me down and mess me around ♪ >> live from new york where business never sleeps, this is " "squawk box." this comes after a bullish run for wall street. we have seen the highest closes for the dow and s&p 500 since november 8th yesterday we also had the highest closes for the nasdaq since september 7th. nasdaq, by the way, has been up ten out of the last 12 sessions, and the dow and s&p have been up five of the last six trading days we'll see how things go as we get close to the opening bell. we have fed testimony today and other things that the street will be watching right now you see that the nikkei closed down by one-third

of a percentage point. treasury yields this morning in the united states, you saw the yield yesterday for the ten-year was at 2.673% this morning it is just below that as 2.664% home depot is just out reporting its quarterly numbers. the hoemt improvement chain earned $2.09 for the fourth quarter. that was below consensus estimates of $2.16 the stock is down about a percent. a little bit over that the company did, though, have a one-time charge of 16 cents related to an impairment loss at interline brands, a distributor of maintenance products it acquired in 015. revenue was also below rs

forecasts. >> twot men are expected to sit down for a brief one-on-one. then they'll have dinner with their advisors and then on thursday the hard work begins where the two will be meeting for a series of times. now, the -- the -- sorry the two men are supposed to be meeting after this.

this factory exports to the united states, and uft e it's one of the many manufacturers that has been able to help vietnam make that transition from an isolated command economy to a more open one the north koreans have reportedly been interested in following this model because there are certain aspects of the way that the vietnamese have been able to do this that have been quite attractive. for one, they've been able to make that transition, but not not only that, they've been able to do that without any political upheaval from what we understand kim, and the whole kim family, have been concerned that economic reforms could potentially lead to their downfall, regime change. another point could be interesting and attract i to the north koreans that vietnam has been able to make this

transition and maintain independence north korea now sees the u.s. as an important trading partner because of that, the veem naiet have had lefrmg over their relationship with china, and they could see that as attractive because at this point north korea's economy is very, very heavily dependent on beijing. >> it would potentially influence the negotiations and what people are wondering is will what he sees here eventually mean that he would be willing to take the deal that's on the table by the trump administration, and that deal is we will make you rich if you decide to give up your nukes, but at this point we don't know, becky, whether or not he would take that path of denuclearization >> thank you

eunice yoon. >> another big story we are following this morning, it is the saga that is tesla shares sliding after the s.e.c. asking a federal judge to hold elan musk in contempt of court over some tweets he sent last week we talked about them at the time literally in the 234 hours that it happened. the s.e.c. says musk violated the fraud settlement they agreed by tweeting material about tesla without preapproval. in a court filing the s.e.c. pointed a tweet from last tuesday where he said that tesla made zero cars in 2011, but will make around 500,000 in 2019. he later clarified to say that the production rate could be 500,000 vehicles, but deliveries estimated at 400,000 this year tesla, musk, and the s.e.c. settled a lawsuit last year over his mus misleading fweets e tweets as part of that deal, any material statement musk makes on

local media will be vetted in advance. tesla hasn't commented, but musk has fired back, tweeting s.e.c. forgot to read tesla earnings transcript that includes 350,000 to 500,000 how embarrassing he is taking the s.e.c. to task. he is taking them to task on twitter and also clearly snubbed his nose at them when he was on "60 minutes. a transcript of part of that conversation from "60 minutes" was included in the filing to the judge from the s e.c. >> what part of the transcript >> he goes on to say that, you know, it's freedom of speech and da, da, da, da >> they've taken some of the taunts to demonstrate that -- >> they called him the short sellers exchange commission right after this deal was settled. >> it's probably not a good idea

to taunt them, but it's certainly if you really have a lot to worry about, i don't know if you would taunt if you were really defensive, you wouldn't maybe he should be, and he just doesn't get it >> it's never a good idea to taunt a government agency because they're human too. >> all these tweets, we talked about it, the next day was when his legal counsel said, you know, i'm going to go back to the job i've been doing for the last 18, 19 years, and it took them two days to respond to the s.e.c. i wonder if that's a big part of the reason that the legal counsel said forget, it i don't want to be on board with this. >> this is great for us, but i'm not sure it's great for the long-term liability of, you know, him being there and being everybody loving him there >> we'll talk more about the story later, but the question is

if you are the judge and you are going to hold him in contempt, what is the penalty going to be? >> what about the 350 to 5 >> they said they would remove him and not let him be ceo >> is that material to the stock price? >> 350 to 500? >> when i saw his tweet last week, i thought it was just a mistake in how he said it because they're talking on become on a run rate by the end of -- i honestistly thought when i read it last week it was a mistake, but you don't get the opportunities to say, oops, i messed up when you are already on double secret probation i mean, there was someone who tweeted last weeng, and obviously this is on twitter, but this is someone who said elan musk is the main reason that i bought shares of tesla. he is also the main reason i stoeld e sold. >> if he had sent those tweets while the market was open, i will bet money that the market would have moved on those tweets they might have actually moved in terms of futures outside of -- >> does trade. still trades do you see "60 minutes?"

do you have a tv set while you were out in the wilderness >> i was on a plane. >> you haven't seen it yet >> i have not. >> chinese government wants to win. >> yes i heard. >> the race. they are subsidyizing the heck out of the whole industry. we will talk more about this, and in looking at home depot, i'm not sure it's trading. i'm looking the bid and the ask, and i don't know if we really were able to see how bad this could be today we have -- there little. see? >> down 3% >> that's a real -- that is a miss that it looks like. they're not adding the charge, the impairment charge back in to get a different number >> rev nigh slightly below anyway, that is worse than probably the dow coming up, home depot stock on the move as we're talking about after the company's quarterly

report we're going to dig, dig through the numbers. we have to talk about beth bed, bath, and beyond too i saw -- have you seen the show "crashing" with pete holmes. >> i know about it zplie watched a guy do a whole routine on bed, bath, and beyond about how he went in there to buy a bed, and he said i spent a half hour. there's no beds there. he complained, and the people there go, yeah, we messed up with the name. we don't sell beds it was a pretty good one as we head to break, here's a look at the biggest premarket winners and losers in the dow. they don't sell -- was ahead of its time.

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[ 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 some stocks to watch this morning. etsy's fourth quarter earnings and revenue both beating the forecast the on-line marketplace says that gross merchandise sales during the holiday period rose 22%. that's the strongest growth rate since the company went public in 2015 etsy also seeing growth in active buyers and sellers. also, shares of hertz are soaring today after the car rental company reported a narrower fourth quarter loss and

revenue came in slightly better than expected. hertz citing a higher sales and pricing in the united states the stock is up more than 11.5%. shares of shake shack volatile in after hours trading. they initially rose more than 3% following better than expected fourth quarter earnings. they've since turned negative. the restaurant chain posted a top and bottom line beat and an increase in same store sales full year revenue guidance lighter than expected, and the company expects same store sales to remain flat this year also, tenet health care posting a fourth quarter loss, but adjusted earnings in revenue topping forecasts. the hospital operator also guiding full-year revenue above analyst estimates sending stocks soaring this morning as a result you're looking at it it's now up more than 16% just this morning up more than 60% this year home depot reporting with us just saw it right at the top of the show the stock now is lower after

bottom line miss, the top line miss and the same store line i don't think we've got you this yet. nation's largest home improvement retailer says sales at u.s. outlets opened for at least 52 weeks and rose 3.2% , and analysts forecast 4.5% senior equity research analyst at oppenheimer initially they're saying rising u.s. home prices, weakened housing demand and construction activity, but coming on of that retail sales number, i'm wondering if there's a bigger issue here. what do you make of these numbers? >> overall i think this is much better than these headlines would suggest. i'll say a couple of things. i dug through the release quickly here one, earnings, if you take out the charge in the quarter, 225 earnings beat expectations with regard to sales were a bit light. i looked at the 3.7% >>ing just on that point, so for your estimate you took out that

charge >> home depot is saying add it back in. >> in my eye i did not have that in there the way i was looking at it initially was the 225 compared with the street figure of 216. >> i could be wrong. you're the one -- >> if the company -- if the company is able to say, analysts didn't know about it and add it back in, they do they're saying specifically -- >> if he didn't have it in his estimate, it's part of the -- >> usually with estimates -- it's always hard nshlly to look at these things, but usually with numbers like that, you add them back in >> i don't know. i would also look at same-store sales and look at revenue, and if everything is bad, then i don't know why they would have a bottom line beat whatever does the -- why is it better if same-store -- what was your same-store sales estimate? >> i was looking for a 4.5 >> that was 38.2 or no >> that was worse. they did a 3.2 against our 4.5, and in the united states they did a 3.7. that's a miss. i think the point there is we

saw through the quarter warmer weather in the month of december for home improvement that's a negative the other note i took with sales, again, we'll have to see what they say on their conference call, but they're guiding and put "initial guidance for 2019. the comp was 5%. >> they say their view of the health of the economy and on the consumer, also the momentum of their strategy eeic investments leads them to believe that do you believe that? >> home depot is a smart company. they know the market well. they also know how to play the guidance game. for them to come out with a five comp this early, that says they're confident. that to me is the big take-away. we've talked about this a lot on the show there's so much concern out there right now with what we've seen weaker housing data, maybe a weaker consumer, i don't so he that, and that's the real key here >> what are you talk about, a snow blowing machines and shovels? >> yeah. >> really? you can do more construction when it's warm and remodeling when it's warm >> it's not -- i don't view it

as an indicative quarter of home improvement. you have -- you do sell snow esquimt and ice removal. if the temperatures are warler, you don't sell as much of that, but you are not going to start constructing something the more indicative period comes springtime >> those guys work in cold weather too. do you appreciate where you are? there are people still -- all right. we admire and appreciate -- >> the highs are higher. do you like the -- you long the stock? what's your target how about the dividend increase? do you care about that >> i'm long the stock. i have a $200 price target with regard to the dividend and the new buy back announcement they put out there today, that just shows how much cash home depot generates, and i think the

real encouraging aspect is here's a company generating free cash flow while they're inare vesting in their business. >> the $200 price target, is that a 12-month price target for you? >> i usually set them 12 to 18 months out >> that's 5% above where it closed yesterday >> right >> it's been as high as 215. it's already weakened a little bit. macy's, i don't know what -- looking forward to seeing that as another data point for whether retail really did have an awful period. i mean, that was a bad number. people -- it was so bad that people aren't -- brian neagle of oppenheimer. thanks >> coming up when we return, a new report and a potential brexit delay it's moving currency markets we'll tell you what it could mean for the next month's deadline that's next and so much more when "squawk box" returns.

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theresa may now reportedly considering pushing back next month's brexit deadline. reports say she will formally propose ruling out a no deal brexit she hopes that the threat of leaving the e.u. with no separation package in place would help gain concessions from the e.u., but she now faces a rebellion by lawmakers and some of her own ministers the move by the prime minister could open the door for a delay

of that march 29th brexit date, and the poun rid rising on that news an all new episode of "profit" premiers tonight on cnbc >> you reuse the mold? >> we reuse the mold >> you can't do that because, a, the correct chemicals, you have to use now with the new fda laws, you would have to test that those chemicals aren't breaking down the plastic, which they probably are. >> the fact that michael just told him that he is violating fda regulations and the way he is manufacturing food should stun tony because i got to be honest with you, i'm stunned >> you can catch more stunning moments tonight in that all new episode of "the profit." it's on at 10:00 p.m. eastern time on cnbc when we return, a busy day in washington for the markets. we'll get you ready for tefrt from fed dhar jay powell and a

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we're under a little bit of pressure this morning. actually dow futures have doubled their losses down by 94 points in the premarket. s&p futures up by 6.5. the nasdaq up by 19. of course, the s&p 500, the down dow, and nasdaq all closed at their highest level since early november yesterday on today's squawk planner consumer confidence numbers are out later this morning plus, we'll also be getting a ton of housing data. housing starts building permits, and the kay shiller home price index are all due out today. >> you know that home depot shar shares are affecting the dow the other one that had us lower earlier were caterpillar shares of the dow compoen ebt under pressure this morning.

ubs didn't do this in piecemeal fashion. they previously had a buy on the stock. they're not going to hold. they're going right to a sell. going to buy to a sell predicting the zwrort of caterpillar's end markets will peak this year, and revenue marge ichbs will come under pressure in 2020 as gee manned cl declines add on the home depot losses, add another five for caterpillar and multiply it by whatever, and you can probably get close -- not quite, but those two stocks are serm affecting the dow >> fed chair jay powell will testify before the senate banking committee. it's going to happen later today. he already has support of one of the world's best known investors. here's warren buffett talking about the fed chairman yesterday on "squawk box." >> i don't second guess it i think he is a terrific choice for federal reserve chairman he actually was at the treasury in 1991 when solomon was in trouble, and i saw him make a lot of very good decision for the united states government he is a smart man, and he is

very level-headed. he understands both business and economi economics. >> the central banks apparent adm admitance of guilt could pose any problem more than any bond sale what do you think of that? >> a couple of pieces. the part that i liked about powell's stance was perhaps putting a halt on increasing the fed funds rate not a terrible idea. i mean, neutral is probably 1% above inflation. we're close to 2%. we're almost at 3% that's not a bad idea.

the continuing unwind of the balance sheet is a good idea because if we're looking for dry pouter, we have to get normal zplags across the curve and get rid of the vestages of qe. the part that gives me balgts of pause is the notion that the unwind in the balance sheet might stop in the second half of the year, too. >> where do you stand on that, and what do you think it's going to do to stocks? >> if you look at the stocks, i cover the brokers and asset managers they went straight down in december, and they came trait back up. they're right where they were before it's almost like nothing happened the market was looking for the fed to go on hold, and that's exactly what happened. flz a whole bunch of other macroevents. breck it china trade. muller report. there's a whole bunch of events that is could push it either way. we're focused on the economy economic growth is 2 pirz plus that's actually good for my stocks >> what do you think the second half of the year looks like? >> the second half >> the second that of. >> i think it will be perfectly reasonable >> everybody is screaming that we're going to have problems second half. >> let's look at the data so

far. it's coming in quite fine. 304,000 new jobs 2.2% cpi exthe non-corp. pieces. even the -- the only bad number we've had recently was retail sales. down 1.8%. that's probably a bad number if wal-mart didn't give us enough indication that that was probably a bad numbers as another indication of things that happened in the shutdown, the e-commerce numbers will be three weeks late there's weird numbers there. most of the data is pretty good, and i think that continues in the second half. >> you look at your guys, and the companies you cover, you think their second half will be as good? zblie think it's a taim of two citi cities if you look at the brokers and the ones i cover, they're putting up stronger growth this is ameritrade, schwab i mean, they're growing anywhere from 4% to 10% before the market they're benefitting from bunches of secular trends. you look at the asset management

world. alternative firms are raising lots of assets blackstone, carlisle, apollo etf's are raising lots of assets that's black rock in the middle there's hollowing out. i think that trend continues this year, and probably for actually a few more years after. >> that has nothing to do with where the economy stands today that's just a larger trend, which is to say people like alternatives better. they either want to go into a completely alternative space or the one that lives in etf's. they don't want to have their money managed. >> there's a few indicators. there's it.1 billion of dry pout poider does that stock every stop the market in january and put a floor? maybe. you have a backstop on the market also, if you look at my retail brokers and follow the cash balances of what retail is doing, there's a correlation there also with the economy, but cash balances are really low what that means is this is not a lot of cash left to come out of the sidelines and help the market on the retail side. >> that's interesting. when you look at athe retail investor that's in ameritrade,

and you look at their cash balances, do you think that's a sign of how competent they are is it a confidence competence signal zbloots, but also a contrarian signal where he we sit today in terms of cash balls, it looks like 2,000, it looks like 2007. >> maybe we have a few more years tock, but when you look at the magnitude, we're sitting here at record low levels of cash in the balance sheets of retail investors >> that should scare you >> here's my one concern margins are now higher than their precurrent crisis peak, and we're having the back end of the tax cut. in other words, the corporate tax cuts are now going to go to consumers in the form of price you have rules-basised strategiesed that identify companies that have increased their def dends, quality stocks, that can fight against that and have some pricing power that might make a good idea >> before i let you go, i'm

fascinated on this cash balance issue. do you want to own those stocks then if are you telling me that this is 2000, 2007, you would say to yourself, okay, sell everything. >> you actually do because they make most of their money now on client cash sweep. that's where e-trade, schwab and ameritrade make 60% of their profits. if they trough and move higher, they have a nice counters cyclical buffer that will help stock. in twaet it wasn't a bad year for the retail brokers it was a bad year for everything else their earnings were strong in 2008 >> craig, thank you. appreciate that. coming up, musk fires back we're going to talk about the tesla ceo's twitter response to the sec's criticism of his tweets that's next. then, later, fda commissioner dr. scott gottlieb will join us to talk about today's big drug price hearing in the senate and the fda's crackdown.

bcx"n watching "squawk bo o cn

welcome back u.s. equity futures this morning have been under some pressure. take a look right now, and you'll see that the dow futures are indicated down by about 104 points a couple of different -- caterpillar trading lower on a buy to a sell at ubs

also, home depot posting an earnings miss for its most recent quarter it looks like home depot is down by 3.25% they're off by 3.5%. time for the executive edge. am sflon adding a familiar face to its boardroom former pepsi ceo is joining the board. she's been named to the board's audit economy. nooyi becomes the fifth female member of the 11-person board. she's awarded 549 shares as part of her appointment, valued at nearly $900,000. the stock price fell as much as 5% in after hours trading. another skirmish between ceo elan musk and the s.e.c. with us now colin rush, managing director and senior research analyst at oppenheimer colin, lay out your bullish case just give us some numbers. what's your price target, and i assume you have, what, a strong buy or something equivalent to that on tesla? >> we have a buy, and we're, you

know, just around 440 for the price target you know, the real underlying case here is really about cash flow, which we think they're going to continue to generate a fair amount of cash. it's of sort of activity with the s.e.c., and it's been cavalier with its commentary around the s.e.c. and interviews and the recent months. you know, this tweet just seems like it was just 100% unnecessary for him to put this out in a way that was confusing for a lot of folks out there, and then certainly probably did not sit well with the s. krechlt given what we saw yesterday. >> being one of the big bulls and not necessarily that you are known for that, but has anything in the last three months given you pause or are you at this point desensitized that's just the way elan is?

>> we've been attentive to everything here, and we don't like to see the turnover that we've seen with senior management and the general counsel. that's not a great sign for stability within the organization we do think that there's enough management to keep this thing going, and certainly a big enough window in terms of the competitive environment for them to continue to take share of the market in terms of the volatility in it the staff as well, and it's certainly a concern for us i think tend of the day what really matters for us is how many cars they make and what the marnlin is on those cars they'll continue to work on that very aggressively. we think there's still a big opportunity for them on rework in the model 3 in terms of reducing the amount of work that happens after the factory. certainly, in terms of managing the supply chain and just the optimization of the process as they ramp up volume. >> hey, colin, if i could make

you the judge for -- in terms of -- you would hold if you can hold -- you know, certainly i was surprised by the light duty challenges they had after the tweets in august, and certainly, you know, if you look at the transcript, you know, you said something about 350 to 500,000 cars this year, and the response -- one of the questions that i asked on the call and so i think there's some gray area here you know, um not sure what judgment will come down, but what i do think is going to happen is they're going to make sure he understands that he can't -- he can't be tweeting out information or misleading or even potentially fuzzy information like this without concern. >> what would you do >> what's still unclear? >> without having gone through an approval process.

>> what's unclear about it >> you know, he said here was that they would produce 500,000 cars just recently in the tweet the transcript says 350,000 to 500,000. what the guidance was was on model 3's into the -- >> he corrected his own tweet. i mean, he acknowledged the mistake by correcting his own tweet hours later. >> he sure did >> that's the approval process where that -- >> colin, here's the problem in my mind, which is that at some point even if you believe that he is the central figure in the future of this company, you have to protect ultimately the securities lauds, and if those seem in jeopardy, and i believe it's why the s e.c. decided to file what it did yesterday, you need to ultimately hold people to account, and so the question is

what is an appropriate penalty is it taking him off twitter i'm not sure you can actually even do that is the appropriate penalty taking him out of his job? is the appropriate penalty some kind of additional fine? given what he has said publicly on "60 minutes" and elsewhere about his -- might as well say snubbing of the notices at regulators unto themselves, if shows what his view of this whole situation is, i think a judge may come down very harshly on him >> you know, it's certainly possible for that, and i agree with you that the entire laws are important. i was surprised at how light the fines were in the penalty was after the august settlement. i thought that was very important for tesla. i don't know if there's a bit of catch-up with this situation, but it's very hard to speculate on this, and i don't think i want to put something into the public realm in terms of what would happen

i certainly feel like this is going to be addressed and will be addressed very seriously. >> what about, colin, are there -- the things bears point to where it's heavily subsidized and -- in terms of the market number in what you can produce and how charge, do you give them the benefit of the doubt on those things >> there's a couple of things that we're looking at in terms of the competent tiff environment. you know, certainly in terms of the competent tiff response, we've been disappointed with the other oem's and what the products have been we've been looking at the operating system at the key lever and the key benchmark for -- drawing the component cost down. you can hit these numbers which they've already got a pretty healthy lead on the order of four years with the model 3. looking at some of the other

vehicles, it brings us 2021, and it's really where we see real competition for tesla and so it's the field in the u.s. and western europe and until then in ermz it of bringing cars to market, and the bond on these vehicles should support something that can ahave, you know, 25 plus percent gross margins on $35,000 priced vehicles the question is how soon do they get there and how efficiently is the factory going to run to get there? assuming all the build-ups of different vehicles, whether it's tesla or other folks, to get down to that number, certainly it's feasible, and feasible with the technology that we have at this point >> thanks, kol irp colin rusch of oppin hiemer

where. >> that's a lot. >> it is 150? >> it would be >> it would be when we come back, pharmaceutical ceos are headed to washington. executives are going to be testifying before the senate before drug pricing later this morning. we'll talk about the issue with fda commissioner dr. scott gottlieb next. right now as we head to the break, quick check of what's been happening in the european markets. red arrows across the board. the ftse is off by more than 1%. at&t provides edge-to-edge intelligence, covering virtually every part of your healthcare business. so that if she has a heart problem & the staff needs to know, they will & they'll drop everything can you take a look at her vitals? & share the data with other specialists yeah, i'm looking at them now. & they'll drop everything hey. & take care of this baby

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big pharmaceutical ceos on the hill this morning testifying on drug pricing. joining us ahead of all that is dr. scott gottlieb of the food and drug administration. thank you for being with us this morning. what do you think we should expect to hear from the senate this morning in terms of what their questions are? >> well, look. i think that there is still places in this market that don't have the competition that we expect to see for consumers. and i think a lot of the competition we do have when you have competition, the discounts that are taking place in the marketplace aren't flowing back. and there's been a lot of rules created by government programs in the past in part from lobbying from the drug industry that have gummed up the system and i think the ceos are probably going to be asked to explain some of those things and defend it or not >> prices have gone up on a lot of drugs a drug to treat multiple

myeloma, it's a celgene drug that drug has gone from under $250 for a 10 milligram dose back in 2007 to almost $720 today. that's the type of things that make people so angry when they hear these things. it's the type of things that unites both democrats and republicans when they go after issues like this what is the real problem aside from just a lack of competition. when you start talking about the rebates that's handed out. >> i don't want to talk about any specific drug, but when we do have discounting in the market, when you have the expected competition in the market place and pricing systems that allow that to distract discounts in the market. in medicare, we don't have competitive bidding so it's hard to extract discounts but when you have the right conditions and you canextract discounts, the problem is that the discounts come in the form of back ended rebates that go back to the health insurer those are used to pay down everyone's premium

everyone is getting lower premiums because of the discounts on the drugs but the patient out of pocket is full price >> or a patient who doesn't have insurance. >> but even a patient that does have insurance is paying out of pocket costs they're spending money to subsidize everyone else's premium. the sick people are helping to subsidize the healthy people that's not how insurance is supposed to work so we've got a wacky system where the discounts aren't flowing to the people. >> is that an argument for saying you can't give these kickbacks to the pharmacy benefit managers or to the insurance companies anymore? >> that's one of the arguments that the administration's advancing. i think what's happened, also, over time is because of other government rules and certain litigation, the whole system's been forced to rebate in the form of these discounts. and it's very hard to give upfront discounts at the point of care to the patient at the

pharmacy >> why not just cut the list price? >> that's what we're trying to do by getting rid of the ability for the pbms to pay these rebates. i think in an optimal system, you want to allow the discounts to flow directly to the consumer >> do you -- are you hopeful that this year is going to be a turnaround point in terms of drug pricing do you think we get our arms around it this year? >> i think we're seeing a consensus emerge in washington for some kind of bipartisan action i think there is a possibility that you're going to see legislation -- bipartisan legislation to try to address some of these issues there's really three issues in my mind. we don't have the expected product competition in the marketplace. i'm trying to work on that by getting more drugs on the market we don't have pricing systems that's allowing us to take advantage of all that competition and extract discounts. in the situations where we do extract discounts, it's not benefitting the consumer that's spending money on the drugs.

i think they're addressable problems we're trying to work on the first one. trying to get more product competition into the market. even when we see that like with the injectable drugs because medicare is a price taker in the part b system in the injectable market, they're not extracting discounts on those drugs >> on that "60 minutes" report and i guess when everyone hears "60 minutes" report, it strikes fear into my heart too i don't know why that is give me an idea of how fair that portrayal was of the back room discussions between the fda and drug companies that caused the fda to put in that long-term, you know -- to allow it to be prescribed so much more frequently with that long-term number was there something going on there? >> i can't speak to actions. the report was about 20 years ago. i had the opportunity, actually, to talk to former commissioner

kessler yesterday. i called him to try to understand what happened 20 years ago. i will tell you what we announced -- >> make it fast. >> we're requiring long-term studies in these drugs to see. >> and they said there were no studies when they did that thanks, scott. >> thanks a lot. when we come back, a lot more on elon musk firing back. responding on twittethr is time to the s.e.c we'll tell you all about it. two big hours of "squawk" ahead. one-millionth order. millionth order. ♪

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good morning, vietnam! >> president trump heading for hanoi for a high-stakes sit-down with north korea's kim jong-un we'll take you live to vietnam's capital. tesla shares falling as the s.e.c. goes after elon musk. they want to hold him in contempt we have the details. and business in barcelona. we head to the world global congress and talk to the fcc chief about broad band and protecting the nation's networks as the second hour of "squawk box" begins right now. ♪

live from the beating heart of business, new york, this is "squawk box. >> good morning, everybody welcome back to "squawk box" here on cnbc i'm becky quick along with joe kernen and andrew ross sorkin. let's take a look at the u.s. equity futures they have come under some pressure this morning. you'll see right now that shares are down by about 80 points for the dow futures. s&p futures off by 5.5 and the nasdaq off by 16 we've got big headlines to tell you about today two dow components putting pressure on the futures right now. home depot reporting $2.09 per share. below estimates of $2.16 revenue also missing forecasts did present a dividend hike in stock buyback program. that stock off call it 2.5% right now. caterpillar as well. got a double downgrade from ubs this morning predicted that the majority of

caterpillars end markets will peak right now and revenue and margins will come under pressure in 2020. then the other big water cooler topic, the s.e.c. looking to hold elon musk in contempt of court. musk responded by tweeting at the s.e.c. saying that he had talked about production levels during tesla's most recent earnings call. he's taken it right back to them and this is becoming more than just a little bit of a food fight and could have real implications for tesla >> is he ever capable of admitting he made a mistake? >> we haven't seen that yet. he's a smart guy so maybe he really did think of all of this. >> look, i was willing to give him some slack last week because he corrected it after the fact realizing that it was -- you know, at the time i thought maybe he didn't realize he was talking about 500,000 being on track for the end of the year

i thought he corrected it and that was actually good wow. once in awhile, show a little humili humility >> he clearly believes in this case it wasn't material information because it was already said right? >> within the range. >> it was in this previous range. >> the s.e.c. has a point of going back to the "60 minutes" interview saying i'm not going to have anybody checking on my tweets he called in the short sellers exchange commission. he has zero respect for any of this >> ceos don't tweet normally and it is a different format you're ceo you've got to really think long and hard about the whole using twitter at all we think about it and we have to -- but if you're just some -- look at james wood if you see someone who doesn't give a crap what -- >> the claim the s.e.c. filed yesterday -- >> it's different when you're a ceo. >> beyond what we talked about last hour, the "60 minutes"

transcript, they also say that they talked to tesla about this and that tesla admitted to them that there was no -- that there was no lawyer or anybody looking at these tweets in advance but the second piece of it is, i have to imagine that tesla must have argued to them over the past week before they brought this case that this was within the range. i can't imagine -- >> the s.e.c. was upset because it took them two days to respond. >> i can't imagine they're raising this issue now i thought they would have raised this before if this is the defense. >> there's another guy who tweets where you kind of hold your breath sometimes. >> yeah. >> it could be taken as official policy yeah i'm talking about santelli no, no >> speaking of that other guy, by the way, speaking of that other guy, that other guy also known as president trump traveling to vietnam for another summit with north korean leader kim jong-un. we want to get to eamon javers east in hanoi ahead of those

meetings with that other guy eamon javers >> reporter: yeah. good morning, andrew, from hanoi here in vietnam. kim jong-un arrived earlier today after a 65-hour trip by armored train from north korea all the way through china and into vietnam we saw his motorcade earlier today as he arrived here hundreds of people lining the route as the north korean leader arrived here in town the president expected within about two hours' time. air force one expected to touch down here in hanoi shortly and then the summit can kick off what to expect from this meeting, the second meeting of these two leaders? in terms of verification, the u.s. side is going to want to have some indication that some progress has been made on some of the promises made in the last summit last year in singapore. so that's one key issue. so the other key issue here in terms of the two leaders is a definition we want to get some evidence that there's a definitional

agreement between the two sides of what denuclearization actually means here. officials briefing us in washington last week suggested that the two sides don't even have a shared agreement of what denuclearization is. and then also, of course, on sanctions. the north koreans are going to want some promises from the united states to loosen economic sanctions against that country which have been so devastating not likely to want to agree unless there's some promises made on the denuclearization front. all to play for here as they say in soccer coverage in terms of the summit between the two countries, we'll wait and see what happens today kim jong-un's motorcade has been out and about in town, guys. he left his hotel and went over to the north korean embassy for a visit with officials there we'll see the president here just about 9:15 we're expecting, p.m. here in vietnam back over to you >> okay, eamon thank you. joining us now, we're going to

keep talking about this. max baucus former senator of montana. the overarching thing for me, senator, ambassador, is the carrot that we're holding for kim jong-un. and that would be a prosperous nation where his citizenry actually comes into the 21st century in terms of quality of life or even food and shelter. he's been doing just fine for years and years. and so did his father. with his people basically starving and he and his cronies have been doing well, i think. is there a reason for us to think that he would like to be seen, maybe, as the father of modern north korea and actually might have a vested interest in cooperating with something like denuclearization >> i think kim jong-un is like a lot of leaders

he wants to perpetuate his power. he wants to be the man he wants to be written in history as one of the most powerful leaders in north korea. he's doing that by building up his nuclear arsenal and building up his missile capability. and my judgment is he's not going to give that up. we hope that he does we're going to try all ways to encourage him to do it, but he's not going to do it meantime, south korea is starting to cozy up a bit with north korea. president moon wants unification not far down the road. add to that sanctions are tough, but russia and china are relaxing slightly. add to that north korea has a pretty prosperous black market so i don't see a lot of changes. we very much hope, obviously, that president trump can work out some kind of an agreement that advances the ball in hanoi. but they're both sort of autocrats. they're their own people kim certainly is and president trump doesn't

follow the advice of his advisers very much he's his own man so we'll see hopefully there's progress, but i'm not sure there will be >> i'm not sure i heard an answer to my basic question. is the carrot that he can bring his people into a much more, you know, much better higher standard of living, is that something he'd like to do? or is he just fine with him being in power with nuclear weapons, his people still don't have the quality of life of almost any other country on the planet does he want to do that? does he want to be seen as fatherly and someone that helps out north korea? or does that not matter to him he just wants to stay in power like he has been >> he primarily wants to stay in power. but if he can get sanction relief, he'll want that. he'll do his very best but he's not in my judgment going give up his whole cart which is his nuclear and missile

capability >> i just wound what we're doing there. almost everyone says this is better than where every three weeks there was a missile flying over japan that we're in a better position now that seems like tensions have eased if they're going full force with development and we're really getting played and then a year from now, they can switch back they got nowhere is that what you think is happening here or is there something brewing that could be positive for the world? >> well, of course we don't know for sure we'll find out what's agreed to. and even then, we don't know what the follow-up will be i think kim will suspend testing for the indefinite future. same time he's developing within korea his missiles not testing them i think that's going to continue i hope i'm wrong, but i think he's going to keep going he has basically done a good job

establishing a strong nuclear capability almost superiority. soon we'll find ourselves working with him to be members of the nuclear club. i know a lot of the american foreign policy establishments, they got rid of all those nukes. i hope they're right but i don't think they are i think we're getting to a point where kim's going to be part of the club >> we're also dealing with china trying to figure out some way of getting a trade deal with china. and for awhile, president trump was linking the negotiations with north korea and china together saying well, you know, i did this to china. now north korea is not responding as positively as they were before. do you think anything that's happening now in vietnam is going to effect the ongoing negotiations in trade with china? >> i think it's important for us to remember that china is the 800 pound gorilla in the room.

and obviously china's going to maintain its position as much as they can strong economic power with respect to the trade talks and china always takes the long-term. you know, maybe in -- that's going to be a summit in mar-a-lago which announced some kind of a deal i think frankly it's going to be helpful. but china, although it will probably buy a lot more american products and reduce the trade deficit, will not in any significant way address some of the core structural problems that we americans are concerned with because if china were to back off, frankly, xi jingping may lose his job there's such strong feelings in china right now. i go to china often. they very much want to maintain their sense of destiny and be a very strong country in the future not going to give up very much >> so eventually you think we're going to be living in a world where north korea is in the

nuclear club >> i do. i do along with pakistan, india, and maybe other countries. >> right and not all of them will necessarily respond. so i don't know what's going to happen that might be a problem. >> it is >> i'm worried about the -- >> very worried. but i don't think -- i don't see a path to getting kim to give up he's not going to give up. that is what keeps him in power. we talk about regime change. if he gives up, we will protect him so he can still be the leader of north korea. he's not going to believe that different presidents come and go, promises are not really kept the thing that keeps him in power is his nukes >> i don't know, max i don't know if i want to spend $94 trillion to fix the atmosphere if we're all going to be obliterated next year

this is worrisome. >> you've got to do the best with what you have >> i'm not going to sleep well continue -- tonight. it's good to see you thanks, senator. when we return, drug pricing front and center we heard from scott gottlieb this morning coming up, senator chuck grassley will join us. ayd later ajit pai will join us. st tuned you're watching "squawk box" on cnbc

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[ 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" this morning take a quick look at the futures. we are in the red this morning dow looks it would open off about 83 points. nasdaq off about 16 points s&p 500 off about five points. we got some bad news from home depot and a couple others. we will talk more about all of that when we return, we're watching shares of home depot after the company reported results a short time ago the results were not what the street had been anticipating that stock is off by 2.5%. we'll run you through the numbers in just a little bit up next, senator chuck

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shares of dow component caterpillar are under pressure this morning ubs downgraded the stock from buy to sell. revenues will come under pressure as demand declines. stock was up in the 150s at one point after, remember, it was down in 80s and 90s for awhile we've been watching it for a long time. it's very economically sensitive. >> globally sensitive, yeah. >> but that's according to ubs i don't know if the analyst is that well respected. that's a big move on an analyst downgrade. take a look at shares of shake shack. pretty volatile. rose more than 3% following better than expected fourth quarter earnings but they have now since turned negative off about 3% this morning. posted a top and bottom line beat that was the good news

also 2.3% increase the full year revenue was lighter than expected. earlier this morning, we were joined by fda commissioner dr. scott gottlieb this is what he had to say about prescription drug costs. >> i think that there is still in this market that don't have the competition we expect to see from consumers and i think the competition we do have, when you have competition takes place in the marketplace aren't flowing back to consumers and the fact is there's been a lot ofrules created by government programs in the past. in part from lobbying from the drug industry. and i think the ceos are probably going to be asked to defend those things or not >> the largest panel of pharmaceutical ceo in decades will be testifying before the senate finance committee on this issue. joining us now is the man leading that commission. senator chuck grassley

thank you for being with us today. >> always glad to be with you. ask me any time. >> what do you think is this the one area in washington where you will see some bipartisan support? >> well, so far everything i've read that the new majority in the house of representatives wants to do and what my colleagues on the senate finance committee want to do from both republicans and democrats, it looks like we put together -- well, first of all we have a very good opportunity to have a bipartisan result and bipartisan legislation come out of this and this hearing was put together in a bipartisan way the panels were agreed to by both republican and democrat members of the committee and they generally include companies that have had drug pricing issues from our respective constituents.

>> we can look through the drug price individual situations where drug prices have risen 200, 300, 400, 500%. sometimes higher than that what do you think the problem is before you get the ceos in front of you today where would you point the bigger blame? >> i'll answer your question this way if i does answer your question if it doesn't, tell me there isn't enough information available as to what drugs a priced at. there seems to be a lot of secrecy. for me on a number of issues brings accountability. we need to get more transparency in the end we have to have some explanations of why, for instance, prices are set way up here then there's rebates that bring the prices down here what happens in between and how

come consumers should be paying the same price and the lower price instead of what's going on in between >> so i say it's fair to assume that you think the situation of rebating either to the insurance company or to the pharmacy benefits manager, the middle men in between, is a bad would you be in favor of that practice >> i'm not sure i can answer your question now, but we've got to have some explanations of why. and it doesn't seem reasonable to me that we have this differential and by the way, we are not going to stop this investigation just with pharmaceutical skpaens. we're going to have pbms and other -- >> players in the industry >> yeah. people that are making these deals. and what's their role? we don't seem to know as much

about that as we ought to. and what extent is there collusion as an example? >> the administration has put forth a plan that would tie medicare drug pricing to drug prices in foreign countries where those prices tend to be cheaper. the industry has come out against that for the most part where do you come down on that >> well, i think that i don't want governments overseas setting our price here i want to willing buyer and seller to make that decision >> meaning you'd like more competition? you'd like more medicare's ability to go ahead and negotiate that >> i don't want the government negotiating if that's what your question is. >> well, the government basically is the biggest payer for these things they tend to set the rate. if they're not negotiating, other people say you'll never get to lower prices. >> when you brought up government negotiation, i thought you were bringing up to have part d of medicare be

handled just like va i'm not in favor of that >> right. >> but i am in favor of more competition. and the extent of where we can have -- i will continue to vote for it but also understand that we have pay for delay schemes that senator klobuchar and i are introducing legislation to do away with those. >> which is what >> pay for delay is when a patent runs out, the brand company goes to a generic and pays them to keep the generic off the market so obviously you don't get the cheaper drug on themarket as fast then another one would be when they don't cooperate with a generic company to get the information that the brand company has so they can get something approved by the fda a lot faster then the idea is to get generics on the market faster so you have more competition because

generics are cheaper >> all sound like very interesting ideas. senator, we hope you get a lot of answers today and hope you'll give us an update on what you learned there. >> you ask me, i'll be here. >> thank you, senator chuck grassley >> i'll be out next week maybe he could come in and sit here coming up, we are awaiting the second meeting between president trump and kim jong-un to get started in hanoi, vietnam. full details what to expect. as we head to break, take a look at u.s. equity futures which are a little bit better than they were with those two dow components that are taking the dow down today we'll be right back. hey toothless.

[ ding ] show me just add magic.

[ 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". ♪ still to come this morning, the s.e.c. asking a judge to hold elon musk in contempt for a tweet he sent out last week. the latest on this developing story is still to come and then round two of nuclear talks kicking off in hanoi president trump meeting face-to-face with kim jong-un. the latest from vietnam and what

it means for your money straight ahead. speaking of money, jay powell will be testifying in front of the senate banking committee today on the economy and interest rates we're going to have full bcverage all day right here on cn "squawk box" returns with a lot more in just a moment. 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. tear up ticket. find the cat. [ meowing ] mittens! make it rain. [ cheering ] [ singing opera ] change the music. ♪ when i move, you move beep. beep. use the rocket. [ sputtering ]

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welcome back, everybody. let's check out some of this morning's top movers dom chu joins us with more on that front >> good morning, becky welcome back shares of home depot now lower on around 15,000 shares of premarket volume this is after their posted a weaker than expected quarter earnings and sales both missed sop analyst estimates. it also forecast full year profits fell below analyst estimates as well. home depot did boost its di dend and authorized a new $15 billion share buyback program. also you've got shares of discovery communications higher with up just about 1400 shares of volume. mixed quarter there with profits

beating. but sales missing estimates there. and then smuckers up big on about 1800 shares of volume after the packaged food company posted a big beat on profit and sales. it also gave upbeat guidance to better sales of some of its coffee products and pet food products some of those shares up 8% right now. and congress gathering in barcelona spain this week. jon fortt joins us now he has a special guest first on cnbc jon? >> thank you, andrew i'm here with fcc chairman ajit pai. >> great to be with you. >> i want to talk about privacy first. i was looking back two and a half years ago, you wrote a dissenting opinion about the rule of fcc came up with on internet -- we've seen controversies lately with

people's personal information being transferred to facebook. what's your reaction to that controversy in light of what happened two and a half years ago and what rule does the fcc have in perhaps weighing in on that kind of thing >> as you know, two and a half years ago, i made the argument that online consumers have a uniform expectation of privacy regardless of what type of company holds their information. they want to information to be safeguarded. the obama fcc decided, no, we are going to single out internet service providers while giving silicon valley tech giants a pass i think the folly of that approach has been released in the past two and a half years. talking about facebook, have highlighted the fact they have essentially -- that's why you see something needs to be done about this issue. >> to what can you do? your argument earlier was put the ball in the fcc's court but can the fcc lead on this

>> the fcc does not have jurisdiction over companies like google and facebook. that would be a decision for congress to make that's one of the reasons congress is examining should we beef up the fcc's rule making and authorities to give them the tools thaed need >> want to talk about title 2rks, with some states pushing back against your actions on title 2. are you making a different argument or can you point to specific day to points over time to bolster your point of view? there's increasing pushback. >> no question there's political pushback if you look at the facts a year and a half ago when we made this decision, some proclaimed it the end of the internet as we know it recode report said the speeds in the united states were up 40% from december of 27. more homes than ever before connected with the fiber recent report from the fcc shows

it's from -- as we know the united states is stronger than ever and because of our reforms, cisco and others have predicted things like 5 g the u.s. is positioned to lead that's part of the reason we've adopted on a whole variety of issues a forward thinking approach. instead of -- >> seen some conflicting data on infrastructure investment. how do you gauge that when it comes to the effectiveness >> part of it involves a macro assessment on what providers are spending on capex. also examining, going around the country and seeing these communities. places like that that are off the beaten path to some. but to me, that's where thest the darkest. we're starting to see that close now because of the forms we

introduced. >> andrew ross sorkin has a question >> hey there, mr. chairman curious about huawei and the privacy concerns on one side and yet a larger debate going on about the future of 5g which i know you've been a big proponent of in the united states. how can we, the public, separate these two issues >> well, i think the first thing is to focus on the need. the 5g fast plan getting into the commercial market place, making it easier to promote more fiber deployment to carry all that internet traffic. and because of the reforms we've made, cisco in popular has said north america will have more connections than asia by 2022. there's also a security component there. the fcc, united states

government as a whole is concerned about the fact we need to make sure the supply chain feeding into the infrastructure around the world when it comes to 5g is secure. that may pose a threat to the united states. we want to make sure these networks not just operate for the benefit of our citizens but are also -- >> but help us with this distinction. because there is sort of an america first view about this which is to say should we be -- should we allow foreign companies putting aside the privacy issues or even the national security issues meaning if we were confident a national security issue was okay, do you believe we could or would allow foreigners to effectively run or be part of our 5g networks. >> well, several equipment manufacturers are not u.s.-based

companies. our position is simple we want the supply chain to be secure from our perspective at least, it doesn't matter where the company is located what does matter is where that observes protocols influencing the decision that the providers make we do have concerns about the providers in this space. >> the chairman of huawei has called for exactly that here, it soumds li sounds like, a vetting process independent of politics to ensure they're secure. or does there need to be a process if they're not to chaefing that? >> i think that's one of the aspects that has yet to play out. we want to make sure that any federal funds being spent are spent wisely at this point, we cannot make the determination that certain providers are operating in an environment that is is entirely

secure >> finally, let's tackle a kitchen table topic everybody can relate to. robocalls. that was do not call list, et cetera, et cetera. i don't know about you, but i'm getting calls all the time from the same area code and first three digits of my phone sometimes the person on the other end is trying to talk to me in mandarin spp there a way to get carriers or somewhere else in the chain to stop that from happening or to bring down penalties? >> this is the top complaint we get from consumering recently i told the industry, we need to dwocht every fingerprint for every phone call this year we need to have it now otherwise there's going to be a tension. the same area code, next three digits are the same, we want to empower them to take action. in addition to that, we've really beefed up our enforcement efforts.

and so that's part of the problem that these -- because of the internet where you can get all these calls from abroad. even if they seem to be coming from a local source and so we want to make sure we stamp out that problem hopefully this time next year we we can hope you're not bombarded with calls >> chairman, thanks for being with us. >> thank you >> jon fortt in barcelona, thank you for that coming up, how does warren buffett feel about the wealth tax? his comment and reaction straight ahead and in the next hour -- >> freudian? >> the advocacy group putting this billboard up blasting aoc for her disapproval of amazon plans for headquarters "squawk box" returns in just a moment want more from your entertainment experience?

just say teach me more. into your xfinice remote to discover all sorts of tips and tricks in x1. can i find my wifi password? just ask. [ ding ] show me my wifi password. hey now! [ ding ] you can even troubleshoot, learn new voice commands and much more. clean my daughter's room. [ ding ] oh, it won't do that. welp, someone should. just say "teach me more" into your voice remote and see how you can have an even better x1 experience. simple. easy. awesome. you could raise taxes but i would say that the wealthy are definitely undertaxed relative to the general population. >> that was warren buffett yesterday speaking to becky about the nation's tax system. joining us right now is former u.s. representative jeb

hensarling and barney frank. i read an article in "the new york times" yesterday discussing this very topic. over the past couple of months, i consulted with tax accountants and politicians trying to get ideas to plug the gap in the tax code my idea was to do it without blowing it apart we wanted to get your thoughts on where you think all of this should go which is to say is there a way to do this and i'll start with you, jeb hensarling i know you don't want to raise taxes, but do you believe that there are some inequities in the tax system that should be fixed? >> i think the tax code can always be made fairer, flatter, simpler. i have cosponsored the fair tax that would get rid of the income tax and owl all of the various

exclusions i question what are we trying to do here? the ink is still barely dry. perhaps a year old on the tax cut in jobs act. nothing is more versus 1.7 nothing is more fair than having the greatest wage gains in ten years. so i ask what are we trying to do here? we do need to make the tax code more fair. i'm glad in the last tax cut and jobs act, 42 different loopholes were taken out i'm sure more could be taken out. what is our purpose? are we just going to use the money to fund some aspect of the new green deal to take away people's cars and their employer health insurance is this about being punitive to successful people? i mean, where i see the most billionaires is where i see the greatest standard of living for the working poor i don't want to do that. now, if this is about making the tax code fairer, flatter, and simpler by removing loop hope

ls, i'm all sbiet. if we're going to raise more revenue and we pair that with spending discipline, i'm in for that as well >> barney, take that on. there is a philosophical thinking taking place in the democratic party, it seems, about why they want to raise taxes. there are some on one end that wants to raise revenue the other maybe feels more punitive in regard to inequality and the idea of taking it away from people. >> yeah. and i think by the way that little group, particularly in the most extreme form, that role in the democratic party has been exaggerated. whether it's a green new deal or tax rates that go up into 70% k, 80%. they are not majority democrats. what you have a is solid

majority of democrats which would include these people who think we do need to raise revenue. apparently the republicans in congress also would seem more. with the enormous deficits that have been growing. i am not one that has been terribly concerned about the economic impact of deficits. if you're spending it for investment, for example. but we are not now producing the revenue that ought to be there to support the level of activity that's going on. and i talked about this the last time i was on. infrastructure it was an agreement we need funding for nfrastructure. nothing would better improve the aub ability of the company but we can't afford it right now. it's one of the president's promises that has gone absolutely nowhere

it's also the case that yes, we got 3% growth because of a very, very great dose of keynesianism. president trump gave the best endorsement of his approach that we've ever seen. and the result was some growth but there is no sign that that 3% is being sustained going forward as it would have been -- >> congressman frank just to go on the infrastructure, the reason it's gone nowhere is democrats and republicans can't agree on how to dole out that money what sort of environmental standard it should be held to -- we've heard this debate for a long time. everyone says they're in favor of infrastructure, but when it comes to the details, nobody can agree. >> there is a fight over environmental. but you cannot do much of the needed infrastructure with private funds. with private funds you can do toll roads, things you can pay back

and the starting problem is there's no commitment of that. the president wants to do it there's no way you do a lot of the repair we need as well as the new construction without ever -- >> i never viewed you as a keynesian. when did you turn into such a big -- did you know what you were voting for? did you know it was a big kainsian stimulus. >> not just the tax ret. >> i would do it again today because again, one of the ways that we deal with the deficit is obviously economic growth. this is tax relief that more than pays for itself i was also interested in barney saying somehow this green new deal is all about outlier

democrats. it just so happens every major can the for the democrat presentation has paid homage to this radical green new deal it's going to cost american families over $620,000 -- >> let me respond first -- >> there's certainly nothing fair about that. and getting back to taxes, listen, we ought to have a debate about what is fair but also have the facts. the fact is the top 1% of wage earners are paying roughly 40% of the income taxes. the top 5% of wage earners are paying over 60% of the income taxes. >> but can we agree -- barney, go ahead then i have a question. barney, your response? >> well, first of all that represents their share of the income but the other point is that 3% would be wonderful if there was no sign anything more than a short-term booth

by the way it's also the large expenditure increase under the republicans, that's an expenditure increase. >> if i understood you correctly, barney, but you're wrong. the 1% makes roughly 24% of the income but pay 40% of the taxes. so it's not one-on-one parity to begin with second of all, economic growth at 3% is simply the average of the post-war era all we're trying to do is rid ourselves of the legacy -- >> but that's not where we are now. first of all, you're argue iing. you're saying 3% is the post world war ii average it can't be both >> actually, it can be it's what helped bring us back >> jeb, please you're not -- neither one of us is the chairman anymore.

neither one of us can tell the other one to stop talking and interrupt. the fact is no one thinks we're going forward with the 3%. that this was a short-term boost. but that no one is projecting 3% going forward. and the notion that the tax cut was going to pay for itself has not been the case it is falling short. >> i know you're buying into the stagnation that -- >> i don't buy -- >> -- have 2% economic growth. it's because we had bad tax policies because we had bad regulatory policy and with good regulatory policy, yes, once again america is capable of 3% economic growth. >> you're making stuff up. nobody mentioned secular stagnation >> i'm making up 3% growth >> please, stop interrupting >> i hate to be the chairman of this committee this morning. we need to cut off both of you

but we do want to thank you for the conversation and we want to do it again. so we'll bring you back in to hope to continue this -- we'll call it a discussion a friendly discussion. jeb and barney, thank you, guys. >> thank you >> appreciate it >> do we >> yes when we return, retail detail macy's ready to report quarterly results. then the jobs creator network placing a billboard ad in times square criticizing new york not wanting hq2 in new york city we will discuss. obvious.

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♪ markets under pressure after a double downgrade of caterpillar and an earnings miss countdown to fed speak chairman jay powell heading to capitol hill senator pat toomey will tell us what he wants to hear from him today. and a developing story elon musk back at it again with the s.e.c. some more tweets getting him back in the agency's crosshairs and shareholders are taking the hit. the final hour of "squawk box" begins right now welcome back, everybody. retailer macy's just reporting earnings they came in at $2.73 a share.

that's 20 cents above what the street was expecting revenue was also better than analysts had been forecasting. comp store sales on an owned plus license basis were up 0.7%. analysts had been looking for 0.9% increase. macy's also forecasting full year profit of $5.05 to $3.29. that stock is up by 3.75%. let's bring in courtney ragan. >> a little bit of a mixed report there overall we had a little snapshot when we got the holiday sales, so we knew at least two-thirds of that quarter. and i spoke with jeff gannett on the phone today for more color and background into the quarter and year he said the year ended better than we expected when we had forecasted it in the beginning of the year. ultimately earnings were strong, margins were flat. our strategic initiatives are giving us traction gannett also announced the

knowledge in december. he says there are things he doesn't believe will be repeated he is saying that took away about 70 basis points for the compable sales gennette also said it was up 6% early in the year. then later, it was down. relatively flat overall. he doesn't expect touring will pick up. in fact, it will be depressed versus what we saw in 2018 he's then looking at the stores most affected and the offset strategies there genne gennette says it's some political uncertainty but likely more of the currency for the reason for the tourist spending declines when it comes to u.s. consumer, gennette says he's watching the related spending very closely. he still thinks the consumer is healthy, but there is a lot of noise going on with the environment. we looked at the categories

across the country and in our other stores and in the behavior and especially how consumers convert online lastly, macy's is restructuring. they are cutting about a hundred vice-president level jobs and above. consumers do feel those changes. >> we should point to the stock's rak fligstock right now. the earnings beat for the current quarter but when you get deeper to the guidance, it does sound like potentially below what the street was expecting. talking about $3.05 to $3.29. >> i don't know how you can figure it out. i don't know how -- >> how you know now. >> in february to say here's what we're going to do for this holiday shopping season. >> which is also probably why you see this wide guidance we've got a long time to go

until we get there potentially a lot of changes in the consumer and broader economic environment >> how many vice residents >> a hundred or above. >> they can cut a -- do you remember wall street the gordon geko speech he said there's 200 vice presidents all making more than $200,000 i don't know what any of them do instead of exchanging paper between one another. there's a hundred vice presidents they don't need >> they say a hundred vice presidents or above. could be some svps >> it was so many companies that it kept growing and keep combining. >> you think of stores closing and malls that are no longer being frequented and salespeople and stuff like that you don't think there's all these guys pushing paper >> what's interesting is i think for so long we were focus odd

then labor in the stores we said do we need all that labor? then you go to the store and there's no one to help you >> it's a self-fulfilling profess. people don't come in because they don't have the sizes they're looking for or the help to help them >> i think we went too long on the store level too long now we're adding it back in. >> i remember. >> blue star airlines. >> yeah. >> bring us all back >> then there was a second one that was, like, the third godfather almost that second wall street. terrible let's check the futures right now. indicated down on home depot, really much of the damage in the dow coming from two names. caterpillar and home depot downgrading fr downgrading. and home depot reporting profit

below forecast revenue also missed forecast did announce a dividend hike i guess that would go up to 2.3%. british prime minister theresa may speaking to parliament as she said the government will hold a vote on a brex sit divorce deal. if the government loses, there will be a new vote on leaving without a deal then parliament rejects the deal and no deal scenarios. parliament will vote on march shth on a limited -- you're going to have to get your calendar out may said a no-deal exit would only happen with the explicit consent of parliament. fed chairman jay powell testifying on capitol hill today. this is the first part of a semiannual monetary report to congress the hearing is expected to start at 10:00 a.m. eastern time cnbc will have live coverage

once this event begins joining us now is pat toomey from the banking committee he's going to be questioning jay powell later this morning. i guess this is really your first crack at the fed chairman since this more dovish stance we've seen what questions do you have >> well, i think really two categories, becky, for me. one is i'm looking toward to continuing the discussion with the chairman about the fed's balance sheet. how quickly is the runoff going to proceed at what point does this runoff end? i think the chairman is likely to explain that the balance sheet is not going to go back to pre-crisis levels. even as a percentage of gdp. if just leave them with a bigger balance sheet than they otherwise would have had and those excess reserves are part of liquidity. i'm looking forward to hearing him walk us there that

how do they control monetary policy in that environment i think he's going to say it's by changing the interest they pay on these excess reserves i hope we will find a way to run off the mortgage backed securities so a lot of discussion, i think, a rnd the competition and the size of the fed's balance sheet. but the other interesting topic as you know is this discussion within the fed and beyond as to whether the fed ought to be targeting the change in the overall price level or the price level itself in other words, if we go for an extended period of time where the inflation rate is below a target, should they intentionally overshoot the target for a subsequent period so the average reaches the 2% and you're targeting a price level. i don't think the fed has adopted this approach. but they're certainly discussing it seems to me that the inflation

demon has broken out of the cage many times throughout history and wreaked havoc. i would like to hear a discussion about why we should be confident that we can manage it with that level of precision. but i think that'll be an interesting topic of discussion. >> senator, that's really refreshing you are very steeped in the final details that go into this. obviously he's lucky to go before the senate and get into that what questions do you think might be a little more controversial in terms of is there still a controversy swirling around the federal reserve, its powers. are there still people either in the senate chamber or over in the house who really question whether there should be a federal reserve at all >> yeah, i think that's a very, very, very small minority of

view i think the overwhelming consensus approves the bank. how quickly should we get a look at minutes of their meeting? what ought to be required? those topics around the edges are certainly topicings of conversation i've got friends that seem to take every one of these discussions to the questions of income inequality and i imagine the cha i remember is going to have to field questions about that he'll get questions about the strength of the economy and the outlook. >> let me ask you about that in particular because the fed has now gotten more dovish, do you have questions about what he sees in the economy? do you have concerns about what he sees in the economy >> i'm not as i give them really largely achieved we've gone a long way in that direction. it looks with hindsight the december rate hike was a

mistake. i think they've changed their path somewhat. now expecting no interest rate-n at all this year maybe that i think chas. but i don't think it's because they think the economy is fundamentally weak i think it's because they realize there's no inflation out there. the phillips curve has lost its predictive value if it ever had any. which i've always been skeptical about. the fact we have unemployment does not -- so they don't have to choke off a recovery here when there's no siep of inflation. i give them high marks for generally speaking how they've been managing our monetary policy >> in terms of what's to come, are you going to be questioning very specifically about what it would take to see him actually start to say it's time to raise rates again? most of the market is assuming they're not going to be doing

that for the next four to six months >> i think he can give us vague ideas about that a little more interest at this moment into the mechanics of the size and composition of the balance sheet and whether they think they ought to change what they're targeting. but, you know, for now it looks like they're in kind of a wait and see mode looking at the data as it's coming in. and the data looks like reasonably strong economic growth that's inflation that's pretty tame. so i'm not sure there's a need f if it goes back to where we've been in the past ten years or so, people are going to say that that was a one-shot deal that it was just the republican version of the $800 billion that we blew. just another keynesian near term stimulus what do you think it's going to

be gdp next year and if it is back down to 2%, 2.25%, was that all for not naught and permanently raise the gdp rate >> so we know for a fact we increased incentives to invest that's just arithmetic that you have a better return on vested capital post tax reform than pre-tax reform. all else being equal, that has to enhance the incentives. we're in a dynamic environment europe is barely growing china, who knows what they're doing? it sure isn't booming the way it once was we have trade friction and tension that while it's probably tariffs are small as a percentage of gdp, they're casting a bit of a shadow. which took us from basically

zero to what is now closer to normal the combination of those things would create a little bit of head wind. i still think we've gone a long way in having a more rational tax code, restoring incentives where they should be >> i guess we'll never, ever know we need the almighty to come down and say either it's supply side or -- we're never going to know those sides will be able to argue at one another >> so far the data's been good for those of us supply side. >> okay. >> senator, thank you. >> thanks, guys. >> senator pat toomey again. a programming note cnbc will be carrying jay powell's testimony starting at 10:00 a.m. eastern time. coming up, we have economic data on the way on housing starts that had been delayed by the shutdown plus, the s.e.c. versus elon musk this time it's the sequel.

tesla's chief under investigation for a new tweet he sent out this morning. causing a lot of trouble for shareholders we'll see what the legal system may have in store. stay tuned you're watching "squawk box" here on cnbc see that's funny, i thought you traded options. i'm not really a wall street guy. what's the hesitation? eh, it just feels too complicated, you know? well sure, at first, but jj can help you with that. jj, will you break it down for this gentleman? hey, ian. you know, at td ameritrade, we can walk you through your options trades step by step until you're comfortable. i could be up for that. that's taking options trading from wall st. to main st. hey guys, wanna play some pool? eh, i'm not really a pool guy. what's the hesitation? it's just complicated. step-by-step options trading support from td ameritrade lies beyond the tech sector. it's about technology transforming every sector. ♪ at pgim, our bottom-up approach uses a technology lens

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coming up, more fallout from amazon's decision to drop new york from its hq2 plans. one group calling one particular lawmak lawmak lawmaker whack we'll have that next here on "sawbo quk x.

there was plenty of blame to go around last night when amazon was pulling from long island city, we heard both sides. but one group was especially vocal in blaming alexandria o koz owe cortez in fact pulling a billboard that said thanks for nothing, aoc the congresswoman said here it says wack. but then two more billboards said i saw your tweet, and like, while aoc cost 25,000 jobs and

$4 billion in lost wages joining us now, ceo of the job creators network alfredo ortiz we've had guests on that say this is all amazon's fault they just should have known what they were getting into and the privilege of being in new york city and being with all the smart people, all the educated people, all the colleges, all the benefits of living here. that should have been enough you should just come and they shouldn't have been so sensitive. >> you know what, joe? thank you for having me. i feel like i'm a little bit in bizarre-o world because i never thought there would be a topic andrew ross sorkin and ourselves and the president would be on the same side of the aisle but here we are. >> we are. >> so you've seen the show. >> cheers to you >> i have. 25,000 to almost 40,000 jobs, i hear, lost from new york and that doesn't even count the endless jobs that would have come downstream from the bars,

the dry cleaners, all the related activity that would have come we calculate that about $12 billion of lost economic activity think about the hundreds of union jobs from the construction that would have gone to build that out i mean, all that lost because one person alexandria ocasio or t orcortez decided it wasn't good for the state. even though the district because the democrat representative of the district thought it was a good idea. but aoc didn't she spiked the football. she basically is taking the victory lap while thousands of people lost the american dream opportunity. >> the real question i have about the billboards is whether you think they're going to have a real impact on the political process going on which is to say in two years from now in queens or elsewhere

will be held to account? >> mayor de blasio before was against it when you think of governor cuomo, he says he doesn't believe what's happening and how this is actually happened. i think what we want to do is take a step back this a bigger discussion, we think. because this is this idea of socialism versus capitalism. socialism takes and capitalism creates. socialism here took near $4 billion to $6 billion in lost wages to new yorkers but on a broader basis, we have to have this conversation. i applaud president trump to drawing that sand in the line at the state of the union and saying this will not be a socialist country. but i have to tell you, it's a little sad to think we are now at a point in history in the

united states where an american president actually has to make the claim that we'll not be a socialist country. >> here's the conundrum as i see it and we're on the same side of this particular amazon issue, yet at the same time it feels like this particular set of facts makes it hard to argue for the issue of socialism versus anything -- versus capitalism in large part because people look at what the amazon transaction they call it corporate welfare one of the things, the statement here is we're at a point here where we've got economic illiteracy in america. >> very true >> we have to take the time to educate americans and our citizens in our schools and our colleges about how public policy impacts the pocketbooks. >> something that our founder at

home depot did day in and day out when he used to run the organization about how these policies impact their families >> where do you stand more broadly on the idea of tax incentives on a state by state basis? >> look, we hate crony capitalism overall but in this particular case, this is the way businesses are done look at the dnc. we're in the middle of where is the convention going to go there's a bid process going on this is just the way business and economics is done. again, of the way free enterprise works if they bring in -- look at this deal overall $30 billion again. $30 billion roughly in revenues coming out in incentives of course the president even chimed in last friday about these incentives probably could have worked a better deal, he said but still, net net $30 billion minus $3 billion, $27 billion,

that sounded like a pretty good deal plus the jobs >> it's another big megabucks company trying to assert itse will and nobody needs that >> in this case it was aoc that asserted her will. she's not the boss it's the american people. >> she's not backing off >> and we aren't either. >> okay. alfredo ortiz, thank you >> thank you very much when we come back, a report delayed by the government shutdown the markets getting a long-awaited read on the housing sector coming up in just a few minutes. plus elon musk tweeting just this morning that something is wrong with s.e.c. oversight. former s.e.c. aianchrm harvey pitt will tell us how much hot water the tesla ceo is in this time so even when she grows up, she'll never outgrow the memory of our adventure. unlock savings when you add select hotels to your existing trip. only with expedia.

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welcome back to "squawk box. rick santelli here with live breaking news. our december read with housing starts and permits expecting up around 1.25 million. a bit less 1.78 million that's seasonally adjusted and annualized and that is -- well, it's not only sequentially lower, it's definitely a miss. that's following a slightly revised lower number that was 1 at any time 24 million seasonally adjusted. permits on the other hand, well, they're down sequentially a fairly good amount but they have a nice jump.

1.326 million. that follows 1.32 million. there was a subtle adjustment. so from the sequential standpoint, it's down a little bit. i take that back it's not down that much. some of the numbers are a little blurry here. but that isn't bad so permits, better starts a little bit worse. and we're going to continue, of course, to monitor everything that is housing. we still have richmond fed and confidence like many sessions, the treasuries are giving up a little bit but mostly in a rather fight hand they've been anything other than in a tight range. back to you. >> thank you so much for more reaction to the day, let's bring in steve liesman and diana olick. steve, why don't you go first? >> this is not the most important month of the year for the housing market it's delayed data. it's a surprise in terms of the

amount that it's down. what i'm waiting for and what i really want to hear the expert talk about is the sensitivity of the housing market to lower interest rates this is after that started to fall looking at the conventional about 0.6 down you'd expect some response however, since the recession, housing has been dancing to its own tune as it recovers very slowly from the financial crisis >> diana, what do you think? >> steve, you're stealing my thunder, is what i'm saying. >> sorry >> we were at 5.01% on the 30-year fixed at the beginning of november. we're at 4.46% today and the big drop came in december. what's killing me about these numbers today is the single family we've got to divide out. you had single family down 6.7%, multifamily down 22%

multifamily is more volatile but to see that single family really drop that much year over year when you have so much housing demand, you have falling mortgage rates you have people who are really desperate to buy homes at the entry level. we're just not seeing the builders step up i know this data is back dated by a couple of months. in the builder earnings, most of those top guys are saying we're just not seeing the interest for our homes. that's because new homes come at a price premium. >> it's an interesting conundrum. we talked about it with warren buffett yesterday. >> it was the one thing he mentioned. he said everything's fine but house eeg terrible >> he didn't say terrible. but he said it was off. >> he said it was weak >> given where we are in the recovery, given what you would have anticipated after the steep dropoff in 2008. >> there's an awful lot of things going on. if you look at a long-term charter to today, what you see is a steady incline in housing as we recover from ridiculously

low levels from the recession. by the way, that number is only very poorly correlated with mortgage rates which have been steady for a long time and have now taken a dip down you have this whole demographic thing of people your age and younger, becky, who are less interested in buying homes, more interested in renting. >> not my age. >> under 30, yeah. >> but that's just -- >> that's what i meant or 35 and younger. you also have by the way, the student loan issue which is an issue that is weighed down there are a bunch of sort of -- i guess when you call them -- >> but steve, you talk about that correlation between interest rates and home builders the home builder sentiment data this month actually jumped up those lower mortgage rates with builders expecting more demand why aren't they putting more holes in the ground? it's interesting what warren

buffett said because i tweeted it, of course, becky people are just making different choices. i don't know they're making different choices because they want to or because they have to. because housing affordability is at a decade low. the gains are shrinking, but they are still very overheated and even this drop in mortgage rates is not pulling enough people back into the market. certainly not into the new home market >> i want to say one thing quickly which is sort of keep the jury out on the housing market until the spring selling season rolls around. i think this should be a decent spring, you know, the economics of people having more jobs, having higher wages, and rates being lower. it could help. and i think you can't judge it fully. >> thank you great to see you and diana, thank you >> we want to get to the other big story of the morning wants elon musk to be held in content mpt of court elon is firing back on twitter phil lebeau joins us with more

>> you brought this up last wednesday morning because this started last tunz night. let's refresh everybody's memory about the tweet the s.e.c. has a problem with these are tweets from elon musk. the first one last tuesday night where he said tesla made zero cars in 2011 but will make around 500,000 in 2019 a few hours later he corrected a tweet. meant to say annualized production rate at the end of 2019, probably around 500,000. deliveries for the year still estimated to be around 400,000 even though he issued a correction and it was a couple of hours later, the s.e.c. believes that he is in contempt of court for violating the agreement that he signed with them in december they filed yesterday saying musk did not seek or receive preapproval prior to publishing this tweet which was inaccurate and disseminated to over 24 million people musk has thus violated the

court's final judgment by engaging in the very conduct the preapproval provision of the final judgment was designed to prevent. that's the agreement that musk, tesla, and the s.e.c. reached back in december well, overnight we heard more from elon musk he wrote on twitter, s.e.c. forgot to read tesla earnings transcript which clearly state tss 350,000 to 500,000 vehicles. how embarrassing along with the crying emoji. a few minutes later he issued another saying indeed i have great respect for judges it's not perfect, but in general we should be very glad of the u.s. justice system. take a look at shares of tesla since this came out yesterday, the shares have been under pressure in after-hours trading and premarket today. down, what about 3% premarket down at the $290 level this has people saying, wait a second the s.e.c. is prompting us to

lose money if we're investing in tesla. he then issued another tweet this morning and essentially what he said in this tweet is, exactly in regards to this question of what happened to people who are investing and if the stock has moved lower. this has now happened several times. something is broken with s.e.c. oversight. we should also point out, we have not heard an official response from tesla regarding the contempt of court filing by the s.e.c. the only thing we've heard since this happened and this developed about 8:00 last night is responses from elon musk on twitter. so the saga continues between elon musk and the s.e.c. >> and the sa ga will continue and the conversation will continue appreciate it. want to talk more about this showdown shutdown. i don't know if it's going to be a shutdown at tesla. but joining us right now is

harvey pitt. he's n it is great to see you we haven't seen you in quite some time. you look at this case and the filing that the s.e.c. just made if you're the judge, you do what to elon musk >> well, i have to say i think the s.e.c. has acted very responsibly. we've got a ceo who, i guess for one of a better word is irrepressible. he needs to have a certain amount of repression of his instinctive drive to go to twitter. so i think that holding him in contempt, fining him, and leaving him with strict instructions that if this continues, the punishment will be worse would be in order at least that's what i would do under the circumstances. he is flaunting the judicial

decree that he agreed to back in september. >> what kind of fine are we talking about here >> i don't know, but i'm assuming, you know, fines that would be in the tens of millions of dollars to make at least an impact he's got plenty of money the point is to show him that if he continues issuingtweets without getting them pre-cleared, he is headed for very serious problems. >> harvey, though, should the fine be for elon musk but also for the company itself and frankly even for the shareholders to pay given that it appears that the board and management did not put in any meaningful place a system even though i know the s.e.c. said

they tried to put something in place. but one that's working to preclear these e-mails or these social media messages. >> i think there's a fundamental problem here musk is a creative genius. i don't think anybody would deny that therefore, he has real value to the company. on the other hand, he does not function the way a normal ceo should function. there has to be something that represses this instinctive drive to put things out on twitter and just give in to his every thought and emotion that comes into his head. so in that sense, i'm not certain how much the company itself can do. he did go on the "60 minutes" show back awhile and said after the settlement that nobody was

reviewing his tweets and, you know, we may make some mistakes but in essence, not in these words, who cares to me that shows somebody who does not take any of this seriously. at least what the s.e.c. is trying to do is get the judge to focus on the fact that unless something is put into place now, he's just going to keep on doing this and cost shareholders a huge amount of money >> finally, we saw tesla's general counsel left the company. do you think there's a larger problem inside this company? >> yes, i do i don't know whether the general counsel left and it was after two months because of any of

these issues, but i suspect that what it is is that mr. musk does not really take advice really well for somebody who's a high powered, very capable lawyer as he was and is, that has to be incredibly frustrating i think the same problem exists in a lot of areas and unless the board steps up its oversight, we will continue to see this huge amount of turnover >> right hey, harvey, one last thing i've been thinking about. and it's to a point that actually elon musk made himself on "60 minutes" when he said, free speech. he said something like, duh free speech i don't remember exactly how he said it. but the point being, you know, can you set up a system -- do you effectively need every tweet and everything he says to be

pre-cleared or is there some other system they say we have a system in place which is if you think you have material information, you're supposed to go to the lawyer and then have that pre-vetted but if you don't think that, you can still obviously tweet whatever you want. >> that's right. i mean, i'm a big fan of free speech i think what i'm not a fan of is reckless speech. and the law has always understood a distinction between the two. now the problem is to see if mr. musk can grasp that distinction as well. >> okay. harvey pitt, great to see you. thank you. >> thank you. >> appreciate you weighing in on this coming up, more reaction to the retail earnings reports of the morning from home depot and ma's quk x"oming right back huntsvill. aka, rocket city, usa. this is a very difficult job. failure is not an option.

more than half of employees across the country bring financial stress to work. if you're stressed out financially at home, you're going to be too worried to be able to do a good job. i want to be able to offer all of the benefits that keep them satisfied. it is the people that is really the only asset that you have. put your employees on a path to financial wellness with prudential. bring your challenges. 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.

welcome back wilfred frost is at jpmorgan at investor day joining us with comments from cfo marianne lake. >> the takeaway being there was no positive upgrades to the guidance that sort of feeds the late cycle narrative that we've got from banks on that note, the cfo marianne lake saying that loan growth would be slower in the year ahead. and the capital ratio used to be targeted 11% to 12%. now just the higher number, 12%. so slightly defensive tone in that return on equity target remains 17%. of course, they are market leader in that area. marianne lake suggested they could perhaps beat that. if they did, it would be reinvested in the business rather than returned she remained constructive overall on the u.s. economy. >> declines in business sentiment have driven recessionary indicators higher

they are not flashing red, but they are off the floor so it's clear therefore today that risks are much more symmetric than they they have. it's harder to characterize given the level of uncertainty but we remain constructive and the data here in the u.s. is supportive of solid growth albeit lower the u.s. economy is consumer led and consumers remain strong and healthy. >> she did suggest the base case at jpmorgan was two more rate hikes over the next 12 to 24 months opposed to any easing a couple other nuggets in the presentation, their branch network should reach 93% of the u.s. population by 2022. their expanding branch network not because of structural demand but because they're expanding geographies and tech spend for 2019 should increase to $11.5 billion from $10.8 billion last

year highlighting the big bank spent on tech versus smaller names guys >> all right thank you very much. wilfred frost. home depot and macy's both reporting results this morning joining us now is liz dunn she is founder and ceo of proforma inc thanks for being here today. let's talk home depot. that has surprised the street today with numbers a little weaker than had been anticipated. what did you think >> it was a softer quarter there were a few adverse weather events in 2018 as compared to 2017 so that was a piece of it. but -- >> because for somebody like a home depot, those are good they drive people into the stores >> absolutely. and the guidance was weak. i think that's -- that with these housing start -- the housing start data that's out today is also a negative >> the guidance was for comp store sales of up 5%

that didn't seem particularly low. >> but the eps guidance was weaker than analyst expected and i think also you sort of look at the 3.4 in the quarter and say but they're going to do 5% next year soit requires a little bit of axcceleration when yo for weather, perhaps achievable, but certainly with the cracks in the housing market, it causes people to pause. >> i always try to figure out what housing market, down housing market means for home depot. on one side, if there is more construction taking place, that is good for the contractors. if people are deciding to stay in the homes they're in and not trade up, they'll spend a little more home depot has done okay with benefiting under both sides. are you worried that may not be the case >> i think it cuts both ways, in the strong economy, if the housing market softens, you invest and stay where you are, but i think the other piece of it is that the economy overall is soft and so if consumers have concerns about the future, they may pull back. >> maybe spending a big number

on a renovation either. >> yeah, absolutely. i think home depot is an excellent stock longer term. i think they reiterated their 2020 expectations and the fact that they're investing while also holding operating margins in double digit territory, while committing to 40% return on invested capital, those are really important things. and so i think it is a long-term winner, but today it will certainly suffer for these results. >> what about macy's is that a similar situation or do you have longer term concerns here too because the guidance is weak here. >> the opposite situation. i think macy's long-term, there was a little bit of a head fake earlier this year. sorry in 2018, when we kind of thought maybe they have sorted some of their issues out but i think longer term, department stores as a sector are share losers and macy's specifically, you know, is the biggest department store i think they have invested in these 50 stores that they really believe are the growth engine of the company, but, you know, you have 600 and you're investing in

50, they're also announcing today that they're cutting 100 jobs and removing a layer of management i just think you can't cut your weight of prosperity. >> is there a -- if you look at your 50 stores, you're right, 50 out of 600 stores is not enough to be working on if things that they're trying in the 50 stores work you think they can roll them out to a larger subset? >> possibly. i think the question i have is how relevant is the mall long-term and whether or not consumers like the department store shopping experience to the extent they once did you don't need to go to department stores to discover brands or to discover product. you discover it on your phone. >> yeah. liz, thank you very much liz joins us, liz dunn, from pro forma. down to new york stock exchange and cramer joins us now. two features today, home depot and a downgrade for caterpillar, jim. and then i don't know about the housing numbers and whether we have a better idea about that retail number and where we are right now in terms of a snapshot

of the current economic backdrop in this country. >> well, i think that there was tremendous turmoil and misdirection call in december. had a mini bear market, many of it because of jay powell and statements he made that started to reverberate i thii thinkthin think things wk they had a tough quarter, deceleration it is jarring to see the housing starts be so low but i also think that there was some weather involved. i know there has been chatter that maybe a generation doesn't want homes i think a generation would love a home but they can't afford it because of student debt. so they tend to live at home and there is, you know, look, it is very, very hard right now to have a job that allows you to have a home because the banks don't want to lend unless they know they'll get the money back. banks lend to rich people these days because they know they can't have any bad loans

i was hoping jpmorgan, consumer strong, come on, let the consumer have more money and do some lending to them but i think right now things are -- the banks were very worried, december, i don't blame them come on, we had a bear market, tremendous belief that we would continue to tighten into weakness that's over. so i expect the spring to be very good. >> okay. how about cat piller >> i'm bullish on the spring didn't we come through we came through. and i think that we're looking at rear view mirror. >> on the other side what about caterpillar peaking right now in terms of fundamentals >> get a chinese deal, guy is going to be eating peak. i think that the stock has been up i know i think it is a china play 55% of the market is down. look, it is so easy to call -- how many times have we heard peak, joe? >> yeah. >> peak. it is, like, k2, everest, i don't know boeing was supposed to peak 350.

peak >> jim, elon musk, tesla, i know -- we're all addicted to twitter. i see you on it too. what do you think? >> i disagree with harvey, i worked for him as a summer associate, this guy is going to attack the s.e.c.? how about removing him he attacked the s.e.c. after -- you know, look, i'm not saying that he's manafort but the s.e.c. has some dignity. this guy just attacks the s.e.c. as if it is funny. he attacks it like it is the s.e.c. on cbs. this is the real s.e.c i think he should be removed i love him he's a genius. that doesn't make him so that he -- they got to put that thing on his cell phone, like, when you're drunk and you can't make calls. he's got to do that. why not do that. give him a little device >> twi -- >> he should talk to siri. talk to siri

siri will answer back and you'll feel better. talk to alexa. >> twitter under the influence >> i guess under the influence >> we don't know >> yeah. all right, jim, we will see you in a few minutes thanks >> righto. >> "squawk" will be back in a minute non-seasoned travelers. and they took my toothpaste away. and you should be mad at people who take unnecessary risks. how dare you, he's my emotional support snake. but you're not mad, because you have e*trade, whose tech helps you understand the risk and reward potential on an options trade it's a paste. it's not liquid or a gel. and even explore what-if scenarios. where's gate 87? don't get mad. get e*trade and start trading today.

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looking at a live shot of

air force one, which has just landed in hanoi. president's obviously on board for the upcoming -- another meeting, another summit, if you will, with north korean president kim jong-un. and a lot swirling around it, around this meeting, and conjecture that denuclearization is now a bargaining chip, not a foregone requirement for some type of progress and i guess it has been pushed out. you haven't really weighed in, andrew, on -- better than it was, but we don't know where we are. >> we thought at one point either look, nothing is black and white. >> the question is what happens with china long been the backer of north korea or their support figure and what happens with trade talks as a result of all of this >> it is interesting, we just say hanoi now. and it is -- it is a valued trading partner we actually, you know, use relations with vietnam to offset some strife we have with other -- come a long way.

>> look at what's happened here since trading began. so, again, air force one just landing. you can expect to see the president stepping down very shortly. we're going to hand things over to "squawk on the street" where they will continue to pick up not only this coverage but also jay powell whose testimony begins in an hour's time we'll see you tomorrow with that, we'll take over here on "squawk on the street" as we continue to watch air force one land in hanoi. again as becky and joe and andrew just saying the president in town for the second summit with chairman kim jong-un, who has traveled there by train, actually, over the past few days, to meet the president. we'll be looking for what we expect to be some kind of formal ceremony to greet president trump. that is just one of several pots we have boiling today. powell, the fed chair, senate banking, home depot missing on earnings, double down grade at caterpillar, the s.e.c., of course,