good morning it is midnight a new year in hong kong. "squawk alley" is live ♪

good morning, welcome to "squawk alley. carl took the rest of the year off. i didn't know you could do that. yeah >> we begin this morning happy new year, yes. we begin with the markets. the theme's driving not only today's action, but the outlook for 2019 as well number one, is the fed on autopilot and is that a good thing? we'll find out friday. then number two, china trade tensions continue to be a major head wind for stocks while gaucnegotiation the week january 7th wield results. remember, we have a march 1st deadline for a deal. finally number three, what will earnings tell us about the strength of the economy. consumer spending and corporate growth steve least mann is following the fed. elon and bob will give us a preview of earnings coming up this hour. >> we're going to start with elon who is in d.c. right now.

the latest on the trade tensions china. >> morgan at least for the moment, they seem to be easing we know president trump and xi spoke over the weekend here's what president trump tweeted about the phone call he said that the deal is moving arong very well. if made, will be b comp h comprehensive. covering all subjects, areas and points of dispute. big progress being made. now the white house did not provide an official readout, but there's more about the conversation generally, that report did back trump's version of the call, but also said that xi characterized their talks as being at a quote, vital stage. he told trump that the meeting of the g-20 was successful now he said teams from both countries are working to implement is consensus and express ed hope that both can meet halfway and reach an agreement beneficial the to both countries and the world as early as b possible. next week, we are expecting top officials from the u.s. trade representative's office and

treasury department to visit beijing for a round of negotiations if that goes well, "the wall street journal" says china's vip premier would come here to washington afterward and meet with ambassador light hiser and secretary mnuchin. we know these negotiations have come in fits and starts. there is not a lot of wiggle l room if they want to have a substantive, measurable deal in place before the next level of u.s. tariffs go into effect on march 1st. back to you. >> all right thank you. meanwhile, shares of apple moving higher this morning however, the stock's on pace to end the year down more than 7% apple down about 33% from its october high last time it fell by that was back in 2016 but over the following 12 months, the stock rallied. surging 75%. so how is apple going to perform in 2019? joining us now, dan ooifs and tim o'shea

early happy new year to both of f you. dan, barring any big acquisitions, the question on apple seems to be do they succeed in shift iing the narrative away from iphone units and towards some i guess general profit growth statistics the idea they can keep iphone prices high. build in services and keep that momentum going what's it going to take for them to be able to do that? >> the big thing here is the services business. they're trying to get the street away from the hardware piece looking at services. but ultimately, i think the way they did it was a disaster in terms of pulling the iphone metri metrics. right here, the first thing they need to do is in december, need to have a cut for march then the street's anticipating and you need to convince the street it's an installed base story for 2019, but it needs to be b about upgrades and right now if i look at ten r, that's ben disappointing in china you need to see the upgrades,

specifically in china and the u.s. price cuts then it starts to be a sfs story. right now, it's guilty to proven innocent stock >> tim, do you agree that apple kind of fumbled the shift in how they report iphone units no longer reporting? and how big a factor is china? i guess mainland china, greater china, was about 20% of apple's sales in fiscal 2018 how much is this trade talk going to play into apple's actions at the beginning of the year >> well, look, the trade talks are clearly having an impact on apple's multiple it's like all these shoppers down on 5th avenue after christmas. everybody's looking for a deal apple's trading below 12 times earnings right now this is if you look at the ten-year stock chart, there's been three occurrences where apple has traded at this level and it's relate to the iphone and it's relateded to the iphone and really the trade war in china. i think that the opportunity here is that i guess the last

time that apple was trading at this low of a multiple was back in 2016. that was when china was reporting revenue growth around 16%. today, the difference is that growth is coming from wearables, from price hikes and most importantly, it's comeing from services and with apple b about to disclose services for the first time ever, you know, we think that these are high margin, higher multiples we think they deserve a higher multiple and as services growing in importance over the next five year, we think gross margin could approach, we think that services could contribute 40% of total gross margin we think the opportunity for investors heading into 2019 is that with apple trading at this depressed multiple that takes into account fears about the trade war, the iphone. we think there's an opportunity to share higher. so that's you know, that's i think where the stock stands today. >> dan, we're talking about apple, but chip stock, worst quarter in a decade.

when it comes to tech more broadly, how crucial are these u.s. china trade talks to the picture here in 2019 >> it's the lynch pin. you look at the black cloud, specifically chip names is the china talks, tariffs and disruption of the supply chain that's one thing as investors, you can see a green light until you know where these talks are going. which is why the chips continue to be that sell the rally. you're seeing more investors look at call it software as more resilient spaces as impacted but none the less, i mean what i could tell you in 20 years covering tech, this is as much of a white knuckle period as we have we've seen just given the fork in the road on the china talks. it's not just for chips. networking as well as the apple ecosystem. fundamentally, we're 20% of the iphones in the window are coming from china so it's not just fox con from the supplies and demand perspective. the double whammy, which is why they have a bull's eye on their

back >> it feels like 2018 was the tale of two years for tech stocks i mean, you had these record highs. faang was beloved for most of the year and we were having a $1 trillion competition liquidity fears and tightening concerns china trade, you name it so 2019, which of those is going to be in place >> well, look, you're right. it's been a tough tape for tech in the past couple of months we think the tech trade is still on this deal with china is the focus right now. the deadline for there is march 1st, so you've got a couple of months before we get any clarity into how this will evolve, but we think they get a deal done. it's like what happened with the deal of china, between the u.s. and canada and mexico. there's a lot of brings mks man ship right now, china is see iing th

slowest growth in over a decade. we think the u.s. is in the driver's seat. there will be a lot of chatter through march 1st. we see a lot of growth left for fe these names. >> okay. so with with stocks where they are now, tech stocks in particular, what is the market factoring in as far as this trade deal and what happens or not on march 1st more upside or downside from here >> it's more upside potential in running down the street, still a little bearish that we're going to get full resolution, it's going to be b a lingering issue. a game of high stakes poker in in terms of what we're going to see. i think there's an upside. if you'll see in china tariffs, sort of solution. but that's why right now, if you look over across tech, you're really seeing it on cloud names. a big focus. you look at google gcp with cur yan amazon aws. then obviously with microsoft, so i think that's why investors are staying away from chip names

and china exposed sectors. focusing on maybe some of the cloud names that are more resilient. this is going to be a sort of a you know, bimodal swigs situation in terms of what we see on china >> tim, you cover the gaming stocks they're all down for 2018. we get that news today that china's beginning to approve some video games after that long freeze for most of the year? any names you like here at these levels >> look, we like activision. take two these are two high quality stocks chltsing we think gaming is a long-term glow grower we've seen generational growth audience is bigger than ever so you know, these names have been hit even harder than a name like apple with stocks like activision down over 40% we think these names, too, are on sale. the china gaming approval has been b in overhang for the

sector also for apple with the app store revenue coming in at apple making something like 75, 80% of hea revenue. so there's exthere it's a positive that will get cleared up and there's been no change in the trajectory of gaming in terms of a past time and now that these approval rs in place in china, you would expect robust revenue through the first and second and third quarter into 2019. >> dave, yeah. another game iing approval, the fort household gaming approval the kids got the nintendo switch, to things are looking up dan, the tim happy new year >> happy new year. >> you're finally letting your kids play video game sns. >> they could before, but limited screen time. >> you are a strict father when we come back, uber, lyft and air bnb. kara swisher will be here with us next for predictions for

tech her take and what comes next for facebook can the social network turn things around after a tough year dow gains are fading here. still up 114 big show "squawk alley" coming back after the break. e the massage chairs working out for everyone? i dunno. i'm still a little stressed about buying our new house. well, it's a good thing we don't have to worry about homeowners insurance. geico can help with that. we can get homeowners insurance help from geico? well, sure. and they could save us a bunch too. mmhmm? i'm starting to feel better already. get to know geico and see how much you could save on homeowners and condo insurance.

i am a techie dad.n. i believe the best technology should feel effortless. like magic. at comcast, it's my job to develop, apps and tools that simplify your experience. my name is mike, i'm in product development at comcast. we're working to make things simple, easy and awesome. welcome back 2019 promising to be b another big name with names expected to go public in the first half and how about

facebook after a year of public outcry, not to mention the 25% drop. with us now for her predictions on the big story lines that investors need to watch, kara swisher. happy new year >> hey happy new year to you, too >> where do we start here? i'm thinking regulation. put a lot of these names under pressure we can start to see that this year here in the u.s.? >> well, you know, i don't know because there's a lot to happen in congress. obviously they're dealing with with the shutdown and everything else so it is on the mind of democrats to start thinking about legislation or investigation or pressing the ftc to do more to look at some of these companies like facebook and google and amazon i guess. there's just a lot going on in washington, so tech is sort of in the good spot in this way there's too much going on. but i do see definite interest in what happened, trying to figure out what to put into place around privacy

there will be a lot of action in the states in term of privacy. we'll see about antitrust. i think that's a developing story over a longer time period, but a lot of people are thinking about antitrust issues and if these companies are too powerful and big. that's going to be an ongoing story for 2019 i think >> and with the congress coming to work, it becomes a bigger theme. in terms of facebook specifically and given the fact we've just seen what's been sort of an ongoing drip of negative headlines and more negative stories in general around the company and data practices, do you expect that to continue in 2019 >>. >> it just keeps coming out. if there's investigations, certainly. any company has to worry about e-mails in general about the things out there within the companies and all these companies have these message boards and slack and all all kind of informations there could be trouble because who knows what comes up.

the question is how much will stay if there's movement there so i think trying to get it right is probably the theme for them and not innovation which it needs to be in a lot of ways the question can they get back to an innovations cycle versus dealing with wild, not wildfires, problems just don't want to make that metaphor anymore dealing with problems all year round. they've got to get back to innovation that's going to be hard for them >> well, speaking of that market, let's talk about advertising writ large and what happens with that in 2019. 2018 seemed to be another rough year for anybody who's not facebook, google or maybe amazon trying to make money off of ds

they're struggling to grow what happens is there a further shift toward subscription toward quality. >> the last one. there's a mix of things. some hadry ridiculous business plans. in advertising, the winners are still facebook and google. then amazon off, they're going to be increasingly in advertise, but their commerce platform is just dominating. so the big players dominating is going to be the continueded story for all the problems facebook has for all the controversies around google's china issues and other things and the sexual harassment stuff. they're still the most dominant companies, period. so that's the big question that's why regulations, can these companies continue to dominate and is there room for anybody else

so i think every company who's at least in content has to be thinking of lots of revenue streams from podcasting to events to subscriptions to anything to do that to try, and keeping the expenses in line, obviously >> kara, i'm sort of concerns more and wondering more about where tech goes in terms of political money next year. you know, eyyear before the election they were burn ed last time around with the threat of regulation and the overhang there. doesn't seem as clear cut which way the value is going to go in terms of money, support, how outspoken the ceos are >> not at all. i think they're going to pull back a lot i think it's a very liberal group of people. not liberal, more tolerant not sure, some of them are libertarian. but in general, much more progressive would be a word that you want to use for people in silicon valley so i think you're going to see donation, but not these loud sort of parties and things like

that i think they're sort of licking their wounds and don't want to an tag. >> anish: either said. they'll probably play to both parties. stay in the middle you're not to see any big fundraisers by these people. i think they're going to be very quiet politically in the next cycle. >> always great to get your thoughts especially on this last day of another very busy year thank you. >> yeah. and still to come, as we have mentioned, it's the last trading day of the year no matter what. take a look at 2018's top performers in the dow. merck leading the way along the wiser, microsoft, nike, visa before the break, how about today's session? here's the morning's down leaders. goldman, boeing, pfizer among them a lot more still ahead don't go anywhere. -here comes the rain.

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dow's up 90 points

lis losing steam here. the fed's policy in 2019, the presidents attacks on powell, all questions concerning the fed. major market theme for investors in 2019. i would say the major market theme. steve liesman of course has it covered for us ahead of friday's jobs report. steve. >> yeah, i don't want to insult or make traders feel bad they like to think they're the most important factor in determining fed policy that's not entirely the case markets do matter, but the fed is most likely to follow the flags outlook in terms how many times to hike rates next year. that outlook is more benign than it was, but still remains within the fed's target range here are some market baseded inflation indications. they're down they were up above 2%. these are using tips versus nominal spreads who are. that kind of show the market's outlook on inflation they're down from above two to 16 on the five-year and still 18 on the ten-year outlook.

current inflation using the fed's preferred core pce rising to 1.9% this december. rdq writes quote we think inflation will be the most important driver of fed rate hikes in 2019. at pantheon, they say the fed doesn't want to be blind sided by a surge in wage growth. this chart looked at the number of officials by the number of hikes they expect from the last forecast from the federal reserve. a third, a third, a third if you want to call it that more or less with two folks at zero hikes that's why you have the media now at two and we'll see if that goes down to one would be my expectation perhaps when they put out the forecast again in march. you can see fwis there's a big debate there at the fed and among wall street economists and forecasters here and it's going to be the economy that's going to determine what the fed does

unless the market makes big and troublesome moves. >> thank you another busy week in terms of fed speak with powell speaking on friday. >> atlanta i'll be there. >> looking forward to it >> happy new year >> central banks were a big theme in 2018 along with trade and volatility, so what does next year hold we have the 2019 global markets playbook >> global markets were rocked by global volatility. first, buckle your seat belt tariff uncertainty will continue to drive -- in 2018 thanks to the u.s. china trade dispute and for more pressure on china's already slowing economy,

neighboring countries that defend on china for trade. it's in china in a big way second, a dubbish fed will off set trade concerns a growing number of trade frictions and a weaker global economy will slow down the pace of u.s. interest rate hikes. any pause or delay from the federal reserve will be welcomed by emerging economies like south afterkai turkey and argentina that are sitting on a lot of dollar denominated debt and have come under immense pressure in recent months finally, expect india's national election in 2019 to be b a close call prime minister modi's party has suffered defeat in five of the country's 29 states. suddenly, the idea that he may not be re-elected in next year's general election is on the table. setting the stage for an intense

and heated battle for power of the world's largest democracy. expect investors to be watching closely. >> now to sue for a news update. >> hello, john and everyone. here's what's happening. the family of a young woman killed in a lion attack over the weekend is remembering her as an animal lover who died following her passion. 22-year-old alexandria black was helping to clean an animal enclosure as a north carolina conservancy when thelioness caped. russia's security service has detain and american sit senn on charges of espionage. the state department says it is aware of the arrest. whole foods may be come tog your town. amazon is planning to expand the chain to suburbs across the

country in an effort to give more people access to its two hour delivery service. and wouldn't it be nice to start the new year as a millionaire? it is possible as long as you buy a ticket. a new year's day drawing of the megamillions has hit $415 million and that is the lot toe's eighth largest jackpot good luck, everybody the news update this hour. back downtown to you >> sue herera, thank you and it is that time for the european close dom has the action >> some key markets around the world are closed in observance of the new year's eve holiday, germany and itry to name a couple other markets had an abbreviated tradie ining session like the uk france and spain were among those open today things finished off positive with france up over a percent. spain up about a half a percent and in the u.k., just marichally

lower on the day today wraps up a trading year that's been tough for european stocks the wider benchmark euro stocks 600 is down around 13% thin the u.k., finishes around 12%. the dax in germany down around 18% for the year and france off by about 11% as well global trade, economic slowdown concerns all those things we just talkeded about in the 2019 playbook will carry into next year, so a lot of key factors will be b driving that european underperformance we'll see if it can play catch up to the u.s. markets back to you. >> we'll see thank you. when we return, the best and worst tech stocks of 2018. which name rose more than 75% for the year, lead iing the secr and entire s&p 500 we're going to tell you that after the break, but first, take a look at the major averages so far in today's session they're all higher, but those

gains are fading the dow is now up about 128 points the s&p is up .2 and north america daz ouabt a tenth. more "squawk alley" continuing right after this break (drumsticks clatter)

it has been a rough final quarter for faan grk g stock, all down at least 10% in the last three months. so is a turn around in the cards

for next year? josh lipton is at one market in san francisco with the best and worst in tech for this year. and the outlook for 2019 josh >> the trade dispute, global economic outlook rising rates, big issues whip saw tech investors in 2018, but there were company specific issues, too, that had investors slamming the sell button like facebook and its scandals from user data to security breaches the stock is down some 25% this year still, facebook has plenty to have ans, too. the company's properties dominated four of the top five downloaded apps in 2018. apple also is poised to finish the year in the red. the iphone maker lost about $350 billion in market cap from its recent high. just to put that in perspective, that's the equivalent of around three nikes. fans and iphone units might dispoint, but they bet that

thanks to those higher priced models, revenue will best down beat expectations in the quarters ahead a big tech name that will finish the year in the green here, microsoft up nearly 20% and kirk says ta stock moves still higher next year as the company delivers steady top and bottom line growth he says, just given the breadth and strength of its cloud portfolio and finally, a big winner in the s&p 500 this year amd. surging more than 70% even as it's dropped 40% in the past three months as the crypto hangover and slowing cloud cap x spending weigh on shares. mitch says to wait until march to take a look again to see how the story plays out for its new games and server chips back to you. >> all right a rot to chew on there thank you. josh lipton. for more on what to expect from

tech in 2019, we are joined by colin sebastian and rob. this time next year, is the u.s. finlgly goingto have a privacy law? >> i think it's likely most of the large internet companies have endorsed such a law. i think that would bring more clairity to the privacy issues that have dogged these companies and the stock. we think that could be a likely outcome. bipartisan outcome and we think that could be positive for these companies. >> you see that as a positive for the stocks if the companies get regulated explain that >> in the sense there's obviously some disinfection among users. i think google and facebook have endorsed data privacy laws in part to give their users more confidence in how the companies are using the data in fact, we've seen in europe under gdpr rules, which are

similar to what the u.s. might enact, that those laws have benefitted facebook and google to some extent and so for those reasons, it could turn into be a positive catalyst. >> rob, when you look at 2019 and all of the negative headlines that have been out, particularly for facebook, but i guess some for google as well, over all of this use of day atad the issues around privacy, big brother, i don't know, does that start to shift in the other direction because i don't see barring some comprehensive just tech tonic shift in law, which doesn't look likely to happen. i don't see how anybody else really disrupts facebook and google >> i think there's likely to be some reversion given the fever pitch that we've been at for most of the year on this issue going all the way, even prior to the cambridge analytica scandals of march. i would expect that to normal e ize somewhat

there's been some misuse about the protections that they need to have in place by the platform providers but folks enjoy these services, i think that's what will carry when all is said and done. >> given the sell off we've seen in the tech and communications stocks this year, faang or the others we talk about, what do you see as buying opportunity s sns. >> we looked back a at the four last market corrections and six last from the bottom, there were three stocks that consistently outperformed alphabet, amazon and facebook and activision was a fourth. we made facebook an audible mention given some of the lingering overhangs and promoted amazon to the top of the list. but those three stocks,

alphabet, activision and amazon consistently outperform, so we like those three >> what about you, rob what are you picks >> yeah, i think the you know, you look at the appetite for risk being the big victim of 2018 the s&p multiples collapsed over four points. it's a really big reversion over a short amount of time and of course, the large cap stocks come down along with that. looking into the new year, i expect either we head into recession, which we are now calling for or you know, the risk appetite increases. in that case, the biggest reversion is probably the fallest that have fallen as well as the best growth stocks. so the best growth stocks are amazon and netflix the fall has fallen is facebook. and it's market. its multiple is close to market, but i would look across to china because you've got the revaluation on the fundamentals plus the country risk concern

that i think will also normalize. you may have a compounding effect of normalization that could benefit those stocks even more so than the u.s. listed names. >> colin, when you look at these big tech names, the china impact seems to be mixed. yes on the one hand, you've got apple, which has about 20% of sales in greater china, but then facebook's not really there. google's not really there. netflix isn't looking at china as a particularly big market amazon, notoriously has struggled there. so are they to some degree protected or just going to get swept up in the broader macro impact just like everybody else? >> well, to some expect, they'll be swept up. amazon for one, a lot of sellers, retailers that sell on amazon source product from china. so there's exposure. but as you mentioned, google and facebook essentially are not present in china outside of some advertising relationships. so don't expect that to be a major theme and the secular

growth drivers will protect those companies whether there is a china standoff or a recession. those companies should do well or better than most other industries in that scenario. so, we like them in either case >> so todd has one of the biggest overhangs. the other, the fed this idea that liquidity is not what it used to be these are the names this were the biggest beneficiaries of the easy policies over the last ten years. when you look at the tremendous rally that they had over the last decade, how much was it tied to fundamentals and how much was it just exuberance and a lot of liquidity and the fact that these were the beloved names in a market going straight up i'm wondering that because some are wonder federal government that's a biggest risk for them next year on the way down. >> you know, looking at that, it's tough to say. but i think what i look to is

the relative valuation to the market multiple. if you look at that as a level ing, if you look at the faang stock, each of them, their valuation versus the market multiple got lower in the last expansion. the market multiple went up a lot from 13 to 18.5 times. the relative valuation didn't change a lot so i would argue it wasn't that. they were benefitting to outside impact i think they were just going up in relation to the market. >> in other words, it wasn't a bubble is that what you're saying >> unless the market was bubble. the individual securities that relative valuation to the s&p went down. >> all right, guys, thank you. good discussion. with some predictions. colin and rob. and still to come, a breakdown of how earnings growth is going to impact markets in 2019 first, rick santelli, what's the

last thing you're watching for us in 2018 >> well, the last thing i'm watching for is that at midnight, it's not only going to be a new year, it's going to be a 20th anniversary for some financial product. do you know what it is i'll tell you after the break.

(urgent drumming) ♪ (drumsticks clatter) today on the halftime report in about 15 minutes, the triggers reveal how they're positioning themselves in the

new year plus, what the opgs are showing. how one key stock will perform for january and we're answering your stock questions halftime starts at the top of the hour >> we're going to get to ring in this final frtrading session. meantime, over to cme in chicago. hey, rick. >> thank you well, what's going to be the 20th anniversary tomorrow along with welcoming in 2019 happy birthday to the euro currency. january 1st, 1999. i remember it well it made its official first day around 118 since then, the high has been a whisker under 160.

that was the year the crisis early '08 and the low just under 83 and that was october of 2000, i believe, it was october 2000 or there b abouts. so the mid price is around 121 the reason i bring that up, i always find that big anniversaries and midpoints have technical significance, but here's the issue today as we get ready to mark the 20th year, let's check out what's been going on. in my opinion, the main driver to pay attention to is both hesitation and integration on hesitation, it isn't only the ecb, but the ec brb as a central bank that really wants to normalize, but for whatever reason, they seem to be doing it at just about the worse time they could have decided on as global economics are slowing it's going to make mario

draghi's job more difficult in a way because at the end of 2019, he's going to be gone and somebody else will replace him, but the notion of how the banks and euro zone are going to end up hitting along with so much still permeated for example in negative rates i know there will be some magic bond they come up with and all this may go away, but ultimately, it's going to make everything more bumpy, especially since recessions come quicker. finally, the political and economic integration economic integration we could argue has had fits and start, but it's okay. it's the political integration think brexit think immigration. all thoese countries getting together after all those years, we knew it wouldn't be easy, but the thing i take away with the issues of brexit before march of 019, if you like to stay or

don't, it's going to be more and more difficult to try to disembark as every month passed now moves forward. just think england there back to you. >> rick, is your bottom line that you think it's been actually despite all the critics and the questions and all the break up calls, a pretty stable success? you know what, i think if i had to give it a grade, i would give it a c plus and if you asked me ten years ago to give it a grade, for the first ten years of my assessment of the next ten probably would have lower and my optimism for the future would have been less so yes, it hasn't been terrific, but it's still ongoing and i think that what we see is what we'll have for a long time don't see anymore departures >> yeah, challenges ahead. rick, thank you. 20 years of the you aeuro crazy. rl ft p and nasdaq nowlaas eay gains have been fading "squawk alley" continues next. i am a family man.

i am a techie dad. i believe the best technology should feel effortless. like magic. at comcast, it's my job to develop, apps and tools that simplify your experience. my name is mike, i'm in product development at comcast.

we're working to make things simple, easy and awesome. welcome back to "squawk alley. gene editing stocks surging again and may be getting help from microsoft founder bill gates. he expects big break-throughs in the area of gene editing and believe it deserves as much attention as artificial intelligence despite today's big gains, the gene editing stocks are still down about 25% or more just in this month alone, so sarah, some stocks to watch in a volatile new year's trade back over to you >> dom, thank you for checking

on gene editing stocks up e down or flat? your outlook for the markets in 2019 may very well depend on your outlook for earnings growth our bob pisani joins us on set with what the analysts are saying about earnings in 2019, what it means for your money and the market >> it depends on what side of the divide you're on, zero percent or above, and that kind of determines the way you think of 2019 in terms of the s&p. so 2019 earnings estimates are coming down, but very slowly they were about 10% at the start of this quarter, and they're a little better than 7% today. they've come down maybe a percentage point in just the last several weeks 17 companies have reported earnings for the fourth quarter so far while the numbers have been good, the first quarter estimates generally have been coming down, particularly after comments from micron and federal express who ♪ed while the u.s. was still strong, international trends were definitely slowing. unfortunately, the fate of earnings may be in the hands of large macro issues that are very

difficult toed mole, and this is why the markets are having such a tough time of it recently. traders are weighing several issues can the fed avoid making a major policy error this is probably number one, meaning hiking in a slowing growth environment with low inflation. number two, other global rate risks. the ecb is ending stimulus what impact will that have an european profits three, will there be clear progress on trade talks and four, how much exactly is china slowing with or without the tariffs? it's a separate issue, china slowing with tariffs how strategists and analysts interpret the impact on earnings determines how they feel about the markets in 2019 so if you think earnings growth is zero, the markets will be dead money to a lot of people if you think earnings will be negative, most people think the markets will drop more, but if you think earnings will still be growing in the mid single digits and by the way, that's the majority opinion right now, then most think the markets should rally. it's very hard to sort of figure 2019 earnings out, when you

can't stick in what the impact the tariffs are going to be, how much china will slow down, whether the fed will raise aggressively it's amazing about how people think the fed will make the policy error and i keep bringing up what happened, sarah, you might remember 2011 and the ecb, trichet hiked rates in the chaos going on >> reversed back quickly they are quick in terms of decisions and reversal the question is not will they mistake but did they already make a mistake tightening into a slowing economy, fiscal policy is done doing the job. >> yes, i think most people think they haven't yet made it but if they continue to rate hike, that's going to be the mistake already. obviously the markets are having trouble. it's not lost on anybody the current turmoil started essentially october 3rd, and that's when we heard powell talking about a ways to go

before we hit neutral, so that certainly is the main factor in what's been going on, although the tariffs are really going to be important now >> bob, big issue, earnings i'm sure we'll be talking about it a lot more in the new year thank you for joining us today >> thank you >> bob pisani. we have more "squawk alley" in less than three minutes stay us you always pay your insurance on time.

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averages right now we're still higher on the day, we're off the highs of the morning. the dow is up 130 points the s&p up 7, the nasdaq is up 20 points of 0.3%. it's a down year the dow is poised to close down about 6% for the year on this final day of trading >> yes, mid-sized tech stocks doing okay this morning, shopify up some 4%, maybe reflecting some post-holiday optimism >> shopify, okay we're going to get the final tally on the closing bell today, for the year, for the month, which was brutal, you mentioned the decline. they said it's going to be the worst year for stocks since 2008, so that's why the final trading hour always important is going to be more important, so we'll see you guys on "the closing bell." thanks for having me on "squawk

alley. the rollover in stocks was an ugly signal and we're seeing this rally evaporate >> ash cashin knows what's up. shopify, an amazon competitor? >> you always pull out stocks that i wouldn't necessarily look at >> i can pull out the little ones who else pulls out stocks, "half time" at post nine, that will do it for "squawk alley" in 2018. scott wapner takes it from here. >> and welcome, i'm scott wapner after the worst year for stocks in a decade, can your money begin working again in 2019 or is more pain ahead it is 12:00 noon and this is "the halftime report." >> the clock ticks down on 2018. as traders position themselves for the first week and month of the new year, today the best places for your money in 2019. we'll tackle the key issues for investors -- washington, trade, the fed, confidence, and more, plus if apple is the key