s&p, nasdaq, in the green as well looks like we'll get a pretty decent day. >> keep getting a late morning sell-off >> make sure you join us next week the gang will be back. "squawk on the street" is next great weekend. ♪ ♪ tell me what you got show me when you got ♪ ♪ show me when you got >> good friday morning welcome to "squawk on the street." i'm carl quintanilla with jim cramer and david faber at the new york stock exchange. stocks trying to end the week on an upnote, but it is going to be close, we're watching intel, starbucks, western digital, dr horton and shutdown negotiations and roger stone's arrest and indictment we will not get durables or new home sales today due to the

shutdown we begin with the shutdown rally, growing optimism about a possible end to the d.c. impasse, helping boost stocks. futures point to a higher open, but an onslaught of earnings still on deck. >> speaking of earnings, intel plunging, starbucks jumping. predicting slower growth in china demand both ceos join us this morning. >> the banks on notice ceos from some of the biggest u.s. banks expected to testify before the house financial services committee in march. their first such appearance since the crisis first up, we begin with two big earnings stories, intel down, the dow component issuing weaker than expected guidance for the current quarter and posting a revenue miss for q4 saying a slowdown in china resulted in sluggish demand for its data center chips intel's interim ceo will join us in about two hours starbucks up after posting

better than expected quarterly earnings and revenue global comps also above consensus, up 4% helped by growth in the u.s. and china. and live interview with kevin johnson later on this hour total sales in china up 18 but transactions down two, they're making this up on price. >> are we ever going to have to ask kevin about that i liked a lot about the quarter. a lot of it was i like america you can tell a good story. but i did -- i said, i sent him an e-mail, listen, this stock, your stock is down 1.25. u.s. is very good. china is good, but not good in the way i would like to see. the fact is a lot of people thought there might be a short fall and he did what he said he was going to do. in this environment, doing what you said you were going to do if your stock is down going in --

>> when china comps were up good, you're okay with that. >> no. that was my question to him. coming on, i was going to say, why are we content with plus one when we get -- >> you still can ask it. >> now he knows, he watches the show won't be like the surprise factor. >> take the fifth. think like -- >> who read the indictment >> we all read the indictment. >> he talks about pan tangali. i don't think our guests will be like that. i think kevin has to answer the question of why are we content with transactions down two we have to ask him about lutkin, 600 scores up in seven months. if you're walking around with a starbucks coffee cup, does the communist party like that? >> 600 stores in seven months. he calls the market highly promotional and disruptive in china. >> these guys are just like starbucks, but they're coming in

20 to 30% below. so i want to know, if i order a cramer in china, will be it $4.50 instead of $5.25 >> it might be it might be. that might be preferable. >> i just think we had a lot of interesting stuff in terms of what he's saying about -- i don't want to give too much away >> don't give it away. >> i think he's using ai and i think he's using ai. he's from juniper, not a coffee guy. he's not like my max suit out there. he's a tech guy. there is a lot of good tech in the call he doesn't lecture you he's not about, you know, the greatness of mankind >> can't wait to talk to him 30 minutes or so intel, of course, the other big story, we'll talk to bob swan after some comments about china that are not good, jim >> no.

and, bob, bob is on "mad money" not that long ago when we were out in san francisco, couple of weeks ago, and told a pretty good story this was not a good story. just said, look, short of our expectations, result of a weakening demand the quarter was kind of over when i spoke to him. lower overall growth in china, that is a constant theme we're getting. cloud service providers absorbing capacity, talks about indigestion that they don't need as many chips. i read this, i said to myself, lisa sue, ceo of amd, the world is your oyster the shortages continue she has the edge on, this is amd, the edge eon intel andy grove, swan is not paranoid enough

he's interim ceo. >> interim not there much longer. >> not fair to him he's interim. >> he doesn't want the top job. >> never wants it. i want to be kind to him he doesn't want to be ceo. >> he doesn't. and what i am hearing is they are going to have a new ceo announced within a month they had hoped to potentially get one announced prior to the earnings that wasn't the case this is taking quite some time and investors may be impatient with it. despite what has been generally positive reviews from mr. swan. >> he's doing a good job >> i didn't like this quarter. data centric -- didn't deliver and amd is going to -- this absence, in the interim, amd is making great strides i would prefer earning amd at 20 than intel at 46. >> after getting the good news that is zylinks and intel and western digital last night, is it more mixed than we thought? >> it is i want to make two points.

lamb research, eight go buy back 20% of the company 5g is on fire. in china, western digital, people misinterpret western digital. i used to own 4% as a hedge fund manager. i owned -- i know the company for a long time. they did not say there is a buy. it is false. what they said is they can keep paying the dividend, things are okay and they didn't miss that much i say this because i don't want to put words in western digital's mouth they're an honest company. we're doing okay those who are shorting the company, betting as it was a piece of research earlier this week, they can't pay the dividend, those people have been -- they got it wrong. let's not put it on western digital here, versus lamb, which did say the bottom is here lamb is a very good book -- they know the book. >> just going through the notes on intel from the analysts who follow it. you're talking about lamb and western dith a lot of them are defending

here they want to defend the company and the stock at -- >> 12 times earnings and when you get a new ceo, you're going to say, wow, i have my chance, because the data center but that will be -- >> do we believe it will be the snapback in the second half next year this year, that they're pointing to, given the lack of snapback in the first quarter >> i think that one of things that bob said, they will catch up by the second half of the shortages. i do believe that they have had some good signups at mobile, very good css. and one -- look, it is intel it sells at the lowest multiple of any company in the -- nvidia at 18 times earnings they have a crypto problem intel is a cheap stock that is executed not as well as it should, but, then again, this guy is the cfo and running the company. enough already this is not fair

tim archer is a kick butt toughest guy, the reputation tim archer is belichick. he's belichick, okay intel is the opposite. they get rid of ryan chrisanich, and then they say, hey, you know, cfo, maybe do this ebay, you know this and that no, it is intel. it is andy grove it is titans it is gordon moore what are you nodding about i'm giving you a heritage. there is a heritage -- >> or there say heritage if you prefer that as to a heritage. >> are you looking to avoid chip companies that are highly levered to the card? for example, as opposed to 5g. >> texas instruments sells at a

ridiculously low multiple. broadcom has a nice mix. the ca acquisition seems to be working for them. >> the question is are they going to continue on the software road now. >> raised their multiple >> this is not punting i'm not punting. there are etfs that are so powerful that it doesn't matterment ymatter me if it is in the etf, it goes higher the smh was on fire. all these guys who advertise, we don't want single stock risk good, you get to own the real crummy ones with the good ones that's what happened yesterday. >> the other big news, jim already referenced in part, out of washington, that's roger stone, former adviser to the president, arrested by the fbi and indicted by a federal grand

jury aymeamon javers has the latest s the white house is now responding. >> reporter: sarah huckabee sanders on cnn offering the first reaction from the administration to this news of roger stone's arrest early this morning in ft. lauderdale, florida. sarah sanders saying this has nothing to do with the president or the white house she went on to say she was a member of the campaign there was no collusion or wrongdoing by the president. says sarah sanders this morning. we'll expect to see more statements throughout the day from the president's legal team. and those close to roger stone for his defense. but here's what we know so far in terms of the allegations in this indictment. there is one count of obstruction. five counts of false statements. one count of witness tampering we know roger stone will appear in a federal court in ft. lauderdale, florida, at 11:00 eastern time this morning. important to note here, carl, that none of these charges that

are being levied against roger stone relate to the underlying conduct of stone's communications back and forth allegedly with wikileaks, which released those stolen e-mails. but in the indictment we get a lot more additional detail about stone's communications back and forth. including this the indictment saying, after the july 22nd, 2016 release of stolen dnc e-mails by organization one, a senior trump campaign official was directed to contact stone about any additional releases and what other damaging information organization one, that is wikileaks, had regarding the clinton campaign soon there after told the trump campaign about potential future releases of damaging material by wikileaks. so that indicates that there was both before and after the wikileaks document dump of dnc stolen e-mails, communications back and forth between roger stone and the trump campaign allegedly according to the government now, what has the president said

about this take a look at this tweet from president trump back in december about roger stone quoting roger stone saying, i will never testify against trump. this statement was recently made by roger stone essentially stating he will not be forced by a rogue and out of control prosecutor to make up lies and stories about president trump. nice to know that some people still have guts. so the president there aperring to cheer on roger stone's decision not to testify against him, to robert mueller and the special counsel team sometimes those decisions, though, look different from the inside of a jail cell. we'll wait and see what roger stone has to say for himself later on today and what the statements are from his lawyers. remember, an indictment is simply an allegation by government prosecutors he'll have the opportunity to explain his side of all of this throughout the day and in court proceedings. >> great reporting let me ask you something, in the indictment, there is a section where -- i'll read it to you, maybe you can tell me who person

two is he says, multiple occasions including one about april -- december 1, 2007, stone told person two that person two should do a frank pan tangali in order to avoid contradicting the testimony. >> they don't name anybody they're not charging i believe this is the intermediary that stone was talking to, also talking to wikileaks. within the past couple of minutes, cnbc.com is reporting that steve bannon is the high ranking trump official ain roger stone's indictment who asked about the wikileaks releases we'll wait and see more detail throughout the course of the day here because obviously as you say, references to the

godfather, intimidating texts and e-mails, this is a very detailed heavy indictment, a lot of new information put on the table for us to sort of analyze and figure out where it all goes. >> we'll have our eyes on ft. lauderdale at 11:00 a.m. this morning. thank you very much. market doesn't mind too much about it because futures are up. when we come back, we'll talk to starbucks kevin johnson on his company's better than expected earnings, strategy regarding china and a lot more dow needs 153 points for a fifth week up and it just might get there. more "squawk on the street" in a more "squawk on the street" in a minutes. they seem to be the very foundation of your typical bank. capital one is anything but typical. that's why we designed capital one cafes. you can get savings and checking accounts with no fees or minimums. and one of america's best savings rates. to top it off, you can open one from anywhere in 5 minutes. this isn't a typical bank.

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that's how xfinity makes tv... simple. easy. awesome. to the bond pits rick santelli at the cme in chicago. good morning, rick. >> good morning, carl. we see that the preopening stock market looks pretty strong today. ten year note yields, two-day chart, coming back today, we gave it up yesterday we continue to shadow box with the stock market direction yields highly correlated. but compressing, meaning when stocks are down, we give up a smaller amount when are stocks up, we gain a smaller amount remember, close to 280 is the

benchmark. if you're looking for significant resistance in treasuries, and their yields, and the ranges seem to be compressing. the yield curve doesn't seem to have any significant biases as of late. look at a two-day of bunds you can see we're hovering under 20 basis points. open the chart up to 20 years. i really wonder, what is mario draghi's encore performance? should global slowing occur? they're already awfully close to zero they dabbled with zero it looks look a rubik's cube sort of problem to try to solve. and if we switch gears to foreign exchange, see the dollar index gave up all of yesterday, one of the reasons is that the euro had such a drop and it is coming back a little bit as you see on the november chart, we did spike down to levels we haven't seen since the end of november. but it has bounced back. it is a big chunk of the dollar index. if you look at it from a brexit

perspecti perspective. europe's economy, uncertainty over brexit, the euro versus the pound, the euro yesterday dropped to levels we haven't seen since april and it's bounced a bit, but smaller against the u.s. greenback carl, jim, david, back to you. >> rick, thank you very much rick santelli. we'll get cramer's mad dash as we count down to the opening bell stay tuned for our interview with starbucks' kevin johnson. stocks up more than 4% premarket. going to flirt close to some 52 week highs today more "squawk on the street" back in a minute. ♪ (vo) here's a question. was it necessary to create a luxury car more teched out than silicon valley? with a cockpit fit for aspaceship. hang on. radar that senses things the human eye can't. busted. and the ability to make a thousand decisions before you even make one. was all this, really necessary?

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last day of the week to trade stocks get started in about seven minutes or so. colgate report earnings, procter & gamble, tell us about a comparison between the two. >> this is a pentangeli free zone, okay just so we know. "godfather 2" reference, thank you, stone this story will make we are wmeo buy procter. latin american sales decreased 9. europe decreased 2.5 asia pacific decreased 6.5, africa, decreased 5% almost the exact opposite at procter. disappointing quarter, colgate doesn't really say disappointing, but forecast is very downbeat.

if you take your cue and sell procter for colgate, which you would have done in the old days because colgate was -- for years and years and years, you're doing it wrong i think that colgate is on the -- though the stock is very, very low but buy procter. they're kicking butt and taking names. they're doing incredible interviews with david. the lead director, very good team at procter. >> all right we'll keep an eye -- >> buy procter, sell colgate >> we got an opening bell about 5 1/2 minutes away we'll get you there right after this

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♪ ♪ each day, brings new possibilities. that's why you need a partner dedicated to helping your company reach its goals. u.s. bank -- the power of possible. you're watching cnbc's "squawk on the street" live from the financial capital of the world. opening bell in two and a half minutes on a friday. stocks are trying to finish up for the fifth straight week. we have talked about the stone indictment today intel, starbucks, haven't

mentioned this journal piece about the fed. potentially deciding whether to end the balance sheet rolloff sooner than expected >> there is a tightening for you. a hidden tightening. i think they should have done it while rates were lower give you some inflexion of the curve, let's understand each other. that's a tightening. that is kind of de facto but the bulls have been hoping is that powell had said, look, let's watch what happens we had the vast unemployment claims in 40 years, the fed is really deeply concerned about employment and i think they think honestly i know there are people in our network who disagree with us, they want employment to go up. this will do it for them they want it to happen they'll get it. >> still have 1.2 trillion of mortgage securities. they're not going to go back to the level they had prior to the crisis it is always going to be higher. and, again, this idea is that they're going to potentially

stop sooner than had been anticipated. maybe go to a shorter duration, though, of what they had. >> speaking of tim sloan, tonight, for mad money the ceo of wells fargo and i want to ask him about this frankly higher rates just so people understand are bad for business even though furloughed workers could get, what, easy to get loans for furloughed workers what was that yesterday, you heard that in. >> yes, the comments >> yes, like dennis the menace. >> they'll give you a loan. >> don't worry you have to pay interest on it. >> you have to pay interest on it, i think people understand -- rates will go up and, again, people, even within our own network who defend what the fed is doing i like the fact that our economy is building ahead of steam and more jobs are being created. a lot of people in the hedge fund business who say this must be a down year

this is ruining the thesis when they start winning. >> we'll see schumer did say we're talking. jpmorgan cut their q1 number to 175. >> i know. >> much to be determined let's get the s&p here at the big board, the australian console general celebrating australia day, the national holiday is tomorrow. that's why we played men at work cognizant celebrating the 25th anniversary. all right. so what's going to lead us about the chips or -- >> i think, look, i'll tell you, the key to this market is the stock that we talk a lot about, but we have not been able to say anything positive about in a long time. which is apple apple should not be up the note is very damming nothing good about cell phones i went through every

semiconductor company, not a single good thing. if you see that stock reverse and go down, you'll know it is business as usual. the second one is facebook there was a spirited defense, did you read the spirited defense of facebook in the journal. >> the facts about facebook in the journal, op-ed by zuckerberg. >> doesn't mention the stone walling, that didn't come up at all. >> he talks about transparency, allowing small businesses to advertise and raise where it was not possible before. >> i i fefelt like i should wria check, the spirit he's giving you. >> we have the story out of the new york times saying that he is going to plan to integrate all the messaging services >> that was very positive. that's why the stock is moving up you see a lot of stocks. >> that would be a pretty significant undertaking. >> my god, wouldn't it in. >> yeah, not that i have a clue.

>> do you think systems sold -- what do you think about that >> thousands of employees are having to reconfigure the service, it would essentially allow everything to be encrypted. >> there is the short squeeze going on there huge short squeeze in western digital. gigantic, huge short squeeze in micron, short skweedz squeezes n all over the place people have to understand, the stocks are not going up because they're saying things are better they're going up because they're not saying things are worse or not saying anything at all this is lam driving it lam is the company with the best -- the best look, the best order for everything tim archer, i studied this man, he came out and said, look, things are better, everyone knows that tim archer, maybe one of the most important people in the valley >> now i do. >> yeah. you should get to know him he crushed it at novelis,

crushed it. >> i won't get to know him because you know him >> tim archer, do your assignment, get your job done. belichick. >> we're taking a look at shares of good old pg&e the utility in california that, well, the stock of which has just been typically going down yesterday, boy, did it go up why? they were not found liable for the tubs fire, one of the 2017 fires. now, the company had maintained it didn't think it had any liability, probably had not expected it would be found liable for that. but certainly shareholders responding positively to the idea that a potential liability at least seemed to have been extinguished although there are still plaintiff who claim negligence because they didn't turn the power off during the fire.

none of this is changing the decision by pg&e to file bankruptcy on tuesday of next week that is according to everybody familiar with the situation, the plan of the company. now, does this lack of potential liability impact the perspective of those who want to own the stock because of that equity recovery value certainly it does. as one possibility some say $50 billion enterprise value, 22 billioned in de ein d. that's a simple way to try and do it. still talking about 2018 fires having liability and in excess of $30 billion and the plan is still to file, barring something unforeseen and highly unlikely on the 29th of this month but that didn't stop it from a 75% gain yesterday truly astonishing to wash. >> this was the 2017

this was the one that got them to suspend the preferred this is not campfire. >> no. this was 17. they did not believe that they necessarily had -- they were arguing there was no liability, not a result of their failure of the equipment or setting trees on fire. unlike 18, which appears to be the case. >> great stuff great reporting. >> we'll be watching but it also doesn't mean there won't be equity value left, which many shareholders do believe. so we'll be keeping an eye 16 million customers can't say that enough, in california. >> incredible to see amazing reporting. bob pisani yesterday on the floor, which the stocks were frozen we have a treat here shares of starbucks around this morning, as they should, the coffee giant reporting better than expected first quarter earnings there was strong u.s. comps. continued growth in china. i would say we need to ask more about it so joining us now, first on cnbc, kevin johnson. how have you been? >> i'm well, happy new year,

guys haven't seen you in a while. >> too long. it has been too long last time at the rose stream we'll do rose stream in milan. this was the first quarter upside on strongest comps since june of 2017 the comeback is here how have you done it >> well, you know, clearly, jim, the streamline activities that we embarked on six quarters ago are paying off it is allowing us to have more focus and discipline against our three strategic priorities we're focused on accelerating our growth in the u.s. and china, that's working. we're leveraging the global coffee alliance with nestle to expand the reach of starbucks globally and we're continuing to focus on shareholder value, creation and we have returned a significant amount of cash to shareholders over the past two years. this last quarter, another demonstration that our strategy is working >> well, kevin, one thing you didn't get to talk enough about on the call, i was surprised, the uber delivery.

miami test is doing great. it is a big win for you. is it moving comp stores sales in miami and will it move store sales when you roll it out across the nation >> what we're doing, jim, we're enabling a new channel for customers to engage with starbucks. starbucks delivers and as you know, in china, we partnered with alibaba and their delivery company to enable it in china. it is going very well in china in the u.s., we partnered with uber eats. we started in miami. we saw good customer demand. and incrementality we rolled it out in san francisco. we have a plan now to bring it to a significant number of stars across the u.s. here over the next 90 days so we're optimistic that delivery is going to be another one of those things that will boost our traffic and continue to give customers an opportunity to engage with starbucks in a new way. >> kevin, we got to ask you this, we talked about it, you watch the show, you're already

prepped for it 2% decline in comp transactional in china 1% growth versus what we used to do eight you seemed almost content with that, kevin. i was surprised at that. given the fact that's a deceleration and given the fact i would have thought this quarter, it would have done better please tell us why you're okay with that desell and what you'll do to fix it. >> first of all, jim, the number one metric we look at in china is total transaction growth. and those total transactions come from a combination of new stores that we build, as well as same store comp. and if you look at the fact that we opened -- we increased the number of new stores by -- increased the number of stores in china by 18% this quarter, and so if you put all of that together, we had transaction growth double digit transaction growth in china. and china is a market that is all about first mover advantage. about building new stores and expanding our presence

in fact, we're now approaching 3700 stores in china we entered ten new cities last quarter. we're in 158 cities in china the addressable market and the growth opportunity in china is significant. the priority we have is really expanding our footprint, while we continue to enhance the experience in our stores, drive beverage innovation and new channels for customers to engage with starbucks like starbucks delivers so we are playing the long game in china >> yeah, kevin, thanks it is david. those numbers, i think people should stop for a moment 3700 stores, 158 cities. that said, given its importance overall to your long game, and the growth of the company, when you talk about the market being highly promotional and disruptive, give us the sense as to what that means and whether that is just going to be the landscape for the long game

you're talking about. >> yeah, so context, whenever you have a large addressable market, around coffee in china, you'll have a lot of competitors come in. some of those competitors are going to try to differentiate in different ways so they're going to have to use price and be highly promotional in what they do. for starbucks, we differentiate on the in store experience, on the quality of our coffee, and we differentiate on the digital reach that we have through our partnership with alibaba the one thing that the competition is certainly doing in china is it is expanding the addressable market for coffee. it is introducing the chinese consumer who is primarily a tea drinking culture to coffee and so that's helpful for the growth and the addressable market for starbucks, we're confident, we'll play our game, we know how to create the kind of experience and leverage the brand strength that we have in china to create -- to create that unique differentiated opportunity for

us to engage in customers. so i think if you look at the overall landscape of who is growing the most share of transactions and engagement with the customer, i think starbucks comes out on top >> kevin, the guys, we discussed the uber eats partnership earlier in the week. and i got to thinking, you know, delivery of coffee is so much about speed and having a cup of coffee that is hot are there structural challenges in delivering coffee in an uber? >> well, you know, this is why we partnered with uber eats. dara and the uber team put a lot of emphasis on uber eats and delivery to the point where we work together to integrate our software so that our mobile app can integrate directly into their software to dispatch and their app interfaces directly into our store operations so we made it seamless for partners and our stores to get those orders and then embraced some of the best practices candidly that were created in

starbucks china when we launched delivery so when we prepare a beverage for delivery, we prepare it as a hot ever temperature than we would normally in the store so that when that beverage is delivered and handed to the customer, ideally it is at the same temperature that it would have been when they picked it up in our stores. we prioritized the customer experience around delivery and fully integrated the operational processes from uber eats into our starbucks stores and that's part of the key to making this a great, great customer experience. >> kevin, i love you, but i would have to wait 19 minutes for my coffee in china i don't care if you put that thing -- you bake it i just do not think after 19 minutes that thing is going to come out piping hot. >> well, jim, we're happy to host you in our stores we have 3700 in china. we're approaching 30,000 around the world. you're welcome anytime >> fair enough kevin, you're from tech.

you're from juniper. you were a great tech guy. i detected artificial intelligence about you trying to figure out what people want. it is the first time i heard it. it is almost as if you finally figured out, you cracked the code about what people want, whether it be nitro, the more expensive drinks are you using machine learning and artificial intelligence to figure out what the customers want for first time at starbucks? >> jim, we have dramatically stepped up the focus on customer insight and we are using technology to help inform us of what customers want, what they need, and what they think of starbucks. that informed our entire holiday plan this year and we had a fantastic holiday. and so we are driving much more use of analytics, artificial intelligence, personalization, and technology to help us be more informed and more connected to our customers and that is making us a better company >> kevin, you know, i like to bring something to the party when i get together with you i have been working some of

these companies like canopy growth you know that is a cannabis company. in this country we will be drinking cannabis coffee and cannabis tea i would rather be able to have a triple venti whatever at your place than i would the other guy. you know that other guys, your competitors, will be having cannabis tea and coffee. will you be in the states that it is legal, washington, california, oregon can i get a cannabis triple venti? >> well, you know, jim, you can't get it today we're well aware of what is happening around cbd, thc and all the trends in the industry we're staying focused on the beverage innovation that we're driving and right now it is all about nitro. we talked yesterday about how we're deploying nitro and nitro cold brew across our entire portfolio of company operated stores but, you know, we will always stay on top of consumer trends and new ideas and so always appreciate your suggestions.

>> well i love the nitro, really makes you feel good. but the cannabis, if you did a little -- a nice way to get down from the one i finished with the nitro. why not sample it in california, kevin? why not take it by storm >> well, jim, i think there is a lot of issues that we have to think through on that. and right now that's not on the road map but we are mindful of the trends, we're mindful of how i'll say cbd oils and cbd is viewed as a health and well nnes and so we're going to keep watching this. but right now, not on the road map. >> you need to go work for starbucks. >> i'm ready to don a green apron in a flash you get benefits like no other company. these guys hire veterans like there is no tomorrow and they deserve it

if everybody else did this, that's what they do. what do you say? >> we still have kevin with us or -- >> no, he's right there. >> i'm not hearing what -- whether we got time. i'm curious about this line of questioning that jim opened up about ai and what you're learning or how you're doing it. can you give us more sense as to how that works or what that meant on the ground during the christmas season for, for example, in terms of your ability to fulfill customers and a more effective way >> well, i'll frame it sort of around customer insights coming out of last year's holiday, we used a number of tools and research to give us customer insights on what customers really appreciated and loved about starbucks at the holiday. and that informed everything from the design of our cups to the -- utilizing the re-useable red cup promotion that we launched, you know we saw gift card sales grow 4%

year on year on the quarter. that was a function of customer insight and research that we did. so this holiday, in many ways, informed by that insight that's an example of what we are doing. we're using all kinds of data, customer focus groups and things to help us be more informed, more front footed on the trends and the things that customers really want to see from starbucks. >> okay. well, kevin what the customers may want to see in china is a cup that is not an american cup, because people are worried about tension in the same way that xaomi takes share from apple can you hold the cup up? does it say starbucks on it? >> this is -- we're in the roastery we have a starbucks reserve right here. >> kevin, this lutkin, 600 stores in seven months, coming in 20 to 30% under you, why wouldn't i want to go to lutkin

over starbucks >> well, jim, first of all, you know, when you look at a competitor like lutkin, they talk about the number of units they're growing. sometimes a unit would look perhaps like a starbucks store, but most of the times they look like a point of presence so, you know, you need to visit these for yourself that said, you know, having a lot of points of presentatice, 0 stores, global coffee alliance with nestle coming in, with food services and cpg, the reason you want to come to starbucks is because we create that unique customer experience. we serve the world's finest arabica coffee our partners will hand craft beverage to your perfection. we create an experience like no other in the industry. and we're going to continue to stay true to the experience we create in our stores and how we extend that experience with thedigital mobile relationship. the china digital partnership with alibaba is making great

progress we have the virtual starbucks store integrated into the alibaba properties now reaching 600 million chinese who use alibaba on a daily basis and so, you know, we think the strategy that we're on is the right one, it is allowing us to continue to grow transactions in the double digits. and we're going to continue to play the long game with the strategy that made starbucks what it is today in china. >> thank you so much, kevin, for coming on, for playing we have tough questions and good questions. this is the best quarter for a couple of years. great job. that's kevin johnson, president and ceo of starbucks >> when we come back, intel's interim ceo bob swan on his company's results and the guidance weighing on that stock and the challenges facing the chip sector. dow is up 190. this would be enough to put together five straight weeks of gains, something the dow has not done since july, august of last year year back in a minute the design thinking, the digital engineering,

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upside when they report on jan 31, and this pose is a sense of where we are, so to speak, that this stock has become not cheap. overweight in the 2,100 price target you'll see amazon up on the jpmorgan research, but this is the beginning of what i expect to be many analysts saying you've got to buy -- you've got to buy amazon. so be aware. >> going to be a busy week next week. >> david, don't sleep next week. you'll be on some nitro and you'll be fine. >> i'm going to watch you. i need to sleep. >> don't take the inica latte. >> i don't know what you're talking about. >> no cannabis recommendations, at least for now, not today? >> not right now. >> tim sloan tonight. >> from wells fargo, you know. senator warren has been somewhat critical, maxine waters, they may come up. senator warren is not a really

big tim sloan fan. >> we didn't even mention warren's wealth tax that's been floated. 2% on 50 million plus. >> would be working just entirely for the government, 50 mill, that's not enough for you? >> didn't ken griffey just buy a $238 million apartment that he's not going to live in >> he might sublet it. >> jim, we'll see you tonight at 6:00 p.m., "mad money. dow is up is 88 on this friday morning. back in a moment so, servicenow put your workflows in the cloud, huh?

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♪ good friday morning. welcome to "squawk on the street." i'm carl quintanilla with morgan brennan and david faber here at post nine of the new york stock exchange sara eisen is traveling back from the world economic forum in davos, switzerland we'll see her here on market dow up 221 most components in the green as we continue to be watching for signs on a compromise on the shutdown by the way, the faa, multiple reports now that the ground stop

at laguardia, and they are blaming in fact air traffic controlstaff shortages. >> that is a tough airport to see something like that happen at in particular well, our road map starts with intel slumps, starbucks jumps. we break down this morning's big movers, earnings movers, and hear from starbucks ceo. >> 800,000 federal workers missing a second paycheck amend an ipo gets put on ice. >> hedge funds, well, they continue to take a lot of hits coming off what's the worst year they have seen since the financial crisis is there a bigger shakeout around the corner, and would a smaller industry be better for the managers we'll discuss that. >> big news out of washington. roger stone, longtime political adviser to the president has been arrested, seven counts including witness tampering and obstruction of justice stocks shrugging it off. markets rall they go friday morning, aiming for their fifth straight week of gains with the s&p once again out of so-called correction territory as

investors prep for next week man, apple, mcdonald's, facebook, the fed, china trade talks. of course, it will be the busiest week of earnings joining us this morning is david zervos, chief vest strategist. thanks for joining us, guys. >> thank you. >> before we get to next week what do you make of relatively sluggish action this week. is this the tape trying to absorb the rally that we've had this year? >> i mean, it's been a pretty incredible rally, up 6% in the first three and change weeks of the year we've actually taken all the losses from last year and now, you know, we've netted those off and we're positive from the beginning of 2018. i think, you know, the bear narrative is sort of morphing a little here, carl, and i wonder how it's all going to evolve we're now talking much more about slowdowns, not about inflation. the fed rate hikes that everybody thought were going to

calm and lower multiples, that's not really the story anymore, so it seems like the bears have kind of done a little swish rtco and they want to talk to the economy and slowdowns, rather than talk pentagon inflation and fed raising rates and everybody getting scared about the higher interest rates raising multiples and last year everyone was talking about global coordinated tightening the ecb would be paring back balance sheets, maybe even japan, so now it's a very different story line i think the bears have to get their act together and we'll see if they can do that over the course of the next few months. my guess is no that story line is going to be difficult to tell. >> and brian, speaking of the fed meeting next week, have you this report in "the wall street journal" that fed officials could be weighing an earlier than expected end to the bond portfolio runoff how likely do you think that is, and what does that mean for the markets and all the volatility we've seen >> well, yeah, i think that's certainly behind some of the rally today. the market seems to love the

newly dovish fed or at least not as hawkish as first billed in december if they are talking about it and, you know, perhaps leaking things into the press, there's a chance that they might announce something next week. jay powell, this will be his first january press conference i wonder if he regrets the decision to do a press conference at every single meeting given how much is on his plate and how little economic data they have with given that the commerce department is not publishing anything, but if he does decide to come out and express at least a sentiment that they are considering ending the wind down in the balance sheet, that again along with taking the rate hike off the table, third rate hike off the table in the december meeting will be a sign that the fed is not looking to do as much tightening or as much normalization as it was just six months ago >> david, what do you think of the dollar this year especially given all of the macro uncertainties in place, and based on that thesis how should investors be putting their money to work on a global basis? >> you know, i'm still reasonably constructive on the dollar the fed's move to this pause which, you know, i think the

market begged them for and they sort of understood what was going on with all the monetary policy tightening that's been put in the pipeline, but we still have a lot of tightening we've got 250 basis points that we've done over the last three years. we've got qt of 500 billion and possibly 600 billion more of qt coming this year hopefully they wane that down a little bit but as milton freedman said economic policy operates with gains and lags and that pipeline of tightening will come into play in 2019 it's going to be a drag on global aggregate demand, but it's going to be supportive for the dollar because that's how tightening works so i don't want to get too excited about a big dollar bear trade even though some people want to do that given that the fed is pausing and maybe quitting qt and maybe even talking rate cuts by the end of the year i think that there's a lot of dollar demand and a lot of guys borrowed a lot of dollars over the last ten years got to figure out how to pay them back, and they will need those dollars and it's not easy

to get them. >> brian, we're just about a fifth through earnings season. today jpmorgan said we've heard from enough big macro companies and certainly the banks to provide investors some comfort about what q4 looks like do you agree or is it still too early? >> we think this is a solid to good earnings season probably not as spectacular as some of the other ones we've gotten from 2018 we're really looking for what 2019 is going to have in store this is a pretty abrupt slowdown in earnings growth considering this tax cut is sort of washing out in the math, and we're looking into slowdown from around 20% to 5% or 6% this year, and we think that 2020 estimates are also much too high, so if multiples can't move up on things like we've been talking about, like the fed being perhaps a bit more dovish, maybe better news from emerging market economies, especially china, it's going to be very hard for earnings to provide that oomph to get us a lot higher than we are today because we do think 5%, 6% in 2019 is

going to be the story. >> david to that point next week, just an on slaught of earnings from the biggest industrials and manufacturers in the world. we've seen what those results in previous earnings cycles have done to the market they have been some of the hardest hit in the last couple of months. do you agree with that thesis that enough is out there in terms of earnings this season to paint the picture? >> i don't think so. i think the market's probably got to prepare for a fair amount of slowing in aggregate demand i really do believe 2019 is going to be different than '18 in a pretty big way. as this tightening works its way through the market, as we see what the fed policy has done to the global sort of dollar usage in terms of debt that a lot of these companies have put on, it's just going to be trickier to make that money and put those numbers up, so i'm much more -- much more nervous about that demand side. that said, i'm pretty excited that the fed has pivoted to a

pause, that they look to be understanding how much tightening they have put in, and i think they can, if they are very careful here, engineer somewhat of a soft landing, but we are going to see that soft part of the soft landing i think come into play in the first half of this year, and it's going to be difficult for a lot of people to decide whether it's going to be too much to tip the scales