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 higher open

european markets, last time i looked up, i think, yes, there they are nicely look at that dax not the best performer of the group. you can see the ftse doing quite well a look at the 10-year note yield and crude oil as well. the november s&p case-shiller report is out showing a 5.2% gain in home prices. >> we don't want that, actually. >> why don't we want that? >> we don't want the fed to see that housing prices are going up, then they feel that the war on inflation must continue to be waged. >> got it. got it all right. let's get to our road map this morning. it does start with the earnings bonanza. 13 dow components reporting this week 3m, pfizer, verizon, all beating this morning, although going to want to wait to see how the stocks are reacting. and, by the way, speaking of reacting, we're waiting for that report from apple, that will be after the bell busy "mad money" for jim later today.

you saw it now, futures pointing to a modestly higher open. plus, we have been waiting for this for a few weeks market didn't seem to believe it for a while, but pg&e did it, filed for bankruptcy country's largest producer of power facing billions, tens of billions of potential liabilities from last year's wildfires. and still from the '17, even though they got off for the tubbs fire and rocky rollout. protesters heckling the former ceo of starbucks, howard schultz, as he continues to mull a 2020 independent bid for the presidency all right. let's get to the markets stocks are looking to rebound, this after one day of the s&p and the nasdaq each snapped three-day win streaks. you also have the fed, beginning a two-day policy meetings. on the earnings front, 3m and pfizer each beat on the top and bottom line for the fourth quarter, but for current year, 3m is cutting its outlook. pfizer issued guidance below

street estimates verizon, earnings, subscriber editions ahead of most forecasts. revenues came in a bit shy stock looking down about 2%. i can go over that with you. i rely on you to tell me a little bit more about some of the other names, jim. >> let's use pfizer as the paradigm here. pfizer, this -- you know what, let's -- pfizer is a stock that i need to talk about, pfizer has been down for days it comes out, so what happens is people just bang it out. and then what happens also is that people realize at the end of the day, wait a second, why was i banging it out it an inexpensive stock. similar with 3m. 3m is important. here is a company that reports a number that people don't like initially and the stock goes down 4 in the premarket. and then people analyze what went wrong at 3m and they say, wait a second, 3m had a big issue with health care health care has come back rather dramatically why are we selling 3m and

suddenly the sellers disappear and buyers come in so this has been -- this is the pattern. if you don't take numbers down a dollar, like caterpillar, or nvidia, and buyers come in and they say, wait a second, that's why the stock went down lam research is up again this morning. you'll see xilinx up so companies that basically say, i mean, 3m is really -- i think 3m will get the shorts because it says 3m is down a lot verizon was up a lot you were paying a great deal for safety and they delivered very little revenue growth and wrote down -- see the write down in oath. >> we know about that. 4.6 billion. we had a discussion about -- some time back, far from the worst deal ever. >> you pay off for what amounts to be safety what you end up getting is a 3m that misses and people say, i like will pfizer come back today? i got to tell you, david, pfizer is not great and overall they said, overall things are fine. but pfizer yields 3.6% and no

one is going to sell pfizer big. >> like 2019 guidance for pfizer, let's stay there for one moment, 52 to $54 billion, diluted guidance to 292. and if you go to the midpoint of those ranges, it implies flat operational performance compared to 2018. >> that's not -- >> you're taking out foreign exchange. >> foreign exchange. i'm saying that, all right, david, i hear you. every bit of that is bad right? it is bad. but pfizer was at 46 when december 46 now it is at 38. did you not think it went down was there anyone -- like advi, was there anyone who thought that this was going to be a blowup quarter what happens is unless it is nvidia, staggering, people come in, they say, hey, the stock is down a lot >> yeah. >> that's all i'm saying i cannot think of a catalyst to buy pfizer i can't.

other than if they do a transformative deal. you know what, maybe they do a transformative deal. you're mr. deal. david, deal or no deal >> i don't see a transformative deal in the future we know ian reed was focused on getting his tax rate down. but that happened with tax reform and the reason that they had considered so many large deals previously, whether astrazeneca or allergen was to revert i heard nothing that indicates they have any interest whatsoever in bristol-myers. >> who thought that bristol-myers could -- >> you see this transformational deal, others talk about, we know they moved more firmly into having a more significant oncology franchise. >> i just find that when you take these giant companies like lily, so lily did a bunch of quarters that are like what happened with pfizer and then they spun off alonco.

that is okay $11 billion company, health care, veterinary medicine. and the stock goes to 115. i'm saying you can't write off these drug companies when the stocks are down a lot. that the health care business at 3m is what turned it around. you get 3m going back up we had jim paulson on before me, on "squawk box" and he was saying things are going to be not so great this year i'm saying that's why stocks went down. what was that? >> my highlighter. it is not working. >> i got some highlighters >> we have allergen, they spent $5 billion on acquisitions they wrote off. i'm 95, and one of my 72 dermatologists said, jim, do you mind looking like a pelican for two weeks? that's what happens if you use it i said i just come back from -- pelicans have a big bill i said no to that.

i thought that might be somebody optim suboptimal if i came on the air looking like a pelican they wrote that off by name. you spend all this money to diverse away from botox, which i use for migraines. >> nice move off the lows. real lows. >> brent at jpmorgan told a story. >> brent saunders, ceo of allergen. >> so beautiful and so fabulous. it was, like, wow. i wanted to jump into allergen i wanted to wear allergen. i wanted to wear it. people are wearing allergen good right now, down 7. there are things that happen, you know, allergan was up big ahead, nvidia was up big ahead s&p, announced a restructuring there. >> yes, they did. >> that was up nicely. >> a number of job losses. >> if your stock was up big into the quarter and everybody had great expectations, then your

stock is down. that's verizon i didn't mean to knock allergan down another thing >> what i enjoy looking at to a certain extent, listen, we're all going to have to get zipped up, no doubt i'm going to get there too. >> my dermatologist pooled cool spa out. my dermatologist says it takes it back from here and moves it to here. >> we'll get a great rate. we'll come back, we'll look like this, and it will be great >> yeah. >> move my eyes. >> that's fine don't forget, david, if you want to get into juviderm, i can get you a deal on juviderm i can get it for -- >> let's talk bigger picture for a second you have all the releases for the full year. you look at capital outlook. >> s&p. >> which has -- >> no, i'll talk capital allocation, an issue with tax ng it

20 plus billion dollars returned to share holders in 2018. >> want to sell that stock at 37 do you want to sell that at 37 on that? >> verizon, capex is not going up that much 2019, the range of 17 to $18 billion. they did $16.7 billion in 2018 by the way, $9.8 billion in cash dividend payments, decreased debt by $5.2 billion as well >> i keep coming back to -- there is a lot to -- a lot of people saying the philips curve, people talking about higher wage, look at the amount of money that union pacific made versus how little they're paying their workers and how david, they're going for precision railroad you know what precision railroading means? >> no. >> fire. fire like get rid of employees. >> i see. >> and make it faster and get rid of marginal. and david charged the clients

for the merge. that's a big win so i come back and i keep saying, was caterpillar really that bad we get a china deal, david, you're paying 150 for that a china deal, so many companies are blaming china. >> nobody blames canada anymore. they blame china. >> i remember when canada was to blame. how about those tariffs? >> shocking guidance, you'll be dealing with it tonight with apple earnings. >> i don't think apple will be that good. >> updates, what can they give us, and what has it been three weeks? >> nationalism versus weakness is it -- do you want to walk around with an apple phone stock hasn't come back >> when you talk about wearables, i'm looking at verizon, full year, they added 2.5 post net additions of those, phones were 1.1 million.

tablets they lost 181,000. they added 1.6 million other connected devices, most of which were wearables. >> okay, so let's go over the apple announcement this morning. apple makes this deal with aetna. >> most of them wearables. >> when bert alini was independent with aetna, he was talking about giving away apple watches. he's out as cvs buys aetna the agreement with apple gives you a chance to be able to reduce the price of your watch by doing what the health care program says it is an incentive business. i have been hoping that we get something much bigger. i want a deal with an aetna over getting your premiums down that is not in the cards getting the premiums down is probably one of the most important things we can do in this country i don't see anyone getting the premiums down. i was hoping for an apple deal to lower premiums.

i am getting an apple deal that will sell more watches people care about the decline in the service revenue growth >> yes, they do. >> that's what people are focused on that's what the hedge funds are betting against, that's why they think you get a short tonight. short. and katie uberti talked about it. >> we'll have more on all of these around the bell. we'll look at verizon, the conference calls going on now. we'll have features from that. want to talk about pg&e's bankruptcy we'll do that at some point. we got to revisit howard schultz day two. >> where is that money coming from pg&e >> they got a $5.5 billion debt, financing from banks and then rate payers, it is going to be -- it is going to be a long bankruptcy in california. and they already have high electric rates and they're pushing renewables, which is great >> there is a huge surge in renewables renewables got to talk about that one day it is changing the landscape it is not helping coal, like our president wants. >> when we return, speaking of

presidents, howard schultz getting a taste of what it might be like on the campaign trail if he does run for president. he was heckled at his book -- last night take another look at the futures, we got a lot more "squawk on the street" coming up

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howard schultz making waves after announcing he is seriously thinking about running for president in 2020 as an independent. upsetting those who believe such a candidacy could ensure the re-election of the current president. at the kickoff event for schultz's nationwide book tour last night in new york, the former starbucks ceo is being interviewed by our own andrew ross sorkin when a heckler interrupted the proceedings. take a listen. >> 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. >> well, that gives you a bit of a taste of what conceivably will be on the campaign trail for mr. schultz. i don't know how -- listen, we're focused on it in part because we know him well we followed his career the company we follow very closely and whose success has mirrored that of mr. schultz as a businessman. day two, though, i wouldn't say it was the greatest launch >> no. but the clip seems -- it is a little harsh the guy is a really substantive guy and really addressing major issues, but, yeah, i mean, i'm looking at "the new york times", please don't run, mr. schultz. the prevailing mainstream media is to say, look, we really -- it is no help it is no help. and i don't know, david.

i'm not talking republican or democrat, but the outcry was not as positive as i thought it might have been in terms of smart businessman, you know, from the left, as opposed to -- >> interesting and this whole idea is there a middle that really can be addressed by a candidacy like this, somebody socially liberal but more conservative fiscally, and then this just -- the idea of billionaires running for president, something that andrew did ask schultz about yesterday. >> the author of "winner takes all" sent in a question. it said, do you agree that billionaires have too much power in american public life? and it gets at the issue that elizabeth warren has been talking about, it gets at -- >> you know, the moniker 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 interests 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 and once again, i go 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 interests. all i'm trying to do is one thing, walk in the shoes of the american people. >> all right, well, maybe he could have done that once, but he's been a really rich guy for a long time.

i don't know the last time he took the subway. maybe yesterday. >> does he capture the zeitgeist? >> i have no idea. i have no idea. >> starbucks yet >> say again >> did you buy starbucks >> the question, do you buy starbucks? >> does anyone care what i have to say about -- i think kj did a good job vetting the terrible issue. kj runs starbucks, kevin johnson. can we point that out? howard was wearing orange, not green. >> get ready for your mad dash, will you, please, get one ready. we have a lot of other stocks to watch this morning, as you might expect nus omowan opening bell nine mitefr n more "squawk on the street" after this obvious.

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we got a mad dash coming up in six minutes before we get started. you want to talk square. >> square has been a charmed stock. why? because sarah, who is just unbelievable -- >> she's gone. >> i know. >> the cfo -- >> follow her. jack dorsey is doing quite well. twitter is good. i don't want to get in front of facebook i think twitter is doing well. raymond james, total against orthodoxy, doing something that the bulls won't like goes to a sell in square why? because they think it peaked in the third quarter. yes, yes, yes. yes, they think it peaked.

talking about deceleration, talking about -- say it ain't so great company, not a great stock. downgraded underperform. this is going to hurt the bulls in square today. margin assumptions look aggressive people don't want high multiple stocks they want caterpillar today. >> today. >> after it was down 9% yesterday. >> intrigued by that they want new core with a massive upsize surprise. steel company, because our tariffs have made it so that new core has to play on a level playing field and the chinese are oversubsidized and they're going to huawei it >> we'll talk more about china, new core, keep an eye on verizon and pfizer, 3m and cat and revisiting nvidia. i'm just getting started we're back after this. (baby crying)

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tuesday going to ring a little less than -- a little more than a minute from now. all right. what is sort of key, your view, of the marketplace today >> 3m. here's why >> tell me. >> trying to get this stuff down so 3m last quarter admitted that things weren't that strong this is why a stock -- the headlines, you should never read the headlines. do the deck. on the third quarter, the health care business was down 1.1 this is a local currency, okay that really shocked people all right. and consumer was down 2.0. that shocked people. well, david, they said it was going to come back and sure enough roman delivered it is 4.8% for health care and 1.9% positive for consumer that's why a stock that reports a number that looks like it is rally bad goes higher. that's the theme if the stock really plunged ahead on a bad number, and you get a bad number or a number that has a little silver lining where they don't cut, then it

came back. 3m is the paradigm of the good and nvidia is the paradigm of the bad. >> doesn't sound overall like the greatest marketplace to be in, period, where that's what's happening. >> you're right. >> nobody's perfect. you're watching the opening bell and you're hearing them as well here at the s&p real time exchange should have a bit more green on there given the futures. here at the big board, h&r block, yeah, it is tax season or they're kicking it off at the nasdaq dicerna focused on liver diseases, celebrating its fifth listing anniversary. >> i'm watching you. it is not trading yet. what is -- >> new core, strong quarter. >> it reported a record quarter. it is going to be up really big. and that, again, an industrial steel company that is america's best steel company, maybe the world's, and they're talking

about the best way to sum up 2018, a record year for nucor. and they just have done a lot of things right and i want to come back to -- there is a lot of people that feel tariffs are bad caterpillar talking about tariffs yesterday, higher steel. the chinese have been dumping steel through all sorts of countries around the world and it gets to our country, okay that stopped nucor without raising the price of steel, steel did not -- that's one reason why i don't like people saying steel is the reason why we didn't do well, nucor is doing incredibly well because once you get a fair market, nucor is up $1.60. nucor does well. we have to have a level playing field. if i was whoever is important in the white house these days, i don't know, let them eat bones if i were -- i'm sorry, if i were wilbur ross, i would say, this is what happens if you give our companies a level playing field. what do you want me to talk about? >> what do i want you to talk about? you think you actually care what i want you to talk about

>> of course >> i was looking at pcg, to see how that stock is reacting it is so interesting, jim, pg&e is actually -- now that it filed bankruptcy, it told us it would, we sort of indicated was a strong possibility weeks ago when we first report eed the 30 plus million dollar liability they were facing, stock is up. there is a strong belief in equity recovery value after what will be undoubtedly a very long, arduous, torturous, as in windy, bankruptcy proceeding. >> i remember when lilco went bankrupt, the purge paid off it took a long time. when ford got in trouble, but did not commit bankruptcy -- >> the only u.s. automaker to not go bankrupt. >> people should look at these preferreds where they -- in 2017, they suspended some of the preferreds that was off the case that just was reversed

but i just think that usually they're the better value, higher in the pecking order, not that they're really high. i'm looking at that. i've got to tell you, you said the right thing, are you seeing anything great i'm coming from the not bad theory corning not bad, xerox, not bad. >> nvidia was very bad yesterday. although off the lows that we saw, frankly around 9:40 a.m., i think the thing hit its lows it is down another 1.6% today. 135.60. >> the whole morgan stanley, nvidia removed the route 66, i'm sorry u.s. 1. >> morgan stanley saw something they didn't like >> saw something they didn't like chinese gaming, david, what do they do? did they stop playing games? no, they're still playing games. i don't like that excuse gme, nothing cooking there

financing wise >> you're talking about gamestop. >> looked negative that was negative. >> yeah, that is down because of they're no longer try iing to se sell themselves. that resulted in almost a quarter of the market cap going away we're not talking about much market cap, by the way, for gamestop. >> yes, but you're talking about a place that there is a lot of b malls and the malls have been, you know, look, gap stores, the malls remain a disaster. they're a disaster outside, you know, outside the mall, you're okay. when you look at intel, that's also part of this issue, intel did not do the quarter it is fairly down. >> it didn't sell off yesterday. even after nvidia. >> this is the -- >> nvidia did have a much higher -- and still has a higher multiple a higher growth rate eventually. >> they said bad things about the data center, which i lot of people thought they were winning the data center. didn't talk about the touring,

the product transformation, now people feel like that ubs has a note, they reset to the point they can start doing better. i think this is one where you got to really wait it out. >> okay. >> you just kind of have to. what more do you know about the verizon weakness >> what would you like to know >> probably, like, the answers >> the answers specifically to what why the stock is weak? >> yeah, i thought that was -- >> a quarter that didn't -- hasn't really excited anybody. >> you didn't think it was -- >> in terms of potential growth. >> rhetorical. it was about how it is too expensive. >> oh. >> at&t, what is it going to do? >> what do you mean, what's it going to do? in terms of earnings is at&t going to do well we love -- >> i don't know. >> you're asking me? how do i know? >> i just -- >> i think there is plenty of challenges for both businesses. >> i can ask the empty chair over here. >> what is interesting is people want to think of at&t and

verizon as the same but they're really very different these d days. >> verizon got too high. >> how are you feeling about the video business these days at at&t feeling good about it? >> i think it is okay. >> how about the transition, how are you feeling about stanky running all the propertys? apparently he only answers e-mails 9:00 to 5:00, four days a week. >> i'm looking for information, he only answers e-mails 9:00 to 5:00. >> four days a week. he runs at -- like running a phone company. not a phone company. i don't know what he is. hard to get in touch with him if you work with him. >> you paid too much at&t, 6.6% yield >> that said -- >> it is interesting. >> they have a lot more debt at at&t there is -- it is only about the

cash flow. >> it is about the cash flow >> the wireless business overall as we know has become less competitive. >> right. >> and verizon's turn was 1.09. >> big hearing coming up with ledger on the hill. >> and that does take us to thinking, we haven't really talked at all about sprint and t-mobile the government shutdown didn't help them, by the way. that delayed things for them they had hoped, i think to have some sort of real answers by the end of the first quarter that being the current quarter, not clear where that is going to settle but a lot of people still believe there is just no way that doj can say, yes, and yet the marketplace seems to think it will. >> the marketplace does. a lot of people feel like they like the 5g competition. people say 5g doesn't matter i have to disagree with that i think 5g is a thing where it doesn't matter until you see it and then you want it a lot of people want to own apple, 5g. it will be linked for apple. >> yes. >> i don't think people are buying the huawei phone because

of the stigma. i wonder whether the stigma in china, the nationalist issue, i'm not looking for a good quarter for apple. nobody is. when you get a bad quarter and nobody is looking for a good quarter, does apple go up? unless they cut huge. >> unless they reaffirm. >> if they reaffirm, this stock is a bat out of hell. >> people are having issues, even with the service revenues, which we have spent so much time talking about at apple, they reclassified certain things and the revenue growth was only 18%, jim, not as high as we originally thought. >> a lot of that could be the apple care you get when you take when you buy the phone and since fewer phones were bought, apple care wasn't up that much so i mean let's be -- i want to be circumspect about apple, i always liked the company i don't -- i'm not joining the haters, high haters, people, they hate that stock but the domestics are doing

well nucor. i'm not saying -- david, it is not etf time the etf, it is not a f.a.n.g. moment, not a cloud moment it is an industrial moment. >> too early to buy allergan >> listen, mr. pelican, you know, the number of acquisitions, i've been looking at the acquisitions they wrote off and looking at the acquisitions they made and i was going over the transcript of my interview with brent saunders when i was out in san francisco. and i said, some of these acquisitions, i requequestioned whether they pan out i would say the vast majority worked out today with the $5 billion write-off we're hearing about the ones that haven't. an acute pill for migraines. what are you being smug about? i'm working my butt off here he's saying botox is still good. and cool sculpt is good. would i buy the stock here you have to believe there will

be a takeover that brent is going to say, enough is enough >> i don't know who would be the buyer. they were so close he was so close to just engineering the perfect exit and, by the way, potentially in a position to be running the combined allergan/pfizer, this close. and then lou just took a shot at him. >> yeah. >> said he wouldn't. we had delivering alpha. i interviewed him, he said he wouldn't do it he would not block the deal. because he couldn't. because of congress. and then he blocked the deal so that delivering alpha, caught a lot of people by surprise. but allergan is trying to find a bottom, trying to find a bottom. >> they're going to court on the native american deal they did with their patents for restasis. >> with the mohawks? >> yeah, i forget -- >> the last of the mohicans, that thing i don't think that, you know, don't -- restasis will go away

botox is big if you're brent, you're hoping on the migraine pill in 2019 the migraine pill is apparently very good. but the fda is not going to be in rush to approve that pill because of amivig and also the lily drug. lily got the formulation for major drugs. look, mixed, mixed, mixed, david. mixed, mixed, mixed. >> as is the overall market, almost flat. you ever own a harley-davidson, by the way >> oh -- >> so many things you've done in your life. >> i've been on a harley my friend michael, you know, michael haley took me on a couple of harleys. we went to a harley store on route 10 in new jersey and candidly i was not the youngest person. i was the youngest person at the harley store i hadn't gotten my cabela yet, so i didn't have my bill -- my pelican bill. >> whatever that is. >> that's what happened.

harley, look, it is a $5 billion company. david, i care more about thor. no, not the recreational vehicle. the syndergaard thor. >> a big mets fan, hard to not get excited by that. >> i met his dad. >> whose >> he was getting a -- 1993, couldn't have been nicer. >> great guy that was nice. all right, let's get to -- >> amd could be problematic. >> one of your favorites. >> absolutely. never dodges a tough question. >> that's something to be said >> to another man who never dodges a tough question, that would be pisani. there he is. >> here is the tough question, why are we up today? earnings, guidance has been lousy in the last 24 hours

and, folks, it is earnings guidance don't worry so much about fourth quarter. we're trying to figure out 2019 numbers. this is the time of year they introduce the 2019 numbers and the last 24 hours it hasn't been very good. but look at the markets, look at the sectors, up today, industrials, many of whom did not report very good guidance, or give very good guidance, generally up, energy is up a little bit, we got oil up a little bit today materials are up banks are up a little bit. consumer discretionary is weak, harley and whirlpool, not good guidance there overall let's just quickly look at what i call disappointments 2019 numbers, that were lower than even the lower expectations when we started in 2019 here so pfizer was below expectations put up the next full screen. 3m lowered guidance there. a lot of people say, it wasn't as bad as people were afraid of. okay, fine it was still down. lockheed, whirlpool, harley, all lower the numbers overall. it wasn't awful across the

board. a number of companies gave inline or better guidance for 2019 verizon about inline, for example, rockwell automation, that was pretty good dover did better gave better guidance, xerox gave better guidance. it wasn't acomplete mess overall. a very clear trend emerging right now for earnings trends. we're a quarter of the way through. we have 135 companies of the s&p 500 reporting and this is what we see for the fourth quarter, there are fewer top and bottom line beats than typically are the earnings growth rate was slower we talked about earnings growth in the first three quarters, well, it is down to 14 in the fourth quarter the important thing is the 2019 guidance and the trend is down not at zero. at 5% growth and about 2% for the first quarter. we're getting lower. what the markets ra ell s realla global activity to pick up

that's the biggest drag on earnings overall that's the big issue right now but wait a minute, all this crummy news in the markets are up why are we up on such poor earnings guidance? a couple of things going on. number one, it is the day before the fed meeting. and we have this infamous trend called the fed drift where the market tends to go up in the 24 hours before the fed meeting i said this many times this is a well studied event, the federal reserve itself has acknowledged this. that's maybe a factor here fed and central banks are remaining dovish and the market is coming to believe that other central banks around the world, not only are are not going to raise rates, but may add stimulus if they have to sometime in 2019 there is optimism on china trade talks, despite all of the caution out there. the market believes that some deal could be made, maybe that it is foolish or not, that is clearly in the markets now as i mentioned, we need global activity to pick up a little bit here bottom line here, let's look at earnings now for the first quarter, that's where we care

about, 1.8% is today's number. it has been steadily coming down, 8% october 1st 5% on january 1st. 1.8% and you see it is drifting lower every day. whether we go negative or not is where a lot of people are debating, where the dividing line is, earnings recession, two consecutive negative earnings growth or stay in the low single digits somewhere around there. a lot of this depends on global activity picking up. for the day, everyone believes so far that things are going to work out we're up 73 points on the dow. back to you. >> that is stark numbers right there, bob thank you. bob pisani on the floor for us let's get a check on fixed income rick santelli joins us from very soon to be incredibly cold chicago. rick >> absolutely. very cold chicago, getting colder by the second we're getting tighter ranges and less attention paid to stocks. at least with respect to how yields are moving. don't get me wrong, they're

generally trending in the same direction. they're directly correlated, yields up, stocks up, and vice versa. but the impact is getting smaller and smaller as we get less volatility and tighter ranges in stocks for the most part it is kind of lost on treasuries just intereconsider this, both ten-year and 30-year yields had tight closing ranges 270s for the 10-year and between 3 and 10%. there is a slight drift lower. it is normal to seed movement before fed meetings, but the drift is different than normal, more of a downward drift look at 10-years, you see the right and left side are about equal, but a little drift, equal to the drift from the same period at the last meeting as you put the dollar index up there, it may be subtle, losing more on the dollar index

even though foreign exchange has been choppy, mostly sideways, but just like yields, we're getting the downward drift and spend more time under 96 there is a lot of issues in europe, great britain and china, but we continue to see that the dollar index can't seem to fight for that 97 handle, much less 9 96 how does it compare to china the dollar has been steadily losing against the chinese yuan. hovering now at levels we haven't seen since about the second week of july. david, jim, back to you. >> thank you, rick santelli. bond report as we head to break, look at this morning's top performing stocks on the s&p "squawk on the street" will be right back

there's a look at faang. apple reporting after the bell jim is going to be all over that

on "mad money" tonight it's the only one up >> that's what you don't want if u a bull >> up next, stop trading with jim. the latest innovation from xfinity

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time now for jim's "stop trading. >> something very interesting in the defense stocks lock he's martin reported a number that didn't seem to please people. now it's almost unchanged. the most important thing is harris harris reported a blowout quarter. the stock is up 10 so before people just say, hey, nothing is working, this is the kind of oddball thing that's working. >> can you give us any -- >> much better than expected numbers for harris defense stocks have -- >> l-3 is -- >> everyone was worried nancy pelosi coming in would change the tone nancy pelosi is not weak on defense. very strong on defense and people don't know nancy pelosi i know nancy pelosi. i've got newcorp tonight i -- it wasn't howard schultz. it's not howard schultz. it's john ferriola

one guy wants to run a company one guy wants to run guided up today. people are saying -- lowered the movement on facebook you want to know why it's down it was a tale told by -- no, never mind david, someone yesterday said once more they're going to the beach and i was embarrassed by people who don't understand any of the history which are -- hey, the histories really hold up check it out, man. it's like stephen king that's how good it is. >> i'll brush up on it twitter is also down >> which one >> twitter when we come back, we're talking about the giant slowdown we'll speak to goldman's co-head of asia research keep ihet re more teched out than silicon valley?

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♪ good morning welcome back to "squawk on the street." i'm david faber with morgan

brennan and mike santoli we're at post 9. carl is on assignment this morning. sara has the morning off let's give you a look at the markets. a mixed bag. the s&p is up, but the nasdaq and the dow both lower actually, the dow, sorry, that is up as well. awaiting apple earnings after the bell which is putting up a good performance so far in the first half hour of trading up about 1% we've got some economic data crossing the tape. want to get to rick santelli for that rick >> yes, david. we're looking for our january read on consumer confidence from the conference board expecting a number around 124. it's a disappointment. 120.2. 120.2. definitely a miss. and last month's 128.1 moves down to 126.6. when was the last time we were at these levels? well, actually it was july in july of 2017 we were at 120

even july of 2017 so this definitely is a marked turn lower but do keep in mind these are still pretty lofty levels. still well above where we were heading on these numbers before the credit crisis hit in '03, '04, '05, '06, '07 weren't at these levels but significantly lower from our cycle high back in october that was the strongest level since september of 2000. quickly, the present situation moved down from 171.6 to 169.6 and the present situation, it is currently at -- well, that was the present situation. expectations moved from 99.1 to 87.3 so misses no matter how you dissect this data. morgan, back to you. >> rick santelli, thank you. our road map starts with wait and see.

investors await for results from apple after the bell >> and pg&e has filed for bankruptcy we'll go live to san francisco >> plus, hecklers attack former starbucks ceo howard schultz after he announces he may run for president. andrew ross sorkin was there interviewing mr. schultz stocks mixed after yesterday's sell-off the dow up about 0.5% right now. still on pace for the best month since january of last year investors also closely watching the fed which kicks off a two-day meeting today. and it's the busiest week of earnings 13 dow components reporting. 3m, pfizer, verizon. apple after the bell joining us now is the chief u.s. equity and global strategist at deutsche bank and jack avalon from crescent wealth advisers. good morning to you both so far, what is your takeaway on earnings when you look at the guidance and earnings guidance for 2019 we've gotten so far

just in the last 12 hours, 3m, harley, polaris, pfizer, whirlpool, even lock heheed mar all guiding lower. >> earnings are, without a doubt, disappointing one thing to focus on the headline number which is about 50% is what it's likely to come in but i think you have to keep in mind underlying earnings, what they're doing. these are q4 earnings. in the first quarter a 10% lap from the cut in the corporate tax rate movements, the u.s. dollar and oil prices you adjust for those two things, and we're talking about underlying earnings growth from a forward looking sense. you're talking about 4%. that's, you know, pretty steep decline from where we were running in the first three quarters of last year at around 11% and pretty steady. so the slowing is pretty sizable. it's disappointing earnings.

but i would argue, you know, a lot of this is very well priced in the market is up almost 2% since this very day pointing earnings season started and there's plenty of things that suggest the market is more likely than not to creep higher rather than lower in the near term >> jack, what's your takeaway on earnings so far and particularly this idea that we're seeing a slowdown in earnings growth. this growing debate we could see an earnings recession. are equity valuations still too high right now, especially when you factor in a fed that despite more dovish commentary is still tightening >> well, it really -- a lot does depend on the fed. normally i'd say interest rates are still below where they have historically been relative to economic conditions. but perhaps current conditions warrant lower rates. and if we do get an easier fed and perhaps easier central banks

worldwide, that could support, you know, what i would call fair valuations but i think the other thing we have to keep in mind is that slowing growth and retrenchment are two different things and i think going into this year, the equity investors had priced in a retrenchment of growth to actually negative growth and even if we look out for the rest of 2019 and look at low to midsingle digit growth, we don't see necessarily an earnings recession here at least in 2019 >> binky, it seems like mid single digit percentage gains if the market is roughly priced in that zone. there's a path there if the fed does not -- is not perceived to turn hostile. what about 2020 some i know 2019 just started but it's almost as if investors will be fine with this being a lull in earnings growth or

steady state plateau are we still going to be reminded that it seems late in the cycle all year >> yeah, you know, we are big believers that the business cycle is what drives equities, and i would remind everybody listening that this is, to be very precise, the eighth time in the last 9 1/2 years the equity market is essentially priced in the end of the economic cycle and that, by itself, no matter what the fundamental arguments are should keep you a little skeptical this is the end. in terms of thinking about the cycle, we can discuss this, of course, in great detail but i'd say there's nothing that really sticks out besides the fact that it is, you know, on track to become very shortly the longest cycle. and i would point out that the end of the cycle was pronounced back in 2010 in the summer still debating this nine years later. so we do need a few things to

get growth back up and, you know, necessary and sufficient conditions and it takes a little while, but i'd still put my money on it happens rather than it doesn't >> jack, what do you want to see out of the fed meeting this week >> i'd like the continued recognition that economic conditions are okay. slowing. no risk for necessarily recession around the corner but no inflation either. so ides lo'd love to see a fed d pat. i think we'll start to see a rotation out of these large cap growth names and into more smaller cap domestic focused value oriented something very similar to what we saw in 1999, 2000 when the fed kept rates artificially low through y2k and tried normalizing rates.

back in those days we saw a huge surge in value and value investing outperformed growth for five or six years from 2000 onward >> a long time ago it feels like binky, you did in answer to morgan's question say that there are many things that suggest the market will creep higher what are a couple of those things >> in the near term, essentially the market is priced for a lot worse and that's why you're seeing whether you think about in terms of earnings growth. so the way that we read it, we're getting underlying earnings growth of 4%, which is the way you want to think about it going forward in the near term but the market is priced at current levels for about minus 5% so, you know, just a rally from a fundamental point of view on things not as bad as feared. number two, of course is positioning. if you look at positioning, you know, christmas eve, basically, you know, at the bottom of the

ten-year range we've krepcrept little higher but still at the low end of the range even moving to the middle is going to give you up side. when you get a big disturbance, it takes up to six months for it to get back down and as that happens you'll see systematic strategies reallocate back into equities we have at the end of this week -- >> a lot of -- >> the buyback comes back. that's also modestly helpful >> thank you for joining us, binky and john as the dow is up about 81 points right now >> the largest utility in the united states, pg&e, has filed for bankruptcy in san francisco. aditi roy is there >> that bankruptcy filing came in shortly after midnight pacific time and was quickly met by criticism from both investors and rate payers. in the filing for bankruptcy,

the utility says it's requested authorization to continue paying employee wages and benefits. continue existing customer programs, including low-income support and energy efficiency programs it also intends to pay suppliers in full under normal terms pg&e is also asking for $5.5 billion in financing with several banks. in making the announcement, pg&e's interim ceo saying we believe this process will make sure that we have sufficient liquidity to serve our customers and support our operations and obligations. now reaction to the filing was swift. blue mountain capital which in recent weeks said it will nominate a full slate of directors in the coming weeks said the filing was reckless and irresponsible. the filing comes just days after officials cleared pg&e of any responsibility for the 2017 tubbs fire which lowered its liability burden by up to $10

billion according to aichb ingi but the decision to file for bankruptcy took into consideration it would not be held liable in that blaze. there were reports that a consortium of hedge funds was pitching to pg&e a $4 billion plan to prevent it from going into bankruptcy. meantime, a group of consumer activists calling themselves no pg&e bailout is calling for a petition they are collecting signatures for it urging lawmakers to make sure that pg&e pays all damages in full to fire victims. back to you guys >> thanks, aditi that financing was more expensive than the financing they're accessing. but there are those who are going to say they're filing despite the fact there's not a liquidity crisis they're not insolvent at this point. we'll see what the bankruptcy judge says same judge this company had when they filed for bankruptcy in 2000, i think. so he is -- >> 2001, yes >> familiar with pg&e in

bankruptcy aditi roy in san francisco up next -- the trump administration unveiling criminal charges against china's wau huawei this as trade talks are set to resume shares of harley-davidson are tanking after an earnings miss hear what the ceo has to s, ay straight ahead ♪ ♪ what if we could turn trash into money? plastic bank is doing just that, by exchanging plastic for digital credits redeemable for everything from food to education... powered by ibm blockchain. when you understand the potential of new technology, you can put smart to work.

the latest inisn't just a store.ty it's a save more with a new kind of wireless network store. it's a look what your wifi can do now store. a get your questions answered by awesome experts store. it's a now there's one store that connects your life like never before store. the xfinity store is here. and it's simple, easy, awesome. just days before a new round of trade talks with china, the

trump administration is unveiling criminal charges against telecom giant huawei and its cfo. a list of charges include stealing trade secrets, violation of u.s. sanctions against iran and fraud company denies violations of u.s. law, and the chinese foreign ministry has call on the u.s. to, quote, stop unreasonable suppression of huawei combined with continued concerns over weakness in the chinese economy, how is it all going to play out here to help us answer this and a lot of other things, goldman sach's chief asia-pacific equity strategist tim moe >> great to be back. >> let's start with the chinese economy, what you know or what you think given the warnings from so many u.s. companies, probably more to follow about weakness in china business >> the numbers are weak. we can rattle through statistics fourth quarter gdp on the soft side pmi below 50 the producer price index just hovering above zero. i can rattle on but clearly the

spot -- characteristic of the chinese economy is weak. the good news, half glass full, is it's clear that chinese policymakers are stepping up i was in beijing on thursday had a series of macro meetings if you look at the various aspects of policy, fiscal, monetary, and the fact that currency depreciated last year by nearly 10%, the combination of all of those suggest the policy is easing and with a lag that should stabilize the chinese economy. >> that stabilization occurring, in your point of view, when? >> probably end of first quarter. our numbers are on a sequential quarterly annualized basis ticking up to 6.2% in q2 and maybe 6.4% in the second half. down from last year's 6.6 but still within the 6 to 6.5% target range >> a $15 trillion economy? >> roughly -- a little less. about 13, 14 >> okay. so the u.s. goes into the latest round of trade negotiations

feeling it has leverage given the weakness you're talking about and the various moves against huawei are u.s. negotiators correct in that belief? >> i think so. it could be fair to say there's moe motivation on both sides to have some sort of narrow agreement. you'll not solve all the broader based concerns and disputes between the u.s. and china which were articulated by vice president pence on october 4th in that speech that was made you could have a narrow agreement on specific trade issues but importantly would have to include intellectual property right and technology theft issues and that's going to be the key sticking point which remains to be seen >> do you think we actually get that this week >> i'm not sure that we would get a hard deal. i think our best case or central case which is just our best guess at the probabilities is that there will be enough progress made not to have the united states go on march 2nd from 10% to 25% to that $200 billion of imports so our central case now is a

continued sort of pause or delay, a truce, so to speak, while some sort of a deal is ironed out i think it's fair to say that a week or two ago, the odds of that appeared somewhat better given just the accumulating news flow with the most recent news flow, the market is more jittery about that and our key point is with a market having risen 8% year to date in tandem with other global indices, a symmetry we identified in chinese equities at the beginning of the jeer less distinctly positive we still like china but it's fair to say with the market having risen, that the outlook in the near term is somewhat more balanced than distinctly positive >> the longer the trade issue and the china slowdown go on, there's these two debates that have risen one is how much of the china slowdown is specifically related to interruption of global trade flows because of the tariffs and will the chinese stimulus

efforts to fight this slowdown be effective >> and those are super topical questions. let's unpack that. in terms of the slowdown in china's economy, part, but not all is related to the external fric friction, the trade war. two ways to exemplify that is china's domestic policy was too tight and may have overstayed that given the external shocks the slowdown of the global economy plus the trade friction. and their series of macro regulatory constraints put in last year which served to slow the economy and undermine confidence on the consumer side as well as on investment so i think there's definitely stuff that can be done on a domestic perspective, irregardless of what happens on the external front to stabilize the economy. and in that regard, we are constructive one of the indicators our economist just introduced is a combined policy indicator which

blends macro pru dential and so forth and that shows some easing down on our graph, easing up is tight but if you benchmark that where we've been in the past, 2015, 2016, that was much easier we still think there's more they can and should ease and that gives us some optimism they can begin to stabilize the economy >> dealing with the dollar value of goods back and forth would seem to be fairly easy in terms of trade negotiations versus, as you say, intellectual property and things fundamental to the way the chinese run their economy. >> right >> they might make progress on it, but it could be years before they actually get to a full agreement. >> david, i think that's right i think -- this is why we think it's unrealistic and zero probability to say this could be one overarching deal that ends everything and everyone kisses and makes up there still will be some areas of agree to disagree and some frictsion. but there's certainly a potential for some very specific economic issues in terms of trade imbalance to be addressed.

and then hopefully some progress made on the intellectual property right aspect. one of the key dynamics or issues is going to be, how do you monitor? that well-known phrase, trust but verify, which is understandable from the u.s. perspective, but obviously from face standpoint, it's going to be more difficult to impose that on china and that's where the friction is going to evolve around and probably the tougher part of the negotiations >> how would you characterize the chinese consumer right now given the news from apple and yesterday nvidia talking about gaming chips where is it? >> the consumer is weak. auto sales recent numbers out that are quite weak and the announced measures to try to stimulate automobile consumption, property restriction being rolled back. if you look at indicators for various aspects of the consumer basket, many of them are week. there's a mixed shift aspect where people may be trade down

to cheaper goods but overall there's a psychological impact where people are concerned about domestic policy being too tight. and that probably weighs on consumer sentiment >> tim, thank you. tim moe from goldman sachs protesters facing off with howard schultz at an event last night with andrew ross sorkin. andrew is going to join us next. and a challenging year ahead. the ceo of harley davidson weighing in on the road ahead for hog after disappointing results. those shares are tanking this morning, although well off the lows down about 4% i've got details, next - hello, i'm brad castillo. did you know that americans who bought gold in the year 2005 quadrupled their money by 2012?

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howard schultz making waves after announcing he's seriously considering running for president in 2020 as an independent. schultz sat down with our andrew ross sorkin last night during a kickoff event for his book tour. andrew joins us now with more. >> thank you i interviewed howard schultz last night in new york city in front of a live audience of 400 people the event, we should mention, was interrupted a couple of times by protesters. we want to show you one of those

exchanges. >> 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 it said, do you agree that billiopaibil billionaibil billionaires have too much power in american public life? and it gets at the issue that aoc has been talking about and the issue elizabeth warren has been talking about >> the moniker 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 interest 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 and once again, i go 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. >> david, i can tell you that the big issue last night, and you could feel it in the room, and you are seeing it play out on the news channels all today and yesterday is a fear, mostly from the democratic party, that if howard does proceed with this plan to run as a centrist

independent, that he could split the vote and that would ultimately help donald trump donald trump, we should note, taunting howard schultz on twitter yesterday to run in fact, then later said at an event in washington last night that he thought the reason he was taunting him was because he thought he would split the vote, but it was an issue that seemed to overhang the conversation last night and i asked him multiple times if it was possible -- he has long talked about being a longtime democrat. if he could be convinced to actually go and run as a democrat and he repeatedly insisted that he would not in large part because he thought the party had moved too far left and he really believes there's a place in the middle, fiscally conservative, socially liberal middle which he thinks is not being represented by the democrats and which he believes -- and i should note, a lot of republicans at this event last night as well who feel disaffected by their relationship with president trump. and he thinks he's going to be

able to capture both of them of course, history is not necessarily on his side given that the last independent president that was elected was george washington. >> that puts it into perspective, andrew. any sort of details from him on how he would fund a potential bid? "forbes" has him at 3 hadn$3.4 billion. would he have to sell starbucks stock, and what would that look like >> i imagine from what we understand that he would self fund part of it but he doesn't want this, and he said it repeatedly he doesn't want it to be a vanity project which he intended to try or would expect to get additional donations i should also say running as an independent just the cost of running as an independent is actually much higher people talk about it being a billion dollars, but probably even higher than that. in large part because he won't have the infrastructure that the democrats nor that the republicans have he'd ultimately have to build

his own database in terms of the kinds of people he'd be reaching out to 42% of americans identify as independents the big question is, do those 42% identify themselves ultimately as centrist which is the plank he's trying to run on. >> yeah. not to mention electoral college math thank you, andrew sorkin back in midtown with that interview with schultz last night take a look at shares of harley right now they are trading down but well off the lows of the session. down about 4% after an earnings and revenue miss also shipments missing i spoke just a short while ago with the ceo and president of harley before the conference call began he said 2018 played out according to expectations. they did see softness in the back half of the quarter so the company pulled back on inventory to be safe heading into the new year. hence that shipment miss now in terms of retail sales in

q4, we saw declines in the u.s 10.1%. a painful drop but not terribly surprising given what's been now years of declines in harley's top market. as for those retaliatory tariffs on u.s.-made bikes coming into the eu, there's been no impact on the dealers no impact on sales or consumer demand since the company has been absorbing those costs they continue to get dinged with those costs. have been in contact with both governments about trade. also noting on the conference call just a few moments ago that they are going to move that production for those bikes to thailand the new plant opening up there no impact from the government shutdown here in the u.s overall, through the lens of harley, he says the health of the consumer is positive right now. they are keeping an eye on credit capacity. keep in mind harley is facing secular declines i ridership here in the u.s. they added 52,000 additional riders here in the end of 2018

versus the year prior. they have this big longer term strategy to build up their rider base here. they don't have the details on what that demographic breakdown looks like yet, though also adding the harley core rider continues to age in addition to recruiting new and younger adults and riders, one of the big challenges is how do you keep established riders from leaving the sport as well he noted that harley grew market share in the heavyweight space tied to that hard core rider and live wire, the first in a series of electric motorcycles, still on pace to be released in august overall, 2019 trends continue. it's going to be a challenging year for the company since two big credits, the new adventure touring and the street fighter motorcycles won't be released until 2020, guys so as you can see, those shares are lower today. i'd also just note polaris, one of their top competitors has been trading lower today because

they had some weaker than expected earnings and guidance similar situation playing out there, too both the secular decline in ridership here in the u.s. and also tariffs and the macro uncertainty that we talk about with so many companies >> the secular decline aspect of harley, it's in the stock, right? it's trading at under ten times earnings under 6 billion market cap above $16 billion like five years ago. >> you've seen it rally more than the s&p year to date. it's been sort of seen as one of those value plays given the dividend and how beaten up the stock had been >> thank you morgan. we'll look at the etf spotlight. specifically at the xlk. that's the s&p 500 tech sector tech stocks mostly lowered this morning thaeafter the nasdaq snapped. down a quarter of a percent right now. by far the dominant is apple 16% of the xlk that company set to report after

the bell dow component making up 16% and that's much higher since they rejiggered the s&p sectors last fall because used to have facebook and google and everything else was in the tech sector no longer the case they're in communications. this will be apple's first reporting since lowering revenue projections earlier this month those shares down. the company released quarterly results last in november looking at other names or a broader look at the sector the ryt is the equal weighted version of that s&p tech sector. this is an etf that evens out all the participants and has outperformed the xlk because you don't have that big effect of 16% holding in apple that has weighed things down. xylink, applied materials. it's structured as an equal weighted etf let's send it over to sue herera witha cnbc news update. >> good morning, everyone.

here's what's happening. former trump associate roger stone to attend an arraignment hearing at the top of the hour in washington, d.c he is facing seven charges, one count of obstruction and five counts of making a false statement, one count of witness tampering. stone is expected ed ted to pl guilty sergey lavrov accusing the u.s. of trying to topple the maduro government in venezuela he denounced the u.s. decision to impose sanctions on that country's state-owned oil company. this during a press conference with his sierra leone counterpart. apple making the group chat function on facetime unavailable after users said there's a bug which could allow callers to activate another user's microphone remotely. the bug in the video chat app could allow an iphone user calling another iphone to hear the audio from the other handset, even if the receiver did not accept the call. heavy snow and brutal cold hitting the midwest. rochester, minnesota, waking up to more than a half a foot of snow and chicago canceling schools on

wednesday when windchills could fall to negative 55 degrees. so bundle up that is the news update this hour david, back downtown to you. >> okay. thank you, sue "squawk on the street" is back right after this.

welcome back a new cnbc fed survey is out steve liesman joins us with the results. >> let's take a look at the outlook of our survey for the s&p 500. and we have some stability here. it dropped in prior surveys, down, down, down and now at least we're going across here. 2750 is the outlook for the s&p for the end of 2019. 2846 for 2020. that compares to 4% a year

what we've been through, i'd take it. the outlook for the ten-year yield, 3%. it's seen going higher by 25 basis points or so and 3.17 by the end of 2020. they were outlooked for 3.5 and change what's behind the market volatility 23% say fed rate policy. 22% say tariffs. 21% global economic weakness u.s. weakness down a little further. and the balance sheet which got all this talk, this group of 46 respondents, they put only 10% of the weight of the market volatility on the fed's balance sheet. is the fed too sensitive to the markets? we asked the question. 27% say the fed pays too much attention. 53% say it's just right. and 18% say not enough here's some of the commentary we got. peter bookvar. chief investment officer at bleakly adviser group. the fed is not data dependent.

it's s&p 500 dependent and mike englund the same. the fed should focus on dual mandate and not stock prices how chair powell handles the market correction will send a signal 100% say no rate hike coming this month at this meeting but, look, we have to change our graphics didn't have this section in there before this year, 78% see a hike. average of one hike. 17% say it's going to be a cut but look at 2020 a lot more division. 48% say the federal reserve will be hiking. 37% say there will be a cut. so, mike, a lot more discussion now and a lot more debate on the street about where the fed is headed >> certainly is, steve thank you very much. staying with there with the economy and economic policy, here's a take on the nation's debt burden from starbucks' howard schultz speaking to andrew ross sorkin last night in

new york >> we are sitting right now with a national debt of $21.5 trillion on the balance sheet of our country. and if we were a company, if america was a company, at $21.5 trillion of debt adding a trillion dollars a year, we would be facing insolvency >> countering that sentiment, they penned a rebuke of washington's debt objection. jason fuhrman joins us to talk about that this piece did create a lot of talk yesterday i think from both directions that might have differences with your approach but describe, if you could, what you are saying relative to the kind of standard view that howard schultz articulated there that the government debt burden is this -- we're going to hit this reckoning point. this point of no return, and we

have to prepare for that >> look, howard schultz knows how to run a good company. his company, by the way, has $10 billion in gross debt off annual earnings of about $5 billion so i'm not running around saying he has too much debt when you look at the u.s. federal government, just look at financial markets. interest rates are really, really low the markets are telling us something. it's not something new not something recent for a while now, interest rates have been trending down and that's a barometer of how concerned we should be about the debt >> so essentially the interest burden, the outlay that the government has to essentially allocate for servicing the debt is basically around the long-term average. it's not something to worry about but you also think the market is going to tell us when it would be time to worry? >> yeah, look. i can't tell you for sure that

we're never going to have to worry about the debt i think we have a lot of problems in our country. i wish we had lower debt right now. i wish we hadn't added a lot to our debt with the tax cut last year but we are where we are. and what i'm saying is i don't think this needs to be our top priority right now i don't think we should obsess over this. don't make it worse. don't keep adding to it with unpaid for stuff but if you don't do that, we can focus on the other issues in our country for now and if we have to come back to this, you know, we can do that >> you know, jason, the flip side of the low interest rate debate has been that these historically low levels have actually fueled the government to go on a spending spree. what are your thoughts >> i don't agree with that at all. you know, first of all, we're not on a spending spree. spending has been stable and

even faller. we've been on a tax cut spree. that's something we've been doing for a while. but, if your interest costs are lower, you can afford to carry more debt. so the right amount of debt for the country looks higher now than it used to. the last thing i'd bring in is health costs actually have come in below expectations and are expected to grow a lot more slowly so people have long been worried about entitlements entitlement growth is a little bit less than what people were worried about a decade ago >> and jason, you have this critique of people who say, look, $21 trillion in debt it's an urgent problem on the other side, there's, of course, this theory that's gotten more attention. modern monetary theory where there's a perception that what it's saying is the government can have an almost limitless amount of spending if they have reasons to spend that money on the population it's been -- i guess it's been either credited or blamed for

kre creating this conversation to rethink the borrowing capacity the government where do you come down on that >> i don't think it's a particularly good theory of anything right now and if it's being interpreted as some do as a license that you can just do whatever you want and don't have to worry at all, i'd disagree we need a limiting principle when you do budgeting you need some way to decide, this is worth spending money on, this is not worth spending money on and some common sense like if you have a new proposal, you should pay for it that would be hard for washington to do it would be an improvement over what we've seen lately but wouldn't lower our debt just making sure we're not making it a whole lot worse. >> debt crises seem to happen suddenly one minute nobody seems to care and the next everybody seems to care you deal with ramifications of it quickly would you agree with that?

>> no, i think debt crises are the most predicted crisis we have in our country. if you look at countries that get to borrow in their own currency, that print their own money, it's exceedingly rare to see a debt crisis. countries like japan operating with a lot more debt than we have in the united states. again, i don't think we should get our debt up to japanese levels i think that would be a mistake, but, you know, i think the problem here is more of a termites in the woodwork chipping away at our economy a little over time, not a crisis >> not when interest costs on the debt exceed any other expenditure of the federal government which is not inconceivable even in the next few years. >> again, i'd rather have lower debt if i got a choice, i'd have lower debt rather than higher debt, but there's a cost to reducing the debt. you have to give up on some other things that you want to do a year and a half ago,

republicans in congress made the decision that they thought that a tax cut was more important than reducing the debt i think that was the wrong decision i think that was a poorly designed tax cut, but this is about prioritization and i don't think of all of the problems we have in our economy this is the one that's keeping me up at night right now. >> termites in the timber is not a burning house at this point, jason. thank you very much, jason furman as we head to what will be a very quick break, look at shares of verizon down about 2.3% after reporting somewhat mixed results revenue a bit shy. certainly not a great deal of growth but earnings did beat results or beat estimates, and results were helped by greater an expected number of additions of new sscubribers "squawk on the street" is back in a minute. m. yeah, that too. i don't want any trade minimums. yeah, i totally agree, they don't have any of those. i want to know what i'm paying upfront. yes, absolutely.

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& you could send him a coupon for that item. welcome to "squawk on the street." rick santelli live from the board of trade cme group. my first guest, mark summerville. let's get into it. first day of a two day fed meeting, all seems to be about cementing the notion they're going to go slower, rate hikes shallower, and lots of talk about t 3, tapering the taper. your thoughts? >> right i think chairman powell had a better january i think it is good to let the markets catch their breath and the economy rehook up. he said he is going to be patient on rates and gave the example of 2016 where they took a break and the economy gained traction

they want clarity on where they're going and there's a debate whether or not they need to ease up on the monthly pace at all i think they have to pick between one of the two and it is probably okay to give more clarity about where they're going and they'll probably be okay >> as of recent thursday late afternoon data from the federal reserve, the balance sheet is a whisper over 4 trillion. the securities holding are 3.85 trillion. the notion that somewhere around 3.5 or 6 could be enough is what i hear when i sin the mashlgrke. have you heard tapering at that level which is higher than some thoughts earlier in the process? >> i've done the math myself you get somewhere to 3.25 at the lowest, probably 3.5 trillion on the balance sheet. i think that's a pretty good guess of where it is i think part of the issue on the

balance sheet is they need to be better in the communication on it you saw esther george say how can we say that there's no effect on qe, but then if we have a recession it will be very powerful they need a consistent message in the same direction and that would go a long way to helping >> now, just trying to think about how all of this effects the marketplace, if we track up and down balance sheet and it correlates with stocks, if the balance sheet starts to flatten, would you expect the economy to flatten out and potentially build from there your final thought. >> yeah. i think we have tax refunds coming, that's probably the best thing for the economy. but if the balance sheet levels off, i expect equity volatility to go down when it shrinks, it translates further in risk markets to equity vol stopping that would be a bit of a calming influence. >> thanks for your thoughts,

mark mike santoli, back to you. >> all right, rick, thank you very much. let's send it to jon fortt on the floor with a look at what's coming up on "squawk alley. >> it has been a rocky start to the week for semi conductors we will talk to the founder of cypress semiconductor what's ahead for nvidia and the whole space. that's coming up on "squawk alley. with fidelity's real-time analytics, you'll get clear, actionable alerts about potential investment opportunities in real time. fidelity. open an account today.

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"squawk alley" is up next. apple getting ready to report earnings and don't miss instant reaction and analysis to apple numbers. that's coming up later today on "closing bell. meantime, the dow is off highs of the session, up only nine points, having shed about 100 points the nasdaq and s&p are lower unay ted "squawk alley" starts in just a moment

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