box" begins right now. ♪ live from new york where business never sleeps, this is "squawk box." ♪ >> all right good morning welcome to "squawk box" here o cnbc we are live from the nasdaq market site in times square. i'm becky quick along with joe kernen and mike santoli. andrew is off today. equity futures are down sharply after the drop in apple shares and that warning about what's been happening in terms of sales and revenue there. dow futures indicated down by 370 points yesterday the futures made a stunning recovery from these levels they ended the session in positive territory though. that's the biggest advance you've seen on the first trading day of the year in just about

ever if you're looking at this now, you'll see the dow futures are indicated back down 365. s&p futures down by 42, the nasdaq down by 177 apple is the big story the tech giant cutting its quarterly sales forecast citing slowing iphone sales in china and lots of other things the china sales was the big issue. apple sees first quarter revenue of $84 billion, that's 5 billio to $9 billion below its origina forecast of between 89 billion to 93 billion. this is the first time that apple issued a revenue warning since the iphone was launched in 2007 tim cook sitting down exclusively with cnbc. >> as we look at what's going on in china, the -- it's clear that the economy began to slow there for the second half. and what i believe to be the case is the trade tensions between the united states and

china put additional pressure on their economy. so we saw, as the quarter went on, things like traffic in our retail stores, traffic in our channel partner stores, the reports of the smartphone industry contracting, particularly bad in november i have not seen the december number yet i would guess that would not be good either. so that's what we've seen. >> cook says this is not a case of china boycotting apple products >> apple has not been targeted by the government. let me take any doubt about that away at the top. there are reports, sporadic reports about somebody talking about not buying our products because we're american, maybe a little bit on social media, maybe a guy standing in front of a store or something my personal sense is that this is small keep in mind that china is not monolithic, just like america is

not monolithic you have people with different views, different ideas do i think anybody elected not to buy because of that, i'm sure some people did, but my sense is that the much larger issue is the slowing of the economy and then the trade tension that's further pressured it >> look at apple shares, immediately falling off yesterday on this news they're down by 8% this morning, a decline of $12.50, back to 145.38 we were saying this is a low year-to-date but also a 52-week low. >> a point below the christmas eve low. that was the previous 52-week low, 146 and change. the question is -- a lot of questions. >> momentum, suppliers no longer doing iphone guidance.

that knocked the stock from 1.1 trillion down to 700 billion a lot of stuff was in that stock. >> smartphone weakness that been a big part of that story line. >> i was looking at goldman sachs, they said they thought smartphone sales for everybody was down by 15%. they thought most of that was coming from the low to midrange. they didn't think apple could escape that. what is amazing, a takedown of 5 billion to $9 billion in revenue, 60 days from the last time they announced this apple is traditionally conservative on where they give these numbers, that makes you think china must have fallen apart. >> the suddenness of the slowdown some are saying it could not help that you have this noise about the boycott after the huawei address mature product category. >> i would blame china if i were tim cook, i would keep saying china, china, china

i think that's a convenient -- i bet he's happy he has china to point a finger at. >> they didn't only blame china. >> he didn't, but -- >> they looked at the product cycle slowing down not playing in because of some -- >> it's nice to say a macro slowdown in economy is affecting things i'm curious how that trade tension came home to roost in apple's -- they have mature cycles >> if you look at some other numbers, if you look at services, services was up 27%. it didn't play through on a lot of those issues. >> this is a quarterly revenue number, isn't it $84 billion. >> the numbers are massive unbelievable >> i had to go back and look that's why i keep saying 5 billion to $9 billion miss. when you look at the numbers,

you think it's not that big of a miss, but it's $5 billion to $9 billi billion. >> they're not saying it's a new run rate >> you may think it's convenient to have china, the first thing i thought when i heard these numbers, look at every company doing business in china. nike may be an outlier i don't know if you can take shoe sales and compare it to this, but if you were counting on china for business. >> china is where a large part of the growth is >> the margin of dollar is coming from there. we'll talk about this obviously it's a microcosm for the overall market the market is down a lot we have taken a lot of value out of the overall market. the process of the numbers coming down when companies confirm the weakness, it's not

always clean here you have 7%, 8% down side move in apple after it's down 30%. maybe most of the bad news is in, but is all of it >> i have someone saying apple slowed because of the trade war. that's such a knee jerk -- >> tim cook himself went out of his way to say -- >> but he also left open macro weakness in the economy. i understand that. >> i thought their statement that they put out -- >> you thought they didn't try to -- i thought they went out of the we their way to not insult the u.s. government or the chinese government they were walking a fine line not to sound controversial >> he said i don't think anyone is boycotting or anything like that we're back to deciding whether it's a good thing that china's economy is slowing >> right >> that's what we're trying to do turn the screws to get some concessions on all of these long

standing disputes. we've been making the point, if we do turn the screws, their economy does slow, yeah, now they have to bargain with us but it comes back to haunt us in our own results. maybe it doesn't hit our gdp directly, but this is the most important u.s. company big story. >> there is ripple effect. apple suppliers getting hit. in asia, check out foxconn, sk hynix, sunny optical. those are not huge moves stocks in europe dialog semiconductor, stmicro, iqe and infineon down. those are also on the move just a general sense that

smartphones as a category -- >> ams down almost 20% >> that's a big move check apple's big suppliers in the u.s. skyworks, broadcom and universal display, which makes oled screens. the primary supplier of the face i.d. feature also down everybody is getting a hair cut. that's the theme now over the course of the day you have to see if people are trying to see winners ver s versus lon a relative basis >> qorvo, you know them? i do not >> jose qorvo? no >> that has a "u." >> i know. >> this one has no "u. >> qantas -- >> that's an acronym >> qatar but it's rare. >> i should say that like a "k"?

>> no, i think i would like to buy a vowel for them all right. >> we are also seeing a drop in shares of u.s. companies with exposure to china. apple, boeing, caterpillar, deere, micron. the standard list of names to watch. the market gets worried about china exposure, they go to those. >> our sleep-deprived co-worker, cramer, has already -- i don't know if he slept at all probably he's back. you buy apple today? you sell >> you will hear jim's take. we keep contrasting the magnitude of the warning with 7% to 8% incremental down side. >> 145 buy or sell? >> 145, you know, longer term? >> what would barron's

recommend? >> buying on a valuation basis, because it's in the low end of its forgive to ten-year valuation range. it's being priced as if iphone is a no-growth business, but it's the most profitable in the world. >> goldman sachs is lowering their price target for 12 months to $140. a lot of commentary that warren buffe buffett's price basis is in this zone >> barron's would say -- unless it was allen ableson, he would say don't buy. he was negotiate sieative sinceo or three >> it's getting there. you have not gone back that far in time in terms of this price apple had such a huge run up to 1.1 trillion in market cap, it's not like you're buying it at a five-year low. it's going back a year or so >> all right, boys what do you want to talk about today?

i don't care joining us is brian levin and steven whiting we can work it in. it doesn't matter if this is your thing it's macro and micro such an important stock and sentiment gauge. it's a fair question you don't specifically follow apple, but what do you aprttribe it to? trade war or just blame apple? >> we don't need to specifically blame the trade war but we have to be careful of tightening financial conditions in the united states and the global economy. china's issue is specific with the maturation of the iphone sales. so i agree with that what i do worry about on an overall basis, what we're seeing with financial conditions, what that has men for the currenc mee

currency and over all economy. we will continue to deal with this volatility. >> everybody will need a new apple phone eventually my battery is 88 >> you can get a new battery >> they can put that in there? >> a new battery is like 30 bucks. >> have you ever had where you can't put your charger into your -- >> because it's broken, sure >> not because it's broken that happened to me last night, i looked i had 60%. really your life passes before your eyes. i was like i need to turn this off. i need to save my 60% to make the ride in tomorrow i need to immediately go to apple. what i did instead, i googled not being able to -- it wouldn't go in no matter what we all tried you use a needle and you go in and you scrape gently where it is >> it had slime? >> no little lint, whatever it

is the slightest little thing -- >> like belly lint >> it took me ten minutes -- >> you sat there preciously cleaning it? >> yes i got the thing out, that allowed it to charge that's neither here nor there. it finally worked -- >> what you described is why the ecosystem -- >> is so essential some services are up 25% that wasn't a trade war thing. there are things showing that apple needs to -- its business model needs to go forward as well instead of just being dependent on iphone upgrades, which they will get any way. >> in china even >> we never asked you. is what we're doing with china worth the angst and the market share losses that we -- or mar can t

market cap losses? >> the fact that, you know, we announced a trade deal with the european union in june we took large hits to european auto shares, all sorts of companies trade sensitive there. we never recovered any of them we seemed to get into this we seemed to have agreements to agree, but we don't get any of the relief from this i think it's going to be interesting this year if we can have trade deals that can create and pull back tariffs and create some sort of relief or not we're fragile. we're fragile on policy. you were just saying, we have chairman powell tomorrow we really need to find out whether they intend for financial conditions to be tightening like this that we want outflows from the fed's balance sheet of $50 billion pe month through the year tightening every single month. that's probably half as large as the rate hikes in terms of the

impact, this is what we intend right now. so i think we need -- >> do you have a calculation for how many rate hikes the balance sheet unwinding -- i've seen someone say it's already six quarter point hikes. >> you might see -- >> is that a real number that's 15 hikes then >> the federal reserve's own modeling suggests -- some of it, that the impacted is so is halfg as the rate hikes. how seriously we can take that when this is untested is unsure. certain level of rate hikes at some point will have a larger impact than the one before it will not be linear. we can't just say treasury yields are falling, libor up at 2.80 private financial conditions are tightening, equities are down, this is all going to plan. we need to hear something forward looking. >> we saw this into 2015 and

2016, so that line about history repeating itself, the first time it's tragedy, the second time it's farce applies here. ultimately in '16 we had a fed that backed off, a dollar that stabilized and oil prices went up and the bull cycle continued if we get too tight with the fed and we continue down this trade path we have to worry about the strength of the economy. the starting point is quite good we're ways away from a recession in the united states, we do need to be careful here >> doesn't feel like comedy or farc farce. >> what would an overshoot in apple look like? i saw 144.5. >> i think going back about a year and a half in price right now. could it go to a half trillion >> i don't know. i think it's more like 120 >> that would be a half trillion we're at 690 now

>> 15% down. >> 15 from here. >> i don't know. >> you remember the other ones that were 600 ones never got back there >> you talk about an overshoot that was extreme >> what was the overshoot, 1.1 trillion or 550? that's half. >> yeah. >> all right thank you. i don't know what it could be next time. next time it could be lululemon. just be ready when you're coming in here for whatever you need to talk about even if you know nothing >> right >> we will be. >> okay. >> especially lululemon. >> any of those. netflix. tesla. see what happened to tesla you have comments on tesla we don't have time >> thanks. when we come back, more on apple's big warning. did the technology giant introduce too many products too

soon we'll hear tim cook's take and debate it next. first a look at the premarket winners and losers in the dow. leading the way for the winners, three losers everybody down across the board. we'll be back in a minute. ♪ [ dog snoring ]

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and it protects you with 24/7 professional monitoring. i guess we're sleeping here tonight. xfinity home. simple. easy. awesome. call, go online or demo in an xfinity store today. our style is we release things when they're ready. i think that's the way it should be if you ever start worrying about cannibalizing yourself, you can talk yourself into not doing both things. all of our products were ready over that period would i have liked some of them to have been ready a few months earlier? of course. generally we'll still march down the road of shipping these when they're ready. >> that was tim cook responding to the question of whether apple introduced too many products too soon the tech giant cutting its

quarterly sales forecast after the bell yesterday citing slowing iphone sales in china. apple is not alone in feeling the pressure of u.s. china trade tensions the consumer technology association says tariffs on imported chinese products costs the tech industry overall $1 billion per month. for more on that, let's welcome in gary shapiro author of "ninja future: secrets to success in the new world of innovation. these kinds of warnings, these kinds of pressures, they'll be realized across the consumer technology area, is apple a bellwether in this respect >> first, thanks for having me the world of innovation is changing so rapidly as we will see at ces next week there's winners and losers all the time even take the telephone era, it started with motorola, they were

replaced by blackberry, nokia, apple and samsung. it's a tough, competitive world. apple is a phenomenal company. i think they'll do fine. this is probably a buying opportunity, but we have to recognize because of the trade war and tariffs, these tacks, it's hurting both china and the united states. the imf said this is costing a large percentage drop in the percentage of growth in gdp, they were wright this is a dang roerous path tha president trump has undertaken and is leading to what will probably be the trump recession, it affects china, china buying and the u.s. we heard about it. apple is just the most recent earnings call. this is a dangerous path we're happy with the truce now, but we have to resolve this like we did with canada and mexico. >> apple was careful not to try and point fingers at any kind of backlash against american-made products, even though we have

heard reports of things like that do you have a sense on whether american manufacturers are suff suffering from additional boycott and resistance by consumers in china >> president trump is correct in that china was not being fair to out of chinese manufacturers for a long time. he was right to try to do something about it his tactic was wrong the chinese don't have outright boycotts they have some challenges with japan, their consumers get a message that they shouldn't buy japanese products. that happened in the past. i have not seen it yet for american companies there's no question that in the chinese press, americans are being portrayed increasingly as the villains there's no doubt that the chinese citizens are getting a message from that. it's a dangerous path when we don't have a good, strong relationship between the two top economies in the world if we could resolve our differences and realize we have different

philosophies and move forward, we'll do well. there's a big battle going on not only on trade, but the future of technology, artificial intelligence, we have to be smart to be able to be in that battle >> you're saying both things, gary you're an association president for technology you are not a ceo, but every ceo has a quarter to worry about, that's the next 12 weeks there's never a good time to address these things with china. if you're still the cta guy five years from now, you let china completely lap us by stealing technology because you didn't want to do anything near-term that might impact you for the next three months, is that the thing you want to be known for what do you mean, we should have done something but we didn't do it the right way if you didn't like t whatshg it your idea? >> i've been clear for ten years what we should be doing. it's not tariffs

tariffs are tax that hurts both countries. we should have had a birlateral relationship we have a big event in china we have to have a partner. we are bound by ambiguous rules. we would like to actually have the same type of rules we have in the united states, clear, transparent, we don't have to have a partner, we can buy real estate here. we let china buy up a lot of the united states -- >> you've been writing these things for ten years, nothing has changed. we haven't made any progress in addressing those things. no one wants a nuclear waste site in their backyard either, but sooner or later don't you need to -- it takes pain to make progress no main, pain, no gain, right >> i agree, but apple has become a major export market for the united states. it's difficult, it's not right, it could be better, but that's how you do it you don't declare a nuclear war with trade as we

did. the biggest mistake we ever made we are doing the same thing we did back in 2000 congress gave limited authority to the president which he appears to be overexercising and he's gone and imposed 10% tariffs, and soon they'll go to 25% if they don't strike a deal. this overhang over the stock market, over the economy, over the relationship is unhealthy. next week at ces we'll have over 60,000 people come from outside the united states and now we're having all sorts of things, a government shutdown. our government is becoming the challenge to doing business in this country that's something that with a billion dollar tax, with the government uncertainty in our policy, we are facing challenges globally president trump has done great things with cutting taxes, eliminating rules, but he's stepping all over it with this very strange and difficult foreign policy, which is imposing tariffs and providing

uncertain leadership for america throughout the world that is what i think is bringing down the economy of course we're due for recession. this trump recession should not be hastened by our own actions of our own government. >> do i think all this pressure on both sides can come up with something of a workable deal by march? it's not that long to wait >> has to. trump measured himself by the stock market he is looking at the measurements today he has to be thinking that this is not good. we have to resolve it. he resolved it with mexico and canada, a new nafta, which is really the old nafta with special effects and adding for new technology like digital. it's a good deal we should conclude it in congress he has to come up with a deal in china. the question is what does he want it hasn't been disclosed they have not said what they want and what can china give? and does the trump administration really want a deal >> all right we'll see relatively soon.

gary shapiro, thank you very much >> thank you. all right. you guys watch football? football fans in >> sure. mrafrnlgtso >> playoffs are coming up. you saw sunday night football? eighth straight year, up 7%. up in the neilsen's. biggest show on anything 11 straight years for those younger people, 18 to 49 tuning in al and cris. >> live from the beating heart of business, new york city, this is "squawk box." >> it's kind of a symphony type thing. would you play that one more time isn't it cool -- >> live from the beating heart of business, new york city, this is "squawk box." >> from the days when the bengals were half decent.

coming up, a new congress will convene in washington they will face a big task, dealing with the government shutdown former senator judd gregg will join us next here's a look at yesterday's s&p 500 winners and losers i consulted with your grandmother's doctor. we can do the screening at her house. hi. this is the man that's going to check your eyes grandma. cognizant ai solutions are helping healthcare companies advance diagnostics and prevent blindness in patients with diabetes. everything looks good. you have beautiful eyes.

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welcome back you're watching "squawk box" li live from the nasdaq market site in times square. ♪ in washington, the government shutdown is entering its 13th day a new congress will convene for the first time joining us now to talk about this is former u.s. senator judd gregg. thank you for being here today >> good morning, becky nice to be here. >> as a long-time washington participant and watcher, how big of a deal is this? >> it's a very big issue i don't see a way out of it at this time. both sides are speaking to their base and for their base. their bases on both sides don't want to compromise we're talking about $5 billion, which on a budget of $4 trillio is minute. it's not the money it's the fact that this new

democratic house came to office with the purpose of destroying this presidency. that's what they ran on. we have to be honest about it. this president came to office with a commitment to do something on the wall to his base, even though the wall in many ways, it's a good idea in some places on the border, in other places it doesn't make sence. the two folks asense. the two sides are locked in. the only way i see this resolved is if some element of the 25% of the government shut down, tsa for example, actually decides to stop working or do a business slowdown you end up with massive lines at the airports, then the american people will get ticked off about what's happening they'll feel the effects of the slowdown, then congress will react. in the past, these government shutdowns usually affected americans by sending out social security checks. this shutdown hasn't yet

until the american people are engaged in the effects of the shutdown, i don't see congress being pushed into action >> you think congress will be the one that blinks? >> i think both sides -- i think the president is ready to blink. certainly vice president pence put that on the table yesterday or the day before. the president walked it back of course i suspect the number is less than $5 billions that they'll agree on and there will be a deal on something else that has to do with immigration that the democrats want the deal is there. the deal is there. >> you point out it's 5 billion. i don't know why you couldn't do less and say it's not just the wall like you said, where we need a wall, have some funding for that where you need money for ice agents, use money for that

it would not be hard to do, but it won't be done until at least pelosi is speaker. schumer, every word out of his mouth is the trump shutdown because he has that from the meeting. >> trump said that >> i know he did he said i'm willing to take it there to get border security corker later will say this is a made-up fight that the president is just trying to gin up his base, it's a made-up fight and there was no reason, that the only reason to do it is that it's juvenile. mitt romney made some -- what did you think of that? mitt romney? >> you know, our party has always had something like mitt romney, unfortunately with the passing of john mccain we lost what was a very serious person who used to point out when the emperor had no clothes

maybemyitt is trying to take that role on he has the right to. he was the former party nominee for the presidency and has status some of the points he made were valid. the president has not acted in a manner that maintained the dignity of the office in many ways >> he accepted that endorsement to get elected in utah it's a weird relationship. corker has a weird rer lagssrelp with trump, too. they're best buddies, they hate each other, sniping each other with these tweets. you expectmore from both politicians. >> of course you do. i think a very good course was shown a few weeks ago at the funeral for george h. bush -- >> throw rand paul in you see what he's saying you wanted to go elsewhere >> they're wrapping up >> you know, if we have judd gregg, we have another minute

maybe, no? >> judd, you think that this will eventually get resolved once it hits the american people how long of a timeframe do you think it is before that happens? there are people who are -- >> i think we're looking well into january well into january. that's before this starts to grab hold in the every-day life of americans as soon as it does, as soon as those calls started to come in to the congressional offices that says, listen, i just waited in line at airport for five hours to get on my flight, i missed it, then you will see action the two parties are not mature enough to reach agreement. as basically joe was saying, this is a simpresident mattle mo resolve. the issue for the base is big. if they don't have the maturity to resolve it, the american people will get upset, that will force them to resolve it >> maybe they're listening today. >> 2.5 billion, throw a wall up

where it makes sense i don't know why -- it's bad you said it at the beginning they ran on destroying a presidency, which mcconnell ran on too with obama >> regrettably that's where we are with politics in america today. it m ccomes down to leadership there is the famous line from cool hand luke, there's a lack of communication what we have today is a lack of leadership >> you know the biggest state where everybody is moving? >> new hampshire >> no. no no where they have the good mainal syrup, vermont >> nobody is moving to vermont don't be ridiculous. >> who made that up? >> all the bad weather that comes to new hampshire comes from vermont >> i'll send you this piece. everybody is moving to vermont didn't say anything about new

hampshire. >> that will destroy vermont's socialist culture if everybody moves there. >> senator gregg, thank you. >> thank you >> did you see this? beautiful shot of woodstock or the fall >> i would appreciate that i don't want anybody else moving to new jersey. go somewhere else. >> i don't think you have to worry about that. coming up -- i live there. i know i like it there. >> most populous state per -- >> i don't like not writing it off my taxes >> most densely populated state. >> you want to write off your exorbitant state taxes we can't do that. new york real estate suffering its worst year since the financial crisis details when we return futures right now, almost 400 down nasdaq taking it hard because of apple. stay tuned, you're watching "squawk box" on cnbc

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apple in almost every story today. we'll be able to have big apple real estate, apple, apple, apple. taking a bite out of the apple stock price today. slicing off -- hitting it to the core, i would say. >> that's better than cutting it to the bone. >> is it appealing at this price? >> stay tuned, we have three hours. at least 10 or 12 that we can do coming up, apple shares now at their lows of the premarket session. as eve offers adam this -- no. a look at the money managers losing the most on the drop. that's next. at&t provides edge-to-edge intelligence, covering virtually every part of your retail business. so that if your customer needs shoes, & he's got wide feet. & with edge-to-edge intelligence you've got near real time inventory updates.

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we're going to focus really deeply on the things we can control. welcome back to "squawk box. today's top story, apple, cutting its quarterly sales forecast leslie picker joins us now to identify the big investors hit hardest as a result. >> obviously, apple, a clear stock for the entirety of the management industry. some of the stock's largest holders include vanguard, blackrock, state street and fidelity if that stock opens down, more than 8% today, that amounts to

losses of about $10 billion for those four firms alone these firms also manage passive instruments like index funds and etfs included in that amount, which may also slip because apple makes up such a large waiting in the s&p. berkshire hathaway owned about $40 billion in shares, a position that shrunk $11 billion over the summer. if the stock opens we're by 8% today, berkshire handling awtha looking at losses of $8 billion a alone. and apple with the largest holders of hedge funds including millennium management, tiger, citadel. these positions are as of the end of september based on recent disclosures and they have likely changed since then it's also worth noting apple's

timing here, releasing these numbers on the first trading day of the year, means that the funds that book heir performance at the end of the year, won't be including these losses, if apple's share prices decline today. >> that's interesting. i hadn't thought of that >> i don't know if it's the funds or if apple has a lot longer to recover. >> or they wanted to make sure the end of the fiscal quarter and holiday sales are in maybe that's a sign benefit of it for years, apple was cast as an underowned stock in other words, didn't have tremendous debts in apple. you see some of the bigot holders. >> and what happens, hedge funds were avoiding apple, a lot of the faang names for a long time. they weren't able to generate alpha without it that all changed in the fourth quarter when apple share prices declined and a lot of hedge funds actually exited.

>> joining us now, tim lesko, the portfolio manager, and you do own apple and some of those accounts, a total assets under management, it's 2%, 3%. and you've ridden it all the way down sold any of it yet >> we did not sell any yet i think that gets to the point what leslie was talking about, this announcement you came back at the end of the year even if you wanted to sell apple at the end of the year, if you're a long-term holder, you have significant gains we've owned since 2005 our cost basis is down in the single digits. so it makes it skvery hard to manage positions like that when you've had those gains over time >> we said, a lot of people saying, we saw it, you've been watching for three months. you've seen the suppliers. you've seen the company itself kind of telegraph the things, as

far as iphone sales weren't going that great that was the takeaway from them not giving guidance anymore with that it's been a break below quite a bit now. actually three or four points below where it was on christmas eve. but there was something that knocked the stock down from $1.1 trillion to 750, 700. now under 700 today. so, how much of this is sort of what was to be expected from what we've already seen and how much is new information, or it worse than people had thought, do you think >> i think it's worse than people had thought they had guided down revenue >> who had guided down revenue >> apple >> prior to that, they hadn't guided down, ever, in 15 years >> no, they guided down from where the street wanted them to be and where the quarterly -- >> but stayed at 91. >> it was a warning which they hadn't done in 15 years. but it clearly was a sign to the street that things weren't as

rosy as people expected. then you had a series of suppliers that did the same thing. and the stock was down 30% it's hard to say that the street wasn't expecting this in some way shape and form i think we had clarity from tim cook that it was over. >> how much could be accounted for with china and how much is problems with iphone upgrade cycles not being what they used to be? >> i would argue that it's probably more of a problem with iphone upgrade cycle the problem with an iphone upgrade cycle you go from 24 months to 42 mon32 months. it's not a problem like we had with nokia in the past, where people stopped using the product. this is really a change. akin to the change we saw with pcs where the cycle was much slower you're now looking 18 months ahead to 5g. really, that's the next change

in cell phone technology >> do you think that's why people are not buying or upgrading now, or it they don't want to pay $1,000 when their phone still works? >> i think that's why people like us aren't upgrading it yet. it will be eight months before they start thinking i can get -- >> 5g is after 4g. we know what that is >> maybe the 6 >> if you look at the sales and not relying on sales and you look at services up 25% year over year, is that enough to say long term i still really like this >> yeah, long term, you still really like it and reasons for people to continue to buy their products and if it's a three-year period where apple is trying to extract 400, $500 from that could be a subscription >> tim lesko, thank you. when we come back, legendary market strategist byron wien will join us to unveil his 2019

surprises for the market stay tuned you're watching "squawk box" right here on cnbc which i used to offer health insurance to my employees. what's in your wallet?

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♪ the stock heard around the world. >> as we look at what's going on in china, it's clear that the economy began to slow there for the second half. and what i believe to be the case is the trade tensions between united states and china put additional pressure on their economy. >> apple, slashing guidance, claiming weak sales in china, among other things a warn sending shock waves through the global markets this morning. we break down tim cook's comments and tell you the sectors being hit by this warning. shutdown showdown, with democrats taking majority

control of the house what's next for washington a big interview with senator bob corker is coming up. plus, china and trade war vulnerabilities a look at how that's hitting companies as the second hour of "squawk box" begins right now ♪ hit me with your best shot wh don't you hit me with your best shot ♪ >> announcer: live from the beating heart of business new york this is "squawk box. ♪ good morning, everybody. welcome back to "squawk box" here on cnbc we're live from the nasdaq market site in times square. i'm becky quick along with joe kernin and mike santelli breaking news, bristol-myers is buying celgene, huge deal. bristol-myers is offering $50 plus one share for every share of celgene a lot of thoughts what's happening with this.

but the company is taking its time to take about its guidance for 2019 it's looking adjusted earnings from $4 to $4.20 that's above what the street had been anticipating, $4.07 if you're looking at any guidance, especially with apple, the earning, what it means for everybody else, they're taking time to say that's above what the street had been anticipating before you consider some of these costs or the acquisition >> 52 is where bristol-myers closed and saying -- bristol-myers has indicated around 47 a day. that would put it at $97 there's six new drugs, apparently, in stage one and stage two development. it's early in late stage pipeline that includes six expected near-term products celgene was put on the map with that weird -- the way they used

that drug to address different types of cancer. and bob hugen for a long time, ran that company, finally ran for senate and good old bob, senator bob menendez, in his ads hammered him for making too much money and cancelling too much for cancer education and so on and weighed in spite of his checkered past >> and also an opportunistic deal on the part of bristol-myers, for the fact that celgene has been in a rough patch. and obviously, bio-tech has been kind of weak has the market has come off and risk appetite is down and celgene is one of those mature bio-teches that will trade at a low multiple. it's not like the high-flying bio-tech

>> $74 billion is a huge number for a bio-tech i watched celgene, over 10, 15, 20 years of watching -- it's based out in summerville based a couple miles from my house. i knew hugen and everything else for a while, they had the sexy stem cell contribution that was going to, you know, explain it or something but really, they've done it all based on revenue and other markets similar to it. >> and they are talking about, wri bristol-myers said the combined company will have over billion >> yes. >> more than $1 billion in annual revenue each. andcelgene will hold 39% of th company.

bristol-myers will hold 69%. and $60 billion in runway carcinogens by 2022. >> you're right, mike, 150 the high -- what did you say, 149. >> i saw the closing price, 146 in early october >> 146 and now all the way -- back in '12, 2012, it was $20. so it went from $20 to $146. and back to the mid-60s where now it's being acquired. >> i would also point out that bristol-myers is saying the transaction is not subject to funding positions. they're going to be funding the cash portion with cash on hand >> and it's one of those drug centers refract forms of cancer. it cures people, essentially it's a really powerful drug. and a life-changing drug for a lot of people.

>> you don't think of that. >> really, the group getting cut down, gilead bid up a dollar on this type of news. the idea that certainly the more mature bio-teches with general cash flow, but maybe a limited amount of products i was just going to say, the ceo is here, and the news just hit coming back from break what is your expectation looking at this? >> yeah, this just reminds us there's two ways of growing as a company. one is organic revenue growth and if you look at earnings around 20%, this year, they expect 8% growth what do you do if you're a large company that has a ton of cash sitting there, you're going to buy some of that growth. hopefully, you see some this

exciting news in other sectors like tech where you try to buy companies that dropped significantly out there. >> a lot more bargains out there. we'll talk about this in just a moment again, bristol-myers buying celgene for a combined purchase price of $68 billion and apple's ceo tim cook speaking exclusively, saying it's new forecast is a collection of macro economic and apple specific issues but he singles out products josh, good morning >> becky, apple is stunning investors with this news, slashing revenue guidance to $84 billion and that was well below its previous forecast of the 89 to $94 billion iphone revenue was not as strong as apple had expected. much of that due to weakness in china, as tim cook told us in an

exclusive interview. >> if you look at our results, our shortfall is over 100% from iphone and it's primarily in greater china. so, as we look at what's going on in klein, it's clear that the economy begins to slow there for the second half. and what i believe to be the case is the trade tensions between united states and china, but additional pressure on their economy. >> i asked cook if he had relayed such concerns about these trade tensions and their impacts to the trump administration he said he has, and feels like he's being listened to when he does it wasn't just kleichina, thougi the developed markets, too iphone upgrades were not as strong as apple had expected >> as interest rate hikes have started in the united states, there's more foreign capital coming in, that makes the dollar much stronger and the translation. we knew that was going to be a

factor it affected us by about 200 basis points and then, sort of in addition to those two things, we started a program worldwide where we dramatically lowered the battery replacement price. so, we had sort of a collection of items going on. some that are macro economic and some that are apple specific and we're not going to sit around waiting for the macro to change i hope that it does. and i'm actually optimistic. but we're going to focus really deeply on the things we can control. >> bottom line, apple was caught off guard here, surprised by what they saw. forced to cut and clearly disappointing to investors guys, back to you. >> josh, now that you've had a little time to think through and reflect on this, what's your takeaway >> so, the takeaway here for investors, one big takeaway,

becky, is clearly saying, listen, the miss is iphone related. and that's primarily china as you heard tim cook say there he's saying the issues are really two-fold. you heard him saying it's slowing economic growth in china. he believes the rising trade tensions are pressuring as well. analysts say pricing is an issue in china they'll say replacement cycles have lengthened in china the last two years people there are holding their iphones longer investors have to make a bet of how well cook and company can help outnavigate those challenges ahead >> josh, thank you so much great interview with tim cook. see you again soon right now, the futures are sharply lower after apple slashed its guidance like that joining us now, susan schmidt, head of u.s. equities of aviva investors. and the chief executive officer

for zoe financial. susan what do you think? concerns about china, concerns about the economy, how much should it play out in the rest of the market? >> i think this fans the flames of anxiety in the market because we got the news. we worry about it's slowing. and china slowing. there was softness in the initial china manufacturing pmi data and we're in the new year, and we're getting a fresh start and everybody went away for a week and forgot all of those concerns that we had in november and december making the market nervous are still around we're going to be hearing about that data doesn't help. the market is going to be focused on that. it's an interesting contrast, but nike didn't say anything about this they were talking about china was actually a good market for them very different, it's concerning to the market overall because the macro is what everybody is focused on right now until we get more management

teams coming out, fortunately it's coming with earnings, but talking about the specifics with the market i think it's going to be reactive >> and as you said, the reinvestments this year in aggregate probably have to come down from that 7 or 8% consensus at the moment. the market is down 15% off its highest, give or take. clearly, the overall market has tried to get a preview of what's going to happen there. but then we see apple come out and confirm what it's about. and the incremental downside i've had a lot of people say, wow, the market, no earnings year, but the process cutting is tough. >> that's right. and it's close back to historical averages depending if you're using cape, or next to the month's price to earnings.

if you look at 7% growth how is that going to occur with all of the things we just discussed? i think that's interesting on the downside, the interesting thing, in my mind, we're going to see more of this blaming the trade wars discussion. one comment on apple, i know we kind of beat this horse to death, but i actually think there's more idiosyncratic risks here than people think and the strategy for a while is there's a big difference in the china market than here ios is huge. i'm not changing my iphone anytime soon i might lengthen how long i keep my phone but i'm not changing to anything else. in china, rechat is essentially fundable even uses rechat for everything. meaning you can change from iphone to -- excuse me -- >> you're not locked in? >> exactly

and for that reason, we're going to see more volatility in those numbers unless apple actually starts to innovate further on what they offer. because people can buy samsung >> you mean changing up their ecosystem? >> right >> for me, it's music, it's photos, it's all sorts of other things that doesn't exist >> over there. my point is here people use the iphone for everything. if i were to change to, let's say, samsung, i would have to actually use a lot of things i use, for instance, my chat in china, people pay for wechat, because it's not owned by apple. i think that something that's missed, a quarter of earnings come from china, so they could hide this volatility earlier but going forward, they can't hide it. they have to innovate. >> does this concern you on a broader scale or for other businesses in klechina?

>> i think we'll see in-depth with that, i think they'll blame it on trade wars i don't know, let's blame it on trade wars i think we'll see more of that now, 30% of companies last quarter already were mentioning trade wars, but then they were saying, i think we'll be fine. >> right >> i think more of those conversations will say, actually, look -- >> it the trade wars or the economy? i'm more worried about an economic downturn that comes across to us >> it comes back when i look at it -- you know, it's tough for us because both things are hitting at once the trade war is a nice excuse two quarters ago, we saw the ceos come out and say, yeah, we're concerned about the news about china, but they couldn't really quantify it last quarter, they started to quantify it and made people nervous. you put dollars behind the impact and it started to be a much bigger magnitude than people expected. you go, you focus on china china is a big consumer market for a lot of our companies and i think you have to worry

about the change for the chinese consumer we'retalking about, on the macro front, this is a consumer that had to get an iphone. they wanted to be more western, they're upgrading. has the iphone upgrading cycle slowed down? most definitely. are they now faced with a slowing economy that they're seeing their growth come down. i think the mind-set of the consumer has also changed over there. >> michelle caruso-cabrera is growing to join us later to talk about the health of the consumer thank you for being here susan and andre, great to see you both gm releasing auto sales just moments ago. phil lebeau joins us with the anybodies. >> general motors releases its sales reports on a quarterly basis. it's hard to impacompare how thr doing relative to other

automakes. general motors down 2.7% for all of the gm sales, down 1.6 sales. gm's sales falling beneath the three most the most notable, car sales down like everybody in the industry utility vehicles up 7% fleet sales up 9%. while the retail market share has improved, you're seeing retail sales, and that's to dealerships who in turn sell it to people like you and me. those sales are down that's not just general motors that's for all automakers right now. the average transaction price, what you and i pay, almost $37,000. the average vehicle selling for $36,946. we'll get the other automakers, their december numbers and the full sales right later on today. >> all right phil lebeau, thank you

remembering a lot of the stuff, santoli. you remember -- james watson said that was going to cure cancer because of cutting off the development of blood -- >> right >> of the blood. this isn't what happened with it, that's what caused this horrible bert horrible birth defect. and also why multiple myeloma. and it was awful they can stem the progression. it's $163,000 a year and it's also used in some other indications as well. it's notanti- genesis. it does more and what's going for $74 billion. bristol-myers buying celgene, just looking at it, it's a

pretty amazing story the way it worked what is that, 81 run rate. there it is. bristol-myers. >> and it's down >> it's all about buybacks and, you know, cash flow. >> and they don't ed immediatel sell one and buy another >> it's interesting. a lot of the stock did okay on the news of it >> i guess it's cash and stock coming up, apple's guidance sending shock waves through markets around the globe plus, we were just saying that big deal in pharma, in bio-tech those stories are next first, though -- or later, blackstone's byron wien is back with the annual surprises for the new year ndut what he's expecting in 2019 i hope we got him his corn

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celgene shares are surging in premarket and the drugmaker agreed to a stock deal

bristol-myers sold at 52 it would be valued at $143. add 50 to where bristol is right now, it's down 14% so, it's not quite -- >> it's not at $74 billion either >> no, nowhere near it, at this point, but we'll see >> take 7% off of that, 7.5%, right? it's basically half cash, half stock? >> right at this point, it's volume e vat what the plearess release says. celgene shares closed yesterday and that's a pretty good run today, up 32%. and bristol -- what was that, mike >> 85. >> versus 74 it's not that far. >> $74 billion with the premium for that >> yeah. >> expect the deal to close during the third quarter of this year and we talked about exactly how celgene got -- a lot of new

nuance to this story caruso-cabrera is here, you know, the ceo for years and years, it basically stopped the progression of this, multiple myeloma. he made a lot of money as celge celgene's stock went up. bob menendez ended up keeping his senate seat in spite of unbelievable stories that came out but that was but that w washugn. they found out it worked more potent for them >> and worked for myeloma. >> and botox, right? >> and what -- >> botox is that the same thing

isn't thalidomide -- >> it's a derivative >> yeah, at botulism >> yes >> something else bad that turned out to be useful. >> yeah. >> all i see, botox goes on, you have seen those people that go to a botox party the person from the salon comes in with a needle, it's like, i don't think so >> it's enough to keep me away too. >> huh supposedly you can do it and never sweat again. >> the bot botulism, that's what keeps me away from it. apple is warning, catching the market by surprise ceo tim cook pointing to a slowdown in china's economy. >> as we look at what's going on in china, it's clear that the economy began to slow there for the second half. what i believe to be the trade tensions between united states and china put additional

pressure on their economy. >> let's talk more about these various pressures on the chinese economy with cnbc contributor michelle caruso-cabrera joins us here good to see you. >> great to see you. >> cook couches this as chinese revenue in a tough spot. do you have ideas what might happen here? >> trade impacts it but there's something else going on in the chinese economy is there has been a tightening of consumer credit on the chinese government it's not what they did, they did a big crackdown on p-to-p lending, peer-to-peer lending. thousands of people got involved in peer-to-peer lending. what is that i'm not getting enough money from my bank i'm going to lend money to people on this platform and get returns. guess what, the chinese government began a crackdown in

the spring of last year. thousands of these things went bankrupt they crescendoed and in august, massive protests for people who lost money blamed the government. there were many, many arrests. we have the video on cnbc for a long time. we now know there's reporting being done and a great piece the other day, showing the ripple effect of this has been much more widespread in the middle class than previously anticipated or expected. >> and is this mostly from people that lost money from lenders of peer-to-peer? >> yes >> not just those? >> no, exactly people got shady or the regulation got so tough. >> ftps that you're referring to had just focused on a woman who lost $90,000 all the way from college, she just put a down

payment on a car and didn't have the savings now and not able to buy the car. >> they interviewed multiple people who have been affected by this but what's difficult is, it's hard to know the exact numbers, right? because this is part of the shadow banking system in china >> and even if you thought you were getting real numbers from the reports -- >> who knows, right? but there's definitely an impact of some kind moody's is only 3% of the population involved in this. but 15 to 16% of the population is involved in some kind of shadow banking because they didn't get a decent return on banks. the chinese banking system is so underdeveloped and does a very bad job at what banking systems are supposed to do, allocate credit. when the government does it from top down, what does it do? it ends up subsidizing state-owned enterprises, big favored industries the consumer, the woman who lost

$90,000, she's not getting any help from some massive infrastructure stimulus. >> sore another consumer who wanted or buy a car or house or iphone, something along those lines, any big ticket purchase that you're going to make there, a lot tougher to get some of those loans. >> absolutely. so, when we see the slowdown that we know has happened in the chinese economy, et cetera, et cetera, and when you look at car sales, dramatic decline, right >> and look at gm. >> and china, apple talking about the phones in china. i think that we're seeing a much more important effect on the consumer through this crackdown on peer-to-peer lending and other things going on in shadow banking. >> there's a certain muscle memory for actors when they see this happening in china saying it's time for a big domestic program again? >> and they're going to. i have no doubt this is exactly what they're going to do just remember, the transmission

mechanism down to the street is extremely difficult. >> michelle, what if you're an america first type individual. and i'm harkening back to some of cramer's comments about pensive speech and the goal of what china wants to do by 2030, just worldwide i mean, they jut conqust conquee other side of the moon >> yeah. which i thought was just an album. >> that was the dark side. same place same place when you see big trouble in little -- or big trouble in big china like this, i don't want to see that in a shadowed way, there's a part of me that almost is like i want to win in this trade skirmish >> you're asking me should we be happy or sad >> yes can i take any satisfaction that these initiatives are hurting the economy? or is that just the wrong way to think about this >> i don't think of it that way.

i think the chinese have been told numerous times, and they even know it,supposedly, what they need to do to improve their financial system so that it works more efficiently, more evenly >> i don't care about that i'm talking about coming in the real world in terms of not stealing technology not forcing companies to play by their rules over there which allows them to eventually, almost like a trojan horse, they won't beat us militarily they will buries like khrushchev >> i think this kind of thing is going to happen regardless trade war. regardless >> and the problem was not the crackdown. the problem was, it was allowed to sprout up and have all of those shady -- not that shadow banking is a problem but the idea that these shady finances that people looked and thought i can put my money here

and get these high returns that i'm not getting lsewhere >> right but the crackdown was not the cause. it was a simple to symptom, rig? the cause is they have a banking system that doesn't work and forces individuals into other parts of the market that they normally wouldn't go to. but their desperate. >> michelle, it's good to see you. >> good to see you >> listen in to the music. ♪ >> oh, nice. coming up, changing of the guard in congress today. plus, the government shutdown rolls on just like -- i feel like i'm back in boulder. i need some munchies we're going to hear from senator bob corker as we head to break take a look at equity futures. and all i have is this hard-boiled egg. >> oh, please, spare me. ♪ i know that every single time that i suit up, there is a chance that's the last time.

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we're watching three big stories this morning one, apple issues a rare sales warning that's weighing on its stock and on the entire market two, bristol-myers squibb is buying celgene and three, the government shutdown continues into the 13th day with no end in sight when we come back, watchdog's byron wien and his list of what

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[kno♪king] ♪ memories. what we deliver by delivering. any more surprises, an wall tradition for 34 straight years, byron wien, vice chairman and private wealth group of blackstone here's back with surprises of 2019 and review of 2018 surprises. byron, just before i get to you, you see the market is now down

2.99 do you see the caplan comments he says he favors taking no fed rate action for the first couple of quarters. >> yep >> it's just funny the way i said it before years ago, the market is down, an asteroid is going to destroy the earth in the morning but rallied in the afternoon after it looks like the fed going to gut rates. it's always the fed, isn't it, china and everything else. one guy. anyway, byron, we talked off camera, i thought we had a pretty goodyear. >> it looked really good on september 20th you did expect the market to come back from that. you thought oil would stay strong for a while >> it was strong and then it collapsed. >> and as i kind of needled you off camera, your wishful thinking was that the democrats took the house and senate was your prediction. it happened with the house, but

not with the senate, this time around but for next year, you've got a lot of compelling facts. i don't want to go back to 2018. i think you did pretty well. it's hard. it's not easy. >> if you think i did pretty well, i've got a big smile >> exactly and i got you a corn muffin. >> exactly >> and next year -- there i go again, this year, so trump stays put -- they aren't able to, they tried to impeach him, there's not enough of the mueller probe to work on it, what's your take on that? >> there's not enough in the mueller probe to get trump there's enough to get people around him, close to him, but not trump. >> and you're not unhappy with that, because you like the tax reform you like the deregulation, and you like the north korea >> right >> you're not unhappy, and you think he could get re-elected, too? >> i do. >> you think he will be? that's your 2020 prediction. >> yeah. that's my 2020 prediction, but,

you know, we're not there yet. i'm looking forward to next year, sitting in the chair talking about that >> it was one of your ten things where apple is going to be at the end of the year. >> no, i stayed away from apple this year. i stayed away from tesla i stayed away from oil you know >> those are all wildcards >> yeah. but one of the ones i'm surprised you didn't comment on, joe, was, i said the fed wouldn't raise rates at all this year >> and you think that qualifies, at the moment, as a potential surprise >> i do. >> it's what the market seems to kind of wish for >> yeah. but everybody thinks it's going to be two or three >> how about the s&p, when it's all said and done? >> well, you know, if the s&p is up 15%, is didn't even carry it the old high >> and you think it gets to the old highs and beyond this year >> yeah. >> no recession on the horizon at this point? >> 2021.

>> 2021? see, you don't get this very many places. gold drops to 1,000. these are all kind of compelling finally, maybe emerging markets do better. why? it just seems like -- >> cheap >> we're talk -- oh, the markets, but what about the global growth? >> well, global growth continues. you know, the u.s. is going to grow at 2.5. europe is going to grow between 1 and 2. japan will grow between 1 and 2. and china will grow at better than 6 >> and tying it all together, if in that environment, the fed doesn't move, it refreshes -- >> right the dollar is stable, where a strong dollar is bad for the emerging markets and the emerging markets are way behind and everybody hates them you know, on this program, you focus on what everybody hates. because very often that wakes up sometime during the year >> and talk about your

surprises, for those who haven't followed them over the years you're talking about things that go completely against conventional wisdom on this. you're looking at outliers which is buy it's so impressive when you can get 50% for next year. >> look, the biggest thing i've got going for me is the sentiment. the second biggest thing is the valuation. they haven't shut down those companies are still operating and earning money. and i can't go into a conference room with portfolio managers and not have them take the negative position >> so, it was it easier to put this list together this year just because sentiment has taken such a swing >> i think the fundamentals are sound, you know? and if the dollar stays stable, doesn't strengthen further which is what i believe, then i think they've got a shot >> some years, it didn't make the top-ten. but i think this is really

relevant, china finally announces we want to be the world leaders in free trade. it sends envoys around the globe to negotiate better trade terms in order to offset the losses from the u.s so it doesn't ever cry uncle to us it goes elsewhere with bilateral trade? >> well, they're going to do bilateral agreements they're already doing it, pretty much, around the world >> that's not fair >> pretty much around the world. but they'll do a deal with us. china needs a deal with us and we need a deal with them so, it is going to happen. and that's going to be one of the reasons, the tone of the market will change >> it's hard to read -- it's hard to read the leader of either the u.s. or north korea, in terms of what finally comes out of this. and it seems, i don't know, it still seems volatile and we read kim jong-un's most recent statement. there's stuff in there that

sounds conciliatory and then there's that crazy stuff that he could fire missiles. no missiles in 2018, do you think something was about accomplishinged? >> a year ago, we were talking about going to war with north korea. >> do you think it's the last thing? >> it is already we're not going to war with them and that's the important thing that trump accomplished in june. >> wow we need you because this is all -- i feel better, for some reason and, you know, i read everything on new year's eve about how we can't wait for this year to be over because it's been so horrific. and i think about the advances that we make every year, just in terms of quality of life and proble prosperity, and everything else, i can't figure out what's so bad for 2018 but you're pointing a pretty optimistic picture for 2019. you're optimistic? >> i'm optimistic. >> and you're happy.

>> every day aboveground is a good day >> and for us. >> ask not for whom the bell tolls. absolutely, byron. thank you for bringing this year sounds like you're watching us every morning. >> thank you >> do you? you're not watching something else are you you're not watching cooking recipes? >> no. >> good. >> i'm a loyalist. >> okay, good. blackstone private wealth solutions group vice chairman, legendary byron wien and i don't mean you as a dinosaur. >> how do you mean it? >> i mean being legendary. >> and having the wisdom >> right >> that's right. >> anyway, go ahead, let's get out of here. all right. when we come back, the sectors and names getting shocked by apple's guidance dom chu is going to walk us through this morning's movers.

this morning as we head to the break, take a look at premarket movers and the dow when we looked last time, the winners were the ones losing the least. all dow components in the red. walgreens losing the least biggest loser, of course, apple, 8% we'll be right back. y. it's about quality. no trendy stuff. i want etfs backed by research. is it built for the long-term? my reputation depends on it. flexshares etfs are designed and managed around investor objectives. so you can advise with confidence. before investing, consider the fund's investment objectives, risks, charges and expenses. go to flexshares.com for a prospectus containing this information. read it carefully.

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fallout, yes, those shares losing any market cap between 54 and $66 billion depending on the premarket shares we've seen so far. that downgrades if not price cuts for sure. take a look at the mishmash that we've put together from last night into this morning. bernstein, 160 from 210. bofa, 195 to 220 ms, 211 from 2236. i haven't seen the note which just came across my note, take a look at skyworks solutions, lumentu holdings and cirrus logic, these are down. and take a look at the market caps, amazon's fall, microsoft's fall, the one that's catching attention is, of course, apple it's now at premarket levels,

not official yet in regular trading. premarket levels, $686 billion in losses. amazon, $737 billion microsoft leading the pack, $762 billion. still a tough day and with amazon, given the apple news that's come out. we'll be taking a look at all of that ecosystem of stocks, becky. let's bring in the founder of luke ventures and ed lee. gene, i want to start with you, i was watching you last night. you said it was a bad day for you yesterday, too but you still have faith long term what do you think, kind of thinking all of this through what are the potential concerns you have, and then what keeps you kind of keeping the faith? >> so, becky, the reason why it's a disappoint for gene munster is this apple is my top prediction, top performer

forfafor faang stocks in 2019 it's obviously not how i envisioned started i'm sticking behind that prediction that apple will in fact outperform faang in 2019. the reason is, investor psychology has been a pendulum i think you illustrated it on the show this morning what the issues are but i'm putting some faith in tim cook's comment that he's going to do everything in his power to try to reverse this, not only fundamentally, but i think in terms of improving the stock performance. there's some levers they can do which we can talk about about. but the key is this, this is not a shaft ift of consumers away fm technology this is caused by economics and some mistakes the economy may by aggressively jumping their phones they jumped the price by 23%

this fall on iphones as long as those themes remain in intact, which is apple'sable to keep all of the devices together in a world that has more consumer electronics, i think this will reverse to the positive in the coming year. >> hey, gene, let me ask you on that point the idea that he's going to do everything in his power to turn this around. a lot of this is outside of his control. if you're talking about a company that now has about a quarter of its earnings coming from china, and that country is in an economic slowdown, good luck. >> yeah, let me just quick, becky, just say, there's another important point that i failed to mention before that plays into this about doing everything in his power. there's a gap between perception and reality that's happening this morning the perception is that apple dropped a bombshell and the company is moving in a negative direction. the reality is they're going to have a record earnings quarter

>> i understand that entirely. i understand that entirely but i think it's china that -- >> let me just quickly anxious your question. the question is what can he do there are things he can do more aggressively around product categories i've got say history of being incorrect. i'm going to stay away from that they can do m & a and inform consumers more holistically about how the business works all of those things are within cook's control >> and gene -- all right gene, the valuation right now, what it implying about the business and how it declines >> so, it's essentially, it's going to be trading at around 10, 11 times earnings. if you subscribe to the post cash, it's around six times. but what it implies essentially is that the street numbers are going to go down by probably 6% once the numbers shake out here. >> gotcha. >> ed, what do you think >> much to say, i'm agreeing

with gene is saying here, i do think there are structure issues with regards to -- what i'm trying to figure out how much of it is china economics or just fear of people buying phones, or companies like huawei eating shares huawei jumped the most in the third quarter, as far as the smart sales around the world apple was kind of flattish and that was a sign that, hey, huawei which is a huge, huge company. it's like their version of samsung. the chinese government is doing its best to kind of make that its big tech player. i think that's a way people have switched or remained loyaled to apple. i think that's a problem >> what about gene's thought that with the price increases for phones, if they bring that down -- >> if you get into this asp metric which is something that we're looking at, i think that's certainly a factor there is another factor which is in china particular, the way people use their phones is

different than anywhere else and that's largely because they only use two or three apps the main app that they use is wechat wechat is like amazon, facebook and google all in one. when that becomes a main focus of what you do on the phone, the phone itself becomes less important, right so i think that's another factor that's weighing in on this that's something that apple hasn't solved there. i think in the u.s. and elsewhere, photos are a big part of why people hold on to their phones >> ed lee and also gene munster, we appreciate your time today. >> thank you all right. coming up, much more on the deal of the morning, bristol-myers buying celgene plus, the government shutdown entering its 13th day. senator bob corker will join us after the break. hey... saved you a seat.

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apple warning. the tech giant slashing its sales forecast on slowing iphone sales in china the stock sliding in an avalanche of analysts out with downgrades a big bio-tech deal, bristol-myers buying celgene for $74 billion. and divided congress democrats take control of the house today, as both parties in washington search for a way out of an increasingly difficult shutdown final hour of "squawk box" starts right now ♪ live from the most powerful city in the world, new york. this is "squawk box. ♪

good morning welcome back to "squawk box" here on cnbc live from the nasdaq market site in times square, i'm joe kernin, along with becky quick and mike santoli. andrew is off today. the futures are less than down 300. that's the way i'll phrase it. they were down almost 400 at one point. now 295. a lot of this is apple-related we have pointed out that there is some fed speak out there, too. i don't know whether that's having an effect maybe leisman, i saw him here. we'll ask him about some of those. you see the caplan comments? >> yeah. >> is that positive for the markets, do you think? >> i don't know. the dallas fed president said hold off for a couple quarters >> yes >> fed sheet impatient hold off on a couple quarters.

>> the question for steve is where was caplan before? >> right >> change in sentiment >> and you got -- >> it's a gathering pause movement, is that the best way to put it? >> yeah. >> maybe i should walk over. >> and the voiced most loudly. >> it's like one of those shows later on the day we're getting you walking. >> a alk-on. we didn't plan this. >> and it's pointed out the fed's consensus of two rate hikes doesn't say when and it doesn't sound compatible with going a couple of quarters. >> i don't know why the market got crazy with this. they were never going to go with one forecast to two forecasts. they need to go in steps go to two, then one and then maybe even zero. as i said yesterday, you don't want to hope for that zero rate hike >> because that means bad stuff. >> because it means bad stuff.

>> like we talked about yesterday, maybe the market would take that as -- >> what do you got to get through before you get that knowledge? >> you got to step down from 3 plus percent growth. >> right >> down into the 1s. you got to have unemployment going the other way. >> you just need to have the market forecasting that, even if you don't hit it >> that's a great point. >> byron said no hikes. >> you know, it's possible -- >> it's got 50%. >> joe, i don't know we're not simpatico on this. i'm the last guy optimistic about the ability of the tax cuts to deliver to the u.s. economy. you should be, too >> i'm what -- say that again? >> why aren't you optimistic about the ability of the tax cuts to deliver -- >> you know i am because if it's not inflationary, i don't think you need -- you heard cramer talking about how finally the working man is getting a better shake. and the fed can't stand it

>> that's just not -- i just disagree with jim on that, okay? i don't think that's the fed that i know. they want people to be -- they want to sustain the expansion. >> are you worth $2 million? >> i'm not >> okay, then i agree with cramer >> essentially -- >> smarter people, okay -- >> when you argue with them, yes, i'll take their word for it, 99.99. >> because they have more money. >> because they've done it they've been in the world. >> well, they should vote -- >> it's day 13 i'm going to listen to them about market opinions. >> but jim is negative on the economy. >> anyway, it's day 13 in a partial government shutdown. and things may not get any easier oh, my god, he's leaving he's not mad, at the >> no, i've got work to do >> but that weird hook that matt

used it looks like it was painful democrats take control of the house today, that will give president trump his first taste of divided government. joining us now, bob corker, his last day as senator of tennessee. senator corker, thanks for joining us, can you tell us, before we get into politics, where will we see you next are you going to have a talk show, are you go to be a cnbc contributor? i don't know, are you going to hollywood or disney world? >> well, you know, joe, i'm in disney world now i'm so glad to be back on the program especially with you, ply friends. i got to know you during the surge in iraq and then the financial crisis and then the auto crisis and all of the machinations with dodd-frank and it seems like the focus moved to foreign policy that i haven't seen you as much but i'm glad to be with you on my final day and i walk my successor down the

aisle shortly and as it relates to politics, who knows but it's been a great, great privilege. certainly, i've endured talking with you all and your audience about issues that mattered i'm glad to finish up with cnbc today. thank you so much. >> we really loved having you. >> we do and we loved how you would -- maybe that's why it didn't work out. you are not -- no, but you are not political. i mean, you should not say half the things you say i mean, maybe more >> i don't know, that's right. >> anyway, we love that, because we always get the straight good for you so, the latest stuff about this shutdown >> yeah. >> obviously, there's some truth to what you said, because you know, i think there were some radio, right-wing radio hosts that were sort of skewering president trump -- you know, ann coulter, not living up to that wall promise that had so much to

do with this re-election >> right >> so, maybe there's some posturing or part of the motivation here. but the other side is not without blame. they were going to do $25 billion, weren't they, bob i mean, $5 billion if you wrap it around, not just the specifics of the steel slats, just wrap it around border security, or pay for i.c.e., or whatever you want to do. no one doesn't think we shouldn't secure the border. and don't you think schumer and pelosi at this point are just doing what they're doing for political reasons, essentially or it both sides doing that? >> yeah, so, you know, joe, back in 2013, the corker-hogan border amendment was added to the comprehensive immigration bill and it provided $46 billion worth of security. we got 69 votes for it on the senate floor that was when we were in the minority let me just say this, it was overprescription and overkill. and had the bill been taken up in the house, our border would be more secure than any border

in the world but it didn't happen yes, this summer, 25 democrats voted for about -- about 26 democrats for $25 billion worth of border security so, there's an easy solution here and i do think that the president felt like, after the two talk radio hosts did what they did, he had to be seen, quote, as fighting yes, the democrats are dug in on, quote, the language around the wall but this is really -- i'm sorry, this is a made-up fight. and at some point, people will get together and resolve this issue. the perfect solution really is just putting the dreamers, which all of us want to solve, most republicans want the dreamers issue resolved team that with some security let it not be so priescriptive a it relates to actual borders our $36 billion deal did have 700 miles of fencing in it

so, there is a need for some border issues. i think just the way the two sides are talking about it is purposely there to create a fight. again, joe, you and i -- let's say becky and i, we can solve this, truly, just in two or three minutes. it's so easy >> so, we've talked a lot about the mitt romney op-ed. and i think back on your relationship with the president. and that's been like a tolstoy novel. i don't know, where are you now? you guys, i think you've been friends. you've been close and been friends. and there are other times you said adult day care. and he said corker's a good man. but then he's saying you're not running again because of your poll numbers >> that's not true >> it's a love/hate relationship, it not >> oh, i don't know what it is but the fact is there's been a lot of good things -- nothing has kept our office from accomplishing a lot over the last two years and certainly over the last 12 we meet and talk at every level

of government today, joe i mean, pompeo, mattis who i just loved and hate to see him leave. but people at the white house, we're constantly working the president and i, as lamar alexander says, we talk to each other in a way a contractor and developer talk to each other and as you know, i'm not a politician and i can't abide by silliness so -- but, look, it's fine i'm leaving here on a high i don't want to say much more. i felt so good about verything you know >> you know, there's a lot of -- you guys are different but in some ways, you're the same because he doesn't want to put up with a lot. have you ever heard anyone say stuff with no filter, but some of it that ends up being true and needed to be said in the first place? i mean, sometimes, it's too far. but you're not that different in certain ways do you think romney's helpful? what's he doing, at the running for 2020

is that a 2020 move? >> you know, i talked to him yesterday. and i don't think that he is i just thought he felt the need to lay out things. let's face it december was a pretty traumatic month i don't think he's running for president, i really don't. i asked him that very directly i just don't think that's what he's doing you ought to have him on the program. he's a much better looking, tall, handsome, much more financially equipped guy than me you ought to have him on and ask him. >> but, bob, you said you asked him, and your takeaway was he doesn't want to run. did he say that explicitly. >> he did. i wouldn't share personal conversations at least their side of it he said that yesterday on television, at least on one of the programs i don't think it was angling towards running, although, some people got excited about the fact that maybe that would be the case >> would you back him or back trump in 2020?

don't give me -- i don't want a wishy washy -- i want a corker answer >> here's a corker answer because i'm thoughtful and pragmatic. and that is, look, let's see who runs >> oh, boy >> no, i think the next three months is going to be a pretty impactful three months >> what mueller-wise >> all kinds of things we've got the government and let's see what the lay of the land is in the future. i promise you i will come on early. of course, you won't care because i won't be a senator >> we'll care. i think you should be a cnbc contributor position >> well, you know, i don't know what's going to happen in the future but in 3 hours and 45 minutes i can begin talking about those kinds of things. >> senator, that was my question what do you do next? what's the plan? >> so, this is not -- this is definitely not one of those answers, joe, with froufrou.

i have absolutely no idea what i'm going to do next i have two good run in business. i haven't even taken my checks since i've been here it's gone to charity i don't know what i'm going to do i know what i'm not going to do. i'm not going to run a university i'm not going to run a think tank that has anything to do with government relations. and i'm going to take some time, maybe the next two or three months and think about the future and think about the life that i've been so blessed and fortunate to lead. what has it euniquely qualified my to do that would be unique to anyone else? i don't know what that is today. obviously, naturally, it would be business. but it could be something else i just don't know. >> all right senator, you've got a great state to go back to. that's for sure. >> and, you know, we never played golf, so, hopefully, at some point, we'll do that. thank you y'all for your kindness i do look forward to seeing you

in the future. thank you so much. >> thank you for all of your accessibility and everything else, senator. and for all of the public service that you're involved with it's not because of the money. i know that. >> thank you >> thank you, senator corker, of tennessee. >> thank you so much >> we would have stayed longer, but here you are you got numbers adp. >> 271,000, adp private payroll company tries to estimate what the government will pay on for private payrolls estimates 271,000 that's against a forecast of 178,000. i need my glasses for that >> that's why you were so positive about the economy >> tell me what the ante is to talk on this show? >> well, you can give that information. >> without opinion november payrolls revised down 22,157 goods, 47,000. services, 224,000. the nonpayrolls estimate,

friday, 176,000. we'll see if people thinks there's upside surprise there. and business, small business, 189,000. and medium, 129. and the larger 54,000. and when i look at by sector, you see the construction there, so maybe something of a weather snap, we're still looking for some of that and i'll talk to mark zandi in a second -- oh, he's not there >> i don't think so. >> i didn't know that. >> they said that in my ear. >> why didn't they say that in my ear who am i, swiss cheese over here december is not a great month for adp. they run about a 42,000 plus or minus error with the bls >> nerms in terms of linking. >> in december, the go-round is not their best it's actually october to november and december. we add all of these additional

seasonal workers they'll come off in january. the summertime is also not a great month for them as well >> so maybe a big beat here doesn't necessarily relate to a big beat on friday, is that what you're speaking? >> right one thing that at dp is very go at, when they're up there, payrolls tend to be on the high side when they're down there, payrolls tend to be on the low side >> we're in a weird place right now. >> what do we want >> i don't know. >> seriously, what do we want? if it's a hot number, then we're back to worrying about the fed we're all worried about global growth now all of a sudden >> we are. >> i was looking at the bond market the ten-year yield bumped up slightly slight flat action which would be a muted version of what the fed would expect >> i want more >> if the market is saying that perhaps the fed as many are

saying should go slower it's because of tightening financial conditions they don't think it's necessarily unemployment >> good. >> i stated first principles all the time i always want more growth. i always want more jobs. >> right >> that has done pretty well, let the artificial stuff, the market relative to those things and the fed's level relative to those things adjust which not not been adjusted. you can't control the number of jobs or amount of growth let's fix the other stuff as well the market, they can reconcile if they made a mistake as well as the fed can, too. the market could end up here and i believe this will be the case, being too pessimistic about this >> being too pessimistic about the economy or -- >> about the outlook i think it's overly pessimistic. i really hope i'm wrong about this

i don't want to be right about it people with a lot of money think that i'm wrong so, you've got to take that into account. i do know the market came in last year, forecast two hikes. it got four. the market was wrong about that. >> one thing i would say, the people who think you are wrong, it's not so much of a black and white situation where economy up, economy down >> right >> they also think the fed is going to play into this. that the fed is going to raise rates. many of them think if the fed does not raise rates it will end that self-fulfilling prophesproy >> i get it. first of all, i don't subscribe bad methods to the fed >> what about -- where are we now on friday? exactly. >> the estimate? >> yeah. >> 176 >> and where do we know now based on this in your view >> i think some economists will raise it and might get a whisper number in the 190s

the adp number on the street as well, which is maybe why you're not seeing a big reaction. >> what do we have on friday >> actually having said that the market's improved. >> if you had to say, okay, what's my biggest fear this is a really important thing, and santoli, i want you to say, is my biggest fear zero growth or an extra point on the fed? >> zero growth >> i would be more afraid that we would not grow than the fed with half a point. >> i think it's linked they're all intertwined. is the china economy slowing down or preexisting or exacerbated by the trade and if the fed raises rates does it get us to that point. >> if you have enough momentum in the key economic drivers through december, maybe the economy is not as vulnerable as some people keep thinking to do the next incremental basis >> that's actually an

psychiatric ceconomic concept as you get to zero it's easier to tip you into recession. >> before the number >> before the number >> you're the man. >> well, i don't know, i wanted to talk after -- >> we'll take either >> we'll take either >> she's not in studio are you going to cleveland >> i'm going to atlanta tomorrow it's the american economics -- tomorrow is the worldfest of the year >> yeah. yeah >> it's going to be -- we're going to be -- we're going to have pina coladas. it's unbelievable what's going to happen down there >> it's unbelievable that the three of them are going to be on >> i am a rock star down there i walk through the halls, it's the only place i'm a rock star people think, oh, from the university of wherever, they watch the show >> the super bowl is in atlanta this year. >> that's the -- that's why i'm staying at airbnb, there's no hotels >> really? >> no hotels

>> because of the economy. >> do they change the sheets, do you know how does that work >> you're just this side of -- >> not for you >> not for me. >> afterwards. afterwards >> and the toilet -- everything is -- do you know? >> i don't know, joe i don't know >> we've had that discussion, do you want someone staying in your apartment? >> i'd rather contaminate someone else's bed than them contaminate me >> on national tv, i'd like to talk the economy >> more reaction from the sales forecast the market as gotten a little better joined by dan niles, well-known and get his take on whether the company stock is where it should be below or above. stay tuned you're watching "squawk box" on cnbc

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welcome back to "squawk box. celgene shares are surging the drugmaker agreed to be acquired by bristol-myers squibb. it was valued the $74 billion. it's $50 cash, plus one share of bristol-myers. you can do the math. it's 95.79 right now somewhere below $74.

and shares of bristol-myers, as you see many times, the acquiring company down 6 down $12 and expecting to close in the third quarter of this year, and they're touting six products in the pipeline at celgene that can eventually add as much as $15 billion to the revenue line. celgene's best known product, pretty well-known by a lot of people, revilid for myeloma. a pretty aggressive cancer drug that it addressed. >> still not a curable disease my aunt passed away from it a couple years ago >> but it can be progression-free and slows the process.

$163,000 a year. $74 billion, but you've got to shave off about 6% based on where the stock is trading right now. when we come back, the year's first read on jobless claims just a few minutes ayaw we'll have the number for you right after this break stay tuned you're watching "squawk box" right here on cnbc you always pay your insurance on time.

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♪ welcome back, everybody. we're just a few seconds away from the latest reads on jobless claims let's get to rick santelli rick >> all right, the expecting number on 220,000, but we have more so 231,000 is the current read on initial claims. from a revised 221,000, which means it's up 10,000 but that revision was from an original release of 216,000. and always an asterisk, holidays play havoc with regard to these numbers. so, maybe that pop may have been a exaggerated. take a couple weeks to get back on track continuing claims move up slightly from 1.78 to 1.74

million. of course due to the shutdown, pointing out like construction, but coming up, we'll have ism. maybe the biggest news of the day is already out in two-fold measure. adp is pretty good even with the negative revision. and everyone is talking about the twilight zone, mini flash crash. all things considered, this is what happens when you short currencies and carry trade that have manipulated low interest rates. they call it a safe harbor trade. but really, it's more like get me out, getme out of those shorts and how many that carl trary tre yen position was in things like, i don't know, faang stocks stocks that have been volatile, the japanese have been aimed at u.s. equity markets. these are all questions that we'll have a chance to see as we get into the full u.s. time zone becky, back to you >> rick, what did you think about the adp numbers and what does the market really want tomorrow with the official jobs report >> you know, i have no idea what

the market wants i know this is all in context with how it will be approached by the fed and indeed, maybe a strong number would put some equity traders off and keep them in that world of volatility and fearful of being on the bullish side of the card but all things being equal, if you and i were trying to get in jay powell's head. i think volatility and all of the years, whether it's brexit, china slowing, those have to weigh in but if we do have stronger employment data that will have to be weighted as well and i'm not sure how the fed will define those issues >> rick, i saw blog sites like it was the end of the world, the yen and the flash crash that we saw in currencies yesterday. we're not even at the lows on the dow. right now, i mean, we're not even now where we are yesterday, and we've had apple. so that was not as ominous as some people were thinking last night, was it. >> i mean, it doesn't look like

it's the end of the -- >> i personally don't think so listen, you know, if we go back 35 years and look at market structure and how it's changed and the various 24-hour -- and the various gaps, as many publications printed, there's a slice there's called the twilight zone where volatility can get out of control the japanese stock market was up on the year. and it hasn't even opened just through the currency valuation side of that i don't know, i personally think that apple has a lot of issues that are above and beyond all of these macro issues going on. >> yeah, that's what i thought >> i think that's the real question today >> i was thinking the same thing. and he can say -- he can play down the china thing but he didn't play it down enough to where we're not talking about it i mean, the iphone upgrade it's like, what's new in the last two years just new names for -- >> well, it's not only that. you know, everybody is going to make this political, especially today with the swearing in but at the end of it, we have no

idea of the counterfactuals. if there's no trade infractions at all, would apple still be reaching a point of peak sales in china we don't know. but there is some evidence that could at least aim in that direction and that's what we'll have to figure out >> rick, does that mean you don't have concerns about other companies that are doing business in china, too but that's less of an issue? because that's what i'm trying to figure out as we heard from appleyesterday how much of is this is the broader markets? what's your take on it >> you know, i think china's slowing. let's just leave it at that. now how does it affect certain entities and production there, it's unique to each entity the way a pond -- when you pull a plug in the middle, the way it evaporates around the edges. i just think apple had kind of a higher beta, with regard to the reversal, maybe it's affecting it greater i would be shocked with all companies, especially the

multinationals bringing some of the revenues back from china i'm experiencing the same thing. we've been talking about china slowing for how long now >> rick, thank you, and we look forward to seeing you tomorrow, too. we have a lot to dig through with the jobs report from the government rick santelli. >> can't wait. let's talk about the broader markets, joining us cfr's steve strategist and historian stan sto wal. yesterday, at this time, the market was off 300 points because of weak economic data we'd gotten from china the markets shrugged that off at the end of the day will they do the same with this? or when they hear numbers from apple, is that a more specific concern that it reaches out to the rest of the market >> well, it is a more specific concern. to remember what's going on, and m & a, and the macro and apple

specific and is the slowdown actually going to morph into a global recession. right now, expectations that chinese gdp will be up 6% in 2019, versus the 6.6% projected for 2019 globally, it's not just for developing nations but emerging markets as well. but i don't think a majority of people are expecting a global recession, and mainly because they realize, should we come to some sort of trade agreement with china, than could end up pushing the share prices dramatically higher. when i got up watching dominic chu at 5:00, i saw the futures are down dramatically more than they are right now that sort of indicates to me that investors are digesting the news and trying to figure out if this is a good-bying opportunity. according to s&p investments, the s&p was trading closer to a 14 handle on december 24th, which is a double-digit discount

to the average over the last 20 years. >> yeah, the market has been interesting coming into the new year of what you have. not just the valuation compression of last year but also just a tremendous concentration of heavy determined selling you got seemingly a sentiment, option a capitulation, if not getting one. but now we're entering this season where just what are the earnings going to show us and what is the "e" in the pe going to be. >> exactly, in the last 27 quarters we've seen consecutive quarters in which the actuals beat the estimates and the average was 3.8 percentage points. so the question is, is that going to happen this time around it has to end sometime right now, estimates are expected to 7.2% and that it

down from september 30th i think they're edging the bar higher so maybe they get a couple penny beats moving into the quarter. >> you know, fro perspective, what do you look at and say this reminds me of such and such time? is there anything? >> well, actually by having knowledge of history, i end up sounding like an economist because i've got two hands first off, the fed raised rates seven times in 1994 into 1995. when the fed finished raising rates, the s&p was up 34% in 1995 the barclays aggregate was up 14.5%. so, are we going to get that kind of recovery in the stock market once the fed starts raising rates? >> can i ask, how did they signal that they were stopping, rating rates at that point >> first of all, they raised once in the new year >> right >> by the middle of the year, they were cutting. i think we got a sub-1% gdp

quarter in '95 so, it was more a signal in terms of hawkish tone. the data itself coming in weak and the market was anticipating that the fed would be cutting rates, or at least plateauing and then conduct rates and that drove equity rates higher. >> that's the bullish position. >> that's the bullish position and very nonconsensus. >> stan, thanks for coming in. the case against apple from eight months ago when we come back, we'll be joined by tech inskrevestor dan niles who was sour on apple back in may and june. stay tuned you're watching "squawk box" on cnbc

welcome back to "squawk box. the futures right now set up four losses. but slimmer losses than they had indicated before the s&p down 26. just about 1%. dow down 260 it was looking more like a 350 loss this morning. and the nasdaq will bear the brunt of that apple warning and decline, down 116 right now. but above where we traded at this time yesterday. apple shares sinking after the company's surprise cut in quarterly guidance josh liston joins us you heard exclusively from tim cook >> yeah, i did get that chance to sit down with apple ceo tim cook for an exclusive interview. we did talk about this decision

to slash revenue guidance. cook telling me the problem is primarily china, including the trade dispute. i asked him if he relayed those concerns to the trump administration >> i've had obviously many, many discussions over the course of many months to be constructive and to give sort of my perspective on trade and the importance of it to the american economy as well. and i feel like i'm being listened to in that respect. and so, i'm actually encouraged by what i've heard most recently coming from the u.s. and from china. and hopefully, we'll see some changes. >> but giving those trade tensions, tim, do remain heated, given what you're seeing with the trade pressures and the course ahead, how do you then navigate this? >> well, you focus on what you can control. so, when i look at this, i say, you know, there's some weakness

outside of china as well i would have liked to have done better in some of our developed markets. >> as for those developed markets, cook's saying the problems include fewer carrier subsidies. a stronger dollar and customers, he said, taking advantage of lower prices for iphone battery replacements joe. >> all right, josh thanks our next guest made a case way back in may against apple's stock in an on ed on cnbc.com he began it in his words, if i were still a wall street analyst, i would downgrade apple to underperform. joining us alpha partner dan niles. i assume back in may, dan, oning basing your opinion trouble in china, which is what we just said tim cook -- i mean, that's how josh started his report, that they blamed it on china is this china's fault?

>> well, no, you go back and you read that report, we talked about the fact that, you know, selling very high-priced phones in emerging markets was going to be tough and thatapple -- you know, this was the wrong strategy, a lot of what tim cook is blaming things on today, we knew about way back in the middle of last year. so, if you kind of thing about some of the things they were talking about, well, consumers are adapting to a world of fewer carrier subsidies. if you know anything about at&t or verizon, you know they've been cutting back on subsidies for a couple years that's nothing new he talked about dollar strength. when you look back at it, november 1, when apple reported, the dollar was 1.60. and on the trade, it was actually lower taking advantage of the iphone battery replacements if you remember last december is

when apple started offering new batteries. we talked about that in the report as well so, a lot of these things are sort of out there. and china itself, their average gdp per person is 10,000 in you're trying to sell phones at $3,000 a phone, you're trying to sell just one you can't push that increase and expect the emerging markets and if you remember back in the september report, they were having problems with brazil, russia, and india. india's gdp per person was even lower than that. these are the issues already out there. part of the issue now is apple is not acknowledging the real problems they have which they push the asps up too much. and qualcomm, that was pushed up

in forbes. and quite honestly, having a new phone out in 2019, when a lot of carriers are pushing out 5g networks the final one obviously meaning that the cell phone market is shrinking for the first time in history. and it will probably shrink even further in 2019. you can't fix the problem nunti you acknowledge what the problems actually were >> we're talking about the stock all morning long it's down 8.5% i don't know if we're really characterizing everything that's happening as a huge surprise or not, dan the stock's down from 1.1 trillion to 700 billion or something today. someone knew what was happening, in terms of shareholders, because the stock is already -- if you weren't an analyst, again, a lot of this bad news is probably already in the stock. i don't know what it does today.

but is it at a level now obviously, it's more fairly priced than before but is it at an attractive price now in your view >> no, it isn't, in a long-term perspective, because a lot what i just talked about, the iphone market shrinking for the first time in history. if you think back to pcs the 2011 was the last year the pc industry grew and then as replacementing elone the pc markets began to shrink this will be the first market for growth i think you'll see contraction for several more years i think apple having asps that were way too high. they were up 28% in the september quarter. the september quarter. so they were already going in the wrong direction for an economy that's slowing down. >> yes >> and that was just abad on their part

and then pushing out operating system releases where they're ready, that just makes no sense when you're having troubles already. >> dan in your view, what portions of the problems we're talking about today are caused by the trade war with china? what percentage, 10%, 50%? what in your view. >> in my view, it's not de minimis, but it's 10 to 25%. the trade war was going on back in september arguably, you can say things are better today we didn't push tariffs up 25% on january 1st. we delayed them. china is actually trying to stimulate their economy. so, there are also some positives in china happening since when they guided so, you can't dismiss that either >> but there are some apple-specific issues that you have highlighted that aren't going away and that were evident in the comments from yesterday >> right and then you got to remember, this year, we're going through an important transition in cell phone market where we're going

to be pushing out 5g platforms starting in the june quarter and apple, as of right now doesn't seem like they're going to have a 5g phone ready so, they're actually going to be behind so if you're looking to spend $1,000 $1,000 on a phone why would you buy a phone that is one generation behind in technology? 2019 could be an uglier year because they don't have the latest and greatest phone. if you are going to charge somebody $1,000 for it it better be the latest and greatest phone. >> do you think they are going to slash price snz. >> i think they have to. how can you sell a $1,000 phone in a market like china where gdp per person is 10,000. in accept they talked about the fact that india was way below. if you are trying to sell a $1,000 phone it is probably hard to sell it.

i think those are the issues there. >> thank you. 5 g, you can't get a decent phone with seven minutes or six minutes? can you get a decent phone for 4 g anymore? >> not next year. >> what is it going to do? download movies quicker. it's going to be faster. >> like a superfast wifi. >> that is not going to work very well in new york. hold on to your 4 g phone. >> i can't do things with 4 g. >> it's like six minuteabs. bristol mayer is buying celgene. the way they are doing this is paying for $50 in cash for every share of celgene.

bristol-myers closed at 52.02 a share. now it is down around $47 and change. that value has been shrinking this morning. joining us right now is barbara ryan. what do you think of the deal? >> i think this clearly came out of left field from the perspective that bristol was probably viewed as the least likely of the large cap companies to do a big deal like this. certainly, they have put a massive stake in the ground focussed on their pipeline over the long term and sustained superior growth. this is the largest transaction done based at over $100 billion with a value of about nine dollars to compensate share holders. i think this is the best news we could have gotten in the new

year going into jp morgan where the performance in the sector has been the worst in about five years. there are a lot of investors in the space, institutions and hedgefunds that have gotten rocked at the end of the year. i think that we are going to see a lot of focus on this at jp morgan for next week. it has been longviewed and in 2018 it was expected that that would be the year of m&a. big cap pharma companies need to improve their pipeline. i think it has been a fact that the buyers and sellers have been too far apart in firms of price and valuation. that is corrected in the fourth quarter here. in addition, we have lots of

companies that were able to easily access capital. that is no longer the case with the performance of secondaries and ipos. and lots of companies are looking to go public immediately after that may not have that launch pad. so i think the focus will be on m&a and the space. i think broadly mid cap pharma will be in play. >> can you tell us other mid cap pharma names that will be in play >> there are hundreds of small ones but the big ones like biogen, gilliad. >> it's great to talk toyou. i really appreciate your time. we'll come back to get more thoughts on what this all means. let's get down to the new york stock exchange.

dan niles said some compelling or things that maybe play into this in addition to a macro china story. there are real specific problems. >> dan is an old friend. i think sometimes is a little too negative. this is a negative story. i think that apple in some ways is still trying to spin it positive. i have always said own it because i like the franchise. it is under pressure. it will be down more than 13. it has to at least take out some of the lows that we have seen. when you are down 13 it means usually 20. i think people shouldn't bottom fish yet. i have been saying it will preannounce. it has to go lower before anybody thinks it settles because typically you looked at january and said what is january going to do. so preannouncement has to be more han 13 points, more than 8.

and then we will see when the smoke clears. i want to know what warren buffett is going to do with it. this is a consumer product story. it has been for a long time. it sells at ten times. 120 is the bottom. >> to your point, just the idea that this is a consumer products company. buffet has talked a lot about the services business and what has been happening there. one of the few bright spots in what we heard yesterday is that the services number is up more than 25% on a year over year basis. so even with hand set sales not going near what the company was expecting even with a $5 billion to $9 billion bring down for the revenue number, if this becomes a services company we'll see it. >> i was a little disappointed. i understand china. we have to find out.

i'm not dismissing -- no one is telling the truth about china. they are really our enemy. i don't know. does the party want to see you buy an apple i don't think the party wants you to buy apple. i think they want to by huawei. i don't know who understands that in the country other than people who remember 1947 to 1949. >> we'll hear a lot more. we'll see you in just a couple of minutes. we'll be right back. people tell me all the time i have the craziest job, the riskiest job. the consequences underwater can escalate quickly. the next thing i know, she swam off with the camera. it's like, hey, thats mine! i want to keep doing what i love. that's the retirement plan. with my annuity i know there's a guarantee. annuities can provide protected income for life.

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thank you for everything. make sure you are back here tomorrow. it's time for "squawk on the street". ♪ good morning and welcome to "squawk on the street." we are live from the new york stock exchange. let's give you a look at futures as we get ready to begin trading. you can see we are looking at a lower open. this was the case this time yesterday. we quickly reversed. a couple of hours later we were already headed higher and ended higher. that was before we heard from apple. we'll see if that has the impact throughout the day that it certainly is having early on before we begin trading. european marts