>> it's wednesday, january 30th, 2019, and "squawk box" begins right now. business never sleeps. this is ""squawk box." good morning welcome to "squawk box" here on cnbc we are live from the nasdaq market site in times square. i'm becky quick along with joe kernan and andrew ross sorkin. let's take a look if he u.s. equity futures market was mixed yesterday the dow ended up by 50 points. s&p down by 3.5 points nasdaq oif by over 50 points this morning it is green arrows across the board dow futures indicated up by 85 points s&p futures up by 7.5, and the nasdaq up by 52.

all of them being helped by apple's results. we'll talk about that in a bit that stock up pretty sharply after earnings came in. >> you will see a mixed picture. the ftse up 1.2 berz cac up half a percent. the dax down by one-third of a percentage point, and then in spain stocks weaker as well. check out the treasury market here in the united states. you're going to see that the ten inform year is yielding 2.722% >> it is a busy day for business news we're going to get quarterly report cards from at&t, boeing, mcdonald's all that before the opening bell

in addition to all that, we are reacting this morning to apple shares because they are soaring after the company reported earnings of $4.18 a share. beat estimates by a penny revenue. also topping expectations. joining us right now to talk about your tom forte, managing director at research research analyst at da davidson we say they beat or whatever, but let's be honest ers. they are taking stuff down so far. let's sort of context walize what's happened here revenue fell in a meaningful way. >> when i think about the relief rally in apple shares that looks like it's going to occur today, it's basically because the performance for the quarter was about as we anticipated. pressure on both the iphone and sales in china >> we say about what you anticipated relative to what they told us a couple of woeks ago or maybe a month ago now when they said things were going to be much worse than they thought. >> i think you're right. less bad perhaps is the way to

think about apple's performance for both the december quarter and their outlook for the march quarter. they told us when they preannounce that iphone sales were weak. gee grskly sales were weak in china. then when you looktd at the outlook for the march quarter, while not great, clearly better than expected. that's why i think shares are poised for a rally >> stock down 40% almost.

athat doesn't seem like it's that nuanced to me >> i think you can simplify it in that manner i think if you look at stocks in general, consumer tech space, kwet is how much bad news is already priced into shares >> don't you think that this will yoouf the tone of the equity markets in general, or is apple that important or am i giving it too much importance? >> you did seat iphone sales drop that's a problem you saw the services which actually looked pretty great, i think, with margins over 60% is that sustainable? >> i don't look to services to save apple shares. i think if you look for apple, at some point they're going to have to transition off the iphone, which is still of 0% of

their sales today. it does generate a lot of free cash flow, and historically in april/may -- clearly for the long-term health of the stock, they're going to have to come up with the road map beyond the iphone >> you said transition off the iphone you don't see that happening in the next five or ten years, do you? >> definitely over the next five to ten yoerz. >> you think in five years of 0% of the revenue is going to be gone >> i don't think it will be gone, but it will be a lot lower poergs of sales. >> we knew the wearables, for example, that's going to be the fastest growing piece of the business >> yes, absolutely i don't think that the strength of wearables alone can be

carried going forward. if you look at the performerance, x iphone it was -- -- >> i understand journalism and everything, but if the stock is up 6%, it's up $9, whatever it is eight and change if you get buying on a stock this size, it moves it up $ the. the report was not underwhelming. >> i definitely think, again, the expectations were so low that their ability to come in pretty much as expected with a preannouncement for the december quarter and guide that march quarter that was not terrible -- >> if there had been more -- jim cramer talked about the first road and then there's a bunch of other roaches coming if there be health care a whole, you know, parade of roaches in this report, i think it would be

down. fp you look at what apple did a year ago and what apple did today, you would be underwhelmed that's basically what's happened >> a year ago it was $1 .2 trillion market cap. it's not falling from $1 .2 trillion why do you think it's down 35% to where it is right now the performance of the company is not as much as it was a year

ago. >> why is it today >> they did better than people thought after they told everybody it was going to be terrible that's what happens. i think the stock will be more than okay on that bays >> would you prefer it to be in the form of buybacks or dividends? >> definitely buybacks >> tim cook was asked about apple tv specifically last night and the growth opportunity for that and what that's ultimately going to look like they've been putting money into content. what did you take away from his comments >> so what i took away from the comments is basicry for apple we're trying to determine what's next, and content can be part of

that strategy. they signed a content agreement with oprah winfrey clearly, that's becoming more important opportunity for the company going forward. >> what's your price target. >> $245. >> okay. you like it. >> i do like it. it's up by but it's a hold >> that would be weird >> you have a buy. you don't sound -- i would not have predicted that with -- >> you if look at, again, the end of the day, apple generates very significant free cash flow.

>> if you can put $100 in this or amazon, what would you do >> amazon. >> why do you like appear zblon. >> >> aws continues to be an incredibly strong position the last dwo quarters has been much better than expected profitability. on cloud computing, on advertise kprks in the growing mix of third party unit sales, which zpaets e that's higher profitability. >> what is your. >> what do you say the multiple is on apple? >> rare -- >> based on earnings, what is the multiple today >> dahl high single digit pe >> is that where it is, ten times? then that shows you, i mean, so% growth you can get zero growth or down. you could have falling revenue and falling profit and still have to beat ten times earnings. >> it almost has a --

>> it's not 30 times earnings. it's nice for companies to grow, but when you have already grown to $85 billion and 20 billion profit if you can just print money like that for the next -- i think that's a question about apple. in five years will they be earnings $20 billion a quarter five years from now? >> depends on their ability. >> what would they have to pivot to >> the next device >> flying car? >> do you have any sense that they are -- >> a flying car with apple tv. >> with apple tv zroo do you have any expectation that they can do that? >> yes absolutely >> why snoo the track record suggests they have that ability to spot the next trend they're not the first, but ultimately, the best >> could in a be based on why their staffing is? >> if you look at their staffing, can you see that they're ramping up in health care it looks like they're pivoting their self-driving car efforts to focus more on si ri from an

artificial intelligence standpoint we talked about content. so snoo tom, thank you >> thank you >> there's a polar vortex taking aim at the midwestern united states 85 pirz of the country is facing temperatures at or below freezing it's disrupting travel and businesses chicago, among the hardest hit areas with wind chill there as woe lowe as negative 23 degrees fahrenheit that number could drop to negative 50. u.s. pollal service has -- in wisconsin at least two beer distributors have halted delivery because the cold is just too tough on the employees, the beer, and the equipment. i suspect you'll hear more and more of these issues happening as the thermometer continues to drop

>> is it always a polar vortex >> i think this one it is. >> we had a couple last year we had a couple the year before. >> did you see minus 75 in some areas? that's low e colder than mars. >> we head to break, and here's a look at the biggest premarket winners and losers beautiful lighting we have on the white house. oople up almost 6% at 163. boeing comingout should be interesting. i'm a veteran

and the army taught me a lot about commitment.

which i apply to my life and my work. at comcast we're commited to delivering the best experience possible, by being on time everytime. 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. >> the government shutdown is over that means the countdown to the next shutdown is on. congressional republicans and democrats beginning negotiations over border security they have until february 15th so

hammer out a deal and avoid another shutdown >> it's only 15 gaze >> i thought it was 21 days starting on friday >> and that's the day after val enstein's day. there could be late night negotiations >> do you get him a valentine? >> you can get him one he can't be your valentine because he is ours >> he is yours >> government shutdown is a focus, but today it's the u.s. and china trade talks. >> i jits looked at the monitor. she is awake and talking and a hear a few cries i'm glad to be here instead of -- thanks for having me thank you very much for having

me i know that the markets have been hanging on these trade talks. it is a critical development for the u.s.-china relationship. china will be bringing a delegation of 30 members of its government high-ranking frontal boundaries every officials they'll be across the table from the delegation from the white house that includes so much trade representatives. the treasury secretary the white house has been cleared of managed expectations. the president is expected to have at least one meeting with china's vice premier leo and china's expectation is that if there were to be any progress made on a deal, it would need the president's sign-off we'll be watching to see if that remains on the calendar very closely. the bhous says that the two sides will be discussing structural changes as well as

china's pledge to reduce the u.s. trade deficit via more goods purchases. there is no appetite to delay the march 1st deadline after which tariffs would go up. that's certainly interesting because we have seen in these talks if the u.s. feels like there is progress, then they're willing to move the goal post. we've seen their will be a little more increasing pressure on the president to make a deal. what with some of the economic issues going on across the earnings spectrum that we've seen with nvidea and apple and others also, with the government shutdown potentially cutting down his standing across the republican party. industry has been weighing in as well they have been telling the cost of the tariff saying that they remain biting into their profits.

>> those who are more reluctant. who, though, is going to be running point on this? who is the person who is leading the talks? >> it is ambassador lightheizer, the u.s. trade representative, who is a china hawk himself. he has been pushing a harder line than others in the room during these negotiations.

hopes are high, and expectations are low. they say focus on the back half of february. when china's potential willingness to really make good on any of the lopg-term issues, that's going to come into the focus then, and it really depends on how the president feels waking up in the morning at the end of february and whether he feels pressure to make a deal. >> this just idea that the u.s. government may be as much about national security concerns and longer term national security concerns as they are about competitive concerns about sort of owning or at least american companies owning the 5g generation the next generation of

technology i was curious if you picked up anything along those lines >> well, i think, andrew, there is still some debate within the administration as to exactly what the 5g policy will be i mean, the justice department laid out a pretty clear set of facts against huawei in the case -- in the charges that they unveiled just a couple of days ago. certainly, when the white house is talking about these issues of intellectual property theft and of forced technology performer, i mean, this really serves them in laying out a very clear anecdote to illustrate exactly what they're talking about and how this plays out on the ground as for 5g, i know it has been a hot topic within the administration there has been that debate over do we have a nationalized 5g grid we roll out do we pilot it in a smaller fashion? those debates are still underway it's still under consideration with, again, a lot of idea logicallogical differences the overall recognition as have you seen laid out in the national security strategy that 5g is of integral importance to the u.s. to its competitive

advantage going forward and as to now they still haven't figured out exactly how they're going to attack it >> what -- what you pointed out a few minutes ago from axios, the idea that hopes are high, but expectations are low i would not say that that is the case from the market's percent plekt. i would say expectations are pretty high. you're not going to see a doubling of the tariffs come march 2nd. i think that becomes a pretty huge shock to the markets. >> well, i think that markets could be in for a surprise because a lot can happen in 30 days the reason why we say expectations are low is because if you look at the commentary that's come out of all of the officials from the administration over the last week, wilbur ross on "squawk box", in addition to talking about the government shutdown, he notably said that u.s. and china are miles and miles from a resolution secretary mnuchin from the white house podium said that, you know, this week's talks are important, about ut that there is another month after that, and that there are very serious

issues that have to discuss. even larry kudlow who has been an optimist through and through said that he acknowledges the difficulty inherent in the talks and that he is happy that china is coming essentially, but that there is still a lot of work to do it seems like the game of expectation management is certainlyramping up. everyone i talk to who is involved in, briefed on, whatever you want to say in these talks, they point to that end of february deadline i report on "squawk box" before that one thing that could come into play is the auto tariffs report i know that the national economic council has raised concerns internally about whether or not they want to announce a strategy related to auto tariffed.

>> shares of amd higher with forecast revenue a little light, though investors have been bracing for weak results after warnings from other chip makers. obviously a slowdown in china. don't forget this either.

>> and overhaul some others. and amgen's fourth quarter profit topping forecasts as sales rose and tax-related costs fell the company says that competition for older drugs such as arthritis treatment enbrel is growing and it forecasts 2019 earnings below estimates >> let's bring you an update now on carlos ghosn. speaking out for the very first time to the media since his arrest back in -- he said that rivalled at nissan who opposed his plan with closer tie of renault behind the misconduct allegations. ghosn telling the nikkei acesian review that he had no doubt that the accusations were the result

of "plot and treason he remains in detention following his indictment on charges related to understating his salary and is expected to be in prison at least through march. >> consumer confidence dropped wholesale prices weakerned market volatility spiked and home sales fell. we will talk about today's fed meeting and the case for caution next right now, though, as we head to a break, let's take a look at yesterday's s&p 500 last night winners and losers.

♪ welcome back you're watching "squawk box" live from the nasdaq market site in times square. good morning among the stories that are front and center this hour, let's see what's going on. apple shares soaring the company reporting first quarter profit and revenue largely in line with forecasts after slashing its sales outlook earlier this month iphone revenue fell 15%.

mcdonald's also that's happening before the opening bell. this afternoon lots of focus is going to be on tesla, microsoft, and facebook we'll also continue to follow the latest out of venezuela. the president there reportedly says he is ready to have talks with the opposition. president trump tweeting about venezuela this morning warning on a massive protest, and telling americans want to travel to venezuela until further notice take a look. u.s. equity futures, we're still three and a half hours -- about three hours before the opening bell jay powell on the path and pace.

here to talk about the market impact is michael tyler, chief investment officer at eastern bank wealth management and torsten, chief international economist for deutsche bank. cfo's may use the government shutdown as a way to massage guidance and lower expectations that they can eventually beat maybe in the future, but in near-term, that might be disappointing. what kind of earnings season overall are you expecting? >> so far we've been getting 11% earnings growth, which sounds pretty good, but it's way down from 25% that was in the third quarter. people are beginning to think about the full year 2019 remember, we're still looking at the end of 2018 when we say 11% for the last quarter

5%, 7% somewhere in that range, and people don't really know yet. it's very early in the year. companies don't want to promise too much and then get slammed later in the year. they've got a great excuse slowdown in china. great excuse they're going to do what they can to be more cautious in what they tell investors through this week and next week and the end of the reporting season. i think that may dampen expectations a little bit. we'll see what the fed has to say whether they likewise will dampen expectations or simply say that the economy is pretty much where people had expected i think that does present risk to stocks in the near term longer term it sets up a nice recovery through the rest of the year >> do you think that people need to own apple, and obviously it's

much cheaper than it has been. >> i'm not going to predict day to day movements in the market that's rap dom niez. i'm looking at the longerterm. tame there's going to be volatility, and we may very well go back to the christmas eve lows i can envision scenarios where enough companies have cautious earnings that people will get there. that would be a huge buying opportunity in my opinion. we'll see if the market tests that or keeps bouncing along and improving. >> torsten jay poul

do you think he has learned that he doesn't know where neutral is or itching to raise rates a couple of times, and he is just telling the market what he wanted to hear. >> two days later you get the employment report, and you have negative data. it's very difficult for the market to figure out >> difficult for him too >> the reason i ask is we had a former fed guy on yesterday. minneapolis, right, where he was? right? >> yeah, former -- >> and then -- maybe they think the economy is never hot

>> is he in st. louis. minneapolis it's cold. always why are they so doish? yesterday he was saying, look, there's no indication globally that inflation is a near-term issue, and that the fed is not supposed to worry about unemployment being too low or employment being too strong. it's like that's their mandate get employment as strong as yo can. why tap the brakes if there's no inflation? >> that's also why the key mantra at the moment is they are patient and flexible and in some sense the meeting is actually a little boring. the question becomes how quickly is the slowing, and is there a dramatic slowdown as a result of the trade war. that's not what we expect.

>> really, thank you for today see you in june. we'll see where things go in the meantime the chances are still that the economy will be picking up later, but for now they are absolutely very clearly on hold. >> do you trust jay powell to walk the line? >> i think he is doing an outstanding job. absolutely. tepid of date they need to have an exclusive for turning more dovish you can't just expect them to turn dovish for no reason. this is really important for markets. for them to turn do you have

every dovish on the next few meetings, they need to see the data deteriorating, and we just haven't seen enough deterioration, even though some of the underlying trends are somewhat more worrying the picture is let's wait and see. >> if you have a good investment process, you will be fine. i do think the market -- i do think the market is going to be up by year end it's the investment process that matters. i do think, by the way, that the fed -- i think if i had to predict anything, i would say zero to one hikes. the only way they're going to hike at all is if markets are favorable to them. we're looking at a slightly steeper yield curve. i think that's a contrarian idea if that pans out, then they can hike if you don't see a little bit of

inflation, i don't see why they bother >> thor had a stoinl and stone and a hammer >> if i had a hammer so it's the stone that's called a -- >> you're right. you've got it. >> joe means italy >> it means coffee cup of joe >> thank you >> to me it means love, but to andrew -- >> yeah. >> no, it's a nice old traditional name coming up, a lot more on "squawk box. facebook under fire again this morning.

we're going to explain what's going on >> what's andrew mean? >> manly and masculine >> that's, like, love it thank you. >> plus, there's a measles outbreak confirmed cases in washington state. we're going to talk about scenes with fda commissioner dr. scott. maybe he can help me with my cough. you're watching "squawk box" here on cnbc d percent renewable energy goal. if we don't make this move we're going to have changes in our environment, and have a negative impact to hawaii's economy. ♪ verizon provided us a solution that lets us collect near real time data on our power grid. ♪ if we can create our own energy, we can take care of this beautiful place

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>> welcome back. time for the executive edge. facebook under fire once more. this time for secretly paying people to install a smartphone app that lets the company monitor all the phone and web activity that's on your phone. since 2016 facebook has been paying users between $13 and bars 35, that's up from $20 a month, plus referral fees to install something called the facebook research app.

apple doesn't allow this to happen they had a different app it's what twhe call reskinned so it could work this way yes, people are being paid so they know what's going on. >> 18-year-olds and up, don't pay kids 13-year-olds and up that allow you to do this without knowing what you are signing away or asking parental permission >> charging their parents' credit cards all sorts to buy games and also to -- sometimes up to $6,000 interimly they had emails between each other calling it friendly fraud they knew about it and didn't

strie trito stop it. the parents had to go to the credit card companies and say reject this. there's something culturally inside this company that is robbing. sorry to say that. >> when we come back -- >> what you are talking about? spike lee movie. >> when we come back, washington's governor has declared a state of emergency over a measles outbreak. a disease that's dangerous to children who are too young to be vaccinat vaccinated vaccinations are a heart of the problem here we're going to talk about the outbreak are fda commissioner dr. scott gottlieb next on "squawk box. tt'his m. at&t provides edge-to-edge intelligence, covering virtually every part of your retail business. so that if your customer needs shoes,

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welcome back, everybody. let's take a look at the at&t numbers just out at&t out with earnings and it looks like the company's coming in with earnings of 86 cents a share. in line with expectations. revenue looks to be in line too. versus the $48.4 billion the street was expecting saying they are reaffirming their guidance for 2019 you take a look at the shares right now, down by about 17 cents. last tick at $30.53. >> deleveraging plan on track. big article in the journal today on the front page about directv and -- i don't know. >> yield being 6.7%. >> 6.7%. but i thought directv was sort of a bridge to what they were finally able to accomplish if it happens. it's still up in the air i can't believe it's still up in the air. not really they've closed the deal. but regulators still looking at it at this point do you think, sorkin, did they need directv did it need directv to get to the scale to buy time warner

was that -- >> it might have i mean, i don't know i think directv is a tough business >> it was a tough business then. >> it was always a tough business you're saying could they just have bought hbo or time warner without it >> no, given the scale and presence in media to be taken seriously to buy those assets, right? >> i think they probably could have done it anyway, frankly >> then you're stuck with directv. we've got dr. scott gottlieb standing by ready to talk about vaccinations there's been a serious outbreak of measles that continues to spread through this country. washington governor now declaring an emergency dr. gottlieb, you've been writing about this and sounding off on a problem we are creating ourselves because we are refusing to have some people vaccinated why don't you talk about your concern? >> sounding off for a long time now. this risk has been building. this is an avoidable tragedy

we're is starting to see a resurgence of this highly contagious disease with every american infected, they'll infect nine to ten other people this is an avoidable tragedy this is a result of the fact vaccination rates are falling. if you look in the pacific northwest, we're seeing this outbreak right now about 8% of kindergartners were exempted by their parents. as vaccination rates decline, these kind of epidemics are going to become more common. >> this is a disease that we thought we had eradicated from the united states almost 20 years ago. what happened? is it because we don't see measles? because we forget how deadly some of these diseases are that other issues pop up and people think it's okay to not get vaccinations >> i think it's a result of people believing if everyone else is vaccinated, my child doesn't have to. i think people have some casual fears around putting a medical

product into an otherwise healthy child. but these vaccines are safe and effective. it's one of the most effective vaccines we have after two doses, it's 98% effective at preventing measles. it's been also one of the most exhaustively studied modern products in medical history. it's been the subject of enormous studies funded by the federal government in part because of the concerns people had around mmr vaccine the government sought to do large and well conducted studies to eliminate those fears those studies were compeleted. they showed no link between the vaccine and the thought it could cause autism that has been thoroughly debunked including studies that have looked at half a million children in one study a cdc study done with medical authorities. >> i do have friends who said,

look my child developed issues and symptoms of either autism or something on the spectrum right around the time they got these shots. why would that be? >> well, the reality is that children who are going to display symptoms of autism and other developmental disorders, those start to become manifest around the time kids get vaccinated that's when you see the disorders. when you see motor skills or language not developing properly that doesn't mean the vaccine caused those symptoms. those symptoms oftentimes become effort around that age i think that's what's happened kids are getting vaccinated and parents are starting to notice change in their children around that age because the kids are developing along a pattern that isn't consistent with normal developmental behavior and they're linking the two. and the two aren't correlated. >> dr. gottlieb, we are out of time we'd love to have you back to talk more about this in-depth.

i think it's really important as you see these diseases rising up again. but we do appreciate your time today, sir >> thanks a lot. >> dr. scott gottlieb. we're ing goto talk apple earnings when we come back

ready for takeoff. dow component boeing set to report results the numbers, the market reaction, and the state of the defense industry is straight ahead.

the fed in focus investors eagerly awaiting what jay powell will say about the state of the economy and interest rates it means for your money coming up and apple will be a big focus today. the stock bouncing back after dropping 10% last month. we have the latest on the iphone sales and the future of the company with one of the street's top analysts as 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 kernen along with becky quick and andrew ross sorkin u.s. equity futures are up triple digits at this point. 105 on the dow the nasdaq up ten -- i'm sorry the s&p up ten the nasdaq up almost 58. a lot of the moves, the green

you see there is apple, obviously. it's in all three of those definitely giving some strength to the dow if it's up 6.5%, that's almost half the dow's gains. not quite. let's tell you about some other headlines at this hour apple shares are moving higher in the premarket trading apple reporting profit of $4.18 a share. that was a penny better than the street was expecting revenue also beating forecasts iphone sales did slow down, but ceo tim cook made upbeat comments about apple's services business and after all of the concerns that have been built into this stock over the last month, you can see that stock picking up by about 5.5% a gain of more than $8.50 this morning. we are a little over an hour away from adp's january report on payrolls. economists expecting 180,000 new private sector jobs for the month. that would be down from 271,000

jobs in december that number ais out at 8:15 thi morning. and we're watching alibaba this morning reporting better than expected earnings per share, but revenue came in below what the street was expecting. the numbers you're seeing on the screen this morning is not in dollars. that stock now up about 2.3% a few stocks on the move this morning to tell you about transmicro devices matching forecasts with adjusted quarterly profit while revenue essentially in line with estimates as well. the chip maker did give a current quarter forecast below street estimates hurt by excess inventory. also ebay beating consensus forecasts with profit of 71 cents per share with the online marketplace reporting in line with estimates ebay also announcing it would pay its first-ever dividend of 14 cents per share and is increasing its share buyback program. elliot management taking a stake

in that company just several weeks ago and concerns about what kind of activism they're trying to pursue with that day two of the federal reserve's monthly meeting -- too much -- a decision on interest rates will be released this afternoon. this guy loves it, you know? just ready made every month. steve liesman joins us >> it's every six weeks, joe just to be clear, not every month. you just read the prompter you never read what's in there dammed if you do, damned if you don't. >> you get two every meeting though >> there's a lot to talk about what i would say for folks today is look out below. last time the fed met, stocks plunged 8% from the meeting until the bottom when it eventually bottomed out. the fed kicks off its first meeting of the year and will try to avoid that outcome, you would

expect the fed will try to avoid a tough transition today from hiking rates in 2018 to waiting in 2019. it's also the first in the new regime where the chairman holds a press conference after everyone meeting and chairman jay powell could confuuse this reset his troubled communications with markets. rsm writes, the fed will attempt to thread the needle on why a pause in rates does not equal the end of its normalization party. we do not envy chair powell. powell has stumbled over the past several months in describing the rate hikes and the plan to reduce the balance sheet. so here's some of the things that you might expect. maybe just a touch less upbeat on the economy, but not so much to cause concern obviously no hike, but you're going to want to maintain the flexibility to hike if things settle down in the economy both the u.s. and globally. it'll probably remove the language saying, some further gradual increases are needed and maybe provide some balance

sheet clarity. that's what the market wants that will come in the presser, not necessarily in the statement. we'll see how far powell goes in the outlook. the question is whether the committees plan to put a number on how much it will reduce its holdings and whether it's willing to slow the pace it's taking to get there. >> okay. for more now on the fed and possible impact, thank you for that steve, we are joined by jason hunter head of global fixed income and technical strategy at jpmorgan eric knutsen did i pronounce that right >> embrace the "k. >> thank you to both of you. just comment on what steve just said is there anybody who disagrees with what steve said anybody want to take the opposite end of that >> i would say if you look at the markets, how they're priced, i think they're fairly priced for a policy for the time being. that's what the house views. then they'll come back in the second half.

it fits with our technical rates. >> what are they going to have to see in the second half to switch >> i think it's going to be more, you know, this is a bit away from the technicals but naturally that would fit in the rally. the data starting to come back and the data does its job for them where they're just coming to the data >> you're expecting a rally in the second half. >> we are. the technical signaling, you know, the forecast value we got from that is behind industrials. was that a bear market bounce? the statements we're getting from the high beta industry groups like semiconductors, they lean towards this being a sustained rally and a reaction to the policy moves we've seen so far >> what happens if we don't get the rally in the secondhalf? >> that would indicate that pmis and growth expectations are dropping you would need to see unemployment start rising in the united states and that would be more of a credit spread

widening that would be a precursor to recession sooner rather than later. >> and you're anticipating what's going to happen then? >> we're optimistic for the second half of the year. we'd agree with jason this has been a bounce in the off the bottom we're actually looking to fade this rally a little bit and then put more risk on after we get through some more probably negative news. there's going to be some more bad news out of china. earnings are definitely slowing. we don't think we go into a earnings recession so there's goirng to be more volatility before -- >> go ahead. >> i read the teleprompter will i be reading in the teleprompter the s&p is trading at an all-time high this calendar year? >> could, absolutely

>> 2940, we're at exactly 2640 300 points away. which sounds like a lot. but all of a sudden it sneaks up on you i just wondered. what are the chances >> or my gosh, we're back to 2300 >> you could see 2300 before you see the highs. on a 12-month horizon, we think stocks are higher by the end of the year and potentially new highs. that's a reasonable expectation. >> do you have any worry -- you know, we had ray dalio on in davos. he's calling for a recession by 2020 he says it's just -- it's inevitab inevitable >> you look at economic forecasts. the consensus is second half of 2020 that would lead me to think it'll either be before that or after that >> right. >> what would cause it to be before that? the fed moving too quickly fed mistake. we don't think that's the likely outcome. we think chair powell is going to figure out how many ways he can stay patient today the biggest concern would be the

chinese stimulus which is significant does not translate through to a soft landing in china. >> jason, you -- head of global fixed income and u.s. equity technical strategies that's too much. do you really know enough about both >> we try to, yeah >> will we see a new high? >> we think so even as early as late third quarter this year, the s&p's challenging the highs it saw >> but you think we've got to go, like, six months or longer before we actually see a gain of 10% to get back or 11% or 12% to get back to that level it's not going to happen any time soon? >> we've got it rebound. they're noup to the underside of the breakdown you had last year. it oftentimes time for the market to digest that. as individuals get back to break even, some wash their hands and walk away. >> we are a long way from where we were last year where people at points thought, my gosh every time the markets dip 3% to

5%, i need to buy. you're saying don't worry about that >> if you look at the late '80s, early '90s, the fed went from tightening the pause you see tightening out of hina this time we have the unique part of the trade negotiation. but in both cases, that policy response is going to push the cycle a bit further, allow it to play out a bit longer. >> what's baked into the cake, by the way, on the trade issue with china you think it's -- do you think the market moves materially if there's a deal on march 1st? >> i don't think it necessarily happens right on the headline, but if you -- like, if you use the pricing around the fed policy as a benchbenchmark, it's priced for nothing the rest of the year >> how concerned are you that the china situation is even worse than we think? take the trade war piece out of it and we catch the cold in a bad way. >> that's where we lean on things like semiconductor performance. if you look at that over a year

over year basis, it leads the global pmis really well. starting in mid-november, they start to out-perform the s&p that's normally something you'd see in late 2002 or late 2008. not in a world where we're heading towards global recession. so if we're using that proxy from a technical perspective, they usually bottom in the first half >> yeah. we're looking at that piece of deceleration and that kind of second derivative leads us to expect we're bottoming and we'll see an upturn in the more classic leading economic indicators but that could take another three or six months. >> eric, jason, appreciate it. all right. when we come back, boeing earnings expected in just a few minutes. we will bring you those numbers and the market reaction as soon as the numbers hit plus, at&t and apple, a major focus for investors this morning. we will get street reaction to those results and talk in depth about both companies with btig's

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a lot of this is coming from the strength in apple's numbers or at least relative strength based on what the street had been anticipating also, let's take a look at shars of at&t this morning the company earning 86 cents a share for the fourth quarter that matched what the street was expecting. revenue came in around what the street was expecting around $68 billion that the street had been anticipating the company did fall short of forecasts. that stock is off. $30.02 is the last trade coming up, private planes will be flocking to atlanta for the super bowl this weekend. some of the same ones that we saw in davos, no doubt we're going to talk private aviation, the state of the industry, and much more with wheels up founder after the break. here are the futures ahead of boeing results which are coming out as well. "squawk box" will be right back. endless fields of grain.... a wealth of oil.... and riches beyond your wildest dreams.

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and private travel to the super bowl is up 20% from last year's contest according to wheels up, a private jet company. joining us now ahead of the big weekend in atlantis, c erk o of wheels up. kenny, we had somebody on, i don't remember the company you'll be flying for this ridiculous number. and it was -- know whag i know about what it costs to fly private -- >> i would say, joe, fake news fake news. you can't have an all you can eat business in our space. >> cheap as you can get per hour is somewhere around $4,000 >> yes we're right now at $4,495 per occupied hour. it's not an inexpensive way to get there. but most convenient way to get there. >> the reason i'm leading into it is because it is a great barometer of -- it's not -- you know, we've seen elizabeth warren talking about dan snyder and his yacht and talking about

henry and his golf course and stuff. those are one type of people then other people that might be able to fly wheels up once in awhile how are they doing in this economy? >> it's expensive, but they're doing really well. i think that people are into value these days which is understandable. >> if you're bringing a group down to the super bowl. >> the super bowl, we did justify here we did american pharoah here we got brady and belichickswho did this since day one >> and you've got the coach of the rams >> and the quarterback jared goff and mcvay so we're going down today at noon and we already won the game so the parties we're throwing which are we got raos, andrew i got a table for you. >> for people that don't know,

that's like an impossible restaurant -- >> to get a reservation in new york city. >> they've never done a partnership like this. they brought it to the masters you got the whole crew down there with us. we're ready to knock it out. we partnered with momentum which is a great agency. chris has done the show before bmw, bose. great stuff. >> when will -- is an ipo on the horizon at some point, kenny >> i'm here. i'll give you some first on cnbc stuff. we hired goldman sachs we hired bank of america and our tried and true geojeffrs helping us there's an unbelievable opportunity in our space we have the billion-dollar brand. and now the real question is -- i'll give you my business model and our business model over the next three years what if it were as easy to book a private airplane as it was to book an uber or airbnb we have the number one tech

team we have 50,000 people doing tech led by dan crow. and he did the subscription business at weight watchers. he's got 50 people working 24/7 on building this marketplace which is -- >> so just to understand, just used the word consolidation. he asked you about an ipo. are you talking about a rollup of a lot of other companies as part of an ipo what are you talking about here? >> i think it's all connected. >> oekay. >> you need currency. >> so you go public, use the currency of the stock to then buy in and bolt on, is that what we're talking about here >> i think we're talking about a strategy -- >> andrew, you should come do this with us i think what's happening is there's a lot of sub-scale players in our space look at the amazon model on what bezos did. a lot of people give him credit for organic business >> how much -- >> but at the end of the day, that's a big consolidation play. >> part of your business has

been the subscription element. effectively you pay the membership fee >> that's our base >> keeps the lights on, right? >> we're going from 5,000 members to 10,000 in the next three, four years. >> and then per ride, everyone -- >> pay as you go >> but the question is when you talk about turning this into an uber, if you will, do you open up the membership beyond that so there's no membership fee? >> no. there's segmentation think about american express the black card, the platinum, gold, green. right now we're in the black card business. >> meaning you get smaller planes or less fancy planes for the lower memberships? >> you know, it's interesting. our consolidation play and our marketplace play is a really simple play. there's 1,000 operators that matter in the world and about 5,000 airplanes total in the world that can play in this charter marketplace. it's our job to be the amazon box. amazon ships books, but they

ship samsung televisions >> amazon didn't make money for a long time. right now the biggest stream of revenue is aws are you buying a consolidation are you buying the airplanes or the members? >> well, for us it's actually looking at the tech. so tech is a very important bolt on for us. i think that we are looking to use third party vetted and verified airplanes that can make up -- think about what uber x is versus uber black. >> you made capital buy planing yourselves >> to tart the four seasons, they had to build a few hotels >> but going forward, you don't need to own the operator or the plane. >> no. >> look, we have rob wizenthal on from blade. he doesn't own the helicopters he owns the tech >> kenny has taken a brand and the brand is ahead of the operations, i think. >> not a question. not a question >> is it not i mean, nobody has branded -- i mean, i see it places. i watch espn on saturday morning

and the wheels up guys come through. justify, the brand is unbelievable >> you look at our party this weekend. i'm hosting -- >> guess why we got to go? to do boeing >> is this about making market share from net jets? >> the legacy players, the net jets, the flex jets, and the vista jets, they have a legacy position like channel 2, 4, 7. at the end of the day we're trying to be apple tv. >> we'll be right back nvesting lies beyond the tech sector. it's about technology transforming every sector. ♪ at pgim, our bottom-up approach uses a technology lens to identify long-term winners. from energy... to real estate... to retail. finding such opportunities for alpha is the true value of active investing. and around the world, you have a partner in that pursuit. pgim: the global investment management businesses of prudential. the global investment management

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all right. welcome back to "squawk box," everybody. we are live from the nasdaq market site and we are just a few seconds away from anticipated numbers from dow component boeing quarterly results expected any moment right now you can see that stock is up by about 1%. that's a gain of almost $3.50 to $368.40. lots of earnings have been coming in. apple last night better than the street had anticipated or not nearly as bad as they anticipated. the stock is up sharply.

that's helping the s&p 500, the dow, and the nasdaq. you can also say that at&t has weighed in with its earnings earlier this morning we'll talk about that in a moment right now you see the dow futures are indicated up by 130 points s&p futures up by 11.5 and the nasdaq up by 61 points mike santoli is standing by watching the earnings coming in. apple numbers last night much better than anticipated. that's helping things. and maybe we've been trying to figure out if that's going to mean something for the markets for the next day or two. >> you know, if it's only a reflection of how fearful people got going into it. the numbers themselves were not that much of a surprise. >> we'll talk more with him in a moment the numbers are out. phil lebeau is standing by in chicago. >> becky, these are very strong earnings for boeing for the fourth quarter and for the full year and the guidance is also going to be much stronger than many were anticipating. let's do the fourth quarter numbers, first of all. beating the street by a wide margin earning $5.48 for the fourth

quarter. 90 cents better than the estimate out there right now refr knew coming in better than expected $28.3 billion for a point of reference, the expectation was for revenue of $26.9 billion free cash flow also a record of $2.5 billion in the fourth quarter. in terms of the guidance for all of 2019, boeing expects to earn between $19.90 and $20.10. that's way above the analyst expectation of $18.30. revenue expected to come in at $109.5 billion to $111.5 billion. the analyst projection right now is $106 billion with operating margins north of 10% 14.5% to 15% operating margin for commercial airplanes services, north of 15% and defense north of 11%

one last note here commercial airplane deliveries this is the first forecast from boeing for all of 2019 expecting to deliver between 895 and 905 planes for a point of reference, last year boeing delivered 806 aircraft you see the ramp up in production for the 737 as well as the expected ramp up in production for the 787 that's the reason you're going to see stronger delivery cadence for boeing coming up on "the exchange" today, we will talk with dennis muilenbu muilenburg, the ceo of boeing. we'll get his perspective not only on a record fourth quarter but also on what is expected to be a very strong if not another record year in 2019. guys, back to you. >> apple and boeing, not too bad, phil. we'll talk to santoli about that if i had to pick two -- >> check it out. up 250 points. >> we'll talk about it, yeah

>> you got china you got manufacturing. you got tech i just think for the s&p, it firms up the tone of everything. let's break down the results sheila, you looked at everything >> kind of just getting a glimpse 806 going up to 905, that's double digit growth. that's strong. about a hundred basis points of improvement. tons of productivity going through. >> so in terms of worrying about trade, what in here do you see that either did happen with trade in china or didn't happen? what's all the hand wringing consternation? why aren't we seeing it? >> i think we talked about this a moment ago this is a long cycle stock the multiple's been capped because of trade negotiations. although it won't move the needle on a seven-year bag log that's what's impeded the momentum in the stocks

>> you can't say that caterpillar was wrong or not executing. it's just a different cycle of business for boeing. they're not managing it better they're still being affected or not by china >> yeah. it's the length of the backlog two to seven years on the type of plane defense as we know as a five-year backlog. so just the momentum in that business makes it less volatile. >> the day caterpillar reported, the dow was down but the other stocks we were showing were deere and boeing. we threw boeing right in with caterpillar. one makes excavators the other make these big flying behemoths and we still threw them together because of china and we shouldn't have? >> i think they both move on the china trade, but just the cycle of the boeing aircraft is much different than an excavator as you say. you know, you look at what cat did. i don't cover cat, but you look at the momentum it had to start the year, that's what drove the

pullback, i think. >> okay. santoli, can we cut out the middle man here in terms of you got the market's up 265 now. you got apple and boeing i know you're going to sit here tomorrow and have talked to the assignment desk and pitch some story about the s&p or the -- can you do it now instead of -- what are you thinking? what does this mean for the tone of the s&p for you >> what i would say about -- boeing is the best stock in the best group in industrials. it is not necessarily reflection of everything else the s&p still up 0.5% right now. it's great for boeing. but boeing has been such a huge outperformer and apple, i've said this for six or seven years it's not really a broad market bellwether it's a very important stock. it's a risk sentiment indicator because apple kind of goes only its own streaks. it's based on its own business dynamics it's not really reflective of macro stuff except for china recently so it's all good but i think for apple, it's a different situation. i think that's a reflection of just how bad expectations got. the bounce off the lows in apple

was much weaker than the broad market now it's catching up a little bit. so i look at amd which is a really nasty revenue guy that stock's going to be up. i think we're still working off a lot of the built-up earnings i don't know whether the energy's being built up to carry the broad market higher in the very short-term. >> we just had a guest here and i asked him, he's thinking that we get back to new highs, but it's not going to happen, he thinks, until the third quarter. sop is that whole mentality we had for a long period, i'm going to miss our opportunity. >> i don't think it's out the door i think after you had a water fall decline down 20% in 60-something days which we had at the end of last year, the textbook says you don't turn around and go right back off the highs. you just kind of chop around a little bit i don't necessarily think -- i'm very agnostic as to whether or not you have to roll over and go

back near the lows i have no idea but i do think it's not usually straight up. and earnings season is a lot of offsetting currents that shake themselves out over the course -- >> you're not willing to say we've seen the lows? >> i think it's very likely we've seen the lows. >> okay. no one can say more than very likely. >> it seems very likely we've seen the lows for now. >> well, there you go again. what do you mean for now >> for a couple month. >> for a couple months >> here's the problem. nothing that's happened -- nothing since december refutes the idea -- >> refeudiates >> the idea that september was a bull market high and you're in a down trending market and this is just the countertrend bounce. and earnings are going to be kind of going around less than 5% and last year the market was down. >> sheila, why do i ever have to make a decision about boeing again after he tells me it's in

place for seven yaers? >> the free cash flow, we didn't talk about that. but their guidance is about a billion dollars higher than the street they're coming in at $17.5 billion. how they'll deploy that back to shareholders with the dividend and share repurchases is very important. >> if i -- >> and joe -- >> go ahead, phil. >> i was going to say to echo what she's talking about there, this is all about kp cushion -- execution one of the challenges for boeing when they started increasing the delivery of rates especially for the 737 which is really the cash cow for that company on the commercial side was the concern of will you be able to not only increase the delivery cadence going from 42 to 57. but would you be able to do it and efficiently do it and bring that money, that free cash flow? they clearly are doing that. and now you've got not only the 737 increase in deliveries coming up this year, another one. but then you have the 787 going

from 12 a month up to 14 a month. so it's very much an execution story for boeing when you've got a backlog of nearly seven years of commercial airplane deliveries, that's the key. that's what you want to show that you can execute efficiently. >> well, my point is next time, you know, wilbur ross says we're miles and miles from a trade deal with china and boeing goes down $4, do i need to take that seriously? >> joe, we'll talk with dennis muilenburg about this today shortly after 1:00 on "the exchange." the reason the stock is going to move down is they get 22%, 23% of their revenue from china. it's tied into china now, that doesn't mean that those airlines are going to immediately cancel their orders. but there is a huge component o their business that is tied to china. so it's natural that the stock is going to move down whenever some of the trade headlines come out. but it has been documented and said time and again not only by

the analyst who is have been on our air, but others that in terms of boeing's outlook in china and delivers and orders, they have not taken a hit despite the trade tensions they continue to rack up the orders and continue to do the deliveries the concern is, what happens if this goes on and on and on >> let the ask you though. if the next headlines come around and knock boeing, is that an opportunity to dive because of the long-term cycle >> the deliveries are in place it's a bad execution and the cash flow is there we view any pullback as an opportunity on the stock >> so the high is $394 all time. right? so we're at $390 not many dow components or big important stocks are at new highs. that's got -- i just don't see why this is not a firm -- >> but see, that's almost -- >> you're just a party pooper. >> no, i'm not

it has been -- >> if you've got boeing and apple on the same day -- >> they're they're responsible for the 250 points right now >> put in for the next couple of months the lows, let's get -- >> who doesn't want that >> still trading at a discount to the market on a free cash flow basis >> you'll appreciate this though it probably all depends on jay powell today, joe. >> i'm just -- i just -- i wanted to cut out the middle man. i know you're going to be here tomorrow with some macro market call >> but he's fast enough to do this now. >> do it now >> i agree with jason hunter >> i don't believe that either i mean, is he really going to screw up again >> what happens if he says something? he could say something >> he could say, boeing is really good, i'm hiking. >> that's right. you got to get in front of this. overheating. >> all right sheila, thank you. >> thank you >> and mike santoli, see you tomorrow

>> probably. >> i'm sure. >> thanks, guys. >> thanks, phil belo where are you? >> is it cold? what kind of a question is that? i took my dogs out this morning and they looked at me like, are you nuts would you go to the bathroom in that weather >> you didn't notice yeah you had to go in, right? when you stepped out, describe it to us when it hit you what was it like >> everything's crunchy. super cold snow. everything's crunchy you don't want to be out more than a minute or so. >> you can get frostbite in like -- >> five minutes. >> within a couple of minutes, supposedly, if you're not well prepared for going out there but you got to be ready, joe >> you're hearty you're just a hearty -- you're from -- well, we know he's from chicago. okay real good. thanks, phil >> thanks, guys. when we come back, corporate headlines this morning later senator rob portman will

join us to discuss the shutdown, trade, the wall, and a lot more. look at the futures. dow looks like it would open up 264 points sthast 225 from apple alone? >> apple and boeing. >> "squawk box" returns in a moment with a cockpit fit for aspaceship. hang on. radar that senses things the human eye can't. busted. and the ability to make a thousand decisions before you even make one. was all this, really necessary? what do you think? ♪

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all right. welcome back to "squawk box. the futures right now up an even 250. 251 on the dow nasdaq indicated up 62 that's a pretty good number there on a relative basis. and the s&p indicated up 13 or so we're watching three big stories this morning, although i think we may need to amend that given what we've seen here take a look at boeing shares now up by 6% that is certainly one of the big three stories we're watching this morning boeing alone responsible for a gain of about 165 points in the dow. that's why the dow popped so quickly. you now see the dow futures indicated up by 250 points let's tell you about three other stories we're also watching this morning. the fed is set to release its latest interest rate decision. that's coming at 2:00 p.m. eastern time also apple's earnings lifting the sentiment. that along with boeing

responsible for 225 points for the dow. and mortgage obligations falling this past week coming up when we return, a month after apple lowered revenue guidance, the company reported results that came in slightly below projections stock was up about 6% in after-hours. it was up another 5% this morning. it opens here, apple would gain back much of the loss. we'll talk about the company's outlook next and the street is ready to hear from this guy. dow component mcdonald's ready to serve up some numbers back in a moment

want to get a check on this morning's stock movers dom chu joins us he's got more on that. >> all right let's talk about some of the ones outside of boeing and apple. let's kick things off with oshkosh which is up 8% around 5,000 shares of premarket volume this after the maker of heavy duty vehicles for the military, it reported profits in sales that both topped estimates it also raised full earnings guidance as well oshkosh was helped along by better sales growth in equipment

and emergency divisions. those shares up pretty big on the other side of things, you've got shares of tupperware which is down 8% at this point on just about a thousand shares of volume premarket. the maker of food storage and beauty products, it posted missing expectations it cut the quarterly dividend by 60% and offered full year profit guidance that was below analyst estimates. those shares down pretty big then there's anthem. we're talking about a move around 7% to the upside on just around 3,000 to 4,000 shares premarket. after the health insurer beat estimates and sales were just about in line. it also raised its dividend by around 7% and forecast ahead of estimates as well. those shares up by about 7%. the big telecom mover of the morning is at&t. no longer a dow component, but still a $223 billion company down around -- you can see there, just around 3% or so on 430-plus shares of volume

premarket. profits matched estimates. revenues did miss. as did the number of subscribers that they added for their wireless business. back over to you >> all right, dom. thank you very much. also, apple reporting quarterly profit for the share revenue beating the forecast as well take a look at those shares this morning. you can see apple shares up by about 5.3% iphone sales slowed once again, but ceo tim cook made upbeat word saying he sees hope china trade tensions have eased. walter piecyk is from btig walter, great to see you today >> thanks for having me. >> where do you want to start? at&t or apple? >> at&t was probably the more surprising one the directv sub-base i mean, i think from the pay tv standpoint, they lost over 653,000 subs that hasn't happened ever. and i think it ties to what tim

cook was saying yesterday in terms of some of the acceleration that may happen in terms of the bundle paid tv package and the opportunity it offers if they want to get into this space. >> what does at&t do at this point? is there any way to stem the losses if you're looking at directv which doesn't have the wireless connection that some of the other cable companies can offer just in terms of internet subscribers. >> they talked about bundling historically the thing was saying we're going to have our new over the top offering but then as you remember, they also just relianced "friends" to netflix. so the question is does the company have the confidence to hold onto the good content they have in order to gain subscribers? at a time they're trying to take their debt levels down, trying to show investors they can grow the dividend, and it's easy to take that money from netflix those are big checks to take to help to, again, deleverage and

pay the dividend >> you know, the stock yields 6.7% before you see these declines this morning. what do you think happens there? how does that even out >> a lot of people compare that to verizon so you really should be looking at the free cash flow yield of the company. i think, look. they're plan on the wireless side is a bit more clear they've got a lot of spectrum they're putting in the markets they are reticily, at&t customers should see a significant improvement in the performance of the network in 2019 that should help to lower insurance. something that's been rising for the last three quarters. stimulate new growth verizon could be an opportunity for that to take share on the internet and media side, it's tough the advertising revenue was down this quarter they weren't cutting costs there to help margins. hbo was impacted by the dish move to black out those customers or take that package directv as we pointed out before

is dropping. so it's tough. >> walter, you mentioned "friends" and the decision they made to continue to sell that to netflix. do you think that was a mistake? because i was going to say, i don't think anybody is going to subscribe to the new hbo plus or hbo warner package simply because of "friends. it's probably going to be a new program that is hot. >> i mean," friends" is a popular content within the library. you need everything you can get to bring customers >> but it was a one-year deal. i thought their new offering wasn't going to start for about a year anyway. >> it was a one-year deal where management had communicated, look we're going to hold onto this content. we're going to create some demand for our product so when we launch this early the next. >> how concerned are you about spending in terms of the ability for hbo plus warner in this new package to gain traction in terms of what they need to spend in terms of original

programming? >> they're cutting costs at turner they're trying to take the debt leverage down. i think it's typical to spend the money netflix is spending when you're trying to take your debt down. i think that's going to be a challenge for them i think they're looking for mobile type programming, other ways to be unique. but it's just hard to see right now given some of the actions and the words, the path where they can really develop an ott offering or direct to consumer offering that's going to be compelling >> wasn't the whole purpose of the deal the whole idea of doing this deal to be able to create this product >> that's the stated purpose of the deal i heard you guys earlier talking about the directv deal the directv deal from my standpoint was about generating cash flow to pay div debd. the time warner deal was about diversification. they're basically mixing all these things together while every individual segment is getting disrupted. >> i'm sorry, we have to run we appreciate your time. walter piecyk. coming up senator rob

portman on the trade war with china and much more. and we're expecting mcdonald's quarterly results. those numbers will be served to investors right after the break. the futures at this hour are up. up 250 on the dow. we'll be right back. ♪ it's the first day of school. yeah, he's so nervous. tom is letting him know it will be alright.

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earnings alert it's a big morning for some big companies. we've already got at&t, boeing mcdonald's is next we're going to bring you the numbers as soon as they hit. apple on the move. the stock showing a healthy premarket gain despite slowing iphone sales and shutting down shutdowns. ohio senator rob portman joins us to make the case for outlawing future government closures as the final hour of "squawk box" begins right now. ♪ live from the most powerful city in the world, new york, this is "squawk box. >> good morning and welcome back to "squawk box" here on cnbc live from the nasdaq market site in times square. i'm joe kernen along with becky quick and andrew ross sorkin we are up 227 now because

mcdonald's is out and down maybe mcdonald's comes back here because the number bottom line was good of 1.9 $7 revenue is in line global comps was above 3.9 i don't know what the estimate was for u.s. comps it came in at -- as i say, 2.3 just from the reaction in the stock. you know, who knows where it's trading at 4:00 p.m., obviously, and throughout the session but at this point -- >> it's not blatantly obvious with these numbers when you look through it the headline number, the first print that came across was $1.82. but that's because it didn't include the numbers. adjusted number of $1.97. >> i really want to know the estimate for faurt quarter by 5 cents. the dollar that just reported. >> system sales were up by 5% in

constant currencies. consolidated operating income down by 7% primarily because of the non-cash impairment charge >> we're talking 1% at this point, so it's not like a zass perp but maybe u.s. comps were either in line or not up more than people thought. because the global comp is good. it was 3.9 estimate and 4.4 is good i can tell you on the way to davos, i was in paris. you can barely get into a mcdonald's to eat in paris they don't have the same stigma you have over there, andrew. they're proud to go in and order a royal with cheese. you know, it's a royal with cheese, right? you know why you know why >> are we going to -- >> because of the metric system. >> really when you're looking at the high growth segment, they really say that italy and the netherlands were the real standouts. not even paris with some of these issues >> ci gave them business in

paris. as i usually do. >> fourth quarter comp store sales up 7.1% in the foundational markets reflecting positive sales in japan and other geographic reasons i don't see anything obvious now that the losses are down 0.2%. that is the first number i saw that 182 is not an apples to apples comparison. >> we have no idea about the volume at this point, maybe comps of 2.3 in the u.s. is okay. because we're now down 21 cents. we can move that >> say that again, peter all right. let's ask somebody else who's been watching this very quickly too. r.j. hottivy you're hearing the basic headlines here what stands out to you as the most important number we should be watching? >> i think it's that u.s. comp number you were talking about. that's where there's a lot of

focus. people looking between 2 and 2.5. we heard results from other competitors it started getting stronger in the december time frame. i think that's putting pressure on the stock >> although the stock was positive a second ago. >> maybe it's people just digesting the rest of the results. all in all, i think it's a pretty positive number across the board. i think you see the results internationally where they have the mobile ordering, kiosk ordering that shows it's still working. obviously we're still working through the system in the u.s. trying to get those things rolled out i look at it as a positive number i think we could see acceleration as they're rolled out. obviously there's been a lot of chatter about franchisees and keeping them happy they've had to make a lot of initiatives for these. but from what i've seen, the numbers are strong if you look at other large operators that have done similar technology changes, mcdonald's was on pace. >> what other chains were you

hearing from as we got into december and beyond that made you think things were picking up across the board for other companies as well. >> we heard some positive things from casual dining that's not a read through. but if you look at burger king which prereleased last week, they saw some momentum from the third quarter, the fourth quarter. so i think that that's where we're starting to see a little bit of traction. obviously traffic numbers are still depressed, still promotional environment. but if we look across the board, the numbers were strong in the fourth quarter as an industry. >> they say that the u.s. comps reflect growth in the average check because of the mix in shifts and menu price increases. what does that tell you? is that good news, bad news? what do you think? >> i think that's a positive indication there's a few things that are probably behind that one is simple menu increases that help out that average check. but what you're seeing there is larger orders. some of that could be things like delivery. it could be mobile orderering. you do see a bump in the average order size there that could be a positive to the issues they put in place

also says that some of the other more premium products they have on the menu could have been successful here. >> so what do you tell people to do with the stock today? >> if it's a pullback, i think you take a look at this one more constructively i think this is a very compelling story for 2019. not only accelerating comp story provided we don't go into recession, but also very strong capital allocations story. so i like the numbers here >> i think of mcdonald's being a company that can do well no matter what the economy looks like as long as they're well operated i think of a company like that and walmart, both of them being very well operated at this point. >> it really is one of those names out of all the restaurant operators, it's probably going to weather recession better than anyone else. we're not projecting that, but even if it's cyclical downturn, it's going to be more resilient. plus you get the tail wind of all the technology positions >> i haven't followed it closely enough, rio de janei.j

are all the burgers fresh now? are we on that >> the burgers are now fresh for all of the quarter pounder products they'll look at other initiatives too. that's something to take time to go through the supply chain. >> has anyone identified the type of fish in a filet of fish? >> that's still part of the trade secret >> nobody knows still? can you tell me -- >> lake perch. >> can you tell me it's not the fish that's like that with the eyes -- >> walleye the flounder >> i don't want to eat a fish like that. >> it's going to be meatless it's going to be technology driven in the future >> they're going to make it out of -- they're going to construct -- >> it's all going to be constructed. the fish, the meat, everything. >> can they make a fish that doesn't really -- that's not fishy? do you think that'd just be one of the attributes that you -- >> one that tastes like chicken? >> they've been a leader in

innovation let's see what they come up with here >> they have but they backed off on that a little and just did everything else better, i think >> that's one of the keys to the success. simple blocking attacking. they've been better operators. better accuracy. imagine what happens when that -- >> there are fast food places where i go and by the time i leave, it's like, this is called fast food. that was not fast. that was -- i mean, there are places that are like that. >> and that's what you need in this environment you need to either be in a convenience location and focus on speed of service and mcdonald's has done that or be in an experienced location. >> always so spooky. >> it is >> i find it weird >> you know what though? you look at the ronald mcdonald houses he's a good guy. he's a clown i don't mean that in a negative way. he is a clown. i mean, i call a lot of people clowns but in his case, it's not a pejorative a lot of people don't like clowns just by definition. then that movie "it" came out.

>> didn't help things. >> what was that guy's name? he was scary. >> no idea r.j., real quickly, you like mcdonald's what other names do you like right now. >> i think starbucks is pretty compelling too i think their resolve on the issuings they've ron into about what the stores need to look and feel like right now versus convenience and experience and the more kind of drive-thru and convenience locations. so starbucks, mcdonald's, probably a favorite two names. >> starbucks you don't worry about potential blowback if howard schultz run for president? >> i do. i think that's a risk you have to factor in with this name. that could create pressure on the stock. any kind of policy statement causes controversy i think at the end of the day, the fundamentals are strong. >> all right r.j., thank you for reacting so quickly to those numbers as we were talking, mcdonald's shares picking up. they're in positive territory.

>> it's pennywise. following mcdonald's, here's some of the other biggest movers boeing, one we've been talking about and will continue to highlight beating street estimates in its latest quarter. aerospace giant earning $5.48 a share versus expectations of $4.57. revenue also beat forecasts. company also gave a revenue forecast above current consen s consensus. so for the first time, our greatest manufacturing company passes a hundred billion in revenue. and apple for the quarter. $84 billion. just think about that. the numbers we're talking about. at&t matching profit forecasts in the quarter however, revenue was light at&t also reported lower than expected net new wireless

subscriber additions and talking about apple, the company reported profit of $4.18 a share. that was 1 cent above street estimates. revenue beat forecasts as well which everything had been ratcheted down including the stock price in the last six months iphone sales slowed again. but after the numbers, tim cook made some upbeat comments about the services business. he also said he sees hope that u.s./china trade tensions could ease or have eased or could be in the process of easing now at 5%. coming up when we return, the private payrolls minutes away we'll have the new adp number after the break. stay tuned you're watching "squawk box" on cnbc 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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we're working to make things simple, easy and awesome. ♪ welcome back to "squawk box. the futures right now indicated up 245 points. the nasdaq indicated up about 61 s&p indicated up 13 and change really, if you put apple and boeing together and do the math on the -- it was 2.3 on the u.s.

comps which was just a little shy of 2.4 we heard from an analyst that the whisper number might have gone up a little it's sort of unchanged right now for them we're seconds away from the adp payroll report mr. liesman has the numbers. going to be seeing the chairman later today. >> yeah. 213,000 adp payrolls saying the private sector in the month of january grew 213,000 that's above the estimate of 183,000 the estimate they revised down just a little bit that december number they have which wasn't right. because the government was actually -- the government number was stronger but it did point you in the right direction. services 145,000 there's the nonfarm payroll for

friday 170,000. we'll see if the street takes a cue from adp and revises upward. pretty consistent across the board in terms of the size of businesses that are adding jobs. 63, 84 and good job growth across sectors. 38, 35, 33 education, construction, manufacturing. trade and transport light at 13,000 not quite sure what's going on there. but really no effect here of the government shutdown showing up at least in these numbers. maybe they would have been stronger if not for it let's bring in mark zandi who puts these numbers together with moody's.com. he does it for adp let's do this now. let's just admit that the economic community has this wrong, that there is some bottomless supply of labor that can come into the market and we can keep doing 200,000 rather than a run rate of 100,000 the real run rate of the economy is 200,000

let's go, mark let's make some news here. and let's change the theory. >> well, you know, not likely, steve. you know, because we've he did kleining unemployment. i mean, at this pace of -- >> barely. i was just looking it up mark, you're between 3.8% and 3.9% and done 200,000 almost every month of the year 2018 the theory has to be wrong here, mark. >> no, no. the arithmetic works right 200k on average. 100k growth and labor force and the unemployment rate has been ticking down consistently. not month to month because there's a lot of volatility in the data but look over the past year, past two years unemployment is steadily falling that labor force growth is 100k. vs at 200k, it will continue to decline.

>> so you're going to stick to this outdated, antiquated theory that somehow we're going to run out of workers in america but we never do we never do. >> not to this point there is a lot of folks that stepped out of the workforce during the tough times there's a lot of room to maneuver here. and people are taking second jobs and things are -- you know, the economy's adjusting. but let's make a bet, steve. i made a bet with young guys in my shop here. >> who's waiting for a good bet. >> a year from now, it will be closer to 100k. >> i kind of hope you're right because if not, we don't have a

theory we've got this bottomless, unlimited pool let's move on, mark, and talk about the shutdown which has not seemed to have affected these numbers. but also these numbers being this strong also maybe tells us that this feared slowdown isn't showing in the numbers >> all this other stuff is kind of noise the economy will be fine we'll continue to grow the hand wringing about an imminent recession this year are overblown. the job market is the key reason why that's the case. by the way, unemployment insurance claims are at an -- i think you have to go back into the '60s to find them as low as they are today we're in pretty good shape as long as that continues to be the case here's the second point though the powers that be better not take the message that a shutdown doesn't matter to the economy. the message is they open the government just in the nick of time because confidence was starting to evaporate.

business confidence. and you saw yesterday's consumer confidence that fell sharply. if that keeps falling, then we're going to have a problem. so fortunately they opened this government just in the nick of time before it did real damage because it would have. >> let's not get too geeky, but people need to understand what to expect from the friday number because president trump signed an order which guaranteed payment to these furloughed workers, it meant that the government could count them as employed so we really should not see much effect unless it shows up on the private contractor side in the friday report. is that right? >> yeah. that's exactly right you know, just because the -- there's a piece of legislation that would allow these government workers to get paid they are counted as employed and we should see no impact. maybe on the margin we'll see some impact, but really modest it might have some bigger impact on unemployment. so we might see a tick up in the

unemployment rate because of the effect but that should be on the margin as well. >> all right, mark i gave you a chance to make history, you declined. think about it we'll see you next month thanks for coming in today >> thank you >> mark zandi. becky, back to you >> all right, steve. thank you very much. give us a quick hint really quickly. one thing we should be watching today from jay powell. >> he's got to handle the balance sheet question and i'm afraid, becky, that he doesn't have committee -- >> backing >> backing for a big change in policy he'll handle it, but the question is whether or not he gives the market as much as they're looking for. >> but the whole point, i thought, is there is some flexibility as long as we have that and they're willing to move if the numbers or the data require it >> right exactly. but we're going to ask questions like how big are you going to -- where are you going to end up? why are you changing the pace you're getting there >> i just wand a little clarity. i think of my job there as trying to get as much clarity about fed policy for the market

as -- >> even when the fed doesn't have clarity >> you know, i think you nailed it right there he may not have clarity yet. maybe he steps forward saying we're going to 3.5 trillion. that's where we're going to stop that would be hugely bullish but he could give us a range he could say between 3 and 3.5, that will be enough for the market he has to know these questions are coming i'm guessing he has gamed out how to answer them i'm pretty sure he doesn't want another post-meeting decline of 8% >> i'm going with less clarity, not more >> me too. >> good to see you when we come back, after the longest government shutdown in u.s. history, a group of lawmakers is trying to make them a thing of the past. ohio senator rob portman will be our guest when we return he wants to shut down shutdowns. we'll talk about that and today's key trade negotiations in washington. stay tuned you are watching "squawk box" right here on cnbc

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welcome back to "squawk box. our next guest is gathering bipartisan support for legislation to permanently end future government shutdowns. let's welcome senator rob portman of ohio. the senator formerly served as a u.s. trade rep, omb director thanks for joining us. >> good morning. >> we'll start with just what i just said and that is that there could actually be legislation to prevent that how would that work, exactly would it be -- would it pass muster with the constitution i mean, can you write a law like that >> yeah. i mean, all you say is when you get to the end of a spending cycle, you don't go into a shutdown you continue the spending from the previous year but then you reduce it after 120 days by 1% then another 1% every 90 days to give the congress and

particularly the appropriators to come back to the table and do the real spending bill it takes shutdown off the table. we got about half the republicans in the caucus according to our legislation now. we've also got the american people supporting it in the sense i saw some polling this morning, it said when given the options of a shutdown or a national emergency or a continuing resolution or something, 9% said shutdown. 2-1 people said stop these shutdowns. so i think we've all learned, again, the lesson we learn after every shutdown which is this is bad for government workers and their families it's bad for taxpayers who don't get the services it's certainly bad for the economy. cbo came out this week with another analysis saying the net impact on the economy negative was about $3 billion and finally at the end of the day, joe, taxpayers don't save money because you pay people back who haven't been working. in other words, if you've been furloughed, you get paid back. it doesn't work for anybody. >> right so this is not going to be law by the time we're facing another

shutdown, is it? >> well, my hope is to include it in the package. whatever we do and i'm for more border security, as you know we've talked about it on this program. i think the president's got a reasonable proposal in terms of more structures but also other border security. i also think adding the immigration things he wants to add, they're pretty simple, ought to be done but then we ought to also put in that legislation that there shouldn't be shutdowns in the future and i think on a bipartisan basis, people would applaud that >> i've seen that there are some numbers out. i guess maybe they were generated by your party. so take that with a grain of salt but they were looking at a lot of democratic regions that president trump won. and there could be some pressure put on some of the democrats there to break with speaker pelosi and actually support something in three weeks whenever it is have you seen that she'd still have to bring it up,

right? even if they break with her, they can't go around her, can they >> it's going to be done in a conference committee i think she probably has a pretty good influence over that. so it's a small group of member who is are trying to work something out. and the idea is that would then come back to the house and senate for a vote. i think we've only got two weeks and a day now left to do this. we've got to get busy on this. when you ask the american people, do you want a more secure border, most people say, of course. among other things, you've got the drug issue which is affecting all of us. in ohio, your home state, we are getting hit with that. crystal meth coming from mexico. heroin, 90% coming from mexico cocaine coming from mexico we need better screening at the ports of entry democrats are for that, but also the immigration issue. i think people realize you've got to have an immigration policy that works. and it's not for a wall from sea to shining sea or a concrete wall it's for following the experts' advice, the customs and border

security improvement plan which has been embraced by our last two spending bills up here on a bipartisan basis and his $5.7 billion is to fund the top ten priorities of that plan it's a plan by experts sometimes it's vehicle barriers which are low. sometimes it's pedestrian fencing. sometimes it's these steel barriers the president's talked about. but it's only 234 miles out of a 2,000 mile border. i think in the past because democrats havesupported that kind of fencing, it's tough for them to say i don't support anything now >> i just wonder what's really going to happen, senator we had a poll -- on nbc poll that had trump is blamed but his approval was fairly flat and pelosi's disapproval rose more than any other player but i think she's being told by her acolytes that she's more powerful than the president. i don't know that would go to my head, i think. do you see any way -- >> we've got to get politics out

of it. >> fat chance. do you see any way that this turns out other than the president uses some type of executive power which we've seen before republicans didn't like it when obama did it with dreamers would he do that then it's going to be in the courts immediately >> i hope it doesn't come to that if it does happen, i think there'll be injunctive relief. i don't know how long that would last maybe through the rest of his presidency then you wouldn't have the border improvements anyone wants. we can argue about what kind of fencing it should be, but i think people agree we need to have a secure border in some urban areas particularly in texas where there's no fencing now, border patrol badly wants an ability to slow people down then you can use the sensor technology, the drones, the increased border patrol. there's a sensible plan here one of the frustrations here, sometimes we're far apart on

stuff here think health care. in this case, we're really not we're really not that far apart. and it's a matter of are we going to spend a few billion dollars more to be able to have the kind of comprehensive border security people want or are we going to play politics with this on both sides? let's not. let's get this resolved. national emergency is something the president probably does have the right to do. as you say, it's not something republicans have traditionally supported. shifts power more to the executive branch also it's going to get tied up to in the courts >> is this shifting gears, is there any chance that something good happens in the near term with china or is it just too complicated and too many moving parts, too many different facets to the deal >> i mean, it has to in the sense we don't want to go to march 1st and have this increase in tariffs and 10% on about $200 billion in product and the chinese have shown, i'm told,more willingness to do that on a few different fronts

one is the ip theft, the intellectual property theft that sort of started all this which is clearly an unfair issue between china and the united states and china and the rest of the world. and second is the way they deal with joint ventures and licensing effectively taking ip through that as well and third is just the enormous trade imbalance we have. my sense is china is willing to buy more soybeans and more natural gas and things that make sense for their economy. so that could help with the trade imbalance. we also have to work on these structural issues. my hope is the talk gos well this week. they're meeting again today at a high level and we could get at least some indication of where we're headed and get something on paper that's enforceable and then continue to work on it and not increase the tariffs again. in the meantime, the tariffs are going to go up again on march 1st unless something happens >> you're doing a terrible job with cincinnati sports teams i mean, is there -- really xavier, the basketball it's not

like it was. i mean, mike brown just ruined the bengals for 20 years what about the reds? anything positivehappening there? >> reds are coming bab i understand they might get a superstar all-star catcher soon. that's the rumor we'll see. look i think it's all about pitching. and with the reds, pitchers can stay healthy and get a couple more starters. >> what do you do? what are you following you following the xavier swimmers or something? is there anything to follow in ohio now >> absolutely. well, look the cleveland browns just had almost a winning season. >> cleveland browns. >> 7-8 >> you're in cincinnati, for god's sakes. >> i'm a bengals fan first, but cleveland browns second. >> he represents the entire state. don't forget >> the browns, they have a great -- they're giving out beer if they won one game then they won quite a few. ohio senator rob portman, thank you. it's not your fault. i don't blame you. >> i'll keep rooting >> yeah. andrew's under the weather

>> oh, really? >> i'm sorry to say. >> like a halls thing in his mouth. >> i've been taking halls all morning. but it's nice to see you across the way here >> thanks, guys. when we come back, a lot more here on "squawk." the fed getting set to make its first interest rate decision of the year it's also powell's first news conference of 2019 we'll get into that and what the markets want and what they're likely to get. stay tuned you're watching "squawk" here on cnbc ♪ ♪ our new, hot, fresh breakfast will get you the readiest. (buzzer sound) holiday inn express. be the readiest.

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good morning welcome back to "squawk box" here on cnbc we're live at the nasdaq market site in times square couple stories that investors are going to be talking about today. the big one, mcdonald's reporting quarterly earnings of $1.97 per share. beat the consensus of $1.89. revenue topping forecasts as did global comparable restaurant sales. u.s. comp sales were very slightly shy of street forecasts. mortgage applications falling 3% last week this is according to new figures from the mortgage bankers association. new refinancing activity fell during the week. the average 30-year mortgage rate was up by one basis point to 4.76% also, tesla will now be producing all of its model x and s cars with the same battery driving range and features will be controlled by software changes. making a move to streamline at a different lower capacity battery. and tesla, we should say, also reporting at the bell today. most analysts are not expecting the fed to raise rates today. in fact, i can't think of

anybody who's expecting the fed to do anything today other than try to hopefully get through this without spooking the markets one direction or the other. but everyone's going to be closely watching what jay powell has to say at his news conference this afternoon. joining us now for a preview of that is nathan sheets. he's economist at pgim nathan, you'd be shocked if the fed moved one direction or another on rates, right? >> absolutely shocked. as you said, it's all about communication. >> all right we spoke to steve liesman a few minutes ago. he said the thing he's going to be pushing for is somebody asking questions in the room trying to get more clarity around the balance sheet >> right. >> what do you think >> so the markets are looking for the fed to sound patient on rate hikes they're going to get it. the markets are also looking for the fed to back away from its balance sheet normalization plan i'm afraid they're not going to get that with that said, i think jay powell is going to sound more

flexible about it and more data dependent emphasizing that he's watching the markets he's going to be more nuanced than he was in his previous press conference >> look. the market has gotten what it wanted to far which is just that the fed to sound like it's backing off. when the market gets what it wants, it pushes for something more just like any child would do what they want right now is to hear there's a real number that they're going to be look agent for the balance sheet. or for him to maybe talk a little bit more about what data he's watching. you think there will be either of those issues? >> in terms of a number for the balance sheet, i don't think the fed knows. and i think for political reasons, the fed wants that balance sheet to be as low as it possibly can be. so he doesn't want to pre-commit to anything. then on the other hand it's got to watch the markets it's got to watch financing rates and funding. and it's got to listen to market sentiment. so it's going to push the

balance sheet as low as possible but no lower they don't know what that number is most analysts think it's around 3.5 trillion that sounds like a good guess to me but it could be higher or lower. time will tell i think if the fed tries to lock themselves in too early, maybe the markets would like it in the short run. but i think it would create tensions down the road >> there are so many numbers we're missing because the government was shut down what data do you look at to see where the economy is headed? >> i continue to see a good u.s. economy. maybe not a spectacular u.s. economy. like you said, the labor market looks good the consumer's still good. we're still going to have fiscal stimulus supporting growth this year on the other hand, we've got to

watch the housing market and then, of course, the global backdrop is concerning with the key question there being when are the chinese authorities going to put in enough stimulus to support growth and stabilize the situation? it seems like maybe now they're in the process of doing it, but it's still likely to be a few months before we really feel the full effects of that >> what about inflation? >> yeah. i think that's the question. what about it? inflation has been surprisingly contained given the behavior of the labor market if you had told the economists a few years ago you'd have an unemployment rate in the 3.5% to 4% range and that inflation, core pc would be struggling to reach 2%, people would have been skeptical. we just haven't seen the inflationary response that would have been expected

does that mean we'll never see it no but the weight of the evidence is on a very restrained inflation expectation passing through into a stable inflation performance. >> you think jay powell's goal is to get out of this today without saying much of anything? >> i think that he wants to get through it without royaling the markets on the one hand. but on the other hand he's got to give a reasonable impression and discussion of what the fed expects to do. i think the fed is constrained as you said by the unemployment rate and the fact the u.s. economy still looks solid. so it's balancing what the market wants to hear against some of the stronger -- >> nathan, did you predict five years ago the unemployment rate and feds fund rate and inflation rate would be less than ten? did you protect that >> i would have been off by -- >> probably a factor of two.

>> close to that >> nathan, thank you great to see you >> always a pleasure >> nathan sheets coming up, more color on one of this morning's biggest earnings report. and don't miss boeing's ceo dennis muilenburg today at 1:10 aymeern ti st tuned you're watching "squawk box" on cnbc (baby crying) ♪

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welcome back to "squawk box," everybody. boeing posting a blockbuster quarter solidly beating expectations phil lebeau joins us from chicago also on the phone we have josh sullivan who is senior equity research analyst at seaport global securities. phil, run us through the numbers first. these were blockbuster numbers >> absolutely. that's why the stock is moving substantially higher look at the shares of boeing and how much higher they've moved premarket as the company reported earnings of $5.48 a

share. almost 90 cents above the consensus of $4.57 what was driving the record fourth quarter for boeing? it's all about execution especially on the commercial side of the business revenue, $28.3 billion, about $2 billion better than analysts were expecting free cash flow of $2.5 billion and operating margin of 13.6%. put that all together and you have a very strong quarter for boeing we've talked about this before the 737, it is the bread and butter for this company in terms of free cash flow and execution. take a look at the delivery cadence for boeing and how it has gradually increased in the 737 range of airplanes over the last year and a half it's going up to 57 per month in 2019 guys, that's what's driving higher free cash flow for boeing again, if you take a look at the stock premarket, you'll see it's moving higher also because of the guidance for 2019. expecting another record year.

becky, you do not want to miss our conversation with boeing ceo dennis muilenburg coming up today at 1:10 on "the exchange." we'll talk about the quarter and the guidance for 2019 and how he believes boeing right now, it's all about execution. and that's why the company is posting such strong numbers. >> today right there let's bring josh into this as well josh sullivan. josh, looking at these numbers, what's a huge surprise is the steadiness of those numbers despite any concerns around the china trade talks. because any time you marhear a negative headline that comes out of talks with china, boeing shares take it on the chin this seems to indicate there's no need for that sort of vo volatility when talking about a longer cycle >> exactly what drives boeing and the whole aerospace group is the traffic and the effects there of all these city pairs in china and india as well as lower fuel prices here more recently has helped those numbers stay more

consistently higher than expectations in where airlines built out their capacity needs but then just on the delivery schedule and the overall cycle here, boeing's hitting the sweet spot to the comments earlier about the 737, you got to remember in 2018, as boeing was ramping up production of the 737, they were also ramping up the max variant. they hit some snags to the structure side but now we're beyond those and going into the quarter here, boeing puts out the quarterly numbers. so the street knew the unit volume, the skepticism was really around the profitability and the commercial airplane side then what boeing showed us here is the true upside in the 737 max as it constitutes a larger portion of the 737 production is really pretty strong don't. forget about the 787 too that's also a big cash driver here you know, going into the quarter, little skepticism around how profitable those programs would be as we recovered on that ramp

but boeing really showed us what they can do going forward with the 2019 guidance where we go up to 57 on the 737 and the max constitutes a larger portion of that >> seems like a poor question to ask when people are impressed with these numbers that were out. but what would concern you what would make you think that there was an issue you might have to be wary of with boeing >> yeah. i mean, to the comments earlier about execution, i mean, that's really where they are. they need to continue to prove that we're going up to 57 here on the 737 so they got to show us that they can do that the 777-x is moving through its timeline here. then there are still outstanding issues like the 737 max accident in indonesia they got to get that right that's about how they're going to produce aircraft in the future using some of these integrated systems they put together there needs to be a market for it then there are issues with the military tanker. so some of these other defense programs that they, you know,

the skepticism is they went out and bought the trainer they got to prove out that can be profitable over time. then obviously trade issues too. >> josh, thank you very much for joining us josh sullivan from seaport global securities. also phil lebeau phil, time around. is it really minus 25 degrees there? >> yes. >> that's colder than it is here and it is cold here. >> yes >> how cold is it, phil? >> it's so cold -- >> my car coming in, it was minus 18 supposed to get down to minus 25 something like that. between today and tomorrow. >> a joke, phil, it is so cold the lawyers have their hands in their own pockets. >> nice! >> he's been prepping that one >> good one. >> phil, thank you stay warm. we'll see you later. with under an hour until the opening bell, want to turn to the markets now, joining us now is joe zidel help us tie everything together this morning we have boeing's earnings, apple's earnings, the fed in

trade talks. are we in a better place than we thought? >> i think we are in a better place. so far the month of january, the s&p is up 5.3% when you look at that in context, it is a very, very strong january over the course of the years, when you look at january returns, if the month were to end here at 5.3%, it would put us in the 90th percentile for performance. important to recognize there is a long ways to go. we have recouped less than half of the drop that we saw in the fourth quarter of 2018 european markets have also seen a lift, but they have recovered even less than they lost in 2018 so the question becomes where is the catalyst i don't -- i think the catalyst is in front of us, the central banks. >> we'll hear from the central banks this afternoon what do you want to hear >> i think the talk from the fed started last week that maybe they would keep their balance sheet bigger than people initially thought. people thought they would run their balance sheet off to 1.5 to $2.5 trillion, but there is talk that they could maintain a larger balance sheet, which

means they slow that runoff, they end that runoff earlier that's point number one. point number two is the ecb has reopened the door to some form of qe. conditions in europe are that poor the last time leading economic indicators in europe were as poor as they are are today was 2012 that's when draghi initiated the qe so i think the cb's got to do something to reverse its policy decision and thirdly the bank of china. they unleashed about 2.2 trillion for stimulus. point about the central banks is this, you look at the fed, the ecb and bank of china, they're moving back toward policy easing which is a sharp contrast from 2018 in 2018, money supply contracted, this year we at least removed that head wind and that's positive for risk assets. >> but you look at where the equity markets are in the united states now and having this conversation with mike santoli, is this a bottom i don't know if it is a bottom, is this a floor for where we are and where we're going up from here, or mike santoli was, you

know, he was -- i don't want to say waffling a little bit, suggested, you know, maybe a couple of months we could turn the opposite way again on us. >> i say we move higher. the reason is if you think back to exactly a year ago, january 30th, 2018, you know, we would be talking about, number one, fed hiking, number two, quantitative tightening and number, three, a market trading at 21 times earnings today we're talk about the fed being on hold, talking about them potentially slowing the runoff of the balance sheet and we have an s&p that is trading at 16 times earnings that's an attractive valuation, and a lower rate environment i would say that argues for bullishness on equity and credit risk assets. >> let me throw a little monkey wrench into your plan. what about china is it possible that chinese economy is so damaged, much more damaged than we appreciate >> yeah, i think the story out of china will be bad news is good news. they're going to have to -- they're going to have to unleash every form of stimulus in order to put a floor in their economy. and that ends up becoming a

positive for risk assets we saw that -- we know how that unfolded here in the united states when the fed expanded its balance sheet, we know how it worked in europe i think china has to do it, they introduced 2.2 trillion so far they could did that and more to put a floor in their economy. >> you asked me earlier, what i said about average temperature on mars being minus 63 turns out that's minus 63 celsius. it is actually minus 81 fahrenheit it is colder there. >> chicago has a little ways to go before they can tie mars. >> exactly >> okay. meantime, joe, thank you >> thank you >> three suvs, you may get there. thanks the warming, obviously warming causes the cold. let's get down to the -- we're playing music. let's get down to the new york stock exchange i don't know why we're playing music. >> i think to shut us up. >> really? let's get to -- i don't know that's a mistake, jim, i think anyway, boeing and apple and a firmer tone and adp, what do you

think? is oil up? that's all we need. >> i find your optimism misplaced, terrible. you're not nearly as cranky and negative as you have to be will you get with the program? things are horrible. >> i didn't get that memo. there are viewers who think we do get those memos. >> talking about boeing, listening to phil talk about boeing, what do i think of, american ascend ans. i had nucor on, the tariffs are working for nucor. when do we say to ourselves that things are better than the stock market believes? we're back to october for boeing that's when this whole thing happened do we ever say on our show that the chinese need boeing more than boeing needs china? i bet you mullenberg will tell you that i'm sorry, things are better, the stock market took a big hit because of powell, if powell doesn't blow it, we're going to go back. it is not the companies. look at apple. apple is still making -- the

dollar crushed apple who talks about that what we hear about is apple lacks innovation i don't know it is getting me angry, joe. it is getting me angry. >> boeing said we finally did $100 billion in revenue for the year but apple's revenue is disappointing at $84 billion for the quarter. >> yeah. i think that we should all just own shares in shaome thank you for saying china was weak everything is powerful and we're nothing, we're pitiful helpless chi giant, back to when nixon ran the country. things are doing well, like the s&p. they didn't pick those 500 companies out of the hat, by the way. they're doing well. >> jim, on boeing, would they ever split that stock? >> i wish. you know, these institutions tell them if you split the stock, we have to pay more per share, you know, we have to pay

commissions for two shares rather than one. the institutions have wrecked what could happen. if boeing were to split the stock, the equivalent of 500 amazon, you think it would be stuck at 1600. individual can't afford the stocks only way they buy them is through the cockamamie etfs, all the stocks lettered etf. the nonsense we have to deal with is incredible by the way, market is doing well i got the memo just now, joe >> send it to me we got to run. keep it up at 9:00, jim. i'll be watching, thank you. >> america is -- is it the americas >> we'll see you in a couple of minutes. make sure not to miss an exclusive interview at the top of the hour on "squawk on the street" with la issu following the company's latest report. don't miss it. stay tuned you're watching "squawk box" on cnbc our new, hot, fresh breakfast will get you the readiest. (buzzer sound) holiday inn express. be the readiest.

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all right. good morning, everybody. and welcome to "squawk on the street." i'm david faber with jim cramer. we are live from the new york stock exchange carl continues to be on assignment i think he's coming back tomorrow take a look at futures this morning as we start you out. you can see we are looking for a higher open this morning and as we always do, let's look at the european markets, see how they have been faring. the last i