final check on markets now show you what's about to happen in a half hour dow opens off about 200 points right about now. nasdaq would open off 60 points. we have citi's earnings, pg&e's news, banking news and earnings reports to bring you throughout the week join us tomorrow "squawk on the street" begins right now. ♪ ♪ oh yeah, yeah oh, yeah, yeah ♪ good monday morning. welcome to "squawk on the street." i'm carl quintanilla with jim cramer, david faber at the new york stock exchange. dow down 200 as q4 earnings season kicks in. day 24 of the shutdown weakest xh esest china export n more than three years. ten years around 269 we begin with china and the global slowdown worry. stock futures point to a sharply lower open investors closely watching the

trade data out of china. and corporate guidance here as citi kicks off earnings. >> newmont mining buying gold corp., $10 billion all stock deal. >> and pg&e under pressure, stock losing half its value premarket after the gas and electric company announces plans to file for bankruptcy stocks are set to open sharply lower amid some worries about a slowdown in global growth. chinese exports fall by the most in two years and then here in the u.s., the partial shutdown of the government enters its 24th day on the earnings front citi beats on the bottom line, but misses on the top line. michael corbat says a volatile fourth quarter impacted some of our market sensitive businesses, particularly fixed income down the lowest in seven years. jim? >> look, why was the stock -- why is the stock below book value, why does the stock come off so much? people realize this one division will be horrible

it was horrible. i think that if you break it way from that, you got decent company that should be higher than it is but then again, look, we're looking for companies with revenue growth the companies with revenue growth this quarter are going to do exceptional well and citi's revenue growth is nil. we're going to say, all right, next quarter it is funny you see these companies and the revenue growth, you can't think of a reason to buy them >> right that's what i wonder, are investors going to overlook that fourth quarter we made this point many times. we know high yield didn't print a deal at all. and there wasn't a lot of activity so goldman, morgan, citi, jpm, you can expect that our investors will overlook it. >> i think it is a great question because frankly, if you to overlook it and look at their basic everyday business, trade security business that they have, which is not trading, it is so great. and yet this bank has radically

underperformed you look at the market cap of this bank versus the five years ago, it is nowhere versus what jpmorgan has done, versus what bank of america has done goldman, talking about goldman, goldman is so mired in what happened in malaysia that people don't seem to want to talk about it i'm willing to talk about that the main thing is you're right, david, citi down here at 56, took us -- 3% yield, value act in there, pushing them, mike corbat does not deserve that discount all the banks are u owners they're valuations are so low, it is like they're coming out of the great recession. it is the cheapest group by far. you need to have someone fantasize that they can get growth and fit fantasize. >> expenses were down 4. credit card up 1 that sounds like a more normal -- >> they're chopping people

look, best goes up 7 i like that a lot. the return on tangible, 10.9, i like that a lot. tangible books, $63.79 someone will say, wait a second, that's not totally tangible, give me a break. when things are not totally tangible it because there are bad loans. there have very few bad loans. i think the fed has given them a lot of latitude to buy stock back or raise the dividend it is cheap. and when people say this market is expensive, exhibit a would be is it really expensive if citi is so far below book this is not cal fit where we used to see book and companies have book and we realize the book is phony. the book is real we sold a lot of stock higher. i would be anxious to buy it lower if it got any more discounts. he's going to stand there and buy it. >> how are we processing macy's with apple with fedex and then some other preannouncements that are not bad. lulu today, croc's, gm.

>> lulu is good. they're doing a comp level they're doing comp level mid-teens. i think you go back over, i want to focus on target for a second. target was really good target is good >> it came on a bad day. we know that we discussed it. but it didn't -- it didn't play out well for investors even though you may say it was a decent number. >> but macy's missed in so many different categories target didn't -- >> i guess, i mean, carl's question is one everybody is asking, we have seen a number of warnings this report from citi may be fine, but it isn't great not the engine that gets people saying earnings will be stronger. >> no, but if you're the federal reserve, you bother to look at companies, i think they frankly have not, just my homework, not homework issue, you look -- you can make a case, that the consumer got appreciably weaker in the last eight weeks. >> we didn't even mention the

airlines >> oh, my. you look at the downgrades, the airlines, there is not a lot to it it is weaker fares are weak the government, the million people, some people say internet -- if they continue to be furloughed, the first quarter will be weaker and i think that airlines are actually more levered to furloughs than people realize. look, jay powell, people keep saying why you to keep coming back to him? the answer is he keeps saying the economy is really strong employment is strong and that may be the economy. but it is not the economy in terms of what the economy i look at which is that things got weak and december was a bad month december was a bad month for fixed income for citi too. >> by the way, on that front, which has been followed closely, things do seem to be thawing a bit, charter announcing a bond deal, couple of other deals potentially coming so we are going to see at least some activity in high yield and the likes, a good sign for the banks and also just generally.

>> yeah, look, there is moribund you look at the big accounts in q4, they did well and therefore they shut down or did really badly and seems like they didn't want to do any worse so there was a stand still and that's what we're stuck with i don't think -- i think today is going to be a day where people say everything moved up too much it is almost like this weekend, people took soul searching and soul searching and say everything moves up too much some of these companies shouldn't be where they were some of these sports teams shouldn't be where they were but i look at all the downgrades and what people are saying about tech and say, okay, now you think it wasn't any good i come back and say buy the dip. we have the bear market, the bear market is over. >> speaking of bonds, david, the bond action and pcg today, pretty amazing. >> the whole thing is amazing, carl we started covering this story in earnest, probably only a week ago, talking about the real possibility of bankruptcy. the market didn't seem to want to listen. the stock did weaken last week

and it is substantially lower again this morning of course, this time, you got a company that this morning said we intend to file for bankruptcy on january 29th under chapter 11 of the bankruptcy code they needed to give 15-day notice, something i made light of -- not light of, made people aware of last week, as a result of the law passed in california 901 that said if you plan on filing bankruptcy you have to give your employees 15-day notice they're doing that the 29th is the day they have lined up a pile of confident letters for a $5.5 billion debtor facility and there are some people who think it is a bluff. some tell me we're not bluffing. anybody who has any question about that, read this endless ak in which they go into no shortage of detail about the reasons behind why they need to file bankruptcy and all the reasons why it is the right move

for them by the way, we did tell you a week ago, piece of news we were able to add, the 30 plus billion in potential liabilities, and that's even before things -- the language is there. they say pg&e were to be found liable for certain or all of the costs and expenses or losses described above with respect to -- we're talking about the devastating fires that took place in california in both 2017 and 2018 in northern california wildfires as well, they say the amount of such liability could exceed $30 billion that's the number we told you about. which does not include potential punitive damages, fines, penalties, damage related to future claims. now, a key reason why they're going to potentially go or file for bankruptcy here and why there had been a belief that perhaps they would be able to avoid it has to do with that 901, that law passed that seemed to be enabling the company to issue bonds to meet the liability from the 2017 fires. but in a closer reading of that,

pg&e says the following. that it believes that any securitization of costs relating to the 2017 northern california wildfires would not occur if at all until pg&e paid the claims relating to those fires. and therefore the company doesn't expect the cpuc, the utility commission, to permit the company to securitize costs relating to the fires on an expedited or emergency basis in other words, it has to pay the claims before it can issue the bonds. so even if the legislature were to convene, and say, okay, we're going to do the same thing for the 18 fire as the 17, they don't have the money they have to have the money to pay the claims first before they can issue the bonds to meet the potential claims guys, they're going to file. the question is what is the equity recovery value? at this point, too early to say. i haven't spoken to enough people around this in terms of the creditors and in terms of everybody else but let's not forget, this, this utility, 16 million people, jim, in california, and it will be

most likely filing bankruptcy roughly two weeks from today. >> i wake up and geisha williams, out. >> the ceo also out. >> this is the kind of thing that makes you think wow, there's nothing here she's gone >> she's gone. >> the talks -- >> she's gone. >> this is like a -- it is a keystone cop situation. >> not a good situation. >> it is suboptimal. >> it is suboptimal as you like to say in all respects this law basically, even if they weren't found negligent, they still have -- they are still on the line in terms of liability for these fires. and, again, that is long before we even talk about the punitive, potential punitive damages, fines and penalties, so the numbers are going to be enormous the company did pull down its revolvers, has some insurance, will have 5.5 billion in debt earned possession financing and the plan is not to change the way its services both gas and

electric needs of its customer base and it believes it can do that the best by being in bankruptcy, which will be in for a long time. >> the bonds, what was the coupon, didn't motion utilities have huge obligations? >> yes. >> somebody is a big loser here. >> there may be -- they have a headquarters building and now very hot part of san francisco that could be worth fortunes, billion and a half there are assets potentially for sale, there are other things that do point to a possible recovery value it is too early to talk about. >> how much of this is so situation specific regarding the fire that they cannot be used as a lesson for overleverage in this period, right now >> i have to believe that from now on you better get enough insurance, they were underinsured, just impossible to -- where is your catastrophic insurance. >> they weren't spending enough. it seems as though this is the wall street journal's reporting, the utilities that service the leer part of this, the southern part of the state seem to be spending

more perhaps than pg&e did they'll potentially refute that. but on trying to prevent fires now, to be fair, they got poles up in mountains, it is difficult to service them. it is difficult, but, yeah, difficult to know that should they have turned the power off when they did not for the campfire a lot of questions >> we're supposed to own these stocks with no risk. you wake up in the morning and your ceo quit and stock is cut in half after being cut in half after being cut in half. should we think, the utilities, do they cut the trees? have they maintained we never talk about whether they maintain is southern okay with the nuclear -- >> in the north, it wasn't typical to have these kinds of fires you could put this at climate change, right? you can say, that's what you need, you need climate change insurance. >> is it offered >> it must be. >> a lot of companies won't write climate change like travelers. remember mr. fitch said i'm not

going to write in florida? and, by the way, just for regular beach houses, they got all these -- >> flood insurance, forget it. >> yeah. you build a beach house at your own risk got to be a little inward, david. >> yes, you do. >> that's what the house dictum says. >> i'm aware. >> you got to worry about -- i got to tell you, i read they didn't trim trees, those of us who are used to coming by and making it look like dandelions people covering it are, like, it doesn't matter this is one of the largest utilities in our country. >> pretty much every state of the country, populationwise, 60 million people. >> i did not pay them when i was living in my car they found me. they found me. they had some creditor organization that has power -- >> come to the car were you stealing power? >> i was not really all that -- there was a previous bill when i

did have a house that i had to pay them it was a little bit shocking that they caught up with me a year later in new york city. i said, boy, you guys are good that's what we do. >> when we come back, we got m&a in the spotlight as well newmont's deal to acquire gold corp look at the futures here got some calls on snap today as well delta which reports this week. western digital and more more "squawk on the street" from post 9 in a minute this scientist doesn't believe in luck. she believes in research. it can take more than 10 years to develop a single medication. and only 1 in 10,000 ever make it to market. but what if ai could find connections faster. to help this researcher discover new treatments. that's why she's working with watson. it's a smart way to find new hope, which really can't wait. ♪ ♪ (indistthat was awful.tering) why are you so good at this?

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got some m&a in the news mode newmont mine agreeing to acquire goldcorp deal comes after barrett gold. 17% premium on this one. >> 100 million in pretax synergies i'm told, a modest number talking about a month from what i understand, not more than that but these companies know each other well it is all about endgame consolidation in an industry that has seen it you have that other large deal this is the end of the game. you want to make sure you get the right partner and are large enough at this point to survive and potentially thrive >> i like the barrett randgold

deal much more randgold was the growth and dividend oriented producer like the old days used to get big dividends. randgold looks for gold in places that are unstable has pretty good relationships with governments that you think couldn't do a deal these guys are much more pedestrian goldcorp has a tremendously horrible stock really poorly run. had so many different things don't think people realize the execution risk at a gold company is just incredible. >> newmont is not considered -- newmont is a strong -- >> consistent. >> which is why you have to hope, newmont, it is a stock deal, it will be down. >> getting shorted potentially by those setting it up. >> you see why people own gold, physical, and the gld. companies seem to have a hard time keeping their costs down. gold had a very good move here people don't seem to realize it is not moribund anymore. these deals are occurring. david, i guess -- how many mines do you need?

>> i don't know. these mines are not in tougher places, they're in canada, the u.s., south america, places that are stable, friendly, not just going to close your mine down one day because they don't like you. >> which is what -- that has been the case for randgold free port has some gold, always been a little tenuous. i remember mark bristow during the height of the ebola epidemic, talking to me i said your mines are right in the center of it he goes, what you do is you fist pump, you don't shake hands. i thought that was a short-term resolution, terrible fist bump you had the flu last week. carl i would not have fist bump you had you been here. >> save yourself tough season. >> people don't like to fist bump got to learn to. much better than shaking hands. >> is it really? should we all be fist bumping? >> yes >> here. >> that. >> no regular -- >> not considered a regulatory

risk on this doesn't need the china regulatory approval. shareholder vote on both sides should be fairly straightforward. >> these companies when g combined, we did a piece saying you should buy randgold. barrett is not that good buy randgold >> good. >> we'll get cramer's mad dash and count down to the opening bell in a moment interesting headlines in yellen on the tape. we'll get you up to date on that more -- look at the premarket and more "squawk on the street" omheysin ment. people know aflac... aflac! ...but not what they do. so we're answering their questions. aflac is auto insurance, right? no. uh uh. is it homeowner's insurance? no... uhuhuhuh! is it duck insurance? nope. ahhh! do they pay me money directly when i get sick or injured? yeah. aflac! you got it. you know aflac! boom! get help with expenses health insurance doesn't cover. get to know us at... aflac dot com.

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all right. another week is upon us. and you're back, thankfully, from your travels. while you were out there visiting everybody and talking a lot of apple as well as we get started with the mad dash. >> spent good time with tim cook, tim cook is very, let's say, confident that there could be trade talks that could go to fruition we don't know. he likes the momentum. in the meantime, he's talking about how there is great innovation david, this morning, webb bush says i would emphasize forget the innovation, they're talking about pricing hubris they're saying they pay too much for their phones they ought to -- they call them behind the eight ball in the race with netflix, amazon, disney, hulu, and time warn, they have to bulk up on content. if they cut price and bulk up in content they can make it back in the service revenue stream it is a thoughtful piece dan ives, the courier for new

view >> got it. >> so, look, all of tech is down today as we get this reappraisal that did tech bottom tooquickl here i think that apple, if you know, i spent my time with tim, i felt emboldened to say give me a break, this thing has gotten too cheap. like many companies, david, if we get a deal in china, you're going to want to own apple if we don't get a deal, you will be suffering because as they say, there is 60 to 70 million iphones slated to be upgraded, new purchases are out of key china regions that's a huge amount if they cut price for the 10r, if you're watching football yesterday, i think you say, when a phone, they advertise and show you what it can do, but, you know what, it is -- some people think it is too expensive in china. if that's the case, cut price, build up service revenue, positive >> all right we'll be watching apple as we more or less always do here on "squawk on the street. and throughout cnbc. we got an opening bell coming up next stay with us [ telephone rings ] [ client ] - hey maya.

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you're watching cnbc "squawk on the street" live from the financial capital of the world the opening bell in just over 60 seconds. busy monday ahead of a busy week we got the shutdown, of course, continuing q4 earnings on the way the president is en route to new orleans to address the farm bureau and then janet yellen at a conference and speech with steve liesman, moderating, saying that it is possible we have seen the last hike of the cycle. rates could be low for, quote, quite a long time. >> if that's the case, this whole chatter about the end of cycle will go away and you'll be buying a lot of the stocks that you're selling today. i do think that that has been my view she's very data dependent. that's what we know about her. obviously she's attuned to what is happening with many of the sectors in the economy very positive she views it that way. all right. >> meanwhile, the shutdown will make us blind to certain elements of data over the next

few weeks or as long as it lasts. let's get the s&p here and the cnbc real time exchange, the big board today, cynex celebrating its anniversary at the nasdaq ceva, a licensor of signal processing platforms and artificial intelligence processors watch the banks, i guess, to start out. >> sure. look, is citi the one you want to lead off? i think citi is an easy comparison they showed you down 21, okay, that's what we're doing. there is a stock i want to talk about we didn't talk about last week enough. that is really had an amazing run and i think the run continues, which is general electric i think that i'm now starting to think the stock was rated down at the end of the year it no longer financial it is now an industrial. it is not trading with financials i always hoped that woul happen if you can separate that from citi and bank of america and just look at it as a company

that is actually starting to have an earnings turn around, wow, that could be a new leader where we didn't think that there would be any leadership. >> right all right. leader as in $7 stock now $8.83. >> leader in that -- >> 17% this year. >> we had taken -- i think ge, i work for ge, do not, we take off the table something i never want to use with ge because it is not right, bankruptcy. i think what happens, i think cope has a lot of different ways to be able to make some money. health care more than people realize. i think the aerospace is terrific let's see what happens with aerospace and trade talks. easy for china to say what they feel like with us is to buy boeing airplanes i know the president is addressing farm. soybeans are not the answer. the stock of deere has been the strongest industrial, saying what is going to happen is another deal with farm soybeans. soybeans is not intellectual property the last i looked

i've grown soybeans. i got to tell you, you can be a dufus and grow soybeans. >> i should look into it >> i found it better than corn alfalfa is the easiest, david. you can grow hay like there is no tomorrow. >> hay, got it. >> you putten en tit on your lt >> okay. by the way, the president is making some comments on his way to new orleans as soon as we get that tape, i'll bring it to you >> don't have a lot to write home about today it is relatively ugly. let's point out that oil was down 85 cents when i got up. now it is only down 44 cents, not that it matters what time i got up, because obviously in grief mode for what happened if oil turned around again, i think people should combine what yellen says, data dependent, with the idea of an oil turn and

you watch citi and jet wciti waw 85 cents it is early. i think people should be far more focused on the pacifics gas and electric they had -- they had gotten rid of their -- they suspended their preferreds in december of '17. i don't understand why everybody wasn't gang tackling this and shorting it. >> there had -- there has been this continued belief that the california legislature would step in in some fashion and save pg&e, it is not going to happen. certainly it is a crisis if you want to call it that and something that the very new governor of california will be dealing with, gavin newsom having taken over from jerry brown a week ago or so at this point. pg&e shares below 9, let's call it 9 bucks a week ago we told you there would be over 30 billion in liabilities. we brought up the idea of bankruptcy, the idea of debtor in possession financing potentially having to be something they would consider

purs pursuing let you know they have to file the notice as they did for the employees of the corporation letting them know they plan on filing on the 29th by the way, to those who would think that, well, there is still potentially a way, you say you're going to file for bankruptcy, it becomes a self-fulfilling prophecy everything else happens, everybody pulls and you have to file for bankruptcy. that's where they are at this point. the question becomes equity recovery value for them, guys. there is a lot more debate i think about what you may see again, last time they filed bankruptcy, there was equity recovery value and the stock i don't believe ever traded below something like 6 bucks a share >> look, there is some news, some research that is very positive i speak to phil lebeau people talk about gm being worth a stubstantial amount worth more than it is trade iing. we should be reassessing whether

gm isn't cheap gm is very cheap and we got to figure out why that is and whether it makes sense >> when i was out west, when gm reported that great number, what did people say jim, get involved with the only growth audit tesla, tesla, tesla. i was in two teslas this weekend, people just driving me around like, where's your -- people aren't driving chevy trucks. chevy truck is doing well. >> yes where were you that they weren't driving chevy trucks >> silicon valley in san francisco. >> oh, right >> not chevy truck territory, you could say. >> it is not. >> special world out there speaking of autos, our phil lebeau is at the north american auto show in detroit and has news regarding fiat chrysler hey, phil. >> hey, carl caught up with mike manly, jeep has been on a roll, sold nearly a million units last year. that means they're going to have to add some capacity, that means adding more jobs here is mike manly talking about some of the plans they're putting in place

>> one of the things we're going to do in our current five-year plan is we're bringing two new products to jeep three row in the full size and in the large, you know, we'll bring back the grand wagoneer. they will need new capacity. no way we can fit it into our existing manufacturing infrastructure so we will bring capacity on board for those. and, you know, as you know, the pent-up interests really in grand wagoneer is huge that will happen in the very near future. >> again, mike manly telling us that they do plan to add capacity the relevance of this is that you're seeing automakers now assessing do we have too much capacity, as is the case with general motors, because so much was allocated to building cars, or do they not have enough, which is the case with fiat chrysler, because, guys, jeep sales are not slowing down they sold almost a million jeeps last year. they're going to pass that this year as they roll out new jeep models and they need that capacity so look for them to add some more capacity and more jobs.

back to you. >> phil, we'll look forward to a lot more from you. gm, by the way, up 1%, one of the big gainers today. so many cross currents in cars volkswagen, ford, fiat. >> basic story, fiat, phil's interview with mary barra was a rally call to buy this stock we're going to figure it out we'll figure out electric better than everybody we have a strategy long-term i listen to that and said, mary barra has done a great job, the stock has not done up. fiat, they got sales they have growth these are not -- here we go again. gm, we got so many companies that are selling at six, seven times earnings i saw a downgrade today, just to follow up there, micron, micron sells at four times earnings they're not going to make the numbers. that's what happens. we have one inexpensive market here selling at 14 times forward earnings is that the level you begin a bear market, no. we came through a bear market. i think people are still

oblivious to the fact that the bear market ended on that horrible half day christmas session. what a session >> today it is morgan stanley that says we're going to retest december lows. they say market is too heavily crowded in defensive they say once we get there, you buy cyclicals. >> we'll go down -- i don't know if we retest that would be something to buy the cyclicals. we saw it upgrade just now upgrade on emerson, which is a company i like, fairly levered to china, sell to hold at citi downgrade, one of the biggest weaknesses in the industrial world is -- i don't -- i like the take i like the take. i want to see this rotation, i want to see stocks go down i want to see stocks go down on good news like the retailers that are just emphasizing macy's i want to see oil stabilize. if these happen and we see facebook go up, because there is a note this morning saying that facebook is going to be making a comeback, that is, wow,

facebook >> mkm says perhaps the largest upside because of the uniqueness of the network they make comparisons to tv, where the audience peaked and the industry continued to grow for decades. >> i ask everybody outthere, who you to lido you like, who d like what ceos are appreciated? keith block. and then you say what do you think about facebook and they say the same thing, just they use terms the equivalent of apple, just not part of the firm of it this was the first time in my four trips i go every year, this is the first time i heard people say they'll get it together. and i think a lot of that is because there has not been a story every single day you go to "the wall street journal," it says what stories they're talking about, there is the les moonves story, that seems to be lasting forever and here is our investigation of facebook the journal and "the new york times" concluded their

investigation and we didn't get a government investigation that led to anything substantive like what i keep thinking is going to happen with goldman sachs when they report. >> and you mean in terms of malaysia. >> malaysia. malaysia, look, goldman reports, a preview, i've been dead wrong, i think they have to say, listen, a lot of people are involved in this transaction and we charge so much, it should have been a red flag they have been saying, listen, malaysia, good government, you know, we did a deal with the government, who knew it was fraudulent but the fact they were making, what, a gigantic -- 10% on the bonds, i don't want to hear that's normal. i sold -- i sold billions of bonds in my time i'm lucky to get 2% was the most i ever got >> the -- still the best performing stock, i think, by far on my screen, since the beginning of the year, is netflix, which has added a quarter of its market value, is down today, but still up 24.5%.

>> that's one that mystifies people >> jpm did cut their target to 4.25 to 4.50 sentiment turned positive quickly. this setup ahead of friday's numbers is more difficult. >> i just -- i'm aghast and in awe that that company made such a comeback in a period where frankly there has been this retrenchment going on. we did mention the fact that china, china numbers were bad in terms of import and export and netflix doesn't have any china exposure one thing about f.a.n.g. doing well other than apple these companies don't have chinese -- so i felt that netflix was kind of the beacon. but to be up so much without a slate that seems to be grabbing you, and with -- as david talks about, the need for money. >> they still have to go, they have to rely on the generosity of the capital market still to

fund -- you know, again, you look at the numbers, at least that are anticipated by the analysts who follow them, in terms of content spend and it is just extraordinary as i pointed out. i think getting to what as much as $24 billion in the next three or four years. >> how much will be up at the end of the day that's how i look at this. i look at it crazy because when a stock is up that much, people feel that someone knows something, that there is a sense that things are better and that is, look, no inside information, that's been the way. i watch micron, these stocks have been good lululemon, lululemon, i don't know, my wife, the price tag is ridiculous and it doesn't seem to be daunting to people >> it is worth noting that citi shares are up. >> there you go. as you say, how much worse when talking to david, they did in line and the stock is below book and citi can buy 8% of the company as it did. i question -- i talked to mike

corbat, it is not working, the buyback, if you buy back below book, it has to work mathematically >> right >> has to work mathematically. >> still in disbelief, a lot of banks, a lot of banks had a recommendation, were buying. >> pg&e, yes >> buy recommendation. >> didn't work out well for them. >> ill advised. >> yes, it was suboptimal. >> suboptimal. citi was -- citi could lead people to say, you know what, things are cheap now we need a catalyst the catalyst may be in the case of citi. if everybody reports the same thick bad number -- >> the banks are going to. it was a bad, difficult quarter. >> regional banks see some growth. >> morgan stanley, a difficult quarter. they're going to report a record year >> 50 million shares >> people may look, they hope people will look past it >> what do you think about the fact that james gorman who has

done such a great job, never gets talked about. >> let's talk about him. >> he's done a great job >> yeah. >> that gorman, really good job. >> how about micron couldcoming western digital being down. >> i congratulate him. i look at tech to see who is coming back down it is all the companies that have inventory in their system, micron, western digital, people saying, don't jump the gun. >> dividend could be a risk at western digital as they cut it to sell. >> stock at $100 when they were going to buy, remember, they were going to -- toshiba, make -- >> yes, i do i remember it well. >> flash and disc drives and disc drives -- flash is down a lot. disc drives are seemingly old technology it is important to recognize that if they don't cut the dividend, wow, what an income, we know that when a dividend is that big, red flag, red flag, red flag >> take their target to 30 from 35 >> yeah.

>> gorman very good. >> dow is down 137 to bob pisani. hey, bob >> advancing stocks it has been improving just in the last ten minutes or so. look at sectors, very defensive at the open. reits outperforming, consumer staples, health care in the middle, semi is weak dialogue, semi, the big apple supplier, quarterly sales at the low end of the target, banks have were negative and have just turned positive here the market is trying to figure out whether it should focus on good news or bad news. there is a little bit of both. that's part of the problem that we have been seeing. the good news is the fed is being patient. that's the most important headline there kwl china trade talks ongoing. brexit uncertainty i think the key is the weak international data, the china trade data was poor on imports and exports. eu industrial production was weaker than expected we're not going to get some economic data if this continues

in the united states even some stuff this week, jpmorgan over the weekend, they lowered the global growth forecast, not a surprise look at the european luxury stock, the china slowdown story, you see it in the international stocks, the big luxury names, hermes, kerring, down 2% or 3% now. citigroup turned positive briefly. they had a lower taxes and expenses revenue miss for them though they were down 28% last year i guess everybody -- i call people at the end of the week saying going to buy bank stocks. they said, why, why should we buy them they had their earnings increased every quarter last year and we got our head handed to them. everybody says to me, you know, bob, the kbe is down 21% last year we had all the right stocks, we had all the right regionals against whatever one you want to play against and we got our head handed to you. you know what we buy we buy fin tech, mastercard, visa, pay pal, who wants to

figure out whether regions financial will do better than some other super regional bank you can buy fin tech that's part of the problem now i agree. it is cheap. one book val ya ue is certainly cheap. people are not flocking to it because it is cheap. credit is good low growth is fair that interest margin is weaker a lot of reasons to own banks. i wish everybody else would figure out a reason. in terms of earnings, it is getting more real. that's what i'm calling it 10% earnings growth for 2019 this is for the whole s&p. this is what we care about today we're at 6.4%. i think there is evidence it is going to go down into the 4s and 5s the reason i say that, look at the company's reporting. i didn't include citigroup friday, there were 20 companies that had reported for fourth quarter numbers and they had had their estimates cut for first quarter. those 20, 75% had their estimates cut in first quarter that tells you the body language that the analysts are getting

indicates they're concerned. that's a high number and they reduced the numbers by about 6% for the first quarter that's very high usually do get a little bit, but not that much. that tells me that there say little bit more to go, so i wouldn't be surprised if we were down to 4% or 5% when the first quarter numbers essentially came in bottom line is this, the market is holding up good reason to be optimistic on the fed and the trade talks. but the global growth story is really one that they're grappling with you see, a little bit of surprise on the china numbers today. right now we're just well off the lows here, dow down right now 141 points back to you. >> thank you very much, bob. the session low right at the open was down about 230 on the dow, breadth remains relatively negative the president has spoken to reporters. we'll see that tape in a few moments. he's on his way to new orleans, taking questions outside the white house. a couple of quick headlines, he's not going to declare a national emergency to fund the border wall, at least not yet.

a response to a question about lindsey graham, whether or not he accepted or talked about a proposal to reopen the government temporarily says he rejected that. as we continue to see the shutdown in day 24 with no clear end in sight >> historically we always have been able to overlook these. study of government shutdowns and how the stock market did after and typically it has been up during this period. i don't know this is longer we're kind of -- >> unchartered territory, we like to say. >> let's listen to the pr president. >> good morning. beautiful. it is beautiful. too bad they took the snow off the ground too bad. it was more beautiful last night. i'll be going to new orleans right now. i'm going to be speaking in

front of our great farmers i look forward to that i did it last year and i look forward to it so we'll be back a little bit later. i believe, i don't know if the weather changes things, but the clemson championship team, the national championship team cham be coming tonight. it will be exciting, very great team, an unbelievable team they will be coming tonight, and i think we're going to serve of mcdonald's, wendy's and burger king with some pizza, i really mean it. it will be interesting, and would think that's their favorite food, so we'll see what happens, but they are coming tonight, the national champions, subject to the weather [ inaudible question ] >> i've been here all weekend. a lot of democrats were in puerto rico celebrating something. maybe they are celebrating the shutdown we have a very big crisis, a humanitarian crisis on the border everybody knows it they know it, and many of them

are saying we hey grow with you. many of them are calling and many of them are breaking. the republicans are rock solid we've got to take care of our border many of the people, they are all going to get their money many of the people that aren't being paid right now are in total agreement with us. you saw the border patrol agents you saw what was happening they are in total agreement with us, so we'll see how it all goes i will tell you this we have a priority it's the safety of our nation. the southern border has been horrible for decades, and it's now because of the success of our country it's now at a level that we cannot put up. the democrats have to do something. we need their votes. otherwise we can't solve it. without their votes, they now control the house. let's see if they can lead i don't know that they can lead, but we're going to soon find out. what did you say

[ inaudible question ] >> well, that was a suggestion that lindsey made but i did reject, it yes i'm not interested i want to get it solved. i don't want to just delay it. i want to get it solved. [ inaudible question ] >> i just don't know anything about it i read it this morning it's a lot of fake news. that was a very good meeting it was actually a very successful meeting, and i have those meetings with everything i know something about it. it was a very, very successful meeting. we talked about israel we talked about the pipeline that germany is paying russia a lot of money i don't think it's appropriate we talked about that talked about many subjects, but i have those meetings one-on-one with all leaders, including the president of china, including prime minister of japan abe. we have those meetings all the time no big deal. >> mr. president, mr. president.

[ inaudible question ] >> i never worked for russia and you know that better than anybody. not only did i never work for are, i think it's a disgrace that you even asked that question because it's a whole big fat hoax it's just a hoax >> mr. president [ inaudible question ] >> who i haven't been following it. i really haven't been following it [ inaudible question ] >> a deal with what? i don't know if we're closer to a deal this should be the easiest deal that i've ever seen. we're talking about border security who can be against it? we're talking about drugs pouring in, human traffickers, tying up women, putting tape in their mouth and pouring into our country. we can't have that we have drugs. we have criminals. we have gangs and the democrats

don't want to the do anything about it they say oh, it's immoral, but it wasn't immoral three years ago, five years ago, six years ago and ten years ago when they all raised their hands to approve a wall all of a sudden it's immoral it's immoral because one reason, because they know they are going to lose in the 2020 election that's the only reason to them it's immoral >> mr. president, alexandria ocasio-cortez called you a -- >> who did >> who cares she's -- [ inaudible question ] >> we're doing very well with china. they are having a hard time with their economy because of the tariffs. we're doing very well with our economy. we're at records our unemployment numbers just did a record, another record we're doing extremely well as a country. we're doing better than any country right now anywhere in the world. china wants to negotiate i have a great relationship with president xi because it's good to have relationships with

russia and china and japan and india, and i have relationships with almost everybody, and that's a good thing, not a bad thing. i think that we are going to be able to do a deal with china i can tell you we are getting things that before i became president you would have had no chance of getting. they would have laughed at your president's face >> mr. president [ inaudible question ] >> the people that started that investigation are mccabe who is a proven liar and was fired from the fbi. lisa page who was forced to leave the fbi and her lover peter strzok who we got their text messages and what they said in those text messages was shocking when you talk about bias, and also comey and i guess they started it because i fired comey

which was a great thing i did for our country. so the people doing that investigation were people that have been caught that are known scoundrels i guess you could say they are dirty cops, and i'll tell you what it is so unfair what has happened to the fbi in terms of the men and women working in the rank and file of the fbi i know many of them. these are great people, and they are so embarrassed by their leadership you've never seen -- i've never seen a turnaround in a bureau or agency like i have with the fbi. they are so embarrassed. i think 12 people now have been terminated and others, if you look at what's happening, others are going to go. what happened at the fbi, so when you say should i have confidence in the fbi or intelligence agencies, when i see all of these people, when i

see ohr and lisa and their lover and their notes and their texts get captured and you see what they said about me, having nothing to do with investigation, let me tell you something, when people see that, you have an angry country because the whole thing is a hoax it's a big hoax, and it's very bad for our country, so what happened with the fbi i have done a great service for our country when i fired james comey because he was a bad cop and he was a dirty cop, and he lied he really lied and all you have to do -- wait a minute all you have to do is take a look at the krooblgd hillary clinton clinton investigation when they brought her in in july 4th weekend. they didn't swear her in they didn't do any tapes they didn't do anything. they just let her go, and she mostly said i don't know she didn't know anything just like james comey a week ago. he was interviewed by congress, and, you know, unfortunately,

people didn't see it because the republicans with paul ryan unfortunately they didn't put him out there, but what he said was either he's a bad liar or he's grossly incompetent unfortunately, people didn't see it, but you can read the transcripts. what [ inaudible question ] >> you know how i feel okay we'll see you in -- what [ inaudible question ] >> i'm not looking to cause a national emergency this is so simple you shouldn't have to. i have the absolute legal right to call it, but i'm not looking to do that because this is too simple the democrats should say we want border security. we have to build a wall. otherwise you can't have border security and we should get on with our lives the democrats are stopping us, and they are stopping a lot of great people from getting paid all they have to do is say is we

want border security that automatically means a wall or a barrier thank you. i'll see you in new orleans. >> that is the president a few headlines outside the white house. one, he's not looking to declare a national emergency to fund the border wall, rejected a suggestion to temporarily reopen the government ahead of any deal with the democrats over that wall obviously you heard the discounts of credibility of the fbi and the special counsel's investigation, called james comb' dirty cop. says he's never worked as a russian agent and for our purposes perhaps the most important headline renewed notes of optimism regarding a china trade deal for more on this we'll go to ylan mui in washington ylan >> reporter: they are expressing that optimism ahead of the cabinet-level talks between treasury secretary steve mnuchin and ambassador lighthizer and

the vice premier that's expected at the end of the month. perhaps some new news can be developed at that time they have been talking about low hanging fruit about the trade deficit and maybe they can move on to more of the structural issues with china's economy. i also think it's interesting that the president appears to be backing away from declaring a national emergency that. had been the plan "b" for this administration it seemed, at least the only available to them to ending the shutdown now with that out of the picture seemingly, it is unclear what type of compromise could be forged in order to reopen the government lindsey graham has suggested temporarily opening the government for about three weeks to see if they can reach a broader type of compromise before the president pulled the trigger of declaring a national emergency but now the president saying it's up to congress to do its job. democrats need to come to the table. right now we are expecting no new talks today. we'll see what the balance of the week brings. carl >> ylan, thanks for that

yewy in washington after the headlines from the president welcome back, everybody, to "squawk on the street. i'm carl quintanilla with sara eisen and david faber. markets in a bit of a tumble down 124 on pretty weak breadth. tons of headlines, whether it's the shutdown or the onslaught on its way of q4 corporate earnings. >> that's where we're going to begin this morning with the markets. welcome to earnings season, and it's welcoming with a selloff. coming off of a strong week of gains. here with us at post-9 is executive vice president at pimco and and the head of the wells fargo investment institute who just lowered their 2019 estimates, paul. is it because all these companies are coming out and giving mixed signals on guidance >> we're look being at the macro picture and seeing growth a little bit slower than we thought it might be, and there's probably some feedback loop negative from all the bad sentiment in december in feeding through into consumer sentiment,

business sentiment you may see that reflected in these earnings reports and as far as future orforward guidance from these companies, and, yeah, that's why we took our numbers down. >> interestingly, paul, financial are the only group that's actually in the green citigroup is up 2% despite the revenue miss i mean, does it tell you anything about what's already reflected in these stock prices even to get some hiccups around earnings >> yeah. it's a very interesting point that you make. financials have really been taken out behind the wood shed and thoroughly thrashed. it's possible that now we're beginning to see some bargain hunters come in, into some of these sectors. i think it's likely very soon that we'll see most of the slower growth expectations be finally priced in. we may be starting to see that in financials. >> how slow is growth slowing, tony >> to a level that's more sustainable. remember, growth in 2018 was 3%. the federal reserve itself believes the most the economy can grow on a sustained basis is

1.8% why, because the population doesn't grow very fast, half a percent a year in terms of the labor force changes. half of the old rate and productivity is only 1% or so and so the economy can only grow in the high 1s it's been growing in the high 2s, so it's actually necessary to see this slowdown in order to sustain it if growth had stayed at 3% in 2019 and 2020, it's most likely the job would certainly fall towards 3% from the current 3.8, and the way triggers would move up in a way that makes it less profitable for businesses and a little bit more inflation and higher interest rates, show this is the type of pause that could refresh in helping to sustain the expansion in the longer run. >> you're talking about the u.s. here are there signs as well of a synchronous global slowdown? >> without question. when we think of global nominal gdp, call it 3% for real gdp and inflation 2.5% still consistent with changes in corporate profits of double digits so it's still a favorable story. the worry, of course, is that there's a feedback loop from all

the weakness in markets to hurt the economy this all started with political factors, call it brexit and it could all feed back into the economy. >> the china problem is real, isn't it there's a significant slowdown there. it is the second largest economy and quite a feedback loop. >> very important, because it's the biggest contributor by far to the world economy, a $13 trillion economy growing at 6.5%, 8.5 billion. u.s. gdp has $500 billion new gdp for the world so china that really matters when you think of the global picture on growth. >> pimco has been pretty wary of a u.s. recession, would you say? >> we would say more for a slowdown and cautiously optimistic we'll get through this. >> looking at comments from last months. >> excellent comments in our recent write-up in our quarterly cliquial forum we do think growth continues we need to get past the political issues that are causing problems in the markets

and could feed back into the economy. generally speaking we're expecting a slowdown in fact, we had an article written by one of our cios a year ago called "peak growth." we thought growth had peaked there's a huge difference between synchronous slowdown and a global recession we're not calling for that, but we would be investing very cautiously from the bottom up looking at individual situations rather than getting a high equity and credit debate in other words, don't get on the bandwagon thinking you're fare well. >> got a slowdown and also have the shutdown and as president trump said at the top of the hour, very little indication that it's coming to a close. how do you think about what it means for investing? do you have to look at certain impact on industries, on the broader economy? give us the latest read. >> on the broader economy it probably accounts for a tick or two, maybe a quarter of a point in gdp growth if it's extended very long, but we don't think that's going to happen the macro economic impact is

probably pretty small. it's the psychological impact that's larger at this point and probably gets investors thinking about what happens when debt ceiling negotiations have to come up closer to mid-year, and will we still be at odds and loggerheads the way we are now between the house and white house? >> is that a real concern at this point, tone >> it's the uncertainty factor markets every day have to deal with the past -- in the past and in the future will deal with uncertainty. there's a huge difference between ordinary uncertainty and the types that markets can't estimate and figure it out it's called a knight uncertainty about a book written years ago about risk and uncertainty and profit every day there are car accidents. they have an idea, a sense of how many there will be, but if there's a comet headed towards the earth they can't estimate and there will be a huge difference in behavior. >> finally, the yellen comments today talking about potentially we may have seen the last height

in the cycle how much weight does she have still? >> no in terms of influencing policy. >> her judgment is certainly spot on and certainly valued by those who are within the monetary policy circles. it is possible a march pause is highly probable a june hike is plausible if conditions change on the political front and if the economy shows it's resilient through all of this. >> but inflation is not -- is going down >> right, so the fed can afford to pause and there's absolutely no basis for a hike any time soon so that the idea that we've seen the last hike is very possible >> all right tony and paul, good to talk to you both as we kick off this new week >> banks the other big story of the day, of course, as citi is the first of the big u.s. banks to release results a beat on the bottom line and a miss on the top. let's goat wilfred frost who has everything regarding citi today. hey, wilf. >> you're right. citi revenues missed but eps

beat due to good cost control. fixed income trading was down 21% year over year it had been expected to fall single digits percentage-wise. there was a large one-off trade but still would have been down high teens either way. the weakness came in december in particular and january has started better equities trading was solid, up 18% year over year strong equities and weak fixed income bodes well for morgan stanley compared to the likes of jpmorgan and goldman sachs consumer business look fine, costs down year over year and 2% quarter over quarter expenses were down 4 boston year over year. that was ahead of forecasts, and that drove the eps beat. the took is now up around 2% while nobody wanted to see a revenue miss in the current environment as revenue misses go, trading is a better place to see it than say the core u.s. consumer bills the analyst call has just started, and we'll be back with more headlines when we have

them. >> wilfred, does it suggest anything about the other banks since citi is really kicking us off? are there any trends now that we need to look at and we can extrapolate in the. >> so in trading the core thing to point out was equities were up year over year and the volatility did lead to trading revenues improving whereas for fixed income it was weak and as i mentioned earlier goldman sachs is more geared to fixed income morgan stanley is geared to equities and it's good for the latter jpmorgan and bank of america kind of balance across those two. in terms of the core business, loan growth was decent and credit costs were good so that does suggest we're not in that really fearful is recession around the corner type mantra, and we'll try and gauge more for more on that topic and overall the net interest margin for citi and the core u.s. consumer business was basically flat. again, given the moves we saw and the rates over the quarter is a fear that could be worse, and that suggests the worse isn't perhaps going to hit the likes of wells fargo and bank of america and the u.s. retail businesses as well. >> you know, wilf, at least i

think investors can take a little bit of encouragement from the fact that they seem to be overlooking the weak quarter and looking forward. i can't necessarily say how they are going to treat some of the other names you've given us, but that's got to be an encouraging sign for some. >> definitely an encouraging sign, and you would say that the broad sector was very attractively valued coming into this that allows them to focus more on the eps beat than the revenue miss goldman sachs and morgan stanley and citi looked very particular coming into that and it does play well for citi cost control was good and, again, the themes we got from the media call that we might not get from the analyst call was that this was very much december, fixed income and currency trading that led to the miss, not some bearish news on the u.s. economy more broadly. >> all right wilf, thanks wilfred frost, covering the banks for us mike santoli is with us as well at post nine to break down what's in store for us this earnings season as expectations have come from 20 down to 14 for

the quarter? >> for the quarter, and then obviously still on paper for 2019, we're looking at 7 to 8. i think universally people think there's room to go down a few percentage points from there the question is whether the market has already price that had scenario in and i think it's got a good deal of the way there. if you basically have reassurance that we're getting 2% to 2.5% domestic gdp growth, earnings should stay above the flat line in that scenario the question is what multiple do you put on that, because i don't think we're back to the days of really rebuilding that valuation on these earnings because i don't see what liberates us from the end of cycle vigil, right? even if the fed is out of way for a couple of quarters or more, it's not clear to me that we're going to get back above 16 times forward earnings and 15 and change now we only flash cheap in this market for five minutes in december at the very end, and then we kind of rebuilt toward a

fair value level. >> what do you think of morgan stanley's call mike wilson saying we're going to flash cheap again essentially. >> i think the textbook tells you that when you get one of these "v" bottoms. you should expect revisiting that zone. it's interesting if you're going to buy it and it's not going to stay there long i don't know what it means except on a tactical basis i do think that makes a lot of accepts. on the other hand, the market has acted really well in the last couple of weeks every time you get one of the morning levels, everyone thinks they are make or break on the s&p, meaning 2,600 in that area, but nonetheless i think there's all kinds of excuses today why you would pull back more, maybe you still will earnings i don't think we're even going to know what the theme is or what the reaction function is and all the rest of it, unfortunately. 45 s&p companies i think reporting this week. >> we just mentioned the pearl form as of financials which is quite strong gold man and jpmorgan leading

the dow, citi having a nice boost and potentially an encouraging sign and financials are in a league of their own in terms of how cheap they have gotten, or is that a good indication that other sectors could respond well, even with some not glowing results >> yeah. i think financials -- i mean, relative to themselves and relative to the market they were very, very beaten down, and so that's why i think there was room there i mean, citi is bouncing to a level that's still like, you know, 90% of tappingible book value. that's how cheap the financials were i always think trading is really interesting because you can write it off it's eye of the beholder thing, and then once the first bank comes out and says trading was rough last quarter, people sort of assume that, and yet somebody can have an upside surprise because it's pretty capricious in that way. i'm not ready to say that we've kind of gotten to a point where we're going to rally on lukewarm warnings universally across the board. i think it's still going to be noisy and a lot of back and

forth because here's the crazy thing. more than half of all stocks are still down 20% from their high, but half of them have rallied more than 20% from their low so you've basically got these stocks in this no-man's land though where you have fast money that has profits and slow money is still looking for -- to get even. >> good way to put it. as always, mike, see you later mike santoli when we come back, kroger ceo rodney mcmullen, his state on the u.s. consumer and whether he sees a recession coming. plus, we'll take you live to the detroit auto show. ford's ceo talking to phil lebeau about the impact the terrorists are having on that company's bottom line. dow down 86 recovering some of its earlier losses "squawk on the street" will be right back don't go away. the future of technology investing

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the global investment management i am a techie dad.n. i believe the best technology should feel effortless. like magic. at comcast, it's my job to develop, apps and tools that simplify your experience. my name is mike, i'm in product development at comcast. we're working to make things simple, easy and awesome. welcome back shares of pg&e plummeting this morning, this after a 6:00 a.m. ak filing from the company makes it clear that it intends to file chapter 11 bankruptcy on the 29th of this month, roughly 15 days in the even roughly. is 15 days from today why the notice it was actually required to give that notice to its employees because of a law that was passed

in california to try to help p & g out with a liability from the 2017 fires into california for which, of course, it is still dealing with the liability. this year's fires or i should say 2018 fires have added an enormous amount to the potential liability of the company and something we told you last monday was the case, if you recall, when i reported that the potential liability was seen in excess of 30 billion they put that in writing this morning at pg&e saying that if they were to be found liable for certain or all of the costs, expenses and other losses described above, that is talking about the fires in '17 and '18 in northern california, the amount of such liability could exceed 30 billion and by the way that doesn't include, as they say, potential punitive damages, fines and penalties. it was with the prospect of facing that like the and the inability to actually finance it in the capital markets in some fashion that pg&e has told its

shareholders, its creditors and its customers that the best course of action right now to make sure it can maintain its responsibility of keeping power and gas lines open is to go bankrupt and to work through the bankruptcy process to deal with all of those potential liabilities. there has been a contingent of investors despite what we reported last monday and others reported during the week despite the fact that they have now or seem very close to securing 5.5 billion in debt or financing that believes the california legislature would somehow come to their aid. this is not going to happen, it would seem, at this point, and so now it'sabout recovery valu and the equity which clearly investors still believe is going to be fairly sizable unclear how that will work this is not a pre-packaged bankruptcy filing that's anticipated by a chapter 11 filing that conceivably will take years to reorganize the company as it is deals with all

of those potential claimants against it being held responsible, even without negligence under california law for those fires, both the 2017 and the terribly damaging paradise camp fire that took place in 2018. it also has a self-fulfilling prospect once you put it out there, it becomes even less likely you can avoid a bankruptcy filing. so we're going to be talking about this, guys, for some time. 16 million customers in the state of california, and really only a couple of weeks ago seemingly unexpected, at least by many of the analysts who follow the company and its equity holders despite the fact that the possibility of this enormous liability has been out there since the fires took place. >> what was it that the investigators determined that their utilities starkd, whparke 18 fires and burned 200,000 acres of land and killed 82

people was that the turning point >> there was the opportunity to turn the power off they did not do that there are claims, of course, that they have not been nearly as effective as they could have been in mitigating the risk of territory in their territory by trimming trees and cutting down trees and doing a better job of knowing when sparks were occurring in certain transmitters and the like, and there you can see some of just the incredible damage. of course, horrible damage done as a result of those fires and the loss of life as well we're going to be dealing with this they are for years to come, and the prospect for california ratepayers is regardless of what road they went down, higher potential rates. >> we'll continue to watch that. sad story. >> all around. >> terrible story. >> time now for our etf spotlight. dom chu taking a look at the airlines under pressure again with delta getting a downgrade dom, what's the story? >> airline stocks are getting a lot of attention today that.

weakness being driven in part by some of the negative analyst commentary from bank of america, merrill lynch which downgraded shares of delta to a neutral from a prior buy citing revenue growth and a lack of earnings catalyst for the coming year the price target cut to $51 from had a prior 62 now, as a result you're seeing weakness in shares of american airlines you've got jetblue, united continental and southwest as well all reacting to the downside that's acting as a drag on the overall dow transportation index which means the ticker iyt is now trying to find positive territory. it was down much more earlier today. it was working on two straight days of losses this fund has gained around 11% just since the december 24th lows other smaller transportation-related etfs that have exposure to airlines like delta are also getting hit as well, but if you're looking for the bull case, the sector was mentioned positively in barron's this past week saying u.s. airlines may be a compelling

valuation trade based on just how hard they have been hit but certainly the airlines taking the brunt of a lot of the market downturn here. carl, we'll see if that stays the way in this coming day of trading. back over to you. >> all right, thanks. >> a big week for earnings when we come back, the longest government shutdown in u.s. history enters its 24th day. we'll break down the costs in a couple of moments. takea look at the major averages here. dow session lows remain down wee 23 'vcut that in half "squawk on the street" continues after this

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call today for a free guide. the government shutdown now in its 24th day. no end in sight. the president spoking outside the white house this hour saying he's not about to declare a national emergency to fund the border wall and will not temporarily reopen the government ahead of time markets so far shrugging off those concerns that the could change the longer the government remains closed. joining us this morning, kbw's managing director and moody's analytics, chief economy mark zandi. good to see you both.

>> good morning, carl. >> mark, people have been talking about signs that would give us a sense as to how this is being affected. our jobless claims this week, one of them. that's a really good realtime sensitive barometer of what's going on in the economy, so, yeah, i would watch the ui claims very carefully. if they start rising in a consistent way, that would be a sign if we're in the low 200,000s that's consistent with a strong job market, start migrating up to 250k per week that would be an indication it's starting to do some real damage. we set the record on the longest one so far what's the thinking in your circles as to how, given how little sign there is of compromise, how long it could last. >> it could last a long time. >> i mean, we're almost halfway into january, could i see it going into february. i could -- i can certainly see it going to the end of the month. state of the union address under normal circumstances is you would say you want this wrapped up before the state of

the union because it just complicates the state of the union and interferes with the message of the state of the union, but these aren't normal times, and these aren't normal politics, so could it go into february i can make an argument that, yeah, we're going to see it go another two and a half weeks into the next month. >> is national emergency considered consensus in d.c. >> no, i don't think there is a consensus on national emergency. i don't think there's a consensus within the white house because it is comes down to one person and that's the president. whatever he decides at a given moment, and i don't think the white house staff or others in washington have a clear view of what he may do i think he's keeping his cards close to the vest on this. you know, just going back to the previous question, why so long i mean, one of the things the administration has taken off the pressure points, you know. when you look at what -- what the impact is, it's mortgage applications, it's tax refunds it's national flood insurance applications, and those are being processed normally

we thought that there was going to be some interference with though you know, until the tsa agents start not showing up in greater numbers, it's hard to look around and see where the pressure points are other than individual stories of government workers having problems with their -- with meeting their bills, and even though the federal banking regulators have come and told the banks to work with customers to get them through this hard patch, so the pressure points that lead you to a deal aren't really there right now. >> so, mark, historically how do these kind of events, the longer they go, factor into sentiment numbers, consumer sentiment, business sentiment, small business sentiment how long does that take? how long does that last and what do you see this time. >> i think it already is starting to factor into sentiment because it's conflating with all the other things that are going on in d.c. i mean the trade war, the president's trade war has already affected sentiment, you

know, partly investor ventment and business sentiment the duke universities runs a survey and expect a recession in 2019 in significant part due to the trade war and i'm sure the government shutdown is starting to conflate with that. the other thing that's going to come up pretty soon is the treasury debt limit. we hit the debt limit march 1 and then treasury has ways to maneuver around that for some time the long their this goes on, the more things come off the rails, the harder this is going to be on sentiment and the more damage it's going to do so far no big deal, but i think the costs will mount pretty quickly as collective psyche begins to get more down in here. >> mark, given brian's comments. we did just put something up that indicated a few things. this is true is the sba not providing loans to u.s. businesses have they stopped financing farmers? we now they are not reviewing ipos and things like that, you know

are those things stopping right now, and will they have an economic impact? >> that's right. so the small business administration is not making small business loans financing for farmers is being curtailed. you know, the court system is disrupted. you mentioned the s.e.c. that's a good exam fda is not doing its inspections. you know, that doesn't matter on any given day or given week but if this gets into weeks and months then the damage is going to certainly become more obvious. here's the other thing that i think is important the government workers aren't going to stick around, right mean, they need to pay the bills. the job market is pretty tight and a lot of other job opportunities. they will start to the bolt. and as soon as they start to bolt this becomes a longer term problem. the government won't be able to get back and running again if the government reopens so the damage will start mounting pretty quickly here. >> brian, one last question.

is it possible that the chinese vice premier's visit could be upended if the shutdown continues? >> no, i doubt it. one, i think it would be an international embarrassment. two, i think you can make a very easy argument that it is a critical function of government, and so, yeah, i would be very, very surprised if -- if the meeting got postponed, delayed. >> guys, interesting good points on both. mark and brian, we'll see you soon >> sticking with the government shutdown, our contessa brewer is live at a port in new haven, connecticut, and she does have more on how the shutdown is affecting operations on both land, air and sea. good morning, contessa >> hi there, david yeah, you know, why there's growing concern about the length of this government shutdown and when they will start seeing real impact i spoke to that with the head of the port of los angeles over the weekend who said, look, we have

customs and border protection showing up and doing the job of keeping the ports safe and coast guard as well, but they are not getting paid let me give you an example the ships that come into u.s. waters need what's called a certificate of financial responsibility it's basically proof that they have insurance if something dire happens, and right now the coast guard has a message up on its website saying these kofrs are not being reviewed and there's some 300 ships by a business dealing with these regulatory issues that currently don't have the cofrs and they can't come into u.s. waters additionally, if you go to the u.s. coast guard website they say that the electronics system is up and running, but they are not going to process anymore federal agencies are responsible for taking foreign trash off of the ships. go ahead, go ahead and play it i'll describe it afterwards. >> our industry runs very tightly logistically and time is money, and, you know, it may

cost one owner "x" amount and another owner "x" amount and across the industry it will have an impact. >> okay. so joe gross is in charge of dry cargo shipping for d'amico shipping lines he says the agencies responsible for getting the foreign garbage off of these ships can't show up the ships are turning around and going back to sea with all the garbage on board for sometimes weeks at a time. not only that, there's a refueling issue because there's no safety inspectors to oversea these ships refueling at anchor out in harbor. this costs the ships between 12 hours and 48 hours he says they just can't afford that let's talk about airlines. right now we know in houston and miami there were closures at tsa checkpoints because of callouts. nationally, the rate of sick calls more than doubled. the faa safety inspectors are not on the job air traffic control remembers suing president trump over the government shutdown. even dairy farmers that were supposed to be getting payments because of the tariff issues aren't receiving those checks and guys today in d.c. even more

problems, shutdowns because of the snow >> contessa brewer it is a mess as far as our nation's transportation and how ships are getting in thank you for laying out some of the specifics. contessa brewer in connecticut let's head over to sue herra for a cnbc news update. >> the good morning, sara. good morning, everyone here's what's happening at this hour secretary of state mike pompeo meeting with saudi king salmon and mohammad bin salman. president trump's threat underscores washington commitment to its partners a decades old boeing 707 military cargo plane reportedly carrying food from curikurdista crashed west of its capitol killing 15 on board leaving a sole survivor. it's the latest disaster for

iran in dire need of replacing its aging fleet. the mayor of gdansk has been stabbed by a stab wound after being stabbed by an ex-convict at a charity event the attacker yelled about his past treatment in prison before being subdued by guards. back at home, first responders are on the scene of a massive fire in massachusetts. smoke and flames billowing from a building in cambridge. authorities say the fire broke out early this morning no word yet on any injuries or a cause. you are up to date that's the news update sara, i'll send it back downtown to you. >> sue, thank you. >> when we come back, a recession on the horizon what the ceo of america's largest supermarket chain kroger has to say about global uncertainty and the state of the consumer quk on the street" will be right back i am a family man.

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quintanilla and david faber as always from post nine at the new york stock exchange. let's get a check of where we stand. lower across the board but not as bad as it looked at one point this morning dow is down 105 points s&p down half a percent and the financials only group in the green after citi group reports earnings investors embracing those stocks and the nasdaq is down a little more than.06%. technologies is the second worst performer. the national retail federation kicked off its three-day retail expo yesterday ceos from the largest retailers and tech companies taking to the stage to discuss the future of retail and, of course, given the news flow, consumer spending i was there to speak to the ceo of america's biggest supermarket chain kroger and here's what rodney mcmullen said to me about whether or not he sees a recession coming. >> they feel incredibly good about the economy but very nervous about where are things

headed, so if you talk about questions in the present, incredibly complimentary and excited. if you change the question a little bit in terms of where do you think things are going there's a lot more uncertainty, and it's not necessarily bad it's just exactly where is it going? >> so when you -- when we come on and talk about how we're almost in a bear market and stocks are down from their highs and nobody knows why, and more economists are predicting recession, when you hear that, does that jive with what you're seeing >> we don't see anything that would cause us to say there's recession right around the corner and i think it's one of those things where i think it's easy toe paint a picture where things could be fabulous hand where things can be a recession, and it's really -- you know, if you think about robert frost and a fork in the road, i think we're

really all at a fork in the road and if you look at the trade negotiations, comes away the way everybody hopes it will, employment at full employment. it's really hard to find people in today's world, all of those things if it continues in the right direction you can easily see how things could be significantly better in a year or year and a half, but if those things don't play out the way we all want it to, then i think, you know, the recession could -- is something that could happen >> rodney mcmullen talking about the state of the consumer which does sort of correspond, guys, to the overall numbers that we're seeing that the consumer is in great shape. wages run, unemployment down and holiday spending is the best it's going to be in years according to past card that's what investors are sniffing out, the uncertainty. it's not like we're heading into a recession because some out there are calling for that given

what we've seen in the markets but that we could go a number of ways and it's starting to factor into consumer outlooks that we've got all of these binary outcomes, trade war, shutdown, that could end up great, but maybe not so much. >> everything he says is sort of borne out in confidence numbers, expectations versus present condition. >> exactly. >> you want to shake him and say which is it, right which do you think it's going to be >> i think it's very uncertain right now because we don't have a resolution to some of these issues and that's what's making the markets so nervous, so good consumer spending, and meantime a company like kroger isn't sitting still. they are trying to look not future a lot of concern about digital efforts. they have a new partnership with microsoft and akado in the uk on warehousing and how they will try to get ahead of what's happening in terms of consumer changes. something we've been talking about a lot. speaking of changes, no changes for lululemon, the company

raising outlook on higher comps and spending in the holiday season lululemon is best in class in terms of retail. they know their identity and know who their consumer is, and they don't have to go with promotions or off-price like other retailers. the stock embracing the news it had been sort of swept up in some of the market turmoil, guys, but if you look at a lulu and a macy's, good holiday season and bad holiday season, i do think it shows you. by the way, macy's called out women's sportswear as one of the weaker categories. it shows you that the the consumer is charge and you have to be really authentic about what you're selling and not just jump on athleisure as a trend to sort of boost sales but more of a lululemon stakeholder your brand. don't expand too much and end up winning the hearts of consumer >> hard defining a growth company in retail these days but there it is. >> just look at the comps. >> yeah. >> a lot is happening on the brand side versus the department store side which is another trend we're going to watch into

earnings giving investors plenty to cheer about, and those comps are some of the best in the industry. >> yeah. >> after macy's and adding the gains throughout the session today, lulu is when we come back, let's make a deal newmont mining build goldcorp, the world's largest gold producer we'll get details on the dale. more about consolidation in that space and take a look at the top performing names on the s&p down alstmo 12 points led by citi at the moment back in a moment

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one market bull says the key to the rally this year sits in the hands of fed chair jerome powell find out why on tradingnation.cnbc.com more "squawk on the street" is coming up.

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adding 1,000 jobs to build a second plant in chattanooga tennessee to build electric vehicles here's the ceo of volkswagen just a couple minutes ago to talk about the investment. >> i think we want to grow here in the united states we have good momentum with our new product. we have a very good team we have been gaining market share. the electric cars will have a chance here and the u.s. is already the second most important market worldwide so we decided to put another facility there. chattanooga, why because we have very good experience and have very good support. we have committed, well-educated team working there also the -- the skill level is very high. i mean, we have been investing all the time since 2009, so we feel very happy there. >> you're close to finalizing some type of a partnership or relationship, further relationship with ford how would you characterize those

discussions? >> it's really big company company. worldwide big car company but we're in a very similar position as ford so we decided to join forces there, and we will become very, very competitive together in this segment which consists of small advance, commercial advance and small and mid-sized pickups. >> will they build mid-sized pickups for the volkswagen brand sold here in the united states >> it's too early to announce. we have a press meeting tomorrow, so we will announce more, and we want to announce it together. >> real finally. how much does this help you with the capacity issues that you have in europe by building for ford or working with ford over there? >> it's really the theme for tomorrow, but all in all we are really strong in europe and china and probably not as strong

as the united states, so we are very complimentary we love to work together with the ford guys. they are really serious, and professionals and more tomorrow. >> are you planning to build - volkswagon and ford will be announcing some type of partnership tomorrow that partnership is widely believed to be volkswagon facilities, potentially in europe, potentially building small commercial vehicles for ford and ford facilities here in the united states helping out volkswagon obviously this is news coming out tomorrow that's herbert deitz, the ceo of volkswagon guys, back to you. >> thank you, phil a lot of auto news lately. also, some news in the deal world involving gold mining.

newmont acquiring gold crecorp barrick also in the end game consolidation for the industry, and closing its deal to acquire randall last week or so. they announced that deal in september. that's what we're seeing, newmont following through in cementing this deal to acquire goldcorp talking $100 million in annual pretax synergies, may well be more than that don't need approvals in china, just if you're trying to map out the risk, doesn't seem to be a great deal of risk again, the view is for newmont, this is the other asset to be able to expand and consolidate and compete with the likes of barrick. 17% premium. gold corp shareholders will own

one-third of the new company let's send it over now to jon fortt with what's coming up on "squawk alley." >> good morning, david janet yellen was talking retail this morning, a kind of shaky start to the year, depending how you look at it impact of the government 'lha ialcongpact of amazon wel vet l mi up on "squawk alley.

welcome back to "squawk on the street." stocks are lower off the worst levels of the morning. 9 of 11 trading in negative territory. let's drill down into one of those big underperformers. a number of ship names pushing that sector to the down side you have corvo, and others, with consistent concern on chips. they downgraded shares, saying the market hasn't fully priced in competitive hurdles the company faces. those shares down by 8%. we'll keep an eye on other

shares as well david, send it back to you guys at the stock exchange. >> all right i will take it thank you, dom. "squawk alley" is just moments away, but first, sara, what is coming up on "closing bell" besides me, of course? >> right, you're going to stay with the reporting on pg&e we have the ceo of columbia sports wear. they have an ad out in "the washington post," make american express parks open again not usually a political company. talk about business impact from the shutdown, this hits close to home for the maker of all sorts of outdoor gear, apparel we'll find out how much the shutdown is hurting, especially the parks issue, why they decided to get outspoken now >> lots of different shutdown stories. is that the hash tag, shutdown stories, different way the shutdown is effecting average americans. >> now that we're in record territory with the shutdown, you have to start to tally up damage 800,000 people not being paid.

>> national parks are certainly a real victim. >> see you this afternoon, guys. as david says, "squawk alley" is next we talk to kara swisher. dow down 71. - hello, i'm brad castillo. did you know that americans who bought gold in the year 2005 quadrupled their money by 2012? even now, experts all across america predict the real gold rush is just beginning.

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good morning, it is 8:00 a.m. at amazon headquarters in seattle and 11:00 a.m. on wall street. "squawk alley" is live ♪ ♪ ♪ good monday morning. welcome to "squawk alley." i am carl quintanilla with morgan brennan, jon fortt at post 9 apple shares are still reacting to news of iphone price cuts in china, and netflix sha