it doesn't bode well for nike landing the most coveted nba rookie shoe deal in years. it is thursday, february 21st, 2019 "squawk box" begins right now. good morning welcome to "squawk box." becky quick is off today take a look at u.s. equity futures at this hour we'll show you what's going on dow jones looks like it would open up 46 points higher nasdaq looking to open higher as well about 22 points higher the s&p 50000 up close to five points some of this off of, as we have off the screen here, a little bit of hope on china trade, but we're going to see about that. we'll have more of a conversation in just a moment. let's just show you what's happening overnight in asia. a little bit of movement there

the hang seng in particular. then european equities right now are looking as we flip it around, you are seeing there, i don't know, you want to call it a mixed picture? i guess the dax and cac are up the ftse 100 and mib down. then quickly, the treasury yield right now the ten-year at 2.663. >> uber has filed for an ipo, but reports say it needs several

more weeks to prepare. ub uber's valuations believed to be -- it operates in more cities internationally and has lots of different businesses like uber eats, and lyft is primarily available in the u.s. and canada a big issue, guys, and i think an advantage for lyft in this case to get out ahead in front in terms of how you set the valuation relative to an uber because i think uber's business while they -- while we talk about them in the same sentence, i think long-term we may actually talk about them as being very different businesses. >> uber has made some bets on autonomous driving, on ai, on food delivery. it's got all these other ancillary businesses it has the increased regulatory risk in addition to the increased growth potential in other countries. >> the question of valuation perspective is are you going to like the pure play version of what lyft represents, or are you going to like the more conglomerate version of what uber represents? >> i think you know what the regulatory environment is in the u.s. and canada, and you don't

know what the regulatory environment is in many other places around the world. that's a key differential. the 26 ended up as a big gain, but that was where the low on the s&p was. i think we're up 19.7% off of that basically on the s&p. that's like a new board. it would be 20%, right yesterday you heard paulson say i'm not sure whether the december thing of an abhoration or the january thing is an abhoration which is an abhoration >> i think what's telling about the premarket trade right now is that we have this idea that

there could be memoranda of understanding between the u.s. and china, and the futures are up and not up very strongly. it tells you one of two things either the market is priced fully some sort of deal in >> six out of seven weeks. seven out of eight >> or is there doubt surrounding whether the memorandum will come to fruition? >> or it's six out of seven weeks that's already been going up. >> reuters reporting that the u.s. and china have started to outline memorandum of understanding. >> wow okay go ahead >> go ahead. >> no, no. >> i don't want to take over i'm just a substitute. i'm here temporarily i can leave right now. it's fine. >> it's nice that you are here, and you were here two days ago too. you're always ready.

>> it's very sweet >> i know. >> they're working on memorandum of understanding on six of the stickiest issues this marks the most significant progress yet towards ending a seven-month trade war. kayla joins us now prosecute washington with more kayla. >> good morning. i think it's important you point out those are some of the stickiest issues the work is still being done the rubber is meeting the road it's a crescendo of sorts here in washington as the cabinet level official from each side are going to open this last series of meetings before the march deadline and really try to put that pen to paper here china's delegation is being led by vice premier leo hub, but this time he is bestowed with a more senior title, special envoy by president xi jing ping. essentially meaning that he has been given the authority to negotiate on president xi's behalf the u.s. side is led by robert lightheizer, and the question is now after communicating that march isst is a firm deadline, what concessions would lightheizer require to extend that the u.s. has proposed a ten-item

action list arks korgd to my sources. these deliverables are things that could be proven in the short-term, like additional purchases by china, and they would be needed by the u.s. side in order to secure this deal or this extension reuters is reporting that the two sides are building out these agreements on six separate structural issues. although this is not expected to be an easy overnight fix those memoranda of understanding. in the meantime, though, importers are trying to game out shipments for next kweek trade attorneys say the white house would feed no to change the language in the federal renlster at least three days in advance of that deadline for it to be effective on march 1 st. companies need to figure out exactly what this is going to look like, and whether it is indeed going to be a last minute deal that happens. >> in terms of the urging on the part of treasury secretary mnuchin, kayla, for the chinese to not devalue the yu yuan, how

important is that and how would it be enforced, if at all? how can you ask a country to manipulate their currency in not devaluing it >> well, that is something that the treasury secretary has been talking about for months at this point. he was actually on "squawk box" back in august when currency started to bubble up as an issue in these discussions, and he said we're not going to look for gains on the trade front to try to right size the u.s. deficit only to lose those gains if china devalues its currency. the u.s. side has been pushing for some sort of stable mechanism for the yuan as part of these talks for the last six months at this point there are some currency mechanisms in the u.s.-mexico-canada agreement of course, those economies are very different than china's, but they could put some language in there. however, enforceable it would be, unclear to me at this point. there could be some language about tariffs coming back on or some other sort of penalty if

the u.s. believes that china is continuing to manipulate its currency >> all right kayla, thank you here's the j & j story the company says it's received subpoena from the doj and the s.e.c. related to the alleged as pe -- asbestos contamination it's mostly cornstarch not talc i haven't used the talc in so long do the other -- there are other talc companies, and i just wonder if they have the same problem. >> issues? >> it's hard to separate the talc from the -- theoretically i don't know what's true and what's not j & j says it intends to fully cooperate and will continue to defend the company in talc related litigation 20 years ago would have been good all cornstarch throw some aloe in there been using that for that long. it's not as -- do you still -- which do you use now the baby powder itself is very silky smooth >> it doesn't seem like a powder kind of guy. >> you're not a baby powder guy?

>> no. >> maybe -- >> baby skin >> a little older, gravity takes over stlo is that what you want to tell the american people at 6:08 in the morning >> it's just a fact, right, mack >> innocent bystander. >> your great grandchildren can use it too, right, mac everybody shares it in the -- okay good back to you. you did like 11 hours yesterday, didn't you, on -- howl yours yesterday? >> three, four >> there are days you do seven, eight, nine hours. do you actually -- >> keep track? >> click in. is there an overtime thing >> punch my card >> do you tell your agent? if. >> no. >> well, he probably knows, though, right? >> if you are on tv for four hours, i think somebody would notice >> shares of barclay moving

higher after the british bank swinging back to profit from 2017 losses. 2018's full year net profit coming inat 1.82 billion dollars. here's the ceo jeff staley earlier this morning on cnbc europe >> results in the fourth quarter and for the year demonstrated that the strategy of barclay's is on track. we have recapitalized the bank we've put all of our legacy issues behind the institution. we have clean air in front of us now. >> barclay's also setting aside a brexit position of $170 million citing a lot of uncertainty. coming up, college basketball's biggest star was injured in the first minute of last night's big duke-unc game, and nike is getting the blame. we'll have all the details next. as we head to break, take a look at the biggest premarket winners and losers in the dow.

one-millionth order. millionth order. ♪ there goes our first big order. ♪ 44, 45, 46... how many of these did they order? ooh, that's hot. ♪ you know, we could sell these. nah. ♪

we don't bake. ♪ opportunity. what we deliver by delivering.

yesterday our story was about the ticket prices for this game that were like the super bowl level ticket prices after it was all said and done, duke's best player wasn't playing because they lost freshman superstar zion williamson less than a minute

into the big rivalry game against unc. this is great. every year doesn't matter who is better or who is number one or who is number ten. williamson planted hard with his left foot, and it blew out the sneaker. the nike basketball shoe falling down, twisting his knee. he was able to walk off the court under his own power. the coach said it's a mild knee sprain nike is doing damage control the company relicing a statement saying, "we are obviously concerned and want to wish zion a speedy recovery. the quality and performance of our products are of utmost importance while this is an isolated occurrence, we are working to identify the issue, and nike shares, in fact, are lower in premarket. down almost 2% it's a dow compoen ebt, i'm stoeld.

>> it's letter irbeing right there can be a flaw in an individual leather -- >> i wonder whether it could be the glue or whatever stitched the sole >> it looked like the seam blew out, and i imagine -- >> where it joins with the rubber >> where it joins with the rubber i'm not sure it was -- >> these guys are -- the amount of torque and force -- >> you don't think they have a bunch of shoes in the locker room that they can switch out for. it still raises the -- >> what a time to happen first minute.

zplool does nike the real trick will be whether nike somehow gets zion to sign the shoe contract. >> that would be a major thing, actually >> that would be a marketing -- they may have to pay up for that that might cost them a couple extra million dollars. >> it might be best in the end for them >> this is clear cut a couple of years ago when we had -- remember when he was our guy. we had so many twitter followers. he did the speedo michael phelps remember his glasses came -- i don't know whether that was a speedo defect or -- diving in the pool do you remember with nike, the jerseys were tearing when they were the nba supplier.

lebron's jersey tore i mean, they had some quality issues there as well i mean, that's the concern where the supply chain did this come from in terms of the shoe, and do they have a good grasp on quality control, and that's an issue. >> and we're back to knowing that this guy is a freshman and how much is he worth think of all the talk about is money here, and, yet, he is still a college -- >> he is still a -- >> it's so much discussion about whether they should be paid. >> that whole discussion >> you talk about all of these ticket prices. they're there for him. they were there for him. ♪

you should be mad they gave this guy a promotion. you should be mad at forced camaraderie. and you should be mad at tech that makes things worse.

but you're not mad, because you have e*trade, who's tech makes life easier by automatically adding technical patterns on charts and helping you understand what they mean. don't get mad. get e*trade's simplified technical analysis. (butcher) we both know you're not just looking for pork chops. you're searching for something more... ...red-blooded. right this way. you thirst for adrenaline, you hunger for raw power. well, you've come to the right place. the road is yours, dig in. i cowe can do theyour screening at her house. hi. this is the man that's going to check your eyes grandma. cognizant ai solutions are helping healthcare companies

advance diagnostics and prevent blindness in patients with diabetes. everything looks good. you have beautiful eyes. ♪

some of the big movers across the globe today standard chartered is setting aside nearly $1 billion to cover fines from investigations in the

u.s. and the u.k the bank has been under scrutiny for several years for alleged violations of u.s. sanctions and foreign exchange issues. swiss re's annual profit rose 27% despite claims from natural and manmade disasters. however, all disasters are manmade now, aren't they the results missed forecasts and last year wasn't as severe as 2017 when a number of hurricanes, fires, and earthquakes in north america made it the costliest year ever for the insurance industry shares of lenovo hitting a near three-year high in hong kong the world's largest pc maker swung to a profit in its hird this quarter beating forecasts lenovo says it's optimistic about further growth in china and plans to focus on the high-end market. >> new this morning, volkswagen ceo is sounding the alarm on u.s. auto tariffs. this is an interview with the financial times. herbert dee says tariffs could cost the german automaker in a worst case scenario $3.25

billion annually he added that the u.s. tariff threat is the biggest worry for european automakers. we talked about this right before the break this is the company that is sounding the alarm it's real. >> oh, absolutely. the president has 90 days to decide from the time of the receipt of the report. we'll see what gets done this is leverage for him, right? >> are you saying you think that the -- this is -- >> they want a deal with europe, and auto tariffs are his leverage we will put the auto tariffs in an exact -- you can see pain in the manufacturing sector pmi's came out overnight it's a continuing story. >> i can't help. we're thinking about 2020. did you see how much money bernie raised? >> i saw that. $6 million >> yeah. >> quick question now, and i want a quick answer. >> k on. >> he could be elected president of the united states yes or no >> anything is possible. >> really? see, i think no.

i think anything is possible >> i don't think anything is possible because of trump, but i don't think -- i just don't think it's possible. i'm worried. i'm worried for you. i look around, and i'm just not -- i think you're blowing it i do i just -- you got to find someone you can settle on who is kind of -- did you see the bookies? trump is, like, 3-2. it's like they're like what's happening here you're giving him a second term. i know how painful that's going to be for you. i just want you to get your thoughts together. >> you're looking out for his best interests >> yes i'm trying someone has to someone has to >> i don't -- i don't want to have to represent the democratic party on this program. i think that there is not -- >> you certainly don't act like you don't want to do that. i mean -- >> i will say i don't think that there is a clear compelling candidate for the democrats as of yet i wonder -- and i wonder whether one exists i wonder whether one exists. >> you know who if you would run as a democrat would be -- >> schultz

>> yes >> he would be one of the most -- he is saying all the wrong things for democrats >> compelling, yes, but what i wonder is whether the party has moved so -- this is why i think howard schultz is not running as a democrat >> like dropping a ho hot potato he has dropped -- >> i did not drop. >> loved it him. whoa, i don't want that. here, you take it. >> no, no, no. i adore howard i absolutely adore howard. i actually feel terrible about the way -- >> the treatment >> the public has reacted to this however. >> i'm the best friend he has. >> i appreciate and understand the way that the democratic party has moved. >> you do? >> and clearly the effort that they are undertaking to undermine his candidacy. >> the friday -- the friday amazon andrew ross sorkin that made so much -- well, what happened to that andrew ross sorkin >> he was frustrated and upset about how far -- >> what happened you slept over the weekend, and

you are now back to -- >> i will find -- >> i want to talk amazon i will absolutely talk amazon. >> always paved with good intentions you were woke to the woke briefly. we got to go to break. coming up, more on the trade war. i don't know how we got into this >> you brought it up >> that's right. i did. >> more on the trade war fall-out a programming note on monday, warren buffett has answers to some of your questions you can start so submit them on media platforms. ask warren always found that show we'll start at 6:00 a.m. eastern as we head to break, here's a look at yesterday's s&p 500 winners and losers

♪ your love is lifting me highe ♪ ♪ than i've ever been lifted before ♪ >> welcome back. you're watching squa skbauk box" live from the nasdaq market site

in times square. ♪ i'll be at your side forever more ♪ >> good morning. u.s. equity futures right to the front of the pack. how much money do you have can you self-fund your campaign? >> i don't know. i want to get money out of the election >> you are a man of the people >> what about one of the go fund me we're in a quandry we're talking about who the democrats come up with at this point, and you finally said yourself >> i have not thrown my hat into the ring >> anyway, wow, the futures are upticking just on the prospect of a sorkin run. anyway, the friday sorkin. that's why they're up. 56 points now among the stories front and center lyft is reportedly planning to file for an ipo as soon as next week sources say the ride-sharing company will list on the nasdaq. plans to target a valuation of $20 billion to $25 billion i'm shocked that uber is valued at six times the level of lyft i guess it makes sense >> much bigger where.

>> still, the $120 billion number, i mean, with the guys like founders like 30 years old. i guess it's happened before we've seen it. to do that and to have a valuation get to that point with -- it seems like a simple idea, but in practice it seems like it would be very hard to do that you would get into a stranger's car and just can you take me somewhere? somehow they -- >> you do it every day >> that's what attacks were. >> you mentioned that. i know, but they got their medallion, and -- >> the medallion is going to protect you? >> they know what they're doing. >> these guys -- >> how about when you get in, and it seems like he is driving crazy, and you think, well, ze this for a living. don't you say this this is fine he does this all the time. wow, that was a pretty aggressive move. you can't get hurts. we're in a cab >> is this me? >> jump ball >> i think it's you. >> we're going to keep an eye of shares of barclay's. the british bank swinging back to profit from 2017 losses

the question is whether they're setting aside enough this time it's $170 million sighting what they're calling a lot of uncertainty and i'll till, i had that interview with the head of the s.e.c. a month or two ago, and he said that what he thought was that u.s. companies were not setting aside enough money for brexit. in terms of how they do disclosures, they need to start thinking about this wrash. >> reuters has started outlining memorandum of understanding. this on six of the stickiest issues in that trade dispute, including intellectual rights cyber theft, and currency manipulati manipulation zbloinchts u.s.-china trade tensions starting to take a big toll on china's export sector. a slew of chinese workers have been laid off as a nation grappling with the fall-out.

eunice has more. >> thanks, melissa well, the companies where i am in the manufacturing south have already been hit by the uncertainty over the tariffs exporters and workers alike have said that they're worried that these could get worse if there is no trade deal >> this chinese factory used to churn out shoes for shoppers in the u.s. today it's idle. back in december the factory shut its doors for the last time they laid off more than 1,000 workers. this man was one of them >> translator: they put up a notice and told everyone to pick up their salary and compensation then we had to leave >> one salary here is six workers there, he says.

>> he looks the skills recruiters today are looking for. >> this is a typical job fair for migrant workers in china in the past advertisements were for construction work or sewing garments now it's it, engineering, and electronics. >> he says i'll have to wait and see if there are other opportunities in other places. and until uncertainty lifts over the jobs market. >> and economists such as the folks at jp morgan believe that

if the tariffs kick up to 25%, china could see job losses anywhere between 700,000 to 5.5 million depending on how beijing responds that would likely put a lot of pressure on the chinese negotiators as they continue to trade talks in washington. it's probably one of the most sensitive topics for the beijing leadership is unemployment since the association is that if you don't have enough jobs, then you could see social unrest. guys >> that's been delayed by the shutdown as well as weekly jobless claims later this morning we will also get manufacturing and services pmi and january existing home sales. then on the earnings front, you don't want to miss this because we're going to be hearing from domino's pizza i got to tell you, i just love domino's hormel then we're going to hear from wendy's, which i know joe likes before the opening bell.

we have baidu, kraft heinz and hp enterprise. we have president of fixed income capital markets at raymond james. also michael tale, chief investment officer at eastern bank wealth management looks like the markets this morning moving on the hopes of a china trade deal. zmo i think investors are being a little bit too happy about that right now same thing with brexit for that matter, which could kr a big impact certainly on european stocks could have a somewhat diluted impact here. investors are assuming there as

well that probably the news will be okay. probably they'll either kick the can down the road because that's what american government and companies do they may be wrong. it may be a hard brexit, and we aren't discounting that. there's some risk there. i think you're right investors right now are looking for happy outcomes >> obviously, if you have this sort of glass half full, half empty view of things, what do you do about that. >> you are betting on the financial health of the american corporate enterprise it's very strong the earnings growth, yeah, it's going to slow down this year, but i think that the valuations reflect that you can say i'll stay fully invested and ride through the ups and downs. there will be a lot of both this year you is ittic with it, and in the end you're going to be fine.

>> it could end the continued roll off the balance sheet later this year, but scott from guggenheim had an interesting take he said and tweeted that fed official have officials continued to -- suggested that rate hikes could resume in the fall would that be good news or bad news for the markets >> from the bond market it's always going to be about inflation and whatever the fed is doing if there's a bit of a disagreement between what economists think the fed is going to do later in the year and what the market thinks that the fed is going to do later in the year, so i think, you know, a trade deal really could change this it could be the savior of the u.s. economy it could be something that drives rates higher.

we've seen it before >> the minutes only bolstered that they talked about china and a trade deal they talked about brexit the things have changed so far a big move in rates either way >> you mentioned the disparity between what the -- if you take a look at various asset classes, an investor would be getting very, very mixed messages. you got the ten-year yield extremely tame you have commodities markets you have a stock market that's on the rise. which asset classes are telling us the true story of what's going on >> i think the markets saying they'll be zero rate hikes in all of 2019. the next move is going to be lower in 2020.

those investors have been putting more assets further out on the duration curve and still investing in quality i think, you know, something big would have to change that thought right now, and i just don't see it i think the favor trend is if you were in three to five-year durations, you're at seven to ten-year durations still invested in quality. >> real quick with michael just back to you, and, again, back to the fomc minutes i'm curious what you think the fed will do and what it's going to mean to equities. i think the most interesting parts of the notes, though, of those minutes was the idea that --

>> the economy economy was the biggest piece of that, but it does matter what's happening overseas as well >> okay. >> dped president james fuller will join us at the top of the hour we'll talk all things fed and get his reaction to the fomc minutes. later, lyft appearing to lap uber in the race to an ipo >> very clever >> stay tuned. you're watching "squawk box" on

cnbc no matter where you are in life or what your dreams entail,

a cfp professional is trained, knowledgeable, and committed to financial planning in your best interest. find your certified financial planner™ professional at letsmakeaplan.org.

fiso, servicenow put yourcial workflows immhm. cloud, huh? your employees must love you. [ chuckles ] thank you. you could say that. i love you. servicenow works for you. wenot the exception.sh food being the global norm, at emerson, when issues become inspiration, creating a better world isn't just a result, it's a responsibility. emerson. consider it solved.

>> making a move to control the conversation on vaccinations

>> pinterest says most shared images on its site relating to vaccination cautioned against it, contradicting established medical guidelines the search ban went into effect late last year and told pinterest can develop a better strategy to filter what it calls collude the content. this gets to the very idea and issue, you know, some people will raise it about sensorship, about the role of social media companies. >> some people might say that's fake news, and they're combatting fake news >> some people say they're combatting fake news i'm saying it's very interesting the role that these different platforms will now play. some people look at it positively and say this is great. they're dealing with conspiracy theories in fake news. others will say they're limiting

free speech. right? this has become the question i think of our time when it comes to digital media right now and who is controlling the flow of all of this information. >> one man's free speech is another man's fake news. >> you ever read your wiki you can't control what people are -- if it's a social generated by users, anything they want to put on is going to be there >> the question is is it fair game should the companies police it i, by the way, am in the camp of they should police it, but they are publishers they are the social media companies. facebook and others historically have said we are not effectively public -- we are not the media, and that's the big question. >> it's the idea that facebook and google was somehow favoring

one or the other, and what that meant to free speech you go down the streets, and there is certain news newspaper stories that will sell you certain publications and won't sell you others. >> when google closed down for a week after hillary lost and they all had to wear black, and people were crying in the ha hall -- that is fake news? are these platforms that should be allowed and users should be able to do what they want, or should they police it? if they don't police it the way you like -- >> i -- >> then what do you say? >> we can't find anyone that's -- >> he thasd. we can't even find anyone to hire that's not in line with what we -- >> but this was my point that you have that view on that side. this is what we're talking about.

it. >> is that going to be one of your plaings >> i'm going to run on brigham zblon back and driving joe out >> okay. >> you just got a lot of votes, i can tell you that. >> i'll go with you against that >> coming up, reading the market signals. what we're learning. >> we have to show that billboard. there's a billboard now in times square just down here. >> about amazon. thanks a lot >> oh, really? >> thanks for nothing, aoc that's what the billboard says >> what we're learning from the dropoff in the vix after december spike that's next. as we head to break, there's a quick check of what's happening in european markets right now. thinabt pnkk oumyla at&t provides edge-to-edge intelligence, covering virtually every part of your retail business. so that if your customer needs shoes, & he's got wide feet.

& with edge-to-edge intelligence you've got near real time inventory updates. & he'll find the same shoes in your store that he found online he'll be one happy, very forgetful wide footed customer. at&t provides edge to edge intelligence. it can do so much for your business, the list goes on and on. that's the power of &. & if your customer also forgets socks! & you could send him a coupon for that item. that rocking chair would look grahh, new house, eh?e. well, you should definitely see how geico could help you save on homeowners insurance. nice tip. i'll give you two bucks for the chair. two?! that's a victorian antique! all right, how much for the recliner, then? wait wait... how did that get out here? that is definitely not for sale! is this a yard sale? if it's in the yard then it's... for sale. oh, here we go. geico. it's easy to switch and save on homeowners and renters insurance.

-it's our confident forever plan. -welcome to our complete freedom plan. -it's all possible with a cfp professional. ♪ -find your certified financial planner™ professional at letsmakeaplan.org.

the volatility index nearly halved since the start of 2019 joining us to talk about what that means is tim freeman, partner at elevations securities i don't know what long term, medium term is for you but i thought last time you were on we were above 20 and i thought we were going to stay in a range between 20 and 25. >> i did >> how long was that out for. >> for the year we would base around the 20 area, maybe fall to 18 at times but see more frequent pops up to 30%. >> what does it mean no one expected this 20% in three weeks on the s&p so that took us down to 14. >> sure. it would be -- the january fed

meeting was a watershed event for the markets. it set the tone for risk this year if you look at fed fund futures, no rate hikes in 2019 priced in and a cut priced in late 2020 so we've done a 180 and i had it -- the fed has always been very important and it's a constant reminder that the fed is important and the words patience and the word -- the balance sheet language they gave us have been the biggest movers of it. it was -- it caught everybody by surprise and here we are lower ranges around the 14 area. i think complacency, true complacency is sub 10 and i don't think we're there. i think we're priced for head winds that we're experiencing and obviously a positive china deal is priced in right now and i'll expect markets to trade down in the very near term but just after that it's risk on. >> we had someone on yesterday and at the time i didn't agree necessarily with them and they

were mad the fed flip-flopped so quickly. i can't remember which guest it was. you know, that they sort of kowtowed to the selloff -- the december selloff and changed their entire perspective and i said, well, what do you do when facts change maybe that was a good thing but you just said like we know what the fed is going to do for the rest of the year i'm worried they could flip-flop again and this is a risk if they don't have firm convictions about things they could go back to hiking again if things continue to go well. >> well, they certainly -- confidence is very -- is -- they have started to get our confidence back and hopefully they'll keep our confidence. >> bullard is going to be sitting in that chair for two hours so we can ask him about what's changing with the facts or don't they know what's happening? >> because markets will react to what that outlook looks like they have to think about what their risk profile looks like.

what we've seen is everyone that exited the market into year end has been meeting with hedge funds and everybody -- all other asset managers trying to get back into the markets so they missed it, they're angry they missed it and they're coming back in and the fed is giving them every reason to be back in. >> how's your tech can you turn around -- you set off the thing at tsa something goes off -- >> all kinds of bells and whistles go off. but my wife is a good motivator. >> thank you tim freeman you were a volleyball player >> debate. >> exactly elevation securities -- offensive? >> i was an offensive player, yeah. >> people could not get through you, could say in not very easily. >> i did okay. coming up, when we return, our guest host for the rest of the show joins us, a very big e, very big guest, james

bullard, st. louis fed president. we'll have him for the next two hours. who says our bank isn't tech enough? everyone, look at your phones. the design thinking, the digital engineering, security, blockchain, and we will be first to market! yes. when we do we launch? unfortunately, in 2 or 3, hours. why the delay? cognizant is helping banks use digital technologies at scale to advance speed to market. driverless cars. all ground personnel please clear the hangar. trips to mars. $4.95.

hydroponic farms. robotic arms. ♪ $4.95. delivery drones or the latest phones. no matter what you trade, at fidelity it's just $4.95 per online u.s. equity trade. now you can, with shipsticks.com! no more lugging your clubs through the airport or risk having your clubs lost or damaged by the airlines. sending your own clubs ahead with shipsticks.com makes it fast & easy to get to your golf destination. with just a few clicks or a phone call we'll pick up and deliver your clubs on-time, guaranteed, for as low as $39.99. shipsticks.com saves you time and money. make it simple. make it ship sticks. the company who invented car vending machines and buying a car 100% online. now we've created a brand new way for you to sell your car. whether it's a few years old or dinosaur old,

we want to buy your car. so go to carvana and enter your license plate, answer a few questions, and our techno-wizardry calculates your car's value and gives you a real offer in seconds. when you're ready, we'll come to you, pay you on the spot, and pick up your car. that's it. so ditch the old way of selling your car and say hello to the new way... at carvana.

>> announcer: live from the beating heart of business, new york city, this is "squawk box." good morning, welcome back to "squawk box" on cnbc, i'm andrew ross sorkin with joe kernen and melissa lee becky is off today u.s. equity futures are higher on a renewed hope that a deal may be reached with china over these trade issues, long lingering conversations that continue on right now. we'll talk about those in just a moment but the dow looks like it would open up 35 points higher nasdaq, we'll call it 18 points and the s&p 500 up over three points >> china is our top headline at this hour. optimism surrounding that china trade talk is helping boost wall street's mood twch the two sides are sketch ago deal of what is the most significant progress yet in those discussions.

it's a busy morning for economic numbers and in 90 minutes we'll get the weekly report on jobless claims as well as the philly fed index. we'll see december durable goods reports. january existing home sales and the index of leading economic indicators will also be out. the hedge fund canyon capital has abandoned its bid to take over navient. they plan to launch a proxy fight to get its own slate of candidates elected. >> barclays reported lower than expected profit but investors were cheered by a 15% profit in the investment bank unit the investment firm also raising its didend, announcing plans to return more capital to shareholders through buybacks. and cheesecake factory reported an adjusted quarterly profit of 60 cents a share, missing wall street forecast by two cents the restaurant chain's revenue

came up short of estimates although its 1.9 increase in comp restaurant sales was higher than the consensus estimate, which was for 1.1% and foot locker announced a 10% increase in its quarterly dividend 38 cents a share now the athletic apparel and footwear retailer unveiled a buyback retailer. >> selling into the nike sneakers. >> maybe not with the exploding seams. the fed releasing its minutes from its january meetings steve liesman joined us with his take on what we learned? >> we learned when the fed pivoted toward a more dovish policy at its january meeting, it pivoted all the way, not only pausing on rate hikes but pretty much deciding to tend reduction of the balance sheet this year here's the quote serve talking about. you have to kind of parse it, too, but almost all participants thought it would be desirable to announce before too long a plan to stop reducing the federal reserve's asset holdings later

this year. some people think that announcement will come as soon as march the statement suggested the fed will stop drawing down the $4 trillion balance sheet sooner and at a higher level than markets previously believed. for example, our january cnbc fed survey thought the balance sheet would shrink to $2.8 trillion on average. now the balance sheet can end up north of $3.5 trillion and stop going down this year in a speech last night, the new san francisco fed president explained the reason for the change she said, quote, we don't want the balance sheet working at cross purposes with our interest rate policy. now, in deciding to pause, fed officials saw risk from the slowing global economy, trade policy, waning fiscal stimulus and the government shutdown but little risk in pausing because of muted inflation so some supported rate hikes if there's more inflation than forecast, others said they might hike if the economy performed as expected. >> let's bring in st. louis fed president james bullard. he's currently a voting member

of the fomc. i don't know where to start, jim. the retail sales number. what was that? do you have faith in that number or faith in the employment report we saw a couple weeks ago? >> that was a bit negative but it's volatile, we'll see how it plays out going forward. >> did you and your colleagues spend time thinking about that >> there's mixed signals in retail sector. you had walmart reporting pretty positive. >> let me ask you in a nutshell. some people thought the put was back on after the selloff in december and the change in stance from the fed. is that a realistic view point and is there a fed call that if the trade talks go well you'll be back on dours raise rates >> the normalization process in

the united states is coming to an end on rates, we've already raised rates about 225 basis point from where they were initial ly on th balance sheet we have that decision the next couple meetings so we're in a good place, we've had a lot of success, people said it couldn't be done we got the interest rate back up we got the balance sheet -- reserves are down 40% from where they were. there are technical issues around the balance sheet which we can talk about but we're in a very good place. we have this muted inflation, no urgency for action, we're data dependent going forward. >> you've had that view point going forward for a while and asking you to speak for the fed as a whole is probably not fair but your view point may not have changed that we were approaching normalization? i think you thought that before some people thought it is.

that fair to say >> i think that's fair but i like the decision here and i'm hopeful this will set up the u.s. economy for a good continued expansion. this expansion will be the longest in the post-war era as of june, 2019. if we can get several more years out of this, it will be success. were certain members of the fed not firmly convicted in their opinions previously when they said we were a long way from neutral or did the facts change and therefore they changed >> it was just so per situation i. >> i wondered. >> do you want to just start with nah-nah-nah do you want to begin your interview with "i was right" >> i think the biggest thing to keep in mind is that we raise rates quite a bit. 225 basis points off the near zero levels and you think of other normalization period we've gone through, that's quite a

bit. it seems like interest rates are l low. >> i guess i just meant should we be scared that now that they seem to be more dovish because they moved -- they changed their opinions so quickly in january, could they change it to being hawkish again? do you viewed they way or not? >> i think this phillips curve argument, the breakdown of the feedback between the real economy and inflation is starting to carry the day. inflation hasn't come around we've put in the muted inflation language you had two years of blockbuster upside performance in the u.s. economy in 2017 and 2018, everybody was surprised to the upside we didn't see any inflation in that environment so that's got people backing off the idea that there is such a lockstep relationship between the real economy and inflation. >> the minutes jim say that

several participants think rate increases are necessary only if inflation outcomes were higher and other participants say if the economy is expected you would raise rates anyway i guess you're not in the latter camp to be a guy who would raise rates if inflation comes in higher than you would expect. >> you want to watch the inflation numbers and inflation expectations numbers which i've dwindled down and are low here i would like to see those improve. one of the things that we could do here with this policy is recenter inflation expectations more on our 2% target. they're too low compared to our 2% target right now and, no, i don't think if the economy evolves -- i think we're tight, we're too high with the rate, but i have a minority view on that. >> let me ask you a question about the balance sheet. i don't want to get too much in the weeds but there is a question about what the right number is. we're at $4 trillion right now

you saw our survey i was surprised at how low that number was i thought 2. $8 trillion was where it was going to. now you're saying we're going to stop this year, which is 2019. i've heard numbers like 3.7 would be where you'd end up. what can you tell us >> i think there's been a growing realization over the last two years or maybe the last year that the demand for reserves is much larger than we thought and that's because of changes in the dodd/frank act, banks have to meet their liquidity coverage ratios and other matters and because of that the demand for reserves is higher than we thought so we're going to approach that very slowly, come down very slowly and get to the right level of reserves. >> can you give me a number? >> i'd rather not because i don't know where the chair is going to come down on this in the end. he has to fashion a consensus so

let's see. >> north of 3.5%, though >> i'm not going to decide on that here but we're going to continue to talk about this and see where it comes out. >> if you want a number, project reserve demand for me. tell me where the reserve demand is -- a downward sloping curve and it hits some point where you've got -- you're satiated with reserves. that's the point we'd like to find but we want to go there slowly. >> can you help us project it yourself. >> what's that >> can you help us project yourself >> or was that a rhetorical device saying we don't know yet. >> we don't know yet. >> i can explain a bit they changed the rules it has nothing to do with the amount of reserves out there but they changed the rules to require the banks to hold more high-quality stuff and they happen to have a bigger balance if it has high quality stuff in

it so it's unrelated but it works out in your favor that you don't have to bring it down so much, right? >> but reserves have come down 40% so we have had success on this. >> how much of the fed's pivot or the change in tone and message we saw from october to this date was because of the market reaction to what the fed was broadcasting >> i thought the december meeting myself, i thought it was a step too far, i argued against that move. we got a bad reaction in financial markets. i think markets started to think we were too hawkish and might cause a recession, you have this yield curve issue hanging out there with almost inverted depending on where you look on the yield curve so i think all of this weighed on the committee and got people to change. >> so you saw the selloff, especially in december and you thought maybe as a committee we've gone too far, we need to reel that back in. >> well, you have to ask other people but i felt like we went

too far. a step too far in december. >> when you're sitting in that room did you feel like people were coming around to the idea that you did -- to your thinking that maybe the fed is a whole step too far and you needed to reel that back in? >> well, i made -- i think effective arguments about global interest rates are still really low in japan policy rate is still negative, europe policy rate is still negative on the order of $10 trillion globally at negative no, ma'egnl rates is sitting out there so the u.s. has high rates compared to that so we've done enough and we're not seeing the inflation. still below target we missed the target on a low side twins 2012. looks like we might miss the target on the low side again this year. we really need to pay attention to those kinds of market signals. >> this scary scenario of we stayed easy for too long is

rearing its head again we've stayed easy for so long, the debt is so big that we're unable to get back to what should be a normal rate because the debt service is too big. there's a day of reckoning coming. >> let me push back against the normal rate idea the safe real rate of return has been declining globally for 30 years. it used to be in the '80s and '90s when i started my career it was up 4%, something like that 5% even. now it's way down below zero even so you have to start -- that's kind of your starting point where you're doing all our pricing and financial markets and that thing has come way down to the tune of 500, 600 basis points from there you want to run your policy and have yourinterest rates be high or low and so the idea that we're -- we have to get back to this normal interest rate, it's not the '80s or the '90s anymore globally. >> did the chairman talk about

that lunch did he -- that he had with trump? >> lunch i thought he had dinner. >> it was a state dinner no less. >> but joe raises the big question. >> it wasn't mcdonald's, it wasn't crow, right >> how do you handle the issue what the fed has done is exactly what the president publicly said he wanted to do? >> yeah, i mean the idea that there are political factors going on, those are dots that shouldn't be connected the committee has mandate to get the inflation rate, keep the inflation rate low and keep employment high and we try to do the best we can. it's a big committee, lots of opinions on the committee. the joint judgment of the committee tends to be very good and made the right call on this. >> so could december have been the committee pushing against political pressure whereas it would have been seen to have

been politically motivated had it not raised rates in december? >> i don't think so. but we do have our dot plot, the way we do that is on a calendar year basis people have pencilled in december for a rate hike all the way if august/september time frame so by the time you get to december markets were expecting a rate hike and we had pencilled it in, we kind of said it's coming so that's -- in my opinion that puts the committee in a box, the markets were volatile, you might have wanted to step back and not do it but because of the dot-plot and isep, we're in a box so that's a bit of an issue and i'd like to fix that but we can go into that. >> that makes it sound like the fed is not that responsive that it was put into some sort of position where it had to go forward. >> let me get jim's review of

the world here you had this quarterly process where you're doing these things that quarterly means it puts the committee out of positions, like we were in december what you could have done is said we won't move in december but we'll keep it on the table for january and see how everything plays out here to me that's how greenspan would have played this in the older era. we weren't for a position to do that and not in the mood but we could have because we had a press conference at the january meeting and hopefully we can play these better going forward, do this substitution across meetings. >> you must have been frustrated given the reaction in the markets we saw when the fed went ahead with it when you urged them not to, basically. >> i'm one person on a big committee so i like to put down my point of view as best i can

and -- >> you're a gracious winner, jim bullard. >> i trust the committee and on the whole it tends to be very good. >> he knows exactly what to say. i wish -- so he didn't order a big mac or -- it was probably a state dinner >> medium, medium rare with ketchup, though. >> you don't know what condiments were served >> we have more coming up over the next two hours jim bullard is sticking around we have more news and this is interesting. apple and goldman sachs teaming up on a new credit card. we have details about that and lyft beating uber to the punch. the company planning do list right here on the nasdaq oureelspeak to bob gifd abt that you're watching "squawk box" on cnbc my experience with usaa

has been excellent. they really appreciate the military family and it really shows. with all that usaa offers why go with anybody else? we know their rates are good, we know that they're always going to take care of us. it was an instant savings and i should have changed a long time ago. it was funny because when we would call another insurance company, hey would say "oh we can't beat usaa" we're the webber family. we're the tenney's we're the hayles, and we're usaa members for life. ♪ get your usaa auto insurance quote today.

[ ding ] show me just add magic. hey toothless. [ ding ]

[ gurgling ] [ ding ] show me cartoons on netflix. [ ding ] [ cooing ] [ door closes ] [ cooing ] ♪ [ ding ] show me fish on youtube. say it and see it with the x1voice remote. from netflix, prime video,youtube and even movie tickets. just say get "dragon tickets". welcome back to "squawk box. we have news just crossing from the "wall street journal." apple and goldman sachs planning to start issuing a joint credit card paired with new iphone features that will help users manage their money the release set for this spring. futures in apple's -- the apple wallet app will allow card holders to set spending goals, track rewards and manage balances apple takes a small cut when

iphone users make credit card purchases through apple pay. you would likely get a bigger slice of the swipe fees from its own card you might remember apple and goldman sachs teamed up. there were i understandicationss going to be a partnership around this a month ago. >> back with my one pass thing for united i use some miles and it worked so it's possible it's possible to use your miles. anyway, coming up, lyft is going to hit the road in mid-march and it's looking to pick up as investors -- as the company plans to go public the latest on that news in just a minute the future at this hour only up nine points now we'll be right back.

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. they all lead here. cme group - how the world advances.

lyft will launch its ipo road show, mark your calendar. here's more on the ride-sharing company's trip to wall street. deirdre? >> lyft is likely to beat uber to public markets, trading as soon as early april. remember, both companies filed confidentially on the exact same day in december. if lyft does get out first it would be the first ride sharing

company to go public and set the tone it's reportedly eyeing the nasdaq and we could see documents as early as next week while reuters says uber needs several more weeks to prepare for its ipo proceedings. both lyft and uber declined to comment. today lyft will announce a new head of investors relations, catherine baun, she worked on other ipos briefly i want to mention important differences between these two companies to keep in mind as they head towards public debuts uber is larger, far more international in more than 600 cities across the world. lyft is in the u.s. and canada only uber has a huge food delivery business, more moon shot projects while lyft is seeing as a pure plain driving both are pushing into, bikes and scooters the main differences reflected in their valuations. lyft $15.1 billion in private markets, uber at $76 billion according to reports they could go public at much higher numbers

lyft rumored at $25 billion and uber as you guys know as high as $120 billion back to you, andrew. >> deerd,irdre, thank you joining us now to continue this discussion, bob greifeld. how important do you it is for lyft to get out ahead of uber considering even though we talk about them in the same sentence, they are very different businesses lyft looks like the equivalent of the pure play, if you will on just straight driving while uber has gone into other businesses including what seems like a profitable one in uber eats. >> glad to be here, andrew i would say it's important to recognize as a public company you're facing an endless series of quarters. you have to produce quarter after quarter, year after year, so the fact one gets out sooner

than the other, i don't think it's meaningful in the fullness of time. >> but in terms of the way you think investors look at these kinds of companies, the kinds of multiples they apply to them, if uber had gone first, do you think it would have changed anything for a lyft? >> no, i think investors are shrewd enough to look at each as an autonomous unit, no pun intended, and look at their doix at a particular set in time. >> do you have a view all these unicorns are overvalued?dynamic time. >> do you have a view all these unicorns are overvalued? that's the talk of silicon valley and wall street right now. >> private marketings represent bilateral deals between parties and those bilateral deals commonly have more structured inference between themselves to the have sufficient of common

stock 2r5iding so public market will reveal the true value of these entities >> bob, i don't know if you focused on this but the s.e.c. proposed a new rule which effectively they're trying to get more companies to go public and would effectively allow some of those companies to talk to private investors privately before it made a decision. do you think that's a good rule? that would be a good outcome >> i wouldn't call it a good recall, i think it's a great rule and we have the day data to support it in 2012 they passed the jobs act and that allowed smaller companies to talk to investors so we have the data point to say what happened as a result of that so after the jobs act passed we saw ipos go up by two to threefold and most importantly we saw the biotech industry come to life. before the jobs act would pass, biotechs were not coming public.

they assumed the negative. they assumed the public market didn't want to bet on their uncertain future the fact they're able to talk to investors ahead of time, they get positive news, came public, and you look at the immunotherapies out there curing cancer, that's a direct result of the policy and the jobs act so to bring that forward to more companies, to the larger companies is a wonderful thing i applaud the s.e.c. for making this move. >> when we look at the lyfts and ubersover this world, this underscores what we've seen recently about companies waiting to go public for longer. these companies that have operated, they have a track record and there could be an argument made that because they're going public later in their life span that the public isn't benefit from the upside. could that will proposal crack that is this just a natural evolution of the markets >> i believe the new regulation

will encourage companies to go public sooner and i think that's generally a good thing because we'll get to true valuation. and later in the life cycle doesn't mean they're upside. each investor has to do their own analysis but you have the asymmetrical growth in the beginning. that doesn't mean there won't be incremental growth over a long period of time. >> final question. maybe a curveball but i think of you as a tech pioneer but you care about securities laws and di disclosure laws. we had a huge conversation about elon musk and his recent set of tweeting and twitter as a vehicle for dissemination of news where do you stand on that >> i think elon has to recognize that he's a ceo of a public company and what he says will move markets he's not a private citizen

we need further maturity on that regard i certainly think twitter is a very effective communication mechanism but it has to be used properly and in the right context so we want twitter to exist in the proper format of use. >> bob greifeld, thank you sir. >> thank you coming up, market strategist mark grant will join us to discuss his new wall of worries. "squawk box" will be right back.

we see heating breakthroughs clearing the air for billions. at emerson, when issues become inspiration, creating a better world isn't just a result, it's a responsibility. emerson. consider it solved.

still to come on "squawk box. the u.s. and china are reportedly one step closer to hammering out a new trade agreement. we'll get market reaction and speak to council of foreign relations president richard haass about what a deal may look like and later lyft ready to hit the road with investors. what it could mean for the ride-hailing market and its competitors. plus the tax debate for the wealthy rages on the man behind the president's tax plan, congressman kevin brady, will join us to dcuisss what is next on the tax front. "squawk box" will be back right after this break your wildest dreams. there's a place where you can find all of this. in a suite of commodities-based etfs

from aberdeen standard investments. everything from field crops to livestock, and precious metals to energy. all of which may help you diversify your portfolio. it's a big, beautiful world out there. why not invest in it? learn more about the commodity-based etfs... from aberdeen standard investments. what do advisors look for don't just track an index, help me meet a client's need. is the fund built to sell or built to last? etfs are only part of a portfolio. so make it easy to explain. give me a quality fund that helps me get clients closer to their goals. flexshares etfs are designed and managed around investor objectives. so you can advise with confidence. before investing, consider the fund's investment objectives, risks, charges and expenses. go to flexshares.com for a prospectus containing this information. read it carefully. ♪ don't fence me in. ♪ let me be by myself ♪ in the evenin' breeze, ♪ listen to the murmur of the tall concrete, ♪

♪ send me off forever, but i ask you please ♪ ♪ don't fence me in. special offers available at your local mini dealer.

who's hungry a few of this morning's movers are in the restaurant business, we'll start with shares of dime brands which is up 2% or so on very, very thin pre-market volume the company behind applebee's and the international house of pancakes posted better-than-expected profits thanks in part to its existing locations. dine brands announce add $200 million stock buyback program to replace its existing one different story with what's

happening with cheese facake factory. sales growth at existing store locations grew by more than expected so you can see those shares up there and we'll cap it off with jack-in-the-box which is up again, higher by 5% or so on very, very thin pre-market volume it posted better-than-expected profits and sales. jack the box says it continues to explore a range of strategic and financing alternatives including but not limited to a possible sale of the company. guys, i'll send it back to you, joe. another stock on the move, nike, this after duke lost its freshman for the game, superstar zion williamson less than 1:33 into last night's big rivalry game against unc he planted hard with his left foo as a lot of players are known to do. >> the torque on that, broke the seams. >> that's called basketball.

blowing right out of his nike basketball shoe. he was age to walk off the court under his own power. he's being treated for a mild knee sprain. also injured, investors to some extent nike stock is down after the incident and is in damage control. joining us is liz dunn, founder and ceo of pro forma liz, let's assume it's a mild knee sprain. what would the scenario be if it was a, god forbid, some horrible season-ending or career-ending knee injury, then what would it mean for nike? what does nike need to do? >> i hope it is a mild injury. this is very bad press for nike. they need to act quickly and talk about quality and lean into this conversation. they need to be quick and thorough about their quality and they have come out with a press release saying that they're doing an investigation but i

think it's also an opportunity to talk about collegiate athlete pay and given their willingness in the past to talk about controversial issues i wouldn't be surprised to hear them weigh in on that. >> so, you know, north carolina won and people were paying $2500 a seat to see this game and they didn't see the game they paid to see, either. there's a lot of things that didn't work out and i'm wondering -- you said what nike should do. what what should zion williamson do now in terms of a future deal i don't want to be cynical about it but does he go with nike? does he set nike against under armour or adidas or some other shoe maker what should he doing. >> i think the kid has a shoe deal in his future so nike, adidas and under armour should go after him and he

should go with whoever give thims best deal. this player is expected to be a top draft pick, he's going to make millions and millions of dollars and i think he's -- from what i've read he's played his career very well he's been a clean player, worked hard since he was a young kid, he's the child of athletes and i think he should maximize his career in earnings opportunities. >> why do you think under armour shares are up 2.2% on the back of this right now? >> i think it's an opportunity for under armour nike has such a dominant position in the basketball category and under armour has been trying to go after them for some time with limited su eed ss so i think nike's loss is you should armour's game you have former president barack obama saying request president shoe broke." >> there's legal implications related to paying athletes in

this instance. could zion -- here's the question of the morning -- could zion sue nike and if nike were to try to settle with zion, which is what you would think they would do, if they were to provide what might be described as an outsized settlement, would that be described as pay for play in the world of ncaa? this is a critical question in terms of how zion deals with nike, whether nike can compensate him for the injury and what that would ultimately mean given the rules around college basketball >> yeah, i've been trying to get some lawyer friends on the phone but i guess they were all up late watching basketball or something but the nba rules says he's not allowed to play pro yet. ncaa rules say he can't be paid for college -- college athletes can't be paid and duke has a

contract with nike and he's required to wear these shoes so it's a very tangled legal web. i would say that he shouldn't sue if he's managing his career appropriately. he's got a long, long road ahead of him where he can make a lot of money, unless his injury is more serious if the injury is more serious -- >> could he threat on the sue and could nike try to settle with him can he receive any compensation for this injury? f there is one at all? that's a very interesting question -- >> i would say he sues duke not nike. >> sue duke? >> they are in the contract. >> that's the question of the morning? you decided that was the question of the morning? >> you're living in this world within the sports business arena, this is what they're all talking about on twitter, on social media, they're talking about it. >> thank you to liz dunn of pro4ma if it's a mild injured -- i'm

just bummed we didn't see the teams play to full strength. and duke is number one and it's always a great game but if i would have been there i would have been like 33 seconds and the best player in the country is out. mark grant has three main concerns for the u.s. economy in the coming months. here is mark grant these worries, none are the fed, mark, even less so based on the fomc minutes yesterday >> yes i think the fed is -- you can blame it or place reasoning where you like but the fed has done 180 degrees about face, stopping raising interest rates, i don't think there will be more interest rates the rest of the year i think it's marvelous and i mean marvelous because the fed short of a war has the biggest

influence on the equity and the debt markets their decision by the way was correct, i've been calling for it for a long time people a the fed get what i write everyday maybe they listen to president trump, however they arrived at it, it was the correct decision. >> are you worried that if the markets rally a lot the fed will be back in play with our rate hike >> no, i don't see him shifting like that. they don't have that kind of mentality. interestingly enough i did some home work on inflation which the st. louis fed president was talking about, the american inflation rate is down in the red at 0.9% but if you look across the world, europe, every place else, japan, there are no inflation any place according to market indicators.

>> james, what is the market signal should the market rally very strongly and we've already seen a bounceback rally but rally further. is that market signal the fed should become hawkish again? >> we don't want to react directly to markets because markets go up and down but to the extent markets saw future growth being stronger that might be the signal i like to talk about the tips market and i like to talk about the yield curve because i think it's been down played by the fed but this time i think it's been getting more attention. >> your biggest worries? number one that the democrats will impeach the president which you think would be a travesty, the next is the economy in china

and not the trade war. so you're worried about a contagion or ripple effect even though the chinese could cut rates? they cut rates six times between 2014 and 2015. >> i think the biggest worries in the world would be somebody -- the democrats trying to impeachment trump which i think would put the country and the markets in chaos second, my focus is more on the economy in china than the trade wars with the united states. i think the real economy in china is up seven points around 2.5% that i think that they're -- the amount of debt they've amassed in the last three years in their normal banking system and the shadow banking system is onerous and is going to cause giant problems and, of course, china's economy has been affected globally. >> mark, we'll leave it there. great to see you thank you.

mark grant coming up, are the wealthy getting worried about -- >> looks like de niro in "casino". >> with the glasses. did you notice those >> how can you not notice them >> yeah, how can you not i don't think we have any -- whoa hold on a second let me -- this is like a groucho -- >> there you go. >> that looks so real. >> good-bye yellow brick road. >> when i know we come back, we'll talk about the wealthy getting worried about tax proposals being floated around we'll discuss that next. in the meantime, domino's fell seven cents short of estimates with profits of 62 cents per share. revenue shy of wall street forecast stock under pressure this morning and down 7%. squawk retur ia mensn mont his family.

his steinway, which met a burst pipe. so grant met his insurance: you are caller number 12. which didn't quite cover the steinway. but what if he'd met pure insurance? owned by members. he'd have met: lisa, your member advocate. who'd introduce him to gustav: leave it to me. a temporary address, temporary ivory, and help him get tickets to the mozart festival. excuse me, grant likes beethoven! uh, the beethoven festival. pure. love your insurance.

the latest inisn't just a store.ty

it's a save more with a new kind of wireless network store. it's a look what your wifi can do now store. a get your questions answered by awesome experts store. it's a now there's one store that connects your life like never before store. the xfinity store is here. and it's simple, easy, awesome. welcome back to "squawk box. feeling the heat over various tax proposals being float bid democrats and robert frank has more on what may be having the wealthy worried this morning. >> the odds of a wealth tax or a 70% top tax rate may be small but high earners are plan fwharg they fear could be a populist wave to tax the wealthy. accountants, tax advisers and estate lawyers say families and clients have called increasingly

with every new tax plan by the democratic candidates. here are some of the steps that some of them are taking. first is gifting now the new gift in the estate tax exemption is $11.2 million so parents are making big gifts to their kids and family in case that exemption comes down in the future they're also taking capital gains. so far none of the candidates have called far capital gains tax hike but advisers are saying when it makes sense they should sell their most appreciated assets before the 2020 election to get that current cap gains rate of 20%. executives who have the option of deferred comp opting to take that comp now since the rate is determined when you take that comp not when you receive it finally, consider moving if taxes going up those in high tax states hit with assault deductions would have another incentive to move so the wealthy at or near retirement age are considering moving before their income taxes could go up. >> i figure there had's no deductions left so i don't know

how you -- andrew, there are ways of -- >> we've talk about it there are deductions left and right. >> which ones. >> not so much deduction bus loopholes and carveouts. >> the issue is you unfortunately -- >> live in new jersey. have an agent i can't deduct it. >> we have a guest let's talk to our guest about it but there are lots of loopholes. >> someone who loves paying taxes, he knows all about the loopholes. >> because i want to close them. >> okay, just not on your own. joining us now, center for american progress seth hanlon. seth, is the irs woefully underfunded? one out of 20 on an audit seems like it's inducing people maybe to -- i don't know if they break the rules they at least bend them as much as possible.

>> 1 out of 161. 1 out of 20 for people over a million dollars. >> yeah, and it's dropped by more than half in the last 10 or 15 years the irs enforcement has been cut by something like a third in real terms just in the last few years and so i think we're seeing clearly the irs is woefully underfunded and that's an important part of these new proposals like from senator warren not just a proposal to introduce a new tax on wealth but also strengthen enforcement because we know wealthy people will try to avoid taxes any way we can but we have a choice in the matter as to whether we're going to enforce those taxes >> nicole, do you think -- i mean, do you agree is that from your side of things -- how would you -- what would you urge officials to do at this point? >> i think at this point we need to be honest with ourselves and if we want to pie for the green

new deal, medicare for all, free college, free child care, etc., etc., that we can raise taxes on high income individuals to finance that but there's not enough money there and we would need to start looking at tax increases on middle income families to pay for this take denmark, a country that's touted often their top marginal income tax rate, 55% but it starts at $60,000, which is just above median income. >> let's take the most pie in the sky stuff off the table and do i what i think of, the logical loopholes on the table so things like would you advocate getting rid of carried interest would you advocate getting rid of what's known as the 1031 exchange for the real estate industry that allows the industry to effectively never pay tax? would you allow the real estate industry to depreciate their assets for tax purposes even while the asset itself is appreciating i'm talking about things like you look at it and you say

there's something fundamentally wrong if you have any logic train at all. >> one of my favorite places to look at raising revenue would be looking at this new pass through provision from the tax cuts and jobs act section 199a and allow small businesses to get a generous 20% deduction it's about $500 billion over the next ten years i think that's an easy place to look i think there's a number of other deductions that we could look at limiting or perhaps moving forward but, frankly, that's not enough revenue to close these gaps. >> and therefore not to do anything that's what i'm trying to understand it feels like often times there's an argument if you can't raise the required revenue or enough revenue or if it doesn't do anything don't touch it at all and i think part of the reason there's such a debate in this country is because there's such a sense of unfairness about certain tax loopholes and why just not close them to get rid of it so you're not having an argument about 70% taxes on the wealthy if you think that doesn't make sense >> that is a step forward.

obviously there is a deficit and that is one way. but there's, again, this big gap between what's being proposed in terms of new spending and what would actually be feasible here. the top 1% collect about 20% in revenue, they pay 40% of all taxes already. the top 10% have a little less than half of all income, they pay 70% of all the taxes so we can raise taxes on this group a little bit but there's probably not enough there to pay for all of these programs. >> i guess we'll leave it there. we'll have you both back to talk more about this. seth hanlon, center for american progress and nicole kaeding with the tax foundation coming up, nbc news contributor richard haass on china and later house ways and means banking member kevin brady will be our special guest. "squawk box" returns after a quick break.

♪ just hold on, i'm comin' ♪ hold on, i'm comin' ♪ hold on ♪ don't you worry, i'm comin' ♪ here i come and everyone i've ever opioloved away from me.thing everything. i blew my ankle out and i got prescribed pain pills by my doctor. if making my detox public is gonna help somebody i'm all for it. i just wish i would've had a warning. servicenow put our this changes everything. you're right sir... everything. no not everything, i mean you're still blatantly sucking up to me gary. brilliantly observed, sir. always three steps ahead.

six steps ahead. sixteen. so many steps. you done? a million steps ahead. servicenow. works for you.

light at the end of the trade snunl a new report says the u.s. and china are drawing up plans to end their bruising seven-month trade war. the race to ipo, lyft reportedly planning to list on the nasdaq next month. what would it mean to beat arch rival uber to the public markets? where's my refund? >> dude, where's my car? >> where's your car, dude?

>> some americans likely to see lower tax refunds this year. congressman kevin brady says that because president trump's tax plan is working. he'll join us as the final hour of "squawk box" begins right now. >> announcer: live from the most powerful city in the world, new york, this is "squawk box." good morning welcome back to "squawk box" here on cnbc live from the nasdaq market site in times square, i'm joe kernen along with andrew ross sorkin and melissa lee. becky is off today the futures are down they were up earlier, up as much as 50 or 60, now down 18 on the dow, nike is down, it's a dough component. the s&p down 2.5%. treasury yields have been interesting to watch we just say it like it's so easy

now but 267. jim bullard is here. we'll talk to him in a second but we have other top stories that thursday's andrew will bring you. >> thursday's andrew, not last friday's andrew, at least not yet. here are the stories investors will be talking about. nike doing damage control after zion williamson blew out his nike basketball shoe 30 seconds into last night's high profile game against unc he fell and sustained what's being called a mild knee sprain. in a statement nike said while this is an isolate odd kurns it's working to identify the issue. president obama was on hand watching this. pointed out that it was the shoe and lots of questions this morning about what happened and what it means for the company. separately, johnson & johnson says it has received subpoenas from the doj and s.e.c. related to the alleged asbestos contamination in the company's signature baby powder.

j&j says they'll cooperatefull and defend the company in the talc-related litigation. and apple and goldman sachs plan to start issuing a joint credit card paired with new iphone features that will help users manage their money card holders can set a spending goal, track their rewards and manage balances. apple would likely get a bigger slice of the credit card swipe fees of its own card versus apple pay transactions. sources telling reuters that the u.s. and china have outlined memoranda of understanding on six of the thorniest issues in the ongoing trade dispute. this is the most significant step toward ending the country's trade war. kayla tausche joins us from washington. >> the two sides have been exchanging papers on these issues for the last several weeks and talks would need to have reached that point in order to extend that deal. talks are at a critical juncture in washington. the vision pce premier liu he is

authorized by president xi jinping to negotiate on his behalf leading the u.s. side is ambassador robert light highser who has been holding a firm line on this march first deadline and has been communicating that's a firm deadline and that in order to extend it, concessions need to be won over by the u.s. side. i'm told the u.s. has proposed a ten-item action list as reuters has also reported of short term deliverables that the u.s. would get from china in order to extend this deal, whether china would agree to any or all of those concessions is still unclear. in the meantime, companies that import goods into the rust wondering what exactly happens next week if in fact this march 1 deadline were going to be extended that could happen so it could be entered into the federal register and take effect by march 1.

if there are ships on the water or shipments that are at ports of entry coming into the u.s. they could be caught with a costly end of this bargain but see if they can be reached the next couple of days. guys >> i want to bring in our next guest to continue this conversation richard haass is the president of the council on foreign relations. good to see you. >> good morning. >> we haven't seen you much. >> you haven't asked me. >> well thank you for being here help through what's happening. are you hopeful we'll reach an agreement and is the agreement going to have teeth? >> my guess is it may take longer than the beginning of next month you'll probably see the biggest progress in the area the president cares most about life is about implementation, implementation, implementation. >> you're sitting next an

economist. how do you feel about what he said is he right? >> i think there will be a deal. both sides have incentive to bring a deal in and we're going to have to see what the details are. >> but the implications of the tariff issue more important to the president or more important to economists. how are economists going to look at it? >> bilateral trade deficits aren't as important as they're sometimes made out to be. >> what you're not going to get are fundamental structural issues china isn't going to change its fundamental economic model to get a deal with us you'll get promises on technology, transfer and technology theft, we'll see whether this time around they're implemented. most of the progress will be on tariff and non-tariff barriers and in particular you'll probably see a commitment on china's part. >> you seem skeptical about this

memoranda of understanding or the belief that memoranda will be signed by both parties. >> that's what we see over the decades where china has agreed not to make films where they continue to violate copyright. in 2015 you had the agreement to bring theft over the internet so i'm not saying there won't be any progress but there will be at most limited progress there this president talks about trade deficits, most economists don't see bilateral deficits as significant but we have a $325 billion deficit over the next three years, five years, serve years that will be halved or disappear and that will be seen as progress. >> so it sounds like you're saying the u.s. team should push hard on enforcement. >> absolutely. but you can't get it guaranteed up front that's about implementation. you'll sign an agreement and we'll know about enforcement over the next two, three, five

years. >> trust but verify. >> and we'll know if service providers are allowed into the chinese market. >> do you look at this as related? it feels like a much larger shift between what was a cooperative relationship between-to-one being described as confrontational. >> economics after the end of the cold war we lost a strategic rational for the u.s. chinese relationship. we had a common adversary in the soviet union economics in trade and investment became the glue of u.s./china relationship. that is frayed to say the least. there's friction there so you have a relationship -- >> is that inevitable? >> no, but what happens when we brought china into the wto which i think was the right decision we didn't monitor closely enough and too many people thought we could give china a pass and -- >> who do you blame far? >> well people say there isn't enough bipartisanship in

american foreign policy. there was enough bipartisanship on that one. >> the other thing i was going to mention is huawei that's become the strange chess piece in this trade negotiation but it's been a cloud over all of this. there's an interview yesterday on cbs with the krcoo of huawei who said they are not a state actor but we, the u.s., have taken a number of aggressive steps against the company but more broadly and claim most of those steps relating to national security issues but at the same time we are pursuing what seems like a nationalistic strategy around 5g and so are they connected or are they something else >> with the uaw way prosecution it's more legal but it's a canary in the coal mine. the u.s./china relationship will change you'll see more separate supply chains where you don't trust the chinese not to steal technology.

cfius much tighter on inward investment there will be a significant degree of separation. >> so richard, we have vietnam next week and north korea again. the president has said i'm not going to push too hard on denuclearization right now but we'll keep talking. >> you've going to have an agreed goal of denuclearization. >> when you wrote "world in disarray" a couple years ago and you were a pretty outspoken critic of obama in terms of foreign policy, is the world more in disarray right now or less in disarray right now >> considerably more what this president has done is introduced a degree of uncertainty and unreliability. >> evenwith the north korea situation? there's no missiles headed over japan right now. >> what you have with north korea is the united states essentially has accepted north korea's nuclear weapons message. >> we did before but in this case we're talking

and there's no bellicose overt move s we're seeing. you think we're worse off with north korea than we were at this point. >> we're better off and worse off, joe we're better off that we're talking -- >> you should be in government better off and worse off. >> or go work for the fed. you could do that, too. >> north korea has stopped the overt testing, i presume they're continuing to do thing coast verdictly, simulations with computers and the like, but north korea is doing nothing to reduce its conventional military threat, nothing reduce its nuclear stockpile, if anything it's growing and meanwhile, south korea is reducing sanctions and we are, i think, on the cusp of reducing sanctions, all the pressure on north korea will begin to fade. >> i want to get back to china and ask you how you look at the chinese -- the chinese economy is slowing, that's a concern for the markets right now. if they embrace what is agreed upon in these memoranda of understanding and they change their economy, can the chinese

economy achieve the growth it had under this new way of doing business >> potential growth is slowing it will continue to slow but they have an aging population so they have longer-term issues but obviously 6% is something we'd like to see here. >> do you believe they're growing at 6%? >> the trade impact has been significant on china the anecdotal reports are all that china is growing more slowly than the official numbers indicate and that's feeding into other countries, other parts of asia and europe. >> richard haass, thank you. come on back, there's a lot of geopolitical stuff coming. >> a great invitation. >> an open invitation. >> you're both invited back and not invited back coming up, the race to an

ipo. lyft reportedly getting ready to launch its road show and likely beat uber. noted venture capitalist -- cue the fleetwood mac -- bradley tusk stay tuned you're watching -- i don't know what he did there. i hope he's okay and had a good lawyer anyway, you're watching "squawk box" on cnbc was ahead of its time. still, we never stopped making it stronger. faster. smarter. because to be the best, is to never ever stop making it better. the new 2019 c-class family. lease the c 300 sport sedan for $429 a month at your local mercedes-benz dealer. mercedes-benz. the best or nothing.

we see eat emerson,mulating when issues become inspiration, creating a better world isn't just a result, it's a responsibility. emerson. consider it solved. on the sleep number 360 smart bed. it senses your movement and automatically adjusts to keep you both comfortable. save 50% on the sleep number 360 limited edition smart bed. plus, 24-month financing on all smart beds. ends sunday.

welcome back to "squawk box. disney, necessarily and fortnite maker epic games have been suspended because of a pedophile network operating in the comments of these monetized videos they appear to have been made with innocent intentions but advertisers are taking issue with suggestive and inappropriate action in the comments section the advertisers have urged youtube's parent company to resolve the issue. youtube releasing a statement addressing the controversy saying any content, including comments that endangers minors is abhorrent and we have clear

policies prohibiting this on youtube. we took immediate action by deleting the accounts and channels reporting illegal activity to authorities and disabling violative comments. >> this relates to the story we had on pinterest and anti-vaxers and it raises the question of these platforms, which are open forum for people to post their conte content how much of a role do they have to sensor? >> putting aside the free speech issue, there's a market-based advertisers which is finally -- finally -- and because they have not taken action historically may have some kind of discipline around these companies but then you get into the questions about whether it's a liberal view or conservative view and whether they're being censored for other things and that's why it's difficult. >> the race ipo in the ride sharing space is heating up. the "wall street journal" says lyft is planning to list on the nasdaq around the end of march

speculation has been high about whether lyft or uber would go public joining us now is tusk venture ceo bradley tusk, uber's first political consultant in 2017, owns equity in uber which is also likely to ipo later this year great to have you with us. >> thanks for having me. >> people like to say lyft versus uber, they're different in terms of the contents of their business how do you view this race? >> i think lyft has to go first because lyft is a more one-dimensional business they're a ride sharing company whereas uber is a ride sharing company, freight company, food delivery company and if uber went first and stumbled out of the boston red sox that would spell trouble for lyft's ipo however many months later. i'm sure uber isn't thrilled about having their valuation pegged to how lyft does but the risk was greater to lyft than uber. >> since you own equity in uber, how do you view what the equity is worth in terms of the ride sharing business in the u.s. versus abroad and all the other moon shot businesses. >> i think the moon shot ones are encouraging because some of

the optimism around ride sharing has dull add little bit. it's been a tough regulatory and cultural fit luckily for uber things like uber eats are growing exto -- exponentially. >> what do you think the implications are for tax policy where places like new york city is calling it congestion pricing, prices went up and if you're going a short distance -- >> it adds up. >> cheapo me has found myself in the past couple weeks actually saying you know what i may jump on the subway it's been happening more and more and more. >> oh, my god. >> i'm just making a point that taxes have an impact i thought you'd be very -- >> aren't you mobbed by fans on the subway how do you make it through >> i bring my security team with me it's very complicated. >> swipe them all through. >> for real, how much is it going to dampen --

>> the higher price supply and demand, we at this table believe in those laws so it will decrease demand however albany is considering congestion pricing tax for any vehicle south of 96th street in manhattan. if that happens and it becomes neutral whether you're in a cab or yourown car or an uber, you still may take the subway more but it probably evens out. >> i'm going to switch topics if you would indulge me, just on amazon which is our favorite topic from last friday you came at it from the other friend the conversation we were having here which was you thought it was amazon's mistake all of this? >> i think amazon, cuomo and de blasio all deserve blame here for managing to take 25,000 great jobs and screwing it up completely. >> so interesting you put the blame there rather than on a vocal minority >> but they should have been able to be smart enough. you have to biggest company in the world, the governor of the new york and the mayor of new york city collectively, they should have been smart enough to say here's the political

blowback that will come, here's how we deal with it. so for example if amazon instead said listen, we don't want any special treatment, whatever tax break s we're eligible for, we'll apply for. if we get them, we get them. if we don't, we don't. they would end up with the $2.5 billion with no complaints no one would have had arguments against them instead they were tone deaf, de blasio and cuomo misread the politics on the ground. >> although the politics changed dramatically since the time the negotiations started versus more recently. >> ocasio-cortez was -- beat joe crowley in june of 2018. that was the turning point on all of these types of issues that still came a good four months before amazon. >> political question. a year or two from now, will the public look at what happened in new york city and say amazon's to blame and we're angry that amazon didn't stay and took their ball and went home the way de blasio described it or will

they point the figure at aoc who has a billboard against her and saying thanks for nothing killing 25,000 jobs. >> neither, the public doesn't vote in democratic primaries and in new york city every election is decided in the primaries. people who vote in the primaries are the ones against amazon and love aoc. >> very interesting. >> getting back to the stories andrew and i were talking about, the onus on the platforms to be the sensor, to be the police of what's posted on those platforms? >> maybe not in the sense that one thing to look at is, is community overrated? all of these platforms, facebook, twitter, youtube, pinterest have the same problems and the assumption is people want to share their comments and talk and that's what creates the value. maybe, maybe not maybe the ways they're generating revenue aren't that dependent on people being able to comment and post things and

maybe the right solution for those companies, say we'll limit that, we'll have revenue with less risk. >> bradley, thank you, good to see you. bradley tusk, ceo of tusk ventures. coming up, congressman kevin brady on taxes with talk that americans may see lower refunds this year. brady is out with a new op-ed piece which says that that's because the president's tax legislation is actually working. all the details are coming up. stay tuned, you're watching "squawk box" on cnbc ♪ (butcher) we both know you're not just looking for pork chops. you're searching for something more... ...red-blooded. right this way. you thirst for adrenaline, you hunger for raw power. well, you've come to the right place.

the road is yours, dig in. you still have service? call the insurance company it's them, calling us. it's going to be a week before they can get through on these roads shhh, sorry, i didn't catch that. i said ask how soon they can be here not you. right now? what's now? he says they're surveying our property now they're probably at the wrong house i don't see any hovering his name is hovering? look up? by using machine learning and analytics to automate claims,

cognizant is helping insurance companies advance how they serve even the hardest-to-reach customers. cool ♪

we've been seeing movement this morning originally it was higher on expectation wes might get a deal with china, things have moved the opposite way on us dow jones opened off 15 points, nasdaq off about a point and the s&p 500 off about two points >> 60-point range. .00002 coming up, we are minutes away from key economic data, including jobless claims and 'll veer durable goods orders. weha that when "squawk box" returns after this quick break. d at this? had a coach in high school. really helped me up my game. i had a coach. math. ooh. so, why don't traders have coaches? who says they don't?

coach mcadoo! you know, at td ameritrade, we offer free access to coaches and a full education curriculum- just to help you improve your skills. boom! mad skills. education to take your trading to the next level. only with td ameritrade. itin 30,000 precision parts. or it isn't. it's inspected by mercedes-benz factory-trained technicians. or it isn't. it's backed by an unlimited mileage warranty, or it isn't. for those who never settle, it's either mercedes-benz certified pre-owned, or it isn't. the mercedes-benz certified pre-owned sales event. now through february 28th. only at your authorized mercedes-benz dealer.

we are seconds away from several key data points. jobless claims, the latest manufacturing numbers from the philadelphia fed and durable goods. the futures are down 18 points

now on the dow they were up as much as 50 or 60 at one point nike is dragging the dow down to some extent on the sneaker explosion with duke and north carolina last night. there's a ten-year at 268. rick santelli is standing by at the cme in chicago rick, the numbers, please. >> all right, we're looking for a february read on philly. initial claims came out first. 216,000. that's down from 239,000 so we'll call it down 23,000 hey, rather big drop, actually if we look at continuing claims, they move from $1.78 million to 1.725. let's get ginto durable goods remember, this is a preliminary number and we're expecting up 1.7. it's close, 1.2 revisions in the rear-view mirror, we're positive from up 0.7 to up 1%

transportation, you lose ground, only 0.1 and a very important metric for capital spending, down seven tenths. that's not a good number we're expecting a slight positive and last look goes from minus six tenths to down 1%. that's disappointing if we look at shipments, they were up half of one percent. durable goods is volatile on its own. this preliminary read definitely volatile philly fed is now out. down 4.1%. that's 10 points below what we were expecting and that actually is the weakest number going back a bit here minus 4.1 is the weakest number since may of 2016 may of 2016. so definitely a disappointment there. sequentially that follows 17 we still have leading economic indicators in existing home sales yet to come. interest rates have crept up

from yesterday we are now down close to unchanged on the year. we settle at 268 in the 10 and we are well above, at least with some cushion, the 255 low-yield close for the year that's also going to take us back should we take that out always way back to january of last year. andrew, back to you. >> thank you for that, rick. for some reaction to that data, steve liesman is here. but we want to get to pour guest host, st. louis fed president james bullard is here as well. great to have both of you. you're punching numbers on your laptop. >> the philly fed is ugly. >> that's the current -- >> that's the one i'm focused on i want to go back to december on the durables in just a second but i'm looking inside here. the employment number was better inside philly fed. the new order is what cratered and shipments crater sod that's one as an expectation, that is not good the durables, it's good it was up and positive but the business

investment number is a puzzle and it has to do with the reaction to businesses to the tax cuts and i don't know whether it's measuring it correctly but we saw this third quarter fourth quarter slide in capital spending that i think is worth noting it starts up again in the first quarter of this year but it waned last year inside the data and we're wondering why that is going on because there's incentive for capital spending in the tax code. but let me turn to jim leer. jim, your read on this data, especially philly fed number that is 10 points below expectations >> the claims number is very strong and we have strong labor markets in the u.s unemployment rates at 4% that's not surprising to me. what i would like people to focus on is that the feedback from a tight labor market to inflation is much, much weaker than it once was so you can't just say because it's a strong

market you'll get more inflation. the philly fed, that's a regional index i like to look at all the regional indexes together. they're noisy so i'm not sure what to make of it. >> overall your outlook for growth this year. >> well, one of the main driving factors is that we're expecting growth to slow down in 2019 relative to 2018 we'll get 3% plus growth for 2018, 2019 probably isn't going to hit that, 2.25% is a good number that's not a terrible outcome it just means the economy is returning to trend growth. >> is there some humility there. very few predicted we would do 3% in 2018 wrong about that it is possible we're wrong again?

you get an upside surprise here? >> it's possible and keep our eyes out far but the data has been mixed and it seems like the economy is probably slowing down some not terribly but some. >> what happens to the unemployment rate this year? we're at 4%. do you see it driving lower? >> no, i see it staying where it is. >> james, you seem to be very in tune with what the markets seem to telegraph and the markets are of a belief that there could be a rate cut later this year based obstruction of justice what you're seeing right now, could that be in the cards >> is it a possible? sure is it a baseline case? no i don't think so i think the baseline case should be where they are, policy will stay where it is and we'll see how the economy evolves going forward. i think you'll have to see some inflation decline when inflation expectations decline further possibly with some economic weakness in order to get a rate cut and right now that isn't my

base case. >> so if unemployment stays at 4%, what happens with the jobs numbers? they can't stay at 300,000, right? >> they've been a blockbuster because we're pulling people in off the sidelines. >> how long can that go on >> some analysis says there's room to go there so we have to see how it plays out people have been predicting the end of that for three or four years. >> and supposedly it was all baby boomers' fault and there are people that are of the -- not me -- but there are people that can come back into the work force that aren't ready to retire. >> and that's a great thing. we want them to come back in, we want them to develop job skills. very good dynamic. >> holds down the wage, push inflation but we want wages to rise. >> wages will rise with productivity we need productivity improvement, productivity growth improvement in the u.s we have seen some but it's still pretty low compared to what it's been historically. >> but you don't -- have you

explained why inflation no longer does what it's supposed to do based on unemployment? >> yup. >> you have? >> yup. >> what is it? apple? google is it the internet >> no, it's because we're in the era of inflation targeting so central banks are so focused on setting and -- first of all setting inflation target, that wasn't a possibility in the earlier '70s, '80s era and they've gotten pretty good at it so we're sitting on a program talking about tenths of a percent on inflation rate. that's crazy compared to the '70s and '80s experience, '90s experience we've gotten good so inflation doesn't move around very much, it stays close to target even though other factors are moving around quite a bit. >> i saw the markets go down once again, not much we're down 20 and then down 50 i was trying to figure out which of those numbers was the bad one, whether it was the durable goods core or philly and then i

was trying to figure out wait a second, do i want good or bad? i still don't know because i don't know what you're going to do, you and all your friends i don't. if you stay at -- do we want the fed -- >> we're going to be very supportive of the economy and we want to see the best real outcomes we can get. >> but i still don't think we're -- i don't think we're sure you're going to stay dovish not you, but i don't think we're sure the entire fed is going to stay dovish even though we're asking about rate cuts. >> >> we've done a lot of rates during 2017 and 2018 now is the time to let that feed through the economy. >> some of your colleagues don't care about inflation they look at growth, not inflation. not everybody is you. >> isn't it weird that 2.5 is the end point? >> i would say that's -- no, it's not. >> so no it's where you stop before but it's not low in the global interest rate environment. it's quite high in the global interest rate environment. >> that's true.

>> there had been, though, this notion that the fed had to raise rates because if we did get ourselves into a recession that there would be no dry powder left all of a sudden that notion has gone away? >> i think that is a fact, has been a factor but we've done the normalization we can do. you don't want to push this so hard that you put the economy into the recession. >> then you get to use your cuts. >> jim, how much concern do you have about a recession right now? >> recession probability models have ticked up a bit they've got -- that's because this yield curve is almost inverted so those models like feed off -- >> those models use those yield curves and so the probabilities have ticked up i'd like to see them go back down to close to zero. i don't really think we're for any trouble but we'll keep an eye on it as we go through the year. >> what kind of factors would you be concerned about it is possible that global economic weakness could cause a u.s. domestic recession?

>> it's possible a lot of companies earn income overseas so it can feedback to the u.s. it's more integrated -- the global economy is more integrated than it was in past decades so it's a factor it's definitely a factor you can look at things like housing, you can look as. >> do other banks not have the powder to combat a recession or slowdown >> i think the biggest concern here is europe was doing well in 2017, first part is 2018, they had a bad second half of 2018. looks like they'll be on hold for quite a while still going forward. so they have not been able to get their normalization program going the same way that the u.s. did. so we're close to the europeans on this dimension.

their worry would be another recession comes along and they can't react. >> because our economies are intertwined does that become, because of the -- >> certainly not a good situation. it's not a good situation but i would remind everyone that the japanese economy has been approximately that situation for 20 years. >> i want to ask very quickly, big debate about how much the fed internal stock market values, what about corporate earnings do you take -- there's some discussion that this quarter could be a zero flat line, even negative for corporate earnings. how do you internalize that in term of economic outlook. >> well, we certainly look at it but we're more concerned about national income so that would correlate better with sales and top-line numbers from businesses. >> so you would watch the revenue numbers whether or not they're making money >> yes. >> you and your friends in st. louis are happy for the rams bitter

you're ballot they got to the super bowl >> we're going to get the bengals to come over. >> if i'm going to bring that up, you'll threw in my face. okay you're glad they lost or glad they made it to the super bowl or you're bitter about both? never mind. >> i would have preferred that -- >> they did that when they were --? >> the patriots not win however many super bowls they've won >> we have brady coming up, but it's -- well, not unfortunately but it's not tom, it's kevin grading the trump tax cuts with congressman kevin brady a little more than a year after the gop tax plan was signed and he's got an odd ally on his argument we'll see whether he sticks to it when he finds out andrew is on his side. we'll talk about the lower refunds and the debate about umat has gained the most from trp's signature achievements stay tuned, this is "squawk box" on cnbc. we're ok. just ok?

we got a saying here. if the brakes don't stop it, something will. that's not a real saying. it is around here. i wrote it. just ok is not ok. especially when it comes to your network. at&t is america's best wireless network, according to america's biggest test. now with 5g evolution. the first step to 5g. more for your thing. that's our thing. lies beyond the tech sector. it's about technology transforming every sector. ♪ at pgim,

our bottom-up approach uses a technology lens to identify long-term winners. from energy... to real estate... to retail. finding such opportunities for alpha is the true value of active investing. and around the world, you have a partner in that pursuit. pgim: the global investment management businesses of prudential. the global investment management sometimes, they just drop in. obvious. cme group can help you navigate risks and capture opportunities. we enable you to reach global markets and drive forward with broader possibilities. cme group - how the world advances. ♪

welcome back to "squawk box. taking a check of futures on that economic data, it was a mixed bag. we've been tight range across the board when it comes to futures. s&p open lower by three points, dow down by 20 j and j and nike are down by more than a percent so on a point bases they's three points total and roughly 20 points off the dow there. and the nasdaq looking to open lower by seven points. >> house ways and means committee ranking member kevin brady and senate finance

committee chair chuck grassley are out with a new "usa today" opinion piece amid some anxiety over reduced tax refunds it's title lower tax refund shows how the republican tax cut is keeping money in your hands all year and congressman brady joins us it's good to see you thanks for joining us. it's embarrassing that we need to say your refund depends on how much you paid in over the year and it has nothing to do with the absolute level of taxes you're paying but we also had to tell aoc that the $3 billion, you can't use that to pay the teachers because you don't get it unless amazon comes so we're in a -- in this weird world where even the most basic math seems to have escaped a lot of people, i think. >> yeah. i was listening to conversation with president bullard wishing i was there in that conversation about productivity and sustainable growth and all that but we are talking about refunds

because i think this is sort of this misleading narrative right now. a couple quick points. obviously the refund picture isn't even accurate. we're a couple weeks into an unusual tax filing season because of the partial government shutdown. the refunds vary from year to year that's natural and it doesn't even reflect the refundable credits like earned income and child tax credit that are important parts of these so, a, the picture isn't accurate and, b, if it were, it has zero to do with your tax bill it's merely what you overpaid the irs in the paychecks last year and you are thinking was in tax reform most families live paycheck to paycheck it's best to drive that boo into their paychecks last year starting in february and march rather than delaying it a year but people can go at work, fine tune how much they want in their weekly or monthly paycheck what they want for refunds and maybe

this conversation will spur more people to do that. >> well, the refund issue aside, and you got andrew on that, you agree that. >> absolutely agree. the illogic train going on in america right now over financial literacy is shocking so on this front i'm with you. >> but i don't think he would agree with you, congressman, that anything proves the tax cut has worked for anything right? you don't think it's worked? the tax revenue is down for the year when it was all said and done and it was down slightly and people point out well, because corporations paid less in taxes but it was a corporate tax cut, right? that's weird they reelized that might be the result of a corporate tax cut is that corporations paid less taxes that was a revelation to some people. >> yeah. so my belief is that everything prove this is tax cut is working. >> now you have to address these

comments. >> in the economic area from everywhe everywhere andrew is a great part of the show i love being on and he's smarter than a whip as you know but you can look economically not just in the headline numbers which are very encourage but blue-collar employment is surging. low-income workers have seen the highst wages in a decade small business startups are skyrocketing and i still believe while revenues were relatively flat, even with the individual tax cut wes saw $105 billion more in individual -- in payroll taxes. why? because people were going back to work and they have higher paychecks. all of which over time i think generate more revenue. >> congressman, how do you square that with the increasing deficit? it's substantial and it is an issue that historically the republican party has made a --

an issue during elections? >> i agree but it is on the spending side where we -- that drives the deficits we did have -- even with the tax cuts fully in place relatively flat on the revenue side, side the difference between 2%, that old slow growth we were getting used to, and 3% for federal revenues is about $44 trillion more for federal coffers over time unfortunately the spending still continues at a higher rate that's where we really have to get serious. >> congressman, would you invest in the irs right now woefully under funded, people inside the irs talk about it. >> we did provide 200 to 300 million more we've always said the irs opens

its books, is transparent, really focuses on customer service, more dollars will be coming i'm really comfortable with that approach but the reason we passed out of the house last year almost unanimously the first restructuring of the irs in two decades was really to redesign them toward customer service, toward taxpayer privacy. i'm hopeful this year working with the new democrat majority, we can get that restructure to the president. >> for every dollar invested in the irs, the cbo says you would receive $6 i don't know any business when it comes to receivables that wouldn't invest in collecting the revenue that it is technically owed why not in this case >> you know, so our belief for some time has been the irs is not using the resources it has at hand.

in some cases there's been a political agenda in other cases they really were distracted, diverted to implementation of the affordable care act so we really think a refocus will tell us what type of customer service we can get. and i will tell you a lot of that tax collection that goes uncollected comes from an overly complicated tax code we hope with the new changes we made we'll actually be helpful in that area. >> this is jim bullard great to see you a lot of the change was toward itemization so there would be less people itemizing. that seems like a big improvement in tax simplification that lost lost in the discussion. >> i think so. more than 9 out of 10 americans will be able to use the intersit form

4.5 million families won't be doing their taxes twice with the amt. with the unlimited expensing, a lot of small businesses won't be caught up in that maze of depreciation schedules >> much tougher to target conservative groups from here. you know, hope springs eternal jim thinks we do 2.25 for 2019 better than the obama 1.8 or whatever it was average, but it still makes it look like a front end loaded, typical stimulus, one time boost instead of the long-term structure change that you were looking for would your argument be that we'd

be below 2.25 or do you hope we do better than that in 2019? >> i expect us to do better than that this really wasn't designed for the short-term it was designed to do two things, provide that boost and change the trajectory of the economy first. it was designed to impact the location decisions by business we've changed all that it takes a while for those location decisions which we're seeing to manifest in the economy. secondly, we really designed it to increase over time productivity that's pure wage growth. that takes some time i'll argue i think the best of this new tax code is yet to come because we dramatically changed bad incentives

>> related to those incentives, what do you make of what seems to be happening in this country, especially on the democratic side of things, a number of the tax proposals almost in response to the rules that were put in place about taxing the wealthy and the increasing polls on both sides of the aisle that suggest that the country wants to tax the wealthy people much more significantly than you have? >> yeah. look, i think it's easy to throw out that claim most people will say, look, i'm not the wealthy, go ahead and tax them until you talk about the impact it has on the economy. these are the wrong decisions. we're moving back toward the old tax code work force ought to be our number one economic issue that

every candidate and every elected official is talking about. it's slowing growth now. it will slow growth even further in the future. that's where we ought to be focused. >> i don't know why we can't get 99% to tax the 1%. it seems like math why can't we get a 99% poll? what's wrong with these people thanks to congressman kevin brady, ways and means committee ranking member from the great state of texas they would take amazon, i guarantee you. >> yes, sir. >> not complain about it, right? they would have said, yes. >> yes, sir. absolutely >> thank you, congressman. when we come back, final word with jim bullard

when you retire will you or will you just be you, without the constraints of a full time job? you can grow your retirement savings with pacific life and create the future that's most meaningful to you. which means you can retire, without retiring from life. having the flexibility to retire on your terms. that's the power of pacific. ask your financial professional about pacific life today. air velocity is reading at fifteen fpm. why would you need to learn every detail about a company? firmness... nine. it's how ibm services helps retailers around the world drive growth and save millions. he's very into this. yeah. is that the standard amount? yes. feels good. when your partners are obsessed with business and technology, you can put smart to work.

we sunleashing the promisegas of clean energy. at emerson, when issues become inspiration, creating a better world isn't just a result, it's a responsibility. emerson. consider it solved.

we do want to thank your guest host today, james bullard

who's been here graciously bottom line, the u.s. economy is strong >> it's good it's slowing just following up on congressman brady there, i do think there will be some increase in potential growth coming out of the tax act but it's from 1.8 to 2.25 so it's at the low end. >> "squawk on the street" begins right now. ♪ good thursday morning. cross-cla the news flows heavy reports of progress in u.s./china trade talks, lyft is prepping for an ipo. europe is relatively mixed macro data has not been grade.