to say tuesday, january 29th, 2019. "squawk box" begins right now. zbloinchts welcome to "squawk box. i'm becky quick along with joe kernan and andrew ross sorkin. we've been watching the u.s. equity futures, and after a down day yesterday for the markets with the dow down by 200 points, you are looking at redary rows this morning dow is indicated down by 29 points right now s&p has indicated down by about three points, and those declined yesterday for the s&p actually put it back in correction territory. down just over 10% from the highs that we had seen late last year you can always take a look at the nasdaq down by 15 points this morning at least that's the indication let's take a look at what's been happening overnight in asia. it does look like the nikkei ended flat hang seng was down slightly. shanghai composite down by .1%

then in europe where there is some early trading that's already taking place, mostly green arrows here. ftse indicated up by 1.4%. the cac is up by -- you have modest advances to the other european forces. the ten-year is yielding 2.74% breaking news out of california this morning utility giant pg&e filing for chapter 11 bankruptcy protection the company facing billions of dollars in potential liabilities for its role in last year's deadly wildfires the company's interim ceo said pg&e remains committed to improving wildfire safety throughout the bankruptcy process and worth noting they went into bankruptcy without a buyer. there has been a lot of speculation over the last two weeks about some potential acquirer, or at least somebody coming in as a stalking course bidder brookshire hathaway had been a company that had been speculated about as a potential buyer for the company. last night at midnight filing

for bankruptcy protection. joe is worried about my cough. >> you have the davos flu or something? >> i know a number of people who also have the davos flu that's been going around. >> here you are. thank you for coming >> had to come in today. >> well, do you -- you don't mind sitting there >> what am i going to do >> i don't know. >> i'm feeling -- >> can i ask you about -- i have a question you see the people in the airport that wear those things >> the masks on the airplanes? >> not him >> us? >> yes >> do you think it would be hard to broadcast with -- >> with a mask on? >> do you think that if i wore one, i would have saved myself i got hit the second i got a on the airplane is when i got hit >> i tell you -- >> two hours into the plane ride, i -- >> nine hours. what happened? sh the wind or something >> yes >> seven hours we went over, and i thought this is a breeze. coming back it's like -- >> a little longer >> i will tell you there was a

ceo who will remain nameless it was a separate meeting. he shook everyone's hand there was a couple of people in the room he says, i'm so sick i really shouldn't even be here. >> i hate that >> i shouldn't even be at this meeting. he proceeds for an hour he conducts the meeting he is, like, dripping in sweat half the meeting >> you didn't have your -- >> and then at the end of the meeting he puts his hand out to shake it again i did not shake his hand i did a good-bye i immediately went to the bathroom and washed my hands >> but you had been sitting there for an hour. he probably got you sick >> i don't know. we're all here >> you did the bow you did the bow? >> i was trying to think what do you do if you can't shake? >> i don't know. >> anyway -- >> we don't want to shake hands. you should say it up front >> there you are being with more people you are constantly driving yourself too hard. this is what happens >> i'm with you. i'm with you i'm -- >> stay over there move forward.

>> shd feel empathetic >> my mother has been e-mailing. she wants to know how i am >> send you soup >> are you going to make it today? >> we have three hours >> all you are doing is the schultz stuff really, right? >> i'm going to -- >> i didn't sue you assigned to any -- >> i'm going to interact >> all right >> breathe on you. >> cough on me rub on me. china firing back against the u.s. over criminal charges against huawei and its chief financial officer. when are we supposed to get some deal by march 1st? this is not timely >> no. the belief is that you can -- >> this is -- it has nothing to

do with it huawei and its cfo are accused of conspireing to violate u.s. sakes on iran by doing business through a subsidiary that tried to hide china's foreign minister and urges the u.s. to drop the arrest warrant and end unreasonable suppression of chinese companies. it called the indictment unfair and immoral. huawei's lawyer said its cfo should not be a hostage in the u.s.-china relations they're acting like it's totally related. the cfo is due in court to discuss bail terms later today some stocks to watch today as well. fourth quarter earnings for whirlpool coming in mixed. the company posted a strong beat on earnings per share. an unexpected decline in revenue. the are pliens maker also issuing a disappointing outlook for 2019 whirlpool citing higher raw material shipping and tariff costs as well as softening industry demand. saturday, you can see shares down by 5.25%. israel's finance minister says

that intel will invest about $11 billion on a new chip plant in the country. last year intel pledged to spend $5 billion to upgrade its existing factory in israel the company hasn't commented on that new investment. its stock down by about one-third of a percentage point. then sap plans to undertake a major reinstructing after missing its profit and revenue guidance of 20 18. key metrics for the business software maker, including new cloud bookings, slowed in the fourth quarter sap will take about $1 billion in restructuring charges mainly in the first quarter. that stock off by 2.8% >> the day after former starbucks ceo howard schultz announced he is stepping into -- plp at least to run for president as an independent. he faced staunch criticism across the board, mostly over fears that he would stiep end votes and earn trump a sec term. i sat down with him last night here's what he had to say about the democratic party >> i believe that if i ran as a democrat, i would have to say

things that i know in my heart i do not believe, and i would have to be disingenuous what the progressive left-leaning democratic party is suggesting is government paid health care for everyone, which is free. government jobs free for everyone, and government paid college for everyone i am a supporter of the affordable care act which i think can be improved. if you tally up those three programs over a ten-year period, it's approximately $40 trillion, and ladies and gentlemen, we are sitting right now with a national debt of $21.5 trillion on the balance sheet of our country. if we were a company -- if america was a company at $21.5

trillion of debt adding $1 trillion a year, we would be facing insolvency. >> i also asked schultz to respond to president trump's tweet on monday in which trump said that schultz doesn't have the guts to run for president and only hopes that starbucks, he said, will still pay me their rent in trump tower. >> i don't think we should misjudge what the president views as strength and conviction it's really weakness this has nothing to do -- >> we're going to show tape at the 7:00 hour. he was heckled twice it's interesting, by the way, how many people have come out in force, and we're going to talk about mayor bloomberg and so many others, who seem to be really worried about what he

will do or could do to the democratic party there's some people who are writing this off, but i have to say the one thing that seems remarkable is how many people at this point in the ballgame, which is only a year, year and a half away, seem so upset and angry. you go on twitter. the idea that he could -- that he actually could have a real base of support, and we don't know, but it's sort of almost surprising how much anger there seems to be. >> what a bizarro world now. it's where i feel certain ways that normally you would feel, and you steele feel certain ways that i would feel. i commend him on pointing out that we're $21.5 trillion, and it would go to $40 trillion. you saw kamela harris. she said free child care and college. medicare for all that adds up we're not talking about the unfunded liabilities that we owe. we're talking about liabilities we have. here hourld u howard schultz is talking realistically about

things, and bloomberg who supposedly at some point was not a left-wing democrat, bloomberg knows about what that platform is he is willing to say don't even talk about this because you might screw it up for some far left candidate that's an embarrassment. i'm embarrassed for mike bloomberg. zleer wou zle >> we're going to see whether mayor bloomberg will run it will be interesting to see if mayor bloomberg or joe biden does not run and so you are dealing with -- >> the far left. >> the far left on one side. >> bernie is still running >> bernie, again, on the far left if that's the case. >> elizabeth warren. >> better thanry is not even on the far left >> kamela is the frontrunner right now. >> trump is on the other side. i spoke to some people last night. there weren't a lot of republicans in the audience. republicans disaffected republicans that would -- >> who are uncomfortable with president trump. not so much, by the way, necessarily president trump's policied, but his disposition. >> right >> they are saying to

themselves, okay, if i don't want that, and then on the other side, could you pick up enough in the middle, i don't know. that's the question. >> bloomberg looked at an independent candidacy last time around and decided that there was no way that he would ever win. >> it's impossible maybe as a democrat. >> for howard schultz to say i'm not going to write off 40% of the country as deplorables and i'm going to actually stake out a point in the center where i'm independent and where i am willing to criticize the fringe groups of both parties that's -- to most democrats and to the far left. >> he is not going to get near attendance vote. >> howard schultz is at least saying i'm not going to write off these people that might disagree with the far left and their progressive -- >> i would not be surprised if in the end you're going to have to create a ticket it would be interesting if he would create a ticket with a long-time historic republican. >> i'm defending howard schultz and what he is saying, and the people i normally argue with

are -- >> they're -- they're nashing of teeth. >> hand-wringing president trump was goding him in that run was also noted maggie has beebram >> she stop tweeting about the covington catholic kids. >> the reason he wants howard to come into the race is because he thinks it's going to screw up the democrats. none the res, we should saw -- >> there were a lot of people that wanted donald trump to run as an independent because they thought the same thing >> i can support it in an objective way and then in sort of a cynical way i do think it would end up -- >> we have -- >> i think trump is right. that's why it's goding him on. >> i like where it takes the conversation and the discussion that's going to happen >> it definitely -- unlike ross perot, which he took votes from the right. this would take more votes from the left, i think. >> we will see jeffrey has been waiting patiently for us >> that's a miracle.

mike must have been turned off his mike must have been turned off. were you talking into the mike without it being turned on, jeff if you already had like a ten-minute conversation with yourself >> no. >> i'm just wondering when you had toes davos sneezes getting on each other. i didn't want to get in the crossfire. >> it's the flu. >> the critique has been stinging over the last 24 hours, 48 hours since the announcement that he is considering running as an independent. do you think it's a realistic approach >> i think it's a mistake. on the show i told you guys eight months ago that i was certain he was going to run, but i thought he was going to run as a democrat it seems to make a lot more sense that he be housed in a party. it didn't work for teddy roosevelt and miller phil modsz mor and others that tried to cut their own part as an independent. i've seen the arguments of some who argue that, well, if it's cutting down the center, it's a different kind of third party. no

i mean, howard -- he has a lot of the great qualities of mythic american folk heroes of business folk heroes. he is feisty and, obviously, a self-made person you know, the log cabin, it's the real deal with him coming up from poverty at a public housing project, and he has gone through adversity in his life. his disruptive vergs vision. incredible communicator. the mess are always defined by howard he doesn't have many ceo opinion leaders following him. he can rouz a crowd up pretty well, but when he gets kaupt on an issue, whether it's non race relations or a barista to tell us how to guide ethnic strife or whatever it is or environmental issues or hiring veterans, it's sort of a theme of the day he loses interest in it. he doesn't follow anybody else's cause. was owe the frontlines after

charlottesville with ken frazier? no on the religious freedom acts, the bathroom bill things that was randall stevenson of at&t and the ceos of wal-mart and ups and others where is howard? if it's not -- if he is not leading it in the van garde himself, he doesn't join anybody else's major business causes and the rest i just think it's that independent streak that's made limb a successful entrepreneur, but it will also derail his career as a politician >> on the flip side of this, two things one is if you were to run as a democrat and, by the way, i asked him multiple times last night if there was a possibility -- >> please run as a democrat. >> no. there were people in the audience even who were asking him what it would take to convince him to run as a democrat do you think that would be -- that would be a successful path given the way -- >> that would be very successful that would be very successful. i mean, i think michael bloomberg or joe biden going in as a democrat would blow him away of course, michael bloomberg has more than ten times the wealth and power of schultz howard is wealthier than perhaps

we are all together combined, and howard has twice the wealth of president trump, but michael bloomberg has so much more, and joe biden has so much more grassroots support i think howard would do very well to write off the democratic party as being the fringe, you know, we've been using the wrong term i don't know where the historians are for the last 18 months they're not progressives they're democratic socialists. worry talking about bernie sanders, elizabeth warren. maybe they don't like the socialist label. that's what they are they should be proud of it progressives were republicans throughout our history bob, teddy roosevelt, they are republicans. they were building dams and environmentalists concerned about workplace safety thus, it was a progressive center of the republican party, and that's what howard should go for that exists in the democratic party they're genuine progressives, not the fringe democrats socialists >> only 50% of the population wants free education you know, that's not to say that most of the democratic party is not screaming for it

i'm in that position we would love to have everybody get four years of college for free a lot of professor jobs. >> to you think that howard shilts schultz' move to get into this race he hasn't declared it's very possible over the next three months that he could decide he doesn't want to do this, but whether this would push either a biden or a bloomberg from declaring their candidacy. >> no. i think it would moetivate them. not to yield to -- it's true that we have seven or eight and possibly ten candidates that are fighting for that democratic socialist base they divide that vote up, as bernie sanders, elizabeth warren, and others carve up that space. that leaves the traditional democratic party right there in the center, and joe biden would do very well with that joe biden has a much deeper anchor in south carolina and on civil rights issues and an awful lot of traditional bases that he

would blow howard schultz out of the water. it would be great to see that fight. it would change the locust of the conversation bernie sanders was looking for a cause. how is that a panacea for any of the world's problems again, unless you are a college professor, i don't know how that's a solution. maybe vocational training. i do think that howard likes the defining issues around himself he is not a joiner he is a great leader he needs to join with others, or it's not going to get off the ground you probably saw the hate mail that i have gotten from ceos, progressive -- i mean, traditional progressive-minded ceos they're outraged they say it's so foolish to do it i sent howard notes to this effect last night with some of the quotes, and he is not responding to me >> well, we will maybe -- if we have an opportunity, we'll put that to him. thank you, jeff where are what were you going to say? zblie just want to know that you asked him the question, and his

response was i'm not going to run as a democrat because i don't want to compromise i want to be able to say what i want to do without being held hostage to any of these things did you get the sense, though, that he really explored running for a democrat and didn't think he would be accepted or pick up as part of the ticket and that's why he kind of went this way >> i got the sense -- i don't know about accepted. i think he truly feels that the democratic party is not his party anymore. he truly feels that the republican party is not trump's party. >> so there is room for -- >> i think that's his fundamental view by the way, kasich made the same argument he actually was on television about a month ago saying he thinks there's a huge middle all of a sudden. interestingly, you know, there's 42% of people saying they're independent. people quarrel with that because if you ask them again which way they lean, they often have a leaning, if you will, but i think there could be an opportunity in the middle. >> the center of the democratic

party, do you think for someone like me -- >> but -- >> for bloomberg to say don't screw it up for this far left socialist democrat -- >> that's not what he was saying i think what bloomberg was saying -- that's not -- >> that's the end result >> that's not what that means. >> howard schultz wouldn't run as a democrat because of where that party is right now. as to where that party is right now, why would you -- >> to bloomberg, somebody who wants to take a look at that party and fix it from the inside of what he sees the problems are. he has already looked at the outside. >> bloomberg, gun control and climate change are the only thing bloomberg ever talks about or gives money to. he feels perfectly at home at the center of the democratic party right now. >> first of all, if kasich were to link up with schultz, you would see the two of them together >> that could be interesting >> look, it's -- there's a -- >> i admire him for saying that. >> i think it's -- >> i think -- >> take him at his word. >> i think there's potential for

candidates to emerge that are more centrist, whether they run as independents or centrists and try to primary the president on the republican side or like mare bloomberg and joed biden as a more moderate. i think that's possibly where this all ends, but we will see >> or you could end up with all three of those scenarios >> there are many democrats. maybe not you. he this sit there and listen to liz warren and a kr. by the way, we talked a lot about -- >> they listen to where the party is right now whether it's liz warren, kamela harris, aoc, and bernie sanders? >> still uncomfortable with -- >> howard schultz looks that the and says this is insanity. i'm going to move over here and not be part of this, and bloomberg says, no, don't mess it up for them >> that would be wrong i think there's also a lot of people that just want to unseat the presses. >> when you listen to aoc -- i dprae. when you listen to aoc or bernie sanders or liz warren or

harris, do you want to take this country where they want to take if do you do you want to take it there 70% -- you want to take it there? >> no. >> i'm not an advocate for 70ers approximate. howard schultz isn't either. >> that's what i mean. admire him for that now. that's why bloomberg -- it's like oh, god, don't rock the boat or mess up kamel ae's chances here madness. he should know better. zlo by the way, that's exactly what -- that's sort of what howard said last night >> he should know better i commend him. such a great -- >> i don't know where -- >> such a good place >> that one actually realizes maybe the other half that the deplorables maybe they're not always just racist it'dots up next, a biz why i day for earnings we're expecting three dow components before the opening bibell pfizer, verizon, 3m in the company hour results from ale tppo after the closing bell that's something to watch for. wouldn't it be great to have epix?

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apple says it will release a patch to fix a security flaw that allows people who call you on fas face time to hear through someone else's iphone, even if they haven't answered that call. the bug relies on the facetime group call feature until apple actually releases that patch, you can prevent audio eavesdropping by turning off facetime on your phone >> someone even figured out how to do it with video. >> yeah. >> do you see that you two k actually see things. >> you don't answer a call in the bathroom, guess what, they may not only hear what you are doing are drks, but -- >> if you press the power luton. apple trying to turn that feature off temporarily until they make the prach available. >> there's a patch that's supposedly available in a few days a lot of people kind of -- >> apple has staked their name on privacy >> that's -- >> so great.

so many things that happen that don't affect me. you know what i mean >> you have facetime on your phone? >> i know i have it on my phone. >> should i do facetime audio? >> supposed to be calling you. >> do you answer >> do you want me to answer? >> don't answer. this guy drives me nuts. >> how do i -- i don't hear you. i don't know how to get it to work >> i -- >> don't look at me. >> we're going to have to do this experiment. >> i'm not answering finally have to explain it

>> don't answer it >> oh. >> when we come back, crisis in venezuela. u.s. slapping tough new sanctions on oil from that country, but will it mean the end of the moduro regime that's next. alerts -- wouldn't you like one from the market when it might be time to buy or sell? with fidelity's real-time analytics, you'll get clear, actionable alerts about potential investment opportunities in real time. fidelity. open an account today.

>> the u.s. targeting venezuela with tough oil sanctions, adding pressure to the embattled president. brian sullivan joins us now with more insight on this i just defer to you on anything oil-related, brian this as well what can you tell us >> it's a big story here, and there's numerous levels to unpack i won't get too much in the

weeds. how about this no more venezuela oil will county come to the united states, but that's not that big of a deal. i know it sounds weird, but they're down to only about 508,000 barrels a day that they're selling from venezuela back to here most of that goes to their own refineries at sit go krks and then it's shipped back not a huge loss there. easily made up with all the u.s. shale. the bigger story is this at the u.s. treasury yesterday they said that no more citgo, of course are the three refinery multi-gas station chain company based in houston that is controlled by venezuela's oil company, no more citgo money is going to go to the moduro regime what they've done is effectively ordered that citgo money to be placed into escrow accounts that they can then send to the government that we recognize of juan guido the problem, guys, is that his administration, while we and other countries have recognized it, isn't really functioning at that level yet currently we're going to plan to put that money in escrow

eventually to get it to him. the question becomes what if the administration, for whatever reason, simply does not work out? the idea, guys, is very simple starve moduro of money if he has no money, will he be able to keep some of the military leaders on his side that's the real question big moves here, guys we effectively you have a country with two governments, and you have a company nas i don't want to say not being led right now, but it's certainly got to be an incredibly difficult position not knowing what its future holds. roznef loaned venezuela a few billion dollars. they took a percent of citgo so putin is in play as well >> that's deep you are right.

that is deep citgo historically, so many crazy things happened as you can remember i remember they didn't have oil for their own people, and they were sending it up to massachusetts with robert f. kennedy jr that is the cash cow down there for moduro, isn't it this spells trouble. >> it's the biggest move against the moduro regime by far the sanctions, yeah, that gets the headlines. the citgo news is really the interesting part of that remember, there's 10,000 prus americans who work for citgo there are three refineries. he does not come to the united states because -- >> he has been watching huawei

>> what i have heard and others have reported also is that a number of the top executives are now in the bahamas in a satellite office trying to figure out how to maybe get citgo revenues to the bahamas, which then they could send back to venezuela >> this is just the first move from the united states government, though there was a bolton yesterday at the press conference handwritten a piece of paper that some people say that said something about sending 5,000 troops to columbia, and a lot of people are thinking that was a signal to the military in venezuela, look, make your choice now this is the first of many more they've been supporting moduro, but if that's the signal that's coming, you have to wonder what the military leaders there are thinking too >> you know what they're thinking what's my way out? whether that's asiel you will oorp imunit.

think about it if you are a part of that regime with some of the stuff that's happened down there, and you don't like moduro, but you are sort of pledging your -- you need a way out here's the reality, guys you know okay money has been worthless for years in venezuela bullets have value they're running out of food. they're probably going to start running out of fuel. that is a humanitarian crisis of the first order. >> brian, you heard th inflation rate >> 10 million percent. i will say one thing, the greatest billboard ever bought, the greatest investment ever is at fenway. citgo, a sign of it. 1940 was when -- it's still there. 1940 it's still every time you see a red sox -- anything about the red sox, that was the greatest investment ever made, i think. >> yeah. citgo is a u.s. company. most their management is american the top people are venezuelan.

you have thousands of people all over the country imagine being in their position today. what's going to happen the u.s. government wants citgo to keep running because what you don't want also, they produced a lot of gasoline. if there's an issue with citgo's refineries, that could cause gas shortages in part of the united states >> now it's lower. i think is it the guidance >> they came in with 231 it was better than had expected. revenue, right, slightly above as well, but if you are looking at the guidance for the full year for this current full year, they're now saying $10 .45 to $10.90 earlier they had suggested $10.60 to $11.05 this includes a head wind of about 10 cents from the acquisition of m. modal. the street was sitting at $10.74 you are talking about them taking down their own guidance talking about some head winds here lowering their earlier

kpngss the street sitting at $10.74, which could be in the middle of this current expectation their own guidance has come down >> yesterday it was up a little. >> it took me a while to get down to the guidance at the bottom i like halls meanthol. >> the cup is over here. >> that's not fair that's not fair. >> right a real one would be better coming up, a busy day for dow components set to report in the next half hour we will bring you the pfizer numbers when they hit the wire they'll probably make me wear a mask by the end of the show. the fed kicking off a policy meeting. will he that talk strategy ahead of the big announcement. take a look at s&p's 500 winners and losers sfx: [phone ringing]

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welcome back you're watching "squawk box" live from the nasdaq market site in times square. >> good morning. we need to -- >> way too early >> we need some kind of -- >> i need something to wake me up >> that can wake you up. >> pg&e filing for bankruptcy protection early this morning. the company faces billions of dollars in it possible damages from last year's wildfires in california pg&e is calclecalifornia's biggt utility providing gas and electricity for 16 million people china firing back after the justice department filed criminal charges against huawei. the u.s. formally seeking extradition of the cfo up in canada they've be beijing calling it unfair and

immoral. the u.k. holding another critical vote on brexit. lawmakers will decide whether to approve program's theresa may's plan to leave the e.u. the vote is scheduled for later this morning u.s. equity futures at this hour indicated down weak again this morning. down 49 or so on the dow the s&p down two and change. nasdaq down 15 futures got a little worse as 3m's outlook came out, and now that's why the dow is down if we look at 3m, it's a 186 bid now. 189 ask after closing up 193 that's indicated down four or five points, which added another 30 points of pressure. >> yeah. it's interesting when they talk about the head winds that they're saying e seeing for 3m, didn't mention specifically china didn't mention trade didn't mention any concerns about the u.s. economy though will be all the issues that the street is going to be

ferret out right now, again, though, that stock down 2.4%. let's talk about the broader markets. athe fed gets set to kick off the two-day meeting on rates today. joining us for that is stephanie lange. principal and chief investment officer of hammic burg juliana manuel at btig let's start out just talking about the fed. i wanted to start there. it used to all about the fed now the fed has the two-day policy meeting, and we've barely mentioned it is it still all about the fed, or is this earnings and china and the economy at this point? >> it's all of it, and actually, in a way it's refreshing that we're not talking about the fed as much and focussing as much on earnings as we are given all of this other news. the fact is what we're looking from the fed is a reaffirmation of that more dovish tone on january 4th. the bar is high to really put out that sort of expression of further patience

>> i kind of think that's what it is. we've already written them off thi they've told us they're going to be more dovish we are really concerned about what we're hearing on earnings, the economy, and china right now. especially with all these companies reported >> exactly you heard yesterday some bearish sentiment from companies reporting. you know, our concern is really around the 2019 expectation. we've already seen earnings numbers come down from 10 to 6, and we really think that earnings recession is still in the cards. >> you do? >> yes, we do. if you look at really the xus numbers, our concern is that you'll see weaker numbers. energy, i talked about this the last time i was on now for our expectations as we're going to see further down side. you already have some negative numbers built in there >> you think this is coming --

you think the bess -- this is something that catches up to the u.s. economy too >> at this point, i mean, we think that the u.s. economy is in good shape. what we're looking at, though, for earnings numbers is if you look at -- if you break down q1 through q4, q1, q2, q3, we're at 1%, 2%, 3%, and then you see it jump to is 1%. -- 11%. if it comes down to where we are for q1 through q3, we're barely positive at that point we see a lot of these numbers coming out earnings expectations are coming down we can be flirting with that earnings recession >> what do you think about that julian >> from my point of view, you really baked a lot of negativity into the equation. you know, very clearly a lot of this is centered around the concern of the slowdown in china. if you look at chooirn aina and currency innic two, the strength

in the currency is telling you that this isn't necessarily that china implosion moment that people are looking for for the last six or seven years, and what it is is a more typical western style recession. you are now at the point where stimulus is starting to come into the pipeline, and that is why there's a bit more optimism potentially for the second half of the year when stimulus starts kicking many >> you would be a buyer here >> we are. we absolutely are. our view is you're basically midway at this point between the all-time highs of last year and the lows around christmas. we think it's likelier that you are going to test the all-time highs in the middle of the year than retest the lows >> julian, thank you very much it's great to see you, stephanie. >> before we go -- >> pfizer is down on the outlook again because the company has adjusted netted. what's wrong, andrew talk about howard some more? >> no, i was going to tell you something that may have -- >> let me just do pfizer >> 64 cents was a penny ahead. revenue okay

also, it was -- i think the current estimate was 13.89 and i think the number was slightly above that for revenue the outlook adjusted is 282 to 292, and the street is at 304. even adjusted, you are talking about a midpoint of about 287, and the street is too high at 304. now that's not too bad i've got a little bit lower on my machine, but it's off a little you know, i was looking to see whether the outlook wasn't adjusted because sometimes it looks lower, and it's not, but that looks like they're taking into account any special items which you assume the analysts are. check out the revenue for' 19? it's 52 to 54 indicate, and i don't have an estimate on the revenue for 2018, but not for 2019 they earn -- the revenue was

53.533 >> revenue for 2019? the estimate on the machine is 54.25. >> it's 52 to 54 both the top and bottom line are below. let's see the high on the -- >> what's up >> i was going to tell you, it's just come back for the last apparently 25 to 30 minutes there was a global outage on google's g mail, including the corporate and personal service >> again -- >> it's apparently just come back think about if the world -- if nobody had e-mail. >> i do not have a personal e-mail >> take personal out many corporations now rely on g mail if you had a full day without e-mail sf squawk returns in just a moment >> life would be a little better more dow components.

all right. when we come back this morning, chip wreck semiconductor stocks under pressure over fears of a eng slowdown in china.

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pessimistic forecast from nvidia drove down chip stocks yesterday. joining us now, senior analyst from niediman. you -- there was -- pretty deep here people don't go from a buy to an underperform in one step you did that on nvidia that's at least two steps as a downgrade. >> yeah. it took us some time to do that, but there is a theory to why we downgraded about a 54% of the revenue is coming from gaming a large percentage of the revenue is in china. china is a huge market for

graphic cards. the economy in china's decelerating dramatically. the second area is data center that's about 25% of revenue. nvidia has been dominant in data center for the last three, four years. they sell to all the hyper scalers. we saw a data center slowdown, deals that did not get booked in the quarter. we're seeing a slowdown in china. and the third area is the valuation. nvidia's valuation is about 28 times forward earnings that's about a 40% premium to the semiconductor group. even the highest kind company trading at 20 times earnings is trading 40% above that so we think there's going to be a re-rating in the price to earnings multiple. close to 20 times earnings and on $5 of earnings next year, we get to a stock of maybe a hundred or below those are kind of the reasons why we downgraded to a sale

opposed to a hold. >> the gaming market was supposed to take up the baton from the crypto weakness or something. why didn't it? is it -- do they have competitors? a a&d a force? why did the gaming sector not pick up the slack? >> it's not that it's competitive. it's more about in demand. so the demand for graphic cards particularly high end graphics has slowed down dramatically so they had a new architecture, a term that had very high asps so people were not buying -- consumers weren't buying on the high end >> anybody else to worry about china? we've got like five seconds. >> we cut estimates last week across the board the title of the report was china, china, china. so semiconductor stocks are leading indicators of a global economy. we think we could be entering a global recession >> thank you "squawk box" returns in a moment more from howard schultz and

other dow components about to report the future of technology investing

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i met up with him where he was applauded and criticized about his presidential run 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 i'm joe ternen along with andrew ross sorkin and becky quick. there are other people here in studio tom farley, ceo of farpoint, former president of the nyse group. >> look at this guy. >> you're okay walking into the nasdaq with your head held high? >> shudder every time. >> but you don't itch and scratch as much as you used to you don't get a skin condition here >> no. it's good to be with you guys. >> i talked to stacey about it >> i don't think they're happy, my old colleagues, that i spend much time here at the nasdaq

i left she's better than i was. sometimes you have to step aside. >> everybody is running for president. is this you yesterday announcing what did you say a chicken in every pot what were you -- >> that is a good shot though. in front of the white house, anybody looks good >> do you want to fill in some of the the -- do you want to give us insight? >> unlike howard schultz and bloomberg, i don't have billions and billions of dollars. >> that makes you more common. >> i'm going to sit this cycle out and i'll see you 2024. >> all right let's look at -- liesman's here too. >> let me give you verizon's numbers. >> verizon coming out with earning of $1.20 a share a beat of 3 cents. revenue coming in about flat with expectations. $34.3 billion versus the $34.4

billion they were looking for. it's the guidance that matters, but they're not laying this out in an easy basis they say adjusted earnings per share excluding the impact of the new lease accounting standard to be similar to what they saw for 2018 adjusted earnings per share looking at the earnings per share, coming in at -- what was the number for the full year $4.71 for the full year. estimate for next year is $4.72. again, that excludes the new lease accounting standard which will have a head wind of about 1 to 2 cents per quarter for a full year of 2019. if they look at revenue numbers, they're saying low digit percentage growth and full year consolidated revenues on a gap reported basis i don't have the numbers up for what the full year is, but again, a beat of 3 cent ifs for the current quarter.

some opacity until you figure out the math on these numbers. >> some what >> opacity until i figure out the math i don't have the numbers in front of me. >> whoa! that mean you can't really -- >> it means i don't know it sounds close. the street's going to take what it wanted from it. they're saying about the same number for the year ahead. the year ahead is $4.73 this year estimates $4.73 next year. capital spending in the range of $17 billion to $18 billion. >> oh! boy, this is good. >> a launch of the 2018 effective tax rate 24% to 26%. again, you can see verizon shares down. and now here's joe enjoying a starbucks. >> ooh, man. they have the best -- doing a reverse boycott. >> this is the greatist cynicism in the world let's take a look at futures, what's going on as the market is two and a half hours away from opening up right now would open off 15

points nasdaq off six points. s&p 500 off a point and a half for now. couple headlines to bring you as well this hour two other dow components out this morning we got 3m. they are earned $2.31 per share for the fourth quarter but the company also lowered its 2019 earnings guidance citing the current economic environment. a similar story for pfizer which is also out with its numbers this morning pfizer reported quarterly profit of 64 cents per share. the drug maker also giving 2019 full-year forecast that falls short of the consensus and harley-davidson shares they're under pressure this morning. you're looking at that stock down almost 6% harley earned 17 cents per share for the fourth quarter that was well short of the consensus. revenue also falling short, that on weak demand in the u.s. let's tell you about a couple of other stocks on the move this morning. pg&e filing for chapter 11

bankruptcy protection as it deals with liabilities from wildfires in 2017 and 2018 the utility company has filed a motion seeking court approval for $5.5 billion in debtor and possession financing that stock down by about more than 5.5%. earlier we saw it down by over 10%. $11.32, the last tick right now. also whirlpool reporting $7.75 a share beating estimates of $4.23. the revenue did fall below what the street was expected. and whirlpool posted its first annual loss in more than ten years. however, the company expects to return to profitability this year that stock is down by 6% all right. the fed is kicking off a two-day meeting and many market participants are taking a one and done approach in 2018. this is according to the latest cnbc fed survey. steve liesman joins us now we have a guest coming up, i

think, later too >> we do. >> big one. >> yeah. >> it's a fed person you don't like this one? >> i like marian a lot interesting guy. >> why are you less than -- >> because, it's like my wife asked how dinner was last night. it's a seven out of ten. >> you said that >> why don't you just say ten? i hope you never -- >> because peter lugar is a ten. the best she makes is a ten. >> i hope you never ask your wife for feedback and she says that was like a two. go ahead >> what that number actually represents, we could have some fun on that. >> exactly >> so let's talk about what the expectations are among the 46 respondents to the survey here >> a even? why not give it -- what's it cost you to give -- why not, greco? why not? >> she made you a dinner you say thank you. that was delicious. >> what does it cost to get you

ten? >> it took me everything to get here to this moment preparing the report and getting up in the morning. talking about dinner was not the the plan i want to talk about the expectations for the fed ladies and gentlemen, thank you for joining us changing times means changing graphics now we have to have two columns for the percentage of respond t respondents looking for a hike and the percent looking for a cut. so 78% look for a hike 17% look for a cut this year that was the first appeared in the survey in december where it was 12%. that is now up for those expecting a cut. look how divided the market is for 2020 we haven't seen this kind of division in a long time. the outlook among respondents in the market was pretty monolithic you can look at the -- eventually getting to 2.98%. among those looking for a hike, they see 60% coming in june. you know, not everybody sees that coming.

and now i want to talk about the great unwind, we call it, which is the fed balance sheet we're now at four. >> by the end of 2021. >> and getting there by the end of 2021. then we asked is the fed going too fast, what will the fed do 68% says they will stick to the plan 42% say they'll reduce the pace. the 42% are saying the fed's going to change. that's a large amount. now, what is it worth? what's a balance sheet reduction of up to $600 billion worth? and they say about 42 basis points of additional hiking is the way they measure this. here's some commentary jim bianco says the fed needs to have a discussion of what $600 billion in the production means. it seems the market thinks it's two to three hikes and one more here at oxford.

she says the fomc will signal a pause by removing the reference to rate increases and modifying or removing the balance of risk assessment so we're in a place where policy is changing, the outlook is changing i think that fed chairman jerome powell and the fomc have decisions they need to make. >> maybe they don't want to. the communications they probably want to keep at a minimum this time around. let's just hold steady we've done a lot of communicating and changed signaling. maybe if we could hold steady this time around >> there was a journal article earlier last week saying the fed is ready to -- it depends on what you -- different people got different things from it but my read is that i don't think the fed's quite ready yet to signal this big balance sheet change because -- >> i agree >> -- it's a big deal. >> i would agree too i would think they hold pat for now. just get out of this with saying as little as possible.

>> the question is do they have the luxury of that i think there will be reporters there asking a lot about the balance sheet. i would say the fed doesn't know they don't know quite where they're going. >> i'll introduce you. let's get -- then you can ask. let's get to our guest host tom farley farpoint chairman and ceo. even former president of new york stock exchange. >> i agree with becky. i think they want to signal as little as possible because in march you have two these two binary events that are going to have tremendous impact on global growth, brexit, and china/u.s. trade relations so don't you think that they're trying to hunker down as much as possible to see what happens as of march 31? >> i do. and i think one of the lessons this fed and maybe all feds will learn from here on in is it

needs to be more sensitive to what's happening across the street over at capitol hill and in the white house i think those are the things it needs to figure out. a lot of what the fed thought was going to happen has changed because of what's happening on that side of the street. i think you're right they need to wait and see what happens in march >> tom, how long were you at the big board? >> five years. >> five times four is 20 you saw 20 earnings seasons, basically, while you were there. does this feel -- not this one, but next quarter -- like we could have a down earnings is there a earnings -- we had someone on forecasting there will be an earnings recession this year. do you believe that? is that the feeling you're getting? >> i certainly think it's possible it's binary. it's hard to come on air and prognosticate what's going to happen because a lot of it depends on global growth. >> china >> i do, absolutely. look at caterpillar yesterday. only 10% of their sales are

indochina. >> still an earnings -- still higher than last year. >> but it's headed the wrong direction. and apple's down 75% a lot of that -- pardon me 35%. a lot of that has to do with china. i think if nothing is resolved with china and china's economy itself continues to -- >> you think it's the trade war versus the china economy we spoke to a number of people in davos who privately said it's going to be ugly, ugly, ugly >> some of it is optics because you had the tax benefit in 2018. but i don't think early 2019 earnings are going to be inspiring at all >> i just wonder -- i mean, we're not talking about a -- you know, the second derivative. we're talking about down below last year. no one's there right now for s&p, right no one's there -- in 2020 or -- >> aggregate earnings, no.

but it's pretty close. >> it's pretty close, but here's what i wonder. how much of this is ceos getting far more conservative in the guidance they're giving for the full year? you look at the numbers today, from pfizer, from 3m you mentioned there are these binary events happening. we don't know what's going to happen if you're a ceo, maybe it's prudent to pull back expectations as quickly as you can. >> i know it sounds like i'm sitting on the fence, because i am, but if brexit goes more favorably and trade relations are normalized in a beneficial way for both parties, we'll sit on the s&p with an all-time high and the economy will be rocking in june. it'll all -- you know, everything -- we'll look back and say why was everybody so worried? >> do you like a brexit deal more than a no brexit deal

>> it almost feels like the 1999 -- remember the bug, december 31st, 1999, bug that the world was coming to an end i think it will not be as bad as people think >> can we underscore the math of what you were talking about? we were talking about the growth of earnings off a level that is 20% above where it was last year >> we want it to go up every year >> if we did three or four or five, in case it matters to anybody the way analysts think about this nominal growth of the economy. right? if the economy grows 5% and you do 5%, you maintain your market share. >> if you hang onto what you had, it's not even that bad. >> i know people are talking about zero i would count that as a victory. >> you're looking at it from the perspective of the economy if you're looking at the perspective of the market, the market is going to give you only props if you are showing growth.

and because we traded up to levels of these great 20% gains in earnings. that's the -- you're right it could from an economic perspective not be that big of a deal from a market perspective it could be a lot more problematic. >> that's taxes, right you had the tax cut. you go up this level you maintain that level. then the question is where do you go from there. if we did 5%, would that be a good number? zblit would. but a lot of that 5% would be buybacks not that there's anything wrong with buybacks, but it's not necessarily signaling the underlying economy growing at that level >> all right we have a lot more to talk about. did you get a coffee today i'm buying would you like -- >> no, i did not i look forward to having this discussion though. it's always fun listening to you and andrew talk politics >> honestly, andrew, if you talk -- i'm not saying this in a cynical way. if he doesn't run, that's fine but just to go against the grain

because he's a life-long democrat and try to bring them back to some sense of -- >> he's not trying to bring them back he's doing it independently. >> a lot of what's being proposed by the far left is absolute insanity. and he has the nerve -- can i get you like an iced latte or something? it's delicious >> we have a tape of this interview with howard schultz. >> are you supporting howard schultz? >> i'm supporting something he's saying >> i am with you, joe. >> would you give him a three or four >> you go to town to open a bar, don't go all the way to the other side of town to open a bar. >> right but what do you give him a two for his presentation yesterday? >> i would say a minus two >> a tough grader. >> we have the appropriate music this morning coffee in bed for everybody today. when we come back, we'll talk more about this protesters facing off with howard schultz last night at an event after his announcement he is taking steps to prepare

for a run at the white house as an independent we've got the video and his reaction coming up meantime, check out the three big dow components that reported this morning right now looks like pfizer and verizon both down. it looks like 3m is up by about 1.5% we'll run you through the numbers. stay tuned you are watching "squawk box" on cnbc i'm a veteran

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and if we are ever late, we'll give you a automatic twenty dollar credit. my name is antonio and i'm a technician at comcast. we're working to make things simple, easy and awesome. welcome back to "squawk box," everyone the futures have a mixed picture at this point. we've had several dow components reporting. one in positive territory. that's enough to help the dow futures up by about 12 points. the others in negative territory. nasdaq now indicated down 2.5 points and the s&p indicated down by less than a point. coming up, howard schultz facing criticism after announcing he's considering a run for president. that news-making interview i did with him last night next as we head to a break. here's schultz on how he would take on trump. >> i think president trump is a very insecure man.

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welcome back to "squawk box. howard shulgchultz announcing h taking steps to run for president as an independent. he faced some criticism inside last night's event where i interviewed him with a live audience of 400 people a few protesters spoke out take a look at this moment >> don't help elect trump! you egotistical billionaire [ bleep ]. go back to getting ratioed on twitter. go back to davos with the other billionaire elite who think they know how to run the world. that's not what democracy needs. >> we're going to get to that

idea and that sentiment in just a minute the author of winner takes all sent in a question do you agree that billionaires have too much power in american public life? and it gets at the issue that aoc has been talking about it gets at the issue elizabeth warren has been talking about. >> you know, the monarch of billionaire now has become the catch phrase i would rephrase that and i would say that people of means have been able to leverage their wealth and their interest in ways that are unfair and i think that speaks to the inequality but it also directly speaks to the special interests that are paid for by people of wealth and corporations who are looking for influence. and they have such unbelievable influence on the politicians who

are steeped in the ideology of both parties once again, guy back to this if i should run for president, i am not in bed with any party i am not in bed with any special interest all i'm trying to do is one thing, walk in the shoes of the american people. >> and i got to tell you guys -- >> they were definitely -- when you go back to davos, you a-hole they were talking to him i just want to be -- >> they were thinking about you. but i was the proxy. >> but they said billionaire >> that's how we know. >> how could i not be on schultz's side when the other person is that bearded whatever -- you know, the guy with the populist whine. you're successful, i hate you? >> people booed him for, i think, really his approach to the question but i have to say and we'll show it in a second, when i tried to rephrase his question in a more polite way, there was applause

for the question which is this and the sentiment he was suggesting >> it was in a bookstore, right? >> we did this in new york city. >> and you're surprised there's applause when they're trashing a billionaire? >> i'm just suggesting to you that there's two sides to this story. let me show you -- >> right and you get to choose. and normally you would choose howard schultz's side. >> this is why being an independent is complicated and -- what? >> nothing i just -- to me it seems very simple i don't know >> what simple way >> in ameritocracy, people who create jobs, make things of themselves and become huge philanthropists -- >> you should be a huge fan of howard schultz and michael bloomberg. >> i am. >> this speaks to the problem the democratic party has when you're speaking of a president with an approval of 37%. schisms within the party >> and it's interesting.

to the extent of republicans come out in favor of him to support him. and you seem to be somewhat favorable of him doing it. there's a cynical take which is president trump said it last night that when he tweeted out effectuallily goading howard schultz to run, because he thinks it's going to split the democratic party >> i think the opposite would be true i think this would be a big gift to the democratic party. >> really? >> because the democratic party is so far left there aren't the votes to beat donald trump in a general election the candidates who are running on the left are pulling even a little bit by howard schultz into -- >> you mean if schultz does not run as an independent? >> no, no. just if he runs. because i expect he's going to realize he only has some small percentage of the vote and at some point he will pull out so he doesn't impact the general -- >> and the latest warren is talking about, she's talking about kravitz and snyder saying these billionaires have too

much they paid taxes on accruing it and creating jobs and being successful he is a bad guy? >> but this goes back to is there a middle that is fiscally conservative and socially liberal? >> what does that mean yes, but it doesn't mean that property rights don't exist anymore and you confiscate money people brought up. >> i'm saying elizabeth warren -- let's say elizabeth warren is over here with 70% marginal tax -- wealth taxes but then the question is, is there a middle ground where there's a huge -- there's a big enough group that is fiscally conservative you have someone like howard schultz talking how big the debt is something president trump is not trying to fix any time soon either could you find enough people both on the right and the left to actually get in the middle? >> neither of the parties look like they used to look. >> are you boycotting it or not? >> i still drink my ice coffee every morning. >> i'm the only one here with starbucks. >> i am too.

>> talking about people in the middle, people who may or may not run, michael bloomberg monday said, quote, there is no way an independent can win and i took that question to mr. schultz. i should tell you there was applause when the question was asked. >> mike bloomberg has built a great business, was a great mayor. i have tremendous respect for him, but i don't agree with his conclusion about 42% of the electorate identifies themselves as an independent. 30% are registered and another 12% affiliate themselves as an independent. now, those 42% have never had a legitimate choice to vote for what they believe in so they've had to vote for democrat or republican i also believe there are life-long democrats and life-long republicans who are -- will likely want to find a new home nobody wants to see donald trump

fired and leave office more than me >> i will tell you, he's already building a ground game hired steve schmidt. they believe they can get on the ballot in all 50 states in every county they clearly have hired lawyers and all sorts of people to try to begin doing that. that's always been -- ballot access, by the way, has been half the challenge who has tried to do this historically. >> but only half, bloomberg doing this two years ago, his concern was even if you did get on the ballot in all 50 states, there's the electoral college. if it comes down to a tie, then you have the vice president who declares the -- >> the math is very, very challenging. >> it's difficult, but you are holding out hope that maybe there's -- >> i'm not holding out hope for anything >> you're holding out hope -- you don't even know what i'm going to say you're holding out hope that some republicans could see what

howard schultz is saying and say i'm disenchanted with trump and i may move towards a howard schultz. >> i saw some of those people last night >> if you'll let me finish, i'm trying to tell you for someone that is familiar with those types of people, howard schultz in not immediately saying the biggest thing i need to handle is climate change or gun control, for him to say it's debt and it's fiscal responsibility and it's bringing in -- and to stop the tribalism between the left and right, that appeals to normal people more than -- and that's why i'm saying, andrew -- i'm not just being cynical or sarcastic about this it could appear to more normal people than the far left or if you don't like trump, fine but i'm saying that i get it i get what you're saying here a with schultz he's far more attractive to those on the right than a bloomberg or even a biden, i think. >> we'll see

>> if bloomberg runs -- i think he will. >> gun control and climate change >> the guy is worth $50 billion. he ran the most dynamic city in the world. i think he'll choose to run. buzz that help schultz in that does the conversation in the democratic party and the independents become about fiscal conservatism and all of a sudden schultz becomes more appealing >> it could bring the conversation back. if you believe elections are sadly often about money, mayor bloomberg can clearly outspend howard schultz in a big way. the other thing is the apparatus. we haven't talked enough about this the democrats and republicans have a huge apparatus. they have massive data bases in terms of being able to reach people howard schultz is going to have to effectively build his own you can't just buy this stuff off the shelf kind of thing. and so, it just -- you can see just the hurdles are so much

higher >> all right we watched it play out before with perot >> with nader. look last night someone was telling me they were blaming jill stein on hillary clinton's loss against donald trump in '16. >> you're throwing your weight behind the far left instead of someone you've known for years and everything else, and immediately -- i can't believe you don't believe kamala harris or elizabeth warren is where the party should be rather than howard schultz >> i didn't say any of that at all. >> projecting. when we come back, we have results to pfizer results this morning. also you are looking at shares of 3m which reported about an hour ago that stock is now indicated up by 3.1%. it's a gain of $6. 3m beat on both the earnings and the revenue, gave a little bit of a lowered guidance for the full year, but we'll talk more about that too right now as we head to break, take a look at the u.s. equity

futures. as 3m has picked up, the dow has too. right now the dow indicated up by about nine points s&p futures down by just about a point and a half, and the nasdaq down by close to three points. stick around "squawk box" will be right back.

welcome back to "squawk box," everybody. we've got some key dow earnings out this morning let's start with 3m. that company beating by 3 cents with quarterly profits of $3.31 a share. pfizer coming in 1 cent ahead of estimates at 64 cents a share. but revenue falling below. and that stock off 2 1/3%. and verizon bottom line helped by greater number than expected subscriber additions that stock off 1.5%. been watching the futures this morning. for the most part, they have improved as we've gotten these earnings in fact, the nasdaq and the s&p just about in positive territory. nasdaq just flipping and the dow indicated up by 13 or 14 points. let's talk the earnings season so far with mike santoli and our

guest host tom farley. mike, probably a disappointment if you're looking at the guidance that's been coming in from what we heard from caterpillar yesterday, 3m, pfizer today 3m's trading higher at this point, but what they talked about was not great. >> on a net basis, somewhat disappointing. i think everybody was geared for numbers in general have to come down but sometimes you don't know the true expectations until you see the guidance 3m is a good example of that they lowered the range below consens consensus, but the market was thinking it could have been worse. tell me how each of these did in 2018 pfizer was considered a very defensive stock, a great run at the end of last year same with verizon. 3m actually got pounded from beginning of last year so i think it's more about the field position of the stocks but in general, i think the question is look for the first quarter, 2019, the estimates are down in the 3% area.

and for second and third quarter, they're around four they get chopped down and that's been the whole question. >> you look young, but you're very wise from the 30 years whatever. >> yes >> i don't think we will have an earnings recession that's just my viewpoint i'll tell you why. if the fed is near neutral, the dollar doesn't strengthen, anymore. we don't have the foreign currency head winds. i think just 4%, 5% would be a bad year in 2019 for the s&p but i think to actually be a down year in s&p earnings is not in the cards what do you think the actually chance is. >> so 30% chance >> maybe not even that high. >> what would cause it >> no, i think it's kind of the hard landing in china, global --

>> hard landing in europe. >> u.s. decelerates faster and gets below 2% for a couple quarters, something like that. there's no magic that needs to happen to get earnings to be positive when global nominal gdp is 5% or 6%. nominal. that's kind of where we are. the problem is where's the growth going to come from that nudges you to that 3%. if google with its massive market cap is still growing in mid-teens percent or something like that, there's a lot of stuff not growing at all >> how much of this is just the part of earnings season that we happen to be in right now? we got through the financials. now we're in the industrials maybe that's not so great. we keep moving through >> it is what it is. i feel like it's almost like this every earnings season there's a story line that seems to hold in terms of one week and then you get to the next week and everyone got geared in that direction >> different sectors reporting >> it's never a clean narrative.

then you have all these offsetting currents. >> is the hard landing in china -- i don't even admit the possibility there. what is a hard landing -- >> negative s&p 500 earnings >> but it's a controlled economy. don't they have ways of just making sure it doesn't land hard >> they have ways of telling it didn't land hard >> when oil crashed and emerging markets had a recession. >> all right it's possible. you gave it less than a 30% chance that's why i asked you. >> because you were going to agree. that's why he asked him. >> i started by flattering you >> you're going to avoid any false perception >> you look good, but you're very old. >> but you're wise >> mike will be with us for the rest of the hour coming up, a look at today's big headlines and morning movers "squawk box" coming right back so, servicenow put your workflows in the cloud, huh? mmhm.

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weaker iphone sales. three, the fed begins a two-day meeting today. the central bank is not expected to raise interest rates this time around, but there will be questions and answers. coming up, we're going to talk pfizer and the company's results. stock down 3% in the premarket then the fed set to kick off a two-day meeting president. at the top of the hour, former mississippi fed president will be joining us. "squawk box" will be right back. ♪ ♪ let's go from plans... to full-blown production.

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box. a lot of market movers this morning. want to get over to dom chu who joins us with some of them >> i'm going to take a deep breath because a lot of them tied to earnings three dozen s&p 500 companies slated to report before the close. early on these three will have the dow impact 3m shares seeing some gains in lighter volume premarket after the industrial giant posted better than expected sales and profits thanks to growth in all operating units in geographic regions but it did lower its forecast. those shares up 2.75%. then you've got a drug maker in pfizer offering full-year profit and sales guidance that fell below estimates. those shares off 2.5%. then there's verizon shares which are also moving a little bit to the downside after the telecom giant, the biggest u.s. wireless carrier posted better earnings on slightly worse than expected revenues. it added more postpaid wireless

describers than anticipated. and a couple of other reports of note to keep an eye on in the premarket as well. shares of harley-davidson down big after reporting quarterly profits and sales fell below expectations due in part to fewer vehicle deliveries in key markets including the u.s. allergan shares moving lower even though it beat on the top and bottom lines also a $2 billion stock buyback program. also watch what's happening with lockheed martin as well. shares moving lower despite a slight profit miss, revenue beat it's moving a little bit to the downside strengthening the f-35 fighter program helped a little bit. back over to you >> thanks. for more on pfizer's earnings, let us turn to mike bailey director of research at -- i guess it's fbr cap pal markets. >> fbb capital markets >> you never know around here. anyway, mike tell me about the quarter just ended and even more importantly,

the guidance which they had to bring down >> absolutely. it's kind of a mixed quarter in general we like the fact they beat on sales, they beat on earnings the one flaw we'd point out, they got a big drug called i-brands little bit of a slowdown there little concerning, but that drug is doing about $4 billion a year in sales now probably headed towards $10 billion. several years ahead in terms of growth looking backwards, i think it looks -- it was actually a good quarter. we look ahead, certainly stock is off mentioned some of the other stocks off today i think a big part of that could be the new ceo coming in i think he does want to take expectations down a bit at this point in the year, give himself a little bit of wiggle room to come back and meet or potentially exceed some of these numbers as we get towards the back half of the year. >> what's the growth story for pfizer given that the regulatory backdrop is, you know, always a little bit uncertain or maybe even negative at times with drug pricing. but what would the positive story be i know it's got a decent yield, but is it a pipeline story

>> so, you know, i think it's diversification. basically this company doesn't have a lot of potholes you look at a lot of other big drug companies, they got massive block busters that could go generic. pfizer's got one smaller pothole this year. a drug for pain. that's going generic that's probably what's hitting guidance today as well once we get beyond that, pfizer's got a very nice sort of runway so they've got from now until let's say 2025, '26. sales growth in that time frame. it's pretty interesting where some of the peer group may see choppy results that's one of the aspects we like of pfizer at this point >> mike, would you consider pfizer to be a likely player in any further consolidation? are they going to be a bidder for some of the more targeted bioteches or anything like that? >> great question. at this point, we would say no the company's been out they said we don't want to do the megadeal that's corporate speak for we're going to say no until we say yes. it's hard to know what to

believe there. but in general, if you look at what we're doing, they don't have a massive hole to fill. so at this point, i think they're in pretty good shape if you roll the clock forward two, three, four years, they get a bit of a haul. i think at this point you're looking at tuck-in deals those could be a $10 billion deal i don't see pfizer going out and buying gilead or some other massive megacap at this point. >> they -- you know, i don't know where the next big lipitor or whatever comes from, it would be nice with alzheimer's we always hear about the company that finally figures out one of these chronic diseases for an aging population is going to be the one to buy do they have the research team available to be at the forefront of the next big discovery, do you think? >> you know, i'd say pfizer, it's above average in terms of their research team. this isn't cutting edge, some hard core biotech that's going

to secure some massive disease >> that's like the at&t commercial they're okay >> but pfizer is a comfortable pair of shoes. this is not some exciting, they're not going to knock your socks off. but the part that we like is they're diversified. you're not banking on one massive product today. they got a bunch of different drugs. what's helpful for us, a lot of them are already on the market that's a very nice tail wind over the next few years. then you're notbanking on five or six others that have to work. if one or two drugs work, $2 billion in sales, that's helpful. but you're not banking on it >> what's your favorite major? >> we like j&j probably our most attractive a little bit of risk reward here compared to pfizer obviously we've got litigation to work through. can you roll forward six months,

some of the companies trading low teens. it looks very attractive as the economy starts to slow down. >> all right, mike thanks mike bailey, fbb capital mark markets. it's 7:56 right now. so i guess we're going to break. coming up, former minneapolis fed president nar ya ma kocherlakota on the economy and check out the futures at this hour. we're up 35 points 'lbeig bk.he green now wel rhtac

new overnight. power provider pg&e filing for bankruptcy hurting from liabilities over last year's wildfires. we'll tell you what's next can howard schultz handle the grind? >> we'll see over the next three month ifs we can ignite a national movement for a better choice >> more from my interview with the former starbucks ceo including how he's respond to attacks from president trump on the campaign trail and fed's first meeting of the year about to kick off our special guest, former minneapolis fed president narayana kocherlakota as the final hour of "squawk box" begins right now ♪

live from the most powerful city in the world, this is "squawk box. >> good morning and welcome to "squawk box" here on cnbc from the nasdaq market site in times square i'm joe kernen along with becky quick and andrew ross sorkin and our guest host tom farley. chairman and ceo of farpoint you recognize him as former big board head honcho. the futures indicated up right now 36 or so that is the dow jones. the s&p is up 1.5, 1.25 right now. and the nasdaq indicated up nine or so. dow components and others this morning. after it's all said and done, we're in the green treasury yields easing a little little 2.74% on the 10-year utility giant pg&e filing for bankruptcy chapter 11

protection that company faces billions of dollars for its role in last year's deadly california wildfires and in fires from 2017 as well. the company's interim ceo said that pg&e remains committed to improving wildfire safety throughout the bankruptcy process. that stock had been down by more than 10% earlier this morning. now it's down by less than 3%. a decline of 35 cents to $11.66. ain exactly one year, jerom powell will be the fed chair for a year >> he did not get that great a grade. if you look at the average of the 46 respondents to our survey, he gets a b minus. bernankes last is a "b." and when we look at -- we di sect there's a lot of people that think he doesn't even deserve a b-minus.

83% the last time around gave yellen an "a" or a "b. look at the percentage giving powell a "c," "d," or "f." that's a bit of the precision there. >> yeah. some false precision there the guy is trying to raise rates. >> well, yellen did too. yellen was the first one in ten years. >> how much has to do with the word autopilot >> i think it's not just autopilot. but it's interesting you bring that up. because we asked about eight categories four of them, overall leadership he came down since 2018. even his regulatory expertise came down. but the big decline is in communication. and that's where i think the fed chairman has the biggest problem. john augustine writes, q4 was about losing confidence in all global policy makers elected or appointed. 2019 will be about whether or

not they regain any confidence and donald lust kin, jerome powell is the worst fed chair since g. william miller. >> that is harsh that is really harsh >> yeah. maybe i shouldn't have put that one up donald is out there a little bit. >> why not >> it's cable. it's cable, as you say it's autopilot it was a long way from neutral and also i think when he made another, you know, comment at the beginning of this year that was sort of controversial where the markets sold off when he's talking about the balance sheet. i think he needs to spend time to get it right. >> it feels he's gotten his footing. everybody makes these mistakes they step into things. remember when mnuchin told us a year ago when he made the comments about the strong dollar or not necessarily caring about a strong dollar. you got to realize what impact your words will have on the markets. and what comes from that >> yeah. they step into things?

like what? what kind of things? >> doo-doo >> you tried to say that this time >> i did do that steve, stay with us. we've got a big guest coming up. let's bring in our next guest. narayana kocherlakota is former president of the minneapolis federal reserve. thank you very much for being with us today. it's good to see you, narayana let's talk about what you would have done. you would have stopped raising rates quite a bit sooner, correct? >> yeah. thanks for having me on, becky i would have i continue to worry about risks. and i think there's downside risk to -- on the growth side from what's going on around the world. and there's downside risk to inflation that, again, partly from around the world but just internally we have not seen that strong inflation push i would like to have seen.

so i would have been much more cautious about raising rates in 2018 than the fed was. >> the fed sounds like for now it's going to be on pause. although it does sound like it would continue to shrink the balance sheet. is that the right move >> yeah. so i'm not quite sure why they're shrinking the balance sheet. i think they're going to need a big balance sheet the next time a recession comes. and as the economy grows, you're going to want that balance sheet to grow in lock step in order to have the tools you want for when the next recession comes so i'm not sure why they're shrinking the balance sheet. i like the -- frankly, i like the autopilot part of it, but i'm not sure why they're shrinking it >> i guess the point was that these were emergency measures. and if we've moved out of emergency period of time, maybe you want to get back to some semblance of normalcy? >> yeah. there is -- you know, back when i was in the fomc, we talked a lot about getting back to 2005 and 2006 we have to recognize the world is a different place

it's a world where interest rates are going to be low for a long time to come. it looks like a place you're going to need your balance sheet tools if there is a recession. you might as well be ready for that now by keeping, i think, a big balance sheet. >> you know, part of the argument that's been out there and again, i won't necessarily agree with any of this, but part of the argument that's been out there is you've got to raise rates so you have a little bit of dry powder the next time the economy comes down next time there's a recession, what is the fed left to do if we've already employed all these measures and left them out there continually? >> if you're worried about the patient getting sick, you want to keep the patient as healthy as possible. and so the dry powder argument is basically the idea is that if we -- you're relying on the changes in the position of your tools. you know, lowering rates is what matters. or easing the balance sheet is what matters the vision that most economists

have is actually -- it's not the change but rather the position of the tool that matters so you want to keep rates low. you're worried about the patient ever getting sick one you want to keep it big. >> can we talk about the cost of money and what money ought to cost we've got a -- what do you call it 2.4% funds rate right now. a 2% inflation rate. which means that real money costs 0.4% is that normal or should there not be some movement back towards, you know, there's a 300-year history of the real cost of money and it's certainly higher than 0.4% for overnight money. >> no, that's correct. but, you know, i'm not very good at telling you things like that. i think as a policy maker and i have to think about these through the lens, you have to

track where the economy is taking us. if you look at the estimates of the real rate of interests that williams had done. those follow a random lock they can go up and go down there's a lot of variation if you look over the next ten years of where we might end up with the real natural rate, might be low might be lower than it is today. or it might be higher. i don't think we can -- the thing with the random walk is you can't say we're going back where we were. >> should the fed then hold tight until we get the inflation that you were expecting? and sort of say, hey, we're there now as long as inflation isn't reacting >> i would love the fed to be more responsive to the data. what i mean by that is, it's not -- i think announcing a pause right now is not really what i would like to see them do

when powell stands up before the press not in january but in march, it could be decided to bring rates up or down i want a more flexible fed than we've seen in the past, really the past 15 years. >> can i give hame grade in communications i've given him an "a" in communications right here. can i do that? >> because of what he said or you agree with what he said? >> i think to say you're data dependent means you're data dependent. don't make any -- >> the problem is what data are they dependent on? that's where so much of the questions come from. key numbers that you get from different dependents of the government what the 10-year does? what data should they be following? >> so the great thing about being a monetary policy maker, you get to filter all the

variables down to two. there are forecasts of error you do the best you can on jobs of inflation and employment. and then yo go on the basis of those two variables. if inflation looks low, you want to keep -- you want to add a combination. if inflation looks high, you want to take a combination out >> but low unemployment shouldn't cost you -- uh-oh, unemployment is low, i've got to raise rates. that's not part of the mandate >> as long as -- i don't think the mandate says don't lower unemployment i think the mandate says don't have inflation be too high so as long as inflation remains

low, i see no reason to be worrying about the level of accommodation having monetary policy being too easy. >> narayana, tom farley here a minute ago you said it's employment and inflation now you're saying notwithstanding the fact employment is at lows -- >> it's low employment you're trying to get low employment you're not worried when it gets there. that's not the concern >> well, rates are also near longtime lows, joe i think at some point you want to look at normalizing that. >> let me break in for a second here so on the unemployment front, you want to keep unemployment low. it's -- i see nothing in congress' destructions to the fed that says they should be sitting there worrying, whoa unemployment has gotten too low except because it has consequences on inflation. that's the only reason >> so play it out then you're sitting in the chairman's

seat and you get a 3% unemployment rate. then you get a 2.5% unemployment rate then you get a 2%. you're willing to let it go? and i don't really disagree with you, i just think that when you're in the hot seat there, you've got to be a little more sensitive to the potential risks to the upside when it comes to inflation. no or you say let them go >> so the risk to inflation is one that's manageable. we know how to deal with inflation. if it's -- especially if you're sufficiently data dependent. if you start to see inflation, then you want to raise rates but the unemployment number being low is not a problem except in so far as it leads to you forecast higher inflation. the fed has been raising rates simply because they don't like -- in my view, they're raising rates because they're worried about low unemployment, per se >> the two factors they look at, the employment if it's high,

then they try to get it low. if it's low, they don't try to prevent that >> right >> which -- >> he was not inconsistent -- well, then you're making -- you're assuming. all right. you're assuming. then you're making a leap. >> joe, what you need is for the fed to buy into your vision of the world. which, god help us no is this idea we have this big global supply chain that the number of workers is not limited, that if there's ever a price that is high -- >> i understand wage push inflation. i understand all that. >> no, no. i'm saying what hasn't happened and maybe the last question to narayana, they haven't necessarily bought into that model there there's a structural deflationary impulse in the world today. and they can push this unemployment rate much further than in previous decades >> it's bad to say it's different this time, but with inflation and amazon and global

rates being so low >> it's a big jump for the fed to embrace it. >> let's wait until we see some progress >> i don't know why they don't embrace it if you look at the models that the staff uses for forecasts for example, they are -- have a flat phillips curve which means they could have unemployment go very low and that's their own staff that says that. i'm not sure why they don't buy into -- you don't have to buy into the particulars again, that's the beauty of not being in particulars of any given story. what matter is the data. the data tells us the phillips curve is flat. >> thank you for being on. narayana kocherlakota. howard schultz is thinking of running for president but can the former coffee chief handle the grind and the mud slinging on the cam trail? we'll hear more from the perspective candidate when "squawk box" returns stay with us

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show me best of prime video into this... you'll see awesome stuff like this. discover prime originals like the emmy-winning the marvelous mrs. maisel... tom clancy's jack ryan... and the man in the high castle. all in the same place as your live tv. its all included with your amazon prime membership. that's how xfinity makes tv... simple. easy. awesome. welcome back to "squawk box. muted gains, but green up 28 on the dow the s&p is indicated up one if you're listening in a car. the nasdaq up about nine points this morning former starbucks ceo howard schultz announcing he is taking steps to run for president as independent. i spoke with him last night and asked how he would handle attacks from president trump on the campaign trail

>> i think president trump is a very insecure man. and that insecurity is manifested with all of these attacks which i really view as weakness, not as strength. and so we're not going to get in the mud with him we're going to do nefeverything can to represent the american people with dignity and respect. no one should doubt whatsoever the toughness and the rigor and the grit that i have to do everything i can to represent the american people well >> schultz plans to see how his message will play out during his book tour. asked if he would pull out when there was evidence that it would help trump which is the thing many democratic voters have on their minds. here's what schultz has h to say? >> if i run as an independent, i will believe and have the conviction and the courage to believe that i can win

i can't answer that question today. but i'm certainly not going to do anything to put donald trump back in the oval office. we will see over the next three months if we can ignite a national movement for a better choice >> and in case you missed this earlier, not everyone was thrilled with schultz's kmecomms last night here is one of the protest exchanges. >> don't help elect trump! you o gotiegotistical billionai [ bleep ]. go back to davos with the other billionaire elite who think they know how to run the world. that's no what democracy needs >> that was one of many moments. we actually then turned that around and asked that question to him because there were a lot of people very concerned about his potential run and what it would potentially do to put

president trump back into office a second term. >> the idea of deciding in three months whether there's really something that's ignited, whether he thinks it can happen, how's he going to measure that >> i asked him that. because we want to know what's happening in three months. he said i'm going to travel the country. i think he's going to put his finger in the wind he's going to either feel it or not feel it. we'll see whether the feedback which obviously the last 48 hours have been tough. whether he looks at that and says, okay, maybe this doesn't work or we can keep talking is there a magical place in the middle? one note, by the way there's a piece we should read from this morning. we keep talking about fiscally conservative socially liberal. and that being the middle. david leonhart says it is not that way he makes an argument against howard schultz's independent -- that it's socially conservative. 53% of americans praying every

day. the debate over abortion, the debate on so many social issues. and that actually from a fiscal economic perspective, that the majority of americans actually want to tax the wealthy more >> he's not a typical republican >> on the economics side >> on expanding the deficit, on making sure he's spending, in being favor of new plans, of wanting to take on drug companies. >> it's interesting to see what the middle really is we keep having this conversation if biden or bloomberg were to run as a democrat or not or let's say don't. then is it the far left versus trump or this middle what is the middle >> that's the middle in manhattan. >> we really have to think what the middle really looks like and what opportunity or path he may have >> how does he propose to cut the deficit? that is appealing to me. somebody who is fiscally prudent. >> i made two comments

one is on ftaxes. we interviewed him when the tax cuts were coming he may have wanted it to go down to 23% >> i think he thought it was too much >> he was frustrated by the income tax rate coming down on the high end though obviously i don't think at that point we've been talking about what that was going to do. you could see something there. he talks about cutting entitlements i would imagine that would be part of the conversation it is an unpopular conversation, but one most rational people from an economic perspective agree the discussion has to be had. that is something that's not been going on for the last decade or more >> we may not know the middle but we know what radically far left ideas there are may not be able to define the middle, but the geographic

center of the democratic party right now is like, i need to go past becky to get out -- i need to go out here to get where it is >> on both sides though. >> okay. >> just so -- no, no i absolutely agree the far left is -- >> you see big tax cuts coming are you talking social what are you talking about on the other side >> i think there's a lot of republicans in the country and i mention them again because i saw them last night at this event. >> that want more? what are are you talking about being far right? what is analogous to where the left is? >> 70% incremental rates there is no analogy on the right. >> thank you for finally seeing the light on some of this stuff with me. but for a new york stock exchange >> we usually agree more everything's a fight today. >> no, it's not. where you been living the past two years? think about it >> you think with your guy in

office, there shouldn't be any fighting >> my guy? if i say that to you, you almost cry if you support a constituency don't pin that on me when we come back, harley-davidson coming up short on the top and bottom line in the latest quarter when we return, 'll wehave comments from harley's ceo don't go anywhere. "squawk box" will be right back. and to manage this risk, the world turns to cme group. we help farmers lock in future prices, banks manage interest rate changes and airlines hedge fuel costs. all so they can manage their risks and move forward. it's simply a matter of following the signs. they all lead here. cme group - how the world advances. weveryone, looknk isn'tat your phones. the design thinking, the digital engineering, security, blockchain, and we will be first to market!

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welcome back to "squawk box," everyone the futures this morning have turned positive. dow futures indicated up above fair value the nasdaq up by 14. we got off to a slow start with some disappointing earnings results or actually some disappointing guidance for some of these big dow components. things have turned around for many of these tstocks all right. coming up, tech earnings the season will kick off with high gear tonight with apple's first quarter. that will be tonight but the iphone maker we already know a lot revenue would be below where

previous expectations were when "squawk box" returns, will apple results throw wall street for a loop or is it already in a top analyst weighs in. stick around you're watching "squawk box" on cn bc for your heart... your joints... or your digestion... so why wouldn't you take something for the most important part of you... your brain. with an ingredient originally discovered in jellyfish, prevagen has been shown in clinical trials to improve short-term memory. prevagen. healthier brain. better life.

good morning, everybody. welcome back to "squawk box" here on cnbc we are live from the nasdaq market site in times square. among the headlines at this hour, gamestop has ended its efforts to pursue a sale of the company. gamestop has been investigating the possibility since june, but said there would be a lack of financing that would be acceptable to a potential acquirer that stock is off almost 23% this morning a decline to $11.99. also check out shares of xerox. the office equipment maker earning $1.14 a share for the fourth quarter 10 cents better than expected. xerox also gave an upbeat full-year forecast with streamlining efforts improving results. all of this comes as management changes took place last year xerox shares up by 5.5%. and the conference board is out with its january report on confidence later this morning. they believe the index will come

in 124 for january that would be down from 128.1 in december apple. apple shocked the markets a couple weeks ago earlier this year announcing a sales warning. we will learn a lot more when the company posts results after the ball and joining us now, analyst at the maxim group. in a word, bad news is in it or it could have gotten worse since last we heard? >> so the bad news of a december quarter disappointment is in the stock. >> you're talking about the outlook then. >> the question is what does the outlook look like and how bad will china get and how long will it be bad for? >> was it china all along? or was it -- they got other issues, obviously, in terms of when people buy new phones and new products and everything else >> we'll see what the actual numbers say. right? my suspicion is that 80% of the miss will be chocked up to china. >> they'll chock it up, is that true

>> look, you'll be able to see the regional data and see how much china was down. >> because of a slowdown in the chinese economy. >> well, okay. so china was up something 15% in the september quarter. and my triangulation says china was down as a region probably around 20% year over year. and then given that it's probably likely china iphones, china iphones were probably down between 30% to 50% year over year we're not going to get that precise data, but we should get enough information -- >> are they trying to sell thousand-dollar iphones in china? >> yeah. >> how do you do that? we had that pointed out by dan niles and others that the gdp per capita is $10,000. >> they have been doing that so there is the upper echelon of chinese buyers that will buy that thousanddollar iphone the question is why is 15% or 35% less buying now than a year ago? that's the question. is it due to increasing nationalism? or is it because there's been all of a sudden this increase in

price gap between the huawei based phones or samsung phones >> or because they've run through all of the potential buyers who can afford a phone like that? >> well, so what's the typical refresh cycle for a chinese iphone user? >> i don't know. >> i'm guessing at least three years. how long have they been selling in china for eight years? >> so it's a -- >> maybe one year to a good year >> 700 and change now. and it was 1.2 trillion or something. so could there be something in the recurring like service revenue that people say, hey there's some positive stuff here it's so much cheaper than it was, i see some silver lining here and i think it's time to buy apple. is that possible >> it's possible in our view, it's unlikely it's unlikely and this is the primary reason we downgraded back in may. because we saw the stock going up and we could not get comfortable with the idea that the services revenue was going to be a big enough driver of being material to the iphone

base and the reason is because the attach rate that everybody is getting excited about is going to be relatively low for example, a long form video content that apple might be bringing out what do you think that is going to be? what do you think would be the comparable service for them? they probably would be the office suite why is it only 10% because there's an income dominant player out there. microsoft office why would they get more than a 10% rate and then you have these other services which is not a service. it is taxing the other application makers there's a lot of noise out there about whether or not they should be paying the rate that they're going to be paying zblu >> you think margin is going to come down? >> which margins >> services margins. >> i think they have been coming down and they will continue to come down. >> let me ask you. to me, there's one major opportunity for growth in the future for this company that's just sitting there which is when 5g really is

realized when do you think 5g will come i think the replacement cycle will be real then. do you disagree or agree >> i don't think it will be a catalyst for smartphone sales. i'm curious to hear why you think it's a catalyst, actually? >> because i think it is the -- part of the dilemma is there's been no new innovation in terms of the phone, the size, screen gets better. but when we went from 3g to 4g or lte, that was a major catalyst in terms of sales people decided they needed to get from one phone to the next when you get to 5g, you would think all of a sudden if you had been on a three-year upgrade cycle. maybe you go on a one-year upgrade cycle for the first two or three it ratierations of that no >> i think you had a 10x increase in speed before now you'll also have a 10x increase in speed.

but why do you need more speed back then web pages were loading slowly and the richness of the applications you could get were not that rich. now they are very rich this is more like where we were with the pc ten years ago where you didn't really need to do more what did we come up with multicores, right? and was it really truly helpful? maybe for a high-end user. but not for a massive set of users. >> apple's trading at 12 or 13 times pe the stock's down as joe said, hugely i think it's 35% is there a kind of a disaster scenario to use a provocative term here, where we look back five years here and say how were we all fooled? they're a hardware manufacturer. it's not a polaroid. but they had the substitutes that could come in and the company goes sideways from here

at best or maybe we enter a long period of decline. >> actually, i think we are looking at a period of sideways for probably the next three to four years you're going to have a resizing of the iphone user base. that's going to be significant head wind. on top of that, as they roll out services, it's not clear whether these services will be bundled into the price of the iphone or it will be explicit additional price and you also have, again, the legacy services which again is not really a service it's them putting a tax on all the other application providers. that could be a potential head wind there as well then finally as you also mentioned, is that you're probably going to see price pressure they did raise the price on iphone x because they did have a differentiating feature. face i.d. with the infrared camera that's going to be a year in technology advantage the chinese market is balking at that extra premium for an iphone

and i think it's going to be a critical thing you're going to want to look at on the earnings calls to see as soon as they negatively preannounced, they started lowering price within chinese channels >> cramer gets excited about health care and the watch and every data point that it can measure as being reported immediately to my provider i don't know, during the show i'd have to tell the doctor don't pay attention to my heart rate or the blood pressure because that probably is -- but does that ever come to where that's a big profit contributor? when everybody is wired in i mean, sort of like a human would be part of the internet of things we'd be reporting all of our data back to our health care provider that never becomes a contributor? >> it goes back to essential question as to wlo is going to be providing that. will it really be apple? will 100% of apple users really want to be able to track their -- deliver their data through apple. >> do you have a heart rate?

>> i look at everything. constantly you got a fitbit >> and i know other peoples have things not an apple watch as well and it's lower asp >> asp >> average selling price. >> this watch in terms of doing your ekg, all this other stuff nobody else yet has come up with that maybe they will, but you don't see a huge audience for that and what's the margin on the watch relative to the phone? >> right so with all things in technology, everything is always r r replicable they have wrapped up sblie but not an infinite advantage. >> when we go back and forth, do you ever watch i mean, does it spike? >> yeah. >> or are you like hannibal

lecter when chewing a nose, it never does anything. >> it's always high? >> the whole time? >> i track my sleep. and -- >> the job is stressful. might not be me, right the job is stressful >> it's not me >> it's not becky. >> you help neil, thank you. >> thank you harley-davidson reporting fourth quarter earnings and revenue that miss street expectations morgan brennan joins us right now with more. good morning >> good morning, becky i just got off the phone with matt levatich, the president and ceo of harley-davidson he says 2018 play out according to expectations. they did see softness in the second half of the quarter. that would be the explanation for the miss on shipments for q4 harley says it's added 52,000 additional riders in the u.s. to end 2018 versus the year prior

they've had this big multi-year initiative underway to recruit more riders here in the u.s. they say they have a big data base that's collecting all that intel. but no details yet on what that demographic breakdown looks like. that said, levatich also adds that the harley core rider continues to age, continues to leave the sport. one of the other challenges is to keep them riding to that. knowing that harley grew in the heavyweight share space here which is tied to that core rider. al in terms of the retail sales for q4, we did see a worldwide decline of 6.7%. more than 10% here in the u.s. which is painful but not necessarily surprising given the years of declines we've seen here the 1.4% drop in europe and the middle east is one of the things to note for investors. that's been a bright spot for harley levatich saying they gained market share in europe and they had strong comps in q4

also those were retaliatory tariffs. that there's been no impact on dealers. no impact on sales or consumer demand there because the company continues to absorb those costs. says that they continue to be in contact with both governments here in the u.s. and europe about trade. looking to the world more broadly, levatich says harley hasn't seen anything the the numbers anywhere to suggest the impact of a global growth slowdown impacting the company says actually harley's continued to see strength in emerging markets. here in the u.s., no impact from the government shutdown. and that overall through the lens of harley and i say this with an asterisk, says the health of the consumer is pretty positive though they are keeping an eye on credit capacity. 2019 expects these trends to continue going to be another challenging year for the company especially since two big products that the company is betting on won't be

released until 2020. you can see shares right now are down about 8.5% premarket on what was an earnings miss and again more declines in terms of shipments in 2019. i would just note, guys, it's not alone this morning polaris also reporting some weak numbers. and that stock is also lower on the heels of those back over to you >> thank you for that. coming up when we return, futures pointing right now to a higher open. when we come back, the biggest morning movers and can major averages stay on pace for their best month in a year that's the big question. "squawk box" returns with that in jt montusa me endless fields of grain.... a wealth of oil.... and riches beyond your wildest dreams. there's a place where you can find all of this. in a suite of commodities-based etfs from aberdeen standard investments. everything from field crops to livestock, and precious metals to energy. all of which may help you diversify your portfolio. it's a big, beautiful world out there.

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premarket on just around 85,000 shares worth of volume after the industrial conglomerate behind everything from post-it notes. traders now shrugging off a lowering of its full year profit forecast also watching what's happening with pfizer shares lower around 242,000 shares of volume premarket the drug maker also posted a profit and sales beat. its full-year earnings forecast fell short of expectations pfizer also said it expected to take a hit after patent protection expires then we've got what's happening with verizon which is down around 970,000-some shares at this point the biggest u.s. wireless carrier by subscribers posting on a near miss on revenues results were helped along by the addition of postpaid wireless. those shares off 3.75% back over to you

>> thank you very much let's get some more market perspective. joining us for that is jim paulsen from the leuthold group. and jim, taking a look at these numbers that are coming in, i know you're a little skeptical about where the markets are headed you think maybe, just maybe, we'll get back to the high water mark this year >> i do, becky i'm fairly constructive yet here for the rest of this year. i'm not saying it won't be a straight line or anything and we certainly probably get another period of scary selloff, some kind of etest of that low. but, you know, i think there's good things here going on. we're easing the pressure on the market by -- we drop the long-term treasury by 50 basis points gas prices out here in minnesota are breaking below $2 a gallon we've got i think the next shoe to drop will be a weaker dollar. which would be forthcoming and i just think that overall economic growth persists you know, maybe around the 2% or a little less.

and we're going to come at some point to agreement that we're not going to hit recession and if we're not, then we've cheapened the market, lowered yields, put a pause on the fed, and overheat pressures you'll probably get an optimism that pushes higher >> in terms of the guidance has really not been anything to write home about just yet. >> well, i expect that -- i really do think the economy is slowing a lot in the united states and it might be -- we might grow less than 2% this year so i expect a lot of bad news. and we're starting to get it i think earnings might be flat to down this year from where they print at the end of 2018. and you're going to see analysts revising down earnings estimates, companies warning on their outlooks you know, overall. and you're going to get bad economic reports that come in including eventually the job market going weaker, i think, by the spring

and this is all part of it that's why the market fell 20% last year as it kind of forecast a major slowdown in the economy. but the key is, i believe, if we don't recess, a lot of the fear that might come from bad reports on earnings and the economy and otherwise could represent buying opportunities here during the course of this year. >> you're talking about gains of 10% from where we are now to get to the low water mark or high water mark from last year. you're still saying, though, you would buy only on down days, you'd buy the dip? >> well, i think if you're not tilted back a little on the bullish side, i'd kind of get myself there and if you are, i use weak days to add to that position a bit. i wouldn't do it all in one day. also move away from the united states because i think international markets are taking leadership and that's likely to persist and they're likely to do better in terms of the stock markets than in the united

states i think it's been a very good sign that particularly emerging markets are out performing the u.s. also international developed markets. i think that says that their economies might have already bottomed and are starting to improve again while the u.s. economy is now starting to slow down and so i think one way to weather this, if we don't recess in the globe, is to be writing it with a greater international tilt here going forward. >> you say, this may be pretty important, you think we avoid a recession not only this year, but the next few years to come. >> i wonder about that i don't see -- to me the traditional things that you see leading up to recession, not a lot of them are present. so i would not be surprised if we have what this proves to be is more a midcycle pause which is pretty frequent historically, we did that, for example, after overheating in '83 or '84 and had a pause in '85 we did it in '94 and had a pause in '95

we did it in 2004 and then paused in 2005 so a midcycle refreshing pause is very common in cycles this might be what that is if it is, it might have bought us another couple three years of this recovery. that's a possibility that's another reason i think you don't want to get yourself too bearish in here on the idea that we have to have imminently i'm not sure that's the case. >> we talked this morning several times about the level of earnings in 'versus '18. what i'm trying to understand is -- what i think you heard you say is earnings may be flat or down versus 2019 if we look at most estimates of the s&p 500, the estimates are around 170 am i hearing you right you expect estimates to come down for 2019 earnings and even if that happens, you're not too worried about a real significant market reaction to the downside?

>> well, we've already had that significant downside reaction. i think what happened last year with stocks falling as much as they did, with cyclical stocks falling even more dramatically than defensive, with credit spreads blowing out, with commodity prices collapsing 20%, that's a big market reaction and partly that partly reflects the fact that earnings are going to go flat this year. when they do go flat, i think the market already passed that and they'll be looking into next year for a recovery in earnings. we had a lot of years in those refresh periods i just mentioned, tom, and for example, in -- when we had a midcycle correction of 15% and mid-'83 and mid-'84, the market went up in '85 even though earnings significantly fell that year so what last year was about rising overheat pressures, bringing down multiples

significantly, canceling out entirely good earnings, this year might be about the fact that even in the face of bad earnings, much lower valuations and easing the interest rate overheat pressures is enough to have those multiples advance even on flat earnings. i really think that the challenge last year was to stay appropriately cautious in the face of the steady stream of good news. this year might be just the opposite, where it will be successful you might have to fight the urge to not get overly bearish or stay bullish in the face of what is going to prove to be a lot of bad news. >> jim, thanks a lot great to see you >> you too >> jim >> to cramer at the new york stock exchange we don't have all of the results in, obviously. we have numbers and we have outlooks from some important companies. given what you're seeing so far, does a s&p at 2643, is that a

reasonable level for where the s&p is based on what we're seeing from some of these big companies about their outlook? >> yes, if we don't get a trade deal, no, if we do get a trade deal i think the common theme here, whether you think they're making it up or not, is china we get a trade deal, a think a lot of the companies that people are selling, like caterpillar, would be good. and i think that we have to recognize that it is just -- apple is the fulcrum in a lot of the international companies that reported verizon is up big. why was it up really big supposed to be steady and wasn't perfect. but the majority of these stocks that we heard about are really about china. and china could be unbelievably good if we get a deal. >> kudlow just said that -- i saw it on a website -- that trump says he's moderately optimistic about a deal. >> well, he's moderately optimistic fellow. i do think that there is

intellectual property issues that have to be solved i think that there is -- we have a president who wants a couple of wins, maybe this is a win but i've got to tell you, i don't want to be too negative. i heard jim paulson. i just don't think this year will be that bad i don't think it is going to be that bad because if we get a china deal and we get a -- united states has been pretty good, but not perfect. we need the fed to say, you know what, it is pretty good, but it is not perfect if it is pretty good, but not perfect, we can continue to keep rates low. >> your view -- it is your view that apple told us the worst case scenario already and -- >> no. >> so they told us a little and when you see the details, it could be worse than what we thought? >> nvidia, nvidia guided down. and it turned out that things were worse than nvidia said. i think that when you do these guidedowns, they tend to be like cockroaches. find one, you find others. i know you had this -- the apple guest just now who is incredibly negative on apple. i think that your questions about 13 times earnings, maybe

goes to 11, maybe goes to 12 but it is not perfect. and you did get a lot of downgrades of nvidia today they weren't downgraded yesterday. but nvidia is way up from where it was at the end of december, and january. and you look at lam research and xilinx and you say, look, if these companies say things will get better in the second half, the stocks go higher while i like what jim paulson was saying, i do come back to the first part of what he was saying, stocks were down a lot if you have 3m and they miss the quarter but say positive things, look what happens. look what happens with 3m. if pfizer says anything positive, look what will happen with pfizer. and there is a lot of companies that you get bristol and celgene and you get a merger because celgene is down so much. i'm looking at advi, they're down so much, i don't want to sell advi. that's a big cap stock with a good drug like pfizer. pfizer came off patent with lyrica i just don't think things are as bad as jim said. i think it is a little more negative i think he's going to feel bad he was so negative.

>> jim, it is tom, our -- >> hey, buddy. >> good to see you our prior guest, jim, basically said he thinks that s&p earnings are going to come down from 170 to 160 and the market is going to take it in stride if anything, the market is going to trade up. do you agree with that >> i think that the revenues are going to be good the dichotomy between how revenues can be good and earnings not as good and he's saying that labor is an issue. i think it is tariffs. i think it is china. we get those out of the way, we get those fixed, revenues go up and earnings go up i like that very much. feels like georgetown this weekend, doesn't it? did you think georgetown would take them this weekend were you surprised >> we'reoi to y gngtrto get you at the top of the hour we're going to have trouble. we'll see you then thanks we'll be right back. ♪

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want to thank tom farley for being with us today. right now it is time for "squawk on the street. ♪ good morning and welcome to "squawk on the street. i'm david faber with jim cramer. we are live from the new york stock exchange carl has -- well, he doesn't have the day off he's on assignment >> on assignment stay focused. >> from the new york stock exchange, 30 minutes from now, you can see where we're headed for what appears to be a slightly