priorities, the consistency of our strategy and our prioritization, the consistency of dau growth and despite these issues, the way we were able to continue to deliver for advertisers, we feel really good about the progress we made, yet, we still accountable for the issues that come up and we intend to address them. >> ned, thank you for your tomb, good to see you. also our thanks for michael n o novogra novogratz. thank you for joining us right now it's time for "squawk on the street" [ music playing >> good thursday morning him welcome to "squawk on the street". i'm carl quinta nilla. futures are up as the s&p is .7 from a record high we got green arrows in europe,

stocks testing critical levels durab durables, though, were fought good ten year 176 our road map begins with twitter. tanking as you know. tesla up big two big movers on this busiest day of the season. amazon and intel report tonight. >> plus the 737 maxes are taking a big hit. the ceo will join us first on cnbc. beyond bearish bets mount ahead of the company's lock expiration and 3q results. so let's start with two big movers in tech tesla is surging after surprising a quarterly product delivery and cost cuts they expect to deliver more than 360,000 teex e vehicles th-- vehicles this year ted segal, on a weak revenue guide, despit daus that beat consensus up 17% the buck in the ad product, jim,

that kept them from basically getting good data to share with their ad partners, took 3 points off the growth. >> very self inticketed wound. ned segal comes to realize as a cfo the spokesperson for the firm, you know, i come back and i say, look, it is still a must buy if you want to introduce the joker. you want to buy on twitter but they did have seasonality and when you listen to the companies that are like snap, they don't talk about seasonality. because the growth path is so good so twitter's self inflicted wounds how they address privacy issues twitter ad serving not necessarily perfect. twitter still vital as a buy for advertisers. the thing that i guess made so it that you are not going to see a bounce is he did say the problems will continue in the fourth quarter you never want to hear that, because what it says is, you will get gob smacked again so i find twitter even down 6 to be a tough buy i just was kind of flabbergasted

that they made so many mistakes, themselves >> do you think it's as critical ad buy given the number of critical outlets coming online this year and next that will be possible ad poet surface. >> i take twitter when he says you want to know where the joker got the best impressions, it was on twitter i never understand when they say you have to watch twitter because of our president they never do that they never just say you know what twitter is intgrale to trying to figure out things you think about they still don't know how to tell their own story i'd find their story is far too diffuse versus what we know twitter as being, which is the way the president disseminates information in the way they used to do press conferences, but they don't do that maybe they're afraid to say, listen, 2004 president's best friend, because he's unpopular in a lot of place, but they don't talk about being a must look

they talk about screwing up. ned was so -- i felt to say to ned, hey, ned, c'mon, snap out of it. you are too down today >> it wasn't just segal, though, jack dorsey addressed this on the call take a listen. >> unfortunately, we had some missteps and bugs in our map ads that increased seasonality in july and august. despite that we saw strong september results and good advertiser momentum. our goal in rebuilding our core ad if map technology secretaries was to address these sorts of issues and increase engineering agility. because of this work, we are much better equipped to identify and fix issues we come across today than we were one or two years ago. stin painful but no longer existential as it was in our past >> well, i don't want to existential. i mean, i'm not asking for a camoo or a sarp, i'm trying to get better-than-expected numbers. one of the things that bothered

me, oh, things you thought was working weren't? it was a like a pre mer we're not as bad as you think, we're going to get better. i didn't know we were buy. >> when you look at a stock that was done, people were saying, wow, not only did i know they were doing what was badly, they haven't fixed what was doing badly. jack and ned had that feel of a team that you know what, we didn't make the playoffs this year and it's early in the season it's not for them. they're not making the playoffs. they're not in the playoffs. >> and they know it. >> they know they're not in the playoffs it's always tough. there is no draft choice at the top if it tanked >> you got to wait a while for the draft. >> yes >> i think >> look. i want to tell jack the trading deadline is next week, you better come up with something. but it was a quall u call where they gave you very little reasons to own i came away from the call

depressed. i came away thinking that i don't know whether i need xanax or lipitol i don't know david if you need a powerful -- >> all you need to do is look at tesla to feel differently. >> that was powered by tesla and cbd. there was a call i got to tell you, ford sounded like tesla and tesla sounded like ford. tesla was like it was like listening to a call from a real company that made cars and made money. >> not only that, they wanted to spend a lot of time on the energy business on some solar. that's interesting to kind of get you excited about that again. >> how about china, the fastest to grow and put up a factory and hire people? this was a -- i'm not saying it was subdued, elon, but it was a guy who makes cars i kind of like, i enjoy him. i enjoy this kind of not wise guy. >> you enjoy the non-twitter musk in some ways? >> yes i mean, look, he gave you. now, people hate this.

people who on twitter to me today, which hey by the way jack -- now i feel like i shouldn't after listening to your call you know, tesla comes out and basically, you say something good about tess larks say, hey, you said it was bad. now you got me caught in a short. the fact is a lot of people think it's hocus pocus i come back and say i look at the indication position and say. >> 5 billion >> the most ever >> they had some actual cash flow i think musk is still very profession promotional. take this from the call. now we think it's in a good place headed to a great place, we've restored resources to tesla storage, so i think that will be the crazy groat for as far into the future as i can imagine. >> but he didn't trash negative analysts. >> no. >> he was clearly sober in the calls, no doubt about that >> okay. you tell me. >> i'm not saying that he ever wasn't. >> he didn't hit sobriety yet.

>> i wasn't, be careful in that conclusion you drew. >> i didn't. >> i'm talking more cbd oriented, anyway i think thc, remember this, it's a fraction >> cbd you rub on yourself >> it's better people say than icy hot. it was just a regular call that's one of the reasons the stocks so much he wasn't on twitter saying this was the greatest quarter ever. i will make 500,000 cars there was none of that, david, there wasn't the china thing, it turns out if you liked, by the way, like dan schullman, if you work with the chinese government, you can do a tremendous amount of business go there was a fair amount of expense control in this quarter. >> yeah. >> stocks still down for the year this is the first visit back to 300 since february but this would be the best day in what since 2013 >> you got to look, it was, again, look,ient to be facetious here, gm had an okay quarter now they got to strike when they lose x money a day

ford tried to put some lipstick on that one. tesla is making a lot of cars and selling them there was no deened ma no one is talking deened ma. remember we said there is no real demand. >> there are still questions about overall demand they have to hit what 100 something thousand this quarter to get to the low end. >> can you say, how about it wasn't a bad quarter can everyone agree with that >> without a doubt they made money when they weren't expected to, they hit their delivery targets talking solely about solar and energy >> s3 says 75% of the paper profits this year have been wiped out. >> how about that? last night -- >> a lot is short coming last night. >> did you see him on twitter last night >> did i see who on twitter. >> elon muck that was me, remember i simulated him. ive said i bashed the short, i really crushed them. i thought it was good. now i know listening to the ned segal moment when no one was watching, but i did it anyway.

>> they're watching. there are some out there. >> there are a lot of people who didn't and they've made mistakes and tail try to correct them not yet. i thought he was betting going snap >> snap disappears >> yes >> a historical record >> is that an insider trade if. >> when we come back, dow getting a lift on earnings beat. we got to get through the airlines and ford and ebay our own parent comcast, of course futures look good as the s&p is in within 1% of all time highs don't go away. obvious. sometimes, they just drop in.

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shares of dow, dow chemical rally. the company posted lower profits and sales. but it delivered an earnings beat, i think more important you talk about dow as perhaps a play on business bottoming and doing better if 2020 -- in 2020. jim is with us do you like my concept this is going up, business bottomed and going forward, we will start to see some earnings momentum

>> good morning, jim, thanks for having me. i do think we've seen pmi slow down for the last four consecutive quarters and we saw, obviously, a step down in the oil pricing about this time last year and since then, things have moved down, invent errors are down you've seen some soft the backlog in the industrial sector now. i think we are poised any pull, any kind of a tail wind with all means that we will get a little bit of earnings momentum and margins improvement and tightening of the supply/demand balances. >> what do you think of what you guys are doing in terms of product lines? people say what does it matter but outlook for ethylene, you're then they and outlook for sill -- urethane and outlook for silicon? because i sigh signs these are all getting better. >> silicon is an area, the consumer is strong silicones show up in a wide

variety of products you use. that consumer demand is pulling that chain with ewe have a little weakness in the oxane chain, as we entered 18 bottlenecks in those plants this year, that will continue those earnings, ethylene and polyest lthylene packages is a a strong factor. we were double digits in asia and china this quarter i continue seeing that growing obviously, changing, too, as we move into more circular products and move into plastics, waste and cyanates, consumer is strong they go into still, automotive sectors as well, automotive, especially in china, has been a bit slow so we see any pull of an demand on the automotive side, i think

you will see these things take off. >> i want to talk about obviously the environment and how the alliance is doing on plastic waste. i also know you taught us, look, there is ten rivers in the world producing it some of them are in china. you started in india to try to clean things up. is there anyway that china, which we should talk about as a major source of pollution will place with the cancellations, the caughtback, what is ending up in the pacific ocean? -- the cutback, what is ending up in the pacific ocean? >> china is taking steps back. we seen commitments with products from waste to energy conversions and close that in. and the major chinese players have joined into the alliance, plastic waste is right there with us. signed on right away most of the large asian players have signed on the alliance is up to 43 companies now over 1.5 billion committed to go tackle this. and it's a full value chain solution trying to look at how do we stop the waste from going out to the ocean, but also how

do we stop it from going to landfill in the first place? put a value on that plastic so that people are encouraged to recycle it bring it back into products that you use every day and into other product that's haven't been invented yet and to create a closed loop versus the linear economy which throws it away. >> jim, i'm talking about some of the legacy things i was hoping we'd see real movement on. cost savings, talking about 7 or 8 million. anyway that can get more what about kuwait and sadara in it will be the savior of the upside jim to me the sedra seems a light weight, an aal al bo tras

/* albatross around your nic that's good. on the kuwait side, really, meg monoethylene glycol product versus collapsed that's putting the drag, kuwait as a cost producer is good for the long term. sedara is really about the financing on the projects. it was really heavily loaded with project financing we made a lot of progress in the third quarter together with aramco to do some things to get ready to reprofile that debt and as we do this in the fourth quarter, we'll finish the last agreement that will create the project completion date and we will go into the beginning of the year re-negotiating the debt with the lenders what that does is it takes ten years of straight line depreciation on that full debt on sedara and will stretch it out over a much longer tenor

that's really the drag you see on sedara. its cost projection is good. it's good on ebitda. the financial stress we have to address. in this environment that's the right time to get that done. >> on this question it's a little more eth eral you and david they taylor said the amount of energy you need, the amount of resewerss to make them alternative, they make so it plastic they do better for the environment. could you please explain that to people a lot of people feel that's just impossible >> we have to manage both the plastics and the plastics waste issue and the carbon and climate change issue and their interlinked. so one of the reasons plastics

has grown so much is you can make it so strong and so lightweight you can replace much heavier materials and materials to make it easier to produce, glass, metal, paper for example, take four-to-five times as much energy to produce as plastics. then you are transporting all of that weight over long distances, so you are burning more transportation fall to get it there. the carbon foot print is much more if you replaced all the plastic packaging today, waste would increase 25 times. >> that isn't the direction we want to go we simply need to close the loop on plastics, get it recycled, get it converted back into other materials, into energy, because it has a high energy value and we have a way to do that i think people are trying to make this to be an insurmountable problem it is not, the plastic waste in the ocean issue is 8 million tons a year. that's a manageable number we will tackle that with the

alliance and local municipalities to show them how to make this work. that's what the alliance is all about. >> well, i got to salute you, the work with the alliance is real, it's not what we call green washing. i know you too are very concerned we get out in the ocean. ceo at dow chemical, good to see you, sir >> thank you, jim, good to see you. >> when we spoke to jerry is kelly last quarter with southwest. he explained his displeasure with the boeing 737 max. >> we're unhappy it's taken so long we're in the dark like you are on a number of technical matters. our pilots are heavily engaged and working with boeing to understand the changes we were anticipating getting 41 more deliveries of the max this year and so our exposure with our route system grows

>> garry kelly will join us after they tack a hit this quarter. we will get to names we have not get yet gotten too, like microsoft, in a moment yeah, that's half the fun of a new house. seeing what people left behind in the attic. well, saving on homeowners insurance with geico's help was pretty fun too. ahhhh, it's a tiny dancer. they left a ton of stuff up here. welp, enjoy your house.

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got some upbeat reactions to earnings from the likes of microsoft, paypal and southwest. we're going to talk to gary kelly of southwest in a moment first, though, cramer's mad dash and the opening bell in five-and-a-half minutes.

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low, down 15% in the second, dan shulman delivered a clinic how to make it so you were doing better than anybody expected they've increased merchants, it went from a head wind to a tail wind for wenmo in september, china, they got approval to buy 70% of a major play on chinese ecommerce and dan schullman endedthe call by talking how to do business with the chinese, play with it, deal with the regulators. do not be a disruptor. >> it's china, it's ali pay, 10 cent you are talking huge players there. i don't know whatter that plan is >> their plan is to be industrial up pay also ecommerce. there is 500 million people in ecommerce. he said if you are not in china, you are nowhere. i thought, you know, david, dan

schullman, i think a lot of people felt after the last quarter he was going to miss he did not miss. he blue it away. he got a lot of money. >> he got about 30 times adjusted 220 etfs, it's growing over 20%. >> the street estimates is 316 i think it could earn 350. i don't know how expensive it is versus the fit tech group. shulman, the metrix are really much better. now he's partnered with everybody. he's got this american express deal where you can split a check with venmo there is like a tray of everybody's amx card when you go out to dinner. not anymore. >> we appreciate it if you just picked it up, jim. >> i picked up you know what i used my apple goldman card. do you have one? >> no. >> why not in. >> no. >> do you have what a

magnesious what do you got. i do not leave home without my apple card. >> actually, the green card is getting a big re-do. it's a big deal. >> the millennial's love it. i happen to love that san francisco -- i think it's jam. you go to that, david, and the podcast now a gigantic yawn. >> who said i was yawning? i was breathing in a lot of air. >> i will get you a cpac mask. >> cleansing breath. >> maybe it's in honor of the opening bell where we got precious metals nova gold, rick partners, providers of risk management insights. jim i did see you thought microsoft was best in show again. >> oh my, satya nadella, they're

growing. azure is not growing as fast andy hood is one of the best cfos, look, when you crush it like we are, you are gathering more and more people who are using our products, so we can't maintain that level of growth. but anybody on that rather short call recognizes they're gaining 2 billion people now not forget that. the actual ios 13s, some people feel this is now better. >> wait, what? >> no, i'm giving you a hard time, like microsoft versus apple. >> yeah. >> i tell you what i really liked about microsoft is satya nadella is basically making deals with everybody so he made a good deal with oracle he made a good deal with vmware. they are really -- it's all about part first you know what, i thought it was a monster quarter, generated a huge amount of cash. just throw it off. the stock's going to go to it's

all time high. if not today, it was that perfect a quarter. >> their cloud busy grows. it's 11 of the 33 billion if revenue for the quarter i think. yes, yesterday you spent a lot of time talking ai >> ai throughout. >> and the edge, where so much information and data is generated. the ability -- what is going to be their ability to deal with that at the edge of the network as opposed to sending it back. >> that was very important >> it will become more important. that when we talk to ginny rameti and hans vesper. >> i'd be worried about how aggressive satya is. the hybrid cloud solution is perfect for them you should listen to amy hood the cfo talking about how much money they are making. they are growing as they are a mid-range company.

okay they are not growing as if one of the two largest companies in the world. this was a fabulous quarter and the headline writers are so stupid, there is no slowing of growth whatsoever there. if anything i could argue that azure, which has unbelievable gross margins is accelerating among all it's different partners. >> you have to be a little more cautious on what hardware the outlook spending on it it hardware is, right >> these guys are everywhere you have to be i mean linkedin. here's an acquisition that they made people should be thinking about how big linkedin is. xbox is still delivering great things the surface is doing okay. but at least it's not hurting them but when you're talking about say a company like novartis using their artificial intelligence to be able to tailor individual drug needs, i mean, that's extraordinary this company is more like sky net than you thought

>> only becoming more so as ai creeps into everything as satya was saying on the call >> it was just -- we're in the earliest days of artificial intelligence, though. >> i don't understand wane e when you see a quarter that goes out and stocks go down, things are slowing, that's outrageous please do not trade the headlines. because in 13 short pages, on that conference call, you heard about a company that really is hitting in all cylinders >> that is really i think that you never hear them, by the way, does anyone say i want them broken up? i mean no one is talking about them being broken up yet they got the best business of any large tech company. >> 53% growth in azure revenue. >> how about the revs, the margins? did you see the margins there? >> they're enormous. >> a really good job stock is up two. >> report card on zuckerberg's performance yesterday. >> all right so here's my views

first of all, he didn't take the bait at any given moment, he could have taken the bait. second he talked about transparency, empowerment. he gave in on libra, so it should be a dollar-based crypto currency, that was very smart. he blunted that. he was right on script to talk about how the chinese will have ownership if the united states doesn't leave. david, i thought it was a tour de force because he did not get rattled. >> and his hark, i mean we can't say enough about that. >> we went right to the substance. >> i'm all about appearances >> david, do judge an ebook by its cover? >> i'm an extraordinarily shallow human being. >> i thought he was going about whether it was cashmere or bought at tj max >> i applaud his willingness to continue to pound against a wall that's not going to move in lib

practice >> if we're going to talk sar torely -- sartorily i'll move on i'm not done. >> they offset the he it from the 737 max. joining us first on cnb southwest chairman and ceo gary kelly. it's great to have you back. good morning >> i got a haircut yesterday, by the way, so. >> you go look good. >> that's the first thing we care about we talked about your last appearance on this show where you were quite candid about your assessment of the max. are you feeling any better three months later >> well, yes and no we had missed our assumption, if you will, for how things were going to pan out here in the third and fourth quarter but we're a lot closer today to a resolution than we were then so, you know, i'm feeling good about that

the faa has reported that they have the final version of the software it's in a certification process, so that's a major step forward. >> does boeing's q4 target for at least the early phase in return to service make sense to you? >> it does make sense, but i think everything has to go pretty perfectly and at this point it's up to the faa. and, obviously, we don't want it returned to service until it's ready and there has been a lot of scrutiny and pa lot of hard work that could get it to this point. we're feeling good about the process from here and not, not as confident about time lines. the main thing is we need to get it right when it's ready, we'll get it to work and returned to service >> gary, it's jim. look, i got to tell you. you always colt on good and bad. this is good i felt that despite what happened with boeing, you kind of had incredible numbers. what's going on that the numbers turned out so much

are we too bearish about the state of flying and travel in america right now? >> maybe and thanks for turning to that, jim. because i did want to brag on our people it was a tremendous quarter. the numbers are quite good the earnings per share is up 13.9% but for the max, it would have been up over 40%. so there's just a lot for investors to be enthusiastic about and there's nothing bearish about travel right now our travel demand is very, very good a strong unit revenue growth we're looking at a prospect of unit revenue growth again despite a not so great schedule in the fourth quarter. because we have a lot of flights in off peak periods because of the max grounding. and even with that, we're looking at a very strong revenue environment. so, yeah, i was very pleased and our people did a great job producing a wonderful operation, customer feedback has been very

high, so, except for the max, everything else is just doing very, very well. >> gary, what would the pilots want in terms of retraining? boeing is talking about say a little more than 20 hours plus it said 23, 24 on retraining are your to spend more time because they want people to feel who are -- they want the passengers to feel more confident about being in this plane? >> well, i think that's important. we -- we're going to have to convince not just our own people but our customers that everything is fine and everything is safe and so, we'll certainly satisfy ourselves. but it doesn't hurt to go to the extra effort just to check and recheck and check again. but, no, our pilots are very comfortable with the training. we've already done refresher

training on the max, itself. of course, there will be additional training required once the airplane is returned to service. so we'll have plenty of training we'll have plenty of fawn revenue flights, if you will, before the airplane is actually put back into revenue service. and we'll be very confident in the airplane before we put a passenger on there >> gary, the bulls on the street argue that when it does come back, it's going to allow your revenue management system to really take full flight so to speak. but there are those still worried about unit costs, not so much as southwest as some other carriers that somehow we are in for the first half of 2020, where that's going to be a worry. how do you balance those two things >> you know one of the things back to jim's earlier question about the numbers in the first quarter is our cost performance. so our costs are performing better than we had budgeted for the year i'm very proud of our people

there. we've got another really good cost outlook for the fourth quarter compared to our budget and i hope all of that extends in the next year i this i the issue for us, not speaking about the industry, the issue for us with next year is just not having certainty on how the max will unfold in terms of our flying there are, we have 34 airplanes. boeing will owe us another 70 airplanes or you know plus or minus next year and just exactly how those are paced and returned into service is going to be a challenge. and so we'll have to staff up to be ready for the flights and then, obviously, that won't be optimal if we have more resources than we have airplanes. so all of that is a little bit in play. but by the time we get to the second half of next year, i hope we are back no normal and we should be having very good cost

performances so the main cost pressure that we have is with airport costs and all that investment. everything else, you know, i'm pretty pleased with the outlook over the next couple years. >> gary, when you were here a couple quarters ago, i talked about, i asked you about, what are you going to do at boeing? you said, we're going to take that up privately. you subsequently had had the discussions, are you one, let down by the way boeing has acted post the accidents and, two, satisfied that they've given you enough of a mea culpa you feel you can go into your people and say you know what, i've dealt with boeing, they have been very forthright with me and i think we can repair that relationship or sit irreparable >> well, jim, i certainly don't think that it is irreparable i stand by my belief that boeing is a great company with great people, has done great things for our country and our economy

and should have every opportunity to get this behind them, but, you know, i have been very clear, we're not happy about our situation. you know, we put our future in the hands of boeing and the max and we're grounded and i think that that pretty much sums it up. my focus right now is two-fold one is i want to settle with boeing to recover our damages. number two, i want to get this airplane back into service safely and those are our two focus items. where we go from here is a question i've also made clear that we'll address next year as to whether or not the strategy that we've deployed for 48 years is the one that we want for the next 48 years and that is something that our board has asked know look at and you know our team will take a hard look at that. but that's something for later right now, it is let's get this airplane back up in the air safely >> but your board is asking to

take a look at whether or not you should use boeing at your sole supplier? >> not new news. of course. absolutely and i brought it up. you know, so that is a strategic question in two senses are they the right partner going forward? number one but number two, the wisdom of having one aircraft type are you looking at an airline that is the safest in arguably the safest in the world with boeing equipment in having a sole supplier and every pilot in our airline is expert on 737 so there is sa lot of advantages not just efficiency but safety advantages to being demoted to one aircraft type. i'm not saying we're going to change him i'm simply acknowledging that is something that will need to be reviewed and next year will be the time to review that >> just to be clear, gary, are we talking about diversifying within boeing's fleet types, or

my grating -- migrateing to a different manufacture or what do you think herb has said about that >> well, i know what herb would have said. because i know what he did say we've always evaluated other aircraft, other aircraft manufacturers and especially when there is new technology that comes on the market we've done that numerous times in my 34 years at southwest airlines so next year will be appropriate for us to do that again and, yeah, i'm primarily talking about diversifying from having a soul supplier. we have no interest in having smaller airplanes, bigger airplanes. we want to stay in the narrow body market. but, again, this isn't new news and it's something that i think you all would expect, our investors would expect and certainly our board would expect and we would consider that >> yeah. gary, if i could come back to something you mentioned just a

few moments ago, which is the potential delivery of as many as 70 planes next year. and the potential for that to sort of, well, how you would pace it, can you explain a bit more behind that in terms of what your expectations are or how you are going to mitigate any potential problems as a result that you seem to allude to from having that many planes suddenly hitting the system? >> if memory serves me, in other words, we have next year assuming back to service here shortly, we end next year with somewhere around 110 max aircraft and we have 34 currently in our possession so, there are 300 or so or more grounded around the world and this is unprecedented. for boeing, southwest, other airlines, the faa, other international regulatory agencies to work together to return these aircraft physically to service

and we have a plan, but we just have to expect that we may have to call some audibles with that plan so we just don't know how many airplanes can be returned in a week and right now we are being conservative with our assumptions. but i think that's the main thing and then, of course, boeing has to build airplanes as well and they've maintained their production capacity at i think they cut it from 52 to 42 a month and, hopefully, that ill sustain that but in order for us to maintain our future flight schedule, they'll need to increase their production capacity back, i think, to 52 a month for us to get all of our airplanes so a lot of questions there to work through but right now, based on all our conversations with boeing, our working assumption is that if the airplane is ungrounded in december and, you know, nothing

else comes to light, then we should be back where we would have been roughly the middle of next year. and i would be just fine with that right now with all the glaze that we've had so that would be fantastic >> gary, your airline is found upon one major principle which is that the customer is always right. well in this case you are the customer when it comes to boeing are you happy with the changes, with the separation of chairman and ceo? would you like to see a new ceo? are you happy with dennis bolenberg and the communications he was given you or do you say to yourself we need a clean break or else i am going to go to airbus? >> well, again, i go back to we're not happy. if their board thinks that splitting the chairman/ceo role is the right thing to do that's fine with me. io enthat i have an opinion on that we work very closely, first, of course, with the commercial unit, which was led by kevin

mcallister and kevin, in my opinion, did a phenomenal job and inherited you know this mess he was only there a very short time so we have a long relationship with him and i have nothing but thanks, for the way he's been working with us. stan diehl is someone we know very well and it's just indicative of the talent that boeing has stan is a very fine executive and we have a lot of confidence in his leadership. we work less at the corporate level with dennis and, again, you know, i think there's -- there's no question that there had been a lot of issues that have come to light over the last year so, we're not happy. and we'll be working with them privately to make sure that we address our issues >> gary, appreciate your time, as always. the stock is up 6% now we'll see you next time. >> okay. well thank you all for having

me you bet. >> quick programing note here. on jim, coming up tomorrow night on "mad money," american airlines' ceo doug parker. -- >> same questions will come out there from gary kelly. what can i say how much do you love that guy? >> i like -- too >> jesus >> a little levity c'mon! >> serious issue he was very serious about it, actually he kept saying new news. >> lebeau says this is as explicit as he has been. >> explicit. okay the haircut was new news >> obviously southwest with a nice gain as we talk to kelly. >> the numbers were amazing. i expected a total fiasco. uh- uh-uh, not gary. >> boeing lower as is the dow. the dow down 34 points s&p hanging onto 3,008 when we come back, we'll talk to the cfo of paypal.

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time for jim and stop trading. >> i actually thought 3m would have a little better reaction because i think mike roman is trying to get his hands around the problems but softness in china is still going to matter there are issues involving core businesses that are related. let's just say health care should be better i like health care overall people just must hav expected something that was like lamb research which was the other one that i was going to use which was the best quart last night p fast is something that they're struggling with and this is this groundwater issue. i'm waiting for tusa to come out and lower his market

that's the jpmorgan analyst. he must be on vacation but he hasn't said anything bad. >> no, he hasn't it's down 1%. >> people must figure he's back. >> they are one of the companies that have cut guidance since last night 11 have cut. >> castro was strong but the softness in china, the softness in autos autos, we didn't get to ford -- >> another guide cut. >> yeah. ford is trying let's say they're giving her all she got. it's kind of like scotty in -- >> star trek. >> star trek, giving her all she's got. >> all she's got, captain. >> i didn't see their haircuts, david. i'm sorry that i can't be more on point. >> keep an eye on that in the future, will you, please apple, microsoft, market cap. >> ubs raises -- says look, it really is on fire and you can own it through to 5g microsoft, amy hood, the most dif few sieve she has ever been

and because she is completely flat. >> never got to our parent company this morning. >> it's a good quarter but it's not really up that much. >> the day is early. >> record broadband ads. 238,000 fewer subscribers to the video product but they only want to keep profitable. >> good caller on peacock, arguing it's going to get cruising altitude before a lot of other streaming services do. >> can i just go back to this lamb research for a second this is heavy equipment, semiconductor, china incredibly strong we're starting to see a pattern. people didn't expect it. incredibly strong numbers for paypal in china with that new deal, incredible numbers that we're seeing in china for lamb research obviously the tesla comments, fastest ever built, ten months china is doing silently some things that are not entirely negative remember on the boeing call you throw in some orders for two 787s and we're back in business.

i hope the chinese listened to that conference call i hope they didn't listen to gary kelly not only did he make no news whatsoever but i had actually never heard that, what he said to me, until i heard it from david, when david asked. in other words, it was news. come on. it was news. i didn't have a chance to lift my head about what's on tonight. >> we'll find out at 6. >> i missed the game last night. nick akins has always does the straight foreand michael neidorf will tell us about single pair we got to go to break. >> with the dow down 65 we're back in just a minute. man: can i find an investment firm that has a truly long-term view? it begins by being privately owned. with more than 85 years of experience over multiple market cycles. with portfolio managers who are encouraged to do what's right

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good thursday morning. welcome back to "sidewaquawk one street." market tumbling largely due to

3m as we sort our way through the single busiest day. >> our road map starts with the busiest day in earnings. tesla, twitter, microsoft, comcast all on the move. we'll dig through the numbers. all smiles for align technology the company is up on its beat. we'll talk to the ceo later this hour. and is boeing's biggest u.s. customer considering a change? what ceo gary kelly told us just a few moments ago in the last hour. we mentioned the parade of earnings let's get to bob >> a good start to the day we've been slowly moving down. the dow is down negative, s&p flat but we're hovering around the 3,000 mark we've seen lower guidance today and there's a pattern to this. 3 m lower guidance stanley, black and decker reduced its full year profit forecast as well, china here as well ford similar situation, lower

than china sales there twitter completely independent weaker revenue guidance overall for twitter. is there a pattern here? yeah, there is, with the exception of twitter it's very simple here. you're getting lower earnings and guidance in general if you got exposure to very specific areas, to autos, to industrials and to china if you got all three, you've got a problem. are we seeing patterns here, yeah these companies have all had similar situations 3m, stanley, black and decker, ford, caterpillar, texas instruments, exposed to autos, industrials or to china, or in some cases, to all three and you've got a problem there's the weak spot in the earnings situation right now nonetheless, we're negative for the quarter, third quarter, but still improving. this is the pattern we always see for the quarters we started the third quarter, estimates were down about 4% overall at the start of the kwa quarter. right now they're only about 2.3% there have been more beats than

misses a week ago we were down 3 wee%., revenues have been ready steady. we'll probably end the quarter down anywhere from zero to 3%, still expecting 2 or 3% growth in the fourth quarter. q3 earnings, you see the numbers holding on i want to point out tesla's numbers. the important thing when exceeding 360,000 delivers, model y, summer 2020 this is one of the big short squeezes out there guys, back to you. >> thank you we have some data crossing the table on new home sales. >> new home sales came in at a seasonally adjusted annual liesed rate down 7.7 month to month because of a huge revision to the august number they were originally at 713,000. they were revised down to 706,000. this is based on signed contracts in september, people

out shopping, signing contracts, not the closings which is the existing home sales numbers. these are reactionary to mortgage rates they went from 3.46% on the 30-year fixed to 3.58%, a significant jump and that affected sales there also the median price of a newly built home in september, 299, 0 $299,400, down 8.8%. it's not that the builders are lowering prices, in fact, they're not lowering prices. it's probably due to a mixed shift that is most of the sales happening on the lower end of the market because of affordability at issue with mortgage rates rising in september. this is a pretty big miss for the buildings. the big builders have been reporting a lot of traffic through the homes but will that traffic turn into signed contracts and clearly in september we did see a drop. back to you guys. >> thank you, diana. turning back to tesla, the

company extending its gains after a big earnings beat. that stock up now almost 17% joining us now with more, ceo katherine wood, news street research -- thanks for joining kathy, no one really expected tesla to post a profit in this quarter. they did how did they get there, and do you think that it's sustainable? >> yes we think they're getting there because they are in such a nascent market right now that something called wright's law is at work. that says for every cumulative doubling, costs decline a similar percentage rate. in the case of tesla and the auto industry generally it's been 15% so it made a lot of sense to us that the cost of the model 3 came down by $2,000 per car. that's right in line with what we expected. >> they're becoming more efficient here but we did see revenue decline in the quarter by about 8%.

is that concerning for a company that really by and large has traded as a growth company >> at this point revenues growth really depends on how the manufacturing facility is stacking up. so it's not a big deal what's really important is the fact that they produce less than 100,000 cars profits are down by 40% and their new hybrid car is barely one year old in terms of mass production despite that, the heightened gross margin which is leading the industry and any other car manufacturer will tell you electric is not profitable yet that's where they're onto something and the street is trying to figure out what it is. >> in terms of the street,

obviously we've seen a huge reaction today with the stock up more than 16%, on pace for its best day since 2013. but you've also got a company with some of the highest short interest as a percentage afloat of any company that's out there, about a quarter of tesla stock is out on loan in order to be sold short how much can we read into today's numbers, kathy is this more of just an unwinding of some of the short positions? >> i think some of the shorts are covering they're stretching to make a negative case now. they're trying to figure out is there some accounting here that has caused this upside surprise. as we dig through the accounting and the numbers generally, if you look at the revenue growth year-to-date, 21%. unit growth up 65% in an auto industry that is declining we think total auto sales have peaked so this is quite dramatic and i

think the shorts are going to be forced to cover as time goes on. >> unit growth is fine but i thought the point was to create a car that they could make some money on, right? they keep getting cheaper and cheaper. what does that do to the long-term model? >> their gross margins surprised considerably, up more than 300 basis points quarter to quarter. we think and so they're at about 22.8%. if you exclude deferred revenue, recognition and credits, it's still up 300 basis points to 19.7 we think that number goes to 30%, could go to 30% in the next year unless tesla chooses to cut prices faster than they have been cutting them. what's interesting about that is given its lead in battery costs relative to any other electric car manufacturer, every other one will have to -- if they want to keep up with tesla, will have to sell their electric vehicles

at a loss. at the same time they're losing their internal combustion engine driven business. so it's quite problematic. >> who's closest on their tail now? volkswagen porsche? who do you think they see first in the rearview mirror >> i think nobody is close, to be honest. tesla came to the market seven years ago and today as far as what manufacturers have announced, nothing is matching the 2012 tesla model s the model s of tesla today is actually 40% better than seven years ago. so that's how tesla turns from being like a disruptive innovator seven years ago to actually an industry leader. they have seven years of experience others don't have, and i don't think anyone is close to them. >> one other thing i'd add is there's another leg to the story. it's really the most important leg. it's autonomous. we think that tesla will be or

is in the pole position to be the autonomous taxi network here in the united states the margins on a transportation as a service business, they're in the 80s. >> why is that the case? >> why are they in the pole position >> correct. >> so they introduced -- they're taking a lead from apple's book. they've introduced an artificial intelligence chip that, according to our analysts, james wang who worked at invidia for nine years, says is four years ahead of any other auto manufacturer's chip, ai chip, and he would know that because invidia is -- >> i understand. >> they also have 10 to 12 billion miles' worth of real world data that is more than every other auto manufacturer combined by a multiple for example, google's wamo has somewhere in the 15 to 20

million miles of real world data, not simulated. that's not going to work for artificial intelligence. >> because they've got all these cars out there. >> absolutely. >> pierre, he did seem to want to take some time in the call to focus on the solar business and the energy business. we don't talk about them too often except critically of course given the acquisition of solar city and the debt that it brought on a number of years ago to the balance sheet is there opportunity there >> yes so, if you look at where it stands today, they produce by themselves maybe two-thirds of the volume of batteries produced five years ago, so they have the largest scale, the most advanced experience in improving battery chemistry and the overall architecture of battery systems. it's important for a battery to get into energy storage and it's limitless. that's the reason why we remain excited about this opportunity

we tried to organize some events around that theme a year ago and investors were not really interested i think investors really need to understand the car story first and once the car story is well understood, i think we'll have -- >> then they can move on perhaps to start to embrace this. >> yeah. >> with a 530 a share price target -- >> which you've had for a while, right? >> yes, absolutely that's a one-year price target that's moving slightly quarter after quarter. there's still very much time to the price target i think -- kathy, i'm very optimistic about the self-driving for tesla i'm less optimistic about like the ride sharing, but i think that in five to seven years from now when elect drive trains will become more commoditized, everybody will be able to do it okay tesla will be the only car with the software and the technology, the hardware that allures you to

sit behind your wheel and keep a distant eye on what's happening. if they achieve that, they will be producing maybe 2 million cars a year which is equivalent to bmw with twice better margins. if you do the math and you bring that back to today, the $500 price tag makes complete sense just on that story. >> 530, 80% upside from today. kathy, pierre, thank you both so much for joining us. when we come back, we got to keep our eyes on twitter shares down 17%. plus look at what's driving that social media stock lower as they talk about a bug in their add measurement tool. dow down 83 points now

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shares are twitter are down almost 17%, a miss in terms of estimates. the company blaming ad targeting issues for what was a rough quarter. shares could, quote, bleed over into 2020. some changes they made, some bugs in the system, leslie, that seemed to impact things in terms of the ability of advertisers to spend as much as they might have

wanted to on the platform. >> it was their mobile application promotion product and they said it contributed to a decline of about three points in terms of a reduction in year over year revenue. so a pretty significant bug for the quarter. the question is how long that lasts. do they have things under control, is it fixed is the bug fixed >> ed siegel was an sidewa"squa" earlier this morning it wasn't completely clear. >> they talked about some data settings that they said were not optimized in terms of ad measurement, but all together, three points off your revenue growth is a big deal we were looking for 15 and got 9. it was a big disappointment. they went public in six years ago. >> there have been some opportunities to sell them along the way. in fact, very early on.

>> yes got into the low 70s airlines the other big story we talked to gary kelly of southwest a moment ago but american moving higher after topping estimates despite the max groundings as for southwest, the stock went to 6 or 7% during our conversation when we talked to kelly in the last hour on the max issue and the airline's relationship with boeing which could potentially change one day. take a listen. >> your board is asking to take a look at whether or not you should use boeing as your sole supplier >> not new news. of course, absolutely, and i brought it up so it's a strategic question in two senses are they the right partner going forward, number one, but number two, the wisdom of having one aircraft type. you're looking at the airline that is the safest -- arguably the safest in the world with boeing equipment and having a

sole supplier and every pilot in our airline is expert in the 737. so there's a lot of advantages, not just efficiency, but just safety advantages to being devoted to one aircraft type i'm not saying we're going to change i'm simply acknowledging that that's something that will need to be reviewed and next year will be the time to review that. >> just to be clear, gary, are we talking about diversifying within boeing's fleet types or migrating to a different manufacturer and i wonder what you think herb would have said about all that >> well, i know what herb would have said because i know what he did say, and we've always evaluated other aircraft, other aircraft manufacturers, and especially when there's new technology that comes on the market we've done that numerous times in my 34 years at southwest airlines so next year will be appropriate for us to do that again, and

yeah, i'm primarily talking about diversifying from having a sole supplier. we have no interest in having smaller airplanes, bigger airplanes. we want to stay in the narrow body market, but again, this isn't new news and it's something that i think you all would expect, our investors would expect, and certainly our board would expect that we would consider that. >> is it new news? for that we turn to phil lebeau. phil, what do you think? >> technically it is not news that they are going to look to potentially diversify away from exclusively flying the 737 however, this is the most explicit i have ever heard gary kelly when it comes to discussing the possibility of southwest eventually some day flying the airbus 320 or 321 neo, whatever it might be. so i think it's significant. i think it is a clear sign of

just how upset he is, the southwest board is, and really when you talk with southwest employees, they're not happy with this entire situation with the max, primarily not just that it was grounded but it's been this drip, drip, drip, drip about what's been happening, how long it's taking to get the max repaired and back in the air look, next year is going to be challenging for them, for southwest, because they have more 737 maxes than any other airline, and bringing that back online both in terms of the ones that they already have that are grounded plus the new deliveries, it's going to make for some challenging times >> yeah, he said, you know, about that very point, phil, he's going to have to call an audible at some point next year. wasn't completely clear i guess because it lacks clarity in so many ways in terms of how it may impact them but it's clear it's going to have an impact. >> it will have an impact, not just for them but for all airlines but southwest will feel

it more because they have more maxes both in terms of already in the fleet as well as those that have been ordered guys, this will now bring up the question, next year does southwest look to diversify in one of two ways, do they place an order for airbus models >> there there's already a long backlog there at airbus but the chance for airbus to put southwest into its customer base, southwest really has been the darling of all the customers that boeing has ever had for them to say, hey, they're with us now, they would find a way to open up some slots to deliver some a 320s earlier than putting them at the back of the line, or do they order the a 220 which is a narrow body, a little bit smaller but allows them -- would allow southwest more flexibility, especially for some smaller markets, or does southwest look at other airlines that fly airbus models right now. spirit, that's a name that's been thrown out there as a potential acquisition target down the road. but there's no doubt gary kelly was very clear with you guys, the most clear i've ever heard

him, that they are looking seriously looking, at potentially moving away from just flying the 737 in the future >> although, phil, when you consider the new training that would be involved, not just for pilots but for mechanics, some argue maybe he's just being a savvy negotiator trying to get a better price on a boeing. >> sure, that's a fair argument. look, the complexity that you run into when you add a second type of aircraft into your fleet, it is significant and it is worth considering the flip side of that argument, carl, is look where they are right now. they were in bed with one manufacturer and one type of airplane, and for years, for years you would hear people say southwest is smarter than everybody else they only fly the 737, they have more efficiency than anyone else well guess what, they're getting nipped in the you know where right now because they don't have the full compliment of aircraft so they are seeing both sides of the coin in terms of the advantages and disadvantages

>> yeah. he did talk about the cost consequences even when the max does return in terms of getting all of their equipment back into schedule phil, thanks appreciate that. quick programming note tomorrow on mad money, doug parker of american airlines, we'll see what he thinks of the max at this stage. the president with a new tweet, the federal reserve is derelict in its duties if it doesn't lower the rate next week and stimulate. germany and others are getting paid to borrow money fed was way too fast to raise and way too slow to cut we'll see what the argument is next week given what's happened with retail sales, industrial producti production biggest drop in four months. >> it took a big drop to get his attention on this today. oftentimes you see more market volatility anyway, you're right we'll see next week. when we come back, is the

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it's time now for our etf spotlight, looking at energy ticker xle, now pulling back after seeing some early morning gains, concerns over the oil demand outlook beginning to offset yesterday's surprise drop in u.s. crude, but crude is on pace for a third straight positive session in a row hitting over $61 a barrel, its highest level since last month the broader energy sector falling. it's now down 11% from a year ago. >> nordstrom opening that new flagship store in new york city today. courtney reagan is live from the store with the latest. >> reporter: hi, good morning to you, carl. it was actually about 20 years ago that nordstrom at least first considered coming to new york but it was seven years ago that they officially started planning for this store and

officially opened the doors for the first time today so, this is a really big investment, north of $500 million, the biggest investment the company has ever made. they call it a generational investment they expect it will add about 100 basis points to top line growth which is something it could use. it might remember that full line sales were down about 6% in the first half of the year, but since the company has plans with the store, the landscaper, high end retail, especially in new york, has changed dramatically neiman marcus opened its first store at hudson yards. lord and taylor closed barney's filed for bankruptcy. saks undergoing a billion dollars of renovation but closing its downtown women's store after two years. analysts are impressed with what they've seen here at this store, particularly the services it offers like 24/7 pick-up, even beauty service like botox, facials and tanning. but in general there is concern about the department store sector more broadly and observed

sluggish trends so far in the third quarter. nordstrom does say that new york is a $700 million addressable market it was already its number one online market before it had a store here and it says in general when it opens a new store in a new market, it sees an online sales lift of 20 to 25%. so the plan is for this to really be an anchor of an ecosystem in new york. you know there are already recently opened two new local service locations as well as two rack locations and the men's store across the street which opened 18 months ago all of that together is supposed to basically do fulfillment faster and easier, as well as returns. they're saying returns are coming back to local stores about 8 days faster which helps it get back into circulation and helps those margins in the end it's a big day and a big party here the line was wrapped around the block this morning but we'll see what ultimately happens with the returns on this generational investment i'm going to send it back over

to you guys. >> all right, courtney, thank you so much. it sounds like quite a good time over there at that nordstrom opening. enjoy. now let's send it over to sue herrera for a news update. good morning, leslie good morning, everyone a wildfire started last night in simo sonoma county north of san francisco. the kincaid fire has grown to nearly 10,000 acres. wind gusts are fanning those flames evacuations have been ordered and power has been shut off to about 27,000 people. in the united kingdom police have confirmed 39 people found dead in a truck container in england were chinese nationals police say they believe the container went from a port in belgium to england the truck driver has been arrested on suspicion of murder. protests continued in lebanon for an eighth day with demonstrators blocking roads and calling for the government to step down because of that

country's economic crisis. hundreds of thousands of people have flooded public squares across the country in the largest protests there in more than 15 years. here at home, olympian simone biles throwing out the ceremonial first pitch before game two of the world series look at that she did it in style last night with a flip before throwing the strike to the houston catcher. biles is a houston native. washington won the game though, taking a 2-0 lead in the game. you're up to date. that's the news update david, i'll send it back to you. >> thank you, sue. as we go to break here, take a look at shares of paypal they are up sharply as you can see. it was an earnings beat. they got a boost from higher customer traffic by the way, the company's cfo, john rainy, is coming up later "squawk alley." don't want to miss that. we're right back after this. ♪ ♪

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dow down almost 100 points stocks reacting to earnings surprises on the upside and downsides of economic data here to help make chase of it all, joyce chang and jill kari hall hello, guys, good to see you both. >> great to be here. >> joyce, you were so early in calling on this global cap ex retrenchment are you seeing any signs now that it's beginning to bottom out? >> the manufacturing numbers are coming in weak and we're really focused on the consumer numbers. the consumer data was growing very fast in the first half at 5.5% and now it's down to 2.5% unemployment also has hit these record lows but we're actually seeing more questions about unemployment and consumer going forward while the manufacturing still seems to be soft, particularly out of europe. >> so are you on alert for disappointments in non-farm or is it too early for that

>> i think it's a little bit early for that but what the market is really focused on near term is u.s.-china, is there going to be a phase one deal and some of the no deal brexit being off the table. >> on that point, jill, these tentative agreements, i guess you could argue whether it's brexit maybe, phase one, g.m., you put that together and does that mean the trade may be a positive catalyst for november >> it could. i think there's still a lot of uncertainty around brexit, around trade, so this is one of the reasons we've been expecting the volatility in the market is here to stay but certainly if we get a mini deal on trade, that could be a positive for risk assets and for some of the multi-nationals in areas that have been hit harder by trade tensions. there's been several other positive catalysts earning season has been holding up okay so far the risk as mentioned, a lot of the macro data, especially on the global and manufacturing

front, has still been weak, hasn't shown signs of bottoming yet. we think this will be the one negative year over year earnings for the quarter and will cover back into positive territory next year. usually when you see a negative earnings quarter, it doesn't just last one quarter when you look back historically really looking for some of that data to bottom out. >> the other thing, joyce, that people are watching is weak volume, 3,000 is the magnetic poll of 3k and new york fed taking repost at 120 i guess is volume and this repost squeeze going to be an issue for a while? >> well, every year we see year end closing earlier and earlier and i think you could get another test in december because a lot of the primary dealers will actually be cutting some of their holdings as they report their scores in. we see two more easings still on the cards in october and in

december and the purchases resume again it's not qe but it basically is making sure that the technicals are in a better position in the marketplace. >> jill, you said that misses are getting hurt harder than usual. what do you think that says about investor sentiment during this earnings season, and as you mentioned the risks that we do see subsequent negative earnings in the quarters to come? >> right usually when misses -- companies miss on earnings and sales they're underperform we have noticed that misses are getting hit harder than usual this quarter i think investors are not yet willing to look through the miss if they don't become confident in the forward looking outlook so one of the things that we notice going into this earnings season was that while guidance has generally been okay, you've also just had fewer companies issuing guidance and issuing forward looking outlooks we'll get a better sense as we get a broader and broader swath

of companies reporting over the next week or two into the height of earnings season, but i think that those forward looking outlooks are going to be the focus this quarter and those price reactions definitely show how confident our investors, that we do see that pick-up in earnings growth next year because expectations to us do seem a bit too high. consensus is calling for around 10% earnings growth next year. we're thinking something more like 6%, but again, a lot of that macro data has yet to bottom out or is just starting to show some early signs of maybe stabilizing. >> meanwhile, europe is doing pretty well here stock 600. testing some interesting resistance is there a chance that if the dollar starts to bend, maybe not break but bend, that the u.s. dollar denominated asset trade obviously really crowded long could surprise some people >> i really don't expect that because i think the bigger picture question in europe is on growth particularly out of

germany and whether they do fiscals. even though the earnings are coming in better i still think there's talk about do you have inflation risk, the slowdown is actually sharper there much as jill said, earnings are going to come in lower in the u.s. we also think that it's going to be more like mid single digits going forward. i think the dollar strength is still based off the growth differential less off the earnings and the growth in europe still is looking problematic. >> we saw president trump tweet about 19 minutes ago saying that the fed is derelict of its duties if it doesn't lower the rate joyce, i know that you've been saying that lowering interest rates isn't enough in this deglobalization environment. >> yeah. >> do you agree with that? >> lowering interest rates is not sufficient it's sufficient to prevent a recession but it's not bringing back the growth. we do see that 70% of the world's gdp, you now have monetary easing in place but you haven't had the growth come

back, so what is it going to take to awake animal spirits there's a lot more talk about fiscal measures needing to be used, particularly in europe and particularly in germany. >> all right >> resolution to trade disputes is stronger -- >> well, and i think the trade uncertainty has been seen as the key risk to investors so they see something for phrase one but most people think this mini deal is going to be just that, a mini deal, that you've got the structural issues in place and so the market had been looking at this as cyclical. now they see it as structural so i don't know if that's going to bring back the kind of boost that we're talking about with respect to growth. >> we'll learn more maybe at apec, we'll see in november. shares of 3 m sinking. >> the earnings call just ended and comments made by ceo mike roman on the conference call sending the stock to the lowers of the session, down about 4% and shaving 70 points off the dow. first on china, roman said 3m

continues to face softness in the country where organic growth is 9% driven by continued weakness in automotive, electric tro tro tron iks and ex ports. they're anticipating that softness in china to persist and it also speaks to the competitive pressures that 3m and other industrial players are facing on the ground broadly speaking, asia-pacific declined 4% in the third quarter. similar to caterpillar, 3m mentioned the reduction in inventory that it's seeing in its channel and admitting that the first year of their five-year plan hasn't turned out as anticipated given the slowdown in these key marjtkets certainly a soft patch for what they're seeing on the ground in china and shares of 3m down 4.2%, david. >> thank you when we come back, all smiles for align technology.

the company ceo is going to join us it's a cnbc exclusive. more "squawk on the street" when we return. - [spokesman] if you've tried college but never finished, (group cheering) snhu lets you transfer up to 90 credits toward you bachelor's degree. - [woman] it doesn't matter how old you are, you can do it, you can finish. - [spokesman] finish your degree at snhu.edu pacifica: ted! goin' oneighbor: yes. takin' it off road station wagon? you know it's an suv! i know for fact your suv does not suck. why is that?

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♪ align technologist are up this morning the company also has now between street estimates on both the -- beat on street estimates the past four quarters, i tried to say. we're joined by the company's director, president and ceo, joe hogan. nice to have you this morning, mr. hogan. >> thank you, good to be here. >> you talk about the portfolio having particular expected or having particularly increased volume in places like asia-pacific and latin america why was that the case?

>> well, asia-pacific has always been a strong market for us and china was in question in the second quarter, but we had a very good quarter in china, upper 30% growth rates, good team growth, and we've put about 40% of an additional sales force in china over the last year, changed some of our marketing there. it's done well on the japanese side when you think about what's going on in japan for align right now, our sales are up over 60%, good balance between general practice tigsers and orthodontists. brazil has been growing over 100% a year over the last three or four years and it's becoming important. it's a big market. there's a lot of interest in dental care in brazil. just like we see in spain and different parts of europe also, these companies that are very focused on aesthetics. overall it was a good quarter for us but i like the breadth of the quarter in the sense of overall global growth of the company. >> what do you find is most

effective in terms of increasing volumes? is it as you referred to a change in marketing for example in china, or is it the core of it the relationship with the doctors and continuing to increase those >> a lot of variables and there's what's nice. there's many levers you can pull as an example, we have 65,000 doctors globally we asked 6,000 more doctors alone in the third quarter we can add sales force and we're expanding in international markets and markets we've been in a while adding sales force. we have a wonderful brand name and accentuating that online and with general broadcast really helps a lot. but i'd also say technology. we're the technology leader in this industry. we've been in it for 20 years. new products like inadvise align where we can treats patients as young as 7 years old we use artificial intelligence to predict eruption in teeth and we can program those in

aligners that widens and broadens the market for us too. that's what's great about this company. there are a lot of levers and depending on where you are, technology, sales force, overall capability from a logistics standpoint, all those things are meaningful from a growth standpoint for align >> in terms of the competitive environment, joe, you have essentially a two-decade-old mon oply and now we're starting to see more upsets in direct to consumer market. that has elicited some concerns from analysts. what do you make of that, especially in light of smile club's ipo and so far those shares are down about 60% from their ipo price. is the competitive environment indirect to consumer a real threat to your business right now? >> i don't consider it a threat at all we're the technology leaders remember, versus direct to consumer we go with those 65,000 doctors i just talked about.

it's in their hands, the patients they understand their patients well and i feel very good about that model what the dtc companies have done, direct to consumer companies, they've identified this mark that we've talked about for years that's really beyond the wires and brackets market that we entered this marketplace in they've identified really hundreds of millions of additional patients that would . i feel that's our market i think we're best positioned to be able to address that market with our doctor partners, not just in north america but all over the world. >> but dtc can also offer it cheaper. in terms of increasing volumes, are you concerned that the price point at which you're offering could come under fire as some of the up starts are able to offer things for a little cheaper, especially as consumer sentiment shifts a little bit.

>> that's a really good question from the cheaper standpoint, before and again in the an log process, only one way to move teeth and you moved them together good thing with digital, you can move one at a time or all teeth. you want aesthetic repair, we can deliver that through doctors at a very competitive price. you want full bite correction, a teenager that has certain mal inclusions that are specific, and we can go as high as some higher orthodontic case start costs in the world we have a flexible model based on digital technology that can address what that specific patient wants, and do it competitively through doctor base that helps to guarantee an outcome and is a safe way to deliver treatment. >> i notice in your press release you seem to trumpet relationships with the san francisco 49ers, carolina hurricanes, the patriots in football as well as raptors, the

champions in the nba why is that an important channel for you in terms of marketing? why do sports teams figure so prominently in your reaching out to customers >> sports teams changed marketing, embraced the communities around them, fan base much better give us great breadth to touch potential patients and consumers, they identify with those in that brand, combining with invisalign, the best consumer brand from an orthodontic standpoint, in conjunction with the sports teams can touch day-in and day-out has been very effective. we're excited about those relationships. >> mr. hogan, appreciate you taking time with us this morning. thank you. >> thank you all right, let's send it to jon fortt with a look what's coming up on "squawk alley." >> leslie, what a difference a quarter makes.

paypal after earnings is having what could turn out to be its best single day in a year. we're going to talk to the cfo of paypal coming up on "squawk alley. fl obvious. sometimes, they just drop in. cme group can help you navigate risks and capture opportunities. we enable you to reach global markets and drive forward with broader possibilities.

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the street." stocks are hovering below the flat line, losing some momentum through the course of the morning so far the s&p 500 is hovering around that 3,000 mark, trying to work towards record highs we have weakness in communication services sectors as well as energy being offset by a little bit of strength in the technology sector, up almost a full percent that's following a string of strong earnings results. you have paypal and microsoft both pushing that sector higher, but the real standout is a chip maker, lamb research, posting better than expected profits and sales, maybe allaying fears about weakness in the semiconductor market and sector. we'll get another check of chips

this afternoon when dell component reports. intel shares in focus now that lam research is in the books back to you, carl. >> thanks for that. a closer look at some movers today, for every lam research there's a 3m, which is weighing heavily on the dow, close to ssn seiolows, down 86. don't go away.

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