>> dow futures indicated up by 73 points after climbing more than 175 points yesterday. s&p futures are up by just over 1.5 points or just over two points, and the nasdaq indicated down by nine points. yesterday all three of the major averages were up pretty sharply. nasdaq was up by the most. it was up by 1.1%. you see the pullback there the nasdaq climbing out of correction territory because of the gains.

the dow, the s&p 500, and the nasdaq all closing at their highest level since december 3rd. take a look at markets in china, hong kong, and taiwan and sourkt they're all closed for the lunar new year, but japan's nikkei fell by .2%. you can see there was a decline of about 40 points to 20,84. you are talking about the ftse, up by 1.25%. the dax up by 1.1%, and then the cac up almost almost 1%. finally, take a look at treasury yields you are going to see that the ten-year right now is yielding 2.734% >> okay. alphabet out with quarterly results, and the company reported a big jump in quarterly revenues that's the good news shares were under some pressure this morning after the tech giant revealed it went on a big spending spree last quarters costs rose for data centers, hardware, and head count you are looking at that stock down a little over 2.5%. >> i don't understand the concern about spending for things like data centers head

count. maybe if you were looking at some of the extra projects that they're funding along the way, but this seems like some pretty basic stuff. >> declining advertising prices, which i think is a major concern. >> yeah. >> which halls always been this trend. i do think, i mean, the stock is down 2.5%. up 2% yesterday. i don't see it as a big panic. >> start reaping they don't buy back a lot of stock. they don't pay a dividend, and it seems as if for a while the story was we're going to be much more vigilant on costs maybe this is just an investment goal it's similar to what amazon did, by the way, this quarter >> i want to go back to the cost per click thing. the costs per click on google properties dropped 29% that's substantial from last year 9% from last quarter to me -- that to me would be more concerning. again, this is about algorithm and machine learning and

advertising. just the sort of race to the bottom, the race to zero >> i think the forecast was down 22% or 23% it obviously was worse than what people were expecting, but the trend in general has always been there. i do think it's a question, is amazon's advertising business pinching is it just becoming that much more, you know, competitive and commo dot ized >> a few other stocks to watch this morning bp posting results early this morning. the company swinging to a fourth quarter profit as production soared following its acquisition of bhp's u.s. shale as etsz. bp ceo bob dudley says he is bullish will the future. here's what he said earlier on cnbc >> it feels like the markets will be firmer couldn't predict the oil price we're planning bp between 50 and 65 >> take a look at bp shares. they are trading higher. actually, almost 5% at moment. we'll talk to bfcfo at 7:45 a.m. eastern time this morning. meanwhile, gilead's fourth quarter profit fell short of

forecasts. its hepatitis c drugs continued to slide the company also highlighting some potential risks that could impact results this year, including generic competition and demand for higher discounts of its hiv drug. that stock down 4% seagate is also down sharply the maker of data storage products reporting second quarter results that beat forecasts. the company's guidance for the current quarter dame in well short of estimates that stock down more than 5% it's been a tough area of western digital and seagate having a hard time >> president trump set to deliver his state of the union address. tonight at 9:00 p.m. eastern time let's get to aemon javers in washington here's a preview of what to expect >> good morning, becky better late than never, right? you remember they had trouble getting state of the union address together during the government shutdown. now the president will be able to deliver the full dress state of the union in the chamber on capitol hill let's start with what we don't know about what the prosecute ez is going to say here tonight

we don't know whether the president is going to announce a visit to north korea a lot of speculation that he might do that tonight. a visit to meet with kim jong un someplace in asia. possibly vietnam keep an eye out for that one, and the other thing we don't know is whether the president will use tonight's address to discuss a possible state of emergency in terms of building a border wall. that's something that aides have been talking about a lot privately. not clear whether tonight is the venue to make that announcement or not keep an eye out for that possible piece of news making tonight during the state of the union, and then here's what we do know ultimately a couple of senior administration officials talking to reporters over the past couple of days have laid out some of the topics that the president will discuss we know he is going to talk about immigration in terms of the border wall, of course, but also in terms of a broader approach the aides say the president is going to strive for an inclusive and bipartisan tone here he is going to talk about trade, possibly update us on where things stand with china.

infrastructure is something that the president, i'm told, is looking forward to doing this year if he can get a deal with democrats. they're going to talk about lowering health care and prescription drug costs, and then, finally, national security is a topic for this president. especially emphasizing, we're told, tonight the idea of ending america's endless foreign wars all of those topics, guys, are ingz this that people inside the trump administration believe there is at least some common ground with democrats on they feel that they can reach out and do sort of a bipartisan bridge building exercise here tonight and try to find some common ground on all of those areas. now, we know as hyper-partisan as washington is today, a lot of eyes will be on the reception to this the sort of seesaw applause that we've seen in previous states of the union. that might be exacerbated tonight. we'll wait and see what the theatrics are in the room, and, meanwhile, speaking of in the room, last night the president had dinner in the white house residence with the fed chair jay powell

we're told that there were four people at this dinner last night. the president, jay powell, the fed chair, steve mnuchin, the treasury secretary, and richard clai clarida, the vice chair. all four people, we're told, had a good discussion of the issues. i'm told there were no pitch forks during the course of that meeting. you know, the president has been very critical of the fed, very critical of jay powell not liking the idea of powell raising interest rates we're told the president was very happy last week with the fed's decision to leave rates unchanged. perhaps that was a topic of discussion as well not a lot more detail. interesting how this was rolled out. the fed put out a statement about that dinner very, very quickly after the dinner wrapped last night the fed anxious to get that one on the record saying at the president's invitation, chair powell and vice chair clarida had an informal dinner tonight in the white house residence to discuss, they say, recent economic developments and the outlook for growth, employment, and inflation. chair powell's comments in the

setting were consistent with his remarks at his press conference of last week he did not discuss his expectations for monetary policy except to stress that the path of policy will depend entirely on incoming economic information and what that means for the outlook. the fed there going out of his way to stress that everything was right and proper about that dinner last night. the white house confirming that they did have a dinner and saying to me that there were no pitchforks in the president's perspective during the course of the conversation we're told they had steak for dinner, guys >> okay. going back to the state of the union, i do expect, as you hinted, that this is going to be thee theatrics. some are areas where they might find common ground speaking specifically about trying to address drug prices or health care increases and costs? maybe infrastructure too maybe finding ways to reach out. do you think that behind the scenes there is any potential reception from the democrats to

ideas to kind of working together on some of the things, or is this still about a stand-off? >> i sort of -- i feel that behind the scenes it's just as difficult as it is in front of the scenes, right? i mean, you take an issue like infrastructure, which, in theory, both parties have a lot of sneincentive to capitol on. pole tigs love spending money. these two parties live on such different planets when they approach these issues. take the idea of environmental regulation around infrastructure a republican bill might have a lot less environmental regulation and might have some ways to sort of strip out some environmental regulation in order to get infrastructure built more quickly democrats, you could never see them going for something like that even as you get to an area where they would presumably agree, there are details there where they might not >> what about drug pricing it seems like they have some areas where they actually agree on things? >> kwau, i think drug pricing is one where it might be more likely to get an agreement, but, again, the devil is in the details, and there are a lot of

lobbyists in this town who will be all over that one, and those things can be sometimes difficult to separate sort of the lobbyists from the fundamental issue at stake >> aemon, ben white reporting in his morning money newsletter this morning that one of the attacks the president plans to is one against social i., which is ab issue we keep increasingly hearing about, especially given some of the tax policies that have been raised by folks like aeo kr elizabeth warren and others how much of that is a real issue that gets talked about in the white house in terms of what might be described as a lurch left not just within the democratic party, but also increasingly among polls and the public >> they love it in the white house, right they love that the democrats are making this lurch to the left and that there's a visible sort of hard left element of the democratic party up on capitol hill now that's elected, it's holding off, and, therefore, can be held accountable, right the president needs a foil this is a president who sees himself very much as a fighter, thrives in a fighting

environment. in the first two years of his presidency, he had all republican control on capitol hill didn't know what to do with that in terms of the fighting persona. now he has a foil, and he has something to contrast himself against? they love that in the setup to 2020 to as well. >> what do you know about david malpass as a potential president of the world bank? >> well, we know that he is the approximatic i'm told by a senior administration official last night that the president likes his experience the president values his insights this is somebody who was on trump campaign, was a trump transition official. somebody who i'm told shares the president's views in terms of the world bank there are critics of malpass, including some former george w. bush officials who suggest that malpass is, in if anything, hostile to the world bank itself administration officials last night dismissing that criticism saying he is their guy and they like this choice >> picked by ivanka? >> i don't know. i don't know ultimately, i'm told the

president valued his experience, but how did the president come to value that experience that's an interesting nuance >> and ingenuity completely out of the running >> yeah, out of the running, and, you know, aides were sort of dismissive of her name when it first surfaced last week, and you got the sense that perhaps she had been critical of the president in the past, and that might have been a hurdle that they couldn't get over >> okay. >> thank you good to see you. >> see you guys. >> a lot more on squawk coming up in just a minute. two democrats were posing a crackdown on buy backs bernie sanders calling out a major american retailer last night. i don't know it's like a show i watched it on -- i saw it on twitter. you got to see what they said. we'll show you next. plus, as we take a break, a look at the biggest premarket winners and losers in the dow. the latest innovation from xfinity

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corporate buy backs. senators appeared on facebook live last night to talk about their proposals. you got to listen to this. >> we think very simply our legislation is going to say unless the company does something for the workers, $15 minimum wage, pensions, outrageous companies do buy backs while they don't have -- have not fulfilled their pension obligations that they owe. other good things. training and that. they can't do buy-backs. >> wal-mart has recently initiated a two-year process for $20 billion in buy-backs and that will make the people, the watton family and others much, much wealthier.

>> it's not in this specific lelgs laiv proposal we're going to make, but we have to do something about dividends because we don't want them not to do buy-backs and then just put it all into dividends. that also doesn't benefit the workers and the communities. >> by the way, this is actually -- i don't know if it's bipartisan marco rubio last year proposed a tax on buy-backs that was similar to the same tax that you would have on a dividend basically, the choice would be

the same from an economic perspective. i'm not necessarily suggesting that's the right answer either, but if you are trying to look at this what i don't understand about this particular plan is, a, what the various thresh holes would be, this idea of paying the workers at a certain rate and all of the sort of things. >> check off all these boxes >> the last piece of this is, as we all know, just because -- if you don't pursue a buy-back or dividend, it's not necessarily clear that you are going to take that cash and, you know, hand it to the workers or hand it to somebody else.

>> the ceo faced a huge amount of pressure from shareholders and from the street. the stock was punished as a result the idea that you are sitting there saying that wal-mart is public enemy number one for this shows that you have no understanding of what is actually been happening. >> that's true, although they are doing a bunch of layoffs you can point to different parts of wal-mart's business, and, also, wall march has used company cash to buy back -- buy out public shareholders and the walton family, therefore, maintains a very large hold on the profit that doesn't mean it's wrong >> i think it's more fascinating

that it shows this is a resident public usual to the average person that is not familiar. it sounds like a rigged game that you can use the company cash to buy the stock. we know it's not the case. >> up until 1982 it was considered stock manipulation, and the sec changed the rule to basically make more routine buy-backs okay >> it was considered stock manipulation because you were goosing the earnings per share >> you could buy your own stock zbla >> you were goosing the shares i think there is one issue that has always been problematic about buy backs. it's been the compensation scheme around buy backs because if you can increase your eps

through buy backs, and that's a metric with which you as the ceo are being compensated to create -- >> look at it. it's very rare for that to be the main metric. usually using that income and -- >> that has happily, happily, changed over the last five to ten years. >> the one point that schumer made that i think is a good one is the idea of being able to do these things when you have underfunded pensions where, if you have already made promises to your employees and you are not making good on those, that's -- >> that's an interesting way to do it. >> that's an interesting way to come at this if you think that employees aren't being paid enough, find a way to pass legislation in the congress that says that you are going to raise minimum wage. if you can't get the votes for it, then i don't understand. >> i agree with you on the pension point.

>> i think it's a jeszure in the direction of we have this lopsided economy, companies and the wealthy have too much. we need to find mechanisms to even it out. this is not. this is a clumsy and heavy-handed idea of how to do that >> it's establishing a quality >> this is a big looming issue, and we want to find ways to get at it. that's my take >> i agree i agree. >> all right when we come back this morning, big technology companies are betting big on china and on india. we'll talk to an author who says that the rest of the corporate world and the trump administration need to follow suit people join us next. (baby crying)

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perog is the founder and managing partner of future map his new book is called "the future is asian," and thanks for being here today >> my pleasure >> let's talk about this we know what america first means. what do you mean with asian first taking over? >> it's been happening since the end of the cold war. it's since that time that with the energy super cycle and the persian gulf energy flows from west aces whia to east asia, and

everything through their inare aregional trade sbeg relegation, and asians today trade more with each other than they do with the rest of the world. >> all of the factors have made asia pretty well integrated, and that has huge consequences for the trade war because we've underestimated the extent to which asians can substitute our exports it them. >> it's interesting because that kind of makes it seem like even if we have this fight with china that the other asian countries are going to be helping it, but what i have heard from other people, though, is that the other asian countries, the india and the asean -- are taking part in the battles they're going to be doing more trading directly with us and taking more of the factories that used to be going to china to you do you see it >> you are absolutely right. that trend, again, began just on

the basis of labor wage arbitrage years ago. it's been five years since the southeast asian countries right back receiving more rdi than china. 2018, india exceeded china's inbound fdi as well. definitely the new factory floor of the world is shifting towards south and southeast asia you have 2.5 billion people in just those countries again, a billion more people than china younger median age and more open, political economies. easier to do business. less likelihood of your getting squeezed ouz as china moves up the value chain. this is why we as corporate america need to look a lot more closely all of these markets we've had so many eggs in just the china basket, it's time to speedy out a bit more.

>> let's participate in the transpacific partnership agreement, but if the u.s. doesn't join, we'll do it anyway let's do the regional economic partnership with asians, says with china, and we're going to join that. >> everybody is fren ms. , but who is close and who is not? >> they practice what i call multi-alignment. they want to have good relations with china, with russia, with europe let's not forget that a trade war is more than two players, and as you rightly said, other countries will win even as parts of american, the american industrial sector and export sect ors will lose parts of china will lose

they also agree that china needs to open, and already today the trade volumes between europe and asia are $500 billion more per year than their trade with us. >> let me ask you this you said during the financial crisis because there was so much trading already taking place between the nations. they were more isolated and more protected from the things that were happening in europe and the united states. does that mean we're more protected right now with the weakness that we're seeing in the chinese economy that maybe it's not going to wash up on our shores like it used to maybe the globe is more divide than it used to. >> that's a really deep and interesting point. the united states in particular and north america in general is the most self-sufficient region of the world economy we only represent 14% of world trade. while that's geopolitically wonderful to be protected in a way as we are, geoeconomically it means we have less leverage than others because we're only

14% of world trade we are dependent on each other, and if we are creating politically motive aid or even justified export controls and limitations on how much we will trade with them and how much they'll export to us, they're just going to substitute us by trading more with each other that's exactly what's been happening. it's been happening for years. we're not paying attention to it because we think that we're the center of the trading world, and we're not where, actually, we're less vulnerable than others are. >> what do you think happens with the trade talks come march 2nd? >> that will provide them the semiconductors and goods >> tariffs go up on march 2nd or no >> probably not.

probably not thanksfor coming in today. >> mu pleasure >> future maps founder and author of the future is asian. >> coming up, a lot more when we return a closer look at quarterly results from google's parent apple. the company posted anearnings and revenue beat, but take a look at the stock because this morning it is down about 2.5% in the premarket. we will tell you why investors are worried and what to think about it also, president trump just hours away from delivering his state of the union address this evening. we're breaking down the key things that investors need to watch straight ahead take a look at yesterday's s&p 50000 winners and losers back in a moment

zbliechblt welcome back. you're watching "squawk box" live from the nasdaq market site in times square.

>> let's talk about some of the stories this hour. fed jay powell, fed chair jay powell, i should say, sitting down for dinner last night with, yes, president trump and the white house. the two dined over steaks at the white house. federal reserve calling it "an informal dinner" discuss the economy. steve liesman will have a lot more of the details at the top of the hour. >> anyway, alphabet smarz are under pressure this morning. 2.5% down. the company reporting a big jump in quarterly revenue that would seem like good news the tech giant revealed rising costs for data centers hardware and head count i think this is actually what really sort of triggered some of the investors out there. costs per click dropped 29% from last year. 9% from last quarter separately, bp posting results. they are swinging to -- as

production soared following its acquisition of bhp's u.s. shale assets we'll talk to the bp cfo. >> take a look at equities futures at this hour about three hours ahead of the market open. dow looks like we would open up higher about 92 points. s&p 500 up about 3.5 points higher, and the nasdaq off a little over six points >> all right let's talk a little more about the broader markets ahead of the president's state of the union address this yoo evening joining us for that is jack caffrey, portfolio manager at jp morgan private bank, and portfolio manager at -- good morning to you both. jack, just to kind of set the scene, right, we had what now appears to be a little bit of an overshoot to the down side in december a panic about ip independent recession or some kind of other disruption taking back about half of the overall loss from the fourth quarter. back to early december levels. earnings have been not so great, but better than feared can that equation work for a

much longer from this point not being as bad as we thought >> not as bad as feared. can carry you for a part of the time i think the shichtd in fed policy away from we're going to tighten to we're going to be even more data dependent than we hinted at being and perhaps pausing forgood. or for at least some extended period then i think if you look within the earnings story, the earnings story is okay. while you have -- you mentioned a large tech bellweather spending a little bit more than people were expecting them to, and at least it speaks to other company's top lines possibly going to be better it speaks to the reinvestment of people it speaks to, i think, an expanding economy. it might be expanding at perhaps only acceptable rates rather than the euphoric rates we were counting on nine months ago or a year ago, but i think at this time still a positive back drop from here. >> as a portfolio manager looking at individual names, does it feel like the ones you wanted have gotten away from you to the up side now, or is it still an environment where it

seems like things are reasonable and you can find ideas >> the lows of december certainly were exaggerated to that end, and january has been a great month. >> we're getting into the heart of kind of earnings season from some of the smaller cap companies. we should seeing variability in earnings tariff issues or other geopolitical impacts and shifting out of china. >> just talk about the small caps the russell 2000 is still 13% below its highs from last year does that give you more of an opportunity, this or is there a reason it's still down 13% when

the nasdaq climbed out of correction territory i think the limited wick liquidity has put pressure on those names, but longer term we still see a lot of opportunity and value. we still think that m&a can occur as larger companies come down to buy those. the smaller cap companies and the cap have thought that they -- they really are because we have become a global economy with a lot of those exporters. the high yield market is more support tiff we saw is a that coming down very hard in december. that's generally an indicator of weakness in that weave recovered some i think if we can see that continue to recover, that will be more supportive for the asset class. >> look at the previous, you know, 20% market declines that were not associated with the recession. it's been several of them over the last few decades the fed kind of gets spooked, gets more patient.

is that your pretty is >> this is more of a slowdown. perhaps you're going to see more earning pressure rather than -- i mean, typically you tend to think of the equity market discounts nine of the last five recessions we think that recession is pushed further out i think if you look with what's working it's certainly probably the most credit sensitive parts of the stock market. the auto stocks are up the consumer durables are up, and the banks are up just to playoff the idea, it's typically the credit market, which is more sensitive to risks in the world wrush they were certainly expressing those risks in late november and december. you saw those declines they're at least suggesting now, okay, the pace might be more moderate than we may have hoped, but it's positive, and we don't feel like you're creating this for a credit problem leaning to a broader economic problem >> maybe a false alarm late last

year >> at least that's the hope. >> we've priced in the whied that maybe markets are not the straight lines that made for bad media and bad interviews, but might make for easier sleeping >> a straight line since december 26. woel see if that has to chop around ats bit more. thanksvery much. >> alphabet beat the street expectations for earnings, and the stock is down 3% actually down by 2.5%. we're going to dig through the report with an analyst straight ahead. are you watching "squawk box" on cnbc

welcome back time for an executive edge highlighting the flight of big earners to low tax stakes. it cites the $10 240us cap on state and local taxes in the new federal tax law. just yesterday, new york governor andrew cuomo blamed a 2.3 bill yn dollar state shortfall on the departure of high earners from the state. new census data showed that florida had the highest domestic

influx in population last year and that new york and illinois had the highest population outflow. it just goes to the unintended consequences of when you change tax structure. not that this was unintended from the federal government, but you need to think through everything that happens on these issues, and it does put a lot back on the plates of the blue states that are really being affected new york, connecticut, in j new jersey, illinois, of what they're going to do about their local tax squaigs situation. >> without a doubt >> it was a prod from a certain group of people that was saying, you know, it really did tip the scales in terms of risk-reward for it to live >> all right >> if you are a road warrior even if you are just traveling occasionally, you got to listen up to this business travellers, chicago's o'hare airport has now officially unseated atlanta. super bowl just happened as america's busiest airport atlanta held that dis iksz for the last four years. o'hare handled just over 900,000 flights last year overtaking atlanta, thanks to american and

downietd rounding out the top five airports los angeles, lax, dallas-fort worth, and denver. >> they're all the big hubs. >> all the big hubs. >> big hubs for the major airlines >> i've never been -- except for the one part of o'hare in home alone, that i have fond memories of every time i go i don't really love o'hare because it's snowing it's delayed l.a.x. is not -- >> it's far from downtown. >> it's got that giant dinosaur thing that's there at least it's like an airport that they've put some money into versus some of the ones we use around here. >> i'm into denver, but there's that long -- >> it's like the newest major airport in the country >> you got to take the escalate or >> also far from downtown. >> what do you call the escalator that -- >> people mover. >> a people mover. >> a lot more to come this morning. alphabet posted an earnings beat, but the stock under pressure this morning. we'll explain why costs per

click, though, sharply the company revealing a spending spree. we're going to talk to an analyst and figure out if that's as bad a thing as some investors seem to think this morning as we head to a break, quick check on what's happening in european markets right now in the green squawk returns in a moment at&t provides edge-to-edge intelligence, covering virtually every part of your healthcare business. so that if she has a heart problem & the staff needs to know, they will & they'll drop everything can you take a look at her vitals? & share the data with other specialists yeah, i'm looking at them now. & they'll drop everything hey. & take care of this baby yeah, that procedure seems right. & that one too. at&t provides edge to edge intelligence. it can do so much for your business, the list goes on and on. that's the power of &. & when your patient's tests come back...

welcome back to "squawk. we've been discussing it all morning. alphabet shares under pressure this morning down about 2.5%. posted an earnings in revenue beat but a sharp drop in cost per click. which is the issue or problem, we want to find out. president of jmp securities is here you saw the numbers.

you listened to the call what'd you think >> i think it's a continual issue that they've been facing which are the top line is not the problem. below the line is what they need to get >> so it's nothing to be concerned about? >> i would be more worried if their core advertising business was slowing. carry business is fine expenses are tough growing. they're buying new markets i'm not worried about that right now. it's not that expensive a stock. they've grown the stock. last two years, it's sideways. >> would you buy the stock >> i would >> why has this stock moved sideways doesn't look like it on the screen, but if you look at it over a long enough period, it's what you said. >> i think portfolio managers have found other ways to be

weighted higher growth tech companies that we talked about i think this has become a cheaper stock. and i think it's become more of a value stock if you can believe that for some growth managers. they're going to pay more attention to that. >> what value do you assign to a waymo? to a multitude of businesses that go under the radar and are hard to even decipher, frankly >> it's funny. i call facebook the most mercantile company in the world. this company has eight or seven different moon shots, if you will, where they're spending lots of money below the line they're spending way more money than microsoft on r&d. there's lots of ways for them to win. i think companies like that -- investors don't value that right now. and i think you will find places >> do you think there will be a day in which they will start to spin these businesses out? >> i do. i mean, you look at the health care -- what they're doing

waymo is a good example. clearly what they're doing in autonomous and just others others is their biggest line item i think they're going to win there. >> get inside, i guess, management's head on this. it's not like the early days of google where it was, oh, we have this magic automatic project that kicks out profits what driving them right now to invest so heavily in these areas? are they either afraid of their core business no longer being so dominant is there a race in certain areas that they feel like they have to compete in >> i think they have eight different ways of -- which have a billion different users. whether it's gmail, et cetera. they need to find more ways to win. i think the fastest growth areas we've seen other people dominate whether it's cloud and clearly these people have dollar opportunities. i think given how much technology they have, given how much data they have, they are going to win here. >> but if you're right, when's

the rest of the investment community going to wake up what is going to be the inflection point where they're going to assign a higher value i assume you need a higher multiple on what's going on here >> you need a higher multiple. you need them to rationalize their above the line story it's the below the line story. >> until they nail that, you think that the stock stays >> look. over the next 18 months they will have to break this out for the investing community. the and i think management will break this out and say guess what this nugget we haven't been able to talk about is much more fruitful going forward this will be a multiple expansion story once again. >> if i gave you $10,000 to invest in any of the things, would this be the top of the list >> it would be. >> nice to see you appreciate it. when we come back, our guest host for the next two hours will be mohamed el-erian. we'll talk to him about the fed,

earnings season, market strategy, and much more. here he comes. and later we'll get you ready for tonight's state of the union. heidi heitkamp will be our guest. "squawk box" will be right back.

powell and the president sitting down for a dinner. the discussion centering around the economy. we have details of what was said and reaction from mohamed

el-erian plus a preview of tonight's state of the union plus rory mcilroy is teaming with the golf channel. that announcement moments away bp pushing higher this morning. the cfo joins us to discuss 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. welcome back to "squawk box" right here on cnbc i'm andrew ross sorkin along with becky quick and mike santoli in for joe kernen who's on the west coast. you'll see him later this week meantime, equity futures at this hour dow looks it would open higher we'll call it 77 points. s&p 500 looking to open 2.5 points higher. and the nasdaq off

we'll talk google in a moment. here is what is making headlines at this hour shares of google parent alphabet are lower this hour. alphabet did have higher revenue for the fourth quarter but investors are worried about significant increases in spending down 2.3%. that's yesterday's gain plus a little more on the downside. t-moblie is pledging to keep most prices for the next three years. they would do that if they are ftc approved their acquisition of sprint. and now might be a good time to trade on a new car. nearly 4 million unsold cars on the lots end of january. that was up 4% from the end of december fed chairman jay powell sitting down for a dinner last night with president trump steve liesman joins us right now with more on what happened and what the significance of that dinner is. >> this was a much-awaited meeting. it was their first since trump

nominated powell to the post and followed months of strong presidential criticism of his nominee. the fed in a statement saying it was an informal dinner, quote, to discuss recent economic developments and the outlook for employment and inflation now, the fed was specific in saying powell's comments to the president were, quote, consistent with the remarks at his press conference of last week and powell said not to have discussed monetary policy expectations except stressed the path of policy would depend entirely on incoming economic information and what that means for the outlook. all that means is that they didn't tell us anything new. trump has been critical of the fed for raising interest rates including ting calling the fed f control. dinner lasted 90 minutes was tended by richard clarida and steve mnuchin. i put this fact in my tweet last night that steak was served.

this is the thing everybody's talking about. that it was not mcdonald's was the steak tough? >> medium? medium rare? what are we talking about here >> i don't know about how it was served it was enough to get the detail it was steak >> any veggies on the side potatoes >> there was no information about there having been vegetables served. i do have a quick look here at some of the history of some of these meetings here. there we go. so in october 2017, yellen and trump met. that was sort of a job interview. and then yellen and obama in april 2016 then some headlines said obama summons yellen to the white house. there's also an august or i think 2011 bernanke and obama meeting. then to talk banking reform. sh it looks like every couple of

years or so this happens >> i think what's probably so notable about this is that it was just last week that the fed really went into dove overdrive which is what the president had been calling for >> dover drive there we go. >> but i can understand why the fed was so eager to get a statement out there saying all that was discussed was nothing beyond the scope last week we are still data dependent. we are not making plans to do anything else beyond >> as far as i could tell at least in the 2016 one, there was no statement released. >> right >> this is what the meeting was all about. that was -- they took pains to make sure there was no sense at all. >> wouldn't it seem it inoculated from the president's bidding. rig right? yes, they backed off from there.

i had said before the december meeting. >> krital to the operation of monetary policy. >> it's not the white house speaking this was the fed deciding. >> you need to understand how the fed believes policy is affected and that's through what it thinks it's going to do, what it says it's going to do, and what it does. and 90% of that happens through the market and the more it happens through the market, the less they have to do. if they lose that credibility and there's a ton of research that animates the fed's thinking on this about the importance of credibility, the importance of independence >> steve, stay right here. let's bring in our guest host today. mohamed el-erian is here from allianz. mohamed, how this has played out is the idea we were so focused

on the details i don't think the market is going to sway. >> it's really important this happened this week and not last week had it happened before the pivot, we would be having a completely different conversation having said that, i think as steve said, this is normal it's happened before and i think it's important i always feel it's important for two sides to hear each other and it reduces the probability of misunderstanding the future. so i think net net this is mutual to slightly favorable to the market but it's not a big deal. >> so what is a big deal to the markets right now? if we've got the fed essentially on hold for the next six months, there are other things to distract the market. but earnings have been the one focus we've seen so far. >> first i think last week was a big deal okay because i think of distributions. whether you look at the distribution of expected returns or the volatility, what the fed

did is it reduced that it reduced the left tail which means the expected return goes up, expected volatility comes down >> when you say left tail, you mean the possibility it will make a mistake i just want to know. >> left tail for the markets that they do not feel that they've got responsive liquidity behind them. and the left tail for the market in feeling they have to sell every rally. i think that's what the fed did. it played on expectations that liquidity would be accommodated if needed. and therefore you can be more comfortable going back to the old view yeah, look at dips as perhaps buying opportunities that's really important. now, what's important is the right tail depends on things that the fed does not control. it depends mainly on growth in europe and china and we got some pretty concerning pmi numbers again today out of italy, out of the uk so it's important to understand what the fed does and what the

fed doesn't do reduces left tail. doesn't increase the right tail. and that's really important. >> we had a guest who joined us a little earlier who was pointing out that our nation and the north american region is much more isolated from the rest of the gloep in terms of trading, where we used to be, how the economy there may or may not impact us. do you think that's a correct assumption he pointed out the asian nations have been trading a lot more with each over in the last 20 years or so. that's why they're more isolated from the great recession that we dealt with here. it didn't wash up on their shores can we say the same that it won't wosh up on our shores. >> it is mainly a function of the u.s. relatively close in the economy. we are much more flexible in the rest of the world. but our companies sell abroad. our companies got a lot of that. we need to make the distinction

between the economy and the market >> would you take our fed survey live on air here let's go when is the next move of the fed? "a," to tighten policy, "b" to loosen policy? >> i suspect it will be to do nothing this year. >> all year? zeros all year >> probably. and next year will more likely to be loosen than tighten. >> and when will this cut come >> some time next year. >> what probability do you put on that cut happening? >> call it 50%, 55%. >> okay. on the balance sheet, will the federal reserve alter its current plan to reduce the balance sheet this year to up to $600 billion >> so it will alter it >> and it will alter both the notion of the destination and the pace >> okay. that's the next question you're jumping the gun on me what is the total? the current balance sheet is $12 trillion when will it get there

>> it's data dependent >> give me a number. >> no. >> why not you're like powell >> because these numbers are meaningless. balance sheet is one of the tools. so you've got to -- it's going to solve simultaneously. it's not going to solve, oh, this is going to fix this is what you've learned. what has the fed learned painfully, that there was a time when autopilot was the right signal to give to the markets. but this is the time to give a signal to the market that all the policy tools are in play that's what the market wants to hear that the fed is responsive and has a range of policy tools. >> last question give powell a grade 37. >> "a.

>> this is interesting there's the great man or woman theory or the great times theory the question was whether or not powell was the right person for the job. u. >> also the most difficult to navigate is when economic prospects around the world are no longer correlated that was a very difficult environment to navigate if you're a policy maker. and that is what he has inherited. he didn't create this. he inherited it. >> and you say right now he's fostered this idea that investors don't have to sell rallies. because there was this idea that, okay, fine if the s&p goes up to 2800 again

and all of a sudden financial conditions are no longer tight, the fed is back in play this year you don't think that's the case? and now we've had a correction. >> have we asked mohamed if he's going to be a fed governor >> no. >> you're not going to be? >> no. >> it was about this time yesterday when we heard bill gross is going to be retiring. you've worked with him for a long time. his fund was facing outflows for a long time. what can you tell us about this man? >> i think you've got to look at bill's career in its entirety.

he entered asset classes that didn't exist he created them. you have to think in terms of the performance he's delivered and thirdly, the biggest test of anybody's contribution, are your methods still used today and if you look around the world, whether it's approach of portfolio construction being used by people around the world. i think it's a main contribution to the industry and one he should be proud of >> mohamed el-erian taking the high road this morning is that the easiest way to say it very polite. >> sure. >> all right we should talk more about all this we've got to come back to bill gross because i have more questions. when we return, capitol hill getting ready for tonight's state of the union address we will run you through what to expect we'll speak to heidi heitkamp. then the cfo of bp joins us to

discuss. stay tuned you're watching "squawk box" on cnbc

♪ all right. welcome back to "squawk box," everybody.

earnings just out from viacom. the company reporting a profit of $1.12 a share advertising sales declined that explains why the stock is off by 1.5% right now. and coming up, we are teeing up some big news nbc and the golf channel teaming up with rory mcilroy more when "squawk box" returns 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.

♪ two of the biggest names in the world of sports are getting together to help drive the next evolution for golf for the digital age. dom chu joins us right now with the news and a special guest good morning >> good morning, becky this is very exciting. what we have is nbc sports and golf superstar rory mcilroy announcing the launch of golf pass this is a collaboration that will give golfers a central destination for everything from tee times to on-demand instructional videos to thousands of hours of archive video, everything. it's leveraging all of the expertise and reach that nbc

sports, the golf channel, and rory mcilroy have and delivering it to consumers with a subscription based model he is the founding member of golf pass. this is after two years of working alongside nbc sports also get access to exclusive content from rory as you're seeing there including stories about his start in the game and what he does to stay at the peak of the sport and what courses around the world really stand out to him golf pass is being launched at a key time for the game of golf as the entire industry goes over the last few years >> and with more on this new venture, we are joined exclusively by rory mcilroy. he is the founding member of golf pass. and mike mccarly, he's the president of golf for nbc sports welcome to both of you how did this happen? what's the back story? >> rory's team had some technology that we were talking to them about about two years

ago. and we started looking at that, we integrated that into our tee times, golf now which is like open table for golf. and we set down with rory about a year ago and immediately he kind of flipped to this great history that golf channel has about being founded by arnold palmer 25 years ago he founded the channel. and he saw it as this future of what the business could be for the next 25 years. >> you had a piece of technology that you were playing with >> no, it was something that our team had invested in and it was a bit of technology that we thought would be useful for these guys in the golf now app that's when the conversation started that maybe we could do something together that's, you know, going to help the game and is a little bit bigger >> what does this product look like and what does your involvement look like in terms of day-to-day or month-to-month.

>> there's five pillars. and it's basically an all in one membership for golf. whether you want to learn how to improve your game, you want to play more, book tee times, watch exclusive content with the likes of myself or when we roll this out, other players, other instructors. and yeah, i will maybe not be in it as day-to-day as mike is. i've got something else to concentrate on but i will be involved >> are you going to be recruiting some of the other players into this? >> i don't know about recruiting, but i think once they see the content and once they see what i've done, i'm sure there's going to be other players that want to get involved. >> can you both place this in the bigger context of the challenges golf faces in terms of bringing more people to watch, play, enganl. how do you see this influencing the bigger picture >> i think golf is uniquely placed where a lot of the people

that watch golf also play golf where that doesn't really happen in a lot of other sports you know, at lot of people watch football and baseball. but they don't play it so i think this is more trying to get people to play more we don't just want people on the app all the time we want participation to be up so i think this golf pass drives that and gets people out there to play. >> how important do you think it is for networks to ie line themselves with individual athletes i'm thinking david zaslav at discovery and we had tiger woods on when that announcement was made are we going to see this in the world of tennis, of other individual sports? or even by the way team sports >> yeah. i think you're seeing it in a lot of places. what lebron james has done with his production company and uninterrupted. this is something that made a lot of sense for us. goes back to arnold palmer

launching a media business and now rory's coming in because he wants to give back to the game and make the game a bit more accessible. and we're seeing more and more young people get into the game which i think is a really important point. and making the game a little bit easier for people to get into with the discounts a lot of different properties and places to go play. it should accomplish that in a fairly significant way >> mike, who's your target audience for this? who's the customer that you have in mind? >> you're looking at the core golfer who's playing a lot of golf and they're participating in all of the different things that you need to play the game you want to learn better, we're launching this today with 4,000 different instructional lessons and tips. >> that you can download and follow through >> absolutely. i did one thing from one of the fitness experts. he trains a bunch of the guys to get ready for the "avengers" movies for marvel. and rory's coach michael bannan.

and you've got some of the greats of the game like nick faldo. >> is this a 35-year-old, 45-year-old? 55-year-old? all of the above >> i would say all of the above. if you're passionate about the game of golf, you're going to want this product. >> one of the things that's going to be interesting, if you look at the bag, this will be one of the first times you'll see an athlete sponsor you'll see a peacock logo on his bag every round he plays going forward. not just because he's a sponsored athlete, but because he has an equity interest in this >> what about on cbs i'm sure you thought about that. >> it came across our mind but he volunteered it. we're looking to build this business together and he starts to believe in this and says i've got an open spot on my bag and i

want to put the logo on the bag. >> this is i'm a business partner. >> do you have any anxiety or worry that as you're walking down the course depending on what network you're on, that you'll be treated differently as a function of this >> no. definitely not i think if i play good golf, that takes care of itself. i'm delighted to align myself with nbc and the golf channel. and i don't think that by me doing that i'll get any different treatment from any of the other networks >> mike, in terms of the discounts or access to courses, what's the back end of it look like what is somebody who scribes to this have access to? >> we've been lucky enough for ten years for comcast to invest in a lot of different acquisitions that we've made we now have 7,000 golf courses that we represent in 26 different countries around the world where you can go book your tee times. we acquired a business called revolution golf which had created a lot of video instruction and you can get into

that you've got discounting at these great golf resorts around the world. the ability to go play, learn, shop, travel we have a business called golf adviser which is a lot of like yelp for golf to get ratings and reviews to make your golf experience a lot better. >> let me just ask you are there other businesses you're playing around with other investments you have obviously this is probably not the only thing you were looking at >> no, it isn't. there's other things that i've done, but more privately something that i've got an interest in whether it's a technology business or a -- yeah there's things outside of golf that i definitely have an interest in. >> any favorite investments you can tell us about? >> no. probably -- yeah, no i don't want to get anyone in trouble.

>> good answer >> we should probably show some video. you were with jimmy fallon last night. >> i was it was fun >> they give you a hockey stick. >> to putt with. a little bit happy gill mothmor there. our favorite golf movie. >> how did you do relative to jimmy? >> we did about the same we got four in each which i thought was okay i'd never had a hockey stick in my hand before so i sort of -- yeah i wasn't -- but it was good fun. jimmy's a big golf fan, so it's always good to come on and have a good time with him >> you know what's also pretty funny? joe kernen would normally be here right now he'd be very active in this conversation >> asking for advice on his swing is what would be happening. >> but he said pebble beach. so we're wondering -- he's got to get primed for a big outing at the at&t national pro am

here are there tips or tricks you've got here >> looking at the weather forecast for pebble this week, stay warm and stay dry >> and good luck with that >> yeah, i know. >> thank you for coming in >> thanks for having us. >> congratulations good luck with it. we will all be rooting for you are you signing up >> i'm going to be signing up. i'm going to talk to mike after this rory and i will talk a little bit about golf courses we had a great conversation about songs. >> it makes me think of the epic pass for skiing for golf courses. that's where this seems to be going, right >> i know i'm probably the -- to becky's point, i'm probably part of the core audience they're delivering this to i will be the one paying because i want access to the lifestyle stuff. >> we're pretty sure that in the last week you played more golf than rory. >> probably last year he did >> over the course of the past three days >> gentlemen, thank you so much. great to see you both.

>> thanks. and a programming note for you, this friday "squawk box" will be live from the at&t pro am at pebble beach joe and i will be bringing you interviews all morning long including jim fish of waste manageme management those interviews and more this friday beginning at 7:00 a.m. eastern. coming up, what should investors watch for during tonight's state of the union heidi heitkamp will give us the rundown next and as we head to a break, take a look at u.s. equity futures, how they're set up right now still looking at a drift higher. you see the nasdaq is the only one down slightly on that slight move down in google. dow jones set to open up about 80 points this morning oh, wow. you two are going to have such a great trip. thanks to you, we will. this is why voya helps reach today's goals... all while helping you to and through retirement. can you help with these? we're more of the plan, invest and protect kind of help... voya. helping you to and through retirement.

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♪ still to come on "squawk box," washington and your money. a preview of tonight's state of the union address with former senator heidi heitkamp then earnings from bp are out. we'll hear from the cfo on the state of the world oil market. then later, disney results will be out today we have a look at the state of

business all of that is straight ahead. stay tuned "squawk box" back after a quick break.

♪ welcome back, everybody. democrats are trying to ride the wave to victory in 2020.

ylan mui joins us with more. >> that is right equity inequality was at the heart of the president's campaign message democrats are now putting it front and center as they look forward to the next presidential election so we wanted to take a big picture view of how big the gap in incomes really is in this country. take a look at the study from the cbo. the data lags a little bit but it does show between 1979 and 20 2014, incomes went up about 26% for the bottom 20% middle, 28%. for the top 20% of house holds, incomes rose 69% and for the top 1%, incomes went up by a whopping 221% over those 36 years so it is clear that income inequality is growing in this country. but what's also interesting is that the attitudes towards the rich have been shifting in

recent years according to pugh that is breaking along some party lines. 71% of republicans say people got rich because they worked harder than everybody else but only 22% of democrats say they believe the same thing. instead, democrats say a majority of them believe that people got rich because they had more advantages than everybody else so what this shows you is that although there is bipartisan agreement that the income gap is a problem in this country, you're seeing this issue become increasingly partisan, increasingly politically polarized. that's why we're hearing so much debate >> thank you for that. meantime, want to get a preview of the president's state of the union address want to welcome heidi heitkamp, former senator of north dakota it is great to see you this morning. and let me start with the issue that ylan was just talking about. because we understand that one of the things the president may

talk about is the idea of socialism and he may go right at it do you think that's the right approach >> he's going to take whatever approach he's going to take. and he's going to use this opportunity to criticize a 70% tax. obviously elizabeth warren has come out with a wealth tax i don't know how that would be structured i haven't seen much detail on it but at the end of the day i think everybody -- it goes back to what i've been saying all along, andrew. you've got to come with facts. the reason why you see those numbers is because wealth generates wealth and if you have wealth in this country, you earn wealth -- you earn income on your wealth and it's taxed at a lower rate and that's something that is a fact and we need to address 37 i think that he's going to queue up those political debates that will lead to the 2020 election he's going the say all democrats believe we should have a 70% tax. he's going to drive home his

narrative and that's how we now use the state of the union instead of actually talking about the state of the union it becomes a political speech. and it's not really particularly helpful. >> let me just ask you, though, about what's going on in the democratic party right now because earlier this morning, we looked at a video from bernie sanders and chuck schumer. both talking about taxing buybacks and trying to prevent buybacks we've obviously heard about aoc and her 70% tax on the wealthy then there's this, you know, wealth tax that's been introduced or at least proposed by elizabeth warren. is that what the democratic party really is right now? >> yeah, i don't think you can conflate addressing the corporate buybacks with an income tax on individuals. so if we could just separate those, andrew, i think that would be important so let's talk about buybacks it used to be illegal for corporations in this country to buy back their stocks. what we saw from the tax bill

was an interest, i think, in the beginning, to making sure that people reinvest that money in jobs, increase capex and that's not what we've seen. what we've seen a corporate buybacks it's natural as a result of what happened with the tax code to have a discussion about whether corporate buybacks is actually in the best interest of growing our economy. and so let's not conflate that with, i think, what appears to be pretty extreme individual income tax provisions that are being proposed by a few people within the democratic party. it's not a democratic party position and so i think that the president tonight is going to try and make it a democratic party position and the question is -- what i would say is be careful what you ask for. if democrats win on a platform of a 70% tax, that might be exactly what you get >> let me just say, you would be

the centrist among the party, but you look at the vitriol and the attack on somebody like howard schultz last week from starbucks who at least indicated he might want to run as what he called the centrist independent and most of the arrows were coming from the left and not even what might be considered the far left >> well, i think everybody's unnerved because they are concerned he's going to be the ross perot of this election and he's going to make it more difficult. you even saw it from bloomberg who can't say is an uber-liberal right? this isn't so much about who howard schultz is. it's about whether he, in fact, is going to be that guy who is going to take away an opportunity for a chance in the white house. that's what democrats are responding to. >> senator, does this pull the democratic party at all back towards the center when you have howard schultz running or is that something that has no impact >> i don't know.

i think what's been ignored is there was recently a poll when everybody says what do democrats want in a candidate. i know and polling proves that what they want is they want someone who can beat president trump. and they're willing to, you know, maybe even look beyond some of the positions people have taken if they think they're the best candidate in the arena to retake the white house. and so i think there's going to be a lot of ideological discussion because most of the people that have gotten into this race so far represent a more left part of the party. once centrists come in and i think that will happen, i think you will see kind of a change in the dialogue and that's certainly what i hope is going to happen -- >> who is that person? joe biden? >> -- you can beat extremism with extremism >> is that a joe biden is that michael bloomberg? where do you put kamala harris

>> i think kamala harris is more towards the center left. i don't think she represents the far left but what i will tell you is i think that people like michael bennett who are rumored to get in, people like bloomberg will, in fact, change the dialogue one of the things i'm trying to do here other than impress you that i'm at harvard, we're trying to have a discuss about the real state of the union and what i hope will happen is we start talking about those systemic issues that are going to challenge america's future and that we actually present the people of this country with a vision of where we're going to go forward from here on things like health care, on things like debt and deficit these are critical issues that if we don't begin to solve them today could, in fact, cripple our economy and lead to, you know, disastrous results for our children and our grandchildren. >> so senator, building on that and given what you said about the importance of economic

growth, the importance of private sector investment, what do you think the probability of having both parties come together on infrastructure program is over the next 18 months is that even feasible at this point? >> i actually don't see that happening. i thought that our opportunity was last year and we fiddled it away on issues that could be easily resolved like border security so now we're in this spot where you see trillion-dollar deficits how are you going to solve that problem by adding another trillion and a half? and the president has this public private initiative which everybody within the construction industry, everybody who really looks at it knows that that's not a direction that's going to give that hyperspeed to infrastructure development. i think it's going to take the next election before we see infrastructure i'd be pleased if that isn't true, but i think if we actually do it now, we're going to get

something that's much more anemic than what we actually need on infrastructure >> senator, you're up in cambridge about to teach a class, i believe, with gary c n cohn president of goldman sachs what do you both agree on? >> we don't agree on the tax bill but we definitely agree on those issues that will challenge us into the future. it's going to be an interesting -- what we're doing is leading a discussion and what we hope to hear from students is maybe open up their eyes, not do the sound bite of the day. but give them an opportunity to really understand we have some systemic economic challenges ahead of us. that they are going to inherit as people who, you know, lead the country into the future. and so we're going to lead a discussion i think it's going to be interesting, probably the area that gary and i most agree on is trade. trade is an area he has been very outspoken on. so have i. i don't think this idea that you

have to choose between being a patriot and being interested in global economic development and global interaction are in any way in conflict. in fact, i don't think that you can be a patriot looking at north dakota or looking at our nation's economy and not be a globalist. and so if there's one area where we totally agree, i think it's on trade >> okay. former senator heidi heitkamp, always great to see you. thank you. >> thanks for having me, you guys >> good luck today. >> you bet when we come back, british oil giant bp beating expectations on strong oil and gas output tho inuse cfjos after the break. who says our bank isn't tech enough? everyone, look at your phones. the design thinking, the digital engineering, security, blockchain, and we will be first to market! yes. when we do we launch?

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it's a now there's one store that connects your life like never before store. the xfinity store is here. and it's simple, easy, awesome. welcome back, everybody. bp's profit doubled in 2018. it was driven by a significant increase the oil and gas production the company has now exceeded expectations for eight quarters in a row joining us from london is bp's cfo brian gilvary. thank you for being with us today. >> good morning. >> good morning. let's talk a little bit about those new projects you've been investing in that led to some of the increased oil and gas production where are the best produced assets that bp has right now >> well, last year we had six major projects come on stream.

we have another five this year we brought forward a project from this year into 2018 that came on in the third quarter and that's helped drive the production growth we've seen this year. and as you say, that's led to actually a strong set of results both the fourth quarter and the year overall. >> you've also made some investments in u.s. shale. those assets are some of the ones you've been bringing online as well. i just wondering with shale assets have been the ones that have been most prone to the new technology we've seen. what is the baseline in terms of how profitable oil has to be or how -- with all the new assets you have >> you alluded to the bhp possession which gave three possessions. it depends on where you are in each of these zones.

depends on how powerful those are. if you look at what's happened with the oil in places like the permian, it's trading at 60 cents below wti. only a year ago, $12 below and it makes those projects more profitable then you're getting the oil that much higher. it really does depend upon where you are. but we see ut as a great investment, and we brought those assets in. we saw two months' benefit of that in our results last year there's more to do this year as we take over operatorship of them in march and we start to ramp up activity particularly in the eagle foot and then in the permian. >> what are your assumptions for the range of oil and gas prices at this point? what's built into your guidance? and i guess how are you investing on that basis? >> yeah. i think the first big point is for the last year we were at $50

a barrel brent fully balanced that is our capital programs covering capex and dividend on that basis i think it depends where oil prices are today they lookic loo they're firming up around 60 bucks we saw the third quarter last year they got ahead of themselves at $80 per barrel i think that's because the market perceived the iranian sanctions would waiver then the supply stayed on the market and prices dropped off significantly. if you look at where prices are today, around $62 brent looks firm i think it's going to be the -- i think demand looks pretty robust last year we had seen demand around 1.7 million barrels per day. that dropped off to 1.3 million

this year oil prices is really going to be about supply >> given it's going to be about supply, where do you put the willingness and the ability of opec-plus? opec plus russia to stabilize oil prices >> well, i think they've done it i think you're seeing it now you saw it in december i think saudi arabia production was down a 10.2 million barrels a day versus their target of $10.3 million. we're seeing significant volumes come off the market from the peak of 11 we've got disruption issues with libya. venezuela, i mean, the sanctions will kick in but the oil will find new homes because those sanctions are limited to the u.s. and i think it's really then about opec but it looks to me based on what we've seen in the most recent conversations, it looks pretty firm in terms of trying to hold prices around these levels >> your stock's up today because the street was surprised by the strength of the results.

the company was much more -- what do you expect this year in terms of how to connect that needle even higher >> i think it's more of the same it was one of our safest years that meant the kit was running that much better as we see more reliability through the kit, the main thing is to operate theess assets and take advantage of the higher prices as they appear. we've got some big turnaround, particularly thunder horse then it will open up as the year progresses >> brian, thank you for your time today brian gilvary is the cfo at bp coming up, it is a small world for disney investors, but it could mean big payoffs for our portfolio. we'll see the numbers in the next hour. but as we head to break, look at the equity futures at this hour. dow indicated up about 85

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a high stakes dinner president trump sitting down with jay powell for the first time since his nomination. the menu and the details of that conversation straight ahead. state of the union and state of the economy president trump preparing to address the nation tonight from capitol hill we've got a preview and a likely sticking point and the abcs of alphabet's earnings beating on the top and bottom lines but the stock is down in early trading. we'll tell you why 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, everybody. welcome to "squawk box" here on cnbc we are live in times square.

i'm becky quick along with andrew ross sorkin and mike santoli. joe is out today our guest host is mohamed el-erian from allianz. we have been watching the futures this morning after a big gain for the markets yesterday you'll see this morning it's a bit of a mixed picture dow futures up 85 points after gaining 175 yesterday. s&p futures up by 2.5 and the nasdaq is slightly weaker because of losses for alphabet after the bell yesterday the numbers were better than expected, but there were some finer points within that that had a street a little concerned. we'll talk about that in just a little bit let's look at what's been happening with the treasury markets in the united states we'll see the yield for the 10-year is sitting at 2.76%. viacom reporting mixed results. 9 cents above estimates. but revenue fell short of estimates as domestic

advertising sales declined you see the stock expected to scale back just slightly cos mettics company beat estimates by 19 cents of $1.74 per share. and the big tech mover of the morning, alphabet as becky mentioned earning $12.77 per share. that was above the consensus estimate of $10.82 a share revenue beat forecast. but concerns about alphabet's spending with investments in data centers and personnel we'll have much more later this hour that stock looking down 2% and the countdown is on. big night tonight. we're just hours away from president trump's state of the union address scheduled for tonight at 9:00 p.m. eastern time eamon javers joins us in washington, d.c. this morning. >> good morning. we had a chance to talk to the vice president yesterday just briefly in the west wing i asked him what we could expect

from the speech tonight. he said you're going to hear a lot of good things about the economy. so expect a lot of economy talk tonight from the president of the united states. this is a better late than never state of the union remember, they were unable to get it together during the government shutdown. so postpone the data tonight officials have been walking us through what to expect the president is going to strive to take the high road tonight. the theme, they say, will be choosing greatness and they outline five topics they say will be the core of the president's address starting with immigration the president's going to talk a little bit about that wall but also try to find an opportunity to appeal to the rest of the democratic party the president's also going to talk about infrastructure. they see an opportunity to reach across the aisle and get democrats to work with them on infrastructure trade, of course, will be something that the president will mention from the roster tonight.

lowering health care and prescription drug costs. in terms of ending america's endless wars abroad, something they feel they can reach across the aisle and get a bipartisan agreement on in terms of the getting democratic votes and support generally for the president's agenda pulling out of syria winding down in afghanistan, winding down in iraq, et cetera. we'll wait and see some of the theatrics in the room. nancy pelosi will be sitting just behind the president visible in a lot of the shots. a lot of people will be looking for her cues to her colleagues whether to stand and applaud or sit on their hands let's bring in our guest senator judd gregg great to see you you've been through a number of these state of the union addresses, what should we expect what are you expecting >> well, unfortunately they've devolved in the decorum of the house and the senate during

these events it's really become unfortunate i hope people will be serious and you won't have any of the, you know, jumping up and down that has become the sort of way it works these days. i think the president, if he follows his course which was just outlined by eamon of trying to reach out, find issues to reach out across the aisle on, that's the right way to go the fact is the american people would like to see their government work. and it's obvious the government isn't working right now. and there are areas where they should be able to reach agreement. but when you've got 15 or 20 people on the democratic side of the aisle running for his job, i think the chances of reaching agreement are slim but at least the effort should be made. >> in terms of theatrics, eamon kind of alluded to this. the idea it's a divided party -- two parties who are there. he's going to have a democrat standing behind him for the first time since he's been president. do you think that this is going to be beyond theatrics or is

this going to be half of the room sitting down for the entire speech or the entire room sitting for the entire people? >> i think you're probably right. i think hopefully he'll start out by congratulating the spe speaker on her position. and everybody will stand and applaud for that that mie be the last time they stand and applaud. i'm sure you'll have applause lines that will be hard for people to sit on their hands even when george bush was president and i went to a number of those state of the unions, there were a lot of people sitting on their hands so it's just become, unfortunately, the way the event goes forward and i do think it undermines the purpose of the speech. the purpose of the state of the union is to give the president an opportunity to say to the american people, this is where i want to take our country and do it in a positive, upbeat way. and when you have all these t e theatrics that were described around the speech, it tends to

undermine the ability to deliver that message that's where we are today. we're very much in a tv type of mentality and you got a tweet society. so this sort of thing happens. >> what about when the cameras are turned off do you think there's the ability for the two sides to work together on anything for this coming year? we could talk about infrastructure there are problems with how each side kind of perceives that. you could talk about trying to lower drug prices. maybe common ground there. but is there anything these two sides can agree on and work towards in this coming year? >> you know, you had a discussion this morning about the -- about yesterday's -- i guess it was yesterday when chuck schumer met and bernie sanders spoke to "the new york times. you had chuck schumer aligning himself with bernie sanders. bernie sand sers a socialist he ran as a socialist in vermont. you look at the candidates on the democratic side of the aisle right now, everyone is running to the left of bernie sanders. i just don't see that there's

much ground for commonality when you basically have one party adopting a philosophy which is so far left. it is possible where there are areas agreements should be reached. we should have an agreement on immigration. in fact, chuck schumer a few years ago had a very good bill with john mccain and we should have an agreement on infrastructure. it would be nice if we did something with the deficit and the debt i saw of what he's going to address, that isn't listed but the chances of this occurring in a run-up to a presidential election where so many people are running so far to the left who want to have his job, i think it's slim >> it's impressive he's been watching for two hours. >> speak to this deficit issue it's one you've spoken about over the many years we've spoken on this program. and it appears that many of your peers and colleagues on the right have not stood up on this issue at all over the past several years. >> you're right. issue has been taken off the table by both sides.

the president took it off the table -- >> i'm not sure it was taken off the table by the both sides. maybe during the obama years >> well, it was definitely during the obama years i mean, the debt tripled during the obama years. but the issue of the debt and the deficit is driven by a single issue of policy and that's health care medicare and medicaid are basically the drivers. $80 trillion in those two accounts if you also throw in social security. and that's our problem nobody's willing to address those issues because they're such a third rail of politics. they're the basic entitlement issues and they're politicized to the nth degree. until we get some leadership and that's the only way you're going to address this, leadership on both sides of the aisle that's willing to step on the toes of not the other party but their party and say we've got to do something about this we're not going to get the deaf and deficit issue addressed. at some point, the chickens are going to come home to roost.

you can't be running a $22 trillion national debt you can't have your debt going to the same level of your gdp and not expect it to -- at some point, you're going to have to pay the piper. >> senator, what do you make of the shift among the economic community. some have thought maybe we overemphasized debts and deficits maybe there's much greater scope to run a deficit economy, if you like where do you think that goes >> i think those folks must also believe that the sun comes up in the west and sets in the east. apples don't fall from trees i mean, it's absurd to think that you can run deficit and debt and run it up way past your gdp capabilities and not have it affect your currency when it affects the currency, that means you're going to conflate the currency and you're going to reduce the standard of living in the country and especially of our children and to deny that or try to sugar coat that, it's really absurd. >> senator gregg, you started this by saying it was the health care programs.

medicare and medicaid that are the big part of this problem there was just a poll that was taken by the hill, i think, citing that 53% of registered voters said that they will vote for a candidate who says they want to expand medicare to all >> what happens under that scenario >> i find that to be one of the most incredible red herrings it was all started by bernie sanders. medicare for all is an absurd idea just on the facts. medicare reimburses at 65% of cost so if you put everybody under medicare, that means you've got 35% of the cost which then has to come from the taxpayer through massive increases in taxes or it comes the way they do it in england and in canada it would be a disaster for our health care system there are ways to deliver much higher quality health care at

much lower costs they have been shown on a number of major medical centers and that's the way you get the health care system back in proper shape you get rid of fee for service and cost-plus reimbursement. and you go to a program that delivers better quality at a lower cost >> thank you for your time judd gregg, former senator we appreciate your time. coming up when we return, disney is today's major player to report. it's going to happen after the bell on the other side of this break, we'll see if they can be the earnings hero the street is looking for. more on the way when "squawk" returns. ♪ you should be mad they gave this guy a promotion. you should be mad at forced camaraderie. and you should be mad at tech that makes things worse. but you're not mad,

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welcome back to "squawk box. the equity futures at this hour are looking at further gains you see the dow set to open up about 90 points. nasdaq is just above the flatline it's toggling back and forth s&p looking to tack on to yesterday's rally. disney set to report after the bell this afternoon. julia boorstin joins us with a look at what you can expect. julia, good morning. >> good morning to you, becky.

disney's facing some tough comparisons in its fiscal first quarter. this is its first for consumer and international businesses expect tough comparisons to last year when "star wars" debuted. earnings are projected to drop 18% as disney's investment in streaming weighs on results. perhaps most important is what bob iger says on a couple of topics first, when will the acquisition close and update on fox regional networks second, we're looking at the streaming straty, how espn plus is fairing and when disney will launch and third, with theme parks expected to show growth this quarter, we'll see what iger says about recent price hikes and its coming "star wars" lands. now, analysts are bullish with buy or overweight ratings.

dan salmon writing, we continue to recognize the long-term attraction of diz niece' leading portfolio of intellectual property but remain on the sidelines. disney has beat expectations in seven of the last ten quarters we'll be watching when they report later this afternoon. andrew, back to you. >> thank you for that. variety's january cover story is titled the empire strikes back it delves deeper into disney's future joining us is the author of that good morning to you. cynthia, help us understand "a," what we should expect this afternoon. but really based on your piece, do you think that some of the issues that you raise in that story are going to come out on the conference call today? >> i think investors are really looking for some kind of clarity and insight as julia just mentioned to how disney is reconfiguring a large part of

the filmed entertainment side of this business to adjust to their ambitious plan to launch a global streaming service they've talked about it for more than a year, but they really haven't put a lot of hard numbers around it. and i think that's where the pressure is coming on them right now. >> do you think the expectation is they will come out with hard numbers? or you think it's still going to be suggestive of where they are and do you think this product will launch by the end of the year >> i think that there will be some hard numbers, because they reconfigured their earnings reporting strategy around this new directv and international segment. we will see some hard numbers. disney has also set an investor day for april 11th, so i don't think you're going to see a ton of data. the data that wall street and analysts want to get their hands on how much on traditional revenue they're going to forego as they build up their streaming platform

there's a lot of spinning plates there right now. i think that we'll get something today. we'll get more in april. >> cynthia, that is an essential question how much do you think they're going to give disney to spend the kind of money and as you just mentioned, in some cases forego revenue that they were getting from other streaming services to invest longer term in their own >> it's a tricky balance that disney is trying to get through right now. i think there's a lot of respect out there that disney is using its market power and its unparalleled collection of assets and intellectual property to build a better mouse trap, if you will, having seen how much consumers embrace the netflix model. disney is looking in that direction. but for a company of disney's size, that means a lot of reconfiguring. a lot of changing deals that had

been very profitable for them in terms of how they sold their tvs and -- tv shows and movies now that's changing and in that change is going to be seemingly at least a couple of years on a real drag on earnings. and as you say, the question of how patient investors will be is really going to be the big question around the company for the next couple of years >> i guess the other way to cast that, cynthia, is that disney now has these multiple transitions going on buying the fox assets and going direct to consumer it changes the storyline from, gee. how many more marvel releases can you possibly have next year in the studio operations as well as the garage yradual erosion on >> and as you point out, there is so much going on inside disney right now, building a new

division, launching a global platform, integrating a gigantic purchase of a lot of assets and people that will be literally going across town from the fox lot to disney in the next couple months and by the way, there's also a search on for a ceo successor to bob iger there is a lot going on at disney right now. >> speak to that it's a time warner property call called "game of thrones. explain both who the two players are that seem to be in line but how their relationship or lack of relationship in terms of that battle may ultimately impact the business >> well, i mean, you know, the search to succeed bob iger has been ongoing for years they've had a couple of -- they've had a couple of false starts with people iger has extended his deal three times. he's of course a tough act to

follow the highest priority of the company. there's a new team coming in from fox executives led by peter rice who is a long-time fox executive rice is very highly regarded rice's name was mentioned, was rumored as a potential successor for iger long before there certainly has been no formal heir apparent but when you have that caliber entity and iger handing kevin mayer the keys to a very important division, it's natural in hollywood circles you're going to get some word about who's in, who's out. who might be the heir apparent there's nothing official from disney yet but iger has said he's going to

step down in another two and a half years when his most recent contract extension is up so clearly it's got to be something that the board is looking at very hard right now. >> really quickly, the cfo made comments about netflix numbers he said they're not giving you the whole picture and what they are is misleading. what do you think of that? >> it was an interesting presentation yesterday it reflected the frustration in traditional hollywood with all the sizzle around netflix at every -- on every level. and netflix unusually for netflix has started to site some numbers. they sited numbers for their sandra bullock movie "bird box." they cited numbers for a show they ie choacquired, a drama cad "you." but they're doing it in their own netflix way, they cited numbers 40 million viewer number for a show called "you" that did

barely 2 million viewers when it aired on its original network lifetime that raised a lot of eyebrows in hollywood. leave it to fx to really do the research and it's basically a question of apples and oranges metrics that silicon valley and netflix find important in terms of video starts versus the traditional sort of -- the gospel of television ratings which are calculated in a very different way. so netflix's 40 million number gets printed, gets publicized in the general media. and everybody in hollywood loses their mind because they feel like that's a false number television ratings for years have been kind of a leveller you could massage them a little bit, but there was a third party provider that would show you how you were doing in netflix's world, you have to take their word for it >> all right cynthia littleton, out in l.a. have fun

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welcome back to "squawk box. equity futures right now drifting a bit higher. you see the s&p up almost four points dow up more than a hundred so at the highs of the morning the nasdaq just below the flatline at this hour. coming up when we return, fed chair jay powell meeting president trump for dinner last night. it's one year after powell took the job at the fed and it was also powell's birthday we will hear about that b-day party and what happened at dinner between president trump eaoro alhasptal bank chief "dl nde" s trump has spent much of the last year criticizing the chair we've got details when we return why bother mastering something?

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♪ good morning welcome back to "squawk box" right here on cnbc we're live at the nasdaq market site in times square couple stories to tell you about. one of the stocks moving higher on results, ralph lauren

reporting quarterly profit beating consensus. revenue also above forecast with same store sales up 4% strong increase in profit margins. that's a nice turnaround story for the company. also another earnings mover but in the opposite direction this time, it's church & dwight, the maker of arm & hammer baking soda and other products. the company also giving lighter than expected full year forecast and apple has resolved an issue in france reaching an agreement with the french government to pay back taxes apple confirmed but did not reveal the amount. in france they're putting the tax bill at $171 million so not for nothing washington, d.c., has some pretty good restaurants at least compared to how it used to be. perhaps the most important meal shared in the capital last night was the one between president trump and fed chair jay powell steve liesman joins us with more on this. presumably at the white house? >> at the white house residence.

this long awaited meeting between the two took place last night. they sat down for a 90-minute dinner steak was served they talked about the economy and the fed in a release said that powell stuck close to his words at last week's press conference and did not discuss monetary policy expectations now, despite strong criticism by the president, a white house official telling our own eamon javers, quote, there were no pitch forks. they had a very good exchange of views. tonight's the state of the union and we want to look back at the state of the economy under president trump. the numbers are pretty good. 2.98% average growth over the six quarters that we have to measure. we don't have a seventh quarter because of the shutdown. we'd have it otherwise, but we don't have it. so there's the prior six quarters under president obama, i gave the first quarter to obama there. could have been, you know, i figured what the heck. 1.4% higher.

you were criticizing if i were good presenting this this is the difference in the contribution to growth i wanted to know where the extra growth come from okay >> okay. >> so 0.7% of the extra growth under president trump has come from inventories. >> what does that tell us? >> there was an anomalous string of inventory drawdowns under obama. we had this huge surge recently of inventories now. >> does that have to do with the trade? >> some could. i don't understand the inventory drawdown in the past i'm not sure what it was one of the good things about this -- i want to go on while it's still up there. some of that could be related to energy, but some to -- i have to say a lot of this of the better numbers predate the tax cuts in 2017 was a great year. it's kind of trailed off some of the onsumer, the federal government, then you could see the residential spending

housing has not done well. that could be explained by higher interest rates. one more chart if you don't mind in the back there. let's look at job growth pretty much at the same time there has been a lower unemployment rate. and fewer employees on the sidelines. i think it's been pretty impressive that it's kept up this pace over that period of time >> because you run out of people. >> right and there's a participation rate ticking up so it's a pretty good record out there for president trump. how much is related to the tax cuts, how much -- and we do have these numbers here that the fourth quarter we believe in the first quarter, the estimates are it's trailed off a bit towards trend. but i have said for a very long time 2.5% if potential growth is 1.8% is a huge victory it would be a very, very good thing if we raised it by 0.7% if we could stay at 2.5%. >> i suspect we'll hear more about this tonight we're going to talk about an interview you have tomorrow in a

moment but first let's stay on this story and bring in other guests to talk about it the interview coming up, it's a surprise wait until the end of this to hear about it -- oh, no, no, to. you ruined my surprise the big interview is tomorrow at 2:30 eastern time. janet yellen is going to be sitting down with steve liesman. you can see it on cnbc now, back to what you can expect to hear tonight in the state of the union. let's get more from david bianco also our guest host mohamed el-erian from allianz. >> the record that steve just laid out, how do you look at this from an up high perspective on the economy what does the president have to talk about >> there's been an acceleration on the economy post the election and also predating the tax cut but post-the election. inventories tend to be a swing factor in all economies. i think it's interesting that equipment where investment spending is the second largest whether it be software, r&d,

that has all picked up there's been swings on energy investment spending. but we've seen businesses step up their spending on software, r&d, and what i call productivity enhancers i definitely think there's been improved confidence to invest. >> i would say labor market, labor market, labor market i would stress that because go back to the earlier discussion on inequality and the sense of insecurity that people have. so what has the labor market produced 200,000-plus every month at this late -- >> 209 average. >> at this late state of the cycle. >> so explain this >> wait. hold on. wage growth over 3%. and as steve said, labor participation ticking up so those three things speak critically to people's thoughts of opportunity, security >> the question is, given those numbers, why is the conversation about inequality

why is the conversation about things that either elizabeth warren and different tax policies that are coming out why are v they gained as much steam as they have at a time when you're talking about a strong labor market? >> because the initial conditions were so bad so we've come from a period of low and insufficient inclusive growth put on top of that decades of rising inequality. put on top of that all the insecurity created by tech and people not knowing where the jobs are going to come from. so, you know, you've got this massive momentum from your initial condition. so overcoming that takes quite a few years of what we've seen so far particularly in the labor market >> i want to ask you a geeky question the idea that we have had this strong job growth, run gdp a point or more above what we thought was potential. and done so with almost no inflation added on top of it does that tell you that

potential is maybe higher than we thought >> oh, absolutely. i've said it over and over again. this notion that we know what potential is when you are changing how people do things. not what they do, but how they do it. potential actually is a variable at thisstage >> let me stop you there which means the fed could align the economy to run at 3% and not worry about inflation and not raise rates anymore. >> correct if it weren't for asset values so if you're concerned that in doing this, you're going to create an asset gap between the prices and underlying economy, then you worry a bit >> so let 'er rip. that's what it is? >> no. the tail finance ends up disrupting the real economy. that is the big risk you've got to combine macro --

this is a tricky time because the way things are done is changing and that means it's very difficult to anchor yourself on any one concept. >> david, go ahead >> on that same conversation, i think a popular question lately that many are asked. maybe this came up during the dinner last night. do you believe in the phillips curve? and i believe the phillips curve is something that good economists and investors treat with -- is there relationship between employment and inflation? and i don't think so and i think that if you've got better productivity, labor force participation, and in my view the phillips curve is not a classic economics model. if we were to run out of labor, it makes more sense that growth just slow down rather than the economy inflate upward. >> if that's the case, somewhat related to that, the policy and economic debate seems to center around this corporate sector and

owners of capital against workers. so if we can have higher wages without end inflation and we're at a later point in the cycle, is there a little bit of a zero sum game going on from investors going on saying the economy is not going to go into recession but corporate profits are not going to be levered. >> not to be geeky, but productivity when you see this investment spending coming in, when you see more labor coming back to the labor market as well, yeah i don't think it's a zero sum game i do think the economy can continue to grow well. and that the economy's not going to die from a natural cause which is running out of labor inputs into the economy. we've never really run out of anything look at the oil price situation. we haven't run out of that >> there's a history -- the most epic let 'er rip moment was --

all wanted the fed to raise rates because the economy was running higher i think if i'm not mistaken, it was earnings forecasts of tech companies that animated his call right then one of the best calls ever made and they let the economy run for another four years or so i think that powell is thinking about such an idea there's been a couple speeches by rich clarida, the vice chairman who said you know what? between maybe the tax cuts and other technological changss, there's a change inside the economy that we should let it go it's something i'm watching and listening for very carefully if they make that pivot towards i am less worried about inflation because there's a change in the structure of the economy. >> how'd that end? 2001 >> correct this gets to what mohamed said that everything is a beautiful thing except for the asset

prices >> if we were to close the economy and didn't care about the rest of the world and couldn't get contaminated from the rest of the world, i'd say i'm with you but what did that do in '96? it created bubbles all around the world that came back >> correct you have to remember that the fed has made a separate change they've upped this macrocredential thing. they're looking more at the structures of the holdings of the banks and trying to head those off at the pass so they can run monetary policy independ of asset values. we'll see about that >> the fed is selling assets now. and look at long-term interest rates. they seem to be signaling these are more natural if you're going to look at interest rates over the past thr two, three centuries, they are more normal. 3.5% on the treasury yield, i

think that's very normal, natural. if inflation stays contained equities still undervalued this is by far the lowest peak for funds rate in any hiking cycle. >> coming from zero. >> we're almost done with the balance sheet. the market is trading like we're still in the hiking cycle. right? has the market appreciated the idea that it's over? >> i mean, the stock market -- >> the all clear signal came last week. it's been doing pretty well since that point i mean, it may take a little more time to play out. >> it's pretty good news if they're done >> yeah. >> i would just add one thing -- >> unless they're done for a really bad reason. >> they stopped in '06 too >> don't lose sight of germany

that spread tells you a lot there. >> right steve, thank you very much great to see you david, thank you for coming in david bianco and now back to the two big interviews tomorrow. steve will be talking to janet yellen at 2:30 p.m. eastern time also tomorrow, treasury secretary steven mnuchin will join us here on "squawk box" in the 8:00 a.m. hour endless fields of grain.... a wealth of oil.... and riches beyond your wildest dreams. there's a place where you can find all of this. in a suite of commodities-based etfs from aberdeen standard investments. everything from field crops to livestock, and precious metals to energy. all of which may help you diversify your portfolio. it's a big, beautiful world out there. why not invest in it? learn more about the commodity-based etfs... from aberdeen standard investments. your but as you get older,hing. it naturally begins to change,

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welcome back to "squawk box. futures are positive right now for the broad market you see the dow set to open more than 90 points s&p up just about a tenth of 1%. and the nasdaq flat. take a look at shares of boeing bernstein just raising the price target to $459 citing strong margins and cash flow as well as 2019 guidance. that is, of course, a new record high for boeing. time to get back to -- i guess we do. time to get back to quarterly results. last of the faang stocks to report this season, that was last night that's alphabet. we are here to break down those google parent earnings with scott kessler. good to see you. >> thanks, mike. >> a lot of modest negative reaction to the numbers. yesterday the stock was up 2%. not to get overexcited about the magnitude of the move. but it seems there's this

constant and louder question around google which is great core business. they seem to be spending a lot in terms of investing for the future when do investors see the harvesting phase is that where we're at >> i think the concern right now is ruth parat was brought in to instill a level of spending discipline and we didn't see that in the quarter's results. right? you saw r&d up 40%, capex more than 60% but those investments are clearly supporting the growth story. growth up 22% mostly organic i think the story is intact and i think people are selling on the news >> wasn't it about to the extent you thought there was going to be -- if you think there's discipline on the spending, it was to break out some of that spending, to actually see where it is. >> right more transparency. when she was brought in, i think people expected kind of more thoughtfulness around the spending and -- >> so you think it's not thoughtful >> i think it's less thoughtful than people might have expected. >> so scott, let me push on that

shouldn't we now embrace the fact that when it comes to technology, it's as if you've pressed fast forward on the corporate cycle. so they become systemically important much faster then they become incumbents much faster. now they face competition much u expect and isn't the right response to that is to step up investment, isn't the right response to continue to try to try to self-destruct? >> they're hiring people, engineers was one of the biggest expense items they indicated they're also spending on the next generation of technology innovation, machine learning or ai, they talked about the cloud. these are the investments you want this company making i completely agree with that and when you have $110 billion in cash and investments, you can do that. so to be honest, i think this is just kind of a pause in -- >> but what evidence do we have to go back to what andrew was saying what evidence do we have that they have misspent, that they spent on the wrong things? >> well, i think it is fair to say that when they talk about

some of the areas of spending, right, they talk about hardware, they have had a lot more misses than hits in the hardware area, i would argue. you could say, well, they're spending on hardware because they want to prove that capabilities of the software and services, fine but that's kind of a longer term story. so what i would say is they're spending, they have obviously been supporting the growth story, but they obviously had some mixed successes in areas and i would point to hardware specifically. >> it is interesting you say that, because you could have been talking about amazon, would investors give amazon the long leash, right even though amazon's core business if you consider it retail is left profitable than google's. >> that's one of the reasons we like alphabet as the story and investment opportunity, right. it trades at low 20s multiple on 2019 estimates, and the growth rate even in this quarter was 22%. so we had people come on and say, look, this is a value play. the question is, what is the inflexion point that investors,

broader investors are going to asoon assign a higher multile? >> i don't know the answer to that question. i think it is a broader play if you look at the broader f.a.n.g. universe, there is no question about that. i think what people have been wondering about is at what point do you see the growth rate start to decelerate because of the competition you alluded to we haven't seen that, and we don't see any signs of that, and i think that's one of the reasons people should be more opportunistic with the stock than perhaps some of the others. >> it is more expensive relative to facebook than it has been in recent years >> right facebook obviously is a very different kind of story, given what they talked about in the middle of last year in terms of the expense ramp that story is more in tact than people expected as well and we upgraded the stock in the fall of last year in part because of the disconnect that we saw between the fundamentals and the perception of the marketplace. >> yeah, the industry trends are that strong. scott, thanks a lot. appreciate the time. scott kessler. >> let's get down to the new york stock exchange, jim cramer

is standing by, getting ready to go with everyone and, jim, a couple of things to talk about, let's talk about alphabet, what your takeaway was? >> it was good the revenue, 20% gain and the conference call was awful. the conference call has become -- i got to tell you, conference calls have become very combative because people feel that ruth, who i think is fabulous is not giving enough data too much about diane green who left the company, too much about how they had to spend but not giving you any sort of insight about how they're actually doing in the cloud so it becomes one of these contests where if you don't tell us a lot, we're going to threaten to downgrade you or say negative things. nobody downgraded it, just people who lowered price targets. it was a good quarter. and if they could just quantify some of the spend, i think the stock would go up. they got to do better orchestration on the call. >> the other thing i wanted to talk to you about was apple. i saw your tweet, just saying apple is trading at this point as if berkshire is buying again. what are you seeing? can you expand >> everyone is out of the way.

becky, it is like there is no sellers. people are reaching and the reason -- i don't know whether berkshire is buying or not but it had the same levitation when warren was buying. what happened is the buyers, they took it up andthe sellers like, where are they all of the sellers in there in the 147 and 157, where did they go 167. i mean, i was out with tim cook when i was at 147 earlier in january. this thing is just incredible. there is, like, no sellers whatsoever by the way, there are no sellers coming back up in amazon remember when amazon was a disaster people come back, but the apple rally is really extraordinary. and i cannot figure where the sellers went to. disappeared. >> i didn't put this together until just now but mohammed el erian was saying how it changed the markets your point, what the fed did last week is people don't necessarily sell on those, sell

on the rallies >> jim, what i said earlier is what the fed basically did is it reduced the left tail for investors and that's giving them more confidence to buy where as before, and you went into detail earlier, you know, the mentality was sell every rally now we're getting more comfortable with the notion of, yeah, you can buy this, because your left tail is much more limited. >> totally this was a big sea change. people in the network who don't even realize what he did, look, i saw autos -- housing was bad, materials bad, semiconductors bad, we got decent commercial construction, but not a lot. anything residential down, regional banks reporting down numbers in terms of commercial growth, commercial lending there wasn't much good you recognize, wait a second, i have to do something about it. gdp okay, hiring obviously fabulous but geez, even retail got there. the last eight -- the last three

weeks before christmas were terrible you've got a lot of things that got weak and a lot of it was because he gave you those auto pilot, really, auto pilot comments, which were a shame kind of a mistake. good guy >> jim, we'll see you in a couple of minutes. make sure to catch a big interview coming up with starboard value founder jeff smith and papa john's ceo steve ritchie. thatom ces your way at 10:00 a.m. eastern time. stay tuned you're watching "squawk box" on cnbc it's them, calling us. it's going to be a week before they can get through on these roads shhh, sorry, i didn't catch that. i said ask how soon they can be here not you. right now? what's now? he says they're surveying our property now they're probably at the wrong house i don't see any hovering his name is hovering? look up?

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welcome back to "squawk box. right here on cnbc our guest host all morning today has been mohamed el erian, and we have been thrilled to have him. can we get to your column out? where did you take "the final time financial times" >> i hid it. >> get it back out i want to make sure people a, see it and they read it. give us the 25 second summary. >> 25 second is the fed now has cleared a way for a big range-bound zone for markets where we break if that, higher or lower, is a function of growth what you do here, i think, is an up and quality trade and you reset what i call the divergence trade u.s. versus emerging markets >> u.s. versus emerging markets? >> yes i think the u.s. will outperform going forward and be careful of not getting caught on the wrong side of other trades that look

anonymous, like i said earlier, 255 basis points, spread between u.s. treasuries and bunds, that's going higher up. >> okay. >> thank you great to see you, sir. >> thank you. >> mike, thank you for being here great to see you everybody have a great day we'll see you back here tomorrow right now it is time for "squawk on the street. ♪ ♪ i can make your hands clap good morning, and welcome to "squawk on the street. i'm david faber with jim cramer, live from the new york stock exchange carl is on assignment this morning. let's get you started for the day. of course, look at futures right now as we set up for the open. half hour from now you can see going to be higher i have a very keen sense for the obvious. european markets have been open for some time. let's look at performance there as we get closer to the session end there. you can see real strengt