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 looked, the dax had

been down and still is you can see a mixed picture with germany's dax, of course, one of the losers italy, ftse in france all up ten-year note yield, fed meeting today, press conference i believe. a look at oil. of course, contained inflation picture, one of the keys there let's get to our road map this morning, so many different things to get to including earnings and what appears to be that rally at least at the open. devel investors awaiting patience tea leaves from the fed. futures are pointing to a higher open got boeing numbers helping the dow, apple is also up as well. okay trade talks also resuming in washington that marks the highest level negotiations since the u.s. and china announced that truce in the trade war last december. but still looming from the date when tariffs will go up. and shares of amd soaring in the premarket. chipmaker reporting record

growth in data center revenue. ceo lisa su joins us exclusively in a few minutes when jim will be outnumbered by two people from queens. grew up there. all right. >> just like from 140s >> stocks set for a strong open this morning thanks to upbeat earnings news. boeing up sharply after reporting better than expected quarterly results. full year guidance also better 2018 revenue, by the way, came in at a record $101 billion. apple's also higher, quarterly revenue $84.3 billion. that is above the lowered estimates, of course, that filed the company's warning that came at the very beginning of this month. earnings beat forecasts by one cent a share iphone sales, they slowed. apple services business up about 19%, jim let's get into apple i watched you talking about it last night on "mad money" as well with the stock up, i do wonder,

is this a sign of things getting washed out, not necessarily a signing of real strength. >> i interviewed tim cook, the ceo, he said january is better >> january was better. >> january was better. second, they bought a lot of stock back at 200. i wonder how much stock they bought back when the market cratered in january. i think they did some smart things he told me, listen, the dollar is just ferocious. so before you just decide that it is a lack of innovation that made it so that xiaomi is doing so well over there, they are, by the way, samsung is doing well the dollar has really hurt them, they have cut price just to stay competitive. the service revenue stream which is continually derided by analysts, you have such a big chunk that is iphone is doing fabulous, back to the 19%, it never really decelerated. >> let's stop for a second on services let's talk about it a bit. we talked about it for a couple of years now as being a bright

spot for the company 30% growth, decelerated to 19% love large numbers but a lot of people say it continues to be linked to their unit growth rather than organic growth within services itself. it isonly still about selling more iphones and as you don't sell as many or don't grow that, you're not going to grow and they haven't done enough on video, on music, on all the other services that really would expand the ecosystem in a significant way. >> i call that optionality it isn't like they're out of money. they can certainly do video if they want. they can go buy time warner back from at&t, which buy directv i just think when you hear about what they could do, what you're not saying is, and they could do it, if they do, you pay more for the stock. david, the watch is something to watch. the watch is starting to gain a lot of steam and it is supply constrained and you begin to see deals made all over the globe

for health and that's going to be -- >> we talk about innovation and i know you've gotten into a thing on twitter about this the last week or so, and people say they're not really innovating, you come back and say what do you mean, the watch is going to be considered a real sign of true innovation. >> i think anything, look, alex gorski, not a hype artist. >> ceo of j&j. >> what it could mean to stop aphib, what we would do to know ahead if my father wore the apple watch, it is not talked about. the problem it is not talked about is because if you look at the ramp, the 2010 to 2014 ramp of the iphone, it was unbelievable it made it it is such a high seller that the iphone is still 62%. the analysts, the analysts said all the negative things, they're trying so hard to get back in, the conference call was dysfunctional. they didn't know what to do. they had their tails between

their legs they cut and run even katie uberti did, who i elevated to -- i put her on a pedestal >> she was a little lost >> yes >> and what do you mean by that? >> her last comments, her last comments were more about the hen hedge fund short side. the desell of services you did not get the deceleration you want a little optionality. they could offer 3% dividend they could pfizer themselves they could pfizer themselves. >> could pfizer themselves stock still trades 10, 11 times. >> 11, yeah. january is better, we get a trade deal, you'll pay 184. >> tim cook said to you, i believe, as we got into january, things would improve from where they ended in december that gives us some optimism. >> the analysts would make you think, like, well, forget about it they have know innovation. they're not taking share like turkey, turkey, the turkish lira, remember when erdogan

declared war on apple, sales went up. you debase the turkish lira and their sales drop by 500 million. the dollar is so strong, it really hurt emerging markets the u.s. was a record. no one wants to talk about the u.s. yes, if they decide to make the service stream bigger, they have to cut the price the service stream, you have 900 million operating phones, and those -- >> 1.4 billion devices. >> those are all candidates to have services. they stuck by the w, the service revenue. problem is, here is what the analysts are going to do the service revenue keeps going up and the phones start going down, those start talking about how there is an acceleration the analysts are lemmings. the analysts are lemmings. >> we talk many times about the reoccurring nature of the revenue and you want to pay more for it here's what cook had to say. services are largely connected to the active installed base, so there's very little of service revenue that is connected to the current quarter sales.

people who buy apple music, icloud, and holders at one point. >> we didn't realize how much of it was just that look at -- look, this notion of innovation, which is not unlike when orson wells and the third man looked down from vienna, said that switzerland, what have they invented in 500 years, the cuckoo clock tim cook invents, people buy that's what happens. he's being denigrated by people who could not tell an ipad from an iphone. and, you know what they're always doing, texting and saying it is all over for apple, like you could -- you couldn't pry this from their cold dead hands, david. >> all right want to talk about boeing briefly before we get to the tease? >> great american company. >> it is a great american company. >> i hear people say, airbus,

remember airbus? >> i do. >> they spent a lot of money building a plane that could land in three airports. really good. it lands in milan if you want to take it and it has a bar that's unbelievable. i stepped back in the bar, they give you free drinks, really good series of boutique gins it is like, hey, you know, let's go back to the bar i don't want a bar i want a good plane that sells i want the 737 who builds a plane that can be landed at five airports? >> it is going up really ast. >> i just expanded they're laughing their butts off about airbus airbus has a plane, david, that can land, i'm not kidding, it is like a -- we have to go? i'm just getting started >> we mentioned apple. we talked about boeing a bit there. >> we talked about howard schultz yet. i'm going to howard schultz you. >> they'll be part of the s&p, an important move today.

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we're going to talk about a great american success story amd shares are up sharply this morning in reaction to a dynamite quarter and fabulous guidance. the stock is up around 50% so far this year, very unusual for most of the semiconductors, by the way. this is an exclusive interview, total treat. we have lisa su, congratulations on a much better than expected quarter. >> good morning and good to be talking to you and david >> david is from queens. i'm from philly. all right. lisa, a lot of people felt that you were going to fall the way of your relatives, jensen huang and nvidia but you got it up to a great second half. can you distinguish between a company that allowed people you are fellow travelers with and the real amd that you have built? >> well, jim, look, i think we finished off a good q4 and a

very strong 2018 i'm pretty pleased with the results. if you look at what we did in 2018, we grew revenue 23%, margins 4 points and added $1.2 billion of new revenue it is really on the basis of products and product momentum that's been our story over the last few years and gaining market share and particularly very pleased with both our pc market and our data center results >> people realize the leaderless intel situation. you have been taking share like i cannot believe from one of america's greatest companies, intel. i know that you are personally going after accounts could you talk about share take in the red hot pc sector >> well, i think, again, it goes back to our strategy our strategy is really focused on innovation and product momentum and we just had a very, very

strong product cycle our rising products which go into both desktops and notebooks has just been ramping very nicely up over the last five quarters and, you know, we believe we have gained share again this last quarter here in q4 for the fifth straight quarter it takes time. some will say it has taken time. we're happy with the results as we have gone through 2018. and actually we're more excited about where that market can go for us in 2019 >> okay, well, data center, intel called it out, indigestion, not that strong nvidia questioned. how strong the data center is. i don't see any of that kind of question from amd. is that because of your tie-up with amazon and microsoft or because it is a low base for you? >> i think the way we think about data center is, look, it is strategically a great, great market if you think about all of the expansion in the cloud, all of the expansion in the enterprise, there are plenty of new work

loads, we have tons of data that need new data centers. that's the long-term trend now, there are some, you know, short-term dynamics. people talked about cloud indigestion. and from our standpoint, look, again, this is a share play for us we had our strongest data center quarter in q4. we had a strong quarter for our epic cpus. more than doubled the units subsequentially. we had a strong quarter for gpus in the data center it is because we're looking at new work loads and new deployments. so, yes, we're starting off a low base, but we view this again as a share gain opportunity for us as our products really gain momentum. >> all right, i shared your quarter last night on "mad money" and got the reaction from several analysts and several investors that lisa su is giving you a guide in the second half that is too aggressive and that perhaps you should be more skeptical. do you fear that perhaps there could be any sort of slowdown that you're not seeing because i have to admit, you are

predicting a pretty good second half, lisa >> no question we see all the signals that are out there, you know, certainly there are some concerns about the macro and what is going on in china, there is a little bit of short-term concern in the data center. we look at this as let's not major on those things. let's major on the product story. we're starting from a place where we think our products, especially our products in the data center and pcs are going to be extremely competitive we'll be first to 7 nanometer we believe in 2019 and that's a big competitive advantage. so we are are, you know, playing to our strengths it is a product story. yes, there are some macro head winds in there our q1 guide was lower than some might have expected but for the full year, we still see a great opportunity. and particularly when we talk to our customers about what's important to the customer set and what are they trying to

accomplish and how do we align sort of the amd product portfolio with sort of the customer, you know, customer needs and requirements in the time frame. >> lisa, it is david i guess that seems to be the focus of investors this morning in terms of your confidence in that second half back to jim's question, and your answer there, you talk about customer traction, giving you confidence, and new product ramps. what else? given that your first quarter guidance was lower than many expected, it is going to have to be a hockey stick here as this year goes along. >> yeah, david the way we look at it is, again, i think we understand the dynamics of our business our business is different from some other businesses, from the standpoint that we have a different mix of business, i would say we are a bit more diversified. we have pcs, data center, you know, endgaming, all parts of our market and we do have, let's call it some head winds in the early part of 2019 due to some of the

graphics channels situation. but when we look overall, again, we see, you know, good markets they're large markets when you look at -- we look artem as a $75 billion tem and we're a $6 billion company. with the products we have, with the customer engagements that we have, we are somewhat optimistic about where we're going in 2019. this is something that is very much at the core of what we believe in it has been a multiyear strategy and we're continuing to execute on our multiyear strategy. >> earlier this week, jim and i spent a lot of time on nvidia when it surprised the street with the very negative guidance. china, gaming, one of the reasons why in terms of fewer chips being sold are you seeing any weakness in that market? >> the way we think about gaming is we really look at gaming across the entire spectrum so we look at gaming in pcs, we look at gaming in consoles, we look at gaming in the cloud.

i think overall gaming is still a very good secular market so, you know, we're optimistic about gaming over the long term. in the short term, we have head winds, particularly in gaming in the sort of the channel market but, again, we view that as people are still buying ining gs we sold more in the third quarter. i do think that gamers are very discerning group of people and so they're looking for, you know, the right performance at the right price point. and we're going to continue to deliver new products to that market as we go through 2019 >> lisa, i'm coming back to you. you're one of my heroes. when we first met i disparaged some of amd's activities in the balance sheet. you have proven right. i see you taking share in pc and work station cpus for intel.

more gains now in server, but will that not change when the 7 nanometer epic arrives because you have a better mouse trap and will you not be able to taken even further share in a well growing market of service? >> i would say, jim, it is a very, very complicated mouse trap but, you know, we do believe that our epic second generation servers, you know, we made some big bets a few years ago when you think about the semiconductor chip cycle, we have to decide three or four years in advance what we're going to do in 2019. and we made some big bets. we bet on 7 nanometer and on a new innovation around how we put these chips together, and our second generation epic, jim, we're going to double the performance, double the performance per socket when you have that kind of inflexion point, in performance, it has to translate into better results and that's really what we're focused on executing

so that's the play in servers. >> where are you in terms of thinking there could be a trade deal with the chinese? it is obviously important for all american technology. >> absolutely, jim we're watching the discussions very closely clearly we would all like to see a resolution and we're somewhat encouraged by the talks going on now. but we have to plan for all scenarios, and china is important market for us. we have a lot of customers and both end users as well as partners in china. so we would like to see this be resolved as soon as possible >> well, you are -- your prowess is only exceeded by your humility thank you very much, lisa su, who runs amd >> thank you so much >> all right you hear the applause building here as the united states coast guard is going to be ringing the opening bell before that, though, we're going to get jim's mad dash as we

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♪ ♪ each day, brings new possibilities. that's why you need a partner dedicated to helping your company reach its goals. u.s. bank -- the power of possible. all right, we got a minute and a half before we get started with trading at the new york stock exchange let's get a mad dash in and take you right to the bell. mcdonald's, a feature this morning as well with earnings. >> people are use ed d to a bet than expected quarter.

he did not guide up as big as people would like. but, david, as cowan would say, all eyes are on the remodeling this is premature to sell the stock. the remodeling is going well i think that easterbrook talks a good gain. you should buy the stock this isn't like at&t where there is things where it looks like they matched, but turns out underneath not so good this was a match, but better and i think mcdonald's, when the smoke clears, people will say, easterbrook has real gain and the numbers in the u.s. will turn up as every remodeling does produce better numbers he's very good at his job. very good. >> and that is reflected in what has been a very strong performance. the stock over the last three years. >> right now people are worried, yesterday, brinker, which is choice, reported a quarter where the labor costs were very, very bad. and it got -- it really sunk the stock. i think mcdonald's has those

under control. let's hear what easterbrook says the fed does not want to hear that anybody's labor costs are not under control. that's why the brinker call really -- >> here is the opening bell for this wednesday you see the real time exchange back at our headquarters, a lot more green there here at the big board, that was the united states coast guard doing the honors over at the nasdaq, brynn more bank, serves pennsylvania, new jersey. >> fabulous bank. >> still early let's get started following some of the stories we haven't even gotten to this morning in terms of earnings reported, jim. i don't know what caught your eye beyond obviously apple which we talked about. boeing which we have hit to a certain extent and mcdonald's just now. >> this is a boutique story.

the cruise business has been weak but royal caribbean reported a great number asked about the changes in terms of the 2020 fuel situation for ships where they have to get out of high sulfur fuel. but royal caribbean is a sign that not all is lost in travel and leisure. travel and leisure has been weaker during this period. >> okay. >> let's hear richard. richard is a very good representative of an industry that has had -- seen its stocks get hammered here. let's follow up on that one. david, there is also a new winner in the medical device >> tell me. >> in the medical device business it is striker. striker reports an amazing quarter. it will hit and take out its 52-week high johnson & johnson has a device business, it is not doing as well as striker's. striker, long thought to be a takeover target, a merger partner. >> many times mentioned along those lines. >> always a bridesmaid, never a

bride. >> yeah. >> yeah. let's follow that $66 billion company that son fire. a lot of these things are private pay. you can't just, you know, a lot of things require you to do well speaking of private pay -- >> yes. >> botox maker allergan downgraded by morgan stanley today, a lot of towel throwing >> there is throwing in of the towel. >> yes >> people saying i'm done. >> it is not going to happen. >> they're done. >> yeah. not going to happen. and now when i spoke to brent saunders, when i was at the jpmorgan health care conference, i was talking about some major depression drug, wasn't talked about as much in the conference call and that's worrisome because that's a huge field. and also considered to be an uncrackable field. and obviously when is the migraine acute pill going to come out my sources say don't think it is going to come out before 2020.

i don't like to talk about downer stocks on an up day, but i think that is really important. and, david, my dog is doing so well today >> everest. >> no, my new dog. xilinx xilinx answers to xilinx. he's dumb as a bag of hammers. when you have a treat, this dog is normally -- formerly named marley, xilinx. >> xilinx. >> yes, xilinx he's breaking out here the chart on this dog is incredible stay focused on xilinx. >> one name that a number of investors are focused on this morning, jim, is alibaba $400 billion market value. also seen as a -- also seen as a reflection of the state of the chinese consumer >> the consumer was weak there. >> 700 million monthly average users they have. incredible let's go through some of the numbers. >> yeah, please. >> i think overall what you say is there has been fear of a weaker quarter that was not

realized, and so you do have -- as you see with a lot of these stocks, something of a relief rally for alibaba. you see some of the metrics that were -- that people followed total revenues up 41%. core commerce grew 40% cloud up 84% now, a lot of those numbers are actually below the analysts who follow the cloud estimates overall, still fairly strong in the q&a, they also talked on the conference call, which began at 7:30 a.m. this morning, concluded, they talked about digital content for local consumer services, as two areas as an extension of categories of their consumer needs, so they can sort of give those 700 million customers and consumers even more sort of in terms of bringing them into the ecosystem from whether it be physical group to content to local services they think that's an important component of the overall

business but, jim, you know, this has been a way to play the chinese consumer >> plus 40. >> had a tough year last year. given everything we're hearing from china, in terms of growth or lack of growth to a certain extent, worries. these do give you some pretty decent numbers to go through and ail lay so and allay some of the concerns. >> i said what do you attribute the weakness to, some is the currency, some is the incredible competition there, this is the xiaomi story, obviously. and then he talked -- i asked about nationalism. he said, listen, there is a nationalist streak growing all over the world, not just in china. this was a nationalist number, so to speak, there is a lot of buying, i think they're buying chinese products. >> they're not monolithic. they're not necessarily following the direction that you

might expect one of the concerns among alibaba investors has been in terms of their strategic mission. how much they're going to spend and will they ramp -- not ramp up but pull back on spending they did address that on the call as well, talking about investor questions and concerns and being worried abou strategically important areas by spending money that generated from their core business while other competitors just spent money from what they raised from investors in the market. so, you know, they sort of continue to talk about, jim, they will invest as they see fit, people should be thinking that they are investing for next few years, but that has been a continued sort of question mark. will they sort of pull back to a certain extent as the growth is still very strong but not quite as strong as -- >> that's really the only chinese stock that i find to be really investable right now. because of the trade war and so i say be careful. you often ask me what the previous market is, and i am going to tell you, it is the

smh. i'm going to use an etf. >> okay. >> because you look at -- remember broadcom? >> of course. >> bought ca, the stock at 230, went down to 205, i stood by him, i like the software, i like the fact that he boosted the dividend its sweet point from its high. xilinx taking out its high advanced micro starting to really make its move back. i will tell you the semis are indicating that there is some health overall to the economy. the semis being important. i want you to watch micron micron was never able to take out that beefy touch below 30 during the december 26, just a horrible decline axpi making a big comeback that's more auto related. >> almost 87 we do remember 127.50. that's a number that will stick in investors' memory elliott remembers that number

well too >> let me put a thought in your mind. >> be nice to have one in there. >> the semiconductors let us down it was the beginning then the industrials came down what would happen when the thesis i'm now propounding, one that stephanie link, my former partner, she and i worked on, what would happen if the semiconductors led the industrials back up and we get a trade deal david, emerson reported orders today quite good rockwell reported some good numbers. caterpillar, not nearly as bad as people think. we know united technologies is reporting good numbers and boeing reported good numbers what would happen if the industrials really catch fire here and then we get a trade deal and jay powell doesn't pull the rug out from underneath us >> that would be seen as very good >> right that's what i think the bears are really worried about the bears are shaky here the bears really felt like they this over, game set match at the

end of 2018. i think a lot of bears knew that 2019 was going to be the worst year, so they pressed their bet 2018, witness ge, still don't know what larry culp has up his sleeve i guess you're going to see him. that's the rumor. >> really? >> you don't have that >> i e-mailed them and i said could you mind doing it with me instead of david this time i did not do that. i said he should come down but, david, i'm looking at things -- >> waiting on ge's earnings. >> i'm looking at things that i like i think microsoft is going to be quite good okay >> i want to get -- i want to get to something that wasn't that good this morning. >> oh, no. >> sorry >> come on, man. >> that's what i'm here for. that's what i like to do at&t let's talk a bit about it. the stock is down -- this after yesterday, of course, we heard from verizon, which the guidance there at verizon did not please investors. this morning at&t reports its fourth quarter earnings. let's go through some of the key

metrics here the wireless business, 304,000 post paid smartphone editions, may have been below analyst estimates, but growing and growing strongly directv is not this, of course, the direct broadcast satellite business they bought a number of years ago for about $49 billion, roughly speaking you can see, directv now, the new over the top service that they had offered for some time at a very competitive price, then they stopped being quite as competitive and what happened? subscribers have been leaving. they had very few subscriber gains last quarter and now 267,000 subscribers have turned off of the service >> how many? >> it shows you -- >> 267,000 about 1.5 million -- it shows you how those new services that are -- youtube services, directv

now, people go off and on them there is a lot less friction, i think, it is not like begging your guy, please come, disconnect, i got to return the thing. sure you want to we really can't. now it is like -- done and so they lost 260,000 -- 267,000 subs there and then directv itself has been hemorrhaging subscribers, we know that. investors know that. but 391,000 and a quarter, it is a big number talk about cord cutting, talk a lot more about dish and directv than we really do about comcast, our parent company or charter. here's where you're seeing the real, real key cord cutting. not in the release, it is in the deck. >> think about that. it was not in the release. >> right >> what does that say? this is the most salient factor? >> one of them. >> how about cash flow how are we doing on that

>> they are reducing -- they are reducing debt, expect $12 billion in free cash flow in 2019 had $171 billion in debt at year end last year. and they see it being $150 billion. so that goes -- that goes to your key point, which is bringing it down, let's get to guidance as well free cash flow, $26 billion range, remember i just mentioned overall $12 billion in free cash flow in '19. dividend payout, high 50s. net debt to adjusted ebitda, 2.5 range and adjusted eps 1%. i'm trying to understand the difference here between why they said $12 billion in free cash flow and -- what >> why are they -- >> usually means people are worried about it free cash flow is -- >> does say that some of the numbers are adjusted finally, yesterday, you and i had a conversation, john runs the time warner assets

that's an important component of this company now, forget directv as well, which is important, but time warner more so. i made some comments about what i understood to be the way he told or instructed some of his employees that he would like to be communicated with, via e-mail and in no way did i mean to impugn his work ethic. that was not my point at all >> 9:00 to 5:00 thing. >> the man is working 24/7 potentially. i did hear this from a number of people, at&t, though, for its part, disputing that he is ever codified in any way or said to people he only gets e-mails at this point in time so i do want to -- i'm not -- i'm not in any sort of communication with mr. stankey maybe that will change one day i did want to correct the record on that. and again, it wasn't meant in any way to impugn -- he's got a lot of work to do. this is a key -- >> that division looked okay am i wrong >> you're not wrong. the key thing for investors to keep in mind, deterioration of directv and there are these questions about his approach to

a very creative company and over time what that is going to be like culturely. >> do they know how to people say, if apple buys video, what does tim cook know about that i remember watchi ining narcos tim, he does not work 9:00 to 5:00 he works 9:00 to 9:00 to 9:00. that's what i'm worried about there. do they understand content you like that hand maiden's tale and that throne thing. >> i do, i do. >> hand maid's tale is a hulu show to bob pisani, so many things we haven't gotten to this morning, i hope you will. >> i'm make an effort. 4 to 1 advancing to declining stocks over 2600 on the s&p. below 19 on the vix. and the most important thing is the guidance is better remember the lousy guidance we started out with, xilinx, caterpillar, 3m, whirlpool yesterday. guidance is better today look at the companies, i'm looking for 2019 commentary on

the guidance boeing, advanced micro, oshkosh, anthem all doing better all implying 2019 would be at or above expectations right now there are a few companies that had lower expectations on guidance they're down juniper had lower expectations tupperware had -- that's not a typo, 25% on tupperware, lower expectations they are definitely getting hit. look, even companies that are okay on guidance, but just fare, not bad, like look at the cruise lines, royal caribbean had 975 to 10 here that's close to where the numbers are expected it is trading up nicely. dragging carnival corporation up with it. i want to mention two big global names, had earnings out, alibaba came in okay again, beat on the bottom line revenue short of estimates joe tsai talking about the urban middle class, going to 850 million consumers in china by

the year 2030. that stock is trading up nicely. lvmh, love to watch how the 1%ers are doing. look at these numbers. record revenue numbers here. this is the 1%, folks. wine and spirits, organic growth, up 5%. fashion and leather, 15% per fu perfumes and cosmetics, 14%. watches and jewelry, 12% year over year. 1%ers are doing well china wasn't as bad as what everybody thought it was remarkable numbers out of lvmh the bulls are looking to mr. powell and to the chinese delegation on trade to maybe keep the rally going on rates, we want to hear that patient. he said the fed would be patient in december. we want to see that incorporated into the commentary. on the balance sheet, everybody is obsessed with the balance sheet. unwinding the balance sheet. commentary that it is not on auto pilot, something like that is what everybody wants to hear. finally, hey, is the ipo market

finally reopen remember all the craziness with the government being closed? i think we might have an ipo pricing on nasdaq tonight. we're waiting to make this clear. but right now, looks like new fortress energy will price tonight. will try to price tonight. 20 million shares of $15 prior price talk, 22 the numbers here, the important thing is, hey, we might get an ipo trading over on the nasdaq tomorrow looks like s.e.c. really is sincere about getting that ipo business up and running. off the highs for the day. 253 points back to you. >> thanks, bob bob pisani covering so many other things not to belabor at&t, but you may have noticed the discrepancy in one slide we said $12 billion in free cash flow and another $26 billion in terms of the guidance the $26 billion is the correct number that is before they paid dividends. $12 billion in free cash flow after dividends. wanted to clear that up for people as we watch that stock

decline this morning the overall market up. a rough morning in the midwest we're talki ing weather now. dangerously cold temperatures. in chicago, minus 20 degrees the windchill an astounding almost 50 degrees below zero. >> your spit freezes before it hits the ground at minus 40. >> the high is expected to be minus 10 mail delivery suspended in some parts. >> this is amazon weather. how many customers does he pick up in this weather bezos. >> i think they cancel school. has that stopped rick santelli of course not. he made it to the cme group in chicago for what i hope is a weather report, maybe bonds in there too, rick. >> you know, no cold weather, no arctic temperatures are going to keep me from coming to this exchange in january 1979, i stepped for the first time on the old cme

floor, different building, i have not missed being on a trading floor for a fed meeting or unemployment report since then 40 years i don't care how cold it is outside, i'm always going to be here for fed and employment reports. one week of 10s, you see that we basically have been consolidating. you know, we have now spent 16 sessions closing in the 270s today will be 17 potentially but my point is in the 270s, now we continue to tighten that range, basically bouncing off 271 and finding resistance at 275. as you see on the year to date chart of 10s, if i was to show you year to date chart of 30s, it would look pretty much exactly the same as that except for the scaling would be 3% to 3.10%. if we look at one week of bund yields, only thing we can say about this chart is we're toying in the teens again the middle of the chart, 18.

now we're hovering right around 19 basis points. once again, on our fed day, i can't help but think how mario draghi has missed his opportunity as global slowing continues, albeit not quickly. look at intraday dollar index dr index looks pretty good. fed dates, rising a bit, but it puts a better face on it we are rising, but we're still below 96, though the shroma nufrg of the forei -- the shroma nuflow maneuvering ia greater predictor that a change is closer. david and jim, back to you >> that is great insight by him. that's what i'm thinking. >> that's what apple is thinking that's great insight by rick >> very important for the market as we head to break, take a look here, of course. we spoke to amd. it is the top performer on the

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annually pending sales are a future indicator of closed home sales in one to two months this marked 12 straight months of annual declines this is also the lowest december reading since 2013 some expected sales to get a boost in december from the drop in interest rates, but that was clearly not the case can the average rate on the 30-year fixed fell from over 5% in mid-november to 4.61% by the end of december. realtors say stock market volatility hit consumer confidence and affordability continues to be a problem. the government shutdown did not play a row regional sales were down everywhere annually with the sharpest declines in the west, down close to 11%. sara >> not super encouraging on the housing front. diana, thank you diana olick. good morning, everyone welcome back to "squawk on the street." i'm sara eisen here with david faber and mike santoli live from post nine at the new york stock exchange carl is on assignment today. let's take a look at the markets. rally on woman street.

the dow is up almost a full percent, up 229. a big chunk of that is boeing and apple. warm receptions to their earnings reports s&p 500 up about half a percent and thanks in part to apple technology is the best performing group a .75% gain in the fed and a whole lot more boeing and apple boosting the averages higher and we'll dig for the results and bring you analysis straight ahead. plus, we've got critical trade talks getting under way between the u.s. and china this morning. we'll take you live to washington. plus, an historic and deadly polar vortex grips the u.s temperatures plunging into the 40s 50,s and 60s below zero. we'll bring you an update. >> a ton of movers to get to, beginning with the two giving the major averages the biggest boost. starting with apple. earnings beating by a penny per share and quarterly revenue coming in at 84.3 billion. that's above the lowered wall street estimates

following the company owes sales warning earlier in the month, iphone sales did slow, but services business certainly a bright spot, and then there's boeing, up sharply as well after reporting better than expected quarterly results and full-year guidance, 2018 revenue coming in hot. record 101 billion we'll have more analysis throughout the hour on both companies, guys, but i think one thing is for sure, and it applies to apple and some of the other companies like 3-m as well there's a higher tolerance in this market for bad news the setup was worst month -- worst december in almost a decade for stocks which means the bar is set lower when it comes to bad news. >> higher tolerance for bad news means expectations were beaten low and valuations were beaten low. you don't know exactly how low until the reports and guidance come out and emerge and you see the stocks react you're seeing that with amd as well as apple and 3-m right now. for now, i also think, by the way, interesting, facebook is up a couple percent at least at the open today because maybe people

are starting to think maybe that's going to be the net reaction for just okay numbers let's try to get in front of it, so we'll see if the dynamic plays out with the latest batch of reports tonight. >> david, it's worth seeing who is getting punished for bad news because it's not like everyone is getting rewarded. a company like at&t, for instance, caterpillar got hit almost 10% on a day where it warned on china, nvidia, so not across the board no, not across the board, although there does seem to be a little bit of a relief rally in some of these names, mike, not necessarily putting up great numbers but not as bad as people had feared even alibaba, for example, up 3% this morning was not above consensus estimates on virtually any of the metrix but was close enough that there seems to be some relief. that does seem to be a bit of a theme. >> any stocks that are bouncing to levels that were last seen, you know, let's say in october or november or in some cases just december. in other words, you're taking back some of the losses, but i do think the impegs that there

was no sudden, you know, abrupt slowdown that we didn't anticipate or wasn't in the overall macro numbers emerging from the data. maybe we're seeing the worst of the dollar headwinds. >> maybe got too far ahead of its skis in the final months of 201. maybe that's what the earnings are saying. >> that's what the 12%, 13% bounce in the s&p suggests for now. let's dig deep near apple. jellyfish lipton spoke with ceo tim cook after the earnings, josh, and i guess pretty well received his message. >> reporter: mike, iphone sales dropped 15% in apple's first quarter. tim cook tells me that's because in china he's said the weakening economy is made worse by the trade war, but he's seeing possible signs of better times saying as we got out into january things vim proved from where they ended in december, and that gifts us some optimism. of course, you don't know what will continue, but i would also point out that seems to map to trade tension if you will.

now, there's a bit more optimism in the air i think in january. i certainly feel that anyway, and i'm encouraged by the comments that are coming out of both countries right now i also asked cook whether part of the issue in china could be intensifying competition from the local rivals, like huawei and others, and he argues that's nothing me i think the competition is very tough there, he says i think it's the most competitive market in the world, but that didn't change in the december quarter it's been like that. as the iphone franchise comes unpressure of course, there's more tension in that company's services division which grew 19% to 10.9 billion. i did ask cook if services can keep grow, even as iphone sales come under pressure. he tells me that's what's more relevant sheer that his total base of active devices keeps growing, now reaching 1.4 billion. services are largely connected he says to the active install base so it's connected to that 1.4 billion. these are the people that are subscribing to apple music they are subscribing to icloud

guys, back to you. >> josh, a lot of talk about 4x. a lot of talk about a slowdown in china how much would you say of the weakness that apple is experiencing can be chocked up to macro economic factors, and how much of it is apple-specific >> listen, i think what cook is trying to make the point that actually it's multi-factorial, that he is in china dealing with the weakening economy. he's dealing with trade tensions he said a stronger dollar also is at work there increasing iphone prices in china in the developed markets he's got challenges as well he talked about fewer carrier subsidies. of course the replacement program. now he's argued that there's levers he can pull there new pricing plans and more aggressive marketing of the trade-in program we'll see, sara. >> all right josh, thank you. we're going to talk more about what to do with this apple stock. jinx us is senior analyst at citi who has a buy call and new street research analyst with a

neutral it view on the stock and a $140 price target. what do you make of the enthusiastic share price reaction >> i think in the context of what you guys just discussed it makes a lot of sense because what we learned was apple's numbers last night is the macro market is bad but not that bad iphone sales for apple are down almost $5 billion. that means iphone revenues are down 4 billion, but all the revenues are down so billion, so that's something that goes beyond china that's happening at apple. what i see in these numbers is actually two things. one is iphone -- iphone users still love their phone but they stick to them longer, so refresh rates are elongating, and the second one is last year the

ipho iphone x went for that phone and all of that accounts for the disappointment at apple, and the macro is only 20%. >> jim did, they convince wall street to move past release of iphone shipments everybody was outraged when they said they weren't going to disclose that last quarter they didn't, and the stock is doing pretty well. so is wall street buying that narrative? >> well, a big part of it is simply the results were not as bad as feared. people were expecting very bad results. remember, they pre-announced negative the first time in over 11 years since the entire existence of the iphone on january 3rd, so people were expecting a very bad march quarter guide arranges and it was more seasonal, so it wasn't as bad. covering up the iphone units, simply we view that companies like to highlight when things are going well and when they are not going well, they like to shift the focus, and right now apple is trying to shift the focus to its services which are

highly profitable, but, again, we do not believe apple is a service company. it's a product company with great services >> all right so given that then, jim, are services really still linked to unit growth overall and not the organic growth of the services' ecosystem? >> they are absolutely linked but not directly dollar for dollar what i mean by that is people's wallet share are spending more money on apps and in-game purchasing today look, when we were all children, we would spend money on bicycles and things like that today people are spending more money on apps and in purchasing things and doing it more through their smartphone whether it's android or the apple ecosystem so the wallet share is increase. services can continue to grow faster than iphone units because, in fact, iphone was was down year over year, and we

expect it to be down for the next several quarters and services are still growing, but it would be disrespectful or dismissive to simply say apple should be valued a lot higher based upon services only you cannot buy just the apple services without also having an adoption of the company's products the company needs more innovation with its products to keep these services growing. >> pierre, we have this bounce which certainly should be characterized as relief, not a particularly strong bounce let's say this stock is back to only where it was december 19th, right, so you're just taking back the worst of that, and i'm wondering about, even as the market gets comfortable with this idea, it's somewhat steadier business and an elongated cycle for iphones, what would be the catalyst to look for wlarks would be the litt little landmarks that you'll look for >> you have to look at all on two fronts the first one is there is an

element of distance purchase so i'm looking for bounceback when it comes back to normal. that's froeshlgs you know, something that is going to happen guidance that can be communicated in july or maybe october. news from the value chain that apple is ramping up production again, and that's only like the hardware business, like the product business that we need to look at. then i think the debate around is apple a product company is apple a service company that's the debate that's going to last for several more years because that transition is very slow and the stock will continue to react on iphone so we don't have shipments anymore and the company doesn't communicate them anymore and we can feel them relatively easily or at least i can and we'll still have iphone

revenues we will need to find traces of an infliction point in that number going forward. >> jim, isn't it also going to be what happens with the trade war between the u.s. and china i mean, how much do you think that is holding back the valuation of apple china sales, iphone sales were down in china 27% from last year they have clearly made a big deal about this, so can you trade this -- can you buy the stock without resolution on the trade front? >> that's a very smart observation. simply put, trade wars are terrible for i.t. hard wear and technology stocks. it makes things more expensive, so the average consumer can buy or afford less of them trade wars are bad simply put so with that being said, and we're facing those right now, it's not a good indication can you buy apple stock on it? well, you have to take a look back at valuation, and excluding cash it's trading around what we call 11 times price to earnings. that's very cheap. when we look forward to your

earlier question about in the month of june, apple hosted its worldwide developer conference we look for indications there as well as september about their new product launches are they innovating even more because simply adding an additional camera on the phone on the back, we don't think it's enough to really, really get a big up tick cycle going again. the next few quarters will be pretty challenging so the people buying the stock are value investors, not growth investors at this time >> jim with a buy and pierre, thank you for coming to post nine with neutral at 140. when we come pack, we've mentioned this already, channel 4, "action news"-china trade talks are under way in washington as major companies announce that they are feeling china's economic slowdown. we're going to discuss that. and as we head to break, here are a look at the top performing stocks on the s&p at&t provides edge-to-edge intelligence, covering virtually every part of your manufacturing business.

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this is it guys. you ready? to have epix? absolutely. woooo! you'd laugh.

oh, ow. [ chuckles ] you'd cry. look, look, look, look, look, look, look,. maybe even laugh while crying. what the fertilizer? sounds pretty great, right? riiiiiiiiiiiiiiiight! just say, "add epix" and it can all be yours. it's easy to upgrade. and you don't want to miss out on everything epix. the u.s. and china resuming high level trade negotiations today for the first time since june when commerce secretary ross traveled to beijing at risk is the 25% tariff on $200 billion worth of chinese goods scheduled to go into effect march 2nd if a deal fails to materialize risk, bottom lines of the multi-nationals, many of them with significant exposure to china. we heard from caterpillar earlier this week, partially blaming china for its biggest earnings miss in ten years

on its earnings call yesterday, apple's tim cook said china is responsible for the majority its revenue guidance shortfall and even after a stellar quarter amd's ceo telling us last hour that china remains on her radar. >> we see all the signals that are out there, you know. certainly there are some concerns about the macro and what's going on in china there's a little bit of short-term concern at the data center, but we look at this as, you know, let's not major on those things let's major on the product story. >> joining us now is a longtime adviser to the chinese government and its companies he's also author of "how china's leaders think. a lot of people would like to know that. well, give me your take right now in terms where we are and what the likelihood you think is of real progress being made, that even if it's not a deal might be enough to forestall those tariffs going into effect on march 2nd. >> i think short term we do have some kind of deal, whether it's

a postponement or actual that won't happen now. it will happen very close to the deadline, not at the deadline but just before. president xi, president trump both need a deal for very different reasons. president xi talks about the significant risk that china is facing, politically, economically, financial risk over capacity, the need to reform state-owned enterprises and interest groups, a whole series of things trump obviously needs a rising stock market like today hopefully and needs a win because of all of his other issues, so there's a great deal of pressure on both to get a deal done. i think a deal will be done, some kind of deal, that each side can say is okay i think mid-term though defined in the next three to ten years, u.s. and china, this deal, whatever it is, is not going to solve those problems we see those in terms of technology, geopolitical issues. things will probably get a lot worse before they get better

i hope long term that there is strategic cooperation between the u.s., but we'll go through a long patch before that. >> the 2025 plan may not be something to your point that they won't talk about it they do have a plan to become the world's largest economy which is likely in the next ten years. >> yeah. >> maybe less and conceivably maybe ahead of us in 5g and in artificial intelligence. isn't that a threat that ultimately means the two countries will be opposed? >> it depends on how you look at threat in the old world, the 19th centuries, part of the 20th century, threats is when people wanted the same territory and it was a zero sum game. there is some that have in the world, but not much. when you're talking about technology, you have incremental basis. it's not a zero sum game technology will bring up everyone what's wrong with competition in technology china 2025 has been misinterpreted in many ways as china trying to dominate the world. china's trying to build its own economy.

it's trying to give a standard of living increases to its people xi jinping has said a remarkable statement. he says he spends more time on anti-poverty work, on poverty alleviation, targeted poverty alleviation reform than on anything else, whether it's the military or economic that's a remarkable statement, so it's not like there's this entity trying to take over the world. they are trying to build a standard of living for their own people they are also trying to protect their political system many. we can disagree with that, but they are trying to protect it so a lot of the moves made are trying to maintain it. the ability of the country through enabling the political survive to survive the various kinds of external threats that they see which may be legitimate in terms what have they do in their own economy, they think it's absolutely necessary. that stability to elevate the standard of living and the people to eliminate all extreme poverty and give people healthcare and social security and education and all the things that they want. >> we have i think pictures from this morning of ambassador

lighthizer, the u.s. trade representative leading these negotiations kicking off the meeting and welcoming the press. they were hall loud in for the initial remarks. what is your sense on how they are far aside on the intellectual property and the enforcement monitoring that seems to be the tricky stuff. >> yeah. if we look at the whole picture, trade deficits started the conversation, but nobody really talked about that seriously. that made made up through purchases. that, frankly, doesn't benefit the u.s. very much at all, for them to buy products it's helpful in some ways but no long-term benefit. there's really five big issues, opening of chinese markets, intellectual property theft that has been going on in the past, cyber espionage and cyber theft, forced technology transfer and joint ventures and the government subsidies of new technologies that's the real -- those are the real issues. now, on some of these china has made real progress and needs to be given credit for that some of them they haven't and

they need to be held accountable. >> what do you mean made progress >> made real progress on the intellectual property issue. at the intellectual property court, there's very tough judges a lawyer trained at yale who had some very big cases awarded to foreign countries. they have that mandate china knows if it doesn't protect its intellectual property number one its own companies will suffer and, number two, it's never going to take a significant role in the world of business. china wants shanghai to be a world center of business, like london and new york and maybe even the first among equals. for that to happen in the years in the future, they must protect intellectual property. so there is great pressure it's difficult for them to do because of the nature of society. in terms of government support of technology, there's great debate in china. i talk to chinese economists who tell me privately many of the things that the u.s. demands is actually better for china,

intellectual property protection, not putting state subsidies for state-owned enterprises because that -- >> that hurts their actual competitiveness in the global market. >> the iron is what the uss forcing china to do will be good for us and in the long term it's better for china. >> in the long term, robert, very quickly, are we going to do more damage to this relationship, lore it lead to a better relationship with china as a result of this trade fight? >> i think there's a narrow window to make it better and that's what i just said. the chinese economists who want the best for china realize that much of what america is demanding now is good for china in the long run. >> robert, we always appreciate your insight. >> pleasure. >> robert kuehhn. >> a blowout for boeing. we'll dig through those results and later on cnbc, boeing's ceo dennis muilenburg joins our phil

lebeau "squawk on the street" returns after this if we don't make this move we're going to have changes in our environment, and have a negative impact to hawaii's economy. ♪ verizon provided us a solution that lets us collect near real time data on our power grid. ♪ if we can create our own energy, we can take care of this beautiful place that i grew up in. ♪

good morning, everybody. i'm sue herera, here's your cnbc

news update at this hour a deadly arctic deep freeze enveloping the midwest with record-breaking temperatures in chicago, temps hitting minus 19 with windchills plummeting to nearly 50 below. schools are closed and schools took the rare step of suspending delivery. there isa may is insisting to lawmakers that britain is committed to securing a deal with the european union over its withdrawal from the bloc. >> last night a majority in this house voted to maintain this commitment to northern ireland, to leave the european union with a deal and to set out with the european union what it will take to ensure that this house can support a deal that is the change to the backstop that's what i'll be taking back to the european union. >> embattled venezuelan president nicolas maduro visiting troops at a military base in caracas as pressure grows for him to step down

the visit comes after maduro told russian state media he's tempted to negotiate with opposition leader juan guaido. that's the update this hour. i'll send it back downtown to you guys back to you. >> thanks, sue a look at etf ita. boeing doing its part today. up more than 6% after posting blowout earnings our phil lebeau joining us with more from freezing chicago where the polar vortex cold snap we hear, phil, has already been felt. >> reporter: it is chilly here but over at boeing headquarters, boy, is it hot, including a very hot and impressive fourth quarter earnings report for the aerospace giant. the company earning $5.48 a share. that was 90 cents better than the street expectation and that's the reason you see this, a pop of more than 6% for boeing shares the fourth quarter, listen to

this record revenue, record free cash flow there's really very little not to like in this earnings report from boeing. its annual revenue, by the way, last year topped $100 billion for the first time a lot of this is due to the increased delivery rate when it comes to commercial airplanes which brings us what's the guidance for 2019? it's impressive. a boost of almost 10% up to 905 commercial airplanes, almost all of them exclusively 737s we'll speak to ceo dennis muilenberg from the exchange don't miss this interview. we'll talk with dennis about the fourth quarter and more about 2019 and his belief that this could be a record year on top of a record 2018 for boeing phil, you know, it was such a comprehensive beat. >> yeah. >> is there anything that

investors feel is unanswered question at this point seems like there's so much investor security with free cash flow in the back vault. >> there's a few things out there that people will be watching for in terms of what's going on with the 777, the middle market airplane, those plans for the future, but that's more for the next couple of years, mike. that's not something that will make somebody say wait a second, get out of boeing shares right now. that's why there's so much confidence they have got a seven-year backlog worth are half a trillion dollars that's not going anywhere. these planes are being delivered because airlines are seeing more people flying around the world when you look at the numbers, guys, there's no doubt that for boeing it is in the sweet spot right now, especial hi when you look at the increased delivery cadence for the 737. >> also interesting with all the hand-wringing over the trade war and boeing being a trade stock that they appear to be brushing off that kind of headwind.

>> sara, we talked about this a little bit on "squawk" this morning. boeing gets 23% of its revenue from china and you can't blow that off it clearly is important. but look tat from the perspective of a chinese airline. if you have a plane delivery next year and there's a lot of sab rerattling between china and the u.s., are you suddenly going to say we don't want that plane from boeing, where are you going to go. are you suddenly going to get that plane from airbus you can't because they have got a backlog that they are meeting with their customers, so there is an insulation there and a lot of times it's a knee-jerk reaction that brings this stock down when anything happens with regards to trade tensions in china. >> phil lebeau, we'll see you later and looking forward to your interview in the 1:00 hour with the bogue ceo when we come back, the u.s. and china launching a critical round of trade talks today, but will a deal get done? we'll give you an update on the latest from washington and about

an hour into the trading session, let's get a check on where the major averages stand phil mentioned boeing. that's broad strength in the s&p with technology leading the way.

u.s.-china trade talks are under way this morning in washing it top our kayla tausche joins us with more on the meetings good morning, kayla. >> good morning, sara. this summit of sorts opened with little fanfare each side exchanging pleasantries about the g-20 in bayers where the contours of this truce were first established and now the hard work continues to keep fleshing out a potential deal we will see. we expected there would be some opening remarks. there were not any the white house providing just

this very brief glimpse into the kickoff of the meetings this morning where the delegations were coming together for the first time we're hearing some of the staple story lines going into this morning's meeting that means treasury is more in favor of a deal ambassador lighthizer of the ustr is taking a more comprehensive harder line approach the question is who ends up on top this time around that's anyone's guess. it remains to be sign. the white house is trying to put some business concerns to rest going into this meeting. the white house and ustr are holding a call that we've learned of from four businesses in a few minutes time where they will be talking about all things trade. they will talk about the u.s.-mexico-canadian trade agreement and will talk about the impact of tariffs and will talk about the trade with china. the white house and ustr say that president trump continues to hold china accountable. you have to imagine that companies are going to be look for some glimpse into what's happening, raising concerns of their own, and we'll bring you

more reporting into that and anything that we can glean from today and tomorrow's meetings as we can get it. guys >> kayla, thank you very much. we'll be back to you with more on that. for more on the impact of the u.s.-china trade talks we're joined by the oppenheimer cio and the asset allocation strategist welcome both we've been dealing with this china trade dispute as a front and center issue for almost a year really. >> yeah. over that time we thought the u.s. economy might be overheating and now we're worried about it slowing down. how much of a swing factor do you think a potential agreement or friction is with the u.s. markets? >> i think the markets are -- china is a huge swing tactor for the markets right now. if you look at the way earnings are being city gestdigested by markets. as we've seen chinese exposure,

those are the companies that see the biggest drawdowns in pricing and biggest misses exposure to china and exposure to the growing concerns around the cyclical exposure to the economy that is clearly right now are the two biggest concerns. >> do you think some kind of agreement would release that pressure very quickly or just that the chinese economy has to find its footing otherwise >> we actually do. right now investors are very, very light on ring we see that in mujahid flows and in mutual fund generally and institutional portfolios so light on risk right now, and any -- any upside surprise whether it's trade, whether it's the european turmoil, we'll have a relief rally that's going to catch investors off the sides if they are not involved in that. >> christian, do youthink the u.s. will be fine and the rest of the world can back a little more strongly? >> i think we have to be careful. can't conflate two separate

issues one is the fact that the chinese economy is slowing down and the second is the trade. they are related, but they are not the same issues, and i think that's important as far as the chinese economy is concerned, they are already starting to simulate the economy and our expectation is that they are going to throw in the kitchen sink before this is all over as far as the trade deal is concerned, one of the reasons why we didn't arrive at a trade deal in 2018 was because the u.s. economy was doing much better as the economies everywhere continue to slow down, the pressures to reach some sort of a deal increases, and i think that the markets are going through a relief real of sorts and i think the outlook for emerging markets is very good because i think policy would be supportive growth is going to come back and we'd reach a trade deal. >> when i talk to investment and portfolio managers on and off the air here's the number one i hear on the u.s.-china trade front. we're not afraid that trump is

not going to make a deal because he's afraid of the stock market falling too much is that something you can bank on as an investor? >> i don't think it's the stock market per se, but i think the economy for sure i think if the economy continues to slow down, finding some sort of a resolution going into a re-election season i think is important politically, and it's really good economy policy to some extent we have to remember, you know, there are different opportunities and times to arrive at solutions for long-term approximate. trying to force a solution in a very narrow window is not good policy, and i think there's enough people in washington who know that. >> we've got a fed meeting today. no one is expecting much of anything something you're watching for, something unexpected perhaps, that's an actual risk? >> so we're not expecting anything unexpect pedestrian, right. we expect the fed not to increase interest rate. >> not expecting anything unexpected. >> i think the key thing to watch for is the rhetoric and the forward guidance remember, we'll get a monthly

press conference so overcommunication from the fed which i think commune shags iica good thing. >> we know who is doing the talking but sometimes his talking -- >> hasn't worked out. >> we're looking for patience and more dovish rhetoric same kind of thing we've seen out of the ecb and boj the last couple of weeks. we're looking for the fed to be consistent in that synchronized approach around global central banking on dovish rhetoric. >> more broadly, krishna, if we remove a lot of the uncertainties everyone is fixated on, right, whether it's the trade deal or the slowdown if we get reassurance that growth is slow and companies are back on firmer footing, does that bring us right back to the point, that hey, by the way, the fed thinks they can still get two hikes in this year. >> i think that's certainly a risk i thinkful markets rally too much, that gives the fed -- the fed the free pass that they are actually looking for because i

think they are still the believers in the phillips curve. having said that, i don't think given all the slowdown in the economy we'll probably get the gang buster rally that we need for the fed to kind of get ahead of it. >> that puts a ceiling perhaps somewhere on the market but it's where exactly? >> i think if we -- let's say end of february we're 10%, 12% for the year, that probably is too much and that brings the fid back no play the bottom line with 2019 from our perfect sieve two things one, five more years this growth will continue at a subdued level but for a reasonably long period of time, one, and second the -- the reasonable growth in 2019 with better policies, whether that's on the trade front or whether that's on monetary policy front gets us better outcomes. >> all right 2024 then, that's when you're calling the recession. >> five more years. >> krishna, maddy, thank you very much. appreciate it. coming up later on "squawk

alley," don't miss former treasury secretary larry summers weighing in on the trade talks and a whole lot more "squawk on the street" will be right back dow is up 270. don't go away. and more people than ever struggle with debt. intuit is here to change this story... with giant solutions like turbotax, quickbooks and mint that give everyone the power to prosper. intuit. proud makers of turbotax, quickbooks and mint.

facebook out with earnings after the bell and one trader says it could sort double digits what has him so bullish on tradingnation.cnbc.com more "squawk on the street" is coming right up.

you are looking at a live shot of an incredibly cold chicago right now. frigid temperatures hitting the u.s. as a polar vortex in the midwest is triggering the coldest arctic outbreak in at least two decades. windchills will if they haven't already fall into the 40s, 50s, even 60s below zero in some places by the end of today, 85% of u.s. land area and 230 million americans will experience temperatures of 32 degrees or colder, dangerously cold

temperatures our rick santelli is in freezing chicago right now where he joins us as always for the santelli exchange good morning, rick >> reporter: hopefully i'll warm everybody up with some interesting conversation regarding the fed with my special fed day guest vincent reinhart, melon chief economist. thanks for joining me today. >> i'm in balmy boston >> reporter: all right now let's start at the beginning. what do you think we will see in the statement and hear in the press conference that you believe we should pay closer attention to, if anything? >> probably not a heck of a lot in the statement they had said patience and prudence so many times in the lead-up to this meeting. they have to put it the into the fomc statement, and what that implies is that think promising not to act at the march meeting, so first quarter of to 19 will be one in which the fed is on radio silence with regard to

rates. in terms of the press conference it's going to be a kindler, gentler report. >> i think that there's nothing necessarily wrong with that. when i turn on the news these days or have guests on or pretty much at least half the programming and cnbc when it's regarding the fed, balance sheet seems to be the number one topic. you know, vincent my issue is it's very hard to quantify if the quantitative tightening ask having the effect that many are nervous about, a dual tightening with rates we really have very few feedback loops to make any judgments and many little history to guide us. do you have any thoughts fess physically about the balance sheet as the securities portfolio is now below 4 trillion >> sure. first of all, the great irony is the can the "q" in qe or qt

can't be quantified. analysts don't know how they affect balance sheet premiums and term yields. we've seen this coming so why would we suddenly be moving rates around for something that's been so well telegraphed that is basically on -- you know, with very hard guardrails around it, so i think this is the excuse of the month, that investors are looking at what -- what's the moving part you can blame today and it's the fed's balance sheet. the fed is going to shrink its balance sheet. it will do it slowly, but the main lever of monetary policy is and will always be the interest rate >> you know, i happen to agree with you on it being the excuse of the month, but being in the markets as long as you have i do

realize that don't underestimate the impact of perception by investors. that goes a long way finally, we have one minute left and would i like to drill down on something that's bothering me for a while. we've never really gone through globalization buildup where all ships rose with the tide do we need a new pillar? is that just inferred? you know, it's u.s. central banks supposed to deal with u.s. issues and yes, feedback globally should merit but does congress actually need to get involved? do we need to carve out a new place in the charter that would specifically deal with the notion of global impacts on policy >> i think that's something you should be talking to with chinese authorities. because by next year or the year after, they're going to be the biggest economy in the world and they've got to carry their weight as a global citizen with regard to their appreciation of

what they're doing in the macro economy and not look so insular. as for the federal reserve, it's implied. if you say maximum employment and stable prices, you've got to realize, there's no such thing as, you know, an island of prosperity in the global economy. fed officials do care about these things it would be nice if congress appreciated it i agree completely, but i don't see the u.s. congress, particularly in this voor environment, worrying about the rest of the world. >> touchtouche that is a great point, vincent inenjoyed the conversation thank you so much. back to squa"squawk on the stre" >> let's now sent it over to jon fortt with a look at what's coming up on "squawk alley". >> well, apple's up almost 5% this morning after earnings, part of that based on an outlook that's not as bad as feared. part of that is because china isn't looking as bad as feared

we'll have more onpp ale and china coming up on "squawk alley. i don't know what's going on. i've done all sorts of research, read earnings reports, looked at chart patterns. i've even built my own historic trading model. and you're still not sure if you want to make the trade? exactly. sounds like a case of analysis paralysis. is there a cure? td ameritrade's trade desk. they can help gut check your strategies and answer all your toughest questions. sounds perfect. see, your stress level was here and i got you down to here, i've done my job. call for a strategy gut check with td ameritrade. ♪

welcome back to "squawk on the street." i'm dominic chu. stocks moving higher today on

the back of those boeing and apple earnings, which is having an effect on the dow but a notable sector laggard is communications services. you can see here in the red, disappointing results from at&t helping to drag things down there. names like discovery, cbs, comcast, the cnbc parent company, and dish also moving lower. but not all the sector components are getting hit newer tech and media companies like facebook, alphabet, netflix moving higher on the day facebook reports results after the close. now back downtown to you guys at the new york stock exchange. back over to you, david. >> thanks, dom yeah those numbers from at&t, direct tv, 370,000 at direct tv now, pressuring a lot of that complex overall. still talking about $26 billion fl free cash flow before dividends, $12 billion after it's a pretty big number >> it's a very big number. but at this point, direct tv is -- seems like a complete sink, right? >> yeah. it's not being well received, these numbers. and it continues quarter after

quarter after quarter, a lot of concern there from people. 7% yield almost on the stock >> yeah, it's amazing. >> yeah. all right, sarah now time to turn to you and say, what's coming up you've got a big show. >> big show. we've got the fed, j powell will be giving his news conference at the top of the hour. and in the earnings, bonanza after the bell on the docket, facebook, microsoft, snack maker, mondelez, qualcomm, tesla, visa just to name a few we'll, of course, bring you the numbers, instant analysis, and a big interview you want to miss former goldman sachs ceo, former economic counsel adviser to president trump, gary cohn will be with us exclusively to talk fed, the economy, maybe the new tax proposals from some of the democrats and a lot more looking forward to seeing you guys and mike >> i will be there at 4:00 >> and you see all of those stocks kind of moving up, inching higher in advance of those earnings >> including facebook, which is interesting. >> and it's another one of these beaten down stocks that in theory, a little bit of relief

would go a long way if the numbers were okay and the guidance looks fine and the business model isn't really disrupted. >> by the way, here on "squawk on the street" tomorrow, we'll talk exclusively to the ceo of mondelez, maker of snacks, which has been outgrowing the food sector snacks is is a growth area, they're really big in emerging markets. in the meantime, "squawk alley" is coming up next. apple is ldi teanghe dow higher. more on the quarter and what to do with the stock, after the break. who says our bank isn't tech enough?

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good morning it is 8:00 a.m. at apple headquarters in cupertino, california 11:00 a.m. here on wall street and "squawk alley" is live. ♪