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tv   Squawk Alley  CNBC  January 8, 2019 11:00am-12:00pm EST

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good morning it is 8:00 in vegas. 11:00 a.m. on wall street. "squawk alley" is live
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♪ ♪ you got it ♪ so much >> good tuesday morning. i'm carl quintanilla with morgan brennan at the new york stock exchange we have jon fortt at the ces we begin with the tech stocks off early rally. nasdaq dipping negative. in the meantime, dow jones industrial average says u.s. and china are narrowing the differences on trade president trump says talks are going well samsung is cutting the outlook
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cutting the weak profit outlook. for more on the tech names you need to watch, let's bring in mark kelly, paul holland good to see you, gentlemen >> we need to talk about this animal. >> what is in your lap, paul >> we have a slow lloris he is from conservation ambassadors. it is a group rescuing exotic animals. he will help us tell the story of tech investment in china. right now, he will go and have a snack of grub worms. >> while he is doing that, what is the story of tech in china? >> we have a tale of two cities here what we have from the trump administration with the aggressive approach with tariffs trying to shutdown a lot of the inter connect with the u.s.
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economy and chinese economy. you have others in tech doing business as usual. i think, really, what we are seeing is sort of an older version and newer version of how we think of china. the older version is we can create our supply chain by putting tariffs up we can stop cheating the newer version is we have a back and forth relationship with china now. they invest a lot here we invest a lot there. frankly, they are doing their own innovation it is a more complicated story than we hear from the government. >> mark, i'm disappointed you have not brought us a cute animal as well obviously, semiconductors are selling off again today on the heels of that apple announcement last week. samsung and lg today at what point does this come home to roost morebroadly
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looking at the tech sector and some of the more internet focused names in the u.s.? does it in. >> thanks for the head's up of not having an animal with me i'll bring something next time i'll focus on the internet names. as far as the china tension goes, there is not a lot of china exposure from my group google on the margin no exposure to china at all. from my group, we recommend a standing pattern if we look at apple in particular. you know, we heard from the supply chanin things were not great. the stock was off 9% that tells us heading into q 4 which starts with netflix with us next week, numbers need to be pretty good or things will be shaky. >> mark, paul, stay with us. will get to phil lebeau.
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we have breaking news. the boeing numbers coming out a few moments ago. >> morgan, boeing shares are moving higher despite the company reported slightly fewer number of deliveries than previous the guidance was for 810 and 815 commercial aircraft. boeing delivered 806 they rallied in terms of 737 deliveries in the second half of the year they had supply chain issues that dragged down delivery in the second and third quarters. that started to change in the fourth quarter in terms of orders 893. $143.7 billion the backlog stands at seven years for boeing the stock moves higher following deliveries just shy of company guidance guys, back to you. >> phil, thank you shares are up 2.5% seven years. that is a case of this being a
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defensive play getting back to the conversation around tech stocks, specifically paul and mark. paul, i'll go back to you. in terms of the market volatility this year and this uncertainty around china and gl slowing global growth. ipo. comments from uber from "the wall street journal" overnight what do you expect from the mega an unicorn names going public this year? will they remain on track? >> it will remain on track that is not being effected by what we hear on the trade front. in terms of unicorns, we have people staying aggressive and private. they were able to raise money at terrific rates and terrific terms in the private market. for the companies now, it is time to shine and get on the public markets and step up to
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another level in terms of where they will go the difference between these companies and the type of companies 20 to 25 years ago, they are mature companies with billions of dollars in revenue around the world we are entering a new phase here of the mega unicorns going out after achieving a tremendous amount of scale compared to other start ups. >> mark, a bunch of names in your universe. our names at the top of others for 2019 is facebook we know about netflix performance this year. twitter and google on there as well how do you prioritize those names? how do you think they fit in the early part of the year where the semis and the semi cycle is still getting so much attention? >> it is a good question i would say among the large names for the ad based companies like alphabet and facebook,
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cleaning up the platforms and regulation will be at the forefront to start the year. for companies like netflix, the user growth is robust. i think the focus is on pricing. we have seen in the domestic market is them raising prices consistently the growth is coming from the international markets and there is a more price conscious consumer it is a mixed bag with ad based businesses and subscription businesses where do they fit in the broader tech landscape they don't have china exposure probably not a bad place to hang out if you think the fundamen l fundamentals are in good shape. >> that may explain the action year to date paul and mark, thanks, guys. see you soon say hi to the loris. >> i will. >> jon >> you had big active account numbers from roku yesterday.
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we have numbers from hulu today. julia? >> that is right hulu announcing it has 25 million total subscribers as of the end of 2018. that is up 8 million in the past year it is across the on demand and live streaming service hulu does not breakdown how many subscribers each service has to put the hulu husubscribers in contrast, less than half of the netflix subscribers. hulu is announcing the advertising business grew to $1.5 billion it is up 45% from the prior year with 20% more time spent on hulu per month than in 2017 now, of course, this question is whether disney, which will control 60% of hulu once the fox deal is final, will buy out the
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30% stake held by cnbc parent comcast or the 10% stake in hulu held by at&t i'll be sitting down with randy freer. jon, back to you. >> i have the ceo of verizon coming up as well. carl, back to you. >> jon, can't wait for more from the ces. when we come back, amazon, the most valuable company via market cap will explain why the stock will double. then we will go back out to vegas and verizon ceo hans vestberg will sit down with an interview. dow stock is up. "squawk alley" continues in a moment
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the chinese have been very clear to us these are separate issues >> the monetary policy is interesting, b hey, batter, batter, batter, batter. [ crowd cheers ] like everyone, i lead a busy life. but i know the importance of having time to do what you love. at comcast we know our customers' time is valuable. that's why we have 2-hour appointment windows,
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including nights and weekends. so you can do more of what you love. my name is tito, and i'm a tech-house manager at comcast. we're working to make things simple, easy and awesome. let's get back out to vegas this morning and jon fortt who talked with the head of amazon voice earlier. jon. >> carl, pete thompson is head of anlexa voice services. he is looking to different companies to build that into different products i asked beyond the home speaker market, where does he want to make an impact here is what he said. >> in the momehome, is the biggt use case as well as timers and alarms people love to use timers for
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cooking. it is something we didn't expect we spent a lot of time making that useful and powerful for people outside of the home, we are seeing obviously in cars that will be the big next wave we're investing heavily in the auto category. >> why in cars >> people want to be able to -- hands free works well in the car. secondly, you need information local to where you are or you remember things at the moment and can't write it down. those are times where a voice assistant could be helpful >> we also talked about privacy. of course, some of the concerns of alexa sending messages to place where is they shouldn't go that happened once we saw apple with that big advertisement trolling amazon and google here is what he said on amazon making sure the voice platforms stay secure. amazon, we take da
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security seriously we mandate of how they can be used it is early days and how voice works. the biggest challenge is when you speak to it hands free and talking to it from a distance, we try very hard to tune it to make sure we only heard alexa. that's when it wakes up. some people say something that sounds a lot like alexa. we have to keep improving that obviously, that's why we're continuing to work on it and we think over time we will get there. >> and 5g, of course, big talk at the show. one of the things 5g does is drain less battery from devices connected to the wireless network. one of the things he and others, google,apple, others with voic services, how do they build a voice service into smaller devices that are around here that in the past could not have
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really been a conduit for the service. guys. >> jon, in terms of the implementation of 5g, are they looking whether it is amazon or the other folks, are they looking at it as a 2019 story or beyond >> i asked about that. he said maybe sooner than 2020 verizon, we are about to talk to, is rolling out 5g. at&t has been rolling it out as well we will see the first implementation my advice first, phones first, but then components built in even next year at ces, lord willing, with low power implementation that perhaps with microphones built in and i incorporate the voice platforms. >> jon, what is the coolest thing you have seen there so far this year? >> the camera i'm looking at the show hasn't opened yet
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officially we came here early in the morning and started to talk to the executives it gets under way in the next couple hours then i'll have something to tell you. >> i'm curious about the bread bot. check that out if you can for me jon -- >> let's hope there's more >> yeah. all right. jon, see you more in a little while. thank you for that report. this as amazon is the most valuable company by market cap bill miller joined cnbc yesterday to say he expects the stock to double. >> amazon's market is so gigantic, it hit a $1 trillion market cap i think apple is very unlikely
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apple should -- amazon should double in the next three years >> to discuss, let's bring in analyst greg melich and anthony chacomba i know you have ratings on the stock. greg, will this double in the next three years >> it is certainly possible. i think the point bill made and amazon has defined the market as the entire u.s. retail sales or gdp. they have 7% u.s. retail share today. walmart is around 10%. we think as they grow voice commerce which is used by 25% of americans in the latest survey they can double from 2,500 to 25,000 it could be at 2,000 by the end of the year. it is one of our favorite names. >> ajtnthony
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>> i would agree with the points just made. they have a huge addressable market one thing which is interesting about amazon is they are a profit machine you are seeing the profits increase at a very fast rate there's a lot of different drivers for that part of that is the continued growth of aws. a 25% operating margin part of that is advertising and across all three of the businesses, they reached an i inflection point, it is growing. we are very bullish on amazon right now. >> greg, you pointed out that amazon is losing money it is international. is there a point at which you would expect that to change? >> we think it can turn in the next couple years. the most recent survey, it was isolated in china and india and rest of world.
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they make money notiin the uk a make money in germany. we don't like to do this, but people like to play the parts map. if you back out the losses internationally, amazon retail north america trades at 12 to 13 times against the next year numbers. you can make a good value argument based on the amazon potential. if you get international to brakes even or better, that will start to show up >> anthony, there is no area to know where to provide that valuation bid. from microsoft, it was cloud the cloud story was told in a way to allow microsoft to expand we have seen that happen in the cloud for amazon already what is the next story that investors will latch on to and cause maybe some of the
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valuation expansion for amazon to catch hold? >> i think one of the big opportunities for amazon is in the health care market they bought pill pack last year. you saw the joint venture with jpmorgan chase we don't know how that will play out. that is a large addressable market which is prime for disruption i would disagree with you a little bit with aws. i think there is a lot of growth potential for aws. one thing we think we will hear in the next few months is amazon was likely going win the jedi considered f contract for the pentagon. >> greg, one area that i don't think has been talked about enough is the whole foods acquisition. i was shopping there over the weekend. new store. just opened up
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lots of advertisements for prime benefits $200 bill. $4 off have they done enough with the whole foods? >> they only scratched the surface. the point with whole foods, over years, you could see they have physical stores. close to 500 you see them expand that the consumer is demanding multichannel retail. even if north american retail is still less than half of the value of amazon overall, it can be a key driver. the key to doing that is gaining share and retail and multichannel walmart has been successful on their online and click and collect. amazon will have to get better using whole foods and direct delivery and handling the last mile if you have the majority of american households shopping every week and monetize it in other areas. one area was health care i would say before that,
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advertising is a business that is $7 billion last year. it could be 14 there are a lot of areas to monetize that membership base. >> greg, i want your thoughts on the transportation network the shipping initiative that is on the way recently ordered ten more planes investing more in airport hubs how much money is going toward that how should investors think of those initiatives? >> i think those are critical. if we with think about amazon longer term that is a key risk for them the last mile. having the capacity out there to handle getting things from any of the distribution facilities to the customer. i think u.s. postal service and fedex is getting maxed out in the capacity to do that. the fact that amazon is adding more delivery. they have been doing that for the last couple years. to keep up the near 20% growth,
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they need the capacity i think they will get it however they get it. if they do it themselves, that is way to do it. >> gentlemen, thank you. amazon shares up 1%. greg and anthony on the other side of the spectrum, a different retail story. sears set to announce the liquidation plans today after rejecting the eddie lambepert's bid. >> setting the retailer on the path to liquidation after more than 125 years in operation. the bankruptcy hearing was scheduled for 10:00 a.m. sources tell cnbc it will liquidation.
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t there was a bid scheduled for late this morning, but what is next for the stores? sears and its advisers are not soliciting bids. others dropped out of the process due to the financial and human resources it would be required to run liquidation. the inventory is estimated to be $3.5 billion the largest retail liquidation cover ducted toys r us had to be managed by the four largest liquidation terms ever shoppers have been complaining of empty shelves at deteriora deteriorating stores sears holdings had 4,000 stores in 2001. $11.3 billion in liability sad day for a story i hied retar
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morgan. >> courtney reagan, thank you. curious to see how it moves after toys r us. coming up, do not miss jon's interview with ginni rometty that is taking place at 2:00 p.m. first, take a look at the best performing stocks in the dow so far today. boeing, verizon. that ceo is coming up. j & j is leading the way don't go anywhere. alerts -- wouldn't you like one from the market
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fidelity. open an account today. european markets closing on this tuesday seema mody joins us. >> despite data showing the germany economy slowing down with industrial production dropping 2%.
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the worst decline since 2008 what is helping? the performance in oil that is helping the energy producers like bp. hsbc putting out a positive note on the retailers the growth rate will slow from 9% to 6% this year, but will allow the luxury companies to increase margins further another bright spot is m & a the deal decline in 2018, chinese mergers increased 82% in the same period. on the topic of trade, eu officials are meeting with robert lightheiser and others to discuss the threat of the auto tariffs. and tomorrow, the meeting with representatives from the united states, eu and japan morgan, back to you. >> thank you let's go to sue herera for the update
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good morning here is what is happening at this hour. supreme court justice ruth bader ginsburg will not sit for arguments today. her second day not on the bench and first missed court session since cancer surgery last month. she will participate from home through briefs and transcripts the u.s. cancer rate hit a milestone. the american cancer society saying there has been a 27% drop between 1991 and 2016. lower smoking rates and early detection translating to fewer deaths however, obesity related cancer deaths are on the rise in turkey, president erdogan telling parliament military preparations against terror groups in syria are mostly complete he refused to meet with the u.s. national security adviser john bolton who was seeking assurances that turkey will not
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attack u.s. allied kurdish militia in syria. and a vessel caught fire and 21 witnesses were rescued. a loud blast shook windows for several miles away you are up to date back downtown to "squawk alley." carl, back to you. >> sue, thank you. a check of the averages on tuesday. well off session highs dow up 85. s&p up 2 nasdaq dipped red. when we come back, verizon's hans vtbg teseronhe other side of the break we're back in a minute
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welcome back to "squawk alley. let's go back out to ces and vegas where jon fortt is sitting down with our special guest. >> morgan, thank you we are joined by hans vestberg ceo of verizon thank you for joining us. >> thank you >> hans, verizon shares are moving up 2.5% higher just earlier this hour, verizon announced better than expected q 4 subscriber numbers what is driving that surprise? >> we saw very good momentum on business now in the fourth quarter with the 1.2 million more retail additions. of course, 650,000 phone adds. that is a strong quarter for us. just continue with the good momentum the wireless team has done a great job continuing to bring
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customers. at the same time, low share. >> this is in sharp contrast to the warnings we got from apple as well as samsung are you seeing either any ripple effects from their trends or similar trends >> i can only talk about what i see in my market space we had good momentum in the wireless business. we added more than double that amount on net additions in the fourth quarter compared to the third quarter. we see good momentum in the fourth quarter. >> you don't see huawai phones >> we don't have any equipment nor any phones from china. of course, when it comes to trade barriers, imported equipment from china can have an impact over time that is very early to say. we don't know. >> a lot of talk about the maturity of the smartphone market after apple's announcement last
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week, but the developed markets and the upgrade cycle is not what it used to be we too often separate the smartphone from the network. network upgrades helped to drive the cycles for smartphone makers in the past. we have not had one in five or six years. >> we have seen incremental improvements from 4g we almost don't remember the 3g. we are right i see a huge quantum leap from 4g to 5g bigger than 3g to 4g we see new pools of innovation for consumers. yes, i assume we will see more new innovation when the new technology is coming out >> is it possible that smartphone subsidy comes back if what apple and others are
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offering in the phones really sells the 5g network to the degree that is pushing the consumer to get on the network fast faster >> i think we will have marvelous working issues now our customer are likes it. you need to follow the market and see what is happening. when great technology is coming and everyone has them, i think it is less of that need. you need to listen to customers. >> hans, you are here at ces peeking about 5g and the abilities it is bringing can you give us an update how soon 5g will be rolled out nationwide and we as a consumer will experience it >> i think what you need to learn about 5g, it has eight abilities. in 4g, you have two of those some of them would come and spread out all the time. mainly right now, we see speed coming through that is why we launched 5g last year which is in four cities this year, you will see
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smartphones coming out where we announced we have two smartphones in the first half of 2019 one more motorola and one for samsung. that is based on the 5g network. it will be a quantum leap in how much speed you have on the phone with the other coverage. we will roll that out over time in the country. >> what about the battle with at&t both verizon and at&t investing billions in 5g technology. how do you make sure you stay ahead of at&t as they double down on the space? >> we started two and a half years ago. we pushed the industry to come a year earlier with 5g remember 2020 was the timeframe for 5g when i worked or another company. i think verizon has been on the forefront of technology and always the best network. that is what we continue to drive. we will be the network with all
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of the currencies. no latenlatency. >> how important are non-smartphone non wifi devices? it is led by phones, but 5g capability, especially in battery life, that is a factor you did not mention, which is supposed to be broader >> the first case i had was in my hand several years ago. take it from the factory or retail store and everything is mobile the latest is so big you don't need cable that is the first use case we work with the large corporations in the u.s. we offered a platform as 5g. they think how to transform the business by using it i think about those lost opportunities which is the
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revenue stream for verizon it is transformative of the industries and legacy industries. >> one use case for 5g is quick streaming of video it is notable you recently got rid of the business. you took a $4.6 billion are on that business. what does that mean for digital media strategy do you see the potential to go into the category the way at&t bought time warner and created warner media >> we are building a service we have a network that is orchestrated of customers from consumers to big enterprises and small and medium what we believe to do, we believe to have that platform and orchestrate that i said many previous questions of buying linear tv companies. we're not interested in that i think we can work with anyone. that's going to be our model our verizon media growth oath
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still has a role to play that asset is our super shadow with media and entertainment and sports, et cetera. finance. it is all important for us overall. that is not for linear it tv that fits in the plan with the service and products just screaming scream streaming along. >> hans vestberg, thank you for joining us back to you. >> thank you we will get more from ces today and tomorrow ibm and all coming up from vegas. take a look at t dheow the session is up 300. a lot more to come when "squawk alley" returns in a minute hang on. radar that senses things the human eye can't. busted.
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you know, the pizza slice. it allows you to choose any doctor, who accepts medicare patients... and these are the only plans of their kind endorsed by aarp. whew! call or go online and find out more. i'm scott walker here is what is coming up at the top of the hour. how much of the market is tied to apple we will see if the market can continue without that stock come back what will earnings season bring? what is a rare downgrade for jpmorgan chase mean for that stock and the financials we debate that in the call of the day. see you at noon. morgan, we're 15 away. >> key questions, scott. we're looking forward to it. let's go to rick santelli for the santelli exchange. >> good morning, morgan. i like to welcome michael hansen thank you for joining me,
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michael. >> thanks, rick. >> you know, normally, the fed is raising rates many believe it is something we need to address future downturns in the economy by lowering them. nobody talks about the balance sheet. are fed officials lowering the balance sheet level to reload to use this as an active tool your thoughts? >> i don't think that is the primary consideration. i do think there is a market reaction that supports that. i think the fed does want to get the balance sheet down to some level they feel comfortable with from the historical basis. no question the next recession rolls around the fed has to do more qe. you heard powell make a similar comment to wag the dog earlier >> you get the numbers from the december meeting tomorrow. is there anything in the minutes that you are looking for to get
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a clue for the next several quarters >> i think balance sheet is a key topic that will get more discussion you had an early version of that in november. i don't know we will reach firm conclusion in november, they liked the big balance sheet of managing bank reserves they don't like all of the side effects it has they are still debating. we won't get clear resolution. that is one thing to look for. >> all right with regard to the yield curve rates move leave ower three months to ten years at 24. is there any color you can give us, michael, on how investors should be dealing with the ever flattening getting closer inverted curves? >> i think the flattening that is happening recently is because you had the market for a time pricing in fed rate cuts we priced that out today i think it will be a high hurdle
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to get the fed to cut soon the market and the fed on the shortened are coming back together one of the best indications in the markets of when the economy rolls over has historically been the yield curve. we are in the range where market participants and fed officials are nervous. there is an active debate of the fed sheet is getting into debate you will hear more caution out of the fed officials frankly. >> all right finally, we begin a set of auctions in 3, 10 and 30 my final question to you is with rates moving down in some big institutions saying the top is in on interest rates what about debt, deficits and supply does it matter >> i don't think it will matter for a while. the classic example is the u.s.
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being the cleanest shirt in the dirty laundry pile other countries are in worst shape. treasury remains the lifeline and blood line of global financial markets. at some point it will matter i don't think we will see it soon >> michael hanson, i thank you for your thoughts today. morgan, back to you. >> rick santelli, thank you. coming up later today. don't miss another great interview from ces julia sits down with hulu ceo randy freer. that is on the heels of the strong subscribe meantime, before the break, the stock surging on union pacific on the new ceo shares are currently up 8% helping fuel a rally for rail 'rbaks overall wee ck in a few minutes. stick with us. i am a family man.
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i am a techie dad.
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i believe the best technology should feel effortless. like magic. at comcast, it's my job to develop, apps and tools that simplify your experience. my name is mike, i'm in product development at comcast. we're working to make things simple, easy and awesome. welcome back hitting a rough patch lately amid global trade tensions and found 2% again today let's head back out to las ve s vegas. >> i sat down with cypress ceo we talked about the short term and the long term. the long term is what they want focus on
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things like wi-fi 6. they will take the 5g signal and allow more devices to get on it. trade tensions with china taking center stage i asked him is uncertainty over this relationship china the new normal he said no uncertainty will eventually sub vie side >> it's the uncertainty and new norm the uncertainty will subsides. it will get resolved where it will land is what i can't predict. i don't think anybody can but it will land anywhere i think it has to land somewhere for the market to have a sigh of relief it's the uncertainty that customers are a little uncomfortable with and the markets are uncomfortable with once it settle, people can plan for the new norm what that is, we have to wait and see. i don't control that outcome what we do control is keep rnd
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where it is. keep engaging with the customer and deep diversifying our business we're not exposed to one region or a specific market segment the company has to lead robust financially and technology >> he's not seen a slow down in customers looking to design in their chips for the long term. we all speak ceo when he's talking that way about unsirn uncertain uncertainty, you can expect he does see the volatility and doesn't see an end in sight. >> all the chip names are leading the nasdaq 100 lower any thoughts on whether they are suffering from trade regulars or is it regular cycle pricing elements that we see on multiple cycles >> i think trade worries definitely have quite a bit to do with it there have been these established supply chains,
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logistical flows when it comes to ships from asia into eventually markets in the u.s. now a lot that have is having to be rethought at the same time has you have this action in memory markets that's causing volatility as well all of that, for market that goes through the cycles of volatility any way is adding that much extra noise. it's pretty uncomfortable. >> yeah. samsung is weighing in overnight added to the discussion as well. great stuff. stocks well off the highs. off the lows as well we're back in a minute
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it's been greet stuff from ces so far i know your day is getting started. what else do you have coming up today? >> a lot more to come. ceo of ibm is delivering the opening keynote later today. right after she gets off stage for that, she'll come over and sit down with me and join us on cnbc i expect to hear a lot about artificial intelligence. i expect to hear a bit about
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weather. ibm has the weather channel asset and provides weather data to a lot of different devices. i expect to hear her talking about ibm research and technology in way that reaches the consumer and hass an impact on the future. something ibm has struggled over the last couple of decades it's framing how its research is going to not only reach the consumer in form of product but add value in a way that provides growth and a stock boost for investors. beyond that, hewe have lisa su f amd. one of the best performing stocks last year also going to do a keynote address here.
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bringing a graphics power to chrome books lots more to come from ces >> it's going to be interesting to see whether ces gets knocked for not delivering on big promises having sort of frilly stuff comes through with real technology this career we'll see. let's get to the half. i'm scott wapner can stocks bottom before apple finds its own footing? one of our own is buying should you as well this is the halftime report. >> is news on trade good enough to really give the bull something to hang their hat on big stocks are on the move today. plus the eve of earnings season has arrived. which way will the numbers take us and what should you watch for? the call of the day centers on a bell

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