chose to wait have missed their shots saying they're not going to go public or get bought if they do go public, it is

going to be expensive. we had a piece on yesterday where they're rushing things to make things happen before the back half. >> there is a sense of urgency out there. tom wishes they came public right here while he was running things >> to his point, there is a risk of waiting and allow your private market value to get so big that going public at a discount is itself kind of impediment and it is a p.r. issue and you are burning your private investors. >> coming up at this hour, all sectors are opening up higher the bounce or the rebound continues in stocks and going in for day three here if you look at the out performance out on the week, every sector is higher, led by consumer discretionary, we got consumer confidence that people were worried of expectation

components yesterday holiday spending metrics have been good. that could be apart of that. technology did very well >> kohl's is the second best performer this week. that tells you and kohl's is up that much. the u.s. consumer competence was a little bit at the top line >> it is the one area where i think it is the least amount of pressure going on. >> home depot and visa is the best performance of the week >> davidson comes out and maintain their price target two-way waiting. large part of their call is about in their view, concerns of tariffs and they have said in the past, they believe companies like apple and their universe

can adjust supply chains in the case of mortar riffs exhaustion and they point to the reuter sto stori stories. we'll see. >> i would take note that apple did not manage yesterday the stock seems to be under a lot of pressure. it is a weak bound off of a bad sell-off if you look at the broader chart, it can fight its way back into a range of 160 to 175 and go sideways for a while. you consider that victory because you are taking so much capital at once. the biggest conversation today is what do you make of the wild markets swing. how much of it is tax law selling? we are hearing a lot of that is going on because of a loser from december and the last few months and pension rebalancing and having to buy stocks because their allocation is out of whack. it has not been that thin

especially during some of these big moments. lack of news and catalyst. what does it tell you about where we go from here or into next year? is there going to be fresh money put to work if january or a continuation of some of the gloom as we end up >> i have been asking myself the question, do you have a blank piece of paper as you start next year and people have their risk budget that are rebuilt. >> i think it is going to happen the answer is all of that, combined with the fact that a lot of things should have worked did not work i think you have this collective idea, we used a lot of ammo this year in terms of fundamentals and buybacks what do you have to hang your hapt hat on if earning is going s is

slow but not dramatically. >> the dollar is weaker that takes a little pressure off of that foreign earning story and the trading story. >> when you have heighten tension, you have stronger dollar and everything is factored in there and yields are higher >> there was a discussion this morning of two golden rules that got broken it was not strong. the other is that s&p slump earnings are up 10 plus which -- i am not sure if that ever happened. >> it may never happen >> the market always rallies >> and peak earnings and whether it can continue and what it sees is that it is not that continuing, right? >> the major averages have cut their december losses to single digits now across the board.

bob pisani is on the floor >> good morning guys, 3-1 of declining advancing stocks here. we are up on industrial average and dow jones. consumer tastaples performing energy okay. tech is slightly to the downside people have been asking the last two day's rally, why you have it i don't think you can decide any one thing. obviously there are several things going on. we over sold conditions zb i can show you some elements of that and why it is the number one factor we have tax loss selling which is abating and finally factoring in that of short covering going on and another pension funds, asset re-allocation that we talked about i want to show you what happened yesterday at 2:15.

we had a big sell program coming in, here is stocks that are heavily shorted. i think you will find that there is not a dramatic change in overall short positions but stocks that had been notably and well known this week have done very well. some shorts are being covered. s&p verses treasury yesterday, 2:15 dramatic sales program comes through. at the same moment dramatic buy program comes through in s&p 500. that's an allocation, folks. somebody is selling bonds and all of a sudden dramatically buying stocks and the pension funds and rebalancing. >> you look at the fingerprints of these kinds of trades in the

market here. let's show you the vix here. not just over sold conditions but over panic conditions. the vix is at 35 on wednesday, the front month futures contract was 25 the cash contract is dramatically higher than the futures contract that almost never happens. 35 on the vix and 25 on the futures contract that ends in a couple of weeks? that's a sign of investores pa c panicking in short term. that's another sign of short term bottoms in the market as for what did well this week, it is nice to see retailer we see an ugly sell-off in the fourth quarter here. kohl's and macy's and foot locker and best buy and ross stores all had a good week

most are on 6% of the week the flattest is the faang name this one of the reason where is the nasdaq 100 had such a good week overall this is a nice move up, facebook, alphabet and amazon and netflix and apple are fl flatish. i will have a lot more to say about the earnings outlook for the fourth quarter on mondays. >> bob pisani, thank you let's head over to rick santelli good morning rick. >> good morning sara, it is an unusual week i have to say it has been an unusual week for the yield curve and treasuries as well we down one and two for the day. we are down on the tens, on the day we are down three on the weekend. 30 is out there by themselves or down one on the day. it has been some curves steepening going on.

let's look at a july start, that's the last time we close down at these levels in july i still contend that we may be able to get chose to that as we whine down the year. on monday, if you look at what's going on with the yield curve specifically, 10 minus 2 for two months you can see it quite dramatically and 30 minus tens as well. >> the last chart is going to be on the dollar index. now the dollar index is really fighting and you can still argue it is fighting we have not had our close below 96 as you see on this chart, we are down close to three quarters of a percent on the week. the more stabilization that we tend to get on equities. i think that's something not

only to pay attention to but to consider as we look towards 2019 when i consider the volatility in equity markets. the treasury is not really so different, the bigger deal is of course volatility does not seem to be a big trigger as it is for generalized move but it is still something that many traders think it is sure as they suspect that we'll see a much firmer tone of interest rates we are about a minute and a half away from chicago purchasing manager survey we'll come right back. we'll go to carl and we'll come back for that data >> all right, rick, thank you. >> that's another key number >> when we come back, former robert greifeld on the market volatility and the road ahead in stocks

consumer stables are leaving dow is down 108 wech we'll get the pmi number in a few minutes. every road in the world is now an information superhighway. (phone ringing) and the car has become an accessory to the smartphone. ride hailing, car sharing, carpooling... mobility services are proliferating. and there's a new generation who don't seem to want to own cars in the first place. it all means massive disruption to the car industry, cities, businesses and investors. i'm martyn briggs for bank of america merrill lynch.

welcome back to "squawk on the street" on the street. here is the breaking news we have been waiting for. december read on chicago purchasing survey, expecting the number knnorth of 60. 65.4 now, it is much better than expectations but it is still lower than 65.4. it takes us back with respect to that particular comp

67.8, we finished last year with the bank that was the number going back to the 20-year high read it is a lofty number the bigger difference is it is better than expectations carl, become to you again. >> all right, rick appreciate it. >> dow is coming off its biggest come back since 2008, urging questions for investors out there. will the fed stay in his you aren't passage for 2019 and the trade war with china and how much of this volatility is caused by automated trading strategies joining us now, our -- robert.

i want to get to all this chatter of what about the way we trade now of how this mark is beha doing on the one hand -- on the other, it seems as if the speed at which the market reprices have increased what's your take on market structure and the way it is happening right now? >> great topic >> these orders are generated by computers with three set logics. it is important to know that we did not created frankinstein i know many other firms, more time and effort is put on the control layer of the order generation layer you never lose control of the marketplace. greater control of market

interactions today than you did in the past because your ability to change your tragedy to change your logic is as quick as it is to access the market initially >> one criticism as you know, bob, you ran the nasdaq, if you are a market making had an obligation to stand behind your bids and offers, you're virtue right now and clauis that a relt change >> no, that's not an important factor you look at a firm like electronic market, you have market operators in the marketplace. you have to understand the market making function is not there to destroy where the market wants to go the market wants to go up or down it will do that. the market making function will

assist liquidity at different stages but it will not change the direction of the market. that was the way it is today and how it was in the past >> does it not feel different for you? >> i know a lot of people been in the business for a long time, yesterday, i looked down the nasdaq and s&p and dow were all moving precisely they kind of wash across the indexes all at once and it is not a much give or take in terms of stock by stock. >> i would say any one point in time you can pick out something that looks like an admiration. my point of view, the last couple of years, the lack of volatility in the marketplace has been an admiration and now that we have seen volatility come back in, that's what we expect to hear and with the central banks that's taking out the support, i think we see volatility i clearly have to study and respond intelligently to it. we'll be in a time of increase

volatility that's not necessarily bad in the marketplace. as i said, computers generate these orders, man controls ever step of the way >> bob, what's your trying to f is behind these extreme market moves, some t likes of which we haven't seen since the deep dark days of the financial crisis and what would you tell them to do >> first, i would put in the perspective. you have to deal in percentages as opposed to numbers, right so the market moves 3%, that's happened many, many times in the past it's never moved a thousand points but we never had a 25,000 dow so 3% move will happen will it happen five times a year ten times a year, 20 times a year i don't know but it will be in that magnitude so investors have to look behind the noise of the moment and look at what is the fundamentals of

the company. so when i look at the market today where i see a disconnect i see that next year corporate profits are estimated to grow 5%, 7%, 8% we think general gdp will grow the 2% to 3% that's not a recessionary environment and i think the market has been somewhat disconnected from those fundamentals and if i was an investor i would focus on what the fundamentals are telling me and not pay so much attention to volatility in a market in a given day. >> bob, speaking of all that, i mean, we haven't had a lot to chew on but you get a richmond fed survey, an empire fed sur stay are weak then chicago fed survey pops out with 65. how do you process that. >> there's always conflict iing earnings i like where the pe number is today.

i always pay attention to what is my pe ratio relative to my growth but you will always find data points that support your theory and you have to choose the data points that are primary to how you want to view the world. >> bob, great to hear from you today. appreciate it. >> thank you, have a good day. dow hanging on the 25 ints a long day ahead "squawk on the street" will be right back ry platform. yeah, that too. i don't want any trade minimums. yeah, i totally agree, they don't have any of those. i want to know what i'm paying upfront. yes, absolutely. do you just say yes to everything? hm. well i say no to kale. mm. yeah, they say if you blanch it it's better, but that seems like a lot of work. no hidden fees. no platform fees. no trade minimums. and yes, it's all at one low price. td ameritrade. ♪

and the army taught me a lot about commitment. which i apply to my life and my work. at comcast we're commited to delivering the best experience possible, by being on time everytime. and if we are ever late, we'll give you a automatic twenty dollar credit.

my name is antonio and i'm a technician at comcast. we're working to make things simple, easy and awesome. i mentioned the pressure on apple today. jackie deangelis has the movers on wall street hey, jackie. >> good morning. the nasdaq composite is up half a percent. what was so interesting is how closely the nasdaq was tracking the action in the dow but what the market closed you saw the dow push up and the nasdaq was able to turn into positive territory. it didn't see the same kind of push higher so this morning we're watching it bounce between positive and negative territory and at this point you're seeing it outperform the dow. what's going on here everybody is saying traders are trying to square their books ahead of the new year and this is something that we receive every year but it's more pronounced this year and on these light volume days you see

swings take a toll on the market as well but as it stands right now the nasdaq is looking to be up 4% on the week but down 10% on the month so those losses not completely wiped away. still, a lot of green on the board today, amazon shares basically what's holding the index up but there's a strong move in retail on the back of the amazon move as well so we're watching names like amd, nvidia, they're the best gainers on the nasdaq 100 as well and i mentioned those retailers gaining background, too. >> jackie deangelis, thank you very much. when we come back, former managering director of the iif, charles dallara is with us dow is up 45 points. the sectors are higher except for energy and for the week they're higher except for utilities. we're back in a minute

with a level of protection in down markets. annuities from brighthouse financial, established by metlife. from capital one.nd i switched to the spark cash card 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?

welcome back to "squawk on the street," i'm carl

quintinilla with air sara eisend mic s mike santoli s&p back up. been a busy day for data, got chicago people mi and now we'reg to rick santelli for pending homes. nick >> our november read on pending homes. this is the 11th number. the first ten, six have been negative month over month. this one also a negative number du down 0.7%. so for the year we've had 11 reads, seven negative, four positive if you go year over year it's minus 7.7. last month we had a subtle revision on year over year but it doesn't makive in change to the notion that housing has had a tough year many argue the numbers are

starting to improve but pending home sales isn't sending us a positive message sara, back to you. >> market doesn't mind too much, rick, thank you. rick santelli. our road map for the hour begins with an end-of-year rebound. stocks higher after posting their largest two-day percentage gain in over three years but have we reached a bottom or is more volatility ahead >> shutdown day 7. congress remains at a government funding impasse. what will be the market and economic fallout from a protr t protracted shutdown fight. >> and finally china, trade and interest ratehikes we'll look at the fundamental issues heading into 2019. >> the markets is where we begin. stocks begin on pace for the first up week of the month ubs head of trading strategies and adviser investment ceo are both with us today what a week. >> quite a week. >> we've had market veterans say we've seen reversals like yesterd

yesterday. had you seen anything like that before >> i've been in the business 30 year years. >> i would not read the amplitude of the moves but the direction is important that's what you should take your cue from. >> does it mean something else in the days and weeks to come? >> we think barring three things going seriously out of hand, one is the weeds don't fall off on the policy front in d.c. or international internationally. and third we should see some signs of growth, some result from the easing in chinese policy this is six months and we should see some results

we expect all of those to happen and we expect the next six, nine months should be very positive for markets. we've seen a dramatic d-rating of equities or the rise in the equity risk premium is twice as mu much. >> did you say if the wheels don't fall off in washington how do we measure? we're in the seventh day of a partial shutdown. >> well, we've seen shutdowns before but markets -- what i'm trying to say is markets don't like uncertainty they're very low tolerance for uncertainty and at some point the real economy as well. >> we've been talking a lot about this pension rebalancing out of bonds into stocks and treating it as a mechanical factor but it reflects these two markets have gotten out of whack so if you had any portfolio is the logic pointing you to rebuilding equity positions or

would you wait and see >> the logic is saying wait and see. the fourth quarter earnings will be the leg up but we want to see the facts before we make any dramatic new moves but your point of remaining well balanced from an investment stand point in stocks and bonds continue to make sense an adrenaline state dissipates in the face of facts and so far whether we're looking at economic data, earnings data or interest rates suggest slow growth and not know growth will be profitable for investors down the long term. in terms of what's facing year end in the start of 2019 obviously fear, volatility and volume and velocity are going to wreak havoc with investors' nerves on the short term but long term it's precisely the kind of market that gives us wealth-building opportunities over any investment timeline.

>> if you are going to be patient, where do you wait there's discussion about why the bid to cover on the two year was weak is there an overhang in supply of treasuries? do you go to cash? where are the sidelines in your view >> well, with cash reserves money market funds yielding 2% that wouldn't be a bad place to keep dry powder. we think actively managed bond funds with managers have been able to provide a track record makes good sense but this is a great time to add to your best long-term managers who are capable of stepping in on days when the market swoons and add to their best ideas at steeply discounted prices. >> with so many people cominged on and ssaying there's a discon and if you don't think the economy is in recession you buy

the market qe 1, 2, 3, nobody was saying there's a disconnect, the economy doesn't look this stock strong, it was buy stocks because the fed was pumping free money into the system. that's unwinding it it won't be reflective of the fundamentals if we see asset prices move the other way is it? >> most likely rates will prove a head wind as they did this ye year why do we expect rates to rise because we don't expect the economy to fall into recession. >> but also the fed wants to get back to normalization of its balance 'sheed which it made clear no matter what the economy is doing. >> i have not met two economists who agree on the impact of qe. >> but everybody agrees it propped up the stock market. >> no. >> no? you don't think qe propped up the market. >> in the sense it conveyed the

fed was serious it was a signaling tool that we keep rates low. >> we were having this discussion yesterday and it becomes difficult to i think even if you're the fed to say most benefit was in your head after the market kind of averted ultimate disaster. >> they specifically talked about the wealth effect. >> bernanke talked about the wealth effect, absolutely. there was -- but i think you have to sort of say at one what point during qe did that stop mattering as much? >> in john mccain they bought so much equities. did that boost the stock market? you bet. did anyone buy equities? not really most buying was in risk-free instruments, some was in mortgages and yes that had an impact. >> you think about the emotional or quantitative aspect of qt and how much is at risk given

reports about whether or not powell should meet with the president at the white house or whether that's a treacherous meeting to have or not. >> well, i don't think it's a treasurer's meeting, the two can be well met. god knows what the tweets will be but i don't think it hurts the fed to have that kind of conversation, the fed is likely increasingly independent precisely because of washington politics trying to sort of run their business for them. i think there's no argument in my book that the fed safeguarded the economy on the brink in 2009 and provided a floor for equity investors to be able to get up and run but we invest in active managers who are selective in terms of what they own so their portfolio might have 30, 40, 60 names not 500, 1,000, 2500 names. this market where stock selection, active management

came to the fore. >> that may be a big trend of the year thanks for coming in. >> thanks for having me. when we come back, much more after the dow's late 800-pound rebound yesterday. where investors should look for value next, but take a look at the top performing stocks in the dow. so far the dow trying to hold on gains of 40. it's united technologies and pfizer both up about 1%. more "squawk on the street" is ilahd. not a creature was stirring, 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. ♪

this is moving day with the best in-home wifi experience and millions of wifi hotspots to help you stay connected. and this is moving day with reliable service appointments in a two-hour window so you're up and running in no time. show me decorating shows. this is staying connected with xfinity to make moving... simple. easy. awesome. stay connected while you move with the best wifi experience and two-hour appointment windows. click, call or visit a store today.

stocks are up, on pace for their worst december since the depression but if we are in a bear market, does that mean recession is on the way? we've been looking at the data and bare market necessities. >> it's technically not a bear market because on christmas eve we only closed 19.78% from the september 20 high not the number that officially marks a bear market so how good a job does the average bear due in predicting depression 13 declines of the 20% from the prior high good news, six times, no recession within the next two years but seven times we were already in or on the vergeover

recession. so in march 2001 they declaird a recession began 16 weeks later 2002 we didn't have a recession after that already in a recession when the 20% marketer was laid down here's more bad news after you follow that 20% on average you fall 8% after the bear market hits good news, 14% average increase one year later here's the meanest bear of them all, down 52% '07, '08, the nicest bear, down just 21% after yesterday's close we were 15% below the 20th high so we have a little work to do you could take your cue from the market or the fundamental which is so far argue a recession is not imminent but who has it

right? the market or the fundamentals >> i guess the take away that the market isn't good at predicting a recession, it moves late once we're in recession. >> i think people who who place their faith in predictability -- predictive accuracy of the market have misplaced their faith here because the signal of the 20% doesn't give you much warning. it does tell you wait a second, maybe i should be worried things are worse than i think because in any given year there's a one in five chance we'll be in a recession so it may tell you the market is pick ing ing up i nevy ignore market signals. my point is they are not 100% accurate which we cannot say for the economist, either. >> i was going to say your next

assignment should be to look at how fast or slow the federal reserve is at predicting a recession or responding. >> the fed never predicts a recession because if you think about it they control the levers of the economy so they never predict that they're going to make a mistake that will lead to recession. >> steve, thank you. >> sure. >> lots of information for more on the economy and how the drama in d.c. may be impacting major indices, we're joined by the managing partner at beacon policy advisers as well as steeple's chief economist. what picture are you getting from the markets as it relates to the any >> i think the market is concerned. there's a lot of differences putting pressure on the market and they seem to be down-to-the down side. we're seeing instability and the

fundamentals of the u.s. economy are pinting to a significant slowdown as we turn the corner into 2019 with the backdrop of a fed that seems very focused on the fear of inflation so i think there is a lot of pressure on the market that will continue to cause ample volatility as we look out to the new year. >> what kind of a slowdown are we looking at? >> i agree with lindsay completely, at least from our clients at beacon on the bye side it doesn't help that as investors are craving stability and consistency from the stwraigs that we keep getting interjections of volatility.

>> you think that will have an impact as we go into 2019 with a government shutdown? >> well, i think it will certainly weigh on some of the softer data points that we see, it will impact consumer confidence, business confidence and may add volatility here and there in terms of the job picture but we don't want to focus on one day point to get a sense of what's happening in the labor market we look at this as a longer term trend which businesses have pulled back. now still positive at this point, we're putting americans back towork but this may compound that downward pressure as we anticipate the downward pressure on wages as well which has been the missing component. >> it seems like an eye of the beholder issue going into next year you could see two to two and a half% u.s. gdp growth, ten year

treasuries at 2.75% yet it's the same exact environment some investors are panicking over as marking too much slowdown. what do you any is going to make the determination as to how that kind of a year if we get it will be received? >> one of the big problems is coming out of washington is that as people investors through the first two years assume that president trump ultimately was bound bid his fixation on his t market performance but they're also seeing that he has the pull towards making sure the bottom doesn't fall out, he has the tu pull towards the most ardent nationalist protectionist part of his base and he's playing to it so a lot of volatility is being driven by the heap he'll finally

not go too far because of the concerns about the market but then they see things like the shutdown, threats like closing about the southern border, concerns about china trade so no matter rhetoric he has a mercurial temperament and they're concerned they could pull the rug out and until they see normality out of washington they're concerned there's no safe point. >> we just got a look at the housing market and got another big drop after economists were expecting a gain one of the biggest debates has been is housing a canary in the coal mine like the broader economy? where do you stand >> absolutely. housing may not be the large net drag on the economy or the leader of the economy but

housing is a good gauge of overall economic health of the u.s. economy it leads lending and construction and consumer confidence so when we start to see bubbling weakness underneath the surface, as you mentioned pending home sales missing but we've seen outright sales both disappointing with slow herb construction activity as well so this spooex to the notion that the u.s. economy is slowing and this is one of the most interest rate sectors of the economy so we would expect housing to show signs of weak ness as the fed breaches the end of this tightening cycle so this is a big red flag and we would expect this weakness to filter out into other key sectors of the economy as we move into 2019.

>> thanks for joining the conversation on the market outlook for economy. >> let's get a check of the major averages dow is up 60 points. all three averages holding on to single-digit declines for december and wti back below 45 we'll get a look at how commodities may close out the year in a minute duncan just protected his family with a $500,000 life insurance policy. how much do you think it cost him? $100 a month? $75? $50? actually, duncan got his $500,000 for under $28 a month. less than a dollar a day. his secret? selectquote. in just minutes, a selectquote agent will comparison shop nearly a dozen highly-rated life insurance companies,

and give you a choice of your five best rates. duncan's wife cassie got a $750,000 policy for under $22 a month. give your family the security it needs at a price you can afford.

now for the etf spotlight. bob pisani is looking at fund flows and what they might mean for where the market goes from here. >> looking at this is tricky because there are a lot of internal things that can trip you up but there are interesting trends that are developing let me show you what's happened this week, for example, this is for ending wednesday here. we are seeing a continuing trend generally in flows into etfs and outflows from mutual funds this has been going on all year, in fact, several years now but for this week etfs that are stock funds have seen inflows of $5 billion

mutual fund stock funds have seen outflows. generally retail investors have been very concerned about the market volatility. it's the same with the bond market modest inflows to etfs that are bond-related, 1.8 billion and outflows from mutual fund bonds. again, this is going on all year they are going into etfs because of the lower cost and popularity of passive investment. this trend has been going on for a long time. for the year let me show you something. the important thing about the flows for etfs is the money is still coming in. there are in-flows, they're just smaller than they were so last year we had a really record year essentially $40 billion a month. almost $500 billion of new money came into etfs last year remember, this is $3.5 trillion industry total inflow this is year so far about $305 billion

that make change a bit but the point is we're still in flows but 40% smaller than it was at the end of last year this suggests to me that money is coming out of mutual funds, a lot going into the etf business but not necessarily all of it. as for inflows if if you want so guess sentiment, qqq, this week we saw some inflows. so at least a small group of people here are trying to figure out some kind of bottom. the flows are modest but i was amazed that qqq and the spdr spy had notable inflow this is wes . >> gas prices have plummeted since mid-october. the national average falling from $2.91 to $2.28.

what's next for 2019 joining us to discuss is patrick dehaene, a senior petroleum analyst at gasbuddy.com. good to see you. >> thanks for having me. >> you have a prediction for what we may see by new year's day, right >> i think we could see the national average fall to its lowest that we've seen under president trump. that would have to drop another six cents a gallon to $2.22. crude oil prices remain low. still a lot of head winds, api posted a big jump in crude inventories. we're 33 minutes away from seeing what teia says but if you see an increase in crude inventories i would expect that the rise withti to revert to negative. >> on the retail front, is the bigger risk on the upside or down side? >> i would say there's probably a risk of moving further down

but then closer to the end of that two to three month window prices will start their seasonal trend higher so gasoline is stuck in this pit of despair from the next month or two demand is relatively soft and with refineries producing gasoline to get at that more valuable distillate, prices will remain challenged so there's still possibility we see the national average go lower before rebounding as it normally does in the spring. >> interesting factor. you mention red finers haed ref sell the more valuable products. at some price does there get to be a response in terms of lower sflux does this make gasoli-- p? >> well, refineries that can't export gasoline, values are very low. in michigan of all places some

gas prices are down to $1.69 a gallon reflecting deeper discounts where gas celine landlocked and refineries don't want to produce more of it but they're still getting at the valuable distillates. crack spreads remain acceptable in most of the country but yeah you'll see a lot of overhang before we transition to that summer gasoline. gasolines will see lower prices as refineries have to move off the market as we progress till spri spring a lot of crude oil and products -- i don't see any quick resolve in terms of

pipeline capacity doing a lot to alter future of prices i think as the pipelines may come online there's more capacity, for now rigidity continues with prices being all over the map because of pipeline bottlene bottlenecks. >> >> your ayes continue to be the best in the space, appreciate your insight. see you next year. >> happy new year. >> thank you. >> let's get to contessa brewer for a cnbc news update. president trump is threatening to close the u.s. border with mexico he tweeted we will be forced to close the southern boarder entirely sergei lavrov says moscow would wait to see if the u.s. follows up its promises with action to withdraw troops from syria he spoke alongside his jordanian counterpart. at least is naming larry ellison

and an executive from wall greens to its board as part of a settlement who deblanded more oversight of elon musk kathleen wilson spent 17 years there before her stint at walgreens. >> sears filed for bankruptcy in october. the company chairman has been working to buy the retailer through his hedge fund he has until 4:00 p.m. to submit a bid. we'll keep you updated that our's cnbc news update. mike, back to you. >> contessa, thank you very much. much more ahead on market volatility after the dow staged its biggest come back in ten years. partners group chairman of the americas and former iif chairman charles dallara joins us on how chinand ada tre might play into that equation. "squawk on the street" continues after this break

♪ ♪ put your data to work on the cloud that drives business. the ibm cloud. the cloud for smarter business. allow you to take advantage of growth opportunities with a level of protection in down markets. so you can be less concerned about your retirement savings. talk with your advisor about shield℠ annuities from brighthouse financial, established by metlife.

let's get to leslie pick we are the natural gas inventories. >> the energy department out with those numbers nat gas inventories down 48 billion cubic feet in the latest reading. that matches consensus forecast. natural gas was down 4% on the day before the numbers were released right now you're looking at it being down about 5%. the overall down trend is a sharp reversal which saw nat gas jump as high as $4.70. guys, back to you. >> leslie picker, thank you very much welcome back to "squawk on the street." i'm sara eisen with carl quintinilla and mike santoli at post 9 of the new york stock exchange an hour into the trading session and that didn't last long. stocks were positive most of the past hour, now the dow is down 60 points. s&p 500 down a quarter percent the nasdaq is down a fourth of

1% oil gains are slipping away. groups like energy, technology, and materials that are leading us lower within the s&p. we have defensive names, utilities, real estate and consumer staples positive. we are watching the global market picture as well global stocks feeling the pain in 2018. japan officially ending its 2018 with a 12% decline for the year. first annual loss since 2011 this ends the ecb global economic forecast slowdown next year will these markets lead a rebound in 2019? what will their impact be on the u.s. joining us is charles dallara, partners group chairman of the americas and former managing director of the institute for international finance. nice to check in with you, good to see you. >> good to be with you, sara. >> if you look at global stocks it tells an ugly picture worst year since 2008. huch how much is the global economy slowing? >> i wonder which one of you

said it was a good time to get on the coney island roller coaster, sara. i think the global economy is slowing and it will become more evident as we move into the new year if you look around the globe, the latest data out of china are not encouraging, whether it's industrial production, retail sales it shows a downward trend. i was in china six weeks ago and i found the move among entrepreneurs with whom i met quite bearish and i think this is indicative of the direction of the chinese economy despite the stimulative measures the chinese government is putting into place in europe you'll see the outlook is dimming the structural problems which surround european economies are becoming evident. >> i guess the question is do central bankers and politicians

have the tools to fight the slowdowns specifically in a place like china and europe? >> it's not only about tool bus perspective. if you look at the federal reserve's recent fomc statement, i was struck by the fact that their focus continues to be on the variables, the data details of the u.s. economy. i think it would be behoof all the central bankers to take a wider prism in looking at the global picture in order to formulate their own policies this would be critical it's clear investor sentiment is a global phenomenon. and it used to be 10 or 20 years ago the u.s. economy would only turn like before the crisis it would only turn like an aircraft carrier. very slowly.

today we're in a different world where new data gets into the global jet stream and market sent nnlt investor confidence can change quickly i think the fed and other central banks need to be attuned to this as we move into the new year because things could change rapidly and potentially investors will have to be much more alert to these mood swings than we have had to be in the past. >> speaking of mood swings, the intraday drop we've seen here, dow is now down close to 140 points you mentioned meeting with entrepreneurs in china there have been some reports of americans who have done business who have become so frustrated with business practices that they're encouraging a hard line on the trade dispute is that a common view? >> i think it's a growing view that the administration's

concerns over china's trade practices are legitimate i think one can question the tactics we've used and the approach because the trade tensions have added to the uncertainty and rob the economy of some of the positive investor sentiment that have been built up for from the tax cuts but i do think that there is a pressing need for change and i hope the chinese authorities realize this certainly chinese entrepreneurs as well as american businessmen operating in china are ready for change and that's a good sign. >> charles, from where we sit it looks like they're ready toto change because their stock market is the world's loser for second year in a row they're allowing u.s. rice

imports as a symbol of good will going into trade talks, confirming talks in january, drafting a foreign investment law. these are good signs what's your level of optimism going into next year for u.s./china trade talks. >> it's a modest level of optimism ic there is a willingness to change but how far are they willing to go? that remains unclear some of the abuses of technology have been substantial and i this will need to be addressed in a fundamental and lasting way. i don't think it's about short term trade issues. i think it's about technology and i think our two economies are intertwained today for us to contemplate either side. so i think it's important that the u.s. and chinese authorities sit down for a sustained period for serious longer-term noigss over not just trade issues but over technology transfer and

other crucial issues north to create a healthier relationship going forward. >> charles, the fact that the u.s. and chinese economies are intertwined and going back to what you said about how the federal reserve has to consider the more global outlook in its poll soy the fed has to make a call on whether the chinese stimulus is going to take hold and whether, in fact, there will be a trade deal? is that the world we're in >> i would say the fed needs to monitor the chinese economy as closely as it monitors the u.s. economy. as we move into 2019 i do think that. it won't take a lot to tip the global economy into a weak position we need to think about longer term policies and investment strategies those of us in the private equity business have putting our shoulder to the wheel. and i think that this has to be the philosophy for investors as

we go forward. japan has had a rough year as well hopefully they'll bounce back and things aren't looking too bright in europe and i'm not only reflecting adverse developments in brexit which remains a huge question mark but i'm talking about the downward tre trend. the economy only got up to 1.5% growth rates and now it's falling back this is not a positive sign. >> i wanted to ask you about the banks with your work with the institute for international finance. what is their stock performance this year telling you? goldman sachs down 36% for the year citigroup down 30% for the year and the group as a whole down 15%.

you'll find they're quite solid. i do believe again that investors are going to have to take a longer term view here i'm more concerned about european bank stocks r whi they're not yet out of this vicious circle that was very evident during the greek crisis and before and the global crisis between bank stocks and the sovereign debt situations. you've seen the pressure on italian bank stocks that concerns me more than the performance of the u.s bank stocks. i think the market will eventually recognize the strong performanceover the u.s. financial institutions and i do think they're well copalized and regulated now. >> charles, thanks for weighing in always good to hear from you. >> good to be with you again.

>> charles tdallara, partners group chairman of the americas stocks taking a leg lower in the last few minutes the dow down 100 points, not quite one half of one percent. we'll have much more on the markets still to come.

one dow stock is about to snap its longest winning streak ever find out what stock that is on tradingnation.cnbc.com more "squawk on the street" coming up. ♪

♪ the new capital one savor card. earn 4% cash back on dining and 4% on entertainment. now when you go out, you cash in. what's in your wallet? >> the roller coaster continues on wall street the dow is down triple digits after being up triple digits for most of the opening hour of trade. it's early still but not quite the magnitude that we have seen over the past few days remember, this comes off of the worst christmas eve performance ever for stocks and the biggest

intraday reversal for the dough and nasdaq. >> qualifies as a breather more stocks up than down so. >> let's get to santelli exchange rick good morning, thank you, carl i'd like to welcome dr. lynn reiser lynn, thank you for joining me this morning. >> thank you, rick. >> we've heard so many guests trying to divine what the market means for the economy. let's shut our eyes to the market volatility, lynn. just tell me your impression of recent economic trends, fundamentals of the u.s. economy over the last several months and try to tie it up as to what it may mean for the future, a void of the market. >> well, rick, the economy looks

to be quite strong we've seen recent economic information to be solid. reporting this morning the chicago purchasing managers index was good for december. we've seen strong retail sales we've seen good numbers on industrial production. so the economy seems to be quite solid. it's in sharp contrast to the financial markets which are much more gloomy. >> my personal experience was the '87 crash. is what about the global exporting of weak fundamentals as we've mean? the last 36 hours with regard to japan in particular and europe

in general. >> >> the world economy is probably the greatest risk to us in the united states but we are not nearly exposed to international trade as many tha some buffer. our real strength is the consumer sector, that's 70% of our economy. and consumers at this point are hanging in there they're having jobs, they're getting larger wage increases, and they still like to spend so as long as consumers stay in the game, we're probably still in pretty good shape >> let's switch gears a bit. i found a fascinating article in today's "the wall street journal" talking about company buy backs. it mentions several companies' buy back performance apple, down 9 billion on theirs, citigroup, down 2.8 billion on purchases this year, applied materials down 1.8 billion

listen, if these companies invested in an actual entity or business that lost that much this year, as the article pointed out, people would be upset. what should we think about the negative performance and buy backs? >> well, companies of course are the ultimate long term investor, so they're not any better at timing the market than any other individual, and companies did see a large windfall this year because of tax cuts. and they basically have three options with that extra cash they can indeed hold it as cash, they can invest in their companies with planned expansion, paying employees more, buying other firms or can give it back to shareholders in terms of dividends or share buy backs. and many of them chose a variety of the options but the buy backs was a major

element. >> very good lynn, thank you. just as an aside, i know that personally maybe they should have considered giving their employees a bit of a raise the money is sort of gone. i understand the stock can come back always different ways to think of these things. thank you again, first time appearance with me as a guest. truly appreciate it. happy new year sara, back to you. >> rick, thank you. getting a quick check of major averages as we head to break. back in the green for the s&p, the nasdaq and dow the moves are smaller today. utilities, consumer staples and consumer discretionary are now in the lead. energy is the loser. more "squawk on the street" in a few moments. duncan just protected his family with a $500,000 life insurance policy. how much do you think it cost him?

$100 a month? $75? $50? actually, duncan got his $500,000 for under $28 a month. less than a dollar a day. his secret? selectquote. in just minutes, a selectquote agent will comparison shop nearly a dozen highly-rated life insurance companies, and give you a choice of your five best rates. duncan's wife cassie got a $750,000 policy for under $22 a month. give your family the security it needs at a price you can afford.

welcome back to "squawk on the street." i am leslie picker the energy sector helped raise much of this morning's rally, despite gains in crude prices. the energy sector is leading losers in solidifying its position as the weakest sector this month, down 12% cabot and checking with oil prices, wti is now flat for the

day. i'll send it back downtown to you guys >> thank you very much talk to you soon. hey, sara. what's coming up on "closing bell" besides me >> i know i say it is the most important hour of the trading day every day, but this week i really mean it it has been absolutely crazy yesterday we saw stocks ramp, a change in the script buying the dip. we'll see what happens later today. also, we've got sears, we will find out at 4:00 p.m., deadline for bids to buy sears out of bankruptcy see if eddie lampert submits his bid. i was going to make fun of mike saying he is old enough to remember sears in the dow. >> it was kicked out along with other economy names. they let in microsoft and intel for the tech bubble to burst in '99 >> classic dow-jones move at the time we'll see you this afternoon, guys when we come back, the nasdaq having the worst month in

a decade, rallying hard to climb out of a 3% hole, end in positive territory slightly red today is a tech turnaround in the cards for the coming years we'll talk about that in a minute shield℠ annuities from brighthouse financial allow you to take advantage of growth opportunities with a level of protection in down markets. so you can be less concerned about your retirement savings. talk with your advisor about shield℠ annuities from brighthouse financial, established by metlife.

from brighthouse financial, for each job exxonmobil creates, many more are created in the community. because energy touches so many industries, it supports 10 million u.s. jobs.

good morning 8:00 a.m. at tesla headquarters in palo alto, california, 11:00 a.m. on wall street. "squawk alley" is live ♪ ♪ good friday morning. i am carl quintanilla with morgan brennan, mike santoli, post 9 of new york stock exchange jon fortt is off today volatility is the understatement of the week. major averages look to claw back some of monday's losses. in one week, saw the worst christmas eve ever, biggers inter day do