lee of bitcoin, what do you think? >> i think it should be 1% or 2% allocation in everyone's portfolio? >> what? >> i think it is going to be an asset class. roughly 2-1 right now and 240-1 speculation use of dollars >> we'll have you back >> make sure you join us tomorrow "squawk on the street" is next ♪ good morning, welcome to "squawk on the street," i am david faber along with sara eisen. carl and jim is both off this morning. let's take a look at the futures as we get ready to start the new year i don't know where we left it some way last week >> yes, it was behind us >> there seems to be a good amount of volatility last week and we are continuing this week.

futures is set up for a much lower open european markets they already have been down this morning. it starts in china with that purchasing manager index coming in at a number that we have not seen, a little 2017, i guess the ten-yr note yield, whoa, 2.6. >> 11 month lows >> as you saw futures pointing to a sharp drop at the open after the disappointing data from china fuelling concerns of global growth. >> not to mention government shut down in this country, president trump inviting congressional leaders to the white house for their first meeting since december 22nd. plus, the faang trade, remember that?

it was a disaster for those high flying stocks. what's going to happen this year it is not how investors who are long at least hope to start the new year futures indicating of a sharp decline. data out of china showing contraction and for the first time in more than a year, out of europe and also adding to what is relatively gloomy sediment. stocks are coming off the worst year they have seen in 2018. s&p 500 was the biggest decline of the major three indices nasdaq also ended down bow not as badly >> let's chat it >> let's chat about it >> if you look at groups like home builders or industrial or automakers our small cap, all

performance significantly worse than the broader index number one, global weakness was the story. all the international indices did a lot worse. that continues today with china's manufacture number we got our pmi below 50 on monday as well, china's manufacturing is contracting >> that's the weakness in the industrial whether it is trade or everything else factoring in there. you have pictures of weakness in the u.s. like the small cap under performance and we are starting to get regional manufacture indices in this country. kansas city and dallas, all came in with -- it is coming off of a strong year and how much is baked into this market in terms of recession and slow down and where are we actually going? >> as you pointed out. the number themselves are not

good, worse than 10 dwreyears oe s&p. so back to an area that you follow closely whether it would be consumer, i am thinking oof of -- concerns in high yield not necessarily having anything to do with default but 8% paper is still not something people want to step up to. >> i wopdnder if you will startt see a focus on consumers on levelled balance sheet companies loaded on a load extent of debt and others are suffering as a result if they miss their numbers as they did not have worries about cash flows when you talk about those numbers >> i think you have a lot of

competition for buyers of debt in 2019. we'll see how it shakes out. we got a lot of corporate refinancing coming due 2019. we are back to trillion dollars deficit in the u.s. at a time where the chinese have not been buying much of our debt and japanese there will be a lot of competition out there and we'll see it how this actually all plays out. despite what you mention deals, it is strong year for deal making >> interesting the way the high yield market did seize up at the end of the year. certain things got put on hold there were a number contemplated as the year ended. it is an era that we'll follow and one of our guests are going to be following which is the market as well let's bring in david rosenberg and saunders, i will start with

you david, some views on the market this year, the hopes this we have for the economy. i kind of kid, it was not long ago you were sitting next to me talking about recession. >> this year >> welcome to 2019 >> sar ral a is updating me on t year it is >> nothing has change your view? >> no, nothing at all. we have to operate of what we do know in 2019 we know there are a whole host of uncertainty domestically and globally we know the fiscal stimulus that gave us a couple quarter of really good growth in 2018, we are finding out in year end that there was no multiple -- we'll go to 2019 with the stimulus of a physical hang over as sara just mentioned, we also know

that what the fed have already done is going to have its peak impact in 2019 in terms of the impact that it is going to have on growth. look for the cascading impact of what the fed have done to hit overco home on the domestic side of the economy. when indicators is down 11 months in a row. not too positive we know and one of you mentioned of what's happening of the corporate balance sheet. all that debt that was taken onto fund those records, 2019 represents the first year of four years we are going to have average a trillion dollars of corporate bonds maturing at much higher interest rates where they were originated. it is going to have a monument

impact whether it has an impact on ratings. the death service drag will be at a low level is going to have a big impact on capitol spending this year. i think it is going to be the next rung up from that which is an extremely weak economy for 2019 you are seeing analysts right now cutting in light of that prospect >> nothing rose y in that view how much is it big in the market already? >> i have to concur with everything that dave said. growth slow down, it is a common occurrence just to get that 20% down and pull back with a significant slow down. i also think that a lot of

discussions about the strength of the economy particularly of the first half of the year and second quarter of the year is being tied to tax cuts a percentage point of that was soybean. it was front running the tariffs. we are talking about the offset of negativity to trade to beneficial stimulus, i am not sure that was specific to fiscal stimulus that's why we are seeing now a rolling off of some of the boosters manufacture second sto well in the original surveys we'll see in the dow >> liz anne, to the extent that the market already anticipated that, what's an appropriate multiple that you are thinking about for this year when it comes to the s&p as we are going to head into another earnings season and start to get some answers in terms of what the

under line numbers look like >> i never think of appropriate multiple point term. the fact that we have financial condition. both of those things tend to put down downward pressure i think of valuation as much of an indicator as anything else. there are times investors are willing to pay more for stocks it is not a technical indicator that's based on macro or micro fundamentals with earnings growth more over and more on the downside of cuts because you are looking at double digit expectations for energy sector. we have not reflected the environment for next year's earnings in a macro environment that suggests downward pressure of multiples you need multiple expansion to support for the market i don't think the condition exists without earnings doing a lot of the heavy lifting

>> on the plus side the market is fully out and any interest rate hikes for the feds this year we'll get powell speaking on friday and they're increasing hopes of a trade deal with china. how do you factor in those positives? does it stem some of the bleeding here in the markets >> yes it is a dangerous game to replace investment bets based on telephone conversations or dinner i thinkwe have to take a look at the trade war between the u.s. and china as a broader geopolitical war between a dominate power this is much more complicated than soybeans or automobiles. if trades are the only thing that's on people's mind.

it is an initial bear market the russell 2000 is a play on u.s. david weomestic demand it is telling you about where the market is pricing in growth for next year. you know you mention about the fed being priced out, well, what if i told you by the end of 2017, would you leap into the stock market on the first day of january 2018 >> we are not seeing those kinds of credit conditions that we saw in 2007 or 2008. >> yes we are seeing some trends. >> with all difference, i could have said that by the beginning of 2001. did you want to start the stock market in 2001, the fed was

cutting interest rates in a meeting. if you want to have a lesson of history, here is what the score record tells you that you don't buy the market on the first fed rate cut you are better off buying the market on the last fed cut then on the first one because it is the reason why the fed -- either a recession or real significance slowing or growth into earnings expectations that drags the market down for the intermediate term to tell me that you are going to turn bullish because the fed is being priced out the market has been wobbly and weak it is because of the reasons why the fed is starting to walk back its tightening rhetoric. that'll continue the next several months or quarters when we go to the positive

economic cycle and earnings cycle. it will be time to invest again. people say don't fight when the fed is easing, or don't fight the fed and the other direction it seems to go the other direction. the situation, sara, it is the lags that matters. financial conditions have tighten, 175 days. the economy is feeling that for the next several quarters. >> let me get the last word on this conversation to liz anne. i hope she can cheer us up in the end here >> i love to try we had an under wait of small cap. if you look at the burst of energy that small cap got on the basis of tax cuts then they got another boost because of their

trading, a fairly large percentage of small caps are not profitable they did not benefit from the tax cut at the same time in the environment weak credit, it absolutely matters for the stock market that's what puts the small caps back on their hills. that's what persists in the first part of 2019 >> thank you, both for setting the stage for what's going to be a lot of conversations about balance sheets this year something we did not talk much about last year. thanks to david rosenberg and liz anne saunders. president trump invited congressional leaders come to sit down discussing the government shutdown. ylan mui is at capitol hill with

the latest >> this is built as a briefing and not a meeting. it gives you the sense of distrust on both sides democrats and republicans are worried of getting burnt here. in the past they thought they had a deal with the white house that did not pan out democrats do have a serious office that's on the table they plan to reopen the government which they plan to vote on tomorrow would fund the department of homeland security february 8th to give them time to continue these discussions. they would open the rest of the agency and fund them through the end of the year. nancy pelosi, she sent out a letter to her colleagues yesterday and she said this. we are giving the republicans the opportunity to take yes for an answer. senate republicans have already supported this legislation if they reject it now, they

would be comply sit icite. president trump treatweeted ove weekend, let's make a deal, question mark. later on he went onto say the wall is being paid by mexico he also said that democrats don't care border security and sara huckabee sanders said this bill is a non-stopper. >> we'll see of any resolution >> it is not in the trade deal, is it? >> it is not he says the economy would go through the deal to pay for if wall but most people do not believe that's the case. >> ylan, thank you >> a tough start for the new year let's take a look at the futures right now. dow is down 379.

more "squawk on the street" live at the post 9 at nyc when we return 300 miles per hour, that's where i feel normal. i might be crazy but i'm not stupid. having an annuity tells me retirement is protected. annuities can provide protected income for life. learn more at retireyourrisk.org i'm not really a, i thoughtected wall street guy.ns.e. what's the hesitation? eh, it just feels too complicated, you know? well sure, at first, but jj can help you with that. jj, will you break it down for this gentleman? hey, ian. you know, at td ameritrade, we can walk you through your options trades step by step until you're comfortable. i could be up for that. that's taking options trading from wall st. to main st. hey guys, wanna play some pool? eh, i'm not really a pool guy. what's the hesitation? it's just complicated. step-by-step options trading support from td ameritrade

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. ten minutes before the opening bell kenny is back with us, welcome back, kenny. >> morning >> chinese manufacture numbers set us off the wrong foot on the new year >> completely rocked the boat. what it now says look we have been talking about a potential slow down for china for months this number, sub 50s as you know

and although it is 4.7 is just below, the number israe real. the longer you drag us on, potentially the worse it is going to get that's what the market is telling you. i don't think it is a complete disaster for the market. so let's see where they go you could imagine a scenario that it is working we are putting more pressure on the chinese economy the way we want to and they're going to ultimately a seed to our demand. >> okay, you can say that and that may be trump's way to go. the push is not only for china but potentially of the global economy. >> well, exactly this continues to affect our stock market and you will see a change of heart for the white house in terms of maybe we should come to the table and be a little bit more cooperative.

>> how much of this turbulence in the market has to do with global weakness and trade and how much has to do with a potential u.s. slow down and the fed? >> at first i thought if you would ask me a month ago, i thought it was a european and asian issue i thought the u.s. economy and economic numbers are good historically low unemployment numbers. i think if this situation continues to spin out of control, it begins to affect the economy. that's a fine line that you are walking and everyone needs to be conscious of that. >> any numbers you are watching in technical that we should keep an eye on? on the other hand, you have to be careful because some of the data may be slow coming out. adp, they're looking for

tomorrow and whether those numbers come or not. >> they are. >> they are due to come. there are some other numbers that are not >> kenny, thank you. coming up, a mix performance by the faang stocks in 2018. we'll explore what to expect in this new year, we got more "squawk on the street" straight ahead.

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there it is, look at how we are going to open five minutes from now when we get started with trading for the new year here at the nyc. it is going to be a significantly down open.

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. we'll start with trading about a minute and 20 seconds from now let's check in with your cash. what are you watching this morning as we get started trading for the year >> well, you will have to keep watching the political situat n situation, the president pulls off this surprise conference, will anybody show up or anything coming out of this i am going to keep on watching oil and energy if we break below 40, i think you could see some real pressure they got a lot of debt out there. if we break down below 40. it is going to put pressure and i think earlier sara alluded the regional feds and the indicators and one of them was the dallas fed that maybe -- >> by the way, oil prices have

been down 25%. >> right now wti trading at 44.58. looks like it is down 1.8% we are back with our realtime exchange at our headquarters barry gold joining us. we'll speak to the ceo of the company about half an hour or so over at the nasdaq, nutri-system we are still a little ways from 40 on wti. you still think that's a possible level that we could hit? it is possibly a critical level. if you look at the people who produce the sand which is needed

for fracking, they have been going down and down. you can look at the recount on one side and other indicators. these people are heavily in debt and having leveraged up. we talk about chevron and exxon or whatever, you got hundreds of little companies out there >> we made the point of the high yield market it depends who you talk to in terms of the market. it is about $1.6 trillion market high yield for investment grade but we are keeping an eye on it. >> the strategists are expecting oil prices to go higher. boy, were they wrong in 2018 looking at the opening trade here and continuing on this theme of broad weakness. you don't see any pockets of strengths and all s&p groups are

lower right now. if you have to look at our performance over the last year, you saw a little bit in healthcare and utilities does that tell us where we need to play and where investors should play defense this year. it tells you that you want to stay on shore and healthcare clearly is an on shore gain and so you have to look out where things are going everybody is terrified that is a sign of global slow down remember it was only eight months ago we were talking about synchronize growth >> all is fallen apart the few bolt that is are out there are saying the reason the chinese manufacturing number drop is because china is trying to emphasize exports and emphasize self-sustaining services and whatnot, the market tends to believe the skeptics

here >> you can see the ripple effect in south korea and china was down 20% on copper synchronize global slow down that appears to be getting worse as places in europe actually start to join the fray we are heading to a brexit deadline with no clear deal on the table and a number of weakeniweake weakening surveys across the region >> you have one or two individuals coming out they think a hard brexit could whine up real damages out there and could be followed by another election and may's party could lose the general election and that would be bad for business, too. looks like we'll not going to be catching up on our sleep as 2019

is going to be as wild as 2018 ended. >> before we let you go, any levels you are keeping an eye on this morning >> well, you want to watch the 226 level. that would be important. for the s&p, i would say you got to go down around 2400 point that's looking for a big sell-off here. it may not come but if we get into one of those free falls like we saw a couple of times the last ten days. >> thank you >> happy new year. >> looking at individual maneuvers, the first place i checked was activision blizzard and netflix. cfo of activision is going to be leaving the company due to cause related to financial reporting

he was going to be the new cso of netflix >> after 14 years. >> could imagine why he's got a lot of stocks that's an interesting move >> i thought netflix was the winner of faang in 2018. the analysts are not coming in not so high so far this year >> yeah, they are not. i usually rely my year to date numbers. >> now they're not showing me anything i got to change my set up here >> thank you for that update >> not everything, celgene is up >> there you go. >> there was some coverage given in the journal as well as drug prices going up across the board for many below 10% but broadly speaking up that stock as you point out,

sara, was a lagger last year and it is down again >> another group i am watching and you are probably watching this group is communication stock. there was a new jp morgan stock out representing what stood out here? >> nothing much. >> you know they talk about comcast and our parent company and free cash flow yield and seemingly over sold and helicopter to continue to be sold at 33.50. >> to the extent that investors are going to be focused as we set on the new environment even though it is a risk of default we are not talking about that. you may see some of these stocks suffer at&t pointed out many time, it is important based on the cash

flow they are producing service that which does not seem to be an issue, at least not now it is going fto be more of a focus this year. in europe they're talking about 8.1 times and ibita being cheap and verses charter and 11.5% yield. >> if you look at the biggest losers right now and there are a number of them it is really china related in the dow it is boeing and caterpill caterpillar. we know those two stocks are tied to the trade story and global economic story and got that late china number over night showing contractions, first time we are seeing that in a few years. we are heading into next week as

low level trade talks between the u.s. and china, sort of the deputy, treasury and u.s. train wreck officials going to china to meet. things have moved into a positive direction the president tweeted that he had a great discussion with xi and chinese allowed rice import to the country for the first time i don't think we produce a lot of rice. the tea leaves are coming together in a positive way around trade but it feels like it is not good enough for the market it is more of a show me action at this point facing up against that march deadline where tariffs are set to increase if there are no deals between u.s./china >> investors at this point are less confident in terms of what you see from the administration. they want to see concrete development. it is a change you may not see the responses necessarily to the positive potential headlines involving

china but you may have a few mo months ago march is fast approaching. >> the 90-day deadline >> tariffs going off and put off as they were after the meeting in argentina between xi and trump. >> the mood of the market right now, i thought we are going to leave with the currency markets because the japanese yen is soaring right now. >> it does not do me any good. >> i did not team it well. >> this is the only major currency that's higher against the dollar of 2018. >> to your point as well when we started to show, 2, 6, and 4 >> it is at .16% of the 10-yr note you are seeing these signs come together, tells a story of global slow down

decrease sense of risk appetite which is where we left off on a weak december for stocks for 2018 let's check in on some of the other stocks this morning. seema mody, give us a sense of what else is moving on the floor? >> lower technology and energy is the worse performance the dow is breaking below 23,000 it is worth noting the weakness started overseas after china reported a contraction in its manufacturing sector weakest since may of 2017. it was not just china. taiwan's pmi fell to a three-year low when it slows down asia feels the pain the question is how does the weak data impact the china/u.s.

trade. remember last year beijing introduced new tax relief measures as well as greater lending for the private sector we have the gdp number coming out next week. boeing and caterpillar and deer. a number of companies have exposures to china and you will see that it is under performing, the s&p 500 and as well as the last year by a wide margin that shows you how investors are positioning themselves dissecting the losses and early trade today, technology is among the biggest losers and led by faang related stocks, netflix and and facebook yields are taking lower as you guys are pointed out and gold is up by around $5. utilities ended higher but

actually lower by 1% >> entering this year with a sense of cautious. >> seema mody, thank you let's head to rick santelli right now, good morning, happy new year >> good morning and happy new year beginning of the year is always interesting for markets. if you look at a year to date starting at the end of last year, of two years note yield, there is something i want to point out. the lowest price, the lowest yield of the year and all maturity of 2018 established on the first trading day of the year never a challenge. even though the back half is reversed and much of what we saw the first half if you look at a 24 hours of tens, we are not coming in with a bang we are coming in with more of a whimper. sara, as you pointed out, we are getting closer to a one year

low. if you look at bund yield at a whopping 15 basis points these are the yields going back to november of 2016. dollar index and the yen are fine investors when things get a bit turbulent. what i want you to know is we had a violation under '96 but it roared back. it was never a close under '9 6. now we are around '96 and three quarters again let's open the chart to october of 2018, what you want to really pay attention here is how we touch this level and it has been fantast fantastic. the dollar index has been a rather tight range even though the range has been pretty wide range. david, back to you >> okay, thank you rick santelli

>> tesla's shares are not having a good stock of the year fill lebeau is with us in chicago and has the details on those numbers. phil >> three things are weighing on shares of tesla. shortly after the opening bell, you can see it is trading around the $300 mark and done 1wn 10% the day. first off with model 3 deliveries this is a focus for investors. tesla delivering over 63,000 model 3. the estimate that consensus was deliveries of 64,900 it is weaker than expected the production number, this is the primary issue that's weighing on the stock this morning. tesla produced just over 80,000 vehicles in the fourth quarter most that i talked with expect

production dpragreater than 90,. you have tesla announcing they'll be cutting the price of vehicles by $2,000 as of january 1st, the federal electric tax credit, the one that buyers can apply for gets cut in half by $3,750. that as you take a look at shares of tesla, one other note from the company. it will begin international deliveries of the model 3 starting next month in february. we'll see what kind of demand i out there. you are seeing the stock down just under 10% today >> investors are not taking the news too well. phil lebeau, thank you very much >> when we come back we'll continue to follow this market sell-off take a look at the industrial jones average, 288

caterpillar is dragging the most on the indention ax and boeing "squawk on the street" will be right back

first trading day of the year tech stocks, joining us now on what to do next with withe sectr tom fortier. on apple and amazon both are keys of where this markets are going. are you looking at revising those at all or are you sticking to your guns >> you know when shares are down 50%, they have to go to 100% i do think for amazon and for apple there is reasons to believe that the sell-office over done and for amazon they had fantastic profits in the june/september quarter we know they have terrific sales for holiday and to the extent

that their cloud computing efforts are continuing to do well 2019 will vote better for people for apple, they're just way too much negativity and shares and what people are over discounting is the higher selling prices ono lower unit sales so i think there's reason to be more optimistic than the market is on those two stocks in particular. >> why do you believe the market has it wrong, then i mean, what about that negativity strikes you as being overdone >> i'd see the big selloff in tech as a reflection of concerns on rising interest rates and then the prolonged and often escalating trade war between the u.s. and china now, hopefully as 2019 progresses, there won't be too many more interest rate hikes and then as it pertains to china and the u.s., hopefully as the year progresses, they will figure out a way to forge a lasting agreement and these tariff concerns will go away and

that will bode for a much better environment for tech in general and amazon and apple specifically >> on the other hand, tom, many people think 2019 is going to be the year we finally get some regulation out of congress on privacy or on some of these other scandals influencing news releases or what -- so-called fake news in some of these social media companies do you think we'll get something out of washington and who will it impact most >> i would argue we have de facto regulation europe passed their data privacy laws and i'm fairly certain the state of california followed suit is so i think while we don't have regulation in the books, you're starting to see that sort of expectation as it pertains to privacy for u.s. consumers so i would argue we have a de facto today so maybe we'll have official laws later and the big impact there is on facebook which is basically in the midst of an identity crisis of its own as it tries to manage

its large billion-plus social network and also protecting the privacy of the members of the social network. >> are finally, what stops the broader selling in the technology index if the market is concerned about higher rates and economic slowdown and loss of liquidity and quantitative tightening which has problemed up this group for the last decade, now it's unwinding. >> well, i think on the interest rate front, an argument can be made that we're near the end as far as interest rate hike so to the xtent the economy may soften, you may see no more interest rate increases and also if you look at amazon in particular this is a company that generates significant revenue growth and while investors are digesting and getting used to the new highly profitable amazon, there's still a lot of sales growth in amazon and reason for optimism there. >> tom forte, thanks for joining with us your picks and outlook for 2019

d.a. davidson, how about that? tech analyst talking about fed hikes. >> facebook the only name in faang that is up, actually, this morning. we're staying on top of what is the selloff take a look at the s&p 500 heat map, you'll see what i'm talking about. not a lot of green avmo "ua othn e street" when we return 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.

. what's likely to make the list of investor concerns this year let's check in with dom chu for the first time this year back at hq dom? >> as we talk what about will happen with the investor concerns, take a look at our calendar because they're full of them in the first quarter of the year just on this week, january 4, later on this week, we got fed chair jerome powell speaking and a jobs report to talk about. later on next week we've got trade talks possibly starting with china to see if we can get things going next week after that, the week of january 14, fourth-quarter earnings reporting season and at the end of the month a big fed meeting. remember, every fed meeting will have a press conference. now, february will be a lot of those earnings reports and come march we'll have another big week on the march 19 and 20 another

feed meeting but that's the deadline, march 1, for debt ago deal done on trade and tariffs with china so this will make for an eventful catalyst trading driven first quarter, back to you guys. >> dom, thank you. dom chu back at headquarters. coming up, wharton's jeremy siegel will be telling us about the selloff we've seen in the first half hour of trading and what he sees ahead for the markets in 2019.

well, good morning and welcome back to "squawk on the street." i'm david faber along with sara eisen and joining us this morning as well is contessa brewer we are live from post 9 at the new york stock exchange. another year beginning carl has the day off today let's give you a look at markets one half hour into trading for the year we are down on all the major averages the ten-year note yield hovering around 2.66 and crude oil down

less than 1% so far. let's get to our road map. it starts with a selloff in stocks to start the new year even more disappointing, data out of china this is the major average coming off the worst year we've seen since the 2008 financial crisis. >> let's make a deal the president set to meet with congressional leaders in an effort to end the partial federal government shutdown now in its 12th day. >> and setting the record straight, hain celestial group finder irwin simon joining us at post 9 we'll talk about his departure from the company he founded and his new role at a cannabis company that's been targeted for a hostile takeover. first up, as we kick off the new year with stocks trading lower, the dow, is and p and nasdaq sinking low intercorrectiinte into correction territory according to fact set, in the past month, earnists have cut

their earnings forecast with more than half of the companies in the s&p 500 question is, what is the market pricing in in terms of earnings growth for 2019? is the market looking for some sort of recession? the news today appears to be global news we'll get u.s. data tomorrow but it's about the weak china number. >> the interesting thing is, we got the gross gaming revenues from macau and they were stronger than consensus. factory owners are going to macau on these vip junkets and gambling they just had a big bridge opening. it doesn't look like the fear made its way into people being willing to bet what they have on trying to get richer in macau. >> the positive take is that the chinese are trying to change the

complexion of their overall economy to one based on consumption but this is not being viewed as a positive but as a reflection of a slowdown globally only eight months ago we were talking about synchronized global growth and watching the markets move higher as a result of that. >> the story of 2018 was global weakness china's stock market down 25%, the world's worst performing stock market and you had markets in europe that are closer tied to china with trade down worse than the s&p 500 so i think the question this year is does the focus shift the u.s. in terms of the slowdown and the problem the global slowdown starting to infect with us a tighter monetary policy and a weakening of the fiscal policy with those tax cuts starting to fade? and that's where investors need

to figure out. >> let's get another view point. joining us from the university of pennsylvania wharton school, finance professor jeremy siegel. good to talk to you, professor when we're talkings about your view of 2019, you think the market should return between 5% and 15%. how do we get there amid this fear and uncertainty plaguing the it that correct. >> well, i look at valuation levels we are selling s&p at 16 times last year's earnings so that is a cheap level historically in fact, over the last 65 years so sold on average over 70 so even if we don't have any earnings growth this year this is a cheap market especially look at interest rates the ten year at 265, no competition from fixed income.

i think we can have a good year in the stock market. >> so when we're looking at warning signs that investors are paying attention to, a flattening yield curve, whether we'll see consumer confidence falling off of these good levels from 2018. what are you concerned about >> first of all, i'm not concerned about the fed. with the ten year at its level that we see now we won't see any increases. if it's below 3%, i think the fed is going to defer. i think it was a mistake i don't think they should have raised in the december but nonetheless i think we don't to worry about fed rate hikes as long as the economy is weak. now, if the economy picks up, we might get one or two but then the earnings outlook is going to look a lot better than what we have today so overall what happened is that we went from a rosy view, way

too rosy, i said last year 2019 earnings were too high to now, oh, my god, there's going to be a recession. the truth will be somewhere in between and that leaves the stock market i think very attractive now. >> do you think it's significant that for all the hand wringing all year long about the inverting yield curve it never inverted if you look at the main twos and tens. and the s&p never reached a bear market, it got a few points away from that or does that not matter >> that does matter and the ten-year -- i look at the 90-day treasury bill and the ten year it's about 20, 25 basis points so we're not quite at that critical level and that's why the fed can't afford to go any high we are the ten year as it is now they do take that seriously. we didn't hit a bear market.

will that christmas eve low hold my feeling is it might we might get a test on it the first few days of this month but, you know, christmas eve i think was a pretty gloomy look at what the world outlook is, even a slowing outlook i don't think really justifies how low stock prices are. >> jeremy, you've typically been bullish, i can go back a long time, and it's been the right call i wonder in this environment is there anything that would turn your view to one that would be less sanguine? >> well, i mean clearly a recession is going to bring the market down more i don't see in the the cards but it's a delicate matter for the federal reserve. we'll get the employment on

friday some say it will go down to 3.6%, that's a 50 year low we can't have 150 to 200,000 increase every month unless we get more people feeding into the work force which doesn't look likely so the bottom line is the fed had to squeeze enough to get us down to around 120, 000 do we have that precision? has the fed ever engineered a soft landing not exactly. there's always been a wobble here and that is what the market feels. we'll be wobbling to a slowdown but not a recession and until we see that clear people say i'm going to be cautious but if there isn't a recession, i think we've got great values obviously a trade war but trump can't afford that now because he know the stock so he won't look at that favorably and he does care about the stock market so

some deal will be reached on china. we avoid a recession, we'll have a good market. >> jeremy, the fed rate hikes get the attention in the headlines. do you think the fact they are trimming their balance sheet, unwinding years of stimulus through qe 1, 2, and 3 is having an impact on the markets psychologically or mechanically? >> well, the thing is there are still excess reserves there that can be absorbed. what we will see -- if the fed gets too tight in its quantitative tightening, we will see the fed funds rate rise above the level that they pay on reserves which is now 2.40 but that's exactly where the fed funds rate now which means there's excess reserves the banks are putting on deposit at the fed.

if it rises above 240, look out, that means they are getting too tight but the fed is aware of that they still think they're somewhere around a trillion dollars of excess reserves that they could absorb but they know they can't go beyond that because then they lift it up from the reserve level and that's tonightment to another tightening of the rate. >> you were talking about trade there. how big a deal is the trade tension at this point? the standoff with china? because when the tariffs first were talked about and implemented, there are experts who pooh-poohed the big impact on the american economy and now in note after note that you see from investment banks and in articles and the "journal" and cnbc.com you see trade mentioned as an important factor in what happens in 2019. >> well, certainly if we go to 25% on all their products it's a

big thing. clearly the weakening of sentiment and the stock market those are factors that could precipitate a real slowdown but you know i mean trump's advisers will tell him that maybe peter navarro won't tell him that but certainly kudlow is going to tell him that so he knows that he has to tread very, very carefully on this he can't afford given the markets to go full scale on that trade war. >> you have to wonder how much pressure t chinese leadership is under. >> really in some ways the weak data out of china plays more into the trump scheme of things. they can't afford a big slowdown, either so they're motivated to come to an agreement. >> jeremy siegel, professor at

wharton, appreciate your insight. >> thank you very much and happy new year. >> happy new year. president trump meeting with congressional leaders over the partial federal government shutdown ylan mui is in washington with more >> this is being billed as a briefing on border security but, of course, the government shutdown is looming in the background of all of those discussions. we are told this meeting will happen at 3:00 p.m. in the situation room of the white house and it will be closed to the press so don't expect a repeat of the must-see tv we got the last time chuck and nancy went over to the white house to meet with president trump. this time republican leadership will be in the room along with the democrats. this is the first time everyone has gotten together for a face-to-face meeting to hash out these issues since the shutdown began. democrats will say that they have a serious offer already on the table. they plan to vote tomorrow on a package to reopen the government they will do that by funding the department of homeland security through february 8 and they would include funding for the

rest of the affected agency us there the end of the fiscal year the white house, however, they say the package is a non-starter because it doesn't include money for the border wall. while all of this is being hashed out here on capitol hill and at the white house, the list of affected agencies continued to grow. we see the smithsonian museums closing their doors for the first time today as they are running out of money the epa closed over the weekend. the fcc is set to close tomorrow if there is not some sort of miracle breakthrough over the next 24 hours. guys, despite the fact that this meeting is happening at the white house, the expectations are low for any substantive progress today david, back to you. >> okay, ylan mui in d.c. for us, thank you. when we come back, fresh off the successful completion of the merger between barrick gold.

we have a lot to discuss including the price of the metal itself which is in striking distance of $1300. shares of tesla shrinking although it had been down. this on a missed delivery num r number. >> plus, former hain celestial ceo irwin simon. we have a lot coming up. as we those break, the top performing stocks on the s&p which i should point out is well off the lows of the session now, down just .59% "squawk on the street" back right after this

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barrick. >> barrick gold and rand gold resources completing its merger, now trading at the new york stock exchange and the ran ttor stock exchange under the tick er simil symbol "gold." joining us, mark bristow congrats on getting the deal done. >> thank you. >> i was looking at the conference call in september when you were discussing the new deal you said, to thrive we have to go where the gold is that makes sense how does the barrick deal enhance your ability to go where the gold is? >> it puts us into the footprints where you find world class gold deposits and that's where you've got -- if you look at gold mining, the value of gold mining sits in the quality

of the asset because we can't prescribe the gold price but what represents o s our revenues the great, the quality of the gold so between barrick and rand we put together five of the 108 top gold deposits in the world and to be a world leader, it's good to have at least 50% of the best mines around the globe. >> you do talk, though, a lot -- i know in the conversations you've had with your investors about longer term and your goals longer term, although many people just want to make sure you'll be running the combined company longer term as well. >> yes, long term -- mining is a long-term game in a very dynamic global economy and the gold prices go up and down, not necessarily in that order so as stewards of our owners investors, we've got to make sure we allocate the capital

band able to deliver long-term returns not only for our investors but also our host country governments who are very important stakeholders in the relationship. >> but what does this deal allow you to do differently more to a different way or scale that you weren't able to do previously? >> so rand gold before the merger had two world class assets, two of the top-ten assets, one in drc, one in mali. and over the last 23 years we've delivered with one of the top performers in the ftse 100 and barrick brings a cluster of world-class assets to operating mines, one developing mine and a new project all in the world-class category in nevada which is a very stable economic address. then it has very big assets in

argenti argentina, in the chile argentinian border and it has an enormously large mine in the dominican republic, 30 million ounces and then some assets in papua new guinea so my point is if you want to be relevant in the gold industry, and we're running the risk of not being relevant in an a public market that has massive market caps so today barrick today stands apart from all other of its peers. >> what are the risks of irrelevance? >> gold is quite a small industry, a hundred billion dollar industry and so if you keep operating as small little companies trying to make a turn on a public market that is a much larger entity that you have -- you run the risk of

becoming irrelevant. >> and then you told me that that there would be some 20,000 employees and contractors. are there challenges with managing the increased power you need to make this market work? >> my approach to management is as flat as possible. what helped us in the past is being agile, more mod americerne way we approach it, smaller corporate office, more control of the organization so we've created three key executive regions -- africa with its own executive team, the americas, north america, canada, alaska with another team and then latin america with another eam. >> each of those are larger than the average size gold mining company today. >> we have to talk about gold prices because we're coming off of a year where stocks had their worst year globally since the

financial crisis you saw defensive plays do better, the yen. gold ended the year down is it frustrating to see it's not getting its typical safe-haven love? >> we're our own worst enemies as gold miners and this's why i celebrate today in putting these two companies together with a leadership that really has alignment on what we need to do and we don't want to invest in -- we don't want you to invest in barrick because you need gold. we want you to invest in barrick because you're investing in an insurance policy that is paying a return that's what rand gold has done. >> how closely correlated is your stock price to the underlying price of gold >> it's always going to be correlated the big thing is can you deliver value for your shareholders at any time of the cycle? and that is the key and the gold

price went up from 2001 to 2012 and no one made real money out of investing in the equity at the end of the day because management didn't take that opportunity and crystalize a margin that it could return back to shareholders. and shareholders need that in bad times and so i believe that with this is a set quality, the quality of management and our joint strategy of dlifi ideliveg real value, we will offer something different to the market >> you said you would be ceo for as long as it takes. how long is it going to take >> well, you know, a couple of years is -- before we start seeing the real benefits and i don't plan to leave just at that point so i always said 65 for me is -- i don't have it planned to retire

it's a great time to be in this industry and such a fascinating opportunity to build -- to take everything i've learn ed in my lifetime and apply it to a better, bigger, more exciting portfolio. >> we appreciate your taking time with us congratulations on getting the deal done. mark bristow, ceo of barrick. shares of tesla sinking after the company announced fourth-quarter deliveries that missed wall street estimates tesla said it delivered 90,700 cars in the past three month, up 8% from q 3. as we head to break, look at the worst performing stocks in the dow 30 equity is back rhtft ts.ig aerhi

welcome back to sweet. ti -- "squawk on the street." time for our etf spotlight you're looking at the noise around credit markets. >> high yield. >> sara and i were talking about that at the top of the show. >> right in focus.

>> it feels like it will be an area of more focus. >> to the extend that the end of the year suffered the this illiquidity, there's talks that banks and hedge funds and everybody drinking their balance sheets down, shrinking it may be a cause of the weakness in fixed income markets you would think once we get into the new year those go away you want to watch the hyg high-yield etf in particular for a sign you're seeing people willing to put risk back on. not seeing that. when you look at this chart, very weak, negative returns on a price basis. also on a total return basis i think you lost money in high yield. never lost money two years in a row since high yield has exist sod that would be super negative if the whole year were down but this is more pronounced when you consider treasury yields have been going down so that means that high yield spreads are going up they went up 3.2% at the beginning of the fourth quarter to 5.3% at the end of the year that's a big move.

it's not at multiyear highs but it's giving pressure on other risk assets. also tremendous put interests in this etf so the thinking is people who own junk bonds aren't selling bonds as much as they are hedging buying puts in the etf the indexes seem to be ruling right now. also no issuance. >> none, zero in the fourth quarter. nothing was going on even at 8%, to your point, people don't want to step up. >> 8% absolute yield so it's a frozen market and you have to see it loosen up if you get an idea that we think growth is okay. >> that said, not hearing many people talk about default. that still doesn't really seem to be something that is a concern broadly speaki ining bes it's -- >> it's a year down the road and cash flows are okay. you have refinance it's more about risk appetite than anything else >> does that translate to squeet equities >> it does. >> mike, thanks.

let's get to headquarters and sue herera with the news update. >> good morning, everyone. here's what's happening at this hour secretary of state pompeo meeting with incoming brazilian foreign minister ernesto arujeo. pompeo express confidence in what he deems as shared values between the two nations. >> you identified cuba, we spoke about venezuela, nicaragua, these are places that people t people of those countries don't have the opportunity to express their views, to speak their mind, to get government that is responsive to them these are the kind of things we intend to work on together. security guards shot and killed a man at a nevada casino yesterday. it happened at the green valley ranch resort in henderson. people told security a man with a gun was inside witnesses say three security guards then confronted the man when he drew a handgun two of the guards shot and

killed the man the shooting remains under investigation. if you're donating to your favorite charity this year, google assistant can help you do it as long as you enabled the payments feature you can ask it to, quote, make a donation" and choose the amount you have to contribute you have to confirm the donation on your phone before the money is routed to the charity. you are up to date that's the news update this hour guys, i'll send it back down to you. sara >> sue, thank you. sue herera. straight ahead, hain celestial co-founder former ceo irwin simon will be here at post 9 in a cnbc exclusive to talk about his departure from the company and his new role as the chairman of a cannabis company, dow is down 189 off the lows of the session. we'll be right back. ♪

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the street." i'm vasara eisen with david fab and contessa brewer. the trading session has already been low we're down 300 points on the dow. down a full percent, 236 within the s&p 500, energy is the only positive sector here to start out the year and the nasdaq composite outperforming the other three, still down 0.8%. most dow stocks are lower, led lower by unh, merck and pfizer concerns about chinese growth growing slower with a sub-50 manufacturing index in china and shrinking. >> and u.s. markets back in the red. investors' focus for 2019 remains on the fed and what's to come for the rates there let's get back to headquarters and steve liesman keeping an eye, gaming out what you expect to see in 2019 steve? >> the market begins the year thinking the fed is done none and done is the mantra.

no hikes it's worth looking at this two ways what is the fed expecting and then gaming out what has to happen in the economy for the market to be right what is the zero-hike scenario pantheon said markets think the fed is done. this time last year markets thought the fed would hike twice in 2018. the fed's no hike scenario, it came up right away 2 .3% gdp growth 3.5% unemployment. under that economic scenario with that outcome, the consensus fed forecast is for two hikes so what is the zero-hike scenario here's my guess for the economy with the numbers you might see for the market to be right you don't want these numbers if you did zero hikes you would be below potential growth. a half point to 1.9% growth, rising unemployment, 2% inflation or falling spchlt i

would say between 2 and 2.75%, stable or rising inflation from the 2% target then you have to two to three hike scenario where you might do 3% plus growth gdp, unemployment continues to fall and inflation again at the 2% target or rising one way to sum this up, if the fed is done, the economy is going to be weak if the economy is stronger, the fed is not done, you cannot have it both ways i'll be back at 11:00 with a detailed look at two scenarios the rosy and the ott mistic scenario for gdp and we can do this like the latest "black mirror" episode, bandersnatch, viewers can pick what episode they want, the rosy or not rosy. >> you didn't do the cutting scenario, steve. that's what i want to know but not a lot of people are -- >> you can gain that out, too, if you look at the wall, you go down below that.

if we're going do zero growth or have negative numbers, i think there's a potential for first a pause and then a cutting scenario after that. >> steve liesman gaming out the fed for 2019 shares of canadian cannabis company aphria rallying this morning, the company becoming the target of a hostile takeover, same day our next guest was announced as appointed chairman joining us at post 9, former ceo and founder of hain celestial, irwin simon. i guess founder and former ceo i want to talk about hain and your outlook for the consumer but let's talk about your new gig at aphria. what's with the hostile takeover bid and short sellers? >> i guess drama follows me. i'm used to drama. as i said, when i used to talk about hain, i used to bring you samples. we would have had a lot of drama on the networks today.

the cannabis industry remains me of the organic food industry when i started in 1993 in the u.s. alone it will hit a $50 billion business if every state approves it today. there's nine states, 33 states from a medical standpoint. when you have constellation brands, you have the package goods companies looking at it. it's the health aspects of it and there's so many people i've talked to and said i've had so much pain and now i'm taking cbd oil. i haven't had a good night's sleep in 25 years now with cbd oil i'm getting a good night's sleep. >> novartis partnering with tilray is a good example. >> yes, so canada today is a

$5.5 billion industry in canada with 28 million people they do a billion dollars in vape pens. you saw what altria paid for joules but what would you rather your kids be smoking, a juule or a cannabis vape pen. >> neither, maybe? >> pardon? >> neither maybe >> well, i see tremendous opportunity in the whom aspect of foods, drink, supplements and vitamins. >> was the aphria fit into this budding ecosystem and why are you fighting a hostile takeover already? >>. >> there has been no official offer for the company and ggb said they'd like to either

partner or merge with the company. so i've had to deal with guys like carl icahn but there's incredible assets. they have a two million square foot facility in ontario which grows the 228 kilograms a year so the opportunity is there and there are a lot of credible assets in aphria where they have licenses all around the world so, again -- >> your goal to make a food -- when i saw irwin simon joined as chairman of a pot company i thought okay, we'll get a food and beverage deal with this company because that's your world. is that your goal? >> there's a food and beverage deal, a retail deal, multiple deals out there and there's no reason aphria can't buy a

consumer package goods company, use that company as a delivery like a hain celestial. >> i have never seen so much interest in a category right now. you want to talk about trends in 2019 the whole cannabis world is a hot trend. >> can we go back to green growth, snow if an acquisition takes place, will you lose a slot on the pink thanew york stk exchange will you be delisted >> that's a possibility but there's no intention to lose that deal and ultimately the thing is -- i think the opportunity for aphria to do it alone, to partner with a from e.j. i c -- strategic company is -- >> do you think green growth is apartner >> at their current offer,

absolutely not could they be? absolutely they are smart guys and with this industry, like any industry, and we can talk about the food industry there has to be consolidation today there has to be tremendous investment aphria has spent a ton of money on these licenses around the world. it's great to buy the licenses but how do i get the distribution and the r&d and the products delivered >> let's talk about your old industry a bit so to spooek. we were talking about con rag that got crushed on the pinnacle deal is there any hope for the old business you used to be a part of in terms of generating growth >> i'm a large shareholder in hain they hired a great new ceo and i have every bit of confidence in him to take hain to the next level. after 25 1/2 years i wanted to do new exciting things in life and that is why the cannabis

world, some sports stuff so there has to be consolidation in the package goods world there has to be some change in brands of what is happening out there. conagra bought pinnacle and you saw what happened. >> why hasn't anyone bought hain >> wehy hasn't anybody brought hain yet. >> the stock is down 62% the hope investors had in this stock is that it would be ripe for a takeover on the way up and that sort of fell apart. >> i think hain went through a review, got to a good place. hain has tremendous brands if you think about it -- i see in front of you greek yogurt we are one of the first that were in cold pressed juices. we're the first into organic baby food, blueprint, terra

chips today is a billion dollar brand. if you ask me what are are the hot trends looking at in 2019, plant-based foods. they own yives, the linda mccartney brand. they're worth a fortune. back in '94 and '95 when i was buying them for $20 million, you can't do that today. so something will happen with hain. >> when you look at what happened to conagra, it doesn't send a message that it's good to do do deals and craft heinz hasn't done anything for years now having looked for the very large deal what it will take? >> i say this here there's a lot different between earth's best and terra chips and garden of eden than there is bird's eye or chef boyardee or

the kraft brands, kraft macaroni and cheese the thing is changing is retail. a third of retail will be brick-and-mortar over 20% of products will be brought on line and then there's something called click-and-pick. the whole 33,000 retailers are out there in regards or the the mass market so brands are going to get discontinued and one of the things that retailers have done a good job in the u.s. is focused on private-label brands where before that was not the way as europe, et cetera so the best brands will win how do you connect with your grands to the consumer and millennials. and me believes wamillennials wt transparency in brands, two, three, four ingredients, sustainability, what is the packaging made of? and they're cheap. they want value. they want to pay the same price for organics and natural that they are paying far conventional

break. when i started this company there was whole foods and then there was 10,000 independent natural food stores out here the world has changed. natural organic has gone mainstream but mainstream like conventional brands out there so i see some major consolidation going on in the business i see the big brands winning and some of these brands are going to go away because millennials and consumers won't buy them >> a multiyear story. >> and with cannabis, who needs to buy these brands anymore? >> there you go. irwin simon, good to be with you. >> thank you for having me. >> founder of hain celestial now chairman of afterphria. look at amazon the price target has been lowered on the stock from 1800 to 1900, saying the current price provides investors with a rare opportunity to own the clear leader in cloud and

excommerce "squawk on the street" back right after this

so dow is down only 153 right now. let's get over to the cme group in chicago rick santelli with the santelli change rick >> thank you i'd like to welcome my first of the year, peter, happy new year and thanks for joining me. >> thanks very much. >> something caught my eye 40% of the s&p 500 revenues are sourced outside of the u.s let's put that over on the left side on the right side i wake up and read about how the ecb has taken charge of an italian lender.

now, there's a lot of banks that are insolvent or have nonperforming loans, so the first issue is i'm not sure why they picked this particular bank, but having said that, our problems are basically that the rest of the globe is slowing and a lot of other issues crop up. but isn't that really the main issue that the markets are dealing with in your opinion >> certainly that was the story in 2018 the weakness really started overseas, and particularly china, that is slowing regardless of the tariff pressure that they're now feeling. they're going through their own deleveraging process it's not really deleveraging, it's trying to control the excessive credit growth but they're slowing nonetheless. certainly germany which is dependent on exports relative to their economy since it's 40%, they're feeling the pressure of a slowdown in china and asia in particular south korea is feeling the pressure so we saw a slowdown in global trade that is now beginning to affect the u.s

>> and the other question you had in your writing i found interesting, would you rather have a 3.5% fed funds target rate and a 3.5% economy or would you rather have the current 2.25ish range and have a 2.25 to 2.75 range economy i like that notion >> if the fed is done, which the bond market is pricing in, we should be worried about growth if the fed is done with this cycle, which is barely above the rate of inflation, then we have bigger issues that we have to deal with. it shows the huge amount of sensitivity that the economy has to very small changes in interest rates, which makes sense because we have created a very credit dependent, cycle dependent economy on credit rather than savings, but i think that's an issue. if the fed is able to get the fed funds rate to 3%, it means

that the economy has actually hung in this year. you're still going to get to eventual slowing, but i'd rather have a fed funds rate at 3 because the economy is good, giving the fed room to move downwards when the economy eventually slows rather than getting stuck at 2.25 or 2.5 because that reminds me of the bank of japan getting stuck at zero which they have never been ail to get themselves out of. >> and that's a good place to leave the conversation because those who are criticizing jay powell ought to contemplate that very notion. peter, thank you contessa, happy new year, and back to you. >> happy new year to you, rick, thank you. let's send it over to jon fortt with a look at what's coming up on "squawk alley." >> happy new year. a couple of insights here. the market did take a beating at the end of 2018, but don't call it a bear market, and also if history is any guide, the major indices are almost guaranteed to end the year higher.

who says that? ngermaetellan, number one lo-tm rk timer he's coming up on "squawk alley.

welcome back to "squawk on the street."

i'm dominic chu. stocks well off their lows mostly in negative territory but energy is the outperformer today. gains are being led by pioneer, also apache and cabot oil and gas. big trade to watch here, guys. i'll send it back downtown to you. >> outperforming after being the biggest loser of 2018. dom, thanks. coming up, the final hour of trading for the first day of 2019, the final hour has been crazy. will the big swings we've seen in the last hour carry over into the new year plus we'll have a bull/bear debate on tesla. the stock today is plunging on those disappointing q4 deliveries we'll see if this is the year tulyakhort sellers on tesla acal me their case "squawk alley" coming up next. ♪ there goes our first big order. ♪ 44, 45, 46... how many of these did they order? ooh, that's hot. ♪

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and three: these are the only medicare supplement plans endorsed by aarp. learn more about why you should choose an aarp medicare supplement plan. call today for a free guide. good morning it is 11:00 a.m. in washington, d.c., and 11:00 a.m. here on wall street. "squawk alley" is live ♪