♪ >> announcer: live from new york where business never sleeps, this is "squawk box. ♪ good morning, welcome to "squawk box" here on cnbc we're live at the times square melissa lee. becky and andrew are off today our guest host this hour, ed lee, cnbc contributor and take a check at futures to see how bier setting up for what can be a very busy trading week looks like we'll open lower by 14, s&p 500, down 129 on the dow and down 42 on the nasdaq, probably the busiest week for earnings season this week. we also have fomc meeting wednesday with the press conference as well as jobs report on friday taking a check on the action overnight in asia, we've got also very big week on the asian front, that ahead of the china trade talks that are taking place here in the united states later this week.

little change in asia across the board. the nikkei finishing lower by .6% over in europe, very busy week for europe as well in terms of a lot of economic data, gdp numbers for the eurozone coming out this week as well as key votes on brexit. we have slight declines, fractional declines across the board with the dax down by quarter of a percent and quick check on treasury yields at this hour and we are seeing the ten-year yield right now yielding at 2.757%. and very big week on the earnings front a quarter of the s&p 500 company who nearly half of the dow all expected to report results over the next five days caterpillar will report later this morning and that's expected around 7:30 a.m. eastern time. we'll break down that report with an analyst and tomorrow we get results from pfizer and apple. then just gets quite busy with microsoft, boeing, mcdonald's, facebook, amazon and many, many more over the course of the week. >> wow, those are great companies. aren't they? >> they are. all in one spot.

>> who is who of american business makes you proud when you do get back from -- >> real read on the u.s. economy. >> coming back from socialism land to see -- >> aka davos. >> you survived, jerry that's good. >> i feel like i take a name remember what happened to patty hurst? she basically turned into -- >> she became -- yeah. >> i think if we can just get universal basic income not just for everyone here but globally, 8,000 a year is good bazos should pay for it. >> 7% tax. >> as soon as you make 10 million and $1, you're taxed at that 1 dollar is taxed at 7%, right? >> uber cnbc contributor ed lee, you are here. >> only when you're here >> you contribute a lot. contributor doesn't really do it for what you do for this network, ed. >> hey, i appreciate it. >> we'll be dominated by two

other events this week i pre-read that wall street will be watching closely. does anyone not know what the fed is thinking at this point? they have another two-day meeting. why are they such -- >> they have to have a press conference. >> why are they such a big part of our life constantly god another week, another two-day meeting. he's going to talk any way, it starts again tomorrow yap, yap, yap. grown pal going to micro analyze exactly what the central bank is doing. if you just leave us alone and let our economy do what it needs -- any way it's going to wrap up on wednesday with a decision and a news conference where jay powell has another chance to screw up the language the fed is widely expected to leave interest rates alone this time around. also on wednesday, chinese vice premier lu is set to visit washington with talks with robert lighthizer. it's like a march 1st date, right? oh, we have plenty of time

you know, february only has how many days, ed? >> it's the shortest month. >> and it's not a leap year. >> it isn't. so it's -- >> four weeks. >> do you know how many months have 28 days >> i have a feeling you're going to tell me that. >> real news you can use at this time. >> they all do. >> that's where he was going. >> yeah. there we go. >> trick question. trick question they all do. >> i'm always going to fall for it one way or the other. >> it's early. yeah >> you've done >> i need more materials >> that just bounces right off me i'm rubber that bounces right off me. you can't hurt me. okay >> former starbucks ceo howard schultz telling "60 minutes" he is considering a run for the white house. >> i am seriously thinking of running for president. i will run as a centrist

independent, outside of the two-party system we're living at a most fragile time not only the fact that this president is not qualified to be the president, but the fact that both parties are consistently not doing what's necessary on behalf of the american people and are engaged every single day in revenge politics. >> schultz is kick off a book tour this week where his memoir from the ground up and andrew will be talking to howard tomorrow morning on "squawk box" for an interview. >> i'm glad you're here, ed. >> run it by me. >> my biggest problem is with the 21 1/2 trillion that's the most horrific example of what's going on and it's not just the republicans fault. >> not just. >> not just the republican's fault, 21 1/2 trillion, democrats share some of the blame, too, for that -- >> it's both sides. >> it's both sides

but for him to -- that'sjust not -- think of 21 1/2 trillion, that's not kind of how i think, but he's a lifelong democrat he's well intentioned. i'm a big backer of his run here i am big. why? why are you laughing >> it's completely earnest, joe. >> it is can you say ross perot if you split take kamala, the front-runner if you read everything, have you been reading everything >> the first two minutes of this race maybe it's really early in the race. >> you looking for someone better you're dampening expectations. >> what's noteworthy with the business guys coming in, if it's a schultz, bloomburg was out there sort of thinking about it, the business guys present themselves as the centrist say up front, you know what -- >> the other democratic bromens said about howard schultz, they're petrified.

>> not far left enough, right? >> they're going to run a far left candidate you know who still is polls better than kamala, bernie polls better than anybody. biden waiting in the wings >> you like biden. secretly i can feel it. >> oh, boy, i like them all. hard for me to pick, really. it's hard for me to. >> pick which one you like the least? >> let's lawmakers are now tasked with trying to reach a deal about a border wall with less than three weeks before the february 15th deadline she is bemused by the discussion wow, that's a nice shot, elon. >> it's all for the cameras, joe. all for the cameras. but the reality is that this compromise that lawmakers in the white house have reached is very fragile. president trump gave a down beat interview and went live last night and president trump said that the odds of a new deal happening in the next three weeks areless than 50/50

he doupts he would accept less than 5.7 billion dollars for the border security and called the issue for citizenship for dreamers a separate subject for a separate time. under this temporary deal to reopen the government, congress has until february 15th to come up with a solution and on wednesday, a conference committee with rank and file lawmakers from both parties and both chambers is expected to start those negotiations but trump told "the wall street journal" that another shutdown is, quote, certainly an option if those lawmakers can't reach an agreement he also once again vowed to declare a national emergency to build the wall if congress does not fund it. now, the shutdown has been politically damaging for the president. new nbc "wall street journal" poll shows half of americans blame him compared to 37% who blame congressional democrats. guys, it is also clear that the country is feeling very demoralized after what has been the longest shutdown in history. 63% now say the country is on the wrong track. that is up from 56% last month

just before the shutdown started. guys, no one wants to see this happen again in another three weeks. >> weird i guess it's not the economy, stupid and i don't mean you but -- that's the old expression, ylan. >> yes, i'm familiar with it. >> i guess it's not the economy. obviously because that 63% say wrong. obviously the unemployment rate is not good. >> part of the government coming back into -- back to work is we'll start to get some of the numbers where we can find out exactly what the impact of the shutdown on the economy has been i think that maybe people felt and clearly the 800,000 workers who weren't getting a paycheck felt that the economy wasn't looking so great because, you know, they weren't able to spend money they didn't know what their finances were going to look like. so, you know, the economy didn't look too great for them. >> how we see what's actually happening are two different things it can be self fulfilling. i saw a poll about nancy pelosi's negatives went higher she had a rough -- did you see

that anyone anyone bueller, no? ignore that. >> i think that a lot of people felt like pelosi was the winner in this fight, but i did think it was notable that nbc's poll showed that president trump's approval ratings did not change. one of the few that showed there wasn't a change there. >> i saw a list of everyone's negatives and her's had made the largest move higher. i know that people are saying trump. i hear the news from the media i hear that. i don't know i don't think anyone looked that great. i mean, we'll see -- you saw some rank and file democrats start to move a little bit too they know that they voted for much bigger numbers than 5 billion in the past. and the american people aren't stupid so, if neither side that was expressing crocodile tears for the 800,000, either side could have ended at any time and they've, you know, people

know that. people know that one side was keeping -- any win from trump and he wants the wall. so it was purely a battle that was clear to most people so we'll see how it finally plays out. >> joe, you saw democrats sort of have different opinions about what should be included in any type of border security package. we know that democrats were planning to offer some type of big number with infrastructure at ports of entry, with technology, et cetera before this temporary deal came up. i think what democrats were successful in doing was holding the line and saying, we can have that debate over border security, we can talk about physical barrier versus a wall versus steel slat et cetera but we won't do it until the government is reopened and that ended up being a winning argument for them. >> $6 billion exceeds the amount that the president asked for so at this point, we've already paid a price for this whole debate. >> it's weird that -- i don't

know is there a caravan building again, right i keep hearing about that. it's weird they seem to not -- they got their own issues obviously need asylum and things how is it building at the same time they're not on -- >> the timing of that caravan is really, really interesting, isn't it >> yeah. how does that work, ed >> i wonder where that's coming from. >> do you think that there's -- some think it's not an organic movement, do you think do you think someone is involved i don't know what you're saying. timing is weird. >> i think it's one thing to know if and when things are happening versus just saying it out of your mouth. >> you're not really sure there is a caravan coming. >> i'm waiting for the news reports. >> okay. all right. maybe it's fake news that there's. i heard it was swelling 12,000 i get my news the same way you do from rachel any way, go ahead. >> thank you, ylan in d.c. social network transformation facebook has a new plan for its

messaging services will it pay off for users and investors? that's next. look at the premarket winners and losers in the dow. ♪

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♪ facebook overhauling its messaging services the social media giant to integrate whatsapp, instagram and facebook messenger so it's underlying tech infrastructure is banded togeth eed together ao "the new york times. ed lee joins us. how do we think of this? are they hiving off legacy facebook and saying this is everything else? is there a business purpose? or is it part of the whole privacy issue? >> that's a great question i think it's really complicated in terms of just the mechanics of what this is. so to start, to be clear, it's really a merging of the back end, the technology infrastructure the front end will look the same to you you can still contact your people the same way. the key difference where it ultimately starts to bleed into each other is there's a chance

the way they're designing it as a whatsapp user, i can message you on facebook if you don't have whatsapp or even instagram. so i think that's where the liability is but also the opportunity i think it's a move really against apple. right? apple's biggest mote so to speak, social media thing they haven't tapped into is imessage. if you have iphone, you have imessage, it circuits around every circuit out there. social media is largely messaging any way, the it's a way for facebook to own that side of it instead of these three different fractured groups so i think that's the motivation the business motivation behind it in terms of how it affects consumers, how it affects everyday use, that will be a liability. my 14-year-old is a big instagram user she knows it's owned by facebook she doesn't like that fact but at the same time it was always sort of a separate thing. >> i feel like two years ago this would have been looked upon

by investors as a positive thing. now it will be a risk. if congressional leaders were ever looking at facebook to sort of crack down on their reign over data and consumer data, this is going to be the time if you say, you know what, we're going to consolidate all these operations by the way whatsapp users, now you may have to give more information about your own personal data in order to have an account right now it's minimal data. >> right now it's minimal data. >> many users like that. >> they like that. mark zuckerberg had a big op-ed in the journal last week effectively defending what facebook already does that he claims that, you know what, there's a lot of transparency and openness and that users have control over their data. from what we've seen from reporting from my colleagues and elsewhere, it's not entirely not the case there's a lot of data that leaks out that is shared that you

aren't aware of and sometimes facebook isn't aware of. i don't think that users think you're trying to do something. you haven't contariined the beat >> in the op-ed begins with the fundamental tension between zuckerberg's view of what facebook does and what users want which is more relevant ads. he kept leading with that and the idea everyone else says i'm not sure if the cost of relevant ads is worth it. >> so, it's interesting what i actually shut off targeting on my facebook just some months ago to see how it works. every single time i'm doing it, there's this thing you will get less relevant ads. the point they're making, you're still going to see ads some people mistake -- >> you might as well get good ads. >> if you're going to get good ads, might as well get something that's relevant for you. i'm all for that that matches what i'm looking for. but that's less of the issue on, well, you have all my data it leaks out in the other ways

that could be really bad i don't know could be bad for democracy from how a lot of the analysts are showing us so i think that's the lack of information, the lack of understanding of how that works is a bigger issue. again, then going back to the point about the three different messaging apps there was a strict division between them because there was strict identities. right? and so put it in sort of terms in the current political cry mat it's like crossing borders, right joe? >> all the founders have left. the writing was on the wall when it came to this consolidation because everybody who is associated with these original platforms that were acquired have gone. >> i think that was a big part of when you're building something there's an identity to it it's not just a piece of technology a lot of users social media in particular that is how they identify themselves. right? if there's less difference between and the other, that becomes less. >> a year and a half ago the idea that you would make these

messaging apps fungible and monetize. >> and collect the data and leverage the data. >> i think leveraging data is a big aspect to it but i do think the fundamental motivation is to really take on apple. that was the thing that was less -- made less clear in a lot of the analysis posts what this is because mark zuckerberg still sees apple as a huge threat in this way. >> but they want to go against apple and going against apple what they say about privacy because apple has been stall wart so they want to go head to head with apple, i don't know that's a real gloves off kind of match. >> two of the biggest companies, two of the most innovative companies in silicon valley gong at it would be a big thing the other thing to point out about the op-ed, zuckerberg wanted to make it clear, it's coming that's the other key take away he's basically saying to congress, not just to congress but to the eu, i know there's

all this discussion. i know there are new systems in place. this is how we do things now we do it well. don't change how we're currently operating. >> we figured it out we're regulating ourselves, right? don't mess with that, please whether that message will end, whether that finds purchase ultimately congress will be in a bind before they get to it he'll probably come back to that messaging at some point. >> when you talk about motes, that's always such a positive thing for a company. what's the difference between a mote and a wall for you? why do you hate walls? >> mote is water. >> yeah. >> they both accomplish the sort of the same? democrats would prefer a mote? >> you know what, if you want to call the democrats and see if the mote is better for them? >> love motes, hates walls many. coming up, update on the

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welcome back to "squawk box. we're continuing to follow the latest developments out of venezuela. white house national security adviser john bolton warning against violence in that country saying any such action would trigger a response from the united states. his comments come after secretary of state mike pompeo told the u.n. security council over the weekend that the world must, in his words, pick sides in the power struggle in venezuela. check on the price of crude right now which was quite a bit weaker earlier when i first got up it's now almost 1.7% down 91 crepts, wti at 52.78 it is costing you a little more to fill up your car these days the average price of gas inching up 2 krents over the past two weeks to 2.33 a gallon after gas fell to 64 cents over the previous 14 weeks. can't get enough of that joe being angry behind the wheel >> i wasn't really that angry. >> you look like it. that's not angry >> that was a 12 cylinder, it

was like so long ago. >> this morning on his way to work >> i was at 800 horsepower porsche and there was just a lot of saturday -- have you noticed on saturdays, do you drive on saturdays? what is it about weekend drivers? >> my biggest issue is in manhattan on saturdays people driving through the crosswalks, always new jersey plates every single time. >> this is like some -- you took this as an opportunity to slam new jersey again >> i've been doing it for 20 years. >> he's consistent with that, yes. i've heard him say that before. >> you have to be aggressive in new jersey too many cars on the road. >> you do? >> there's weird jug handles in new jersey. >> to escape the mobsters? what are you really saying exactly? huh? >> it's the density of it. >> so outrun all the -- >> car density, yes. >> outrun the pollution, oyou

ever been to the short hills mall >> i have. >> and >> right it's like west berlin, you know, back in the middle of all this other stuff you don't want to see. >> there's something i don't like about what you're saying there. coming up a live report on the european markets and talk earnings expectations with our panel of strategistings. plus, caterpillar on deck to report on the next hour of "squawk box. we'll break down the numbers as we head to break, look at friday's s&p 500 winners and losers ♪ i like to move it, move it, i like to move it, move it ♪ ♪ i get knocked down but i get up again ♪ ♪ never going to keep me down ♪ i get knocked down does it m yeah, i'm afraid so. it's okay. this is what we've been planning for. knowing what's important to you is why 7 million investors work with edward jones.

♪ >> announcer: welcome back you're watching "squawk box. live from the nasdaq market site in times square. good morning and welcome back to "squawk box. u.s. equities future at this hour, last i looked, there they are. they're not triple digits anymore. trying to be down less than 100. i don't know hangover, whatever it's monday

davos is over. everyone is sort of the promise of solving all the world's problems you get back and realize, wow, they're still here you know. >> i'm really disappointed. >> i thought that -- did you see a picture of how many private jets they are lined up in davos it's just that i don't think you can get enough in to solve income inequality and climate change just in three days or four days. i don't think you can do it. just you need more time and need more jets, i think, right? any way. just me? okay i thought it was you developing story out of brazil dam broke over the weekend and catastrophic the officials say 58 people are confirmed dead, firefighters are continuing to search for hundreds of missing people the dam is operated by the world's largest iron ore minor v aerks le

the company has suspended planned dividends, executive bonuses and buybacks. >> they're also ord toerd set aside $2.9 billion for damages over the weekend so that should be interesting. and the brazilian markets were closed on friday there wasn't any reaction out of brazil when it comes to sheez shares in the local markets. interesting to see how they react once those markets are open let's get an update on the european market action julianna tatelbaum joins us live from london. julianna >> good morning. well, as joe mentioned it looks like a hangover monday for u.s. stocks here in europe, much of the same story. markets have started the week on a cautious note. the stock 600 is trading about 0 .5% lower this morning this follows a pretty decent week last week for european equities look beside me, it is a negative day across the various regions european investors are eyeing much of the same factors that u.s. investors will be watching this week. so the fomc meeting, u.s./china trade talks, payroll late they

are week and big corporate earnings for tech, industrials and pharma names on top, highlight the ftse 100 is trending lower, down 0 .4% now because brexit firmly in focus on top of all the top-down global macro factors i just mentioned. tomorrow, house of commons will be debating a series of amendments to theresa may's brexit deal which you'll remember was defeated by a wide margin by parliament earlier this year. now quick look at the sectors and see how things are shaking out at the top of the leader board firmly there is basic resources up 0 .4% and as you mentioned the vale story, boosted by the expectation of a move higher in iron ore prices on the back of this tragedy in brazil at the bottom of the leader board, oil and gas down about 1% we've seen a pull back in the oil price and that is no doubt contributing to the pullback we're seeing in the oil majors here in europe that is the picture in early

trade. hand it back to you guys in new york. >> very good for more on the markets, we'll turn to our guest, market strategist at bank of america merrill lynch, jeff stoud at raymond james chief strategist like to set this up with a socialism versus nonsocialism. >> which of us is the socialist? >> i was talking dictators. >> no. i was saying that there's a fine line between socialism and being a dictator. >> one doesn't lead to the other? >> not necessarily think so. >> just a coincidence that it happens. okay pretty high koerllation. jeff, best start to the year which is probably not a big surprise you probably predicted best start to the year for equities andaround the globe going pretty well. we're off of that corrective mode that we saw at the end of last year? >> yeah. you had three of the biggest

selling climaxes i've seen in quite a while. ended on december 24th and you've been straight up -- we thought the target area would be 2,600 to 2620 with the resolution of at least in the short-term of the government shutdown you overshot that but by our measurement of internal energy, the markets internal energy is used up we don't think it can spike much higher from here. >> what is that, by the way? internal energy, what is that? >> proprietary measure of how much energy is built up in the market doesn't tell us which way it will be released upside or downside, it tells us there's a bunch of energy in the market. move gets going like it did off december 24th, there's enough energy to give you a decent move. >> it's like a coiled spring. >> exactly. >> no. i think that that's about right. that's what we're seeing is that cash levels got to really high levels by the end of last year

suggesting the market was setting itself up for a nice rally. and today those cash levels have come down a bit. i do think there's still areas -- and you tell me what you think -- but i think there are areas with a lot of internal energy, maybe more within the cyclical side of the market. if you look at sectors like industrials, technology, you know, what i think is really interesting is that any company with any news good or bad during earnings season has rallied. it's like all news is good news especially for industrials, tech, even consumer stocks sectors that were left for dead by the end of last year have actually -- i still think there's a bit relatively light positioning in those areas of market and i don't know if your internal energy monitors are telling you those are good places to be, but that's what our work is saying. >> yeah. i tend to like energy and financials believe it or not. >> yeah, financials. >> sectors from last year. >> yep. >> a lot of strategists that were at 3,000 for last year are

now at 2750 for this year. which is -- >> too low. >> where are you >> 2,900 >> 29? >> 2960. >> oh. you guys are really close on this. >> what about technology we saw in the last quarter a lot of top line misses some of the big issues. >> absolutely. >> china affected apple as we know caterpillar is going to report in a few days. technology, where do you see in terms of the upside? >> i think where we see the opportunities are really more in old tech rather than new tech. if you look at -- maybe not semiconductors but some of these bigger, older, clunkier company like software or hardware where there's super cheap, again, given up for dead, nobody owns them and if we do see the economy not head into a recession, these stocks could do pretty well.

they also have tremendous free cash flow which will become increasingly valuable as the fed continues raising rates and cash gets a bid finally there's pockets of tech that look really good i see new growthy tech those stocks are overowned and subject to more governance risk, data privacy issues. lots of kind of issues around those stocks and they're super crowded. >> just from a numbers standpoint in terms of the competition of the market, the growth year tech, they're the bulk of the markets. we reach that target of 2960 if we don't have the participation of the fang. netflix reported a decent quarter and the stock is down cig nif kantly since it reported earnings. >> and it's also crowded. >> can we reach the levels you're projecting without the participation of fang? >> yes, i think you can.

>> okay. >> okay. >> i think you have a rotational into other sectors in the cycle, if you will. and i agree with savita. i think the old tech is the place to be in technology. and i will say it again, i like energy and financials. my dad used to tell me good things happen to cheap stocks. those stocks are cheap >> savita, you mention as the fed continues raising rates. we've taken back a lot of the kind of panic of december and people said things weren't so bad. we haven't slowed down very much but we're still reassured the fed will be patient especially after this shutdown. >> right. >> what's the process as the market transitions from that, i assume you're thinking, to saying, okay, maybe the fed can get in a couple rate hikes here, can the market handle that >> i think it is again, as you point out, it's within the context of okay growth, you know, nothing too extreme. and the fed has signaled they're watching the data and not going

to do anything that throws us back a market downturn so, i mean, that's putting a lot of faith on the fed. if you think about the next not even this year but next two or three years the cost of capital is increasing rather than decreasing credit spreads are tight, interest rates almost at all-time lows. the name of the game is to think about cash-producing assets like dividend, growth stocks, companies with high free tech flow and shift your allocation more towards those guys and. >> that's the calculus. >> not netflix for per se but those stocks that need a lot of capital to grow their businesses. >> so right now emerging markets seem better. when we're raising rates here -- >> they're cheap. >> all hell breaks lose when we're raising rates here for whatever reason currency

fluctuations, loans already out there. you think they're in the clear as well now? >> i do. i do i think emerging markets and frontier markets are cheap i think if your time horizon is long enough, three-plus years you'll do just fine many those asset classes. >> all right do they know at bank of america about the socialist stuff? >> i don't know why i'm being branded as a socialist i did go to berkley, though. there's corroborating evidence. >> you're a right winger you're far right so is growthy a word, yes or no? >> it's become a word. >> no, no. no, no, no, no. >> oh boy. >> it is a word and it's been a word to describe a certain type of livestock, characteristics of livestock. >> you mean like cows? >> context could you use the word >> you want me to use it in a sentence. >> yes, please use it in a

sentence. >> like the spelling bee. >> exceptionally fast in growing and gaining weight both of them were growthy horses that got better with time. it's first known use 1884. so growthy is a word growthier is also a word >> also could use it in the context of humans. >> you could. >> but i thought it was refeuduate, which that is a word now. my favorite is carbage all that stuff in there, you have to get all the carbage to the garbage. savita jeff saut. both of you will use everything you just heard i know that. >> carbage. >> feel free. coming up, the s.e.c. now wants some answers from nissan about former ceo carlos ghosn's pay. that story is next stay tuned you're watching "squawk box" on cnbc

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morning. >> word smiths. >> words with friends. >> u.s. equities futures are lower this morning now back triple digits 108 on the dow, s&p down about 12 the nasdaq indicated off 40 so far this morning nissan has confirmed its received an inquiry from the s.e.c. and the automaker says it's cooperate they're investigating nissan's pay to u.s. executives how that was disclosed and whether it did enough to prevent financial misconduct both nissan and former chairman carlos ghosn have been charged in japan for falsifying financial statements and understood reporting ghosn's income by more than 80 million dollars over an eight-year period ghosn was first arrested in november and has been in jail has denied all accusations he faces up to ten years in prison the s.e.c. probe appears to be in the early stages and hasn't extended beyond a request for documents. coming up, another big week for earnings reports apple is expected after the bell tomorrow what should investors expect after the company warned of lower revenues just three weeks

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wig week for tech results this week including happe ining the bell let's welcome back ted lee with "the new york times. the outlook is going to be key they haven't given the outlook

for the march quarter. >> they haven't given the outlook. you know, they're telling us to stop looking at unit sales we knew china wasn't great for them i guess my question for them is what should we be looking at, right? service is something we have all been talking about one of the more in my estimation a more predictable revenue stream it doesn't do this thing whenever the new iphone cycle comes out. i think that's a big potential -- i think the growth area is -- we'd have better visibility into that growth if we had a better breakdown of what services is right now we tend to think of it as apple music, media sales as well as the advertising that comes through all their app stuff. let's get a breakdown. i think that's what, you know -- we're getting less visibility here, but more visibility there. i think that will give us a better idea of its media strategy going further spending a billion dollars, $2 billion on the original tv stuff they're working on they're spending there

it's something we should have a better sense of. i think that's -- >> what's interesting is apple can spend a billion or $2 billion. it sounds like a bunch of money to them. >> it's an experiment for them it's at the same time a huge opportunity. i think we talked earlier about zuckerberg being worried about apple's imessage i think with time warner and disney, they're all worried about what apple could do, the amount of money -- they could spend ten times that much and still not blink. but that would have a huge effect on all the other streaming services out there i think that's an area ripe for growth they should also -- tapping more into the app economy that it created, i don't see any strategy around that i think that's another missed opportunity. when you think about what uber is, uber would not exist without smartphone technology. >> but i would think there's a potential for high volatility surrounding this particular

earnings release given the outlook for the march quarter. given a much bigger emphasis on service revenue growth and now the new dimension of getting the gross margins for service revenues there's going to be such scrutiny on every single item of this particular report >> we haven't given up on the idea of knowing what hardware is going to look like too china's not an answered question >> it's not. but there's always going to be challenges there's always going to be third party data to look at. that's what we're going to rely on going forward again, if you're apple, you could sort of play this game of, fine, you want to look there whatever we're not looking at that. >> if you liked it at a trillion two, you must like it at 700 >> it depends what's your anticipation >> the watch that sends all my data to my doctor and says oh, you just had a heart palpitation, take something. i don't know >> i think health care is certainly a -- for tim cook in

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earnings takes center stage on wall street we kick things off dow component caterpillar and find out if the trade war with china is hitting the bottom line from coffee to the white house? former starbucks executive howard shultz weighing a bid to run for president. plus a bad moon rising for business the latest on the state of business showing a knots so rosy picture. the second hour of "squawk box" begins right now ♪ live from the beating heart of business, new york, this is "squawk box.

>> good morning and welcome back to "squawk box" here on cnbc that camera as you could see was shooting the moon. a shot of -- >> goes with the song. >> i heard that. i heard that. >> it's masterful producing. >> i'm joe kernen along with melissa lee and mike santoli the dow now down 117 at this hour the nasdaq down 41 it's the -- it's the calm before the storm. virtual tsunami of earnings coming this week i'm boycotting anything the fed says or does i'm going to focus on earnings >> there's trade >> trade's different for powell. another two days to just -- micromanage. >> it might actually reduce the focus on each one. and you kind of -- it u.--

>> the market seems to repeat several times. >> he doesn't say the same things looking at october through january. he only said the same thing when he took out a piece of paper on stage. some stories we're following for you this monday morning, the fed as we mentioned will gather for a two-day meeting starting tomorrow it will wrap up on wednesday with a decision and a news conference with jerome powell. they're expected to leave interest rates alone also on wednesday, li hu is set to meet with robert lighthizer and we'll wrap up this big week with friday's jobs report howard shultz telling "60 minutes" he's considering a run for the white house. >> i am seriously thinking of running for president. i will run as a centrist outside

of the two-party system. we're living at a most fragile time not only the fact this president is not qualified to be the president, but the fact that both parties are consistently not doing what's necessary on behalf of the american people and are engaged every single y day -- >> for handrew will be talking howard shultz in an interview you can see tomorrow morning earnings are in focus this week caterpillar is out in less than 30 minutes tomorrow, apple, 3m, and pfizer are some names to look for wednesday we have facebook, microsoft, boeing, and mcdonald's and the list goes on. dom chu joins us now with more on what to watch so far not awful good response in the equity markets for the beginning of this year. >> like you said, joe, you said

it correctly it's going to be an earnings tsunami this week. but according to all of the analyst data we've tracked so far and if all the earnings reports that are left to happen. and just over around 5.5% revenue growth, that's according to data from refinative. so if you take a look at this week, it is the thunder dome, the busiest week of earnings season, and the busiest day as well we've got 114 companies in the s&p 500. so over a fifth, a little less than a fourth of all s&p 500 companies reporting this week. 13 of them are dow components. you mentioned caterpillar today. that's one of them of course apple tomorrow 37 companies on the s&p are going to report on thursday alone making this on thursday the single busiest earnings day of the season so far if you take a look at those names that are going to report, it will be huge to watch some of

those key ones because of caterpillar on that commentary about china and what they're going to see also because of what's going to happen with apple. we got that huge news on january 3rd that they're cutting that key fourth quarter how much of that is priced in? apple shares already about 11% off of the lows we saw on january 3rd. and of course a lot of the commentary about globaltrade o u.p.s., amazon, we have an idea of what we're going to look for there. then on the oil and gas side with chevron and exxon on friday a lot of preview but we'll have around half of the s&p 500 companies reporting done by the time this week is over, guys back over to you, joe. >> thursday, huh >> thursday. 37 stocks in the s&p >> getting a little scratchy throat coming on i just -- you know, exhausted from davos and everything else i just hope it's not thursday when -- actually, tomorrow andrew has that howard shultz interview. anyway

joining us -- no, i'm looking forward to it. seriously. stephanie link, global research director, portfolio manager at nuveen we'll get to you in a second, r.j. stephanie, you are a maven when do you graduate to -- there's maven and then what's above that magnate? anyway, let's -- >> that's a great compliment thank you. >> earnings maven. what do you think so far and do we care about the rearview mirror or is it all about the outlook? i'm interested in the outlook of these companies. >> it's very early right now only 16% of the companies have reported looking at about 13.5 times earnings growth, so that's good. about one percentage point better than people thought okay it's the guidance, though, joe, to your point. mixed at best. but the interesting thing is look at the stock reactions. look at the semiconductors and the semicap equipment and the

industrial companies last week numbers were actually coming down and the stocks actually exploded higher. and that just speaks to very cheap valuations, very low expectations which is quite the opposite of what we saw this time last year last year we were expensive at 19 times forward and we were expecting great earnings we got okay earnings and the stocks fell. it's quite the opposite this year >> suddenly into the business lexicon is earnings recession. i'm not even sure what that means. it doesn't even mean to be negative is that how you see it what does it mean? >> that earnings decline are around zero. but the overall economy has not gone -- >> no. but an earnings recession is what people say when they're not really -- they can tell it's unlikely it's going to be a global economic recession. >> well, 2015-16 you did have year over year declines in -- >> does it have to be a decline or it's no longer double digit -- >> it has to be a decline.

>> then there's no real reason to think that either, is there >> 13.5%errings growth right now. >> but what about this year? >> i think we're probably going to do 4%, 5%, 6% >> that's close enough that could swing the other way theoretically, i guess >> maybe but like the multiple contraction you've seen in the past year are accounting for that we're expecting that anything better would be a good thing. >> the reaction you're talking about, it seems a measure of as you say how cheap stocks got, how basically people got back on their heels not expecting good things from the market i wonder how far that takes us it's still unclear you're 10% from the highs in the s&p 500. >> and that's a very good point. it's a stock pickers market. just compare and contrast some companies that delivered and those that didn't. look at intel. look at stanley black & decker which was down 15% look at united rentals look at southwest air.

it's getting to be much more specific on stocks hopefully that's good for managers >> r.j., in terms of this discussion we're having, what do yields tell us right now i'm shocked we could be talking about the "r" word with yields as low as they are right now i don't know what happened to our economy that used to support 5%, 6%, 7% yields. what we can slow down at 2.5% on fed funds? >> well, good morning. as far as the yield level, a number of years ago, about five years ago at the end of the taper tantrum, we had a discussion internally and we felt the highest the 10-year is probably going to go is 3.5% or 4% and we might be lucky to get there. productivity is still low. demographics have slowed the developed world doesn't have the same potential growth trajectory there's plenty of debt out there. the lower level of nominal rates you alluded to is more burdensome, more binding in a slow growth, lower inflation world than historically the

charts would suggest we hit 3.25% in november and our thesis proved true it took years to get there, but risk assets couldn't handle it there were many other challenges in addition to rates, of course, that had to do with the fourth quarter. but clearly higher nominal rates relative to history are unlikely lower are more likely. and a deceleration of growth is what we're facing as we go into the new year of 2019 >> twa wwhat do you expect to hr from our friend jay powell this week >> i think it's clear they've called off the dogs, if you will on rates it sort of dragged the fed into the discussion there have been plenty of media articles about it. chairman powell's talked about it i think it's very likely it'll be a key topic in the post-meeting conference. i don't think they're poised to make a change just yet they went from autopilot to plexablerapidly.

maybe qe which helped to lower rates and propel on the way up is now realizing itself in reverse. and qt does matter so some signaling on the balance sheet is important the idea of where is it going has not been defined by the fed. how small or how large relative to history will the balance sheet be when they finally decide to level it out >> so what's the most attractive part of fixed income right now if i needed to put it into my portfolio just to minimize my equity exposure, what should i do munis or corporates or junk or what >> after the fourth quarter, we felt that was overdone holiday period markets allowed for exaggerated moves. we thought rates would retest higher after hitting around 2.55% on the 10-year that worked. we felt spreads had gotten too wide that the economy is not recession likely in 2019 those also came in we positioned for that as well

going forward, it does get a little tougher it's a good question you're asking i think with yields close to 3% on the 10-year treasury, with yields reset higher over just two or three years ago, that it probably does make some sense to introduce some higher quality fixed income into your portfolio. we still like taking credit risks and are still overweight yield. but to a lesser degree than we were three or four years ago we are not in the recession camp if anything, we might get a slow bleed a little bit higher. then there's a lot of uncertainty. the china/u.s. stands out as likely the biggest one the fed's balance sheet is another. fixed income as a diversifier even of the high quality variety like munis like you mentioned really can make a lot of sense i think people should stop fearing duration. >> yeah. i fear duration. i mean, why -- they're so low. but if they move down, then that

doesn't really matter, obviously. >> in real terms, the inflation rate's less than 2%. the 10-year treasury is close to 1% in real terms long-term history, it's usually around 2%. but a slower productivity world can support lower real rates maybe a 1% is that centering point on the real rates side >> is caterpillar going to blow our mind with some china stuff is that possible >> no. i mean, the expectations are low. my only concern is the stock has rallied 20% off of this low. that's my only concern >> anybody else through this season where we're going to go, wow, we underestimated the trade war with china that is convenient for apple to say it was china >> tiffany's did too there were a couple of companies that did call it out the stocks have corrected. then we've had this bounce fortunately or unfortunately i think the expectations, the risk/award today aren't as good. putting that into perspective,

it's still down from its high. and it's still trading at 11 times forward. it had a 3% dividend this is a new management team that's focused on profitability and kind of less on the boom/bust type of markets that we've seen from caterpillar over the years. so i think they're managing it better, it's just that the environment is very uncertain. i have to say out of all the things that occurred last week, i think the fact that the ecb is more dovish was huge news. they're going to keep on qe for a very long time the boj is the same way. china is stimulating that's very good for risk-on assets so let's see about earnings. but keep in mind the global picture is changing too. >> all right thanks, steve knee thanks to r.j. gallo stephanie is not leaving she'll be rejoining us later i wish she could tell us now about caterpillar, but we'll get your take when it hits coming up, bad moon rising for companies? the latest survey on business conditions from the national

association for business economics. and we are just a few minutes away from caterpillar earnings the numbers and the reaction straight ahead stay tuned you're watching "squawk box" on cnbc sfx: [phone ringing] you still have service? call the insurance company it's them, calling us. it's going to be a week before they can get through on these roads shhh, sorry, i didn't catch that. i said ask how soon they can be here not you. right now? what's now? he says they're surveying our property now they're probably at the wrong house i don't see any hovering his name is hovering? look up? by using machine learning and analytics to automate claims, cognizant is helping insurance companies advance how they serve even the hardest-to-reach customers. cool ♪

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the automaker says it's cooperating fully. ghosn has spent more than two months in a japanese jail. all right. coming up, the government is officially reopened. this week washington will be focused on the president's trade agenda a report on what to expect is after the break. plus as we've been talking about it all morning, dow component caterpillar will kick off a huge week of earnings we're going to get you caught up on what you need to watch on the earnings front "squawk box" will be right back.

a face-to-face trade meeting expected to take place later this week in washington. kayla tausche joins us now with more on what to expect good morning, kayla. >> good morning, mike. it begins on wednesday it's the continuation of these formal sit-down face-to-face talks between the u.s. and china. and it comes as white house officials over the last week have stepped up their calls for china to become a stronger policeman in the global stage on intellectual property theft and to level the market in several industries those are tall orders for china that would require a major concession from the united states in the last year, the white house and treasury have already

lifted a sales ban on chinese telec telecom. but one of them that could become relevant is the potential extradition of meng wanzhou. the treasury secretary steven mnuchin says huawei and trade are separate and the department of justice has said it would move forward with extradition. he would consider intervening in the huawei case. quote, if i think it's good for what will certainly be the largest trade deal ever made which is a very important thing, i would certainly intervene if i thought necessary. meanwhile, tariffs on china may be in the meeting of the world trade organization they will take up the legality of those issues. it's to be a protracted review of those tariffs but could put the u.s. in a difficult negotiating situation in just a couple days. >> all right kayla, thank you

kayla tausche in washington for us is it doom or gloom for business the national association of economics business data related to current conditions. steve liesman joining us with more interesting results. >> it's gloom, but i'm hopeful it might change. it's an ugly business outlook. taken during the shutdown. hopefully it was influenced by the shutdown which is hopefully over here's some of the data for the current outlook. the current assessment of the economy. sales at a net rising index of 29%. that's down 26% which is the fourth largest decline in about the 40-year history of the survey the lowest level since the third quarter. profits just at three net rising that's also down 26. lowest since the fourth quarter. employment holding up at 25 plus two. plans for capex the next three

months have fallen below the level where they were before the cuts were enacted. say the tax cuts have had no effect on hiring or spending plans. some good news in the survey, 77% say tariffs have not affected hiring or spending plans, prices, or under control. and firms continue to have trouble finding skilled workers. and 64% of respondents that's pretty good it's down a little bit at about a third seeing it below 2% this year this is one of the first business surveys we've see since the shutdown we will see if it is confirmed by other surveys once the government opens today and if it remains open, perhaps we get a rebound in the outlook. that's my hope >> some of those numbers -- i mean, i always try to look at the positive, but some of those numbers seem -- you'd be viscerally affected by all the -- what we heard about the government slowdown. but where the rubber meets the road is employment >> yeah.

that's one place it meets the road also in capital spending as well. >> they don't know it could change on a dime whether they do end up spending if the demand was there. that's more of a -- sort of a feeling. just i don't feel good about things i may not spend. why'd employment go up >> because people are -- >> you still need people >> i'm getting the strong wrap just ignore it okay, fine the story is that i think people are afraid about not finding the workers they need. even hear stories about hoarding they feel like there's no urge now to do capital spending it's not just the shutdown but this is post-all that tu multiwe had in september >> we don't want to talk ourselves into anything. >> i think you start piling stuff up >> we'll be okay thanks, steve.

when we return, caterpillar results and instant market reaction what will the dow component say about the impact of the trade war with china, the global economy, and business overall? the numbers, comments, and market reaction straight ahead as we head to break, here's where equity futures are we'll be back. ♪ ♪ our new, hot, fresh breakfast will get you the readiest. (buzzer sound) holiday inn express. be the readiest.

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we're working to make things simple, easy and awesome. welcome back to "squawk box" live from the nasdaq market site in times square. i'm melissa lee. we are awaiting earnings from caterpillar. the earnings are looking at a lower open right now down 104 on the dow. down 35 on the nasdaq index. in studio to react, steven volkman of jeffreys. is it 298 on the eps >> that's the consensus. >> and on the revenue? >> revenue side we're looking for about -- what is it? $17.3 billion.

>> $17.3 billion but obviously the commentary on china is going to be key here for shares of caterpillar which have been a poster child for the china/u.s. trade war stuff >> i mean, excavator sales in china as a whole were up 23% we're not going to see that in 2019 but even if you get to double digits, that's still a very positive tail wind for the company and for the industry as a whole. so i think the big question i have is they took a 1% to 4% price increase in the fourth quarter. i want to know what that does to a lot of things. obviously it should help on the profit side and margin side. what did it do to demand as well that's a big question mark >> looks like the numbers are just hitting here. adjusted eps. >> 255 quite a bit below sales 14.34, that's right in line with expectations right? you know, you've got more than

just machinery you've got revenue and product ma vechinery and energy now, 2019 has seen it 11.75 to 12.75. that's a big range but -- >> how does that compare >> 12.73 is the estimate if it's 11.75 to 12.75 they've got to hit the high end. >> look at shares in the premarket. down -- >> 4.5% now. >> taking the dow along with it in terms of the implied open down 164 right now we're still looking for the commentary -- >> you upset >> actually, i think this is a good thing >> what? are you long or something? >> actually, we're not long or short. but i do think this is a good thing. i'll tell you the reason everybody is obviously concerned about the economy rolling over, the capex numbers you heard steve just talk about. what we need to do is we need to de-risk this story i'll tell you the buy side

thinks the numbers need to come down it's going to derisk the story then people will feel like they can get back in. this a cheap stock >> we were down 108 on the dow we're now down 155 four times seven or eight is what 30 additional points >> do you extrapolate stuff on what we've seen from caterpillar? do you say industrials, i'm a little worried now >> we also had a bunch of the rail companies that did quite well relative to higher expectations the risk reward was not so great. cat's rallied 20%. the question is bad news, good news and it was for equipment, is this now the as well

a lot of commentary and color. so i don't want to really rush to judgment right now. i think i agree, though, the stock is extremely cheap free cash flow yield of 7% and a dividend yield of 7% >> and cash. they've got $8 billion in cash end of the quarter >> they're much stronger as a company than they have been. the new management team is focused on that. >> if they do 11.75 the low end and did $11.64 in 2018, then you're down to zero. >> that's minimal growth but the stock is trading at 11 times earnings. >> is there anything, steven, in terms of what we might expect in pulling forward in demand? or does that stuff kind of persist into this year >> let's go back to the price increases. because people know these price increases are coming it's possible you saw a little bit of pull forward ahead of that we'll have to see what that

commentary looks like for the first and second quarters. that price increase we talked about was the second one they did in 2018. so we're lapping in some products close to double digits. >> in erm it is of the price increases when they hit, i believe the last quarter ended with lean inventories. the latest reading was cat had lean inventories if we have this price increase, how does that all play out >> well, inventories were actually up quite a bit last year or last quarter. what cat said is they were leaning on a month's worth of sales basis. we have to take their word for it we don't have that number. but what it means is that, you know, you're right there will be some product they can't pull forward. >> it sounds like the outlook they're giving so far in the release because we're not going to get the conference call until i believe 11:00 a.m. this morning, it sounds kind of conservativ conservative the ceo says our outlook assumes a modest sales growth as well as

a macro economic environment we'll continue to focus on operational excellence including cost discipline while expanding in operations and services to drive long-term profitable growth do we know anything about how he guides what the tone is? the tone sounds conservative >> well, it was conservative last year. remember they beat their initial guidance last year in 2018 so that was fairly conservative. he has changed the way he guides he guides to an eps number with no revenue we don't know how they're getting there. and so people sort of assume the worst on that sometimes. i'm not sure that's a great idea but that seems to be what they're working with now >> he's been there a couple years. but you have this new cfo that's only been in the slot for four months i would think he'd want to be conservativ conservative i don't have a problem with them guiding conservatively they have things in their favor. outside of the macro, china is a problem. you know, this is a china story. even though they don't get

nearly the amount of revenue you would think. i think the numbers are conservative i think the valuation is what it is let's hear what they have to say. >> what's your number one question going into the conference call today? >> number one question is trends at the margin in oil and gas and mining those are the two things that are going to drive the stock >> i just looked at deere and a couple others. they're going to be down >> i don't know that it finds buyers today, but i think this starts the process of de-risking the stock. >> deere's been a much stronger stock. >> yeah. i like some of the mackenzie speak though i say that, you know, from your stockbroker if you're in a position, it's like, you know? it's consolidating at lower levels building a base. like a coiled spring, really it's kind of like, it's spring loaded there's a lot of different ways of saying it what are they doing again? >> i think it's a good reminder when prices go down, risk goes

down >> exactly and you're talking about a company that's better than it was in terms of its ability to do cash flow we think trough margins are going to be better >> do you have ratings >> we do >> what is it? what are you >> we're on a hold i'm not here to schlep this one way or another i'd love to see the stock below $120 you'd buy it there. >> do you have targets, too? >> we do, yeah. >> well, what is it? it's like pulling teeth. what's your target for cat >> it's about $135 which is why we have a hold rating. >> but you love it under $120? >> i think it's much better under $120 >> okay. all right. steven and stephanie, that's fun. all right. thank you. coming up, the government shutdown is over at least for now. what another closure could mean for airports and travel. as we head to break, take a look

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zplmplts welcome back to "squawk box. caterpillar threw the dow for a bit of a loop this morning with lower than expected numbers. 255. the street was up just under $3. and the outlook was $11.75 to $12.75 and the street is at $12.74. that's some dow pressure right there. and it's hard to find something exactly like caterpillar like deere is not exactly like caterpillar. but it's down. boeing if you think china's a problem, you check the shares of boeing which are down 3%. that's not helping the dow either right now either. boeing will report later this week this is going to be tough to come back from this. >> even a company that reported great companies last week, united rentals, is feeling pressure from caterpillar this morning. just tells you the concern

around the whole sector even for companies that have given an outlook, given earnings, and have delivered >> i think also the context. right? the market was basically flat last week from a level where people said, well, makes sense to have a bit of a pullback here yes in those sectors, the kind of industrial area will see some damage at least in the morning coming up, shutdown showdown just three weeks for a deal and the president saying another shutdown is certainly an option. if you were flying on friday, you felt the effects at the airport. thepresident of the national air traffic controllers association joining us after the break. and then john taylor joins us. "squawk box" will be right back. my experience with usaa

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great to have you. thanks for joining us. >> good morning. thanks for having me on. >> how quickly can things get back to normal at this point >> we've been working through the weekend. we have meetings all week. bringing things back up online is a lot harder than shutting everything down. so we're going to do it methodically and make sure that we really start addressing some of the issues we hadn't in the last few days. >> what seems so shocking is this seems to be the surface of the problem. 30-year low of air traffic controllers. there's just no backstop if people call out sick or there's another shutdown, do you have the bench for it? >> that's -- you got the numbers exactly correct. shutting down the academy in oklahoma city because of the shutdown has really hurt also. so the pipe line has stopped so we have to focus on getting

the academy up and running, hiring people, and training. it's a long training process to become a fully certified controller in the system depending on the facility you go to, it could take three to five years to be fully certified. and it is on-the-job training. that's really the only way to learn it >> because of the shutdown, is anybody as far as you know accelerated their retirement or decided to say you know what it is time to hang it up >> we have seen some have resigned some people that were in training just resigned because they just -- they don't like the instability. and then we don't know the exact numbers that have retired. because obviously those offices were closed during the furlough. we'll get that information as well hopefully we didn't lose too many that would have a negative impact on the volume we can run. >> does your association urge its members to stay on the job or did it urge your members to

stay on the job during the shutdown >> we're highly skilled, highly trained professionals. we reminded them that they are essential to the safety of the flying public and we take that oath to the highest level. and we were lower in sick leave than we were historically this time last year so that was really heartwarming to see how professional that workforce showed up every day. keep in mind, there was a lot of stress put on them it was stress that they didn't know how to deal with, how they were going to pay their bills as they were running out of money what was, you know, the uncertainty of how long this was going to go on an air traffic controller has a high threshold for a medical clearance. and they owe it to the public if they're not fit for duty, they are not to come to work. >> do you believe, paul, that the american flying public was as safe during any of the 35

days as they would be otherwise. >> if you were on an airplane and flying through the skies, you were safe. because the air traffic control are the guardian of the sky. but the undue stress that was put in there and the fact we built this robust safety system over the last ten years of reporting, identifying, mitigating risk out of the system, and then training down the whole -- through the whole workforce, that wasn't happening for 35 days. so therefore i would say we were less safe as we now have to mitigate that risk >> you mentioned the system was deteriorating.

how close to we get to that shutting down and being a danger to the system? if we went 45 days into the shutdown, would everything change >> it was hard to see. that's why this uncertainty was we don't know how much risk was in the system. because the people that would help us identify was not working. that's a deep concern. what we were starting to see, mistakes being made for routine clearances because people were distracted and controllers were saying watch out for everybody. because people were distracted they were thinking about getting another job, driving a lift or an uber or waiting tables after their shift 37 so they were also fatigued we knew there was a problem and it needed to end immediately we do not want to see another shutdown the uncertainty of what it could do we had a handful of people that

called out sick because they weren't fit for duty and we weren't able to open u up all positions. so we reduce the capacity. because we can't run the normal line you're safe when you're on the airplane we will be the guardians of that airplane and make sure it's safe, but you will not be able to run the capacity which will have a negative impact on the economy moving forward we don't want to see that either >> paul, great to have you with us thank you for your time. paul rinaldi, president of national air traffic controllers association. and we continue to follow the latest developments out of venezuela. john bolton warning against violence in that country saying any such action will trigger response from the united states. his comment comes after secretary of state mike pompeo tells the security council over the weekend that the world must in his words pick sides in the power struggle let's check on the price of

crude right now. we've got it down about 1.6% and it is costing you a little bit more to fill up your car we follow this every week. the average price, though, went up -- this is why we follow it it went up two inches. 2 cents. the average price of gas inching up 2 cents or that's where the inches came from because we're inching up it is 2.$2.33 a gallon that's a good number that's a very good number. the increase comes after gas fell about 64 cents over the previous 14 weeks. do you have a car? >> yes >> okay. where do you park it >> garage. >> like, ten blocks from where you live is it like a seinfeld thing? >> it's a little bit less

convenient than i'd like >> how many blocks >> it used to be by my old office that's the issue >> how many blocks from your house? >> 30 blocks >> from where you live >> yes >> he takes a car to the car >> new york living you're making fun of me. mine is like four steps from my -- >> suburban. >> there are tradeoffs i'm aware of some of the benefits >> 30 blocks that is a total -- >> 30 blocks is not that far, really, in new york standards. it could be in a different borough. >> i only use the car to get out of the city. it's not like i'm using it every day. >> you don't need to get out of the city every day >> almost never. >> okay. all right. let's take a look at this morning's market mover that'd be caterpillar. looks like it's up premarket session lows 6%. dom chu joins us with more this is tenderly taking a bite out of the dow >> yeah. so we're talking about maybe 40, 50 points at some point here

as you can see here with the premarket session, now down towards the lows we were seeing. at least so far. so if we do see these take over, you're going to have -- a couple other stocks we want to keep an eye on not necessarily dow. that may be reacting in some way, shape, or form to the caterpillar results. specifically the outlook for 2019 you look at one non-dow component and that's deere they still make construction equipment, farm equipment, the heavy machinery that goes into powering industry and agriculture all over the world deere shares reacting in some way, shape, or form down by $2.50. that's one we're going to watch today heading into the opening bell the other one we're going to watch is in the dow jones industrial average is what's happening with boeing. boeing is seen like caterpillar, like deere, like other

industrial companies as a proxy for what's happening in china and other parts of the world we've seen it as part of the trade discussions. we've seen it as part of the trade movers on those trade discussions. those shares off by about 1% as well those are going to be the biggest weights so far we're going to get a slew of earnings results apple one of them although we don't know whether they're already priced given the pre-announcement certainly, melissa, boeing, deere, caterpillar, those industrial names that will be making up a lot of discussion going into the opening bell today. >> and a lot of scrutiny on the conference call coming up. last year on the call -- >> high water mark >> exactly it actually fell during the earnings call and continued to fall because of two words on that conference call

as far as first quarter con fence calls go -- >> the stock remains down on a 12-month basis trading where it was about a year and a half ago. >> three words >> high water. well, hyphenated yeah sure three words. whatever you want to call it >> two and a half if hyphen only >> okay. dom, thanks. coming up, congressman bill pascrell on the reopening of the government and what is next. >> he never says what he really thinks, this guy and later, john taylor joins us to discuss the fed, the economy, and what it means for your portfolio futures at this hour after cat's big miss, the dow really feeling the pressure looking to open down 173 points. the nasdaq down 41 we'll keep you up to speed on the markets the next hour. stay tuned can

. earnings central comes alive. dow component caterpillar just out with numbers we'll have the reaction. a faang worth your money noted investor allen patrickoff

weighs in and whether apple belongs in your portfolio. howard shultz saying he's thinking of running for president. how would it shake up the 2020 race we'll find out as "squawk box" continues right now. ♪ live from the most powerful city in the world, new york, this is "squawk box. >> good morning and welcome back to "squawk box" here on cnbc live from the nasdaq market site in times square. i'm joe kernen along with melissa lee and mike santoli andrew and becky are off the futures are down down but not out maybe? i don't know they were down about a hundred until caterpillar reported then that dow component along with boeing got us down about 175 now on the dow the nasdaq indicated down 42 the s&p down 14. big week for earnings.

the heaviest week that we will have, i think, a quarter of the s&p, a third of the dow will all come in the coming days. treasury yields right now 10-year 2.76%. >> our big earnings report of the morning comes from cot pillar $2.55 a share versus expectations of $2.99. revenues did beat expectations coming in at $14.3 billion looking ahead, cat sees 2019 results in the range of $11.75 to $12.75 a share. stock falling following those numbers. the guidance for 2019 does skew it below the prevailing consensus of about $12.73. >> yeah. basically the estimate wrs at the top end of the range it'll be interesting to see if cat giving any color also on the cadence of the quarter whether there was a turn towards the end which would be more hopeful or whether or not whatever they saw is persisting in that conference call starting

at 11:00 the first quarter conference call a year ago was a rocky one when the ceo used the term high water mark given the decline we're seeing here. and of course that is the tip of the earnings iceberg a quarter of the s&p 500 and nearly half of the dow expected to report results over the next phi d five days. it'll be off to the races with microsoft, boeing, mcdonald's, facebook, amazon, and many more. for more on the markets, we now turn to keith banks the global wealth and investment management vice chairman. are you gleaning anything? what is the message so far >> it's been mixed you talked about that early in the show it talks about where you're positioned end of the day, it is all about

earnings we believe we'll see some slight expansion of pe multiples this year right now based on the earnings forecast of $172, we're at about 15.5 times earnings. but maybe it goes to 16. maybe a little higher. that'll help but we need to see the earnings come through. if we don't, the markets aren't going to do it >> what would drive that multiple expansion i just wonder what liberates us from this late cycle thinking that we're in right now? is it just the fed being patient for six months >> well, yeah. i think it's people gaining more confidence that we are going to see 2% to 2.5% real gdp growth opposed to 1% or less that the market began to discount th that that in turn will lead to earnings growth of 3% to 5%. that the fed is on pause

there's even some probability of a cut. i think the confidence grows as the year goes on it's going to be a saw tooth it's not going to be straight up we've had a good january so far. we're up over 6% total return, but we can't extrapolate that and think we're off to the races and everything's going to be just smooth. 6% up feels better than 6% down. >> it feels like there's a lot of land mines to happen in that we don't know what the true impacts are of even transitory hits like the government shutdown or the u.s./china trade talks. we don't know what's going to happen with those talks. whatever outlook we get, whether positive or negative on these conference calls, do you just sort of look through it? i mean, how good are any of the outlooks going to be, really >> i think you have to glean from these company reports how much is unique or idiosyncratic

to them versus more of a window onto the macropicture that may give you more or less confidence in the gdp coming through as we expect what inflation looks like. because that's the bigger picture and that's what's going to matter, i think, overall. but you're right there's a lot we have to work through. we still have to get through the china/u.s. tariff deal that's coming up on march 1st. we do have to see if the fed is truly paused we think they are. there's a lot going on out there. even though we had a good start to the year and we think we'll have a good ultimate finish, it's not going to be a straight line up, that's for sure >> even among people who would agree with that general outlook, there's a divide in terms of how to be positioned for it. some people say cyclical stocks got too beaten down, they should have a big snapback. it has been the more aggressive that has led the rallies off the lows on the other side, it's late cycle quality, better balance sheets is the way to go. is there a way you would lean?

>> we would lean, number one, we are still overweight u.s. equities we have a slight overweight in emerging markets it's kind of a barbell approach. that's our option on future growth a lot of that will tie into strong dollar or lack thereof. china negotiations i think in the u.s. what we like, we like the financials we like technology we like high quality, large cap companies that have good cash flows, strong balance sheets we like the ones that can generate dividend growth we think those will be the way they play it in a fairly uncertain period of time right now. >> and you like em >> we like em. we're slightly overweight. we don't think the dollar is going to strengthen from here. if we do get positive resolution on the china/u.s. tariff talks and china can stabilize growth around 6%, we think the emerging markets can do well. >> 3% to 5% earnings growth this year, a lot of people would say fine if it settles there, if we have

6% nominal gdp globally, that's not magic. if it's continuing into 2020 -- i know it's early, but if it's 3% to 5% is the last little swing at growth here that might be the concern. >> that'll be a problem. you know, part of how you get to a 2900 on the s&p and certainly higher numbers than we are today is not only getting through some of the near term road blocks that we talked about you've got to have belief that this is not the last year of economic growth and not the last year of profit growth. we don't think it is we think you could stay on a trend line growth into 2020 which would be roughly around the 2% type of growth rate but you're right especially as we get into the second half of the year, that will loom larger and that will play into that and whether this thing will sustain into 2019 or not. >> keith, thank you. >> great to be here. >> keith banks, bank of america. coming up, president trump

already lowering expectations that an immigration deal can be reached to stave off another government shutdown. when we come back, new jersey congressman bill pascrell joins us to talk about the costs of ma athst-ended shutdown and the dagenoer one could do. stay tuned you're watching "squawk box" on cnbc to have a hundred percent renewable energy goal. if we don't make this move we're going to have changes in our environment, and have a negative impact to hawaii's economy. ♪ verizon provided us a solution that lets us collect near real time data on our power grid. ♪ if we can create our own energy, we can take care of this beautiful place that i grew up in. ♪

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. welcome back to "squawk box. there's what we're looking at. premarket indicated opening for the dow down 174 the s&p down 14. and the nasdaq down almost 44. all this after caterpillar disappointed the street with its current quarter results as well as its outlook for this year >> yeah. and the stock is down 5.7% right now. washington, d.c. coming back to life this morning after the end of the longest government shutdown in u.s. history ylan mui joins us with more now. >> reporter: federal workers are back on the job here in d.c. and across the country the white house says they're expected to get their back pay in the coming days and the workers that we talked to this morning said it can't come fast enough >> i had to call my mortgage company and arrange a

forbearance agreement where we were going to pay one-third of the normal payment i also called the other services provided to us directv, others, and negotiated deals with them to delay payment. >> reporter: workers know they're going to be on the job for at least three weeks after that it's anybody's guess. lawmakers have until february 15th to come up with an agreement on border security president trump thinks the odds of success are less than 50/50 he also said another shutdown is, quote, certainly an option if they fail to reach an agreement. even though the government is reopened for the next few weeks, a lot of folks are just looking at this as a reprieve because this fight is far from over. back over to you >> okay. thanks let's bring in our next guest. congressman bill pascrell. he serves on the house ways and means committee. how do you see the next three weeks proceeding and do you see a way for democrats and republicans to work together on avoiding

another shutdown >> yes i think once you get over the political hurdle, i think that's possible we have a conference committee now from the senate and the how's. equally divided with democrats and republicans. we've got good people on there with people from both sides of the aisle. so the whole wall -- the wall down payment was $5.7 billion. so the shutdown cost more than what the president was asking for. makes no sense i think the legislation would be to get rid of all the hutdowns because they're used as political sabotage, i believe. so that you can face your

opponent and debate him and have a compromise >> congressman, how should we look at that that it costs $7 billion and we were only talking about $5 billion. should we say, gosh, the democrats you might as well have just done it or do we just blame him no matter what? >> no. >> i mean, we could have used the $7 billion for that. no one thinks we shouldn't -- >> democrats are not going to give anything to anybody we're going to have a solid budget we want to protect america this notion about democrats like open borders is absolute nonsense i was on homeland security i was on the original committee when president bush was the president of the united states we had democrats and republicans devoted and committed to this nation by the way, we don't only have one border hello? we have many borders and they need to be protected.

i've never seen a terrorist come in from the southern part of our border, at mexico. we've had problems come across the canadian border. just look at our history so this is total nonsense. we need an immigration package we had one several years ago when democrats and republicans came together and the senate and the house didn't have the guts to bring it up, the leadership in the house so i believe this has to be a total package. whether we can get some conceptual agreements between now and three weeks from now, your guess is as good as mine. but i know there are good people who are trying to put that together and i'm very proud of my country and moving forward. we're not going to go backwards. we're never going to go backwards. that is what i believe >> what about the state of the union? are you hearing anything about -- is speaker pelosi going to -- >> i believe it will be decided within the next ten days and the president will give the state of the union as is expected

i believe the shutdown, the government did not really -- it wasn't conducive to that i think in my mind the speaker made the right decision on that particular matter. i support her on that particular matter >> so we'll know in ten days, but there won't be -- >> i'm sorry >> we'll know in ten days when it's going to be, but it won't be given in ten days >> i think it will be given in ten days that's what i really think. >> can i ask you about what's going on for 2020? you saw the news from howard schultz. how do most democrats look at whether whether schultz should run as an independent? >> we're going to have what republicans went through in 2016 you're going to have probably more candidates than they had. you know, there are people -- every name that i've heard and every person that i've heard speak gives me hope for 2020 not

only for democrats but for the entire nation. got some really great people, some good names. some are a lot more independent than others. that's the nature of the beast that's politics. can they gather support from the rank and file and the base that's the question. and i believe it's interesting that everyone is trying to get their own little space, so to speak, during this campaign so they'll have something to campaign on with there being so many candidates. independent candidates are welcome as well. this is the democratic party you agree to disagree. then you disagree to agree later on so nothing changes in the democratic party along those lines. >> i don't know whether i believe, you know, everybody's racing to the left, obviously. >> i don't know about that >> okay. kamala harris who a lot of people say are the front runner. >> some polls say that, yes.

>> okay. so medicare for all, preschool for all, debt-free college for all. >> who's going to pay for this >> i don't know. >> i think that's a good question i think democrats have to stand up to it we have a deficit which is crippling investment in many areas. we need to understand this and the very people who are supposedly the conservatives, the people that are going to watch every dime and nickel have really spent like -- and i don't want to make sailors culpable, but drunken sailors. this administration has no idea what it's doing adding to the deficit. the $7.2 billion that we lost during this shutdown just adds to the mess. we need to face up to it we're not going to face up to it, democrats, in cutting medicare or social security. that's not how we're going to do it but we need to face up to it

we can't walk away with it medicaid for all, medicare for all, i think we're going to move in that direction. we're not there yet. we can't afford it at this particular time. but we'll have a debate about it. >> let's say you find an old lamp in your house and you rub it and a genie comes out your wish is who runs -- who's your nominee what's your dream ticket right now, bill? >> wow well, i love joe biden everybody loves joe biden. you know what? sometimes you love people and they're not smart. joe biden is smart he's done it he's been there. i have confidence in him but i have confidence in a lot of the other candidates. if you ask who i had to pick today -- >> what about bernie >> i'm not a bernie person i like bernie. i debated him in china once on natural law. i'll never forget this and i think bernie had his shot and he's welcome to run just like anyone else i respect him for his acumen on

politics i respect him for respecting other people i think he had his turn. >> i can hear some common sense in a lot of the stuff you talk about, congressman i think it's from the area you're from. >> god forbid. >> i know. you were mayor of patterson, right? >> yes, sir. i was mayor of patterson, great city, for 11 years before being elected to congress. about 30% of the people in congress right now have served in some form of local government be it a mayor, council, board of education, et cetera and i think that's a healthy kind of thing. those local politics will never leave you. you had no time to hide behind a desk or under a desk you've got to make decisions the congress moves at a pace that puts you to sleep many times. and this shutdown put us behind in all of those things we need

to be doing. not simply because the democrats, we've taken over the house of representatives but because the country needs certain things whether it's health care, whether it's trying to deal with the deficit, whether it's trying to deal with the crazy tax bill that was passed december of a year ago. we have a lot of problems to address. we don't have the time to mess around >> i just wonder -- and there are some, obviously, with the unemployment rate and gdp. there are a lot of positive things >> a lot of positive things. >> maybe in your view, it's in spite of president trump >> i think, you know, look how much does a president have to do with whether things go up or down is debatable >> deregulation, i don't think you can deny -- >> i think the president has done some good things on the economy. i think that president obama who brought us from the cliff -- the edge of the cliff -- don't forget when he became the

president of the united states, what the economy was like. >> right hey, just let me -- because we got to run but if -- i don't know where the geographic center of the democratic party is right now. i don't know if it can be brought back or not. but if you had a far left candidate get the party's nod and then you had howard schultz, that just seems like a -- i think there's a lot of democrats already saying -- >> or how about the former mayor of new york? >> he might run too. is it a ross perot situation where it takes away from the democrats and it ends up re-electing donald trump i mean, i see that being written right now. >> well, you could be a pundit about this kind of thing, but remember this is the democratic party. so expect anything and you'll be able not to anticipate everything >> all right, congressman. thank you. we appreciate it hope to see you again soon >> honor to talk to you. >> congressman bill past credcr.

coming up, apple's results coming tomorrow. we're told whether the stock has a place in your portfolio. meantime, dow futures are at premarket session lows looking to close down 200 points caterpillar shares down more than 5%. boeing shares down by a percent. you're watching "squawk box" here on cnbc so, servicenow put your workflows in the cloud, huh? mmhm. your employees must love you. [ chuckles ] thank you. you could say that. i love you. servicenow works for you.

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welcome back to "squawk box. take a look at the futures right now. we are headed for losses at the moment looks like the s&p would open down a little more than half a percent down 17 points the dow jones industrial average to the downside set to open down 2 hurk 200. caterpillar, negative reaction to their numbers nasdaq now futures down 50 the fed will gather for a two-day meeting starting tomorrow the central bank will wrap up on wednesday with a decision and a news conference with fed chair jerome powell. the fed is expected to leave interest rates alone this time around also on wednesday li hu set to visit washington for trait talks with robert lighthizer and we'll wrap up this big week with friday's jobs report president trump just tweeting on the steel industry tariffs on the dumping of steel in the united states have totally revived our steel

industry new and expanded plants are happening all over the u.s we have not only saved this important industry, but created many jobs. also billions paid to our treasury a big win for the u.s. nice oh, no i added that nice. a lot of times he does or if it's the other way -- i do that now sad. >> you just do sad out loud. >> i do it on twitter too. i'll do a sad. you know it's only three letters. and it gets -- >> it's very expressive. >> very express i have coming up, big week for our tech earnings. sad. no we'll see. it's going to kick off tomorrow with apple is this the right time to invest in the iphone maker and the rest of the tech giants when we come back, we'll talk to tech investor allen patricof that's going to ruin everything, right? reheweetn.ross perot mo wn rur

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i am seriously thinking of running for president. i will run as a centrist independent. outside of the two-party system. we're living at a most fragile time not only the fact that this

president is not qualified to be the president, but the fact that both parties are consistently not doing what's necessary on behalf of the american people. >> former starbucks ceo howard schultz telling "60 minutes" he's considering a run for the white house in 2020. let's bring in andrew ross sorkin who's going to interview him tonight. great to have you with us joining us this morning. you've asked him so many times in the past whether or not he was going to make a run for the white house. each time he gave a vague answer what changed >> i think he's been thinking about this from the very beginning, frankly and, you know, even when he stepped down, i think this was in the back of his mind. i think the bigger news is the idea that he's planning to run if he does run as an independent opposed to a democrat.

he's always described himself as a life-long democrat i think he could be pulling votes from whoever would be opposing trump on twitter, he's having an effect of some sort. because the pushback is real somebody must think that he has a chance here. i pushed him on this issue yesterday when i got him on the phone. we are going to tape an interview in front of a live audience tonight and will bring you that tomorrow morning. i said would you ever change your mind because you have all of these democrats who are coming to him saying don't run, howard, as an independent. you're only going to mess it up for us you're only going to make it

harder he said, i feel if i ran as a democrat, i would have to be disingenuous and say things that i don't believe because the party has shifted so far to the left he has lots of views does not believe free health care for all and free education for all is a responsible economic plan. at the same time on taxes, he probably said he would have pursued some point with tax reform but would not have been nearly as aggressive made the point several times to me that when you look at the gallup polls in america today, 32% of americans identify themselves as independent which is more than a republican or democrat having said that, you should note that when you look at those polls, when they're asked again, you know, do you lean one way or the other, invariably, they do so there are people on both

sides of this issue. also wanted to read a tweet you -- i think this sort of speaks to how anxious the democrat party is. this is a former -- vanity projects that help destroy the democracy is disgusting. if he enters the race, i will start a starbucks boycott because i'm not giving a penny that will end up in the election coffers of a guy who will help trump win. >> i was going to bring that up to you it was swift there was no nuance to the way the hard core party. i didn't see a single one that said we welcome you. i think they're right. i don't see any way this could -- maybe we agree on this. i don't see this helps the democrats take back the white house. i don't. do you >> i'll tell you a couple of

things one is -- so one of the greatest challenges historically has been getting on the ballot for an independent. he's actually -- or says he has laid the groundwork to do that you know, look i think it really depends, frankly, on who ultimately emerges in the democratic party. if you have a far left candidate in elizabeth warren or bernie sanders, i think there's a possibility there's a wide opening in the middle on both sides. i think there are republicans who might look to a howard schultz. i think there are democrats that might look to a howard schultz having said that, if for example a joe biden were to run and emerge as the lead contender, someone who is considered a little more moderate, i think that becomes more complicated. which is to say that when you hear neera tanden talk about a boycott of starbucks, kevin

johnson who just had a good earnings report last week, this could become a referendum on starbucks. the same way when mitt romney ran, it became somewhat of a referendum on bayne capital. i think you'll see this on a political standpoint on all sides of this. >> i think the concern here is because he's running as an independent, there's backlash from both sides targeted straight at starbucks. and it's a lot easier just to say, you know what i'm not going to buy that venti cappuccino or whatever joe buys in the morning >> joe biden i think he's a talented executive and i'm urging him to go full force. i think it's a great idea. i think he'd make -- >> says the man will ulterior motives. >> i think he'd be a great president. tell him to run. run, baby, run run, howard. >> the sarcasm is dripping dripping >> no, no.

he took that chain -- there's like -- every block in new york there's three out of four corners -- >> great american dream. >> yeah, it is you know what? he is -- at least bring your party back a little bit from way out there on the left. i'm talking to allen patricof, not you, andrew. >> no matter what side you're on, he ultimately -- >> on the country's side >> no, no. he ultimately is a better example of the american dream than virtually anybody out there in terms of, you know, coming from the projects, creates this company around the world and give people health care and stock options and is deploying veterans and all that long before any other ceo in america ever even began some of these things so i do think he will get points there. and i will say this. you know, to the extent that people are writing off howard schultz, simply the fact that

we're having this conversation and there seems to be so much angst on all sides and in particular on both sides how potentially strong and the potential opportunity he may or may not have having said all that, he's going to crisscross the country on this book tour of his. he's going to put his finger in the wind, i imagine, he will decide then whether to proceed so this is a long march. we won't even know whether he's going to go for it >> if he hit a new high for an independent, i think ross perot has the previous record. 19 or somethingthat just ushered in the clinton era pure and simple that's why 41 lost, andrew i just don't see how this is a positive i was only kidding about supporting him he's a spoiler we're going to talk to allen patricof i heard a little froggy in your

voice again. it's tough for us in davos, isn't it >> the second i got on the plane home, i got hit with it. but i'm going to rally for tonight. >> can't we turn the winds around and get it behind us coming back? >> let's get the concord back. >> anyway, we'll see you tomorrow, andrew and we are now joined -- >> with that interview with howard schultz, you bet. >> now a man that knows politics well allen patricof you've had a long history with the party. mansioning director of greycroft. >> i made a mistake with howard schultz about 35, 40 years ago when he -- when someone brought the idea to us to invest i said what in the world does new york need with another coffee shop? we have one on every block and he likes to smile about that and so do i. everyone has to have a few of those in their background.

my point is i wouldn't underestimate howard schultz twice. i think he's a formidable guy. he's no ross perot ross perot was a funny looking odd guy who had no exposure whatsoever. howard schultz is known by every human on the planet. >> but the party is far left of where how aard schultz is do you like biden? does that make sense to you? >> i haven't decided who i'm going to back at this point. there are a lot of good

candidates they're only starting to come around and visiting. you know, joe biden is a tried and true name. i think nancy pelosi of being 78 years old and with her feistiness proves that joe biden certainly -- >> only got 16 months until the convention is there. >> he'scertainly activewise, healthwise, he'd be a formidable >> senator harris raised -- >> in one day. was it 20,000 people i saw the crowds they're amazing. >> a lot of excitement there early to call a front runner but there are some people saying she has the makings of a front runner >> they certainly are painting her in a obama 2019, 2020. whatever you want to call it she comes across, great speaker. hard not to like

and her views are kind of not as far left to make you happy >> yeah. they're pretty far >> we have months to talk about this we want to get to some tech though earnings apples reporting tomorrow so alan, if you look at the charts of all these big tech companies, it seems like everyone thought it was to the moon a year, year and a half ago. now consumed by the idea that there's a regulatory pressures and maybe these platforms aren't as dominant and durable. does that filter down into your world of earlier stage tech investings is there change in enthusiasm? >> there's no change in enthusiasm for early start up companies. hope springs eternal and nothing that's going to happen out in the marketplace, not even donald trump is going to change that personally i am concerned with the position of apple -- excuse

me not apple. with facebook and gooi inl and amazon are having in our society. it's been bothering me for quite a while. it's a new form of monopoly which results in lower prices to consumers rather than higher prices which is our traditional monopolistic company we've got a real problem how do we deal with these companies absorbing more and more of our life >> you're concerned about it a lot of people are concerned about that aspect of it. is it also a threat to the businesses it seems like the weaker their business is on a relative basis, the more you'd be concerned about. >> i think their businesses are strong and getting stronger. because their database gets strong and the amount of information they have which can offer buyers of one service or product get stronger and stronger then the competitive aspect, you know, from the retail standpoint, look at the empty stores around not just new york.

shopping centers and regional ones we're having a profound change because everything's going up. amazon is just one manifestation of that. they are not the only one, but they are certainly the percentage of retail that they are taking over is pretty significant. >> in terms of investing in businesses, though, would you say it's much harder for an upstart business to get backing if its life blood is consumer data would you ever at this point say i'm going to back this company given the threats on the horizon? >> if you're building a business based on facebook or as a platform or google, you're in danger i mean, there's not a day that goes by, a week, that i don't see one of our companies reporting saying last month was lousy because google changed their al go rgorithm and they ho build it back. then a year from now it changes

again. if you're dependent on that as a source of your income, it gets tougher to operate i'd say it has a strong anticompetitive aspect because they've -- you know, the genie's out of the bottle. that's the real problem. i don't have the answer how you solve it you know >> any of your companies have the answer how to solve it is that one of the areas you're looking at >> they're all trying to solve it in that world but i think at the end of the day, it's not for me it's the ftc or other body of government to look at whether the companies can stay with all the aspects they've had. amazon is now in health care amazon's now delivering your food it's a difficult world >> total addressable market is everything alan, thank you. alan patricof. appreciate your time the balance sheet is in focus for the first fomc meeting of the year. john taylor joins us to look at what's on the fed's mind stay tuned

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welcome back to "squawk box. we want to get you up to speed what's happening with the marks. caterpillar front and center as we look at the stock moves, down 8% or 6%. heavier given the earnings report a couple of other stocks you see what's happening with the deere. albeit on lighter volume just around 32,000 shares have traded there in the last few moments or so premarket and then one other one to watch here is shares of boeing often talked about as a proxy for how china trade is going also the chinese economy, they deal with a good amount of business over there. shares off 1.25% around 17,000 shares of premarket volume all of those industrial names highlighting this discrepancy

highlighting the course of the past year with reference to industrial stocks to the broader s&p 500. as you can see here, the gap getting bigger on the heels of that china trade talk that's been going on. as we talk about earnings season, industrials very much a key focus, joe back over to you guys. >> okay, dom thanks we do have a -- if you watched last night -- i don't know scott pelley one of the things scott pelley asked howard schultz was, this is going to run between 7:00 and 8:00 by 8:00 you know that you're going to be tweeted about by president trump. and i think howard schultz said, i think everybody is bored with president trump's tweets at this point. so it wasn't right at 8:00, but it is out now. and there it is. howard schultz doesn't have the guts to run for president. watched him on "60 minutes" last night. agree with him that he is not the smartest person. besides america already has that

i only hope that starbucks is still paying me their rent in trump tower. now, our intrepid washington man who looks forward to weekends as much as anyone, eamon javers, said --him, trying to bait schultz into the race. almost a double dog dare i'm not sure if it raises to the double dog level, but it is at least a single dog dare. >> you tell somebody they don't have the guts to do something. >> exactly that's exactly could be earnings just a part of the story this week. the first fed meeting of 2019 also starts tomorrow and while a rate hike isn't expect, the markets are watching closely. joining us now john taylor, worked in the treasury department under president george w. bush and we talked to you frequently, john, but i don't know if we have -- i got a lot of questions about, you know, how this point where we are in rates is suddenly neutral

or i felt we were a long way from neutral in your view, i think a lot of the rules-based taylor rule accounting would put the real rate much higher than it is right now. how did it bite at such a low level to actually start slowing the economy? >> i think the fed is trying to be a little clear about where it is going recently. that's interpreted as the idea of patience. i think as you get in closer to their estimate of the neutral rate, there is more focus on what is going on in the economy. so that's where the data dependence comes in. i think if you combine their data dependence which many have talked about and the notion of some patience you come to some kind of policy rule, which i think they're trying to stick to that doesn't mean you state what you're doing and don't make any adjustments, of course you make adjustments depending on the economy that's what they're trying to say. >> i watch, you know, the fed and its participants and the chair. i don't say they fly by the seat

of their pants, but they certainly don't use a rules-based system like you would like obviously there is times i wonder which is the superior method, john. where would -- if it was ruled-based, where would fed funds be right now based on the protocol you would have used wouldn't it be up to 4%, 5%? >> with current estimates, where the dots are going at this point. got a couple of more moves sometimes this year. they haven't said that's not going to happen yet. so also i think it is important to point out they have done a lot in the last year and a half, two years in terms of talking about rules, some of their appointments have focused on rules a lot. there is three new additions to the monetary policy report, which discusses the importance of rules, the chair talked about how it is useful to him. so i think it is a positive move i think the economy has done better because of that quite frankly. one of the things along with the tax reform and inventory far

more generally which has been positive for the economy. >> do you agree they should be on pause for a while do you think they should start, you know, taking data into account with whether they continue the balance sheet reduction as well? i would have thought a couple of years ago you thought we should have raised rates. is that true we missed our chance >> i think the notion that a lot of them think that the so-called equilibrium rate is three. they're getting close to that. as you get close to it, other factors come into play the state of the economy, that's for sure and the balance sheet is another issue. they have laid out a pretty good description of the balance sheet, certainly compared to what they were doing back in 2013, so-called taper tantrum. this one has been relatively smooth new focus on the impact on the markets, a micro aspect. we'll hear a lot about that at the fed in the next few months the micro and the macro about the balance sheet, both very important.

>> so how would you grade powell at this point and if you were, let's say that trump decided to milwaukee make a move at some point and talked to you, would you be more dovish or hawkish at this point? >> i wouldn't -- i don't like those words, by the way, but i think what i do is i look at the state of the economy more. there has been some changes in growth, you know, 4.2, 3.5, whatever, looks like the last year is going to be one of the strongest in this recovery need to take that into account, is that the supply side? i think a lot of it is supply side they need to be factoring that in in a way which i don't think they have done enough in the past and that would move in the direction of a slower increase, eventually smaller increase, but i think all these things are important. that's why the data dependence policy rules, patience, all wrapped up into a way we think about policy. >> john taylor, thank you. hope to see you again soon

down to the new york stock exchange, jim cramer joins us now. were you disappointed with caterpillar, jim surprised? is it -- is it something that should be bought here or do we need to take a step back and say what's happening >> i don't know, i was listening to stephanie talk, and talking about the derisk my problem is that this is the kind of slowdown that i expected in the fourth quarter. and why i was so concerned, i was getting the feed, was concerned about jay powell being so bullish there are actual issues here on many different lines and it is in keeping with union pacific, which had some good and some bad so, no, i mean, caterpillar also has been -- at the beginning, they try to reset the bar and i don't think the comp scores could be that great. i don't know i'm going to say there are other stocks that are better if deere comes down, i like the ag side much more. so i can't rave about these guys i do think it is inexpensive, but that's not enough to buy the stock. >> and you know howard schultz,

jim. and when you follow his career and everything else, just what do you think what are your comments on -- what is your opinion on the whole saga, soap opera >> i think that howard would like to actually, i know he says he doesn't want to be a democrat, how about if he got it by acclimation, something howard would like, therefore didn't have to go through the slings and arrows of primaries which i think is something that would be very hard for him. i think that howard, we all know, howard is being combative when you disagree with him some would say he's thin-skinned i like the term combative. that doesn't necessarily lend itself to retail -- let's call it retail campaigning. and the idea of boycotting starbucks, i mean, geez, put a short on starbucks because you know they have to sell a lot of stock, i don't know. i think it is important. i think it is worth following. the book tour is going to

determine what kind of speeches we get on that informative. i think he wants to run, sure. he would run >> thanks, jim we'll see you in a couple of minutes for more on that "squawk box" is coming right back one-millionth order. millionth order. ♪ there goes our first big order. ♪ 44, 45, 46... how many of these did they order? ooh, that's hot. ♪ you know, we could sell these.

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- [narrator] custom ink has hundreds of products to help you look and feel like a team. upload your logo or start your design today at customink.com okay, 200 points on the dow. that is in some respect due to caterpillar, which is sharply lower. last time down 8, that's like 60 down points or so. and 8 and change

boeing also trading lower. we're going to have a weak opening and this is the big earnings week and it is all dependent on earnings, not the greatest, not the greatest move out of the box for caterpillar thank you. >> my pleasure. >> thank you >> see you next time. >> you're not driving time >> no, underground >> make sure you join us tomorrow "squawk on the street" is next good morning and welcome to "squawk on the street. i'm david faber with jim cramer. we're live from the new york stock exchange carl is on assignment this morning. futures as we get ready to start the trading for this week. you can see we are looking at a down open, at least so far european markets, mixed bag. europe also in the red as you can see right there. still open, of course. right now spain is the worst performer thus far during the course of the day.