been made america competitive without 21% rates and paid for, but i think the way to get -- the way to actually move the incentives is to frankly get business reinvesting. >> are you throwing in your support behind the 70% rate? >> i'm not >> okay. >> not necessarily >> thank you for being with us >> saved by the bell >> we didn't get "the washington post" op-ed. >> read the op-ed in "the wall journal. >> "squawk on the street" begins right now. >>. ♪ one more time >> good wednesday morning, welcome to "squawk on the street." futures pretty solid as are the core results and the flurry of bank earnings we have gotten today. record stimulus in china and the brexit drama, may is expected to survive a no confidence vote later today. no re tail sales number back

home, we will get housing sentiment and beige book today we begin with the bank bump. stocks set for gains at the open goldman delivers the best quarterly refer kne lly revenue >> uk prime minister theresa may facing a new confidence vote today after historic defeat in the house of commons. >> and another day, another megadeal fiserv to buy first data in the fin tech space stocks on track to open high, getting a lift from upbeat earnings news. b of a, better than expected results helped by what the company calls solid loan and deposit growth goldman's q 4 numbers beat the street the chairman and ceo david solomon saying, we are pleased with our performance for the year, achieving stronger top and bottom line results despite a challenging backdrop for our market making businesses in the secretary half and it was down.

>> jpmorgan was great, made a lot of money citi made a lot of money gold made a lot of money bank of america made a lot of money and now has growth going for it i think we have to think about this group as -- we figured what good is it it is totally involved with the fed. this is the first quarter where i think we have to start saying, you know what, these companies can grow their businesses. and they can grow the businesses with digitization, customs relations management, bank of america, smarter than the average bear so to speak at goldman. whether it be jpmorgan just having 7% growth with loan growth with pristine credit. look at these stocks i say, what are they doing being valued so low. doing really well. >> so you're not really thrown by chargeoffs, expectations. >> no, i think bank of america, the net interest, what they're making is growing, they call it the net interest yield

it is really a good number i look at what bank of america is doing with the website, 36 million people 5 million in addition to when it was announced on our show. i look at this and say, wait a second, the efficiency ratio, making so much more money, they make so much more money, when i used to work and deposit my check, that was a very expensive process for a bank digital banking is very inexpensive for banks and loved by customers i think bank of america has the best digital interface i think that it is showing i earlier said the bank of america reminds me of amazon but makes money. >> it was clever. >> i like that >> back to goldman we knew the credit markets were essentially closed in the fourth quarter, certainly in december net revenues and fixed income currency 18% lower than the fourth quarter reflecting significantly lower

net revenues and credit. at this point, and, by the way, with jpmorgan yesterday, and citi the day before, the market does seem to be willing to overlook what was not the greatest capital markets quarter. equities were okay, by the way. >> jpmorgan was down from 118. you know, it is not like these companies -- we have seen the banks near their stocks almost -- always near the highs when we come into earnings this time, jpmorgan was at 92. i think people are saying it is going to be the big retest and then we listened to -- bank of america comp score will be great. i think goldman will surprise us by saying, listen, you don't have to worry as much about malaysia as you think. i want to see how they did in asia, ex-japan, see if there is reputational risk. if their business is still good there, we have to stop talking about the -- >> solomon, first earnings call,

blankfein left it to lieutenants. but there is an expectation that he'll address one mdb somehow. >> see what he has to say. >> here is my feeling on goldman sachs conference calls they have been so painful, the way goldman sachs has run the conference call, i'm all in favor of disclosure. i don't want as an alumnus of goldman to hear, we did x, which is really bad. we did y, which is disappointing. we did z, which i can't believe how bad we are the self-flatulation on the goldman call, do they really deserve the multiple of six multiple are they like micron ak steel ak steel >> i don't think so. >> i don't either. do you think the smartest people in the world want to go work for

ak steel i don't think so people want to work at goldman this is a shocker. i know it is a shocker seven times earnings >> i know it is. look at the comp ratio too 23.6%. that was really low. >> you don't make any money at goldman. what has a higher price to earnings multiple. ford or goldman? >> ford. >> yeah, i mean, until today >> ford reported numbers that were far below what -- >> far below and ford has roughly the same multiple we have to start talking about the idea that maybe stocks, particular big groups, are not that expensive and the reason why you don't see it is because goldman is not going to merge with citi if you were a big bank, you would buy goldman. >> you mean financials. >> can't merge, they're hamstrung. they still got to worry about the federal government wants them to do bank of america, $20 billion. >> they d goldmid was that well advised?

>> no, that was suboptimal >> so they spent $3.3 billion of shareholder money on buying back stock at higher prices >> no one ever said they were good at trading. >> ouch. >> there is black rock 608 is a miss. a hike to 330 a share. larry fink on the air earlier today and talked about whether we're seeing the seeds of a slowdown or recession >> i think in the short run we probably hit a bottom. >> that lasts how long >> it really depends on what happens geopolitically >> okay. >> if you can give me an answer, where we are going, whether trade negotiation with china, what is going to be the ultimate outcome of a uk. >> they recently announced about 3% layoffs and some leadership changes. we know about flows. >> i'll tell you, one of the things, continual theme here, we know we have unemployment, it is hard to find people that work. the layoffs in this industry,

and bank of america laid off a huge number of people over the last decade, laying off people i think that there is more slack in the economy i think jay powell is -- he does have to wait you have good loan growth. what's the matter? >> funny how you brought it back to jay powell, seven minutes in. >> okay. no actually, eight get an apple watch i think that what is has happened here is that we have layoffs, we have digitization, we have efficiency ratios that are great. we have great loan growth and low credit quality so i can argue that at some point this year, if this continues, that jay powell could justify a rate increase. but right now, kind of like, wow, that's interesting, we have balance, we have a lot of layoffs, but we also have a lot of revenue growth. i think there is -- it is difficult to be jay powell right now. >> i guess there is one estimate out today that the shutdown will create a negative january jobs growth,

first in 99 months. >> i get electricity numbers this is a new one. electricity. the electricity use is down rather dramatically in that area >> in the d.c. area. fewer people coming to work. >> i'm just saying that's good proof that -- you're supposed to say, is that really the kind of thing you look at, are you that granular >> are you that granular in. >> yes, i am thank you for asking i think china doesn't really tell the truth anymore. >> after electricity use >> i don't know, david they steal a lot of electricity from us. that is -- that's facetious. people on twitter, they say, does he not know -- when elon musk told me they could have all the power in the whole country from northwest quadrant in colorado and that would happen in five years and that was about five years ago i like elon musk >> no, you don't no, you don't. >> well, we have talked some u.s., we talked a little china uk is the other big story. the pound is stabilizing a day

after parliament overwhelmingly rejected may's brexit deal she now faces -- >> well, carl, last night was the most historic defeat theresa may in the immediate aftermath talked about what she would try and do to resolve this impasse. she seems to be watching across the political aisle, looking for fresh ideas to see where she could find the majority in the house of commons behind many he that would then satisfy the europeans and find some kind of deal on brexit tonight, around 2:00 p.m. eastern, she'll be facing a motion of no confidence in her government, tabled in reaction to last night's defeat by the labor opposition leader jeremy corbyn here is her response, essentially explaining why she thinks it is a bad idea for the motion to go through. >> it would deepen division when we need unity.

it would bring chaos when we need certainty and it would bring delay when we need to move forward so i believe this house should reject this motion >> no indication that theresa may will lose tonight's vote that would require members of her own conservative party voting against her, something they have all seemingly so far today said they will not be prepared to do if she did lose the vote, it would trigger a general election within a couple of weeks time. that election would then take place a month from now and that would bring it rvery, very close for this deadline. a lot of conservative lawmakers and others from other parties talking about the possibility of extending the two year negotiating period with europe that is one option on the table. of course, if the vote goes against the opposition party, if theresa may survives, a number of questions about what she'll be prepared to do to try and form a consensus view on brexit, guys. >> she has proven to be resilient in a number of ways,

thank you for that good explainer i wonder, if you were impressed by the glass half full action in the currencies yesterday. >> i was surprised and i think that the nation on its own, it is not as chaotic. looks like parliament is chaotic. we're doing good coverage this morning, talking about the worst defeat since saying this was so great, 19 -- since -- >> the defeat, i saw 1840s. >> you're talking about parliament, david cromwell, worst defeat since -- >> cromwell? >> yeah, cromwell. >> couldn't end well for him. >> no, i don't think so. got to brush up on our shakespeare too. >> yes, we do. >> i have to ask david a question, in terms of the mickey mouse nature of governments, ours or theirs >> come on, really you'll ask me that

>> m-i-c-k-e-y -- come on. >> m-o-u-s-e. >> i can't there is a government shutdown >> you get paid anyway >> i do. yeah >> more than some folks can take >> we have a paycheck to paycheck economy do they realize that i don't think anyone in the government should be paid. congress no one >> you got to come in, and not get paid, or you're fired. >> there is a thing called the 13th amendment does anyone remember what that is >> i do. >> lincoln, smart fellow. >> yes, he was >> when we come back, got some m&a off to a fast start, a deal between fiserv and first data. a lot of news on snap. united airlines as well. and others "squawk on the street" from post nine in a moment alerts -- wouldn't you like one from the market

when it might be time to buy or sell? with fidelity's real-time analytics, you'll get clear, actionable alerts about potential investment opportunities in real time. fidelity. open an account today. when did sleep start requiring effort? what if it didn't have to? each tempur-pedic bed is made with advanced pressure-relieving material,

so you get the deepest sleep you've had... ever. there's nothing like tempur-pedic sleep.

so you get the deepest sleei 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. another megadeal, we already

discussed it a bit going on, pfize e fiserv buying first data they're both in the payments processing business. about a 29% premium to the unaffected stock price of first data kkr, they took it private years ago, took it public, frank bizignano, on the right financial footing, reducing the leverage, from $24 billion in debt to $17 billion in debt. back to the industry, to try to put this in perspective, you know this stuff, they deal with the big banks. this is all the payments infrastructure, things you never think about. first data largely deals with the acquisition of customers, merchants, before the credit card company you get somebody who is starting a business and they get them all set up you put them together, you kind

of got a beginning to end solution, so to speak, there are some overlaps, but not that many which is why from the perspective of the companies they don't feel like there is going to be a significant antitrust risk this has been around for a while as an idea i can remember making calls on this, hearing some rumors, nine months, a year ago, these latest talks began in october they were initiated by the fiserv side, this according to people familiar with the situation. who felt like now is the time. you had that world pay deal. >> yes. >> which may also have sort of sparked the idea that, hey, it is getting closer to the time when we need to make a move. and you create a behemoth that will have $4 billion in annual free cash flow, including the synergies that they're talking about ere, by year three investment grade there is still a good amount of debt on first data balance

sheet, move that over to the combined company, it is less when you look at the leverage ratio and become an investment grade company in the s&p and generally think this will be very positive for them with $900 million of cost savings, $500 million of revenue synergies over five years, saying it is adjusted gps let's keep an eye on fiserv. some pressure, all stock deal, short the acquirer, but not the greatest market reaction. >> no. up initially, interesting. i think that, first of all, congratulations to frank because this was a heavily indebted company, stock was at 16, big spike, came back on a miss they bought this clover point of sale that's pointed out as being something that fiserv wants. if you go to the website, you'll see this is a theme that i think people at home may be tired of hearing, but don't be. this is creating another great fin tech company and that's what people want.

is it square square is unbelievable. >> pay pal, $107 billion, a behemoth >> yes. >> no, it is not. >> it is not it is not. >> but it is big there is a look at the deals we have two weeks in the year, $74 billion deal this is 22, gold deal this week, eli lilly with the important oncology deal things are busy. >> let's talk about that why is that? >> what i'm hearing is that if you wanted to do something, you can make a rational argument that the pullback late last year gave you the opportunity to argue on the economics, getting a better deal. >> celgene at 90, pulls back to 60 that's my -- first data, 23 and down to 60, stock is not cheap a lot of companies were saying, if stocks get cheap, we'll do deals. bristol. lilly. these are smart companies. >> this was in the works since

october, but even then -- an all stock deal everybody participates and the potential upside from the combined company, you're not getting taken out for cash but there is a real pace of deal-making going on. >> you'll be so busy i'm sure they said, listen, we don't want to tell is. we got to move on. >> david will be much busier than usual. >> we'll see about that. a lot of -- big year ahead for m&a. we'll find out we'll get cramer's mad dash and opening bell in a minute premarket. back after a break who says our bank isn't tech enough? everyone, look at your phones. the design thinking, the digital engineering, security, blockchain, and we will be first to market! yes. when we do we launch? unfortunately, in 2 or 3, hours. why the delay?

cognizant is helping banks use digital technologies at scale to advance speed to market. the aarp auto insurance program from the hartford? let's take a ride with some actual customers and find out. - well, tell me about your experience when you switched to the hartford. - when i switched to the hartford, i'm sitting there thinking, "man, i should have "turned 50 years ago." they saved me a bunch of money. you can't beat that. - what blows me away about the hartford is their lifetime renewability benefit. now this is their promise not to drop you even if you have an accident. - i know when i'm driving, i'm covered. - [narrator] drivers 50 and over can save hundreds of dollars when they switch to the aarp auto insurance program from the hartford and get other incredible benefits like lifetime renewability. not an aarp member? the hartford can help you join in minutes. call the hartford to request your free quote at...

or go to...

welcome back doing something a little different today. talking about a theme being buybacks >> thematic. >> thematic. we were talking about it at the top of the show. bank of america and goldman sachs. both brought back a lot of stock, but they did it differently in terms of timing to the benefit of boc and perhaps not for goldman sachs. they were very smart, goldman paid too high. these guys bought low. remember, when this issue of buybacks, bank of america is trying to get over, they used delusion, they have way too many shares i think this shows they're get back to where they were, which we always hoped.

and, david, there is some accomplishments here not getting credit for that we'll give him credit for right now. a 27% of all consumer sales is through digital. 1.5 billion logons in to consumer banking act, 26 million active mobile banking users. they are making more money on a customer and the customer is more satisfied that is exactly -- that's kind of -- it is a page out of the playbook of marc benioff, and brian wenihan felt it was important, not look at them as the millennial bank, but recognize you have an iphone, you should bank at bank of america. >> by the way, don't forget about buffett. he owns a lot of this thing too. >> buffett still generating $15 billion a year there >> yeah. >> goldman great traders, paid too much >> we'll focus on all of the financials this morning because it is looking like a strong day

e eng llncial sector thopinbe just a few minutes away

♪ ♪ ♪ each day, brings new possibilities. that's why you need a partner dedicated to helping your company reach its goals. u.s. bank -- the power of possible.

. you're watching cnbc's "squawk on the street" live from the financial capital of the world. the opening bell in just about a minute covered a lot of ground already. the bank earnings we have gotten today, the shutdown, the uk brexit vote and the no confidence vote later today. china is going to get lost in some of this mix as they announce a record $83 billion injection into the financial system >> the -- doing some work on the largest companies that make the most money there is still five chinese banks making a lot of money. and what they need to do, trying to ignite the consumer again, too many empty buildings, do they sit there and buy that stock market at $2500? they put a floor on that stock market remember a lot of consumer spending triggered by the growth in the stock market when they were having that kind of nasdaq like run they're very cryptic about the relations, i like to know more >> we got to go. >> what? >> we got to go to china got to take you there.

it is time >> i know. >> cramer in china that's the title of the show cramer goes to china >> peter navarro should come on. >> there is the opening bell the s&p and the cnbc real time exchange the big board, mothers against drunk driving, the organization celebrating its 39th year. and at nasdaq, new york council member keith powers. so what do you think goldman, boc, black rock >> boc is amazing. growth stock and they should be applauded >> they should what? >> be applauded. a growth stock. >> a growth stock, really? >> technology driven growth stock, cut expenses, and really managed to make you feel like what is it doing here? this group is so important and it is funny, first data does its fin tech, maybe we should be talking about bank tech.

bank tech. >> like that >> yeah, i do. i understand what you're saying. you're making the point about their digital offerings. and how successful they have been in terms of their -- the interface with their consumer. >> we can't ignore it. we have to believe remember, they do things that are digital, when they do these voice driven -- it is very forward. they're really thinking about what to do with this in banking. they revolutionized -- they have a great website. i love merrill, they're not being acknowledged because all we care about is the interest margin by the way, very good. we have to start thinking about banks as growth vehicles 7% loan growth at jpmorgan, goldman putting up some good numbers, these are not static institutions that -- the companies sell at 7 times earnings, they tend to be companies that are, you know, western digital

listen to general motors, jeffries, macy's, mylan, ford, viacom, america airlines, seven times earnings, goldman sachs, pulte group, free port, free port that's a gold and copper company. you get -- those kids out of harvard, going to free port? >> the leaderboard is peppered with the banks and the airlines. united is the top s&p, up 6% they come in with a b 241 over 204. oscar munoz on earlier saying we haven't seen conditions from the shutdown present themselves yet. >> no. and steeple has a piece out today. may be the meanest piece of research i've come across in a long time. united continental, fourth quarter so good, it almost makes you forget about cody parkey

how vicious is that? >> blocked attempt. >> is that unbelievable? doink doink. united continental we have to start having research being a little more entertaining >> i agree worthwhile gets read. >> boom. >> got your attention. >> yeah. >> americans tonight with csx, but -- >> csx will be big. >> key macro canaries. >> yeah. look, i keep thinking that we got to -- we got a mixed economy. we didn't talk much about sherwin williams yesterday and what it means for the housing business but the mortgage numbers today, diana olick, they surged 13.5% because rates went down. >> apps? >> yeah. >> mortgage apps that's a fantastic number. >> it is almost the best -- going back to april. >> i think it is big, big, big i think it is really important people say, okay, well, there is

ford and then we have got mortgage apps. we got united continental and delta. we have real differentiation this whole etf notion, we have to start thinking about that too. >> what do you mean? >> the airlines, supposed to have single stock risk, we have airlines doing badly, then united continental that will work the note this morning -- >> going to benefit by -- >> exactly that's another -- i think we got to debate that issue i think what is very interesting, in the cody parkey note, united airlines' gain comes at the expense of delta and american what they're saying is a little zero sum, the planes run on time very interesting >> i was taking another look at this fiserv. it is down 5.5% on the deal, the call has been going on they want to let everybody know they think they're going to be a massive cash flow machine. but right now i guess the investor base is not as focused on that?

not sure to be fair. depends how much in terms of those risk arbiters, you set it up, shorting shares. >> such a big deal. >> think they paid too much? >> no. >> what was the adjusted multiple, like 14 times? >> good deal >> frank put together a decent company. >> not bad, right? >> 12 1/2 times 2020 numbers first data shares are up 29% premium coming down a bit. results of being an all stock deal and the overall value. >> also thought bristol paid too much for celgene i didn't think that deal was too good. >> shareholders viewed that deal as not particularly -- >> double down. >> youliked -- you -- you didn't like bristol-myers deal at first >> when you pay six times

earnings for a franchise like that and celgene told you they have things that can replace revlimid, i get -- i warm up to it you know what is the deal that people hate that i like? you know what is the most hated deal i've come across that i like >> tell me. >> cvs and aetna they don't stop selling that stock. yesterday was the walmart deal you got the judge, the dumping on it. i've been so long on this thing. i will not be wrong. this is -- this is cigna express scripps. >> you do? >> i do. >> you're going with a fine merlot. >> i'm not a pinot fan i paid a fortune for pinot in san francisco. now i'm paying a fortune for merlot he'll never come on our show i think we got to drop that.

it is the first time he ever heard it, don't you think? >> maybe not 7-year-olds don't typically know -- >> 7 times earnings, chep st s , cvs. >> back to something we highlighted on your show, the constellation guys they came on, "mad money" last week, your crazy week in san francisco, they said they bought 1.1 million shares >> personally. >> yes wasn't quite the case. and i thought it was -- i'm noting it because it has been noted to me by a number of hedge fund managers, they weren't happy with it because they all went to look. >> bummed by my stuff or bummed by -- >> no. they felt like, well, they didn't really buy in the open market, 11.1 million new shares >> that's important. because i should have realized immediately you can't buy stock before you report earnings you can exercise options you're right i wish that i had been better.

>> not a function of what you did. >> no. i should have been better. >> a lot of people felt, whoa, that's a big number. >> the stock went up 10 off of that that's a good point. >> news regarding speaker pelosi the president and the upcoming state of the union for that to ylan mui >> the state of the union address expected to happen on january 29th nancy pelosi says that because the secret service has been unfunded, they're part of this furlough and the shutdown, she says they have been the lead agency scheduled to handle the security, the planning, the coordination of this event, she's now asking the white house to work together to find another suitable date after the government shutdown ends for the state of the union to occur. guys, we'll let you know if and when the white house responds, right now, pelosi asking president trump to reschedule

the state of the union >> either reschedule or deliver it in writing, right she points out in this letter that a state of the union has never been delivered during a shutdown >> right i don't know we ever had a shutdown during a state of the union. perhaps that's a moot point. the political issue here is that democrats don't want the president to come to capitol hill if the shutdown is ongoing and use it as a bully pulpit for his continuing demands for a border wall, for his continuing demands on border security, and to frankly just bash democrats during that time so we're now seeing the state of the union enter into this debate as well. >> ylan, thanks. a couple of other stock stories today, nordstrom, goldman cuts it to neutral we got this call wrong. >> terrible. execution so bad there, holy cow. full price put >> new low. >> this is -- this is a challenge model again.

macy's, people are -- it is rack, their off price that is doing well and the number of people who are sticking by this thing before this quarter, really incredible. now i really wonder what is going on there this is just bad. >> we should mention snap. tim stone, cfo, leaves after eight months on the job. even though the company's ak says adjusted ebitda in the quarter, revenue slightly favorable to the top end >> yeah. i mean, this is the second cfo i think it is really important, carl, to point out this is not -- not related to any disagreement with us on any matter related to accounting, strategy, management, operations, policies, or practices. are you kidding me that's what you put in the statement? put that in the statement. i was trying to figure out what's left, right weather, weather >> they don't generate any free cash flow, right you can't take them private. >> what kind of high bar are you putting? >> i'm just wondering.

put it out of its misery a private company anyway you don't have a vote at all >> no, it is an association. he came -- tim came from amazon, highly regarded, part of the whole foods integration. he came may 7th, stock at $10.74 he made a big impact as evan spiegel. given the stock $10.74, is that impact >> perhaps he laid the ground work for the potential growth in the future >> you think he did that >> he'll look back and think those are the key ten months >> yeah. >> no. i have no idea i don't know the man it is typically not a great reflection of management overall when people come and go within windows less than a year. >> accounting, all the things he did, tells me we're fine there all fine >> too soon to buy snap? >> once they start paying the

fees they have for web services, think we start seeing where the cash flow is it is too early. it is too early. david, between pc and pacific gas and electric and snap. >> which one >> i don't know. took it out of the s&p immediately. >> snap. >> 12 million people use -- 16 your kids still use snap >> yes. >> my kids left it for instagram stories. and facebook, facebook is on fire, right? >> it is a f.a.n.g. economy. >> no idea what's going on i don't want to know >> probably for the best >> we got one month highs on the dow. the nasdaq, and the s&p. and as for you guys, who are watching, correction territory, down 10% from the high, got about another 100 points or so, maybe 90 points until the dow exits that territory >> room to run. >> bob pisani on the floor.

>> out of correction territory the trend is moving in that direction. better than 2 to 1 advancing to declining stocks cyclicals are leading again. characteristic of the whole month here bank stocks doing great as we go into earnings season that's a very positive trend health care, doing okay, not really strong. tech is the big market leader again. cyclicals doing well energy is okay topped out in the last few days, oil has stalled around $52 here. i want to show you the bank etf, the kbe, we're up 9% so far this month. there is a bank earnings, some bank stocks, bank of america, goldman sachs, comerica and u.s. bancorp. i want to look at the kbe for the month here this is the bank etf 9% for the week. the month. up 2% for the week there it is for the month. see how we went down and i've come back here this is a very good sign, in the sold into earnings a lot of these were down 25% in the fourth quarter very good sign as we're in

earnings season right now. as far as the bank earnings, i emphasize, less emphasis on trading and more on how the consumer business is doing and the business business is doing here if you look at bank of america, consumer loans up 5% commercial loans up 2% the deposits up 3% net interest income, how much money are they actually making on their interest? higher rates loan growth helping them out, up 7% these are good numbers and very similar to what jpmorgan reported yesterday let's move on, talk about black rock, a lot of discussion, a lot of talk their assets under management declined. declined because the market went down not because suddenly people are taking money out the inflows were very strong this is a giant in the etf business it is the giant in the etf business $81 billion in inflows in the fourth quarter that's a quarter of all the inflows for etfs last year a quarter for the whole year for everything that's how big they are. assets under management for ishares, etf business, that's half of the value of all of the

etf business in the united states it is an amazing number. total etfs, $3.6 trillion. total assets under management there. that's an amazing number if you look at what's going on there. black light. all the asset managers have problem because good news for consumers, low cost etfs makes it tougher to run the businesses got to do get more efficient if anybody can do it, black rock can do it right now. where are we right now the good news is we have resumed the upward trend we're stalled out. after that great run we are now back on an upward trend in the last day and a half, over all, s&p dropped, geez, number of points, between december 4 and december 24th, probably dropped 450 points. we regained 60% of the losses in december that's an uptrend we have got and the cyclicals, the tech, industrials, and banks that are the leaders overall. very positive trends off of that december 24th bottom as far as the earnings go,

reiterate, first quarter numbers, keep coming down, but a way, the market already anticipated in the big drop in december 8.1% what we thought first quarter earnings, on the first of october, today down to 3.3% i think they might go down more. but not dramatically that much more i think a lot of the damage is already done, still got to figure out what that government shutdown means and, of course, any implications from brexit back to you. >> thank you to the bond pits as well check in with rick santelli at the cme group in chicago good morning, rick. >> good morning, carl. outside of the first couple of trading days of 2019, the treasury complex has been pretty firm in a pretty tight range look at one week of 2s and pay particularly close attention to the angle of the assent on the right side if you look at one week of 30s, you see the difference the long end is leading, rates are firm not up huge. up six basis points on the year on a ten

we're up 8, 9 basis points on the year on a 30 it isn't so much steepening as you look at tens minus twos year to date. a little bit of steepening, but more than anything, the long end seems to be leading the firmness seems like the 10s and 30s go and the 2s, 3s, 5s start to catch up that isn't a bad thing my guess is lack of some of the economic fundamentals is playing a significant role in this process of trying to define how the economy going to look. at a two day of the dollar index, yesterdays with a big day. it snapped back, popped back over 96, shadow boxing that level now. really it isn't a proactive dollar trade at this point really was the weakness in the euro that was the catalyst of that move. look at one week of the euro versus the dollar, you see it has been staircasing lower yesterday a period where it was quite volatile, seemed to coordinate with the headlines of mario draghi which fit nicely

with the renewed concern of weakness in the eu and particularly when the golden jewel of the eu, germany, seems to be obviously slowing as was evidenced by its performance last year. everything brexit is important to traders the pound versus the dollar may not be highest level in a significant amount of time, but it is at the highest level against the dollar should it close at current levels since about the third week in november and that really does sound surprising to many it is about what investors expect and how they trade on those expectations carl, david, jim, back to you. >> talk to you in a bit, rick, thank you. rick santelli. one month highs here on the s&p, dow, nasdaq. 2622, all banks and airlines to start. goldman giving the dow at least a 50 point bump. back in a minute

♪ ♪ the unknown beyond the horizon. that was once our frontier. but today, a new frontier has risen. and this is the vehicle crafted to conquer it. introducing the first-of-its-kind lexus ux and ux f sport, also available in hybrid all-wheel drive. experience amazing at your lexus dealer.

the dow and s&p trying to climb out of so-called correction territory for that the dow needs about 60 points s&p needs to get to 2646 we'll get more with jim in just a minute i am a family man.

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

♪ >> let's get to cramer and get to stock trading. >> could jpmorgan stanley, best could be last. when you look at all the extrapolated and wealth management, morgan stanley has it all stock was 58 back in march and yields 2 hadn't 74%. could this be the next one that surprises? i say yes. i'm sticking my neck out james, please tonight cut it off. >> that's tomorrow morning you would rather own it than citi >> citi is so cheap. citi is really cheap. >> yeah. >> morgan stanley sells at nine times earnings, and this is a great growth business. again, i come back to how can a great growth business sell at nine times earnings when clorox sells -- i happen to like

clorox you've got clorox selling at three times earnings. >> always come back to clorox. >> david, because it's the gold standard you can drink modella and corona, but you can't drink bleach don't even think about it. >> don't drink the beach what's on "mad" tonight? >> i have a guy called lew cirne. his company is called new relic, it's an anagram, like row man cassadice. it's an ongram, and let's say you go to a website and you've got streaming. they make it be sure that it's off every single website just rolling websites, and there's nothing worse than like going to mlb.com and it's frozen >> frozen. >> great disney animated

picture, too >> "mad money" at 6:00 p.m. eastern time when we come back, former jc ta cef chief and one-time apple reilhi ron johnson the dow is up 41 esting lies beyond the tech sector. it's about technology transforming every sector. ♪ at pgim, our bottom-up approach uses a technology lens to identify long-term winners. from energy... to real estate... to retail. finding such opportunities for alpha is the true value of active investing. and around the world, you have a partner in that pursuit. pgim: the global investment management businesses of prudential.

♪ good wednesday morning welcome back to "squawk on the street." i'm carl quintanilla with sara eisen and david faber at the new york stock exchange. one-month high on the stocks, at least for the dow and s&p as results out of the banks and airlines are pretty good both indices trying to climb out of correction territory, and now we're getting housing sentiment. for that we'll go to diana olick. diana? >> reporter: home builder sentiment turned around rising 58 on the national association of monthly business home index the recent drop in mortgage rates, sentiments had fallen sharply to the end of last year to the lowest level in over two years. anything above 50 is considered positive and a year ago we were 72 still much lower the index's three components, sale expectations increased three points to 64 and buyer traffic rose one point to 44 that last one is still in

negative territory regionally on a three-month average sentiments fell five points in the west, down three minutes in the which had west and south and that was the northeast down five points housing starts and building permits will not be released tomorrow due to the partial government shutdown. nahb will announce december single housing starts show a 3% over 2017 totals. >> on housing sentiment, not toot shabby. our road map for the hour starts with big banks goldman and bank of america giving stocks a boost this morning. dow and s&p attempting to climb out of correction territory. >> plus, no deal the prime minister of the uk theresa may facing a vote of new confidence after the historic defeat on a brexit deal. >> and gold consolidation, we'll hear from the ceo of newmont mining after the acquisition of gold corp this week creating the world's largest producer of the

metal. >> both goldman and bank of america topped expectations, b of a of 5% and goldman first quarter reports under new ceo with a closer look at earnings great to have you here, tom. >> great to be here. >> seems like the lessons have been core businesses pretty solid. credit looks okay. yeah. >> and the trading activity in december we understand. >> the greatest fears didn't materialize in the fourth quarter. as you know, after the third quarter there was a sense gross domestic product was decelerating we took on average bank earnings growth estimates down 10% to 7%. there were concerns it could be much worse and i think what you're seeing today and yesterday is actually somewhat of a relief real which is none of those worst fears are materializing. >> is the story. do you think it's turning into a '19 story of growth, loan growth >> there will be loan growth but everything is going to happen

just slower in our opinion a lot of biggest cast lifts maybe for the economy or for the banks are behind us. doesn't mean things aren't still going to be good we're looking for 7% earnings per share growth yet the stocks are probably 15% to 20% cheap relative to where they normally trade. 7% is not that bad >> some people are looking inside these earnings and wondering what comes next. are there any clues for the future in terms of credit loss provisions or the tone that the executives are striking perhaps. >> so i -- i do think the stocks are attractive and they are undervalued, but also you want to be realistic. credit just can't get any better we've been saying that for some time you're going to see net charge-offs go up, non-performers will go up. a natural thing to have happen i think the comment is that the banks are very well prepared to deal with t.capital is the highest ratios in almost 80 years. the banks are buying back a lot of stocks so they can manufacture a lot of earnings per share growth on their own, so i think it's -- it's just not going to be as robust of growth,

and they are operating at a much higher level of profitability >> the buybacks, goldman buys back stocks at closer to 36 and about of a closer to market price. they don't always have the same market impact and sometimes in retrospect they can look bad at the same time do you think we'll see the pace of buybacks continue >> i think it's accelerating >> why >> for a variety of reasons. one is the companies are profitable and are generating a lot of excess capital organically she will fuel it the second thing is it's taken washington a while to implement dodd/frank now that we're getting to more of a regularity to how they view the stress tests, there's a little bit more of a re-calibration these banks still have a tremendous amount of capital, but i think they will be able to share more of it with their share holders so slower growth in the economy, a little bit of re-calibration on the regulatory side, and you're seeing buybacks accelerate and we saw. it also what's happening, david, is a lot of banks were in the

blackout period during the big market selloff, so they are coming back in earnest we saw synovus just this week enhance their program. >> dividends, too? >> yeah. >> you talked about returns to shareholders >> so the way we measure it is total share of capital for the biggest banks. it will be 100%. they will take 100% of their earnings, and they are going to buy back stock or pay it out in dividends. >> just going to ask about the biggest source of growth is. that consumer loans at this point? >> the consumer is still grow, and, remember, we had a good retail figure. the consumer i think feels good. employment is good wages are up, so i think consumer is okay the biggest numbers really for a lot of these banks that are swinging the results are the corporate returns. third quarter was a really sluggish surprisingly slow loan growth quarter looks like december of this -- of this past year was a pretty good period, so we're seeing pretty good end of period loan growth, but i'll tell you, we've taken all our loan growth

estimates down, and that's partly why we've got our estimates to 7% growth instead of 10. >> solomon is making estimates and said it's been a difficult time but franchise in asia remains strong does the street understand that story yet. >> >> it will take a while our analyst call there is when we see something like that happen it's-year-old before it comes to a conclusion, but what happened is goldman was trading below book value when the stock closed last night, so trading below book value is just too [ cheers and applause i really think it's going to be hard to see that stock go on a sustained rally until that gets resolved, but below book value goldman, especially with these results, that stock was just too cheap. >> finally we were talking off camera about the trading activity in december and all the excuses people were giving for why that was happening. volcker rule, balance sheets and liquidity drains what have we learned from that >> we eesks appearan've experiet

what's happening through this year is active versus passive management passive management can take over the market we saw $7.5 billion flow out of financial services and the etfs since june and there's a lot less liquidity that's a by-product of the volcker rule so drexall lit technicals can take over a stock in the short term, and i think it will create opportunities for long-term active investors both on the upside and downside. >> we've been hearing that for years, and it hasn't -- the active guys continue to not put up the numbers. >> well, when you say that with that question, the good news is we're closer to it happening they haven't put up the numbers. i still think there's a place for -- for etfs and -- in everybody's portfolios, but i think that this just keeps growing as a percentage of the volume, and it -- i think it will create opportunities for more active managers it won't mean all of them. >> understood, but there will be opportunity. >> i'll go back and tell a story. there's a story that when text

reform happened in the banking industry, banks in the index performed really well including in the bermuda banks that had no impact from tax reform which made no sense. look at the valuation of the largest members of the financials in the russell 2000 versus the valuation of the smallest members of the russell 1000 there's a difference why is that? because the passive impact is a plus for valuation at the top end of the 2000, and it's a minus at the bottom of the 1000. for folks who pay attention which is what we do every day, we try, it's an opportunity. >> but it sounds like you think that that pattern that we saw last month could repeat itself. >> i think we've got to live with this for a while until something happens with liquidity. now, there were tax law selling, look, the concerns about macro issues are real. the economy is slowing i think market structure needs to be more of a conversation we are, i think, the world's biggest and best organized capital market it should be better than what's

happened at times, and i think we've got to pay attention to what regulation was done that was implemented. >> so you're talking about volcker and the lack of liquidity, not just the incredible growth of index. >> i believe volk ker was taking a lot of off balance sheet items in real big markets, not to have less liquidity in small-cap stocks which is what's happened. >> tom, thanks good to see you. >> yeah, thank you. >> the quarter is far from over on the show. >> thank you, thank you. the other big story, a resounding no for uk prime minister theresa may's brexit deal after an historic vote yesterday. that was the biggest defeat in the house of commons in modern history. >> the ayes to the right 202 the nos to the left 432. wow! >> british parliament will hold another vote, this time a no confidence vote in prime

minister theresa may the country is scheduled to least eu ten weeks from now. what happens next? prime minister may has until monday to present a backup plan but eu officials are already saying that the deal that parliament rejected was the only one they would accept. you might wonder with all therefore uncertainty, why the pound actually rallied on the back of that vote and went positive i think the answer is it was so bad, such a disastrous outcome for prime minister may that the only realistic shot was that she would either win this vote because she still has a majority in parliament and come back with a softer brexit deal, or they would extend the march 29th deadline on leaving the eu and just crashing out. there's just too much to lose for both europe and the uk to let that scenario play out, so it's just come back to the drawing board and some of the next steps actually look quite appealing given her loss was just so large assuming she can win that vote today. >> the evidence that the eu is willing to help her create a new deal is thin, right?

>> sure. >> it's thin, but they are going to have to accept a deal, and it would hurt the european economy brutally if the -- if the uk crashed out without any kind of trade deal, so it's kind of a no-win situation on that front we'll see what she comes back with i think the justice department that nobody wants to see -- her party doesn't want to see jeremy corbyn take control and according to the research deals for the market as well and a no crash brexit out of eu would be a worse deal, and by the way, mark carney, the governor of the bank of england testified in front of uk parliament, and he was asked about why the pound rebounded and sort of what the market indication was from that, and he pretty much confirmed that, saying that it looks like the market -- their intelligence shows it's expecting some sort of extension. >> yeah. >> of the deal, so that's the base case scenario we'll see what happens there's no doubt there's still a risk here that they could crash out of eu and that would be

terrible for everyone involved. >> uk cpi right in line with consensus today so the data continues to -- >> all the central bankers have really tough jobs right now. i think they always did and between carney and draghi and powell, it's a little bit more difficult these days. >> when we come back, stocks are on the rise. dow up 150 as investors cheer some of the results from the banks and some of the transports we'll get more after the bell tonight. dow and s&p inching closer to getting out of correction. we're watching new mining buying gold corp in a world's largest deal we'll hear from the ceo of newmont mining straight ahead when we return ♪

memories. what we deliver by delivering.

hey, 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, 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. stocks moving higher this morning boosted by strong bank earnings black rock ceo larry fink joehnck "squawk box" this morning commenting on whether he sees recession coming. >> you're seeing the seeds of a global slowdown, but we're not believing we're seeing the seeds of a global recession. >> right. >> and i know there are people who believe that we believe that the u.s. was going to contract anyway the tax cuts, we'llnormalize, and now we have all this undernt that's probably accelerating. >> as concerns over a global slowdown and trade grow, investors looking to the season's earnings as a bellwether the latest company ford forecasting a weaker than expected 2019.

retailer nordstrom shares tumbling after disappointing holiday sales. for more on what all this could mean for market beear joined by brian levitt oppenheimer fund senior strategist and the head of the u.s. equity of division and strategy brian, the signals from earnings, are they good enough to keep this market real going >> i think they are, and remember we had a pretty bad correction last year and that was starting to forecast some pretty bad economic outcomes, really tight monetary policy and a bad environment for earnings, and so we're recovering off of what was some pretty dire market moves. we have to remember that going into a period of slowing growth and better policy should actually be quite good for the markets. not everyone is going to be a winner in this environment we go back to favoring what we believe are the true growth companies, but so far the signal for earnings generally positive. >> are you as positive, greg i think you are worried about margins and peak earnings growth has it been factored in? >> yeah.

absolutely we think not we certainly saw after q4 earnings releases which were good quantitative earnings and the qualitative guidance was much more conservative we've seen the likes of apple and fedex guidance relatively negative around the return of the year and there's downside risk to consensus earnings this year. >> brian, how much -- how much would the market -- how many downgrades and guidance cuts can the market take at this point with current valuations? >> i think the market can take quik a bit cycles don't end at average valuations with stocks i mean, stocks are trading at cheap to bonds as they have since early 2016 and before that 2013, and, you know, it's very hard to imagine a cycle ending with an earnings yield of stocks north of 5%, a treasury-year-old, what, 2.6, 2.7, it's just an environment where you're being incentivized

to own equities. guidance down will be expected in a slowdown. that's what the market was telling us last year we priced in had a slowdown and perhaps even more. what that gives us is better policy, stabilization and growth, some stimulus out of china and that should support global markets. >> what do you make of forecasts that say we're 90% in a global recession now, and on top of that how long can the u.s. stay uncoupled from it? >> look, what's ended up happening is if you look at most major economies of the world they have been growing at or perhaps slightly below trend while the united states decoupled so the united states had a big year of growth and what is happening now is the u.s. is converging back towards trend where most of the major emerging economies of the world are hovering near trend. there's a couple of outliers like a turkey, for example, and china slightly below trend because of trade concerns, but you're starting to see some policy, stimulus out of china,

so if you think about it where are we from trend most countries also kind of converging together so that's actually a reasonably good place because it keeps policy generally accommodative the stabilization of the dollar has oil prices going back up that's helping the credit markets and this is why the equity markets are bouncing. >> greg, given your view that we haven't seen the worst of earnings, do you think the adjustment and equity prices that we have seen is sufficient, or do we need multiples to continue to contract >> well, i think certainly i wouldn't disagree that equities are relatively fairly valued, but i think shortly in the short term valuations haven't ban particularly good indicator of short-term earnings moves. so if we see more downgrades come through, that's going to drive more volatility for equity markets. our year-end target for the s&p is 2580 so we'll see the market finishing the year somewhere around these levels so we're not that bearish, but we do think we'll get more volatility, and i do think it's important to look at the extent of the slowdown in earnings growth that we are

having so from plus 20% last year, the market was forecasting high single digit growth this year that's now coming down to mid-single digit growth so that's an unusually aggressive slowdown. >> if you look at market history you've had only a couple of times where you've had two negative years in a row or even a negative year and then a flag year so those examples are 2,000, 2001 and 2002 we started there with valuations 306 to 40 times earnings we have the example of 1937 to '74 where inflation went from 3% to 15% today inflation is 2 the other examples are in the great depression unless we think that this is the great depression, a significant bubble somewhere in the world or massive inflation coming that's going to lead to significant policy tightening it's very hard to envision 2019 not being a good year for markets. >> that's the optimistic take. >> greg, doesn't it depend though for your view on what sector you look at i mean, look at the banks having another great day. so far for january up 6% names like citi group for the

month up 20% doesn't that show you that negative expectations, whatever we got from the banks, were already in those stocks? >> yeah. i think to -- to a degree after this drawdown that we had in q4 there is more negative sentiment reflected in the stocks, and one of the things we think we could get is an environment of more dispersion so morrelltive winners and losers, outperformers and underperformers rather than this kind of strong bull market that's been a rising tide. so we think there's more of a differentiation this year between relative stocks and investors. >> which one does the best in your view? >> we don't necessarily look at things purely on a sectoral basis. we're looking for pockets of equities across sectors where we think margins could be more resilient or the buyback story could be more resilient and looking to pair those where they do have large outstanding bye backs and we don't think they are sustainable or culprits with slightly lower margins and more at risk from a market

compression from wage growth and a slowdown in the top line and we don't think those pressures will be fet uniformly. >> good debate, guys thanks for joining us. >> when we come back, the shutdown entering day 26 with no end in sight former s.e.c. chairman richard brandon weeden will join us on what it means for financial markets. plus, we'll hear from the ceo of newmont mining on the heels of buying gold corp "squawk on the street" continues with the dow up 144. [leaf blower] you should be mad at leaf blowers. [beep] you should be mad your neighbor always wants to hang out. and you should be mad your smart fridge is unnecessarily complicated. but you're not mad,

because you have e*trade which isn't complicated. their tools make trading quicker and simpler. so you can take on the markets with confidence. don't get mad. get e*trade and start trading today.

welcome back to "squawk on the street." let's take a look at the action in the gold area on the heels of newment mining's acquisition of gold corp. the ticker gdx, amongst the top ten holdings as you might expect given the size of the deal, down for start of the year and down about 15% over the last 12 months brian sullivan joins us now with more color from the ceo of newmont mining from the big deal announced a couple of days ago. >> brian, thank you very much. we spoke first on cnbc with newmont mining ceo gary

goldberg now, he'll become the ceo of the new my minted company called newmont gold corp at least through the end of the year and then will leave and give the job to tom palmer. in a couple of months in gold, barrick gold bought ram gold for 6.5 billion so we asked goldberg if this deal was a signal flare that he thinks gold prices will stay lower for longer. >> we're designing our business to survive through the cycles in prices we're not predict an up or down. as we go through our longer-term price we use a $12,5 gold price in making returns and making sure that any project or business going forward is delivering at least a 15% rate of return. >> not only has gold been a dead money trade for a long time now, remember, we were above 1,700 an ounce back in october 2011 for the next four years it went down, down, down been stuck in that range around 1,200 for a few years. remember, it fell nearly below

$1,000 in late 2015 so i asked goldberg how confident he is in that $1,200 protection. >> we do test our plans at an $800 price, $900 and then up to 1,200 so, you know, at this stage we look at past history and where we're at i think we sit in a solid position in terms of cost of production to be able to compete through the cycles. >> and i think goldberg, guys, wants to make sure that the deal doesn't appear that they do. the deal was announced monday morning, so clearly there are skeptics that this kind of a deal will pay off. goldberg also talked about how to cut costs, especially in the two offices. there's no overlap in the physical minds but maybe they can achieve more economies of scale. the full interview will be on cnbc.com, guys, but still not a lot of optimism around the price of gold at 1,200 that's where we are now, so there you go >> yeah. interesting. you know, listen, prion, to give them one out at least. we've seen fairly negative reaction to many so of the large deals announced in terms of the

stock. today this fiserve deal. you can see skepticism from large investors about these deals. >> that's an excellent point and you'll know more about it than i do i'll flip it and go back to you. do you think it's a reflection that the market believes deals don't work anymore or maybe a reflection from bristol and newmont and others that you cover so well are overpaying >> listen, some of these deals that have occurred, not the newmont deal as well, actually it was done pretty quickly from my understanding, a month, but some occurred as a result of weakness we saw, brian, last year, late in the year with equity prices overall and the acquirer seeing an opportunity, but there does seem to be a view and bit of caution on the part of some investors whether or not that was a well-taken step at this point or whether it was one that was taken perhaps more out of desperation

not in this case this is end game consolidation that you're talking about in the gold industry with the barrick deal and now this one. >> this is a sign there's too many players that are mining too much gold. if there's too much of a commodity and by the end of the interview and the full thing will be up on the website. i said do you think there's more deals to come, and he thought there would be, not that there's many big players left in the gold market but people were super bushel on gold, radio ads, kind of like crypto, that's come down so if you can't get the commodity price up, what do you do bring your costs down and hope that the market reacts >> all right brian, thank you thanks for bringing us that as well, and we'll have more later on brian sullivan back at our headquarters. >> very nice let's goat sue herera and get a news upgreat back at hq. >> hello, carl good morning, everyone here's what's happening at this hour an explosion struck near a patrol of the u.s.-led coalition in the northern syrian town

killing at least 15,and u.s. officials are now saying that includes three u.s. troops the islamic state group claiming responsibility saying it was a suicide attack the white house says president trump has been briefed on the situation. top russian officials ridiculing allegations that president trump could have worked for moscow's interests dismissing them, quote, as absurd and stupid. foreign minister sergey lavrov reflect a lessening of journalistic standards snow is falling in the california sierras with the worst yet to come. 12 to 15 inches expected today and more expected tomorrow sports illustrated is moving its annual swimsuitish few february to mate. the company says it makes sense given the fact that may kicks off the unofficial start of summer it released its first swimsuit issue in 1964 when february was

a slow month for sports. you are up to date that's the news update this hour sara, i'll send it back downtown to you. >> good to know. sue, thank you. up next, leaving the door open for fraud former s.e.c. chairman richard brandon weeden here to tell us what the shoutdown means for regulation markets and investors. we're about an hour into trading. major averages are higher across the board. nasdaq up half a percent and s&p up .4, and stocks doing better, almost out of correction territory meaning 10% off recent highs as the rovecery continues. "squawk on the street" will be right back

welcome back to "squawk on the street." weekly ones from the u.s. government just in the last few mints moments. oil envip try dropped by 6.2

million barrels, a lift expecting a slightly bigger draw gasoline inventory up by 7.5 million barrels. the expectation was for a rise of 3 million barrels crude oil holding steady right now, carl, at just around $15 for wti. gasoline futures did tick slightly lower on that news, but watch that oil trade, oil prices are already up about 23% carl, over to you. >> sometimes leads the overall market meantime, day 26 of the government shutdown and no end in sight obviously it may be starting to spook the ipo market our bob pisani joinches us to explain. thundershower starting to get the markets a little bit lower there's a pipeline and 160 companies have filed to go public with the s.e.c. including big names like uber and lyft, and if the shutdown continues into the end of january a substantial ipo backlog will

continue a specialist told me even if the shutdown ends soon the market is being pushed back by at least 30 days and it's possible now that you might not see a substantial ipo market until march to move forward with a traditional market, they have to be declared effective. that's the s.e.c. has to essentially approve the application since the agency is not open for regular business. the staff cannot review and declare effective any registration statements. that's a major problem this delay could come at a very bad moment for i'm ppo hopefuls. equity markets have stabilized in january, a necessary pre-requisite for the ipo market and the ipo etf, a basket of the 60 more recent ipos, it's rallied 10% this month, far outperforming the s&p 500 indicating investor appetite for ipos is in fact returning. still, some cops are trying to forge ahead, so, for example, several biotech companies filed

to go public just this week and one company that had already filed, this is new fortress, in an integrated gas to the power company, they announced terms for their ipo on monday. that's very important. the company is essentially already out on a road show selling its ipo and theoretically it could go public next week if the s.e.c. makes the registration effective the problem here, carl, is there any one at the s.e.c. to declare the registration effective while they are closed? that's a major issue so i'm going to watch this one very carefully back for you. >> thank, bob. wall street's top watchdog, the s.e.c., operating on a skeleton crew during the shutdown adding to concerns that the longer the shut don lasts the greater the risk to investors. joining us now is richard brandon weeden, the chairman of brandon weeden capital manage m.nice to have you here and good to see you. >> nice to be here. >> what's going to be the impact on the s.e.c. of a continued

shutdown in terms of regulation of the markets, of fraud, of files and everything else? >> well, i think this is anything but an ideal situation. right now technology helps a lot. the surveillance wires that are automated and -- and can be reviewed by minimal staff are working. tip lines. the automated surveillance systems here at the exchange at at naz-at the other sros are working and so technology lets the skeleton staff at the s.e.c. keep an eye on things. more things than would have been true ten years ago, but it's certainly not ideal. there are ways that companies can get around some of the problems bob was talking about i mean, you can -- i'm actually involved with a company that filed a registration for the delayings amendment and under

the law it was affected automatically. for a big ipo going effective without s.e.c. comments, it's a little bit -- it would take a little daring but can be done. so right now things are holding together, but not ideal. >> any idea what date at which you sort of start to really suffer greater consequences? >> i think it will be progressive. january tends to be a slower month. march and april is going to be full bore proxy season so you have a lot of companies that have filed proxies going to get shareholder resolutions. the s.e.c. would normally arbitrate as to whether those resolutions have to be included. companies may have to either include resolutions they would normally exclude or make their own judgments and take the risk if they choose to exclude it without s.e.c. approval. large deals, merger prockies

will will be a larger progressively merger issue, so none of this is healthy. america's economy depends on our capital markets. the s.e.c. is an important part of that and so the sooner thends the better >> also a watchdog is this a case where the cop is off the beat there's more of a risk of insider trading or other types of fraud happening. >> well, for anybody out there thinking about doing that, number one, the surveillance lines are working just fine. the exchanges as i mentioned are doing their normal surveillance? the agency has authority to take emergency action for law enforcement and the protection of property, so under the anti-deficiency act passed in the 1800s, and so it can respond if there was another madoff that they discovered, discovered an ongoing fraud, i'm quite certain jay clayton would call in staff

and deal with it i think if your cop on the beat goes on vacation for a day or two, you don't expect a crime wave he or she announces that he's going on sabbatical for a year, you might create temptations that are not healthy to create right now investors shouldn't feel that they can't transact in the exchanges. companies shouldn't feel that they can't do business the risks are not extreme today, but they will get steadily worse. >> i was going to say. to what degree is there, i don't know, an erosion of reputation if you're a foreign entity considering london, new york or hong kong, right it terms of isting, does this -- does this -- is this an argument against new york? >> yes certainly people around the world look at this and say this has to be the stupidest way to run a railroad anyone has ever invent, and it's -- it's a

spectacle that suggests we have -- that our partisanship in washington is having graver knock-on effects in the economy. on the other hand, those other exchanges don't have the liquidity that we, have and right now the functioning of the market is okay we had far worse problems with what we went through in december than what we're suffering at the hands of an absent -- >> and we're seeing a lot of merger activity actually it's an important point we're getting set for. >> when you have a large deal, take your gold dealers that foreign involve foreign players and if they are held up trying to get merger proxies, where they can't get shareholder vote to approve a transaction because the approximaty is held up in

washington, that would certainly affect people's future calculus on what exchanges do they want where do they want their company to be domiciled, and what exchanges are their principal place of business? so none of the long-run implications can of this are good. >> wanted to ask you about another news store i today, sort of in your world alexandria ocasio-cortez joining the health financial services committee led by maxine waters what's that going to look like for the industry >> well, maybe she will learn something. >> are you questioning some of the -- some of her economic ideas that she's put out there >> i -- i've never seen any historic evidence that 70% tax rates facilitate gdp growth. perhaps, you know, we'll discover something. >> only up to the first so million. >> that's the beauty of the

house of representatives i testified many occasions in front of them, and you have members from all -- all points of view, and i think we'll survive that it will be an interesting dynamic if elizabeth warren turns out to not be the most liberal progressive person in the financial services arena she needs to watch out that she doesn't start looking conservative i suppose. >> first, we've got to get the government reopened so we'll work on that and then move from there. >> that's got to be the first priority and hopefully the business community, along with the investing community, adds their voices to all the parties involved to say find a compromise democracy is about the word compromise, and it's high time we found one. >> richard, thank you. appreciate your time. >> thanks. >> richard brandon weeden. >> as we head to break here, take a look at shares of snap. the parent of snapchat nos

diving after its cfo tim stone unexpectedly resigns less than one year into his job. it follows a host of other executive departures in the past year for this company. snap down 11.5% almost "squawk on the street" will be right back why are you so good? had a coach in high school. really helped me up my game. i had a coach. math. ooh. so, why don't traders have coaches? who says they don't? coach mcadoo! you know, at td ameritrade, we offer free access to coaches and a full education curriculum- just to help you improve your skills. boom! mad skills. education to take your trading to the next level. only with td ameritrade.

stocks are shrugging off political uncertainty and history suggests a bgeigr rally could be ahead check it out on tradingnation.cnbc.com more "squawk on the street" is coming pack. ♪

acan echo throughout ane entire community.nge that's why we proudly support, invest and volunteer in communities like yours. because the changes we make today... can you hear me? ...shape the possibilities of tomorrow. u.s. bank the power of possible. let's get to the cme group in chicago and the santelli exchange good morning, rick. >> reporter: good morning, carl. breaking out it hard to do, whether it's the markets or political strategies or referendums, and i think that the first call of the day is to look at the following chart. this chart is the month of january 2018 ten-year rates on top of the stock market, the s&p 500. highly correlated. let's harken back to that time

there was lots of protesting higher rates, not good, but what we've learned is lower rates are much less agreeable. in the end i think it should be the long end and light curvey steepening that should be the trigger for ongoing normalization of fed policy. it just makes sense. at this point the fed has snugged up i was always calling for some sort of normalization, and granted it came late, and that's probably why it preceded in a what i that wasn't the first choice of the central bank, but nonetheless, it is what it is, and i think that given global conditions, the long end even managed to what it is with the treasuries held by the central bank is probably the best course of action. the other breaking out that's hard to do obviously is the uk and brexit no matter how that vote goes in three hours for theresa may, the uk really only has three choices. they can rescind article 50 and call the whole thing off

i think politically that would be a disaster. i think there is aer in across the close even though it's complicated as you can through an election cycle, that's the least likely out come. extent the debade is the most like lick contest rp economists for the most part, their guidance is always guided by what part of the freeway we're on and which part of the lane we're in, the middle, left or right side. how bredit i think it's the only choice, because if you delay brussels is going to demand a pound of flesh in some fashion or another and it's going to be the messiest for the markets. i think a hard brexit has a couple of nasty quarters but the

healing process begins almost immediately and the markets get affected in a way that benefits the uk economy and think weaker pound. it might be the hardest decision, but ultimately history may prove if they make that choice, it might be the best chase. david, back to you >> okay. well, we'll know, probably 12 weeks or so. now let's send it over to jon fortt with a look at what's coming up on "squawk alley". >> jon >> reporter: bank earnings have given us a fresh read into the state of the consumer. but nordstrom, that wasn't good, similar to my'acs. we'll take a look at all of that and the implications for tech, coming up on "squawk alley." to. lease the 2019 rx350 for $449 a month for 36 months. experience amazing at your lexus dealer.

welcome back to "squawk on the street." i'm dominic chu. stocks higher, but off of their best levels of the morning, a number of sectors are hovering right pander break-even with the s&p 500 less than 1% away from exiting that 10% pullback territory. material stocks, notable out-performer, rebounding from yesterday's losses, which were driven primarily by that profit warning from parent company, sherwin williams with today's gains, material sectors now trading out of that bear market territory range, but it's still down about 19% from its highs last year. among the groups leading the group higher, newmont mining, ppg industries, freeport mcmoran

and nucor among the groups to watch. >> thank you meantime, citigroup offering up an assessment of pay gap between its men and women in its global workforce. revealing that females at the company earn 29% less that be men do the bank also reporting among its u.s. employees, people of color earn 7% less than their white colleagues the disclosure is a comparison of median total compensation bloomberg talks to the head of hr and says the numbers are difficult. they're striving for 100% parity and they're trying to get there. >> the question is, why did they put this out now did it have to do with the uk ru rules, where companies have to be more transparent? >> they are the first big u.s. bank to offer a pay gap report >> it's probably similar across the industry and it's good for banks and companies and not just banks to be more transparent about this, so that they can figure out how to fix it and do better. >> absolutely. this is for the same or similar

jobs, i assume >> right >> just so people know it's not as though -- it's really astounding. 29%. >> that's a big number >> especially because women make up half of the workforce at citi, which is good. but, they should be paid equally for their jobs obviously. >> that would get me very steamed. >> in the meantime, banks are a big piece of the puzzle today. for a big reason, financials more than any other sector, leading the charge today one reason the dow is up 121 goldman, of course, bank of america, big stories today, but tomorrow, as we were saying with jim, david, we'll have morgan stanley to chew on >> we will we will. and jim said some positive things that stock up 2.75%, carl. of course, goldman up almost 7%. and that is helping the dow, as well but a very strong showing so far this year for the financial sector overall, with the likes of city, which reported a couple of days ago, up almost 20% goldman now really outperforming, despite those

continued concerns about malaysia david solomon addressing that a bit on the call. i think i saw you tweet, carl, using the word de minimis. always a favorite among investment bankers they always like that word, de minimis. sarah, i know what you have at 3:00 is never de minimis >> correct >> so what is coming up on the "closing bell" >> so we've got a lot of news to chew on today at 3:00 p.m. we are all over this no-confidence vote happening in the uk this afternoon. prime minister may facing a vote within parliament, it comes down at 2:00 p.m. eastern time. we will monitor that for you and we also have some earnings after the bell, including railroad company csx jamie dimon is speaking this afternoon at the economic club of new york. he's always pretty fiery, i think, and especially coming off of earnings, it will be interesting to see what he says about the future, the fed, the government shutdown. he raised some warnings about the uncertainty there. and bill cohen always good to talk to. today, he'll be talking bank earnings and of course, the

newest member of the house financial services it will be good to get his thoughts on how miserable she could make life for the big banks through subpoenas and testimonies and that sort of thing. >> yeah. that's quite an appointment to that committee when we come back this morning, former jcp ceo ron johnson on the state of the economy, department stores, and the u.s. consumer sidewa sidewalk "squawk alley" starts in a few minutes. hey there people eligible for medicare. gimme two minutes.

and i'll tell you some important things to know about medicare. first, it doesn't pay for everything. say this pizza... is your part b medical expenses. this much - about 80 percent... medicare will pay for. what's left... this slice here... well... you have to pay for that. and that's where an aarp medicare supplement insurance plan, insured by unitedhealthcare insurance company comes in. this type of plan helps pay some of what medicare doesn't. and these are the only plans to carry the aarp endorsement. that's because they meet their high standards of quality and service. review aarp medicare supplement plans and their rates in this free decision guide. call united healthcare insurance company or go online. visit aarpmedicaresupplement.com to request yours. even apply online... any time. oh. speaking of time... about a little over half way and there's more to tell. like, how... with this type of plan,

you'll have the freedom to choose any doctor who accepts medicare patients. great for staying with the one you know... or finding... somebody new, like a specialist. there are no networks and no referrals needed. none. and when you travel, your plan will go with you anywhere in the country. so, if you're in another state visiting the grandkids, stay awhile...enjoy... and know that you'll still be able to see any doctor who accepts medicare patients. learn more with this free decision guide. call or go online to request yours. tick, tick, tick, time for a wrap up. a medicare supplement plan helps pay some of what medicare doesn't. 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.

good morning it's 8:00 a.m. at s.n.a.p. headquarters in los angeles. 11:00 a.m. on wall street and "squawk alley" is live. ♪ good wednesday morning welcome to "squawk alley." i'm carl quintanilla with morgan