clap ♪ >> live from new york where business never sleeps, this is "squawk box." >> good morning. welcome to "squawk box" here on cnbc we're live at the nasdaq market site in times square i'm melissa lee along with mike s santoli where, joe and becky and andrew are all off today the morning after state of the union address. the dow jones looking to give up 65 at the open the s&p looking to give ip nine. the nasdaq looking to be down by 25 all three major indexes are at or close to 200 day moving averages we're sort of a critical point here in the equity markets here in the u.s overnight in asia markets in china and hong kong were closed for the lunar new year they continue to be closed the nikkei, though, is up fractionally by .1%. there was a big move in the australian dollar.

that's worth noting. in that part of the world the australian bank opened the door to policy changes, and we did see a big move in the aussie dollar european equities this morning reacting to some german factory orders, and it was an unexpected dough cline for the second month in the month of december we've got the dax down by half a percent at this hour the check on the treasury markets yields this on the ten-year yield 2.69%. still hovering over the level we've seen for weeks now multiple reports say treasury secretary steven mnuchin, and robert lighthizer will take part in another round of trade talks next week in beijing. president trump's state of the union last night, he said any new trade deal with china must include real structural change to end on unfair trade practices, reduce the trade deficit, and protect american jobs the president has vowed to end u.s. tariffs from 10% to 25% if the two sides cannot reach a deal by march 2nd. we will talk to treasury

secretary mnuchin today at 8:00 a.m. eastern time. disney said its sport streaming service, espn plus, now has two million paid subscribers that is double the number it had just five months ago, but still losing money we'll talk more about disney with investor bill smead in just about ten minutes. a number to watch snapchat, parent snap posting narrower than expected fourth quarter loss as revenue jobs snap also reporting flat user growth, putting a halt to the downward trend in numbers that has plagued it over the past year investors loved it is, and some short sellers likely had to cover here he with saw stocks surge in the after hours session which extends here this morning. up 25%, but even with this move, snap is still down 60% from its 52-week highs. big turnaround, but no help there. president trump making headlines last night during a state of the union address let's get to eamon javers in

washington with all the highlights >> good morning, melissa there were some heartwarming and bipartisan moments last night, such as when astronaut buzz aldrin saluted the president, and when the president saluted the large class of female freshmen lawmaker that is were in the house chamber for the state of the union yesterday evening. for the most part rhetorically he stuck to his guns on the most dividi dividing issues during his term in office. particularly on immigration. here's what he said last night >> no issue better illustrates the divide between america's working class and america's political class than illegal immigration. wealthy politicians and donors push for open borders while living their lives behind walls and gates and guards [ applause ]

>> i mean working class americans are living with reduced jobs, lower wages, over burdened schools >> an economic miracle is taking place. the only thing that can stop it are foolish wars, politics, or ridiculous partisan investigations if there is going to be peace and legislation, there cannot be

war and investigation. it is going to be a year of investigations democrats are going to crank up the subpoena machine the white house is going to be in a defensive crouch for much of that incoming, and then the big question is can the president get any of the legislative items that he talked about last night, including lowering drug prices, infrastructure bill of some kind can he get any of that done in a washington where he is suffering from all these different investigations, whether it's the mueller investigation or capital hill democrats, and at a time when a lot of the democrats in the room last night are going to be running for president against him in 2020. >> and you have to wonder, if the back drop of the stock market and what the stock market has done in recent months has

sort of changed the way president trump addresses this state of the union speech, versus his first address to congress last year, which is a little bit bolder and had more of an agenda and this year it appears a little bit more like he is on the defensive in terms of his main agenda items >> a little bit more on the defensive, and this is a president who has cleared the you cupboard in terms of agenda items. they failed on repeeling and replacing obama care, which is a big campaign promise they did get the tax reform that the president wanted, and you heard him talk last night about a lot of the regulatory reform that this administration has done there's not a whole lot left in terms of a positive agenda going forward and items that the president wants to pass. he ticked through a couple of those last night i think the real question in terms of the stock market is how the president and this administration were going to watch the dow as they move closer to the china negotiation. we're told that a number of the administration officials are going to be going to china to continue to negotiate before that march 1st deadline on tariffs. are they watching the market and the market's potential reaction

to a deal there, and is that encouraging this white house team to come to a deal with the chinese on whatever terms they can get? >> did you even mention -- he did not mention the stock market, right? he did not >> no mention specifically of the dow. lots of talk about the economy >> right >> more broadly. employment more broadly. that includes a number of different categories he didn't talk about the stock market he tweeted about the stock market a couple of times last week >> yeah. >> particularly when it crossed that 25,000 threshold. again, he didn't mention it last night in the speech. >> all right thank you. eamon javers at the white house. jason, what was your take on the state of the union in terms of things to chew on for the markets? the markets were looking for inf infrastructure, drug pricing, in ermz it of actionable sorts of trades off of the state of the union. >> i would say my flash impression, frankly, is that i don't know if it was a conciliatory speech, but i don't think it was a divisive speech in any way he stayed away from a lot of the -- despite some of the topics, but just the general style of the speech was, i would

say, pretty even-keeled for my percent pengt, which i think is good i saw cbs poll this morning. 76% of the people that watched the speech approved of it. from a market perspective, you know, i agree with eamon that that necessitatin today's worldn bond because of the nature of central banks and where central banks are mired in terms of low interest rates there is a stock market vigilante, and we saw that in late december, right there were concerns about the fed making a policy. there's concerns about trade policy i do think that's a reasonable question, and i do think, frankly, stock market moved large in terms of the way the administration thinks about these policies, and from all the things i've heard from my contacts there, all sides want a deal china wants a deal the united states wants a deal you know, the consequences of not getting a deal, i think, are not anything either sides really wants to deal with at this

stage. >> i was joking a couple of weeks ago that january was the subtraction of all fears, right? you did have the fed move in a direction the market was kind of pushing it obviously, the economic numbers came in, i think, in a way that made december look like a premature panic over the economy, right, and a jobs number and everything else yes, trade is out there, but do you think now that the market has kind of checked off that box already in terms of what we might get out of a deal? >> i think it certainly seems like at this point you would almost have to say trade is more a potential risk than a potential boost just because i think most people, you know, my view on trade is a pretty consensus view, which is that both sides want a deal, and that some deal will be hammered out in some ways there's more of a risk of something not getting done by the same token, the administration has made it clear that watches the stock market pretty closely >> i believe the consensus view is that everybody wants something to get done, but the risk in the market is defining

what getting a deal done actually means does it mean that tariffs remain where they are right now for an unspecified amount of time while the other structural changes get worked out you know, trade deals are typically thousands of pages do you think that they're going to come up with that by march? that seems kind of unlikely. >> you know, i would say if you look at the deal with canada and mexico, as a result, it's marginally better for the united states, but it's not open heart surgery better you know, it's not something that is 180 degrees different. i think a deal is largely -- i don't want to say it's symbolic, but i would expect massive changes coming out of it it's probably something where both sides can claim some sort of victory, but it's not going to be huge structural changes, and i would say candidly, any sort of expectation that china would really follow through -- i don't want to be controversial here, but really follow through on some of the more controversial parts of the deal, whether it's on paper or not, i think would be naive

i don't think it should be standing in the front and getting some deal on some of the other issues >> if that's now and it seems to be the next remaining known catalyst for the market, i mean, aside from just a basic flow of data and earnings and everything, where does that leave it i can't think of a market cycle where a state of the union speech mattered in an enduring way for the market one way or the other, frankly >> i agree >> right now you have the markets rebuilding risk appetites, earnings being revised down for 2019, but they're still holding up in general. >> listen, to me the big pay-off, and i think a lot of people have written off the tax cut in terms of its ability to add anymore stimulus to the economy. we don't feel that way mainly because it was a supply tax cut designed to increase capital spending if by some chance you knock that pin down of trade negotiations, if things seem to calm down a little bit in washington, in my opinion the real impact could be on business confidence, and you could see more of a willingness on the part of companies not to buy back stock, but to actually

invest in the future the other thing i would argue, though, too, with the election coming up in 2020, you have five years of full expensing of capital spending there is a chance that companies take advantage before the 2020 election to try to get the capital spending -- >> in case >> in case president trump does not get re-elected there are a lot of moving parts here, but i'm pretty optimistic on the economy because i think you haven't seen the full effects of that yet. >> you have to wonder or hope that the stock market appreciates that because, you know, market rebelled a little bit when google said we're spending $7 billion on capital it's a different equation when it comes to is there an economic push behind it and how the market values it >> absolutely. >> jason will stick with us for the rest of the hour >> right spotify announcing two acquisitions moments ago the streaming service bought podcasting services gim low temperature media and anchor it's going to be the producer of

podcasts and podcast createors spotify out with its quarterly results. the company reporting its first ever operating profit. premium prescriptions up 36% chaired to a year ago, and a programming note, spotify ceo daniel eck will join squat u squawk on the street that is coming up at 9:30 a.m. eastern time still ahead, we have a huge line-up today to respond to president trump's state of the union address. former democratic senator evan bayh and shelly moore capito, and that's followed by anthony scaramucci he will join us at 7:30 a.m. eastern time it's all leading up to our big interview at 8:00 a.m. eastern with treasury secretary steven mnuchin. stay with us this is huntsville, alabama. aka, rocket city, usa. this is a very difficult job. failure is not an option. more than half of employees across the country

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company says it is cutting its net profit outlook for 2018, although it is leaving its operating profit in revenue forecast unchanged you see shares are down less than 1% at the moment. mercedes benz parent daimler out with results the company's fourth quarter operating profit fell 22% as the trade war and rising rnd costs hurt the bottom line shares there down a little over 3% coming up, disney earnings and revenue topped estimates, but it is the sports streaming business that's generating buzz this morning doubling its subscriber numbers in the past five months. we'll talk to investor bill smead next sfx: [phone ringing]

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bill, great to have you with us what was your take on the quarter, and do you think, you know, the knock on disney stock is that they -- investors want to see progress and streaming because that business is seen as a growth business that can offset declines in the core business do we get any indication of that so far

>> well, we're long duration players, not short duration players. there's lots to look for long duration players in here remember, melissa, that the thing about the disney corp. is a child in born in the united states, and they're almost automatically a customer of the disney corporation therefore, parks and movies and brands and characters just incredibly flourish because of the incredible goodwill attached to now two prior generations of family before they come. they just want to make sure that they're organized well to provide those brands and those products to all the generations all the ways they want them, and then the other side of the coin is in the capital markets, the last five years, you were much more rewarded for spending money on things that would cause you to do well ten or 20 years from now, so they just kind of took a

time-out a year or so ago and said, hey, we're not getting any multiple for our earnings and free cash flow let's fight off these threats to one side of our business >> does that mean going back to the original question, bill -- i'm not really sure if i got the answer -- that you are seeing some signs of progress in terms of the streaming business to the point where you can feel comfortable in saying they're making the investments, as you said, for the right reasons, and we're going to see a return on the investments and the ability of disney to offset the declines in the core business >> the answer to your question is, content is always king, and no one can touch their streaming content. whether it be espn -- you know, professional sports and college sports are going to ebb and flow to a certain extent based on the composition of our population. you know, we have 60 million gen-xors we had 80 million baby boomers when the baby boomers were 35 or 40 years old, watching sports on

television was at the sluabsolue peak of popularity now we have 60 million instead of 80 million, and that's less human beings that are interested in that than there used to be. that will change because the group behind them is 86 million people again, it's what you want to worry about in the short run the reality -- when you get right down to it, they have superior content in all those phases therefore, when whatever demographic is hot -- for example, no one has been talking about the fact that they own 5 to 10-year-old kids. what do we manufacture in the united states? children of college educated women, affluent. the average child is born into an above average income household, and the grandparents have waited way longer than they've ever waited to have a child. they're starving to take that 5-year-old child to disneyland and hook them into the ecosystem

they have produced >> bill, there's no denying. parks was a real bright spot in this quarter i think one of the things that perhaps is suppressing the valuation of disney as it trades around the forward earnings at the moment, is that getting to those customers with those brands in this new way is just a little bit less reliable you sht just sort of charging them a month through the cable bundle as we used to be before i wonder how you are reading this transition period and whether there's more financial risk at least in the short-term? >> well, you have already mentioned what the risk would be disney is a company that normally trades at a premium to other companies. it has -- it's pretty much a staple, and it trades at the multiple of businesses that are very greatly affected over the years by economic forces you've said it all right there

what is the likelihood that 20 years from now the disney corp. is a massively successful company, and what are you paying for that possibility of it being massively successful, and the answer is you are getting a great risk-reward relationship right now. >> bill, jason here. i was wondering if you just talked maybe from a more macro point of view about the pricing power at the parks themselves. i mean, for a lot of people this is starting to get pretty high up in the paint cards as far as what people need to pay to go there. i'm looking at more from an economics point of view in terms of inflation and just an overall sense of consumer confidence if you talk a little bit about that >> that's a great question so i remind everybody when warren buffett speaks to college students, he reminds them the worst thing ever did was in 1966 he sold his disney stock buffett says a great business

has a mirror on the wall, and the ceo goes and says mirror, mirror, on the wall, should i raise my prices this fall? if it's a great business, the mirror comes back and says why wait if you looked into the numbers, they raised the prices in the park because they have got to find a way to regulate the number of visitors inside the park you're going to ruin the experience for people if there's too many people in the park. the only way for them to regulate that through price, and, by the way, for our political leaders and other people that regulate things like the internet, price is how you regulate things. the answer to that is is it worth $150 to go to the park is it worth $200 to go to the park we don't -- my guess is with 60 to 70-year-old people waiting for their first 5-year-old grandchild, there isn't a number anywhere near where we are right now that would interrupt that. >> bill, great to speak with you

this morning thanks for your time bill smead of smead capital management i think the point you bring up is a good one in terms of streaming the multiple you have to think if it's going to be compared to a netflix, it's going to make a tougher comparison, but are they also hoping to get a little bit of the netflix multiple if they go more into the stream sng. >> or at least participate in this tv world where there are high multiples and the perception is, by the way, it's not a zero sum game, right i think initially in the build-out of netflix -- >> who wins? who loses? >> one or the other. see if disney -- >> when we come back, we have a huge line-up today to respond to president trump's state of the union. former democratic senator evan bayh, republican senator shelly moore capito, communications director anthony scaramucci, and all leading up to our big interview with steven mnuchin. as we head to break, a look at yesterday's s&p 500 winners and losers

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>> welcome back. you are watching "squawk box" live from the market site in times square ♪ arms are open wide >> hello all right. welcome back to "squawk box. it's like come on, time to wake up instead of the blaring alarm we'll hear from glaxosmith kline. we'll get quarterly reports from chipolte and sonos and international trade numbers that were postponed because of the shutdown we'll get productivity numbers u.s. equity futures at this hour indicated to slightly lower

across the board down about 8 the s&p 500 63 on the dow and nasdaq we're going to give up about 24 here elilily just out with its quarterly results. the drugmaker earned $1.33 per share for the fourth quarter that's a penny below estimates estimates did come up above was forecasts. lily cutting its full-year outlook oncology it does say it sees a more underlying business going forward. the stock is down by 1.5%. >> electronic arts is sinking after the video game maker cut its revenue outlook for the year ea's new battlefield five game sold about a million fewer copies than expected as it faces rising competition from popular titles like fortnite you see those shares down 15% in the premarket. that was already a very weak stock where, at some point that got cut in half over a matter of about five months. that's been a tough video game -- >> they delayed battlefield, which is one of the premier franchises, says and also they have this competition from the fortnite kind of games, the pub

g games. >> dominating the eyeball hours. >> after the president's state of the union address, what's in store. gene goldman at cetera investment manager, and here is paul hickey, co-founder of bespoke investment group good to have you with us >> thank you >> do you recalibrate how you view the stock market or the environment for getting things done, things like drug pricing controls and infrastructure based on what you heard last night? >> yeah. last night, i mean, first of all, president trump, he definitely went through his checklist. he talked about, you know, unity. he talked about unity especially around drug prices unity around immigration unity -- just unity was strong i think the key point he talked about is the economy, and we foresee him -- president trump running on 2020 re-election campaign on the economy. his comment about the hottest economy in the world made sense. i think overall what we've been telling our advisors today is

that we were cautiously optimistic about the markets and about the economy, but now we're modestly optimistic, and there's four main reasons why. first of all, the fed has turned from a very hawkish stance to a very dovish stance we feel the trade war is a limited resolution that we think it's going to be solved pretty soon you are seeing olive branchds from both sides. you see the need for the u.s. and china. demographics, they're transiging from a manufacturer to a -- it's really being hampered to buy a trade war. third of all, the stocks last quarter were weak. one concern was the 2019 recession. we don't see that. you know, job growth continues to be very strong, and then the last point is a look at corporate earnings going into the kwaurkts

corporate earnings was very skeptical, but we've seen half of the s&p 500 release earnings. 70%, 70%, have beaten expectations by 3.5% from an earnings standpoint. 62% has beaten from a revenue standpoint by 80 basis points. we are optimistic for the first half of this year about the markets. >> going from cautiously optimistic to modestly optimistic seems like a nuanced down shift in assessment i'm not sure if you are cautiously or modestly optimistic, but where are we here this earnings season, we look last quarter, third quarter earnings season in october this quarter we're getting eh earnings reports not as strong as they were not as strong as relative to expectations investors can't get enough of these stocks their stocks are being bit up. they're opening up more importantly, then they're getting bit up after the open, and necessity keep going up.

the average stock that reports earnings this quarter has gone up over 1%. we're seeing investors willing to look past this, and we saw sentiment get so washed out, it doesn't take much to light a fire >> to me the persistence of this rally and the fact that it just seems to kind of find a bid through the course of each day is mostly a measure of how ill-positioned investors were for it, right? i guess how far can that take us at this point. theas last few days it felt like 2017 where in the absence of another influence is going to go up a quarter of a percent. >> we're seeing this positive factor out from earnings when erkz season does wind down, what do we focus on going forward from there

we'll see. semis to that point in sky works solutions have gotten totally crushed, right the positioning was very poor on that side, and here we are we're climbing a wall of worry every day. >> you know, my view is that you really want to be in the more cyclical sectors of the markets. financials, industrials, technology, energy those are the places -- i mean, last year economic growth was much better than expected. earnings growth looks like it would be up 20%, 22%, and yet, the best performing sectors were utilities and consumer staples, right?

>> we don't have the idea of there is no alternative, you are in a situation -- cash is certainly an alternative now there's no two ways about it with short rates where they are, but with the fed side looirned, want just because of inflationary expectations here, but because of what's happening abroad, it's -- you're not leaving people a lot of other options. it's in my opinion i agree with gene, i think the chances of a recession in the united states before the 2020 election are quite low. i think that has changed the mixture a little bit >> i think one of the things we've been watching to see if this rally is going to start running out of steam, what led us on the way down semis, home builders, and emerging markets what stabilized before the market all three of those those are doing well now, and as those sectors continue to outperform and hold up well, i think that's a tell for the market emerging markets are coming out

of a massive period of underperformance, and if you are going to sew an easier fed, weaker dollar, it should help the sector >> gene, how are you positioned for a modestly optimistic outlook on the economy >> so i think -- i definitely agree with a lot of what you said earlier you look at january. we saw small cap and more aggressive sector asset class outperform large cap we've seen growth outperform value. nasdaq has outperformed the dow. it's positive there. we like the cyclicals and technology i think technology given the ability to improve productivity, given the fact that artificial intelligence is the future you see it everywhere. think about this gas prices are down significantly. this is great for consumers.

health care telling nolg and consumer discretionary are our favorite sectors right now >> all right thank you, gentlemen, for your time and your analysis paul, bespoke investment gene goldman of cetera investment management. let's get a check on the overseas markets this morning. we are joined from london. good morning >> good morning. yeah, it's a bit of a mixed picture as far as european markets are concerned, and remember, yesterday we had those pmi numbers pointing to the weakest growth for europe since 2013 the macro data has been quite weak when you think about what's been underpinning the market, though ftse 100 is just inching into the green. the telegraph hasds hinted that there are secret talks about delaying brexit timing by about eight weeks. that's been helping to lift at the u.k. shares early on in trading. i want to bring your attention to the german intelligence dax is underperforming today we had weak earnings out of

daimler, says the auto company citing increased cost on tariffs and also on electric car roll-outs as well. that's at the bottom of the dax there. half percentage point. also want to bring your attention to the proposed merger between alstem and siemens the german company has now been formally declined by the european commission. siemens's stock is trading down 1% on the news again, weighing on industrials and the german index here. let's talk about sectors in terms of the overall breakdown as i mentioned, right at the bottom we had the auto zone on the back of the weak earnings out of daimler dragging down the german index chemicals also struggling today. down half a percentage point right at the top we have technology led by gains in a frefrm software company desol which signed a partnership with airbus that's up 10% today. in line with some of the price action we had in the u.s. yesterday and tech sector. we're seeing that bounce in europe banks also seeing a little bit of a bounce this morning as well up .3% this despite some of the weaker

earnings that came out of the french bank bnp spas parabus 3% -- that's a laying adviser. i want to turning your attention very quickly, though, to what we're seeing in cable this morning. we talked about the weak pmi data and the weak political setup as well. the president is meeting tomorrow in brussels to extract more concessions when it comes to the brexit deal really, all eyes will be on the bank of england, the tone that will come out of the bank of england. can you see that sterling has dropped below that 130 handle. it's about two points higher than where we were when the meaningful vote initially failed a couple of weeks ago, but this is the level and all eye on that bank of england meeting tomorrow back to you, guys. >> all right there's always a central bank story to watch somewhere in the world. thank you very much for that meanwhile, a shake-up at apple. we will talk about the sudden departure of the company's retail chief, and then response

to president trump's state of the union. former communications director at the white house anthony scaramucci who will join us at 7:30 later, treasury secretary steven mnuchin will join us live from the wlous. that interview coming up at 8:00 a.m. stay tuned cc.re watching ""squawk box"" onnb obvious. sometimes, they just drop in.

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time for the executive edge. listen up, business travellers united airlines is betting big on comfort it's expanding the number of premium seats in its fleet by 50%. seating configuration will change on some domestic and international routes two of its airbus models will gain four first class seats, and some of its boeing planes will gain 16 business class seats and 22 premium economy seats it's part of a push to win more high-end passengers. tesla is lowering the price of its model three for the second time this year. the company says the end of its costly customer referral program allows an $1,100 price drop. that brings the cost of the least expensive model down to $43,900. that's still above, i guess, the ultimate goal targeting mid 30,000s. there you see tesla shares down .75% >> you see this, and you automatically go to elan musk's

twitter feed you know he will be tweeting about this, and that's how the news came out. he was asked about getting the model down to the $33,000 price mark he said they are doing everything they can. it's about an a "super hard grind. that's always been the production hell and trying to get this down. >> he likes to portrait where, but what's fascinating is in that memo when they had layoffs, he said we might squeak out with a lot of difficulty the profit this quarter we're a good deal better than that in a quarter at least for the moment >> that stock is still a widow maker for sure you get that thing below 300 -- >> for both sides. >> for both sides. you know, it doesn't stay there for very long. back up to 320 >> i counted it's crossed $330 30 times in the last few years >> the company's retail chief angela suddenly leaving. she's been mentioned as a possible successor to tim cook take a look at the biggest premarket winners and losers in the dow.

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the way we look at it is building a relationship and if we can create, we can look you in the eyes and create a life-long loyal relationship where you trust us, you trust what we're teaching you. you trust what we're offering for you to purchase because we're not selling you. and then it's no different than fashion. >> that was outgoing apple chief angela aarons talking to josh

lipton in 2017 she announced she was leaving yesterday. for awhile had been mentioned as a possible successor to ceo tim cook let's get back to our guest host, jason trenert. jason, you mentioned you don't think there's the circumstances that would lead to a u.s. recession before the 2020 election >> yeah. >> you think that the market is priced otherwise at this point >> listen. i think the market is trading at a little less than 16 times 2019 earn education would spit out something more like 17 or 18 times earnings i'm not so bold as to say we're going to trade back up to 18, but i think the risk reward is quite positive the downside risk is quite low especially in some of those you

talked about before. the cyclical sectors which have not really participated in the stronger economic news that we've had since 2016 >> how great a risk is there in the markets that the fed actually does move i mean, it's all but priced in there is no hike any time this year that there could be a cut in the next move rick rieder said it would be against consensus. it would be a problem. zblit would be a problem two this year would be a problem. >> would one be a problem? >> one i think in the second half of the year if the economic news came in, that's largely what's priced in it's not only because of what's happening here, again, inflationary expectations are quite modest here. the problem is what's happening in the rest of the world makes it very difficult for the fed to get out too far ahead of the band if the fed tightens too quickly, it causes a lot of other dislocations

dollar price gets too strong commodity markets go down. in the old days the fed didn't have to worry much about the dollar now it has to worry a lot about the impact of the dollar on risk markets. >> where the fed gets spooked by what the markets do and they go on hold for an extended period of time. >> listen. chairman powell has done -- essentially whispered sweet nothings into the ear for four or five weeks. they might have gotten too far ahead of themselves and the communication probably wasn't as good as it should have been in the fourth quarter of last year.

they're on this path of trying to blend into the work work. >> much easier when they didn't have to have the dots of the consensus call we'll see what happens march >> true. >> all right jason, great to see you. >> thank you for having me coming up, our state of the union reaction kicks off next with the republican senator shelly moore and anthony scaramucci will join us. then do not miss our big interview at 8:00 a.m. eastern time with steven ma nugs you're watching "squawk box" on cnbc

president trump delivers his message to the world >> members of congress, the state of the union is strong >> the president taking aim at the economy, drug prices and more >> disney's magic, beats the street is the mouse house setting investors up for a big 2019? >> is this an old message? >> it's the front door >> disney's electronic arts all on the move this morning

the second hour of "squawk box" begins right now ♪ welcome back to "squawk box" here on cnbc. let's take a check on u.s. equities at this hour. we are looking at a slightly higher open. nasdaq looking lower by 2. here's what making headlines at this 7:00 a.m. hour we're watching walt disney and that topped consensus by a wide margin. analysts had it pegged at a buck

55 boosted by the theme park business and improved are ults at the abc broadcast network also eli lilly out with its quarterly numbers. mixed earnings there revenue did top the consensus forecast lilly cut its full year guidance two pieces of news from streaming service spotify today. company announced the acquisition of anchor for undisclosed announced. it also had its first quarterly operating profit daniel ek will join "squawk on the street" in an exclusive interview at 9:30 a.m. i am very impressed, mike, by our guest host we came in with a little grateful dead. and i'm very impressed >> i grew up in the '60s and '70s, so it was age appropriate.

>> still is. >> we'll talk to you in a seconds of course. few stocks on the move this morning. snap reporting flat user growth putting a halt to the downward trend in numbers that has plagued it over the past year. that is pushing shares up 20%. electronic arts sinking after the video game maker cut revenue for the year battlefield 5 sold fewer copies than expected as it faces competition like fortnite. shares expected to drop 16% at this point president trump delivers a second state of the union to the nation last night. eamon javers joins us now with some of the highlights good morning >> good morning, melissa there were some heartwarming and bipartisan moments in the speech last night included when buzz

aldrin saluted the president and when the president saluted the female members alongside him last night but the president not backing away from some of his core demands in a very divided and very partisan washington, d.c. the president insisting that his proposal for a border wall on the southern border will work and will be effective as negotiations are ongoing on whether or not he could get funding for such a wall. here's what he said. >> simply put, walls work and walls save lives. so let's work together, compromise, and reach a deal that will truly make america safe >> the president also criticizing the democratic majority in the chamber for what

he called an embrace of socialism. here in the united states, we are alarmed by the new calls to adopt socialism in our country america was founded on liberty and independence and not government coercion, domination, and control. we are born free and we will stay free. >> the president also pushed for infrastructure spending and controlling prescription drug costs as well as medical costs more generally the question will be what kind of legislative momentum does the president get out of that speech last night as i said, there were some of those heartwarming moments, but also a lot of democrats sitting on their hands as they watch them lay out an agenda >> thank you, eamon javers

for more reaction to the president's address, let's welcome senator shelly moore capito and our guest host evan bayh great to have you both here with us. >> thank you >> senator,c i will start off with you what was your take of the president's state of the union address and did you think that he was more conciliatory or took a harder stance when it came to the border wall? it's funny when you read the headlines in the morning the day after, it's like a rorschach test on what was said and what people took away >> i think the president went to his core principles, his core values of homeland security in terms of the wall. as chairman of the subcommittee of homeland security, basically i thought he sort of stated the obvious that he has been consistent in his beliefs. and that is that we need a comprehensive border security plan that includes a barrier and a wall

and i think there should have been no surprise of anybody in the audience that the president reinforced that. but i think it's important at least from my standpoint being on the conference committee that the president sort of charged us, get together, compromise, look for a bill that kind of meets all these standards. and so i think he threw it back in our court which quite frankly i'm grateful to and i think those of us on the conference committee are optimistic we can meet that challenge. >> so you do feel charged with the ability now to find a compromise when it comes to this contentious issue of the border wall >> absolutely. we do this every year. we try to strike a balance between our different interests and our different priorities and we find something in the middle and that's what we're going to -- we're getting back to work at it early this morning >> senator bayh?

>> i did notice your colleague was standing and applauding more if we could have the west virginians work this out, i would be optimistic. we hope we can get a deal done here the seeds of a deal should be there because there have been agreements on this sort of thing in the past. why did the president characterize the efforts of the committee a waste of time last week why is he more pessimistic than you are? >> that was disheartening that the president kind of prejudged where we were going as a waste of time. i think as time has gone on, you've seen the commitment from both the democrats and the republicans on the committee in the public statements but also the ability -- he knows that we're negotiating back and forth. nobody's shut down here, to use that term. and so we're working together. and i think hopefully he'll sort of adopt the stance that he did last night this is now in your court, members of congress. come up with a compromise. >> hopefully they'll stay off

twitter. things seem to be going well and something aggravates them and then a tweet comes over and makes it more difficult. good luck to you and hopefully we get a deal done >> i think you bring up a great point here we have the teleprompter trump as we might say, right in conciliatory tone we're waiting for that next tweet -- >> like now. >> like perhaps at any moment we're waiting for that and it's a serious point do you think there's anybody that can get to him and say, listen you've come off this speech. there were some great moments. we had some applause on both sides. we had cheers. when he talked about the number of women legislators how can you get to him saying, you have good will, don't blow it i'll go to bayh and then senator, i want to hear from you as well. >> there have been people around him a long time including his own family members who have been urging him to stick to the

script and try to be a little more on message. it just doesn't work this president doesn't seem to function that way. i suspect we won't see any tweets today because the response to the speech was pretty good. i would look to friday morning before michael cohen's testimony in the house he may be more aggravated then it's part of his dna he doesn't seem able to help himself. >> and the way i look at it, too, i always try to spin something positively because i'm an optimistic person we know how the president feels. he's pretty honest in these tweets while they aggravate and we're all on pins and needles sometimes is there something coming up next unexpected. at the same time i think we know where he stands. so in terms of the committee, i really think the best thing the president can do is let us work our will i hope he stays silent on that the next couple of days. >> you sound pretty optimistic about the makings of some kind of a deal with this committee. is it basically just trading

numbers right now? i mean, characterize the nature of these negotiations and maybe your confidence level that something comes out of it. >> well, i think, you know, i'm cautiously optimistic. but i'm also realistic and realize this could be very difficult. neither the speaker nor the president has given a number certain that if it goes over or under, it's a no deal. i think that is good and i was glad the president didn't get into specifics last night. but there's obviously a strong disagreement there let's try -- you know, i'm speaking with my democrat counterparts in the house and the senate i think we -- you know, after the shutdown i think we all feel like here in congress that we need to prove to the american people we can do what they sent us here to do which is to reach a compromise we should be able to get there we're familiar with the people on the committee >> what's the probability, senator capito, of another

shutdown you did say you're cautiously optimistic on how things are going on the committee level >> well, i don't think we'll have another shutdown. i think it was misery path i don't think it will go that direction. i think the bigger question will be if we reach a compromise, how the president interprets that compromise >> senator capito, i want to just quickly turn it a little bit here because the president did mention opioids once in the speech last night. 47,000 americans died last year from an opioid death whether that's a prescription drug or heroin it's decimating places in your state, in west virginia, in my home state of virginia as well president mentioned it but i do wonder what can we realistically do we can throw money at the problem, but is there a solution on the pharmaceutical side, a hard one that may cost companies money to solve this national crisis >> well, you've seen a lot of -- you've seen us here in congress

address this issue through the support act. but one thing that states are doing as well is to tighten up the ability to get long-term prescriptions for pain to make sure that the accountability is there for the prescriptions, but what you've seen is people moving then to heroin because they're addicted. and then now even -- not even worse but more troubling is methamphetamine. killing people if it's laced with fentanyl. one of the things we can do to that is to stop the flow of the drug because we know it's coming up through our ports of entry on the southern border. getting back to border security, the president made the point if we have the enhanced inspection materials at the port of entry, we can disrupt the flow of fentanyl like we did in arizona just last week so it's all tied together, but it needs to be recovery, treatment, drug courts, education, transition into jobs. it's such a huge problem that there's not one thing that's

going to solve this. and we have to also, i think, pattern our responses after what's working like a lillys place in west virginia that works with drug-exposed babies at birth so there's lots of good things going on, but for me in my life of public service, this is one of the saddest and most deeply troubling things i've ever had to try to figure out what's going on here. >> senator, thanks so much for your time. >> thank you >> great talking to you. senator shelly moore capito of west virginia. our guest host evan bayh will stick around for the next hour we're not done with the state of the union reaction and our own big brother, the mooch,care mu chi joining us today. also secretary steven mnuchin also another guest we'll talk to him about the state of the economy and trade as he gets ready to head to china to hammer out a adtre

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all right. let's talk about the broader state of the markets right now joining us to do that is dan we've had this almost perfect "v" from the beginning of december the stock market goes down worst december ever. one of the best januarys in memory now where are we we've undone the panic for december some of the most beaten up stuff that led the way higher in this rebound. where do you think that leaves the market here? >> i think that's a perfect way

to describe it if we look at where the market is today, we're essentially at the averages of november so it's almost like december never happened which i think makes a lot of sense from a fundamentalal perspective. not that much is going wrong in december therefore, it didn't make sense to have that type of crazy violent move in the market so we're back to where we were november and i think from here, maybe there's a little bit more upside from here, but i think the reality is the force that drove january is kind of -- it's petering out i think the force that's going to drive markets for the rest of the year is one of slowing prov profits growth history tells you it's unlikely that cyclical high beta out-performance you've seen is going to last for the rest of the year if profits growth continues to slow. because the cycle by definition is defined by the cyclicals, right? >> basically profit growth for 2019 right now, forecasts have been revised down. first quarter near zero.

what does that tell you in terms of where you want to be positioned >> i think when the profit cycle slows, you want to move away from cyclicals, away from high beta, and move up the quality change we're focused on large balance sheets and stable growth i think those are the key themes that people need to focus on and not get faked out by this january rally which is the opposite of those kinds of companies. >> what kinds of sectors though? >> well, to some extent, it's the quality aspect that's more important than the sector aspect of it. any company, doesn't matter the sector, that has stable growth attributes, strong balance sheets, good returns on equity that makes a lot of sense. from a sector perspective, a lot of those companies will tend to fall within health care and staples. and even utilities the reason we're not more bullish is we're aware of how far they've come down. they tend to be rate sense ty. we're a little bit more lukewarm >> nasdaq up 11% in january. is that it sounds like you're telling mike that's all she's got

>> i think from here, you know, like i said, maybe there's a little bit more room for those guys to run in that's going to be driven more by sentiment but i think underlying this is going to be really this focus on companies that has stable growth people underestimate how cyclical tech really is. when i was at my old firm, we looked at how each sector and each industry, how sensitive they are to the economy, all these different economic factors. tech surprisingly had the highest earnings correlation relative to ism and lot of these cyclical indicators. which a lot of people don't realize. >> you like china though so is that a planned positioning? because we saw positioning get us a long way from the december bottoms. >> yeah. so at rba, the three things we focus on most are profits, liktty, and sentiment. sentiment for china is as close as bad as it's been.

they're pumping liquidity into the system then from a profits perspective, the current hard data coming in is very weak but we're getting a lot of green chutes out of china. i think that's a representation of the fact they're bucking the trend globally everyone else from a fiscal, monetary perspective is moving towards a tightening bias where china is starting to step on the accelerator pedal. but you're focused on profits which makes a lot of sense what about in the political realm? we have nafta that needs to be reaffirmed we had the president having dinner the other night with the chairman of the fed raising questions about independence of monetary policy. what in the political world would upset your forecast? what are you most worried about coming out of washington >> i think one of the biggest risks for 2019, there's upside risk as i mentioned, we talked about

china. the biggest risk is shooting ourselves in the economic foot, right? policy has the biggest chance of derailing that profit story we're talking about. right now we're looking at profit slowdown. but policy, i mean, if we don't get trade resolution, if we have another sort of policy messed up on the oil front, it's very possible we could have a profits recession which would essentially mean what we saw in december was actually a good foretelling of what could happen for the rest of this year. >> so policy and uncertainty could be a head wind >> even with a shutdown, most people weren't focused on the fact there was a shutdown, that we couldn't debtget a deal even fitch came out saying we will downgrade the u.s. credit that's where you start to see the tipping point of having real effects on the market and the economy. >> thanks very much. richard bernstein advisers coming up, anthony scaramucci weighs in on president trump's state of the union. "squawk" returns in a moment

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till to come on "squawk box," anthonycare mu chi will be our special guest. disney reporting stronger than

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welcome back to "squawk box. the futures right now indicated slightly lower open here the dow looking to lose 51 at the open s&p 500 looking to be down 6.5

and the nasdaq looking to be down 13.5. take-two interactive is tumbling posting notable misses on both the top and bottom lines all right. last night's state of the union had a lot in it. it was the third longest of all time if you're wondering, bill clinton has the first and second longest. you're welcome part of trump's speech was to send a clear message to congressional democrats about working together and keeping the economy on track >> an economic miracle is taking place in the united states and the only thing that can stop it are foolish wars, politics, or ridiculous partisan investigations.

if there is going to be peace and legislation, there cannot be war and investigation. it just doesn't work that way. >> joining us now to talk more about all we heard last night and more, anthony scaramucci sky bridge capital founder, former white house communications director anthony. >> brian, good morning >> it's great to see you >> same here >> what is the difference? because last night's speech, i think people on the left would say had great moments. what's the difference between teleprompter trump and twitter trump? >> well, i mean, it really -- i think twitter trump is when he feels undefended and he's watching the news cycle from inside the white house and he gets upset and feels like he doesn't have media advocates out there defending him. he'll start firing off tweets that i would say are non-strategic. they're distracting from his

message. that's twitter trump but last night is vintage strategic trump. what he's looking at right now is the center for the 2020 re-elect and he knows he's got to come in holding onto his base but reaching out to moderates. >> was that his first campaign speech >> in some ways -- listen, it was a policy speech too. but in some ways i think it really was at the end of the day, that's been the president's core message that got him elected what happens is when you get to washington, you go into this big huge chasm of dividing you start shooting peas at each other. in order to get re-elected, the president knows he's got to get to those moderates the shutdown was related to holding onto that base remember the base has to vote for the president in 2020. they're not going to vote for the democrat, but you've got to get them to turn out at the polls. i think people missed that in the strategic calculation of

shutting down the government now he's in a good spot. >> does talking about compromise mean he's going to compromise? does he need to hold onto the notion of $5.7 billion or close to that for the border wall? there wasn't any indication as to what he would goif up, what he might soften his stance on in exchange for that. >> i personally don't think so i think he could go to his base and say shut the government down for 35 days. i'm doing the best i can the opposition, you see how difficult they are you see how hard it is for me to work for them. i need you to turn out and vote in more republican senators more house of representatives candidates as well so we can really take this to the next level in the next four-year electoral cycle. had he not shut the government and ann colter and some of those people on the right disavowing him, i think it hurts him as it relates to voter participation i think that was the core critical strategic move that he made over the last 75 days >> in another way it seemed like

a setup to 2020, putting the stuff out there that might interrupt the boom if the economy doesn't feel as great in 2020, he could say i told jay powell he shouldn't raise rates as fast as he did. and two, investigations, distractions kind of dimming the mood of the country. it seems like that's also kind of sets up an argument for 2020. >> again, all those things i agree with, michael. and i think him and his speech writers said, okay, let's pick three or four things that if you're an american, forget if you're democrat or republican, you're going to cheer about. you know, the moon landing the d-day invasion cancer survivors children that have been saved. how about prison reform? that was a key bipartisan moment for him. >> so anthony, the president said you can't have legislation and investigations but there are going to be investigations in the house of representatives. not my old body the senate because mitch mcconnell is still in charge there. does the president have the

ability to compartmentalize? bill clinton was investigated but put that over here and focused over here. the president needs some wins going into the election. can he compartmentalize the investigations or will that send him over the edge with constant tweets >> i think he can. he's survived three or four bankruptcies in his corporate life he survived the ups and downs of the campaign and i think he's frustrated by the investigations and some of the investigations are legitimate those are mostly the ones that have nothing to do with him. i think he's just frustrated about the russian situation. again, i -- remember, only 11 days in the white house so i was nine months on the campaign, 12 weeks on the transitional team i didn't see any russian collusion. i don't think the president colluded with russia so let's get that piece of the investigation behind us. these other investigations, the things going on with the indictments, they don't seem that they're causely related and

deeply connected o the president. i think he can compartmentalize. >> there was some squirming going on when he said many of the people in this room voted for a $46 billion basically wall border security bill in the past now they won't give me let's call it $6 billion some uncomfortable stuff in the age of social media, in the age of the 24/7 news cycle, are we going to have any bipartisanship at all? if somebody dares step across the aisle on a big thing, they're going to get eviscerated by their own party are they not >> well, there's that risk that's one of the reasons that they're so reluctant to compromise many of them are afraid of a primary challenge. so we'll get more statesmanship and more compromising when the american people insist on it when they say we've had enough of this partisan and brain dead ideology, we want results. when they start rewarding politician who is are willing to be brave enough to take on some of the radicals and get things done >> af craz i have a crazy idea

i'm not in favor of more new laws but how about a law that says we can't pass any new laws -- >> a law about laws that sounds really smart >> let me finish, ms. lee. let's talk about this. can't pass any law without at least one vote from the other party. so we don't get the 51-0 would that work? is that reasonable >> well, in the senate you got to get to 60 votes so it's more than one just there was something a couple years ago where they said we weren't getting any budgets. so they said if you don't get a budget passed, you won't get paid guess what happened the next year. the bill got passed. >> you change the incentives, you change the way things happen the gerrymandering is keeping these people polarized that's a big issue for the

united states. universal voting like in australia, you did that you start liquidating in the body of politic. but i think the key thing for today because it's a day after the state of the union, did the president do a good job yes or no i think decidely he did a great job last night is he going to compromise? i think he is. i think he is a type of person where, you know, he made that comment that he could shoot people on 5th avenue, his base is not going to leave. i think he's now proven to his base that he's with them and so a couple of compromises here on the way to the re-elect is probably the right strategy. >> so you're in the hedge fund business a year ago in terms of the outlook for the economy and stock market was different compared to today. and so i'm wondering how you see that president playing into how the stock market will do this year >> so the market was down five, sky bridge was up 3.5 last year. we put ourselves in a defensive position market down 4.5, whatever the

right number is. but we put ourself in a defensive position i think the market's going to be fine this year coming out of davos, switzerland, the 3,500 elites up there were decidedly grim. that's a good indicator of where the market's going to be economy will probably be 2.5%, 3% growth and at a 14, 15 multiple what are you laughing about? >> okay. we're debating who's going to ask you -- >> not debating. >> who's going to ask you about "big brother." can you tell us anything it's over. you probably signed -- >> why the heck did you do that is the question? >> melissa, first of all, i like having fun at the end of the day, i was on the bill maher show. i caulked off the bill maher show there were two cbs producers there. they pitched me on being a twist in the "big brother" event and i had a great time doing it. i said yes, i'm going to do it i'm probably the only "big brother" candidate that went

straight to davos, switzerland, to give a keynote speech >> who is the most interesting person real life person >> well, you know, this guy tom green is incredibly smart and very strategic he may over-think the show at the last minute, but he's got -- >> wasn't he married to drew barrymore? >> he was. you're just loaded with all this trivia let me tell you something. okay i had a great time it was four days of my life. and at the end of the day, when people snicker about that stuff, they're missing out on the action so i'm sorry, guys for me it was great. >> you get a lot done in a short amount of time >> who knows maybe "dancing with the stars" is in my future. do you know how to dance, senator? >> i do, but it's not pretty >> i've been taking dance lessons my whole life. i have three left feet, but least see what happens >> could be on "dancing with the stars" next. anthony scaramucci, thank you very much. let's get to phil lebeau we have numbers crossing >> we don't have them yet. you're a little ahead of the

gun. coming up at 8:30, general motors earnings for the fourth quarter. this company has already given its guidance for all of 2019 when you look at shares of general motors, this is a stock that was trading between 33 and 36 through most of the year. then it jumped up. you see that jump there early january. that's when the company had its capital markets day. that's where they gave the guidance and now the question becomes after this earnings report and the conference call was c-- wit ceo mary barra where we really break out. it's tried repeatedly over the last couple of years has been unable to do that don't forget after the earnings cross at 8:30, we have a first on cnbc interview. you do not want to miss this it is with gm cfodhivy cfodhivya suryadevara. we will be talk about the push

to dramatically increase the free cash flow again, numbers coming at 8:30. sorry that you jumped the gun a little bit there, brian, but we'll have them for you in 45 minutes. >> all right, phil we look forward to that. coming up, morning movers including reaction to disney longtime media executive tom rogers will give us the state of the media industry "squawk box" will return in a minute the future of technology investing 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.

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♪ let's check out some of this morning's big movers dom chu joins us here with some of that. hey, dom >> good morning, mike. we're going to start with big pharma we've got shares of eli lilly which are lower around 4,000 to 5,000 shares of market volume after they had a missed quarter. revenues did come in better than expected lilly was helped along by better sales of drugs like trulicity that helps diabetes. those shares off by about 2% take-two interactive is moving lower in a big way around 75,000 to 80,000 shares of market volume reported a sales miss. its earnings, though, were complicated by a tax benefit that means comparability to

analyst estimates are off. then cummins ink down around 1,000 shares of market volume. the maker of engines reported profits that missed analyst estimates. sales though, slightly better. cummins was helped along by increased truck production in north america and better demand for global construction and power generation equipment those shares off by about 3% and that brings us to the slightly over halfway point in the earnings season. the s&p 500 right now up around 6% since the close of january 14th when that big bank earnings season really kicked off it's up about 16%, though, since that christmas eve low back over to you >> all right, dom. thank you. let's get to disney now and the media industry for that we bring in tom rogers, executive chairman of winn view. great to have you with us. >> thanks for having me. >> in terms of the disney numbers, do you find it heartening that the streaming service espn plus actually had

that many paid subscribers for the quarter? which is double the number it had five months ago. >> i have to say i love this transition from the state of the union with the mooch to the state of the magic kingdom and the mouse. it works espn plus, they're going from a model which is impossible to do better than. they're going from a model where espn is watched by 20% of the people, but they get $7 a home across the entire cable and satellite universe including the 80% that barely watch it to go to espn plus where the only way you derive value is selling it to somebody who's going to use it, they're going to do okay with that i have no doubt. but it can't be as good as the existing model that they're coming from which is in decline. and the real issue is, how fast is that decline on the existing business relative to what they can make up here they had some nice sub-ads, but just to make up for their

ultimate fighting championship deal of 300 million of which espn and espn plus split that, they probably need 3 million subs just to cover that one rights contract. so you really got to look at how they cover the costs against something where they can only get revenue from the people who are actually going to wa ch. >> it sounds like you're on the fence of whether or not the new streaming business will offset costs in the core? >> it's complicated because it isn't a streaming service. it's three it's espn plus, disney plus, and hulu and you have question marks on all of them. hulu, you got this huge issue that i don't think anybody's digging into 40% of their adult play is owned by their two biggest competitors. comcast and at&t we really don't know if they have any kind of decision making or governance control, how that's going to be unwound it isn't going to be, hey, we

just walk away from that 40% interest and that's going to be their major non-kids opportunity to chase netflix with so i really think there are a lot of question marks here on all of them. >> tom, math though. help me out with some metath. four is less than seven. mike, you know the answer to this one espn plus charges $4.99 a user they're getting 7 bucks from the cable company. if santoli cuts his cable, they lose 7 he signs up for espn plus, they gain 5 they're losing 2 in that transaction. do we have any idea how many are using it as an add they've got cable and do espn plus otherwise it's a net loser for disney >> that's a huge question. and how many people are going to use both espn and espn plus? my guess is, there's a decent

overlap there. you have the issue of all these skinny bundles where espn will make its way into some of them as people cut the cord and go to these packages of channels, but people will take skinny bundles because those are going to be the lower cost that's where they really take the hit. because today they're getting paid across all cable and satellite subs >> netflix has relationships with millions of customers no one would ever say that disney's streaming service would get that kind of multiple. but if it's not a zero sum game, in other words, you either lose a cable sub to gain another one. are they decently positioned in terms of the franchises, the brand, the fact that they can basically make a billion dollar box office movie seemingly whenever they want >> there's no doubt they are a studio powerhouse. they were before with the acquisition of the fox movie and tv studios even more

so their production capability is huge. but the netflix issue, i think, is one that they got to get away from to your point, no one can catch netflix. i don't think disney can begin to catch netflix but they don't need to catch netflix here to create a asset value that really helps to deal with the issue of the core business decline the question is, how much are they really going to invest there? we don't -- nothing about this earnings report really gave us a clue about that. they're going to have a major issue in term of fore gone opportunity on all the licenses that they're not going to do that's a subpoint to some extent we know what drove hulu so far disney's avengers on netflix people don't talk about that because of the reason they watch netflix. they watch the netflix for the originals. that's a mass ispend we don't know what they're prepared to do there and what

valuation they get is about how long are those losses going to last how deep is that cash hit going to be? when do they turn profitable if that's ten years out, you're going to get a different looking asset value than the $150 billion that netflix sees today. >> tom, great to have you. >> thanks for having me. >> tom rogers. let's get a quick final word from our guest host evan bayh. senator, governor. you've done all these things what's the final takeaway? give us a reason to have some economic and political optimism in america right now especially for the next couple of years >> well, i would characterize myself as an emotional optimist but an intellectual pessimist. by that i mean i think we'll make progress. i guess we'll get a deal with china. whether it will be enforced over the next few years, that's something else but my guess the economy and markets will like that we're not going to have another

government shutdown. they'll work something out there. whether the president decides to declare an emergency and go it alone, we can't say. but the government won't shutdown there will be investigations in washington there will be the usual political dysfunction. my advice would be tune out as much of that as you can and let's hope we can elect people who realize that compromise is an act of statesmanship, not of betrayal this country was found on compromise we need to get back there in our governing in washington. >> well said thank you. coming up, steven mnuchin and his comments following the state of the union we return with this news making inrvw xtteiene

the economic state of the union president trump praising the jobs market and the economy in his address to the nation even as the next government shutdown looms next week. treasury secretary steven mnuchin gins us to talk trump's speech in minutes. gm earnings out this hour. we will speak with the company's cfo. and was this a magical

quarter? >> oh, my god! >> reporting operation overlord is a success >> oh! >> disney beats the street on the top and bottom line, but the heavy focus is on the streaming strategy the final hour of "squawk box" begins right now ♪ live from the most powerful city in the world, this is "squawk box. >> good morning and welcome back to "squawk box" here on cnbc we're live at the nasdaq market site in times square i'm melissa lee with mike santoli and brian sullivan dow looking to lose 44.5 at the open spds looking to be down by 7.5 and the nasdaq looking to iniif

at 15 points you've got the 10-year at 2.69%. all right. trump trumpeting american job gains during his speech last night and also hitting much more including infrastructure, trade, and a bunch of other things. eamon javers joining us with the wrapup speech that clocked in at the third longest of all time. there was a lot in it. >> well over an hour of speech last night interrupted as the state of the union speeches are with a lot of rounds of applause the president reaching out for middle ground with democrats on a number of issues including infrastructure and pharmaceuticals. but there was one moment that stood out above the rest in which the president talked about the role of women in american society and then he reck niced that a number of the democratic female lawmakers had stood up to cheer what he had just said. the president, of course, knew what was coming up in the teleprompter here's how he handled that moment >> don't sit yet you're going to like this.

exactly one century after congress passed the constitutional amendment giving women the right to vote, we also have more women serving in congress than at any time before. [ chanting usa ] >> that's great. >> so it was a well received and bipartisan moment. but for every one of those, there was another moment in which the president stuck to his rhetorical guns on some of his key issues including the wall and immigration. he also criticized democrats for embracing what he called socialism. >> here in the united states, we

are alarmed by the new calls to adopt socialism in our country america was founded on liberty and independence and not government coercion, domination, and control. we are born free and we will stay free. >> so the question now is what is the impact of last night's speech on the president's legislative agenda up on capitol hill you know, he's not taking to the road like other presidents have done to sort of hammer home the message from last night's speech instead the president will be here in washington today he'll be announcing his selection for the world bank we expect it will be david malpass of the treasury department to get that nod then we'll see whether the president can make any progress on those bipartisan initiatives he talked about in the state of the union last night, guys >> all right eamon, thank you very much eamon javers at the white house

for us let's get to our "squawk" news maker of the morning joining us to discuss last night's state of the union address, treasury secretary steven mnuchin thank you so much for joining us >> thank you great to be here with you. >> the president spent a lot of time in his speech proudly outlining the progress the administration has made when it comes to the u.s. economy. trade, though, looms large when it comes to wall street's outlook for the economy. and an outlook for corporate profits. and i'm wondering, as this is prolonged, as this process keeps going on, do you acknowledge this could be a drag on that progress that trump praised so proudly last night >> let me just say, the u.s. economy continues to perform extremely well and really we see a slowdown in europe and other parts of the world but the u.s. economy is still very strong. and that really is a result of the economic program which has always been tax reform, regulatory relief, and trade we're pleased lighthizer negotiated a great deal with

usmca. that's one of the thingswe'll look for congress to pass. >> are you on your way to beijing in a couple weeks? and how are you setting up for that meeting what's your outlook? wall street wants a deal, obviously. what can you tell wall street? >> we had very productive meetings last week here in d.c a large team of us are on our way to beijing next week we're continuing the talks we will put in an enormous amount of effort to get a deal. >> what does a deal look like? i think that, you know, parts of it, you know, tariffs, when it comes to tariffs it's easy to say they could be halted or tariffs could be lifted. the other part in terms of structural reform are really much bigger thornier issues. can you tell us what a quote, unquote, deal could look like when you come away from those talks and whether tariffs will always be in place as long as the structural issues remain outstanding.

>> well, we are trying to reach a comprehensive agreement on a large range of issues. now, the good news is we have been talking about these issues for over the last year these are everything from structural issues to technology issues to the long list of issues that were in the 301 report and we are also very focused on free and fair trade for u.s. companies to have access there and to have a more level playing field which will bring down the trade deficit. >> mr. secretary, it's brian sullivan what was if the usmca is not approved what happens then? if there's no nafta, effectively? >> i'm not going to comment on what would happen if it's not approved because this is something that ambassador lighthizer has worked very closely with both the republicans and the democrats. it's an enormous step forward on a long range of issues so i really don't see why this wouldn't be approved unless we get to a situation

where the democrats just refuse to bring it to the floor as long as the democrats bring this to the floor, i think we're highly confident this will be passed >> mr. secretary, i want to bring it back to china and this notion that, you know, you have been talking about these bigger structural reforms for the large part of a year now that really underscores the notion that these are very hard issues to deal with. so given a march 1st deadline, mr. secretary, can you envision a scenario where the tariffs are halted or lifted even as these structural issues are being worked out >> i don't think it would be productive to speculate on the outcome because we have a lot of work left to do. as i've mentioned, there are a wide range of issues we're working around the clock if we can't get to the deadline, it's not because we haven't worked around the clock. i think there's a big commitment on both sides to try to meet this deadline. and we're working under the direction of president trump and president xi hopefully we'll continue to make progress >> mr. secretary, so from your

perspective, are the senate issues that you need as a threshold for making an agreement with china already on the table? do you know which negotiating points right now are in play to get to that march 1st deadline >> well, one of the areas we made a lot of progress on last week was the area of enforcement. one of the things that's very important to us is if there is a deal that it's an unforcible deal we don't want this to be an agreement that's not enforced. we need to do a little bit more work on the mechanism. but there are a lot of issues here we're making a lot of progress there's still work to do i look forward to the trip next week >> the purchase of soybeans, the offer to buy 5 billion tons of soybeans when the chinese delegation was here was touted as progress. maybe the chinese willing to make a deal. some people look at it a different way, that it's -- there's some irony wrapped up in the fact this is being touted as

progress when really we want china to move away from a centrally planned economy. and move to more of a free market how do you read those tea leaves if they are tea leaves at all in terms of whether or not the chinese are actually willing to come and make some progress on some of these other bigger issues >> soybeans are important to our farmers. we are a big supplier of soybeans but let me just say, this soybean issue has been exaggerated and there's a little too much focus on just the purchase of soybeans that's one of a lot of issues. and we're really focused as we've talked about on the structural issues. but the good news is the u.s. economy is doing terrific. we continue to have very strong jobs numbers i think you've just begun to see the beginning of tax reform. i think you're going to see that kick in a lot again. and as the president talked about last night, his economic program is working we're not going back to socialism. we're not -- we're going on an

economic plan for america that works. >> in terms of the chinese economy, we certainly have seen a slowdown, mr. secretary. that has been viewed as leverage over the chinese in making this deal at what point, though, can you see that actually backfiring because a lot of u.s. companies clearly do business in china and feel that slowdown themselves which then in turn hurts the u.s. economy we live in a global world and a slowdown in one of the fastest growing economies in the world certainly has effects elsewhere including the u.s. >> well, there's no question there is a slowdown in china i think a lot of that is somewhat inevitable given various things they are doing. let me just emphasize if we can get a good deal for u.s. companies. this is a one of the single biggest opportunities. there's a tremendous growing middle class this is an enormous opportunity for u.s. companies to participate in that growth

>> is there a pain point, i guess is another way of asking this, mr. secretary. in terms of how much pain the chinese economy feels because of the ongoing trade negotiations and how much pain you see the u.s. economy suffering because of a china slowdown? >> well, i don't see the u.s. economy suffering a slowdown at this point at all. matter of fact, the outlook is very strong. i was with a group of ceos yesterday. they continue to have a strong outlook on u.s. business i think we've made a lot of progress already on trade. and i think the outlook for the economy this year is quite strong matter of fact, the u.s. is outperforming the rest of the world. and we continue to see a lot of capital coming into the u.s. creating more u.s. jobs, building u.s. factories. so we're quite pleased with that >> how much do you watch the stock market, mr. treasury secretary? >> i've always watched the stock market a lot i think, you know, i've been in the investment business since i

graduated from yale. i've tended to watch the stock market every day since then. >> we've had a pretty good start to 2019. do you view the equity market's rebound from december as a positive sign about the economy? do you find optimism in the fact that people have come back into the markets after what was a december to forget >> i do, indeed. my comments in december were that i thought there was a real disconnect between what was going on in the economy and what was going on in the markets from everything that we were hearing from ceos and business leaders around the u.s but as i've commented before, markets are never efficient. so you usually do see markets moving in both directions. corrections are a healthy process. we encouraged people to be long-term investors and i continue to think over the long-term the u.s. market is one of the most attractive places to put capital in the world >> mr. secretary, obviously the

president addressed his border security objectives last night in his speech. and of course there's a committee trying to come to some kind of a deal to keep the government open right here can you give us any insight into what the state of those negotiations are do you think there will be another government shutdown? >> well, the president has been very clear on border security. and border security is a whole range of different issues that he's focused on. which i think are very important to everybody one of those pieces is a physical barrier i think that we already have physical barriers. i'm very hopeful that the republicans and the democrats will reach a compromise. these are important issues democrats have supported physical barriers in the past. i don't know why they wouldn't do that now. i think there's a compromise deal to do and i hope they can deliver that to the president. >> you had a dinner that was

reported about not too long ago, mr. secretary. it was a dinner with the president, the fed chair, as well as the fed vice chair has the president expressed to you a change in opinion how jerome powell is doing >> i think it was a productive dinner on monday night we had talked about the potential for the fed chair to meet the president this is something that's occurred in the past i extended that invitation to jay powell on friday at the request of the president and we had a very casual dinner up in the residence. i think it was quite productive. chairman powell gave the president an overview of the economy and what he was seeing which was quite strong and consistent with his public comments and the president was quite engaged. we talked about everything from the economy to the golf match with tiger and jack to the super bowl we covered a wide range. it was a -- i think a terrific meeting for them to get to see each other they had not met since jay

powell was put into office i think it was a productive meeting. >> was there any acknowledgment of the pivot he had made from his language and markets or even the end of december to the beginning of january there was a market pivot in terms of the fed language and how it views future rate hikes and its balance sheet. >> i think that the fed chair has been very clear in looking at the economy and the fed being clear that they have different tools. it's their job to focus on the growth of the economy. which is a very, very good thing. again, i thought it was a very productive meeting it was a casual meeting. we enjoyed a wide range of topics >> was there a thank you from the president to the fed chair

thank you, mr. fed chair, for being easier now on rates? >> no, there was not a thank you. there was a thank you for coming for dinner in both directions. and in very good conversations >> how do you guys walk that line you know the line, right it's supposed to be an apolitical office, but i understand there's questions you probably have with the fed chair. they might have for the white house and treasury secretary are there preset parameters when you go in? how do you guys walk that fine line because i'm sure the president just knowing his personality would like to say to melissa's point, you're going to raise rates again this year. >> well, i meet with jay powell every week we have a very productive relationship this has been a relationship that other treasury secretaries and fed chairs have had for a long period of time. we talk about a wide range of issues every week. everything from the u.s. economy, international economies, regulatory issues i update the fed on everything from our trade discussions to

everything i'm hearing the fed with their reserve banks all over the u.s. with the information they're hearing back so we have very open two-way dialogues. as it relates to the dinner with the president, there were no preset parameters. i think jay powell is very clear that he wasn't going to say anything in private inconsistent with what he said publicly although we did have somewhat of a covert operation getting him into the white house so it didn't create speculation. jay powell put out a statement right after the meeting. we weren't trying to hide this and, you know, again, it's something we'll contemplate again in the future. it's consistent with there have been meetings between presidents and fed chairs in the past. >> did he have like a wig and a mustache on? >> he did not. >> you said covert operations. i didn't see the helicopters i was wondering how you snuck in the fed chair? >> they did it, that's for sure. mr. secretary, want to ask you

about middle tax cuts. are they on the agenda still >> we'll look at everything. you know, we obviously have to now work with the democrats on bipartisan issues. there's a long list of issues we'd like to work on the president talked about infrastructure that's something he's talked about during the campaign. it's very important. this has been important to democrats in the past. i hope we can do something housing reform is something that i am very focused on chairman crapo put out an outline last week. i'm encolonuraged the senate wil take this up with us we have the debt limit my position is clear. we need to raise the debt limit. that's something we're going to focus on there are a lot of issues that we can get bipartisan support on >> give us more clues as to infrastructure this is a bipartisan issue i've been down to d.c. i've done meetings with congress men and women. you've got some of the

pennsylvanians on board of this. both bipartisan support. the issue seems to be funding. how do you do it is it through a raise of the gas tax? is it through another form of stimulus is it through a big just spending package where do we stand with that infrastructure bill? and how do you believe is the best way to pay for anything that we might do >> well, the president has been consistent that infrastructure is very important. you heard him talk about it last night in the speech. he's a builder and he wants to build. and we'd like to have a trillion-dollar package that doesn't necessarily mean that it will cost a trillion dollars that's not my expectation. i think the cost will be substantially less there are many ways to have this paid for there's also many ways of leveraging other money whether it's states money or other money that can be spent on infrastructure and we look forward to sitting down with the democrats and the republicans in congress and having a bipartisan solution to pass a infrastructure bill >> quickly, a lot of hedge funds

will care about this freddie mac, fannie mae, where do we stand? >> we want gse reform but also more broadly housing reform. we'll look at fha. we want to make sure if we fix the gses, we don't end up with too much risk on the government balance sheet with their market share increasing as i've said before, our preferences to do something with congress on a bipartisan basis, that doesn't work. we do have administrative tools that we can make moves in housing. and we're looking at all of our options. >> mr. secretary, last question. how do you feel about what seems to be a war on capitalism going on particularly on the part of democrats. the new candidates but also a proposal from senator schumer and sanders effectively saying corporations shouldn't have the ability to issue buybacks and raise dividends whenever they want to.

there should be strings attached >> i'm surprised senator schumer attached his name to that article. senator schumer has been close to the financial markets for a long period of time in new york where it's a very important area they need to allocate capital. that's important to the economy. share buybacks are just one of the tools of the capital dividends are another tool and it's a fundamental premise if companies can't invest, they return it to shareholders. that gives shareholders the right to invest in other areas so we don't believe in a centralized planned economy where the government puts restraints on it having said that, i think the issue -- some of the issues that were in that about worker training is something that this administration believes in very much but we want to work with companies on these issues. we're not looking for centralized planning out of congress to allocate capital

>> mr. secretary, thank you so much for your time this morning. we really appreciate it. always good to speak with you. >> thank you >> steven mnuchin, the treasury secretary. coming up, just over an hour to the opening bell. check out the futures right now. they have lifted in the last 15 minutes. the dow down about 22 points at this hour. s&p looking to open down about five that's 0.2% or so. nasdaq just below the flatline after the break, we'll hear what trump's message and what we just married from steve mnuchin means for wall street. stay tuned you're watching "squawk box" on cnbc each day our planet awakens with signs of opportunity. but with opportunity comes risk. and to manage this risk, the world turns to cme group. we help farmers lock in future prices, banks manage interest rate changes and airlines hedge fuel costs. all so they can manage their risks and move forward. it's simply a matter of following the signs.

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all right. welcome back to "squawk box. we're seeing a turn on the futures. the fair value continues to go up we are in the green. we've had a pretty good month. in fact, we're up 8% on the dow for the month of january really, i know we're in february now first couple of days, we're seeing continuation. maybe every day in february we're going to see gains we're batting a thousand in baseball terms >> well, almost six days into a 28-day month we'll see if -- >> that's some good math you are the markets commentator. >> well, i couldn't do the six over 28 in my head let's get some reaction to what we just heard from steven mnuchin and what it means for the markets. joining us now barry nknapp. barry, it doesn't seem the

markets are fixated on economic factors except for trade it seems like that's what we're looking for. >> i would agree >> and steve liesman is here too. >> i didn't know if i should take off the set >> he introduced barry and didn't introduce steve he goes like this. >> should i be here? >> i'm not used to the whole page break thing >> i see steve over there. no, i think that when you think about potential legislation or even administrative actions from the administration this year, gse reform holds some interest once he's confirmed, the question that was asked today was an excellent one >> thank you. >> it will be interesting and important to the markets as to how that plays out but trade policy is really the only matter of business as it pertains to things that really are impactful for the markets. >> do you think right now it is suppressing risk appetites or

market valuations? >> i think you could make an argument that business confidence has taken something of a hit what i like to look at is the capital spending plans from the regional fed surveys those are still up near highs. but there was "the wall street journal" small business survey that took something of a hit in the latest reading so there's some questions about business competence. that's the primary mechanism i would be focused on. >> steve, we're going to see you in a little bit. we got some key economic data. apologize for letting you slip there. some of it was delayed because of last month's government shdo utwn are expecting earnings from gm any minute. we'll have those after "squawk box" returns from a quick break.

welcome back to "squawk box" live from the nasdaq market site in times square. rick santelli standing by with the numbers. >> all right we're looking for fourth quarter preliminary productivity unit labor cost i have a feeling this is not going to be an easy process. we're also looking for november trade balance partial shutdown, partial data points. don't see anything coming out yet. is i know that gm is going to come out momentarily and phil le bow is going to be all over that my guess is maybe we should go to phil and come back because the data just is not being released >> that's a great idea, rick you look into that let's get to phil lebeau with gm's fourth quarter results.

phil. >> not surprisingly shares moving up higher as the company reported fourth quarter earnings that easily beat the estimate on the street gm earning $1.43 a share the estimate was $1.22 revenue much stronger than expected $38.4 billion. that's nearly $2 billion above the expectation from analysts. profit margin of 7.4%. made $2.8 billion in the fourth quarter with free cash flow of $4.2 billion and really, it's only about two markets that people are most focused on when it comes to general motors let's start with the good news north america running hot as it should be. because of the strength of trucks and suvs. gm making $3 billion in the fourth quarter china where gm is either number one or a close volkswagen, the profit down 33% going from $450 million in the

fourth quarter of last year down to $300 million in the fourth quarter of 2018. so guys, those are the numbers from general motors. you see the stock moving higher today. now trading above $40 a share. coming up in about 20 minutes, we are going to be talking with gm cfo dhivya suryadevara. you don't want to miss this interview. remember again, guys, in terms of guidance, they already gave their guidance in 2019 at the gm capital markets day about four weeks ago. and that's why the stock moved higher at that time because of the expectation that as they right size the business in 2019, you will see a growth in free cash flow and profitability. again, gm shares moving higher on these 4q earnings >> we will see you in a few minutes for that interview meantime, let's turn back to barry knapp as we break down gm's earnings. so what's your take on -- we saw a little bit of a turn in the

futures. we're down 21 in the dow now >> my perspective is similar to what we saw from mmm or cat for that matter. that china's slowing internal demand but also their export channel is this big catastrophic event for the u.s. when, in fact, you look at these corporate results, they're still more leveraged to the u.s. and if anything, the weakness in chinese demand puts downward pressure on prices here in the u.s. and has made things easier for the fed and all. so it doesn't have the same negative impulse as the heavy industry hard landing from 14 to 16 when their investment slowed in -- >> so we shouldn't worry about all the bad economic data coming out of china >> not as much in 14 to 16 this part of the chinese weakening story is not nearly as significant for the rest of the

world as when steel and all that excess capacity weakened back in 14 to 16 >> we do want to get back to rick santelli. he's got some of the data points we were expecting. >> right on manufacturing productivity fourth quarter preliminary, we were up 1.3% that's much better than the three quarter 1% average from the fourth quarter of 17 to the fourth quarter of 18 on the november trade balance, expecting minus $54 billion. a little lighter than that following a slightly revised minus $55.7 billion. so we haven't gotten some of the service numbers with productivity or unit labor costs, but at least we have some data back to you. >> steve liesman is here so steve >> this is good for fourth quarter gdp growth we'll see if it ends up taking away from other places, the trade deficit, that is

and overall i continue to look for the recession the market predicted in december. now, the -- it's kind of like a truth and consequences game. the market gets scared about a recession or whatever in december that doesn't show up in any of the data we get in january the result is in part it forces the fed to change policy i'm not sure that was wrong that the fed would change policy. but not for that reason. i don't think you have the slowdown we're tracking now in the area for the quarter. weaver not tracking it we don't have any data. if these car numbers come in well is that -- and i'm fascinated to hear what barry has to say about the outlook for earnings i hear a lot of pessimistic stuff that we're going to do zero in the first quarter? >> i don't think it will be near that i think we still have -- >> but you hear those numbers?

they are saying goose egg, right? >> that's what people are quoting. i think it'll be much higher than that. in large part because you still have strong revenue growth and there's so much operating leverage look at the industrial -- that's given the limited data we've seen >> so bob pisani yesterday at the news meeting, i don't know if i should say this publicly, he was talking about 0% earnings growth which is unprecedented >> but revenue numbers are very slow to get revised. the analysts kind of get the earnings numbers before. >> these are guesses by the analyst communities. >> by companies underpromising >> speak margins has been the story for three or four years. >> peak everything. >> and part of the reason they

haven't peaked is innovation adoption >> if in december the markets did what they did, they tanked, and the fed rearranged its thinking the markets according to mike santoli has come back. does that mean the fed is going to now readjust and get more hawkish? >> i don't think they'll get more hawkish i believe it's possible to have a rate hike this year. but i think it's probably in the latter six months of the year. i think if we continue to run above potential, if inflation firms up, if it looks like the global economic weakness i had a rate hike checklist and had four or five factors on that you got to check two of them you got to have the global weakness goes away and get a trade deal some of these uncertainties go away i think of the fed in three-month buckets. and i'm pretty much going to rule out this first three months and i'm thinking about the second three months. i think that's where we are right now.

>> i chose october in your surv survey, by the way >> thank you >> i think the major point is the real reason they slowed and powell said back in september, inflation is not responding to labor markets. so it's really the inflation outlook that's key it's highly unlikely that's going to turn with downward pressure on prices from china, germany, all the export oriented economies on the core goods prices and the service sector prices have been stable for some time. >> can i talk about my interview before we go >> not a bad one i'm going to talk to janet yellen today my first question is going to be what's happening with the economy. where is that recession? >> what's your last question going to be? >> we got to go to that. >> why aren't consumer prices responding to -- >> that's a great question that's something yellen will have a lot of thoughts on. >> 2:30 p.m. eastern time, janet yellen stay with us coming up, disney topping

expectations with the first quarter earnings last night. it's the streaming strategy that's getting a lot of attention. today tuned. you're watching "squawk box" on cnbc

disney beating expectations on both the top and bottom line in its litest quarter. it's the company's streaming strategy that was in focus on the conference call. julia boorstin joins us now with more hi, julia. >> good morning to you cei bob iger focusing on the direct to consumer business announcing that espn plus now has 2 million subscribers. that's double the number from five months ago. also saying he's bullish on disney plus. >> the fact we have a technology platform that's working, the ability to sign consumers up en masse, the use of the primary

platforms to promote the new platform what we believe will be a strong price to value relationship with disney, and then the strength of all the brands i think it all adds up to a very, very positive picture. >> iger saying the company's structure enables it to leverage those brands for digital and minimal additional costs gave up some of their after-hours gains in that earnings call while the company's cfo warned that the studio will face tough comparisons in the current quarter with revenue expected to be down as much as $500 million compared to the year earlier quarter. iger also saying that the economic slowdown in china has impacted the attendance of their shanghai park. analysts weighing in with a big focus on the company's streaming plans. saying, quote, while disney plus doesn't have a paying subscriber yet, the company will own an unrivalled team library to activate consumer interests. we'll hear more about that disney plus product on the

company's investor day coming up on april 11th. >> bathank you very much. joining us now is the man who literally wrote a book on disney jim, good to see you >> good morning. good to see you. >> a couple years ago when you talked about the pace of the cord cutters and the people losing cable tv, you'd think we'd be at zero by now >> right >> did you find any -- and of course we're asking -- we have a vested interest in this question -- any reason for optimism that that pace of decline on the abc side, espn side is slowing? >> definitely. i think one of the key lessons from this particular earnings result is that the cable model, the old media world is not imploding. they grew revenue 7% and they did indicate a slight decline in subscribers to espn, but it must be very modest that's not falling apart which actually, you know, to me makes it interesting a lot of ceos would look at these results and say, well, i

don't know that we need to take this bet to transform the model. because it's really pretty stable i think they do have to make the change, they do have to pivot. and the streaming looking ahead is going to be incredibly important. >> that's important for shareholders because we did the math earlier espn plus is 5 bucks they get $7 from a cable subscribe subscribe subscriber they want 7, not 5 >> they get that from many who don't even want it it's in their bundle so they get huge numbers i've seen a lot of analysis of these numbers and you've got to really get a premium price for that to equal the cable revenue. look, there's a devoted base there. again, i think when you separate out the people who really want it and will pay for it directly, they will pay quite a bit for this product >> there are comparisons to netflix in terms of the pie they're going after and what they need to spend is that misguided? is that comparison not valid

because they're not going after every single netflix subscriber. so therefore, the budget shouldn't have to be that much either, right? the assumption is they're going to have to spend a whole lot -- >> they already spend billions on content. >> that's right. >> they already have most of their product. i mean, they are ramping up production you are going to see higher expenses they've been saying that but the big money they've spent primarily for the premier sports franchises, they're already paying for those right they may have to renegotiate those. but i agree. they're not going to have a lot of incremental cost. i think the head-on competition with amazon and netflix is a little bit exaggerated disney has a clearly defined market that so far netflix and amazon have not seriously targeted particularly sports to some extent. so they do have a very, very strong brand in that area. very strong consumer following and they've locked up a lot of

the rights >> you mentioned looking at the resilience of the traditional cable model, maybe they shouldn't have done this if they hadn't, if they seemed like this exhibit "a" of dilemma, they couldn't have changed the conversation >> no. >> now they get to say, look we did this big fox acquisition. we're doing this direct to consumer rollout it's kind of messing up the traditional financials, but don't worry about it because we have a grand plan. >> yeah. i feel they had to do it i give them credit for doing it. i say some people wouldn't have, but they had to get ahead. they couldn't wait for the disaster to come to make a bold move like this you know, they had some modest losses i give them credit for releasing the direct to consumer results i think those losses are going to get bigger. there's going to be some investment here. this is very early i think espn plus is really a pilot for the bigger operations.

2 million subscribers is not a big number really. >> it's like they're testing it. they want to see what works. >> i think that's good because one of the big concerns here is that disney has never really been a technology company. they have not succeeded trying to get into the digital channels particularly before now. what does disney know about delivering content >> they had the mlb effectively. >> that's been one of the big question marks and i think if they can use espn plus effectively which iger says they've learned a lot and they're doing well, that's going to reassure people when the big leagues come along >> they get the wristbands at the parks. now they got "star wars" and the marvel they can keep raising prices jim stewart of "new york times" and disney book author, thank you. >> thank you now earlier this hour, treasury secretary steven mnuchin telling us both the u.s. and china are trying to find a compromise on trade.

>> there are a wide range of issues we're working round the clock. if we can't get to the deadline, it's not because we haven't worked round the clock i think there's a big commitment on both sides to try to meet this deadline and we're working under the direction of president trump and president xi hopefully we'll continue to make progress >> let's get down to the new york stock exchange. jim cramer joins us now. he also said that talks have been productive. how should the markets take this >> well, i mean, i think that i want to hear from peter navarro because secretary mnuchin is obviously very pro deal. larry kudlow, very pro deal. we hear so many things from peter navarro saying we're not going to have this kind of deal. we're not going to give up on intellectual property. we're not going to give up on basically theft. and so what i hear is one side wants a lot of stuff bought. i think the mnuchin side is about having stuff bought from us and i think the navarro side and

also vice president pence's side is to say, listen. this is about military, spying unless they cut that stuff out, we're not having a deal. you've got two sides of the camp >> it's interesting though because the treasury secretary had said to us that the purchase of soybeans, for instance, was the -- making a mountain out of a mole hill basically. that that wasn't a big thing buying stuff is not the heart of the deal and yet -- >> no. well, it's not ag. the idea is that they'll commit to buying boeing, commit to apple. the idea they'll commit to emerson, honeywell it's not ag. and it's also like joint ventures will no longer happen they'll let morgan stanley in. they'll let jpmorgan those are all fine and that's what secretary mnuchin wants. but when you start getting into what the trade representative wants, navarro, you're really

just talking about we want an end to the 2025 initiative we want an end to belton road. and we're going to come into venezuela and you know what, china? all that money they owe you, forget it. you're not going to be able to take the oils. won't be able toe oil. they're coal warriors, right they're coal warriors. i got to tell you, i think they're the winners. navarro is the winner. the president is a coal warrior. >> we'll see you in a few minutes. >> okay. >> good to see you. >> thank you. >> jim cramer. don't miss stras zelnick later ♪

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welcome back to "squawk box. general motors posting fourth quarter results earlier this hour back out to phil lebeau who joins us with a special guest. phil >> let's bring in dhivyha suryadevara, the cfo of general motors joining us from the company's headquarters fourth quarter earnings, much stronger than the street was expecting. that's why your stock is up 4% premarket. you look at the fourth quarter, do you look at this and say big improvement in terms of north america, but you have some concerns perhaps with china? >> yes, strong results across the board for the quarter and for the year and this was despite the challenges we faced from a commodity and fx perspective strength in north america as you

talked about we still posted $2 billion of equity income in china for the year and we had strength in gm financial as well. and if you look at these different segments, i would say that north america was helped by our truck launch and the continuing strength in our crossovers as well as a laser focus on cost. we're impacted more by our launch costs as well we had $100 million of impact from our new launches of vehicles coming up in 2019, that also impacted our results. but all of this pointsto the earnings resiliency of the company and the execution and volatile environment >> i want to talk more about china, dhivyha, only because you guys are a great way of focusing, so many people's attention on china and this question about whether or not the economy there is slowing down yes, you had the launch that impacted fourth quarter results.

your equity income was down about 33%, fourth quarter over fourth quarter how much of that do you look at as the launch cost and how much do you look at and say we have a market here that is slowing down what we're trying to get an understanding of is what is happening with the chinese economy. >> i think if you look at china, obviously q4 was a very volatile quarter. and we saw pressures from a volume and pricing perspective in january, you're seeing signs of stabilization across a number of indicators, early days, but we're keeping an eye on it there is also talk of stimulus and we're keeping an eye on. and if you look at our position within that, we're constructive about the fact that we are a very unique position in china, we have 20 years of market leadership our brands are very strong and we have excellent launches coming up across all of our brands the strength of cadillac, cadillac was up across the board about 20% year over year in

2018, in a declining market environment. so what we're focused on is what we can execute and we are cautiously optimistic about the measures being talked about, but what we can control is our execution. >> so just to be clear, just to put a button on this, you believe the china market, to a certain extent, is stabilizing in terms of auto demand out there. it may be lower, it is not falling off a cliff as some people have feared. >> yeah, our outlook in the china auto industry is for flat industry year over year. >> real quick, i want to talk about what is happening in north america. you're idlinga number of plants, in the process of shedding about 14,000 workers as you bring down your costs in north america. and yet there are some on wall street who look at your guys capacity and they say, they still have a little bit too much capacity whether you look at the fairfax plant out in kansas city or you look at some of the other plants is there -- can you guarantee analysts right now that you have right sized the business, that we will not see further cuts either in 2019 or 2020

>> we have nothing new to announce today the actions we announced in november were aimed at right sizing the capacity. and you know, phil, there has been a shift in -- in demand from a passenger car towards crossover and that's not new news and the actions we took in november are necessary actions to position us for the long-term success of the company beyond that i don't have anything else to share today >> quick snapshot of the u.s. consumer are they continuing from your perspective to buy the trucks and the suvs at the rate that you expect are you seeing any softness at all? >> no, our outlook for our auto sales this year is low 17 millions total sar and what we see across the board is strong balance sheets from a consumer perspective. we have wage growth and unemployment at a constructive level. all of which point to a healthy u.s. economy

so we may be at a plateau, but it is a plateau at a pretty strong level, and we are seeing signs of continued demand and the truck sales are going well our new truck launch has gone exceptionally well and you're seeing that helping the results today and we continue to see that into 2019 >> dhivyha suryadevara, the cfo of general motors joining us first on cnbc this morning, just minutes after the company posted better than expected earnings results, guys. that's the reason why you look at shares of general motors, up almost 4% at premarket following the better than expected earnings guys, back to you. >> pretty upbeat take, phil. thank you. up 3.3% right now. meantime, spotify announcing two acquisitions earlier this morning, the music streaming service bought gimlet media and anchor, both for undisclosed amounts. they say the acquisitions will help it become the leading producer of podcasts the company reporting its first

ever operating profit with premium subscriptions up 36% compared to a year ago and a programming note, spotify ceo daniel ek will join "squawk on the street" at 9:30 eastern time. take-two is down in premarket trade, that's impacting other game publishers as well. missing on the top and bottom lines. ea reporting numbers late last night. missing bottom line estimates by one cent, cutting the revenue forecast as well ea down 14.5% with take-two down by 9 barry, the treasury secretary said he seemed optimistic when it came to trade are you? >> i am. in part because getting intellectual property protection for chinese innovators is in their interest not so much to protect against stealing there is real incentive for them to do that there is also incentive for them to stop protecting their heavy

industries, start cutting steel capacity so a deal with us actually gives them the cover to cut that and so i think a deal will happen i don't think it will be incredibly economically impactful, but i think it will happen. >> barry, great to have you with us for the hour. barry knapp of ironsides that does it for us on "squawk box. fun to be here, for all the gang we'll see you tomorrow "squawk on the street" is up next ♪ good morning and welcome to "squawk on the street. i'm david faber along with jim cramer we're live from the new york stock exchange carl on assignment this morning. let's give you a look at futures. half hour until we get started trading on a hump day. you can see there, i don't know, how do you characterize that maybe up a little. >> eh. >> it is eh. european markets, we can make a more definitive judgment on those. they have been open for quite some time. mixed picture there.