♪ everybody's working for the weekend ♪ live from new york, this is ""squawk box." good morning, everybody. welcome to ""squawk box"" here on cnbc. we are live from the nasdaq market site in times square. i'm becky quick along with andrew ross sorkin and -- right now green arrows across the board. dow futures indicated up by 70 points s&p futures up by 5.5, and the nasdaq up by nine. this comes after gains for the market once again yesterday, and those gains really kind of kicked off after we heard a report on dow jones that was saying that there was talk that we could potentially be seeing trade tariffs dropped against the chinese. that was apparently an idea thatstein mnuchin, the treasury secretary, had floated it's still weird to figure this all out. >> the treasury department saying there's no formal proposal to do that, but, yes, you know, the rkt ma was kind of

hovering in positive territory most of the day, and hanging on to this rally we've had 11% to 12% since the lows, and then around 2:00 or 2:30, we did get a big pop on the headlines the market didn't fully pull back it seems there's persistence to the january rally. people feeling as if, you know, they don't necessarily want to cash in on it just yet >> it's weird to try and figure out where the story came from, what the leak is, if mnuchin wants to do this or not. if you want to figure out game theory, maybe it's proof to show the president that, yes, the market would like to see some sort of resolution on this sooner rather than later we'll rally on any sort of news that suggests that >> you go down the list of what we seem to already know. the president is focused on the market impact and having a positive one with china, and also that the treasury secretary has been a voice for a more moderate approach to china as opposed to a hard line as a negotiatesing tactic that was --

>> opponents in the white house quickly pushed back that that would be a seen of weakness, that you wouldn't want to be doing such a thing >> the whole thing in a sense -- it makes no sense to put it out and deny, deny i still don't understand where the markets have moved the way it's moved that's the part that makes no sense to me at this moment >> that to me is more about where the market is at and where the psychology is right now because i think you had a market that was up 4.5% year-to-date, okay what is it january 18th people feel as if, okay, i can't let this market get further behind -- further ahead, i mean. >> to leave me behind. >> that's not going to last forever. you're not going to chase it all the way up we saw this last year, and it didn't work for the full year. it is interesting, though, to your point, that we did not unwind those i don't think -- i think the market kind of assumes there's going to be something positive on china >> i do too. >> it's not as if -- >> that would be the teep of thing that would knock this rally down >> why don't we take a look at what happened overnight in asia as well. you're going to see that the nikkei ended up by about 11.29%.

then in europe this morning with some of the early trading that's already taking place there are green arrows across the board there, too major averages the ftse, the cac and dax all up by better than 1%. in fact, the cac is up by better than 1.38% stocks higher in italy and in spain. then the treasury markets, you're going to see that the ten-year, which was yielding 2.747% this is yielding a little bit more this morning. 2.768% >> we do have breaking news to bring you on tesla right now the company cutting its work force by 7%. it's part of an effort to lower costs so the company can sell the model 3 sedan at a lower price. according to a memo from elan musk that was viewed by the "wall street journal" and seems to have been passed around overnight, the memo also said unaudited results from the final three months of the year indicate tesla made a lower profit than in the third quarter. now, you are going to look and you are seeing tesla shares down about 7% almost 7.5% on that news we should say, by the way,

they've got about a month to get that stock to about $360 a share. maybe it's $365. it's somewhere in there where, otherwise, they're going to be on the hook for about $2 billion of debt that they say -- as ae opposed to being able to convert the stock. there's a real move, i think right now to try to make things work they've also lowered not only are they going to try to lower the price of the model 3, but they're also dealing with -- they've actually now raised the price effectively of model s because they've gotten rid of the lowest price version of that they're doing lots of little things the question is are you playing for a month? that's the question. elan -- the stock -- this is one of those times where i hate to say manipulating the stock price, but getting the stock to a certain price within this month matters a lot. there's a real cost. >> what are you saying that's going to make the stock move higher you are manipulating the stock it's not working >> unless it translates into a guy who -- >> setting a low bar

>> a guide to higher demand because you have lower priced models you and maybe say that you are more profitable. >> i'm not suggesting he is trying to manipulate the stock all of a sudden the stock price on an acute, specific day actually matters >> if the stock price is below that threshold, they've said they're going to go half and half it's not either all stock or all cash, but it's still significant amount of cash that they would have to raise, and, you know, musk's letters is now up there, and he refers to the fourth quarter eeking out a tiny profit with all of the effort >> by the way, the other thing that i just can't cultural figure out about this, he has worked these people to the bone, right? now he is cutting them i don't know what that does to your culture i was actually -- that's what i was thinking about this morning more than anything else. these people -- many of these people have been killing themselves working more hours than you can imagine on the promise of what this company is going to be in the long-term vision of it and being there for ten, 20 years and owning stock and all of this stuff. then if in the midst of all this

you say, actually, we're not going to use you >> he says in 2018 head count was up 30% >> i don't know if it's going to be first in, first out, but it's still not great. yeah >> meantime, our guest host this morning is "new york times" media reporter ed lee. he is also a cnbc contributor, and we have a lot to talk to him about. want to start with this one. netflix shares because they are lower this morning let's show you what's going on with them right now after the company reported a mixed quarter. this stock down about 2% right now. netflix topped earnings estimates by 6 cents, but revenue fell short the company also said it added 8.8 million paid subscribers last quarter netflix also talked about competition saying the video game fortnite is a bigger competitor than hbo or hulu. here's netflix's ceo he is not wrong. here's netflix's ceo reed hastings on the company's earnings call. >> we compete so broadly with all of these different providers that any one provider entering, you know, only makes a difference on the margin

that's why we really think our best way is to win more time by having the best experiences, all the things we do and that's helped us a lot. >> i'm going to go straight to ed lee how did you take this quarter? it was a mixed element to it a lot of people excited to hear this news obviously about what's the bird movie come on. >> "bird box." >> "bird box." >> reached 80 million people >> not just -- a bunch of the other shows finally revealed more numbers, the viewership it's something reed haits haigsings and netflix has been saying for years now there's no point in giving you these numbers. we're not an ad-based business you don't need to know how many -- of course, if you are in hollywood, if you are a creator, if you -- >> you want to know. >> not just for your own ego sake, but am i charging you enough am i being valued the proper way? that was always the big buggaboo, should you do

something with netflix, is it worth knowing there? people are going to netflix and doing more work with them. getting these numbers is not just good p.r., not just good marketing, but it's a way to woo more hollywood it was mixed results i think the fact that they missed on the top line and they are guiding for slightly slower growth for this quarter, i think it's telling i think that's saying something. i think the u.s. is getting more saturated. then there's going to be more competition coming in with at&t warner media disney will have a service by the end of the year as well. >> the international is always the one that either blows out of the water or -- >> nobody can get their arms around it. >> that's massive. it would be huge if you were an ad-based -- if you were an advertising-based service. it's phenomenal. if you're not, what do you do with that?

>> we talked about how he is saying the biggest competition is fortnite. what happened to sleep remember when sleep was your biggest competition? that's the issue by the way, his comment -- the fortnite comment made me think, do you think we'll ever own a video game company or will they run video games over -- twitch obviously is something that competes with -- >> twitch is amazon, which is -- in a allows you to watch other people play video games. if you have a kids, you might have seen it that -- there's a -- it's video game-like, right i think -- >> they're getting sued for that, by the way from the creators of those books. >> ultimately, it comes down to something that's sbe active. that's what it showed. it's not just a lean-back

experience or streaming. it's,ic loo, you can actually interact with the programming and get a different result >> here's what it did give me, too. do you think they ever embrace any sort of advertising in their model? man, i think that is a welt of -- >> it's a great question i think he addressed it specifically on the call where he says no advertising he said at one point, you know, we're a great service. lots of people watching with no advertising. i think that's still the value proposition. i think that 10% figure, which is interesting how they came with that. they're estimating a billion hours of tv watched every day. they're accounting for 400 million of that. i think it's more a function of them telling the market like, look, it's only 10% rash i'm going to be the one that is always standing, and any of the rest of you guys are -- >> look, he is always sought to play down the zero sum game idea that it's netflix versus cable

versus ahbo. it's -- this is a huge new world. internet tv, as long as we're the leaders and can exploit our head start in pricing and eyeball hours. >> that to me was a convincing argument for us. >> and, i think what's smart about the approach is him bringing up fortnite as competition. it's not one or the other, to your point it's anything that takes your attention to the screen is something we are going to be competing against. it's not just going to be about i'm competing against -- >> do you have any worry about the amount of money they're spending >> i have been trying to -- you talk about tesla earlier in terms of where they are, in temz of as their debts are coming in. i i think netflix is in a much better spot all-around they're projecting another $3 billion cash burn for this year, which is the same as last year their content only gags bumped up past $19 billion. it was $18 billion last quarter. i would like to get a better sense of where they start to see that leveling off. where is it that they have enough content now where we could slow down that production

and still get the user growth. i mean, i think there's some math there there's some kind of -- >> they did say after 2019 they expect it to be a smaller cash flow burn in the subsequent years. smaller than $3 billion. at some level they decide how much do we deploy into new programs >> as long as the market gives them the freedom and to run with it >> i think there was always an explanation that they get to a certain place, and they could actually start cutting >> kugt it as -- >> people thought that with amazon, too. they still haven't stopped world domination >> if there's -- if they have room to deny to burn the cash at a regular rate, and their margins go up, the market will give them room to do it.

>> thank you >> sure. >> brilliant analysis. a lot more to come more on your favorite topic. >> another one when we come back, ousted cbs ceo les moonvez is fighting his former company for $120 million in severance we have the details next and a programming note for you next week we will be in davos, switzerland, at the world economic forum all week. >> we'll be there. steve mnuchin won't anymore. >> no, he will not we will be bringing you, though, live interviews with some of the biggest names in business, including the ceos of jp morgan, goldman sachs, bank of america, ibm, uber, chevron, cisco, dell, marriott, and dozens more. our coverage starts tuesday at 6:00 a.m. eastern time >> squawk super bowl >> right now as we head to a break, let's take a look at the biggest premarket winners and losers in the dow. looks like leading the way today, you've got dow dupont up .8%. sfx: [phone ringing]

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breached his employment company and failed to fully cooperate with the investigation moonvez is demanding an arbitration hearing. ed lee is here he wrote the story for the times. ed and i actually talked about this >> it's that much more bad pr for this guy if you -- given everything that we've known about him now, that for him to then sort of try to claw back this $120 million. >> he must have known his reputation is not going to be salvaged you might as well just try and get what you can out of it >> the other incentive is that cbs is actually footing the bill they're paying his legal fees for this >> they're paying his legal fees even if he loses >> the cavat is if he loses, he is responsible for paying his own legal fees up until then,

cbs is still paying it >> they may want this to go away even more than he does they pay him now >> i think the pr calculation on that side is if you are cbs, you are, like, you know what, even if we lose this, i would rather not settle, right? if i settle, it just makes us look that much worse if we lose, it wasn't our call it's the arbitrator's call >> do you think the effort is to get the money because he genuinely believes that he will be found innocent or that through discovery or other things he will prove that the conspiracy theory that the red stone family was out to get him. i mean, what do you think this is really about? >> there's something -- i mean, the thing is the ash training hearing is confidential, right if anything leaks out of that is going to be, you know, to his benefit, it's going to be -- they have to figure out a way to say here's what we said to prove that he is not all that bad. i think it's just getting really, really naughty, and it just -- i think it's ultimately weird. >> spin the story forward, though, because the other thing

that -- as an ongoing concern that is cbs for a moment, there's still lots of spelk las vegas about the company merging with viacom. you reported and others have suggested that the ceo search or the permanent ceo search seems to almost be on hold and has everything else taking place >> in tan dem with the idea of looking at a viacom merger, right? as you are evaluating ceos, you are looking at them and saying, hey, what do you think about a viacom merger? how would that work? does it make sense what's the best way that can happen that's what you are about. it isn't simply can you run this company? can you run combined company, and that's the bigger calculus >> does this imperil, slow down, impact >> i think it's a side show. >> it doesn't matter for what's ultimately going to happen with cbs, which is there is going to be some corporate action it has to get bigger it's still the most watched network. it's still going to -- it has nfl, super bowl. they've got it tore this year. they're going to have strong

numbers, but in 18 months it's going to be a much, much more difficult picture for them, and the net e next -- for nfl renewals, that are going to come up in 2021 for the monday and sunday, they may not have the pockets to renew these or to get as many as they had before >> everyone may not have the pockets of amazon or google or somebody else showing up >> that's the big question mark, right? do they come in with -- do they come in heavy and say we're going to spend that much more to get it the nfl by every estimation, they want to be on broadcast they want to be on regular tv because it's a distribution issue for them they need reach. amazon hasn't proven it yet, but anything can happen. >> all these issues inform what the terms of that combination would be that's what wall street is saying yeah, sure put them back together, but who is the buyer who is the seller? who gets a premium who doesn't? >> they are not that far apart on economics when les was still there. there was questions about how much synergies there really are. at what ratio one stock has

taken over the other i think cbs came out on top for that it was a management issue. i think they can get back to that i don't think it's that -- i think viacom is definitely a stronger company now. sfwha it was amazing how important you think that is for fox and what is happening for today or am zbloon or for somebody else coming in. >> you think that's -- >> and how much bigger that number could get. >> the whole economics o television on that >> when we come back, a company that makes a living picking up your junk. we will talk to the founder of

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we thank you for being here today. zh >> i think thanks for having me. "squawk box" was a part of our early story. it's awesome to be back. >> wtf,otology fail, for anybody that was going to jump ahead i want to talk about the story first of all, it's an incredible entrepreneurial story. the whied that you started this business in college just to pay for school, and then what happened >> well, then i was inspired to drop out you know, i didn't finish high school i talked my way in i bought a beat up old pickup truck for $700 i started hauling old junk, and sat down with my dad, and i said, dad, i have good news for you. i'm dropping out to be a full-time junk man i'm learning more about business by running one than studying it. he said how is that good news. now ten years later it was a good decision.

i saw a chance to build ab industry it had never been professionalized we said we were going to fedex the junk removal industry. nobody had done that that's what the book is all about. >> what have you found along the way? we've not gotten better as americans, i think, probably as getting more minimalist in our ways >> you know, i think we're getting worse, sadly good for my business, but i care more about the planet and sustainability than i do about my business. the sad part is we create more we keep buying stuff you go to amazon, and you buy, buy, buy, and you have all these boxes. instead of going to the store to pick up a little something, you now have the extra packaging i think everyone wants to keep up with the joness, so to speak, and so renovations happen, and you have all these shows on hgtv >> netflix just came out with a new show about tidying up. >> hoarders. >> it's part of the culture at the moment >> people renovate so often. they don't like their couch any longer even though it works perfectly. they change it out because it's not the right color.

i think there's aproblem, and sadly, there's lots of waste, but, again, business is booming. >> business is booming i think $310 million was your revenue number for last year >> exactly >> what happens? how does that work have you learned about business as you run one >> i have leshd that there's lots of opportunities, not just in junk removal. what we've done is we've scaled into other home services we have three other brands we have wow one day painting where we paint people's homes in a day. just like they want to clear out their old furniture because the color is not great, they want to change their walls we franchise these industries, and business is great. i mean, we're growing. every industry while one day painting or shop shine are growing more quickly than my first business 1-800-got-junk. >> what's the highest margin >> they're all similar they're different, about ut they're all based on a similar profit model, growth model, and so we've -- we're consistent >> shack shine is what exactly that intrigued me. doing little stuff around the house? >> it's windows, gutters, power

washing. >> seasonal shores >> we shine your shack, and your home will lot of us. it's a simple business also highly fragmented with huge $100 million -- >> i was going to tell you about the fragmentation, and not just fragmentation, but also going to ask you about the gig economy, which is like just task rabbit and people like that do you feel like you compete against them >> well, thumb tack it a partner of ours. we do a ton of work with them. kneel refer off their pros to us it's a win-win the gig economy helps us the gig economy, it's hard right now to find people the number one challenge our franchise partners would face is how do you find happy people how do you find these great people that come into our business and start a potential entrepreneurial journey working in the trucks and then becoming an owner yeah >> by the way, it really is your voice in the commercials, right? >> it is my voice. i amp it up a little bit because roy williams, the wizard of ads, said i got to put on this bigger personality. drives my kids nuts.

>> we're going back to the marks. ae before for next week's big earnings reports among the highlights on the list johnson & johnson, by the way, doing a deal with apple. with he have to talk about that a little bit travellers, our parent company comcast is up as well. procter & gamble, intel, and ibm. we will bring you a live interview with ibm ceo from davos right now as we head to a break. take a look at yesterday's s&p 500 winners and losers back in a moment [knocking]

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zpleerjts welcome back you're watching "squawk box" live from the nasdaq market site in times square. tesla cutting 7% of its work force. it is part of an effort to lower costs so the company can sell the model 3 sedan at a lower price. according to a memo from elan musk that memo also said unaudited results for the final three

months of the year indicate tesla made a lower profit than in the third quarter tesla shares right now are indicated down by about 7.9% the street had already been anticipating a lower profit, so not much guidance in temz of how much lower, and that's maybe what the street is trying to figure out today, too. netflix shares, in the meantime, are falling after the company reported a mixed quarter earnings topped estimates by 6 cents, but revenue fell short. the company also says it added 8.8 million paid subscribers last quarter netflix shares this morning down by 1.25% that came after a big run-up leading into these numbers global stocks getting a lift on some conflicting reports on trade. the "wall street journal" is reporting that treasury secretary steven mnuchin has proposed lifting all or some tariffs on china to speed up a trade deal a senior administration official shot down that report telling our very own aemon javers, there is no talk of lifting tariffs right now. u.s. equity futures are indicated higher dow futures now up by over 100 points 102.9. s&p futures up by about 8.5. the nasdaq up by 16.

>> we have news just crossing on cbs and wal-mart we want to bring you the two that have signed a new pharmacy benefit contract to keep wal-mart's pharmacy in the network. now, earlier this week cbs has said that the expected wal-mart to leave the network with the two sides in a dispute over pricing. financial terms of this new deal were not disclosed, although the pact is described as multi-year. we're looking at cbs this morning. that stock up 2% also, stocks rallying overseas we want to take you live to london to our own juliana. good morning >> good morning. so the positive momentum that we saw yesterday on wall street driven, in part, by those headlines around u.s.-china trade as becky just mentioned have filtered through to the asia session overnight, and now to europe here today to the main european equity index stock 600 that's currently tralgd more than 1.2% higher now, this is driven by gains across the regions here in europe as you can see beside me, every single one of the regions in europe are trading up this

morning. every sector is trading higher as well. interesting is those trade-sensitive cyclical sectors that are outperforming now, i want to hone in on one region in particular the u.k., of course, beyond what's happening on u.s.-china trade. brexit is, of course, looming large. the ftse 100 is currently up about 1.2% let's take a look at sterling because this has been the key way that investors have expressed their view on what comes next for brexit. while we are seeing a little bit of a pullback in sterling versus the dollar at the moment, it is still holding firm just below that 1.3 mark versus the dollar, and as can you see, year-to-date sterling is up a pretty decent amount versus the dollar the next date to be watching for breck it is monday theresa may will be presenting her plan b, and then on january 29th ministers will have a chance to debate and vote on that plan b. right now uncertainty remains the defining characteristic of what's going on here, but investors at the moment seem to be holding steady until we hear more back to you, guys.

here wir up 12% in the lows in the s&p 50000 less than four weeks ago. still down 10% what would it take to prove that the rally is more than just a bounce >> i thought that january 3rd last leg down encapsulated a lot of what was going on because it was trigger the by this surprise of the ism dropping from 59 to 54 you know what -- >> and the apple warning >> the apple warning the 54 caught my eye because i think that was a dramatic overreaction 54 is expansionary yeah, it's not 59, but it's still pretty good, and i think that's really indicative of what we likely will see in 2019 still an expansion a little slower. consensus estimates, and i like

to focus on top line because it's a better sort of long-term earnings projection, consensus top line is up about 6%. i think we'll hold that. i think that will be enough to at least get the rest of the sell-off back from the fourth quarter. >> yuri and forward earnings estimates do continue to come down clearly, the early edge of the fourth quarter reports have been good enough to support the market, but we're looking at, you know, perhaps 4% publish consensus maybe for the next few quarters how do you think the market is valued right now relative to that kind of a slowdown in profits? >> you know, as always, this comes down to earnings and the fed and right now it's certainly no different earnings estimates for the calendar year 2019 we're at about 12% for 12% growth a few months ago they're down to 7% and falling pretty rapidly actually about 50 basis points a week. at this rate we may only get into the low to mid single digits for 2019.

this is not the quarterly in the flb. a lot of that decline actually is in the energy and technology sector maybe it overstates the severity of the erosion, if you will, but, you know, q4 is estimated at 11% q1 at two. q4 at four clearly earnings have slowed the earnings groelt rate from last year was never sustainable, obviously, at 24%. the market needs to get some sense of where earnings growth is going to settle, and my sense is it will be somewhere mid single digits, and i think that's okay as long as the fed, you know, kind of stays on hold, but even there the debate is going to be or already is now taking place that it's no longer about whether the fed keepds tightening or pauses, but whether it pauses or actually cuts rates that's a whole other dimension to what we need to deal with here in terms of figuring out whether investors are getting fairly compensated for taking

risks in an uncertain world, and, you know, with the pe falling 30% last year, i think that actually is the case. i do think investors are getting fairly compensated here, but clearly things are less certain than they were -- than they have been over the past couple of years. >> that's the thing. if you project ahead six or nine months, right, let's say the earnings come in as we think, are we going to be freed from this sense that this is maybe the last gasp of this expansion or that the fed remains at least alert to the idea that they might have to tighten a little biltmore i'm trying to figure out what kind of -- what gets you away from this idea that this is a kind of late cycle >> that's a good question. i don't know that anything ever can, right every time you see good numbers, you're going to think, okay, this is the last high pressure raw, this is the last one. it's so long at this point that people just anticipate it.

>> maybe they just stop at 2.5 it's clear that we keep hearing that that balance sheet is going to keep shrinking. what do you think right now roughly speaking in terms of the fed, trade, and all the rest of it is now assumed by the market? >> my assumption krigtsdly or incorrectly has been all along that trade with china is a very long kind of containment strategy, and whether we will or will not get a deal, you know, in the next month or so, it's still one battle in a longer war, if you will i'm not going to pin too many

hopes on whether something gets done or not, because i think this is a much longer -- much longer, you know, thing, but i do think it's significant if there is some breathing room for china to actually stimulate their economy. everyone thinks china is doing poorly because of trade, and obviously, that's a major factor, but they're doing poorly because, you know, the chinese economy has been slowing, and the chinese policy makers have been unable to really stimulate the economy because china stuck with a currency that's pegged or linked to the u.s. dollar, and when the u.s. is tightening, china can't really ease because it has to import essentially u.s. monetary policy the fed going on hold or even reversing, which is certainly not i think where the fed is, but the market essential is pointing that way, if that were to happen, that gives china a lot more relief to kind of reflat the economy and so when they lower interest rates

requirements, it's going to get a lot more traction when the fed is sort of not getting in the way. i think that's actually a more important development in terms of global growth and what's happening at china than whether we or -- whether we will or won't have a trade deal over the next couple of weeks >> all right sounds a little bit like 2016, which i think the market would be okay with right now as we see equity futures left a little bit more thank you very much. less moonvez is fighting his former company demanding $120 million in severance pay we will talk to crisis management expert in the next hour stay tuned you are watching "squawk box" right here on cnbc

♪ >> it is now day 28 of the shutdown with no deal to reopen the government in sight. here are a couple of key dates to watch on january 25th one week from today about 800,000 workers will miss their second round of paychex. that's also the day that the administrative office of the u.s. courts is expected to run out of money that means federal courts will still operate, but with only some of their usual employees. the irs is expected to start accepting tax filings on january 28th it will recall tens of thousands of furlowed workers for that task who will be working without pay. end this already >> and we should tell everybody, we will be in switzerland next week with you. there will be lots of people we're going to tell you about who is going to be there we should also say there are people that are not going to be there. live coverage from the world economic forum american officials say they are going to sit this one out. just yesterday president trump who had canceled his own plans

not to come and canceled his delegation's plans due to the partial government shutdown. treasury secretary steven mnuchin, and mike pompeo had expected to leave the u.s. delegation people like wilbur ross and others were planning to be there. there will be lent of executives there for us to be talking to and bring you news this is the super bowl of squawk jp morgan, goldman sachs, bank of america, ibm, uber, che ron, cisco, dell, marriott, and dozens more. if you want a sneak peek of what's actually going on in the business world, this is the week to watch >> that's right. >> you got to watch every day. >> every day >> i just want to be clear >> this is back to back biggests >> biggests. >> coming up when we return, the breaking news of the morning we will talk tesla they are cutting jobs. we have details and the memo we'll talk about all that after a break. plus, we're going to talk to one of asia's largest private equity

firms about doing business in china. the trade war where he is investing now. that is next head to a break to a check on what's happening on european markets right now. at&t provides edge-to-edge intelligence, covering virtually every part of your healthcare business. so that if she has a heart problem & the staff needs to know, they will & they'll drop everything can you take a look at her vitals? & share the data with other specialists yeah, i'm looking at them now. & they'll drop everything hey. & take care of this baby yeah, that procedure seems right. & that one too. at&t provides edge to edge intelligence. it can do so much for your business, the list goes on and on. that's the power of &. & when your patient's tests come back...

welcome back to "squawk box. recapping this morning's news, tesla cutting 7% of its workforce as part of an effort to lower costs so the company can sell the model 3 sedan at a lower price. the company also expecting q4 profit to come in lower than q3. tesla shares now down. tiffany reporting a 2%

decline in comparable holiday season sales and it expects the guidance to be toward the lower end of the prior guidance it had been $4.65 to $4.80 a share. street is currently at $4.77 but you can see traders getting ahead of that. and global stocks getting a lift on -- lifting all or some tariffs in china to try to speed up a trade deal. but a senior official now shooting down that report telling eamon javers there's no talk of lifting tariffs right now. that is a nice segue to our next conversation here to talk about trade in china and the impact on investing and really the context behind all of this, weijian shan, he is from pag also the author of a new memoir called "out of the gobi" with a

forward by janet yellen. your one-time professor. >> yes >> nice to have you here >> thank you >> your book tries to offer a contextualization to explain where we are ski you to start with that in terms of helping us understand where you think this trade war really goes. >> well, in the relationship between china and the united states, really dated back to richard nixon who visited in 1972 but the formal diplomatic relationship was established in 1979 which was exactly 40 years ago. this month is the 40th anniversary. since then, of course, the economic relationship has developed a great deal today the trade is around $500 million. >> what do you think is misunderstood by americans when it comes to china? in terms of how china is

negotiating with us now? >> well, i think there's a misunderstanding on both sides from the american side, i think most economists recognize that trade is better than no trade. no trade is better than less trade. trade war hurts everybody. that's why yesterday when there was news they may lessen up on the trade war, the stock market shot up. and from the chinese side, i think there should be a recognition that the market needs to be more open, should open up more to american imports. because the trading balance is not sustainable. >> who's got the leverage in this negotiation right now in your mind? >> at this particular point, it really depends because at this particular point, the chinese economy is relatively weak, the sentiment is weak. even though last year economic growth rate was 6.6% and the american economy is very hot. but we all know that american

economy goes into cycles we're probably at the peak of the cycle. the next phase is probably going to be down and if you look at china in the past 40 years, it has not gone into recession ever and there's some special characteristics of the economy so at this point, i think america is in quite a strong bargaining position. >> but it sounds like you think if we wait, that the chinese will eventually get the other hand do you think that is the feeling of the chinese negotiators and do you think there is a lot of patience in terms of being able to wait that out? >> i think the chinese side would like to get this resolved as quickly as possible but i think their pain threshold is higher. i think you need to recognize that even though there is a large deficit, the trade relationship is beneficial to the united states. every $100 exports that china

does to the united states, 56 cents -- $56 goes to american companies, american workers. reported by the wnts two days ago. >> if you were to handicap the situation, something will happen in a positive way by march 1st would you handicap it in the same way >> it's very hard to predict but i'm cautiously optimistic that there will come to some kind of solution i don't know if the solution will be permanent. but i think there's probably a longer cease-fire come march 1st. >> okay. we're going to leave the conversation there congratulations on the book. thank you for coming in this morning. >> thank you very much >> we appreciate your perspective. "out of the gobi." coming up when we return, we'll look at futures as we head to that break.

we're in the green we'll talk to an analyst to break down some of the data from netflix. stay tune ed to "squawk" rugt here

. tesla cutting its workforce. the details and stock reaction straight ahead shutdown day 28. we're joined to talk about the latest out of washington and what it means for business netflix under pressure >> open your eyes. open your eyes

>> please don't take my children >> the stock falling after mixed results. we'll speak to a top rated analyst about the quarter. the second hour of "squawk box" begins right now live from the beating heart of business, new york, this is "squawk box. >> good morning. welcome back to "squawk box" here on cnbc we're live at the nasdaq market site in times square i'm andrew ross sorkin with becky quick and mike santoli joe is making his way to davos as we speak. at this hour, futures are in the green. dow would open higher about 136 points nasdaq up about 22 points. s&p 500 up about 11 points in part -- well, i don't know if we're -- i was going to say about china. but maybe not. anyway, we have more to talk about. >> we have been on a roll.

hard to say why. breaking this morning, tesla cutting its workforce for 7% in an effort to reduce costs. phil lebeau joins us with more on this story. also implicitly a bit of a guide down for fourth quarter results. >> right and those are the two things that are weighing on the stock, obviously. i think the indication is it's down now trading at the 320 level. closed around 345. look, the indication here is that tesla is going through the growing pains that almost everybody with the exception of those who are bullish and believe that elon musk can do no wrong, everybody has known that at some point tesla would face the hard realities of increasing manufacturing at the same time trying to drive down the cost of building the model 3 and in an e-mail to employees, elon musk said we have to bring down the costs of building a lower priced model 3

in order to sell it at a lower price and to be profitable at a lower price, we've got to bring down our costs while also ramping up the economies of scale. as a result he said the company will be cutting about 7% of its workforce. the last indication we have in the third quarter is that tesla has approximately 45,000 employees. so you're looking at a cut of about 4,000 workers. and that's based on third quarter employment numbers so we don't know the exact number at this point again, you mentioned the guidance for the fourth quarter, the indication from elon musk is while they will not be making a 4% profit which is what they turned in the third quarter, they do expect to be slightly profitable and then coming into the next year, the first quarter should be okay then it really gets tough in the second quarter as tesla looks to bring out a lower priced version of the model 3

it all comes down to battery costs. they are the leader in the industry, but they need to bring it down even further that means bringing down the overall cost of production >> thank you for that, phil. we want to get to some street reaction you saw this news and your first instinct was what? >> this looks to us like a mix of a proactive move of cutting costs but also a bit of cleanup on the kind of massive push to get the model 3 out this year. i think they added a lot of staff to get these numbers and extra resource like the tenth they put up to move cars through. and so to see them cutting the staff isn't a huge surprise in our view >> these aren't temps, though, right? >> they're not temps and they go through an ongoing evaluation of their team on an annual basis is our understanding. so it's not a huge surprise to see this you never want to see a growth company cutting staff like this.

but we're not overly concerned what we think is the real, you know, point for foreign investors right now is whether the company is going to be able to sell 250,000 of these cars. the model 3s every year. and i think they're being proactive here to get toward that 400,000 number. >> you still think this stock is going to be worth $418 >> we do there's a couple things going on we're bullish on one, theyer clooed out inventory in the quarter so they lower the next number. we think they'll begin ramping this in china. people will get bullish on that. then showing the ongoing sales numbers is going to be a key driver for us in terms of the case >> how much do you care about this debt payment that's coming due next month >> it looks like they've got -- we think they've got enough cash

on the balance sheet to actually do that without having to convert that stock we think it's a catalyst if they can keep the stock up above 360 to get that converted. >> it would be a catalyst. my question is do you think that's going to be there in a month? >> it's hard with this market. it really depends on where the number comes out we think, you know, street expectations have been creeping higher that's a little more of what you're seeing in the stock market today >> and part of it sounds like you're making a bullish case on where vehicle sales are going to be in the second half of the year but you'll have a number of rea competitors coming online. >> let's get realistic about what that competition looks like people have been excited about some of the vehicles coming out in 2018. that's been one that they have been delayed two, haven't been as excited as anticipated. and we saw around ten evs on the show floor none of them were particularly

exciting you know, there's only one, the hyundai, offering what remotely comes into consideration in terms of competition and it wasn't that exciting of a car. it's still just beginning production potentially available as early as february. but it's a little unclear. so you think about what the real competitive environment looks like and, you know, the operating system they have brought out where they can update the vehicle we're not going to see those cars for another two years >> how much does it matter and when do you think the model 3 will be available at the $35,000 price point that was the original plan? >> you know, it's -- this timing has been slipping. we would look at somewhere around late 3q, 4q, they're going to push to get it out but july 1 >> we're going to leave the conversation there we appreciate your time and perspective, colin thanks for calling in. >> my pleasure

a few stocks on the move this morning american express earned an adjusted $1.74 per share for the fourth quarter revenue also missed forecast the miss comes amid higher rates. netflix reporting 30 cents a share last night beating by 6 cents. however, revenue was slightly short of forecast putting some pressure on this stock as well after a huge recent rally. stock up more than 30% just this month. and jason helfstein will join us later to discuss the results when we return, the markets and your money what you need to know ahead of the opening bell fortnite is bigger competition than hbo they're throwing down the gauntlet we'll discuss. stay tuned you're watching "squawk box. or really you're watching fortnite and "bird box" on cnbc

right now. back in a moment ♪

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♪ it is day 28 of the government shutdown. eamon javers joins us this morning with more of where things stand and hopefully maybe where they're going. >> yeah. good morning, andrew we don't know where they're going, but the latest battle is over trade and tariffs this week we saw this report from "the wall street journal" yesterday which suggested that steven mnuchin the treasury secretary had proposed in internal strategy meetings, the idea of offering to lower the tariffs to the chinese in their negotiations later this month. the white house and treasury department put out statements seeming to put -- pour a little cold water on that here's what a senior administration official told me yesterday. the official said there's no talk of lifting those tariffs

now. he said the president has no interest in making decisions now. if he did it, that would put him in a weaker position he said the focus here is all on the liu he meeting on january 30th and 31st. that's the chinese vice minister who will be here in washington for negotiations with the u.s. side a treasury spokesperson also pouring a bit of cold water on the idea that anything is imminent any time soon saying neither secretary mnuchin or ambassador lighthizer have made any recommendations to anyone with respect to tariffs or other parts of the negotiation with the china. this is an ongoing process with the chinese that is nowhere near completion so what you see there is both the treasury department and the white house offering up denials here that anything is anywhere near being finalized but they're not necessarily denying in the nuance here that mnuchin may have suggested something along those lines in an internal meeting that was a very preliminary conversation.

so the question is where does all this leave the president senior administration official telling me yesterday that he just doesn't want to make any decisions any time soon. i asked the treasury secretary about this yesterday after the story broke, i saw him in the west wing he said he's not making statements on this at this time. >> all right eamon, thank you very much by the way, welcome back it's good to see you >> thanks. good to be back. >> we've missed you but congratulations on the new baby too. >> thank you she's beautiful. >> she is. let's get to the broader markets now. joining us is jim iuorio of tjm institutional services, also a credit card contributor. jim, i want to start with you and talk about the moves we saw yesterday after we heard this news about the potential for trade talk movement. the idea we might actually pull off some of the sanctions. how much of a factor was that and what else is happening >> well, okay. the takeaway hear is that it was relatively benign and modest news it wasn't that earth shattering. it's one guy in the

administration we know the administration is governed pretty much top heavy so the fact that the stock market was so quick to latch onto that and even when cold water was thrown onto it as eamon said, we still kept some of the gains but i think since the fed somewhat pivoted, the market's in a fairly good mood. and the market is quick to latch onto anything good i think that's indicative of the underlying strength of the market yesterday i talked about the 2600 level to me that's a big deal. we're back in the region from 2800 of 2600 i think that gives people confidence i think now this whole thing is done since the fed has pivoted, i'm relatively bullish stocks now. >> you agree with that >> jim and i talk abouted about this we've got three key sign posts that we were looking at in march. this trade deal with china on march 1st, next fomc meeting middle of march, then this

brexit situation end of the month. the fact that the fed realizes they had a communication problem and they've now expressed the fact that they are patient, data dependent and realize what's going on, we may, in fact, be done maybe there's only one more quarter point hike in the second half of next year. i think we may have seen the bottom at 2350 and this resistance level here is going to be very important. if we could get through that, we could be off to the races. >> the fed pivot is just one of the three sign posts we were watching we still don't have resolution on china trade we still don't have resolution on brexit. >> i think all three of them are important. we've got no control over brexit we're at the mercy of what may and the uk are doing the news on china, i think we're moving in the right direction here the reality is u.s. market was down 20% in the fourth quarter of last year the chinese market was down 30% or so over the last year our economy is slowing their economy is slowing

both nations are motivated in our view to get this done. and they've got this march 1st deadline now, whether or not they completely consummate this deal on march 1st, i don't know but we'll make progress on lowering the deficit and the intellectual property issues if you've got the fed done and progress on china, that tells us the move down to 2350 is probably the bottom. >> that all makes sense and sounds pretty good i can't help but look at the government shutdown nobody thought was going to be a big deal but everybody thought we had more adults in washington. what's going on? when does this become a problem for the markets? >> kevin hasselt has told us to take one tenth out of gdp every week or so right now it's not a big deal. but how long does this go on >> i don't want see any end in sight and any way that they kind of move to a -- >> you're right about there

being a lack of adults in the room the piece i'm going to write next week, if this drags on into next week, i think we've got to have a bigger immigration-related solution and use the wall as a bargaining chip we need to be talking about the dacas and dreamers and the chain migration lottery. >> stuff that's been out there for years. >> i think we've got an opportunity to throw all those things on the table and horse trade our way through a solution that's not going to happen today. >> that sounds pretty good the way you said that. >> my sense is over the next couple of weeks, that's going to be the solution. >> jim, if this panic period as you say is over, what's the ceiling at this point? even people in a bear market thought wow we're going have to bounce from here what is needed to prove this is more than a bounce >> i think to go over, let's say, 2800 in the s&p and i know that looks a little bit distant right now, we need a real life

solution to the china situation that the market believes now, larry kudlow was in chicago a couple weeks ago one thing he stressed is that he likened it to nancy reagan saying just say no to drugs. just say yes to something. when you put it in that prpt i, it seems it's a relatively low bar to go in the right direction. again, i want to stress this we need something the market is going to believe is a resolution whether or not it's really a long-term resolution is ancillary to the point i think that if we need that and we need to -- i don't think we need to get through the government shutdown thing. but then we need to settle the stock market above the 2800 as like a exclamation point to the story being fundamentally better than it was. then i think we head to that >> jim, thank you for joining us today. also phil orlando, good to see you. when we come back, les mo moonves fighting for his golden parachute. we'll talk about whether he'll win arbitration for a severance

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welcome back to "squawk box. les moonves challenging the cbs board's decision to withhold his severance package. joining us now is ceo of dezenhall resources. good morning to you. we were having this conversation with ed lee in the 6:00 hour he's with us as well is there a downside for les moonves to do this that's just not on the table any time soon. you know, one could make the argument that the more he keeps this around, the worst it is for his reputation but if somebody like me were whispering in his ear, i don't think reputation is what it's about. the question for cbs right now is what is less bad? is it less bad to give him a settlement no one thinks he's getting $120 million. if they give him the smaller

settlement and have a three-day story rather than continuing to fight this in which case it could be a many-months story which is worse >> and that's the question ed is here ed lee made the case effectively that settling this in any way if you're cbs from a pr standpoint is ultimately worse. i don't want to put words in your mouth >> exactly right >> but i just did. >> they have an out, right where the arbitrators can -- if they make the call, they can -- even if they lose, cbs says hey look we don't agree with this but it wasn't our call. they look like they're doing the right thing. >> is it worth the $90 million extra if you were going to give him the $30 million settlement >> i think ultimately -- i don't know what you think. i don't know how you would advise cbs here. if you should settle or wait it out. >> you know, cbs has access to facts that we don't sitting here so a lot of how you advise somebody is there is often a rock or a log that you kick over and you see all the maggots

running around they know what that looks like i sitting here do not. the problem that you can't separate out is they're operating in the me too environment. even if you don't give them that, they will say $30 million after all of these allegations, what kind of company is this and they are going to continue to be hammered that said, the question remains what's less bad? if they give him the $30 million which is a number i acknowledge i'm making up, you know, you probably have a shorter term story than if this continues to drag out over many months. so they just have to figure out what is the less awful option? >> but isn't the -- you know, in this sort of me too era we're in, it's not just one company, one person as more of these allegations come out not just at cbs but anywhere else, that this becomes the continuing part of the story and that cbs will always get tagged for settling with what

the public sees as someone who has harassed people within his employment for years and years >> well, that's exactly right. i mean, they're going to continue to be a company for many, many years they are going to continue to have to attract employees. they are going to continue to have shareholders. and they may very well have to take the position this is what our investigation found. zero tolerance you're not getting anything. and hope that what moonves' advisers are telling him is it's not very good for your future to continue fighting this that said, i want to come back to his point his future as a potential ceo is pretty much zero >> so from a leverage perspecti perspective, his gamble has to be to play this out as long as humanly possible and cbs at some point says there's a cost to this pain. but the question is is there a cost to the pain if you're cbs does the overhang of the suit

matter to anybody except les moonves? >> you can't lose sight of the fact $120 million is a lot of money. >> no, no. i'm saying the public relations -- the idea we're going to talk about les moonves. is there an economic cost to cbs because of that? >> i think there is a reputational cost. i don't think there is necessarily an economic cost what they have to calculate and a lot of corporations are worried about this there is an obsession with reputation because of the ongoing factors. >> the reputation of him has already happened everybody else -- they've tried to clean house all of that is done. my point is we've been talking about whether cbs merges with viacom if they verge with viacom, they start a new story. and the fact les moonves is suing them, does it matter >> i think that's the sort of thing -- les moonves and his reputation is shot but cbs, its corporate

reputation is still being debated, still being sorted out. if they settle, that hurts the reputation if they lose in arbitration, they could say we tried to do the right thing. >> eric wants to settle. >> what's your recommendation to cbs here >> again, the recommendation depends on facts they know that i don't. the general rule is if you can get off with a much lower amount of money and have a two-day story rather than a three-month story, that is the less bad option >> eric dezenhall, thank you, sir. appreciate it. >> you bet when we come back, finding a middle ground. as we enter day 28 of the government shutdown, is there light at the end of the tunnel congressman josh gottheimer will join us. let's look at the futures. dow indicated up about 130 points s&p up by 10, nasdaq up by 20. screening at her house.

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♪ we're watching three big stories this morning one, tesla cutting its full-time workforce by 7% as it tries to improve its profitability. two, walmart's pharmacies will remain in the cvs deal and three, netflix shares are

under pressure after missing estimates. coming up when we return, the government shutdown compromising business as well as federal investigations congressman josh gottheimer is going to be joining us after the break to discuss the latest. i want to show you the futures at this hour we are in the green. the dow up about 145 pntois, nasdaq 25 points, s&p up close to 12. back in a moment so grant met his insurance: you are caller number 12. which didn't quite cover the steinway. but what if he'd met pure insurance? owned by members. he'd have met: lisa, your member advocate. who'd introduce him to gustav: leave it to me. a temporary address, temporary ivory, and help him get tickets to the mozart festival. excuse me, grant likes beethoven! uh, the beethoven festival.

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all right. welcome back, everybody. we are in day 28 of the

government shutdown. the longest in u.s. history. but the problem solvers caucus says they see light at the end of the tunnel. joining us is senator josh gottheimer so people understand what the problem solvers caucus is, it's a group of 24 democrats and 24 republicans who are trying to find middle ground >> yes we get together every single week and look for place where is we can actually agree versus disagree there's plenty to disagree on. we've worked on everything from immigration to health care reform we've been seeing if there's anything we can do to get the government reopened. >> i'd like to think there's light at the end of the tunnel, but nothing i'm seeing indicates that >> i think we're all seeing the impact it's having on safety and security and the economy the positive side is i think,

you know, although yesterday's news is equally frustrating. but i'm hopeful. we met with the president this week he invited us to the white house to talk. and the biggest issue right now, neither sitting at the side of the table. >> is there an actual negotiation that could be had? is there something that says, yes, you're going to give some money but it's going to be used for these purposes or you're going to get something else like a daca deal or a dreamers deal what does a negotiation look like >> so when i've talked to -- i talked to a lot of folks we all do. democrats and republicans in both the house and senate. we met with senators earlier this week as well. i think there are -- and i believe there is a place to find common ground whether that's on tough borders with fixed imgralgs i think there's definitely an agreement there. we had one last year and couldn't get to the floor of the house of representatives to actually vote on it.

if we had, it would have passed. a deal that would have included dreamers and border security many of us believe we need tough borders, but we need to fix our immigration system i think there are enough people. you can't do it unless you open the government first it's very, very hard to have these discussions when you feel like you're in a box. >> are you behind -- when nancy pelosi said -- when president trump said to nancy pelosi if i let you open the government and come back 30 days later, can we have a conversation of the wall. she said no. are you behind that? do you agree with that >> the interpretations of what those comments were. >> if it was said that way, do you support that >> i support border security right? so, you know, every side is going to have different interpretations of what that means. for me i think there are many options on the table ang lot of us believe that to have tough borders you know, the problems we're talking past each other. if we actually sat down and had

that conversation, i know because we're having it every day among members of congress, there's a place to find common ground where you can have tough borders. and make sure we can get dreamers here and other groups that are obviously wondering every day if they're able to stay in the country. >> would you put a billion or two towards a wall >> i'd be open to anything in the negotiation. >> is any sort of a wall in your negotiation? >> i feel physical infrastructure could be part of it >> it sounds like you want to have that debate after the government is open >> that is the issue you can't have this real discussion and can't negotiate on tv. but what you can do in any negotiation, you have to sit at the table. but you got to get the government open first. because you can't really -- and by the way, republicans and democratic senators alike.

we can't run a government if every time shut it down if we don't agree. we can have disagreements. you don't open the government and put our safety and security and economy at risk. and you have the negotiation let's find a period of time to open up the government by the way, the bipartisan group of senators want the same thing. >> both passed to reopen >> the senate won't even consider the legislation that's why you have democrat and republican senators and mibs -- give us a chance to work and then we can have the conversation you're talking about. >> you know, we started this out saying that you see that there could be light at the end of the tunnel for this. but your meeting with the president was before nancy pelosi canceled the state of the union address and before president trump canceled her trip to afghanistan. it seems to me the shenanigans are just upping in terms of tit

for tat. >> it's going to be constantly back and forth it's going on for a month now. right? >> right but are you less hopeful than you were a couple of days ago? >> no. because i think the pressure is growing on both sides. i think the pressure -- when you have tsa workers not coming in, air traffic controllers telling us the skies might not be as safe as they should be, when you have law enforcement saying we're stopping investigations, when you've got small businesses in my district saying i can't get the permits. you've got the -- when you've got economists saying this is going to have a real impact. this morning i was reading on our economy. when you start having those pressures, i think both sides will feel it and are feeling it so that's why i'm hopeful that we get to the table. but we have to get to the table. and that's kind of the break we're looking for. >> but the pressure you're talking about, that has to build on senators who then pressure

mitch mcconnell to bring something to the floor >> what i heard from senators this week is the pressures, they realize that but they're beyond the day-to-day pressure. they recognize this is not the way to run the government. >> do you think there's going to be any pushback on democrats for this right now there's no pressure. >> i think there is already. >> you feel pressure on you? >> of course i mean, i feel pressure on -- >> you don't think that once the president said it was his shutdown and schumer has held firm on that, that right now you don't feel that you're more in the driver's seat. that's why no one's come to the table yet. >> i think both sides -- i talk to members on both sides they both feel like they're winning. you know, do i think we're in a better position? sure but the problem is the day-to-day gamesship that's the problem. i think we're all losing >> do you support nancy pelosi's move to delay the state of the union? >> i think again when i get back to i think all these things need

to actually stop and weapon need to go to the table. >> so you don't support that >> no, i -- i think it's a smart move to say we should get the government back open and delay things but to delay things until we get there is a fair thing. but that doesn't stop the fact i think we've got to actually talk to each other and stock -- i think the games played yesterday with the plane, all these are just -- they've got to stop. what we need to do is actually talk i think the american people are losing my constituents are losing that's why we need to open up the government to have this discussion. >> you said something a little bit about about how tsa agents are working without pay. air traffic controllers warning we aren't as safe in the skies do you think americans are at risk as a result of this >> i know what i'm hearing from the air traffic controllers. you know, i know what i'm hearing and that concerns me you know do i -- the reports i'm getting is everything is safe right now, but they're very concerned about

if this goes on, what could happen and i think that's what we should be all thinking about >> why are the democrats not making a true commission argument on this though? one thing i would suggest is currently -- nobody's feeling it in a big way it gets exponential early on ipos coming to market don't come to market. all of the people that were going to work on all of those things -- you could see the cascade effect and i think it does ramp like a hockey stick in a meaningful way but not for another month. >> i'm hearing from a lot of businesses in my district whether that's small business loans or businesses not able to open they are business a microbrewery are waiting on a permit from the federal government they need to open up.

can't open up. and there's case after case of folks calling to our office saying i've got a problem that i can't open up. i think it's already having that impact i think you're right that's one of the things we should be stressing. as you know, there's a lot of things and a lot of noise. this is why -- again, i really believe we've got to get to the table, have a period of time to open the government to work on this issue, to find that deal, and get to the table now and that's what i'm going to keep pushi ining for. >> congressman josh gottheimer, thank you for your time today. >> thank you for having me coming up, netflix stock soring up until today. what the company is saying about 2019 we'll be right back. next week, "squawk box" is live from the world economic forum in davos, switzerland. joe, becky, and andrew will be

speaking to the leaders of business and politics shaping our world. guests include brian moynihan of bank of america, steve schwarzman of blackstone, ray dalio of bridgewater associates, michael dell of dell technologies, james moore of morgan stanley starts right here on cnbc. and saying, "really?" so capital one is building something completely new. capital one cafes. inviting places with people here to help you, not sell you. and savings and checking accounts with no fees or minimums. because that's how it should be. you can open one from right here or anywhere in 5 minutes. seriously, 5 minutes... this is banking reimagined. what's in your wallet?

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welcome back, everybody. let's get over to dom chu. good morning >> happy friday, becky big three movers this morning. we're going to start with the guidance update. first of all, you've got tiffany moving a bit lower you can see it's at holiday sales. globally down about 1% sales at existing store locations down 2%. growth in both of those metrics were flat if you exclude the impact of currency it attributed that softness to among other things softer demand in the americas and europe which may have been influenced by recent market volatility tiffany does, though, expect to report snk for the full year also vf corp. shares as well it also raised its full year

outlook. then there's slumberger. that's down from $2.2 billion last year. if you do take a look at the strong performance out of the gate so far in this early part of 2019, energy, consumer discretionary outpacing the broader market they were hit hurs during the last of end year energy and retail, some of the outperformers. we'll see if those stick in the coming weeks >> they have rediscovered the cyclicals. thank you very much. meanwhile, netflix beating on sub viscriber growth but misg on revenue here's the call last night >> we've got all these ways to try to figure out which shows work best, which product features work best we're a learning organization. and it's the same cycle improve the service for our members. that gives us more money to

invest so it's the same things we've always been doing just at greater scale. >> for more reaction to the quarter, we turn to jason helfstein. he joins us here on set. good to see you. >> morning >> first of all, a modest move in the stock market. often netflix swings wildly after the numbers. what does that sell you? essentially membership growth, and where do for the rest of the season >> there were a number of parts this quarter number one, the company changed the way they are profit. they put that out there ten days ago. many of the onlyists had not updated their numbers. if you look at the analyst who is did update their numbers on profit, it was like a 2% miss in the u.s. it was still much bigger internationally. but separately the company is focused more on the paid subs

versus total i think when people were comparing last night, they were comparing some apples and oranges. we looked at it as an inline payoff quarter basically these gains in price will come the second half of next year. and they knew that, right? but we didn't know that. so you've got some noise people will be updating their models we walks away saying we can raise 3% for the year. we now think that this year, u.s. subs will be up 9% international. still very strong numbers. >> their guidance for subs is obviously baking in this price increase doesn't necessarily effect international? >> they're not talking about over -- obviously they don't want to raise the price everywhere at the same time. they have a way they think things through and the idea is at any point in time there may be an increase in some region.

this year it will be the u.s >> so they're -- we're talking about net pay. they're growing like wildfire. they're going to hit 150 by the end of this quarter. that's what they're estimating when do they get to 200? how quickly do they get there? >> the fourth quarter you had no slowdown in subs in the guidance, looks like they bake a little slowdown one or two points then assume a good thing continues to slow. we're looking at subs being in the end of period subs being at 175. so by the middle of this year across the 150 i mean, there is nothing that looks like a slowdown. the question is, you know, people worry about the economy they worry about -- i mean, tiffany's you just saw talking about international sales. it's a question for amazon this should still be countercyclical. right? it's a good deal

it's hard to think of a more economical way than net flix rather than going out. >> does the dynamic change when disney shows at the party. >> at&t's warner media, yeah >> a multitude of competitors they're going to try to jump into this pool. >> you know, netflix for a long time has been driven by original content. now the focus seems to be original feature films they want to have one, you know, hollywood show cause a month. if you say even if i pay for the preemup netflix, the highest plan, it's still way cheaper than going to the movies or paying for the itunes download that one month. that's what they're thinking in the u.s. separately they gave us a stat last night that was not backed up with a lot of data. but the 10% of screentime in the u.s. during the rest of the world,

it's larger. >> we're just -- is there a moment at which families say, you know, downturn, i'm not going to have hbo, showtime, hulu, and amazon >> this is my question for you i agree with that sort of framework which is do unction that price hike wasstrategic ahead of at&t launching their service? saying i'm going to hold onto this netflix and not buy this new thing from disney? >> clearly, like, they would say this was planned many months ago, quarters ago. and they're not just reacting to what's happening in the media. we do know, listen if you -- the service you spend the most time with, you're least likely to drop if you think some of the legacy

paid now you can literally go month to month and after the show you want to watch hbo, turn it on in the app store. then tell don't order, renew that's a dynamic that netflix has been dealing with for awhile people would go on, watch a whole bunch, turn it off come back two months later and they were paying to reacquire that subscriber. so they've been thinking through what the whole rest of the industry hasn't. saying we want to join that party. >> you made the case and the company consistently makes the case it's a good deal for consumers and they love it and spend a lot of time on it. investors want to know, when do we get ours? right now it's unclear when netflix can step off that treadmill of plowing revenue growth in. >> on an ebitda basis, they doubled last year. they're on track, i think, to

they basically said that will be stable once they get to the point where the majority of their content is self-produced, you do even back out when they pay somebody else to make the content, somebody else pays for all of the production and then they give them a check when the project is in the can when it's done. when they self-produce, they're putting cash up front. i think investors have gotten comfortable with this. when they start to charge the company more money, then you have that. >> if and when interest rates rise, it could hurt them >> who do you think they're competing against? they made the comment historically sleep was one of their big competitors. we talked about fortnite in the last hour. >> it's interesting, right >> when you look at what youtube is kicking off

youtube when we compare it, it's seeing staggering viewership you have a whole generation, younger people, who spend a huge amount of screen time. is it netflix versus youtube if you want to watch sports -- >> what about facebook are they competing with them >> people multitask. you can do both. >> whatever you do with your phone, that's what they're competing with yeah all right. jason, thanks for your time today. when we come back, a lot more on "squawk box. china, trade, the government shutdown former senator bob kerrey is here plus much more on tesla cutting its workforce to ramp up production as the company looks for ways to lower its costs. more on that in just a bit and what's happening to its stock today. >> also thanks to ed lee being

with us this morning >> a big two hours here. >> and one big hour ahead. take a look at futures as we head to a break. we're back in 90 seconds

t. rowe price experts go beyond the numbers to examine investment opportunities firsthand, like biotech. because your investments deserve the full story. t. rowe price invest with confidence. tesla slashing its workforce. ceo elon musk trying to cut costs as electric car competition ramps up the month-long shutdown on day 28 of the partial government

closure. progress is slim and there's no end in sight former senator bob kerrey will join us to talk solutions. and news from netflix. the giant reporting a mixed fourth quarter but revealing some audience data for the first time the final hour of "squawk box" begins right now ♪ live from the most powerful city in the world, new york, this is "squawk box. >> goorpg, everybodd morning, ey welcome back to "squawk box. i'm becky quick along with andrew ross sorkin and mike santoli. right now the dow futures have picked up to 140 points above fair value s&p futures up by ten, the nasdaq up by 23. we've already seen four days in a row of gains >> i think it's four straight days

the s&p now up 12% from the lows of the rally that started december 26th. you've recouped almost half of what was lost between the all time highs and december 24th >> you're still seeing green arrows we still have earnings coming in let's look at what's been happening in the treasury markets. yields a little higher today >> some stocks on the move this morning. eli lilly shares are lower after study results did not confirm the benefit of a sar kcoma treatment. the company said it sees a 17 cents per share impact to full year guidance. tiffany says it's down by 2% also expects for the full fiscal year to be toward the lower end of its prior guidance.

wall street consensus is currently at 477 stock fell about 3% earlier. since rebounded a little bit it is down less than 1% at the moment okay the government shutdown now clocking in at one month long. we want to go to eamon javers who is back in washington this morning with more. >> good morning. a couple things here in washington to bring you up to speed on the first is this question of china tariffs and the second is the shutdown let's start with the tariffs that was all the market was focused on here in washington yesterday. "the wall street journal" reporting the treasury secretary steven mnuchin had suggested in internal strategy sessions the idea of ratcheting back on tariffs to china to induce them to offer concessionsof their own. white house officials responding to that with denials that anything fundamental has been decided yet. a senior administration official told me yesterday there's no talk of lifting the tariffs now. that the president has no interest in making any decisions

now because that would put him in a weaker position the senior administration official saying the entire white house focus is on the meeting with liu he. he is the chinese vice premier he's expected to be in washington on january 30th and 31st for talks we the u.s. side. so no decisions, i'm told, until after that an the very earliest. there's still a month to go before the march 1st deadline. no indication that ratcheting back on tariffs is happening any time soon. meanwhile, we all focused on the government shutdown here 37 nancy pelosi had earlier encouraged the president to postpone the state of the union due to the shutdown. now the president saying you need to cancel your trip to afghanistan. sending a letter saying due to the shutdown, i'm sorry to

inform you that your trip has been postponed we will reschedule this when the shutdown is over the nuance to this was pelosi was scheduled to take a military aircraft and the president can simply order those not to take the speaker of the house on that trip to afghanistan. the pelosi side reacting with some frustration to this suggesting both sides here are being somewhat childish saying ultimately neither side should be taking goodies away from the other side and that both sides should come together and get to a deal here. no indication, though, that a deal on the government shutdown is in the offing here in washington any time soon >> thank you joining us right now, hopefully a man with a path on how to settle this former senator bob kerrey is here you have been watching all this. you know washington so very well spp there a path >> of course look the congress did its work. they passed all 13 appropriations bills

the republican congress did last year and the president now threatening to veto the bill unless he gets $5.7 billion for the wall he reached an agreement with the leaders and then he backed off of it. there's clearly -- democrats have supported construction of walls in the past. we've seen the numbers of immigration -- illegal immigration coming over. >> what does it take on both sides? without relitigating the past at this point >> how do you not relitigate the past but believing that ridiculous plum presumption aside, the problem here is the closer you get to november of 2020 and the members calculate am i going to lose because there's two kinds of people down there. it's the closer they get to the election and you're getting close to the election -- >> but what's going to be

remembered more? and this is a little bit i think part of the calculus that's going ton right now. both on the republican side and democratic side. which is to say is it the government shutdown and what it may or may not mean to the economy and everything else or is it going to be border security >> you can't -- well, next year it might be something different. you can't ignore the fact the president sets the budget. congress takes the budget and assign numbers and these things work their way through and you can't -- next year it might be the president saying -- >> let me turn this around i'm going to make you charles schumer for a day. what are you going to do >> that's a scary thing to do. i thought we were friends. >> i want to know, what are you going to do? >> who are you calling what are you saying? >> look. what would i do? i wouldn't do it necessarily as charles schumer. that's why i'm not the leader of the democrats in the senate. but there's a deal here. give him $3 billion for the wall or something like that and make an adjustment.

it's what they had before. the burden really is on the president. are you willing to reach an agreement that ann colter and rush limbaugh aren't going to like you can't get there -- >> you don't think there's any way to get to $5 billion >> i think you can the closer you get to november 2020, the political people inside of each one of these senate campaigns, i promise you mitch mcconnell does not want to be the minority leader in 2021 the closer you get to 2020, that's exactly what he's going to be -- >> we're not talking about a shutdown that's going to last 22 months >> he said this can last years no, no one of two things -- becky, one of two things has to happen. the president says i'll sign the bill or the republicans say we're going to vote to override. >> and they may be the more likely scenario. judd gregg says he thinks eventually these leaders will get enough pressure that's coming in saying that. >> no, no. it's not pressure. the closer they get to november 2020, you've got a half a dozen

republican senators who are going to say i'm going to lose and mitch mcconnell is going to say i don't want to be in the minority >> call me a cynic though. right now -- >> you're a cynic. >> -- there's money to be made for both sides i believe there's donations coming in on both sides from bases on the positions that are being taken right now. that there's almost -- we haven't got into a losing position for either side >> oh, i think we're in a losing position on both sides i don't think either one of these guys are -- i mean, the dustup between -- if the secret service thinks it's a threat, don't let the president go down there. you wonder at some point what's going to happen. the republicans and the majority in the senate are saying we will not move a bill because the president's going to veto it at some point they have to say we're going to move a bill and

vote to override your veto >> i think that's a what happens. i don't think he could sign anything short of three. >> do you think that speaker pelosi is there at $3 billion? is that on the table from the democrats? >> i don't know. i mean, do i look like i know what speaker pelosi thinks in the end the republicans in the senate are going to say to the president you want $5.7 billion, you can't get that. we can get $3.5 billion or something, whatever the number is and it's like 1% of the total budget my god we still got entitlements from this at some point they're looking at numbers saying we're going to lose the majority. we'll lose the majority and we're going to send you a bill if you veto it, you veto it. >> all right separate question. >> what does it mean when you

say joe is off >> double meaning. >> it's an ambiguous statement >> he's on his way we're all winding up at davos. we're all traveling at dimpbt times this weekend he's starting now. >> i have a question for the democratic party, the direction with which you think the party is going whether it be the popularity of everything, sort of -- >> that used to be barry diller's company, didn't it? >> iac >> close. >> what feels like a true move, perhaps even lurch to the left and whether you think that is a winning strategy >> i don't know. i saw some polling data yesterday that said the majority of americans support 70% income taxes. it's amazing what they've done to increase the popularity of a single bayer health care bill. given the opportunity to do a

buy in, it may be. the problem is people are struggling with the cost of health care. what's your alternative? and it's entirely possible the public themselves will say we want something that appears today to be pretty radical >> if, in fact, that were to be the case and they were to be in power, that would have a radical impact on investors, capital formation, all of it >> i think for me personally, the big thing the democrats cannot do is give up on national security >> if we appear to be weak, international security having to do with foreign policy if that's how we come out, we've got a problem. >> that get yous back to the wall iscussion >> look, personally the biggest problem with border security are the point of entries that's where the illegal drugs are coming in. we've got technology so if the democrats have to have

a rational response to security in general that the american people say is a good idea. >> do you have -- real quick before we let you go -- a view on where this whole china back and forth is going to land by march 1st? >> i don't know. i had an interesting op-ed that i agreed with. saying you have to recognize that and deal with it and probably deal with it on a multilateral basis we do have to take the lead in it i just don't think tariffs are the right idea >> all right former senator bob kerrey, nice to see you thank you. when we come back, stocks spiking last session on a report that the u.s. could, in fact, lift those on china to get trade deal when we get back, we'll see how china's economy is holding up under the current tariffs and how likely a deal really is.

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welcome back to "squawk box," everybody. we've been watching the futures this morning it's a brighter picture there. all morning we've been in the green. this morning it looks like right now the dow futures are indicated up by about 138 points s&p futures up by ten. and the nasdaq up by almost 25 the dow's latest spike came on reports the trump administration was considering lifting u.s. tariffs on chinese goods. a white house official later commented there are no plans to lift such tariffs. joining us now with the latest on the china standoff, derrick scissors aei resident scholar. good morning >> good morning. >> so your take initially anyway is that we have to be focused exactly on what the growth rate is in china, what the condition of the chinese economy is. i guess that has to inform how these might play out what is your top line take on

that >> well, sunday night our time, the chinese are going to announce their annual economic results for 2018 of course they'll say gdp for the year is outside of a narrow range. the number is wrong. people should not pay attention to it. gdp was very slow in the fourth quarter if you care about gdp. so we -- you know, the number one thing -- first thing we have to do is get more propaganda from china in this case it's going to be well off the mark. >> well, if you say that the numbers are always wrong and the country always keeps gdp in this range, is it significant that this time real growth is much lower than they state? what's the trajectory of the chinese economy and how is that playing into the trade negotiations >> well, the trajectory right now is for significant weakness. the fourth quarter is very weak. if you had to put a gdp growth number, i'd put it at about 2% that wasn't true three quarters

ago. and the question, you know, for u.s. trade negotiators are -- is this weakness due to trade or due to internal developments in china? i think the answer is internal developments in china. so you should understand chinese trade negotiators as feeling under pressure but not necessarily due to the trade war with the u.s >> so does that make chinese negotiators willing to tough it out? i mean, we had a discussion already this morning about the relative pain thresholds of the two countries and china might be digging in at least on some of those longer term structural issues the u.s. wants to press >> well, i -- you know, i'm on the record many times as saying the chinese aren't going to do what we want so it's not so much digging in it's just they're not even going to consider the structural changes we want. will they buy more u.s. goods? sure do they want u.s. tariffs not to rise or perhaps be rolled back absolutely so they're going to make some concessions lopg those lines they were never going to give us what we wanted, in my opinion.

they are under some pressure to boost sentiment. so if you just want a short-term deal, this isn't a bad time to make one if you want a long-term deal, we're dealing with the wrong government they're not interested in a long-term deal >> and isn't the united states also in a position, though, of wanting at least a short-term deal right now >> well, when you say the united states, i think the president definitely wants a short-term deal he flipped on that in november and has stuck to wanting a deal since then i don't think that's a good move for the united states. that's my own opinion. but i do think the trump administration wants a short-term deal. i think the limits are the president needs something he can sell he needs to say i got this it's going to happen you can trust me on that and if it doesn't happen, we'll go back to tariffs so you can't just make any deal. but the president does want one and i think will get one in about a month. >> wall street has been fixated on this issue since a year ago but perhaps the bigger issue concern ultimately for the markets would be a hard landing

in china would be further economic stress coming out of china. or an inability for the country to re-stimulate the economy there. setting aside even the short-term trade deal. is that a big risk right now >> i think it's a risk again, the weakness we've seen in china is really concentrated in the second half of last year. it's not a two-year decline. but the number i'm looking at if you want to get a gauge of risk, narrow money is what we use in transactions opposed to saving narrow money growth was 1.5% last year on chinese figures their money supply figures are usually reasonable that's really low. that's not compatible with 8%, 9% nominal gdp growth which is what they're going to report so when you look at people using money, you're not seeing a lot of economic activity behind that, the chinese are saying lending increased 13.5% so banks are pushing money out to firms and they're not using it that is a sign of, you know,

deflationary pressure, a very slow growth, and of stimulus that doesn't work. so it's a short-term we haven't seen this problem for a year we've seen it for four or five months that's where the risk is there could be -- we do have a signal of a hard landing in china that they'll not admit but a hard landing in 2019 >> and would some kind of refreshing of exports through a trade deal buy the country time or potentially pull them out of this >> well, i don't think exports matter that much to chinese growth anymore on a percentage basis. i think it's more a sentiment play in other words, one of the reasons growth is so low peopl don't want to use money as lack of confidence. one way to improve confidence is to say, all right. we've got a deal with the u.s., you don't have to worry about pressure on the currency or capital outflow. that's not the only problem in china. but it would be a sentiment boost. you might get people more interested in spending that

money that they're borrowing from banks >> all right derek scissors from aei, thank you for running through all that with us. coming up when we return, the big story of the morning tesla slashing its workforce we've got a full rundown of the memo from elon musk he sent to his employees. and analyst reaction that's all ahead stay tuned you're watching "squawk box" on cnbc

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look at you, mike santoli. welcome back to "squawk box. they had a nice angle of you coming from the outside there. take a quick look at futures right now as we set ourselves up for the market to open about an hour from now. if it sticks like this, we'll be up about 136 points on the dow nasdaq would open up 28 points higher s&p 500 would open 11 points higher when we come back, our latest alternative read on economic data that we are not getting because of the government shutdown. steve liesman is here. he'll tell us all about it also make sure to join us next week when we'll be in davos to interview the ceos of jpmorgan, goldman sachs, uber, and many more companies our coverage starts tuesday at 6:00 a.m. eastern time stay tuned you are watching "squawk box" on cnbc this is huntsville, alabama. aka, rocket city, usa.

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good morning, everybody. welcome back to "squawk box" here on cnbc we are live from the nasdaq market site in times square. among the stories that are front and center on this friday morning, we are watching shares of state street. the financial services firm announcing a workforce reduction and a move to try and control costs. it's going to be trimming 1500 employees in what it calls high cost locations it's also going to be cutting senior manager ranks by 15%. state street also reported quarterly profit of 168 a share. that was one cent above what had been expected. stock is up by 1 1/3%. cvs and walmart announcing a new deal to keep them in the benefit network. earlier this week cvs expected walmart to leave its network this morning cvs up by 2.4%. two economic reports are still ahead this morning december industrial production figures are out at 9:15 eastern

time and the latest consumer sentiment index will be released at 10:00 a.m. eastern. the shutdown putting the breaks on the flow steve liesman joins us with at d alt data >> looking at google trends search data in the absence of retail sales from the government due to the shutdown. can google search help us know what happened this christmas the answer yes to an extent. we used the topic search shopping that included a group related to a group of people looking to buy stuff. it shows some seasonal peaks in december that makes you happy about the data there saying all right it's cool. then you have a lull many the spring and we put a trend line in there using our sophisticated software

and it shows a nice but not stellar rise in fact, if you did the math on this, it's about 1% up peak in december economists wrote in 2009, quote, we are not claiming that google trends data helped predict the future rather we're claiming that google trends may help in predicting the present we can't even figure out what happened yesterday if that's true, it was not a good christmas for apparel makers however, it's well to remember that we can't know the extent of which searches tas plak on google >> that's the craziest chart i've seen. >> it spikes in the right time and places, but it does trend down we don't know if that means people are starting their search for apparel in google. now, economists at jpmorgan, they had the same idea we did. they wrote a paper on it look closely at google trends. here's what they said. alt data can provide timely

signals around true turning points unfortunately this can't replace the comprehensive nature of government data except when we don't have that data in which case it's all we got >> that's it maybe not blind, but it's foggy. >> but it's one way to know is it still there what troubles me the most is this could be a turning point. if there's a moment when you need the data, the market freaked out in whatever it was suggesting there was some economic turning point coming. and boy would i give a few bucks to know if the data is strong or not. i really want to know what happened this christmas. we've got these very mixed corporate reports. like we talked about yesterday in the absence of, you know, the government data, you have no bench mark for this corporate stuff. >> although sometimes i question whether the government data is really capturing as much as we need too >> oh, sure.

sure as i said many times, we have the best set of economic data invented to capture the economy in the 1950s right? it's a manufacturing set of data but like one quarterly survey for the service economy. and i think if the data folk who is i believe should be fully funded and we shouldn't be going through this i know they've done more on that >> thanks. we're here to talk more about the government's shutdown impact on the u.s. economy and the markets. joining us for that, mark zandi and joseph zitel just to steve's point, i could imagine if a year ago everyone is saying the economy is ripping and maybe we're going to overheat a government shutdown, maybe you would think that's going to cool us down. right now we really want to know how strong the economy is. how strong is it

>> it's okay it's wobbly at the start of the year i think growth has really throttled back gdp growth was closer to 4%. that was all juiced up by the defense tax cuts now we're down to probably around two if the shutdown drags on, we'll probably go below two. that's a key threshold 2% is the potential growth of the economy. that growth rate stays consistent with stable unemployment it's the difference of an economy with falling or stable unemployment and an economy with rising unemployment. once unemployment starts to rise, we're vulnerable to bad stuff happening. >> but mark, if we go below 2% and the government reopens and we have a little bit of a giveback, is that still a big issue? >> not by itself, no i mean, i think i and most economists are expecting that the president and the lawmakers will get it together in the next few weeks. reopen government.

and we continue down the road. the economy's fine we get a reasonablebly good year if this drags on to february and march, then growth rates are going to fall to a place where unemployment will rise once unemployment starts to rise even from a low level, the problem is that people know that they sense it. they become nervous. they pull back on their spending businesses see that. they pull back on their hiring you risk going from being in a virtuous economic cycle to a vicious one. of course that's the fodder for recession. >> yeah. so joe, when it comes to the markets, four weeks ago everyone was in a little bit of an intense panic about the possibility that recession risk was rising very fast it seems like we've come off that idea. the markets are up a lot in four weeks. the numbers haven't necessarily changed that much, but they've been stable enough so where do you think we are with regard to the markets and what it's pricing in for the economy and the fed this year? >> i think the markets continue to move higher i think equities and credit will out-perform. because as you mentioned, you know, you go back four weeks ago when the markets were at their

trough they were basically pricing in a greater than 60% chance of recession in 2019 or early 2020. and the data just didn't support it and what happened is a lot of people confused slowing growth rates with slowing growth. right? because everybody sort of knew that the economy was going to slow from, you know, close to 3% in 2018 to somewhere around 2.25% to 2.5% in 2019. and they knew that corporate profits were going to slow from plus 20% to plus 6% to 8% this year the big issue was people confused the slowing growth rate with slowing growth. both the economy and profits will continue to expand, but not at the same level. the market overreacted and i think the last few weeks have represented a bit of that swing, that sentiment swinging back to conditions just aren't that bad. >> that might be true that the people confuse that, but you could also say last year we had best growth of the cycle by many measures you had 24% earnings growth.

the market gave you nothing. what's slow growth going to give the market >> it's a good question. if you look at the whole year, market was down 4.4% if you go back over the last 60 years, there's only been 13 calendar years where the market's been negative for a full year. and 8 of those 13 years were in recession or just before recession. really it was a market overreacting in september when the markets peaked, they looked at the trade war, slowing growth, and said none of it matters end of december they looked at all those and said things are going to end very terribly the biggest story that people missed all throughout that pullback and they're still not talking about today is the fact that the 10-year treasury yield moved to about 2.7%. look how mortgage applications are responding and what that does for valuation it's bullish >> mark, we broke the story on monday that the administration had doubled its forecast for the effect of the shutdown to 0.1% a

week from every two weeks. without having a big, long, detailed discussion, "a," do you agree with that? and "b," ian shepherdson went a step further and said if this thing drags on, we could have negative growth in the first quart perp what's your thought on that? >> no. i think that's overly pessimistic. of course a lot depends on what suj assumptions you're making. i'm estimating if the drags on through march, it will shave half a point off on q1 and i'm assuming the administration is continuing to treea a triage things. irs tax refunds, food stamps, fema flood insurance so the housing market doesn't cave. they're doing everything they can to keep it together. i'm assuming they'll be willing and able to continue -- to be able to do that. so that's a key assumption i'm also assuming and this perhaps is a heroic assumption

that consumer confidence doesn't cave under the weight of all of this that, you know, so far investors have gotten very nervous obviously business people have gotten very nervous. if you look at the surveys of cfos they expect a recession this year but so far consumers have hung tough, their sentiment is high but i'm assuming that consumers can't hang tough, you know, through the end of march if those suassumptions are wron, then the forecast would be more right. >> yeah. all right. psychological is a hard thing to read right now guys, we have to leave it there. thanks to moody's analytics' mark zandi and to steve liesman. when we come back, netflix falling. when we come back, behind the veil of the streaming giant who's giving us a peek at some of its audience numbers. stay tuned alerts -- wouldn't you like one from the market

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welcome back to "squawk box" this morning we got a lot to talk about let's show you the futures right now. we're about 45 minutes away i from the open and will open higher about 141 higher on the ndow. breaking this morning, tesla cutting its full-time workforce to lower costs phil lebeau joins us now and phil, it's more than just that the market's kind of sorting through a lot this morning

you do see the stock under some pressure >> it's under pressure and a couple of things to keep in mind, becky. that even though elon musk in an e-mail to employees they expect to be profitable, it's going to be a lower profit than in the third quarter. here are the job cuts being outlined by tesla. as these go into effect here, the end goal is to lower their production costs they expect to cut 7% of the workforce. that works out to about 3100 jobs approximately the last number we had at the end of the third quarter is there are 45,000 employees at tesla. it comes out to about 3100 jobs. and again, this is all about lowering the costs for manufacturing the model 3. and in an e-mail that was sent to tesla employees late last night, elon musk outlined the rationale for authorizing these cuts saying tesla would need to make these cuts while increasing the model 3 production rate. and while making many engineering improvements in the coming months. keep in mind the model 3 as you

look at them ramping up sales, the model 3 average price right now is somewhere around $51,000. by the middle of this year, they plan to come out with a lower price variant of that vehicle. somewhere in that 35,000 to $40,000 range. and in order to bring down that price point, they have got to bring down their costs that's why when you take a look at shares of tesla, guys, this is the beginning of tesla going from being a niche manufacturer of vehicles to more of a mass manufacturer of vehicles and a big component of that is bringing down your production costs. remember, they also have a debt payment that's due here in the first quarter. i think it's about $980 million. if they get that price of tesla shares up to about $358, it's a convertible note they can then issue tesla shares otherwise they've got to come up with that money. >> thank you, phil we've been talking a lot about that convertible note. joining us now for street

reaction is jed dorsheimer do you think they're going to get to that $358 does that matter are they in a good cash position >> i think they're certainly in a better position than they were probably nine months ago when you and i were talking about this so i think the business is right sized quite a bit. clearly we're going to see pressure on the stock today. the copy/paste expectations of kind of q3 going through 2019 need to be reset but i don't think the debt will be a major challenge to restructure. >> you think the stock is going to be at $358 in february? >> i think it would be very difficult given the cuts that we're seeing here as well as the acknowledgment to get the sub34,000 model 3

which means they're going to need to restructure that >> if we're having this same conversation a year from now, where's the stock? >> so our price target's at $323 which is -- and we have -- >> a little bit lower than where we are today >> correct >> and in terms of your calculus on the why, if you will, it is what >> the why this is occurring >> no, no. why you're at $323 >> oh. we have expected this volatility so we expected the -- you know, our strategy is we're early days in who's going to win this war on electric vehicles and you've got a lot of new entrants coming in it's tough to pick the,er right now. our strategy has been to buy on weakness and dips below 200 >> jed, thank you for your perspective this morning appreciate you hopping on the line as this news is breaking this morning. >> no problem. another big stock story this

morning, netflix after the company finally gave investors a peak into its audience numbers julia boorstin has more. >> well, showing the massive reach of netflix around the world, reed hastings saying "bird box" will be viewed by 80 million households in its first four weeks on the platform projecting two new series will both be watched by 40 million householded in their first four weeks. take a listen. >> we've got all these ways to try to figure out which shows work best, which product features work best we're a learning organization. and it's the same virtuous cycle. we grow, that gives us more money to invest. so it's the same things we've always been doing just at greater scale. >> without giving specifics,

netflix indicated it will spend more money on content this year. they expect the cash burn will peak in 2019 then start to decline. as for licensed content, netflix says it isn't worried about the studios pulling back or about services launching this year and next >> we compete so broadly with all of these providers that any one provider entering only makes a difference on the margin again, that's why we don't get focused on any one competitor and think our best way is to win more time by having the best experiences all the things we do and that's helped us a lot >> hastings saying he's not worried about disney plus the way he thinks about competition is taking market share from other forms of entertainment including video game fortnite and youtube. >> all right thank you very much. let's bring in rich greenfield he's analyst at btig who thinks

he can basically do this with his eyes closed. roll the promo get out of there. >> comes to play "bird box" in the house. >> let's do it >> all right what do you think? we should have made you leave that on the whole thing. >> no, come on >> and answer the questions with it on. >> we've got newspapers on the walls. we're okay >> netflix have pulled back today. but that's after a huge run-up leading into this. what did you think of the call >> i think what was amazing is when you look at the fact this company now is at 60 million u.s. subscribers there's a great global story but in the u.s. alone, they had their best net add year since 2013 when the company was less than half the size of subscribers. it defies all logic. after getting to 30 million subscribers. this company is accelerating at 60 million subscribers it sort of defies logic. i think the core driver of this, consumers love the content

and i think what you like and what i like may be different andrew's favorite show might be different. mike's show might be different but there's so much content and the price value equation is just so compelling. >> it's not just me. it's the content i kids, they'rl watching different things and this thing is smart enough to figure out what to pitch to each of us. >> correct you're getting more and more engaged. for $13, my charter set top box costs more per month than netflix costs. >> i think everybody having their own individual profile, so it is pitching you and only what you want to see on all of those things, how do others catch it or can they? >> the internet is i think all of you have known for a long time, internet seems to be winner takes most. there will be lots of opportunities for others you'll see amazon has good programming, i love mrs. maisel, i think it is fabulous if you look at hulu, killing eve crushed it at the golden globes. you're seeing lots of other players here there is one dominant player, in

netflix, and they're getting bigger and bigger and the price increase is not about driving more cash to the bottom line free cash flow will be just as negative this year that price increase is for one reason. >> more content. >> give you more of what you like. >> this has been great for customers. it is great for content creators when is it -- i think really mike's question to some degree, when does it ultimately benefit the shareholders >> the shareholder made a lot of money in this stock. >> in terms of money coming back, in terms of profit. >> look, you know there are industries, let's take comcast, the owner of this entity we're sitting in, comcast ran at negative free cash flow for well over a decade, right cable industry had very high capital expenditures, had negative -- >> physical. >> but i'm saying they had negative free cash flow for a long time and yet you were willing to mackke a bet on comcs and it worked out well for the roberts family and shareholders. >> they were laying down the train tracks. >> and they had exclusivity in

certain geographies. >> this is exclusivity of content. the only play you'ce you're goio get "bird box. you can't get "stranger things" anywhere other than signing up for netflix. there is something you can't get elsewhere. it is why the company made a big smi shift from licensing other people's content, but there is a major shift over last 24 months to move into original production again, people seem to like it because they're watching more and more of it. >> how long or short are you then the other efforts meaning what we're going to be seeing from this warner media package, what disney is going to show up with, if people are so addicted to netflix and if the number is going up comcast is going to do it for free. >> free for cable subscribers and satellite subscribers. i think the reality is people want to stream the core takeaway you're seeing from netflix, from the growth of roku, people love streaming. they want to watch on demand they don't want to get home at 8:00 and have it tune into a show

look at the numbers on this show "you." a lifetime show. you probably remember it or don't remember it, it was on lifetime last year, co-production with warner bros., 600,000 people watched an episode. netflix said last night, this is global versus u.s., but 40 million people watched at least one episode of this show on netflix in just the first four weeks. so i think it is showing you, people don't want to watch entertainment programming in a linear fashion and they want to watch it on demand. >> this is what the internet is doing to every industry. amazon, what you want, when you want it, how. >> there is room for multiple players. there is going to be an opportunity. can anybody be as big as netflix? that's challengchallenging it comes down to disney. disney has incredible content. they come out with avengers endgame. they put that in the theaters and then dvd and itunes and then disney plus at some point later on if they were willing to really go for it and really this innovators dilemma and put all of their content on to disney plus right away, they would be hugely successful.

they're just -- it is this classic innovators dilemma where they're scared. >> getting people to come to you, but would the profit match what they do now >> nothing will ever be as good as the legacy cable business is for profitability. think about it 85 million people paying for espn and the vast majority don't watch it, they spend $9 a month for espn, there will never be a business as good as that. >> netflix, though, it is amazing, i love looking at a chart of subscriber growth and it is a perfect linear thing going up to the right and you look at the stock chart, right it has gone from 220 to 420, back down to 220 and now it is up in the mid-3s what is the market right now believe and how fast can netflix get? >> you have to have a strong stomach to own this stock. you are betting out, luyou're looking out three, four years to get comfortable. you have to believe and so every little data point, every little sentiment change, whether it is related to competition, whether it is related to their own

international rollout, all of that matters. >> is there anything that would make you change your bullish take on netflix? is there -- >> subscriber growth changing from accelerating, so sitting at "squawk box" a year ago, forecasting 21 million subscribers globally for netflix for 2018 they just reported yesterday, 31 was the number so they keep meaningfully exceeding expectations if you saw the reverse of that, continually missing expectations in the growth slowing, that would be a problem especially if they couldn't raise pricing. right now they're accelerating and raising price and the other piece is competition if i saw disney turn around or comcast turn around and start collapsing windows and really start going day and day, not putting new entertainment programming on nbc and abc and putting it on to their streaming services, that would definitely make you change your view. >> if you saw them buy into sports in a big way -- >> netflix. >> netflix, would that be a positive in your view?

>> they don't have the cash to do it. so it is just technically from a financial standpoint not possible today they don't have a balance sheet. they're levered enough going into entertainment programming worldwide where they can't the question becomes they're going -- they talked about 2020 as the beginning of the free cash flow inflexion point. what is the next big thing after they conquer -- assuming they conquer international and watching hours a day, the only next big area to spend money on in 2024, 2025, you could imagine could be sports. today i would be panicked if they did it in 2024, 2025, we'll see. could be interesting at that point. >> rich, thank you very much >> thank you. >> rich green field from btig. >> "squawk box" returns in a moment. next week, "squawk box" is live from the world economic forum in davos, switzerland. joe, becky and andrew will be speaking to the leaders of business and politics shaping our world.

guests include brian moynihan, of bank of america, steve swartzman of blackstone, ray delio, michael dell of dell technologies, james gorman of morgan stanley, and many more. "squawk box," live from davos, starts tuesday at 6:00 a.m. eastern time right here on cnbc. it's absolute confidence in 30,000 precision parts. or it isn't. it's inspected by mercedes-benz factory-trained technicians. or it isn't. it's backed by an unlimited mileage warranty, or it isn't. for those who never settle, it's either mercedes-benz certified pre-owned, or it isn't. the mercedes-benz certified pre-owned sales event. now through february 28th. only at your authorized mercedes-benz dealer.

want to wish everybody a good weekend and happy martin luther king day.

we will not be here on monday. markets are closed and so is cnbc great having you here today. great to see you we will see you, though, tuesday, from the world economic forum in davos, switzerland. lots of big guests coming up big shows, tuesday, wednesday and thursday from the world economic forum in davos next week have a great weekend we'll see you next week. ♪ deal or no deal. ringing in the opening bell at the nyse good friday morning. welcome to "squawk on the street." i'm carl quintanilla with david faber, sara eisen and cramer is off today. futures up more than 100, looking for a fourth day and a fourth straight week of gains. the longest stretch since august for the dow. netflix and amex big stories tesla cutting jobs, day 28 of the shutdown green arrows in asia overnight industrial production in just about 15 minutes we