parting is such sweet sorrow isn't it >> it is just one day we had together, joe. >> but it's been good. it's been three hours and went fast at least for us. quick final check on the markets now. markets are now positive at least for the dow. make sure you join us tomorrow "squawk on the street" is coming up next. ♪ everybody get up ♪ good morning welcome to "squawk on the street." i'm scott wapner with morgan brennan and mike santoli carl, jim and david have the morning off. let's take a look at how futures are set up today and you do have, well, mixed picture across the board. the s&p is one-third of 1% away from its best gain since 1997. nasdaq up 11 of the past 12

days we'll see what the last -- second to last trading day of the year has in store for us road map today starts with the record-breaking year for stocks. the s&p within striking distance of its best yearly gain since '97. >> plus, tesla's china play, the automaker ruling out first sedan from the shanghai factory with ramping up next month. >> we begin with the year end rally and the record run for stocks mike, it has been quite a year and we go into 2020 seemingly with a lot of momentum. >> been a very, you know, kind of orderly low drama rally in december a lot of folks say we may be set up for a pullback. i think we keep having to remind people, it has been a great year, successive record highs for much of the year we started in a deep hole. i think that's important not to sort of downplay what a strong performance stocks have had had this year, but to point out

they're not necessarily all that far out on a limb because they're up 30% of the 12-month basis because they're up about 11% from 15 months ago, right? i think that the broader trend is pretty important to keep in mind and obviously implicitly the markets are suggesting a lot will go right next year and that will be the test as we get to the first quarter. >> nice broad meltup as well. >> yes it is interesting. we had santa claus rally under way right now, coming into the final two trading days of the year not necessarily a lot of volume or a lot of volatility with equities where you have seen volatility has been currencies. the dollar index in particular, i bet you have thoughts on this. >> the dollar is obviously -- it is generally rolled over a little bit it is in -- one of the softest -- if you look at the u.s. dollar index, softest level since may, i think going back several months. interesting, there is a call for 2020 people suggesting that it is going to perhaps continue or at least the dollar is not going to go back toward new highs.

that will probably fit with the general kind of global cyclical improvement theme and the idea that risk assets can be okay. >> good backdrop for stocks. i can't remember a period where you have stocks doing so well, continuing to set new records with such uncertainty about where earnings are going to go normally earnings have fallen into place or pretty confident they're going to now it is like who knows what is going to happen. what are earnings going to be in the coming year? >> i think that in general you can say, first of all, this year, earnings held at record levels that's the way to think about it they more or less are flat, at record levels and so slight incremental growth from there is probably what is built into the market now, you know, i think where the credit ca credit markets are priced is probably supporting relatively high valuations on the earnings. but no, that is the big question, scott. basically, the phase one trade deal allowed the market to say, we're going to gift economy the

benefit of the doubt, assume we'll get reacceleration and price assets for that scenario even before we see the evidence and i think the similar case goes for earnings growth i don't think anybody can expect somebody to hit the consensus. >> history is your friend too. you have a gain like you have this year, the s&p on average up more than 11% if you come into a year having done at least 20%. so history is on your side already. >> we have seen the number crunching from a number of different strategists and research groups showing just how strong the fourth year of a presidential cycle can be for stocks historically as well. that's going to be one to watch coming into 2020 the other thing that has got my attention right now is energy. we have seen something of a stealth rally for energy stocks in the month of december best performing sector within the s&p, we had the u.s. carrying out precision defensive strikes in iraq and syria against iranian-backed militia over the weekend we did not see crude move on that so we have seen this rally

within stocks, but in general, yes, crude prices are up double digits for the year. when you step back and you look at what 2019 has meant, i mean, sanctions, supply cuts, attacks in saudi arabia, tankers seized, lots of geopolitical events and you haven't seen a major spike in crude that's going to be one to watch. plus, you have the international maritime organization anti-pollution mandate, which is going to have -- we talk about trade flows, a big effect on the cost of goods moving around the ocean next year. >> you have people start talking as well, mike, about whether they're concerned about the meltup going too fast. >> i think that's where we are tactically i think short-term you can look at a variety of sentiment indicators and sort of trader positioning indicators, one that i have here from davis research, composite of trading sentiment it is up to where it was in early january of 2018, not a great time necessarily to put new money to work. i do think sentiment has

definitely become -- toward an optimistic level and you no longer have sentiment as in your favor if you're a bull in august, you had people very despondent and more or less more anxiety than you would expect given how modest the pullback was. that was the basis for this 14% valley sin rally since the august lows. stocks at new highs, you should expect people to think stocks are a good thing to invest in. so it is not an outright sell signal, but january has seen some shakeouts in the last 20 years, especially, you've seen a tendency of backing off action in january i do think it is sentiment is no longer your friend but it reminds me of early 2017, we broke out over the long range to a new high and people were excited after the tax cut and, yeah, i mean, the rally slowed down we had a recession scare this time, exactly. totally. so i think it is something to keep on the radar, you don't necessarily want everybody to get overexcited, that being

said, wall street strategists are not super bullish now. the targets are modest from today's levels and the retail public is not really throwing money at stocks. flows very modest, even though the market is up a lot, therefore they have a lot of equity in their allocations, i don't think it is something like every single person loves stocks but sentiment is getting a little bit of a head wind now. >> you hear comments like this is midcycle rather than late cycle and that the shift especially with the moves that the fed took this year makes sense? >> yes, so far the script is playing out that way by mid it doesn't mean we're only halfway through it means you're not at the end of it, right the fed has found a way to kind of prolong things for a while. >> a little more on this now joining us is prudential chief market strategist quincy crosby and brian jake cobson you were listening to our conversation on the market where do you come down on how

we're coming into 2020 and where we may go? >> russia is the number one performing market this year. think about that energy and central bank that lowered rates. we have a central bank globally that had been lowering rates, that's helped. we don't expect them to raise rates next year. we expect actually fed funds futures showing a rate cut next year we'll see bouts of profit taking the market is at 19 times forward earnings something is going to come along, could come up with a number of scenarios. profit taking. i think that will put more money to work. one thing that fueled the market is cash. we looked at how much cash is on the sidelines, it came in, where is the cash going to come from for the next move up in january? i think you're going to see selling in certain sectors moving into other sectors. we would be hedging a bit. you see utilities down you see reits down treasuries those are the ones that will

probably be attractive if -- if you can't go options, if you can't buy puts you'll start seeing money going into those to hedge your portfolio. there will be profit taking. there is no doubt in my mind you know why there always is. >> yeah. come the turn of the year. brian, in the crux of our conversation, mentioned those who were in midcycle versus late cycle. that's you that's you, she was talking squarely about you. >> well, yes that's right i think part of it is -- kind of two fold number one, late cycle seems to be the new midcycle, right a lot of people have been saying we have been late cycle for years now. and the economy and the markets have proven to be more resilient than what people give it credit for. the second factor, it is not a cycle. used to be that from an economic perspective that you oftentimes have, like, the credit cycle, the consumer cycle and business cycle synchronize as far as leading to conditions of little

bit of excesses that needed to be corrected with recessions and if you look at the data over the last maybe 10 to 20 years, you'll notice that those subcycles, so the consumer cycle, credit cycle, business cycle, they're not all that well synced up. i think that's one of the reasons why we have had rather subdued growth that hasn't really created the excess conditions that need correcting. and in fact, you know, a lot of 2019 was a year of the collapsing of the yield curve, the inversion of the yield curve. 2020 is likely going to be a year in which we see the slope of the yield curve increase, and perhaps a lot of those recessionary fears begin to fade, which is one of the reasons why sentiment might be somewhat elevated, but it can continue to go higher. that's why my team, we're really positioned more biased towards risk assets, that is equities over fixed income, preferring commodity currencies over, say,

the u.s. currency, a lot of it is -- even though you -- it feels like it might be more late cycle, it is not much of a cycle. >> quincy, politics are going to continue to dominate the headlines in 2020 as we come into the presidential election what is priced into the market >> what's priced into the market right now is that trump is going to win that he is not going to be kicked out of office at this point. and he'll win. in fact, the cnbc own poll shows that 50% now moving up from low 40s are seeing him handling the economy very well. it is for him to lose. and also not factored in is a progressive getting the nomination and winning now, if that changes, if that calculus changes, this market will have a very good reason to sell off >> what happens if we don't get the profit taking that you think we will? does that make you more concerned? there are some saying if you

continue to have this meltup, you're right for a correction of some magnitude. >> it will depend on earnings. one thing that we had from the clue of how the market is focused is on the ipo market when suddenly fundamentals mattered that all of a sudden, everyone was saying, wait a minute, this company, that company, they can't be worth this much this is how i think the market is going to focus next year. >> brian, we were talking about the dollar a little bit. do you think that the conditions are finally there for non-u.s. stocks to be a beneficiary of all this >> our team is positioning portfolios to hopefully take advantage of the little bit of dollar weakness here we much prefer say looking at the dollar relative to the euro. we prefer the dollar over the euro but when it looks at a broader basket of currencies, the yen, the canadian dollar, the australian dollar, emerging markets, we think that we could be in store for a little bit of dollar weakness, which then from just the mathematical perspective that does tend to

enhance your non-u.s. returns when you convert it back to u.s. dollar so for a lot of our u.s. clients, we are preferring to have more unhedged currency positions, looking at em, japan, canada, australia, in anticipation the dollar could weaken relative to those it is a little different when we're looking at say the dollar versus the euro. but it has been quite a long run for the dollar and we're a little hesitant to call that a turning point for the broader dollar index, just because a lot of people have been calling for that for a few years and the timing has been terrible. >> brian, we appreciate your time, quincy as well happy new year to you both see you in 2020. >> when we return, tesla following up a record run for its stock with a delivery of its china made vehicles. we're going to fill you in on that taking another look at the futures with just over 15 minutes until the opening bell little bit of a mixed picture, both the dow and the s&p 500 are indicated to open higher

the nasdaq lower we got more "squawk on the street" live from post nine at the nyse when we return. i love the new myww program, because it's tailored to you! take the personal assessment and get matched with a proven weight loss plan. find out which customized plan can make losing weight easier for you! myww. join for free + lose 10 lbs. on us. if you listen to the political it sounds like we have a failed society. but nothing could be further from the truth. americans are compassionate and hardworking. we aren't failing. our politicians are failing. that's why i'm running for president. to end the corporate takeover of the government. and give more power to the american people. that's how we'll win healthcare,

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helps you live your dreams today. find a northwestern mutual advisor at nm dot com. ♪ welcome back tesla has begun delivering model

3 vehicles built at its factory in shanghai. 15 of its employees received model 3s that they purchased and that it plans to ramp up deliveries in china next month tesla shares have been on a record run including a 93% jump in the second half of this year alone. guys, two things that get my attention about this the first is the fact this is a wholly owned factory by tesla. so that's kind of key in the sense that tesla is very much valued in sort of seen by many as a tech stock than an auto manufacturer, the fact it could hang on to its technology, its ip and operate like that and a market like china. key to the company and also i think really speaks to the fact that this is a market that is already starting to make the moves to open up to more foreign investment >> that stock move gets your attention as well? >> it turned into people got too bearish and a short squeeze and

now pure momentum. i think the fact that the story is now china says so much, because this stock needs to feed off of the eternal tomorrow. it can't be about how many model 3s we sell in this quarter versus last quarter because that's not going to sustain a $68 billion market value when you have this size of an actual business, so it has to be how much penetration in china, it is the largest ev market. what is the average selling price of a car, any char ar in china? you don't have to think it through to say this is the next huge market, they're there, they have competitive advantages, and it is a long runway before we even know if they realized that opportunity and i think that's when the stock does best. >> i think it is a key moment for tesla to be making these deliveries within that market right now, given the fact that 2020 is seen by many analysts, many auto watchers out there as a turning point for electric vehicles you got something like ten new ev models poised to launch next year so this puts tesla ahead of many

in the potential future emerging ev game as well. comes on a day where you have earnings from neo too. >> remarkable run into the end of the year. and it really plays sort of into the conversation we started the show with, where the market is in general, and that fear issue, the more you keep melting up, the kinds of stocks that would be hit first if you do have any kind of turn of the calendar pullback you don't think there will be profit taking in names like this >> i would have to imagine yes that being said, i think tesla has always been its own species to a degree. meaning what are the other stocks that have run, you know, without gravity. apple. exactly. ones that are super profitable and people are saying for years and years to come they can protect the profits, that's not the tesla story. it is much more speculative and animal spirits almost purely. >> whether we return to "squawk on the street," art cashin is

with us with what he's expecting today. let's look at futures. trying to get the best year for the s&p since '97. don't immediate that much don't need that much to do it either

♪ > we're 7 1/2 minutes before the opening bell let's bring in art cashin, director of floor operations with ubs for a preview of the day. good morning. >> good morning.

>> how do you read this sort of late december kind of incremental upside to the market we have seen if recent days. seems like a sellers strike and yields going up as well. what is your initial take? >> i think the sellers strike is an apt thing it may have to do with year end tax planning a lot of people said i have a big gain here, i don't want to take it this year, i'll think about taking it next year and see what the balance of the year brings so i think you're apt in saying there is a bit of a sellers strike yields are going up in a sense globally, but they're inching up i still believe there will be no rate hike this year. i think the fed, don't call it qe, but it is qe, it is -- that also is putting a bid under markets as we he go into the new year. >> no rate hike in 2020. and that's generally a well accepted thing because the economy performs as the fed thinks or how -- what is the takeaway on that >> i think if you talk to the

media pundits, they think year end you might see a hike but the markets themselves and the people trading the futures don't seem to believe it i think the fed learned its lesson well when it surprised the markets and disappointed them and so i think they will be very, very careful about what they do, and as i said before, when they were so surprised that the repo explosion and they still claim they haven't figured it out and that is truly disturbing because that means that there are forces out there in the market that the top top doesn't understand and so they added more reserves to keep the market very liquid and that has the effect of putting in more qe than when you were doing qe. >> what if there is a rate hike that is not of the fed's making? what happens if rates continue to go up at 192 on the ten-year, what happens if you get the slow

creep. is that a risk >> it is a risk. if you got above 2, i think you would certainly get the markets' attention and go from there. >> that's all? that gets your attention that's not that far away. >> i know. i think they have mile posts and landmarks they look at i think too, round numbers tend to focus people's attention and, you know, we'll see where they go from there. you got to remember one other thing, many other central banks are realizing that negative interest rates are an absolute disaster it destroys your banking system. and so the banks are pulling back, i don't think some of the rest of the world will be so quick, but i do think, you know, you got lagarde in there i don't think she's a fan of negative interest rates. >> yeah, that might be one of the big landmarks of this year, perhaps, that we had that

realization about negative rates. art, happy new year, thank you. >> happy new year to you >> the opening bell minutes away

you're watching "squawk on the street." the opening bell is set to ring in about one minute. watching to see what the big winners do in the last couple of days i just looked now again, and i just have a hard time believing that the nasdaq is over 9,000. i mean, technology has been such a huge winner. that's such a standout number. >> 9,000, you know, it's a tremendously weighted in apple and microsoft right now. both of those stocks essentially stretching to new highs successfully, tremendous years and semiconductors that's basically all of the nasdaq in terms of real drugs. biotech has come around as well. >> software, big year for software names >> the real question is whether you have a sector, rotation, a lot of times temporary in january or for the full year we're going to have to find maybe more cyclical sectors to

take things higher. >> you hear the applause starting to go you are watching the opening bells which are going to start ringing in about ten seconds or so couple of trading days left, we'll see what happens today you got the best friends animal society, national animal welfare organization at the nasdaq, molecular data, e-commerce platform in china so we'll see what happens. trying to get the best gain in the s&p since 1997 29.6% is the gain that you need. you're at 29.3-ish. >> total return for this year, with dividends, well over 30%. the difference, again, i mentioned about the whole calendar effect we started off so low in 1997, you were starting at an all time high at the end of '96. in 2013, you had approximately the same gain, a few percent below, and all time high, and then got to a high in the spring

of that year so i do think that it is definitely notable, you have a 30% up year, but a lot of the setup was such that it amplified that view. to me, it is almost more interesting than it has been a year of two parts. defensive stock leadership, a lot of -- not just defensive, but quality growth, traditional growth type names working for the first two thirds roughly of the year and once we got past that sort of recession scare, the fedwas kind of okay with three rate cuts and going on hold then it became a cyclical revival. also, not really causing a huge sell-off in the defensive. it was the everything rally by the end of the year. >> yeah, good way of putting it, everything rally everything did rally whether it was gold or bonds or stocks, it was that kind of year barons is one of those making big predictions for the year ahead, and it is a big cap world, right, for them viacom, cbs, just completed their deal apple, netflix, coca-cola, what

does that tell you about the kinds of stocks that may work in the year ahead >> one of the take aways from this approach is that looking for big stocks that aren't going to be susceptible to continued cost gains like wages going up and in other words can preserve profit margins and that's -- it is interesting, you have that slant on what 2020 might hold and the other one says, hey, small caps have just broken out, maybe that's going to work and that does not fit at all with this idea that it is all about kind of defensive low profit margins, swinging with the cycles i don't think you can say right now which approach is going to take it. >> i also think -- we have seen some margin pressure this year, we can talk about the effect that the trade war and tariffs have had on companies bottom lines. arguably, the bigger issue in terms of margins has been the fact that we're at these record low near record low unemployment rates here in the u.s. and what

that has meant in terms of wage increases, headlines out of the wall street journal, more workers eligible for overtime pay in 2020, rank and file workers get bigger raises. in terms of a sector like manufacturing, for example, here of manufacturers national this year over and over again in its surveys said it wasn't tariffs or trade that was the biggest concern for their members, it was the labor costs and trying to get enough workers and what that has meant. that will be a key going into 2020 as well >> more states increasing minimum wage at the turn of the year as well that's been -- >> speaks to why the consumer, this idea of a by fbifurcation,y they're held to the u.s. economy. >> jay powell said the link between wage growth and broader inflation as they measure it has been loosened or broken. that's the question for the

markets as we go into this year. everyone took it as great news that the fed said we're going to let inflation run before we think about raising rates. that was a positive when we were afraid of disinflation and yield curve inverted and recession but if you start to get some inflation, the fed says we're not concerned yet, to your point earlier, see what the bond market does about that. >> want to flag another stock for you, worth talking about, good year for disney stock up 35% it has been the year of disney relieve yourself of the bigger concerns surrounding tv and you got disney plus. you got "star wars." and then you have this stat, mind blowing, that 40% of all box office in this year came from disney. >> exactly part of that, not a tremendous part, but part of that is that they acquired fox. and that added to the market share from whatever the fox studios produced in 2019 i think a year ago everyone knew the box office piece was going to be a very bullish part of the

disney story i don't think it was easy to say, in advance 12 months ago that the pricing of disney plus and what they were going to throw into it would be this massive overnight catalyst, which is what it was in the chart when they detailed all that. >> here is what is fascinating about this too disney dominating the box office even as it launches its streaming service. ticket sales, the u.s. box office in terms of ticket sales this year could according to some estimates hit $11.4 billion. that would be the second highest take of all time behind last year and so we have conversations about what is streaming is going to mean for the box office, but still been another strong year in part because of the content coming out. i also would flag another stock that is moving higher today and actually it is space, it is a space-related names. it is maxar technologies, stock up 17% right now this is a real turn around story. stock traded as low as $4 a

share earlier in the year. now up trading at nearly $17 a share. it is moving higher this morning because it said that it is going to sell one of its businesses, space robotics business to a consortium led by northern capital. so it is a sale that is seen as going towards its debt load and a company starting to get some pretty noticeable, pretty sizable awards from nasa and the like this year it just has been a name to watch. the other one i would watch is virgin galactic, which marked a milestone this year, becoming the first of this new breed of new space economy names to go public still don't have that space tourism business up and running, expected some time in the middle of next year the stock is trading just below $12 a share now where it nr initially priced we saw it plunge a couple of -- up until a couple of weeks ago

and steadily moved higher, you're getting some initiations from the likes of morgan stanley. >> i was going to mention in terms of the leadership and the s&p 500, very much kind of by the losers type trade going on people betting on tax law drying up halliburton, walgreens, boots alliance, and 3m another top one. right now it is mopping up some of the stuff that is lost this year betting on january, which often is -- people talk about the january effect not just that stocks tended to go up. it is more about beaten up stocks from the prior year have a revival that includes small caps >> good day for financials in a good run as well for a lot of the banks. looking at some of the names, goldman up this year, more than 40%. been a good year for jpmorgan and other names. maybe not surprising given the fact that yields started totic up better feeling about the global economy, maybe trough, better

growth, rates higher >> that was actually your kind of green light to a degree and the yield curve going positive and they were always kind of acclaimed as cheap and were cheap, but only if in fact you weren't at the end of an expansion. if you were going to have to worry about recessionary type conditions and credit costs going up, cheapness turns into a value trap that didn't happen they have a unified way revalued higher so see how that -- if it can continue the yield curve by the way has gone positive, but it is still relatively narrow in a positive slope. >> it is an important group. it is not as big as it once was. other sectors have eclipsed it by a large margin in terms of the s&p. it is still an important group in terms of sentiment, where we are globally from an economic standpoint and, you know, where the prospectses are for those stocks. >> and for a way of flagging whether this financial stress or systemic risks out there, and the market saying really not if you look at where corporate

bonds are trading and financial stocks traded, it is not telling you have to worry at this point about anything toxic making its way through the system >> looking at energy too, morgan mentioned energy earlier and the fact that so much had a good year. commodities and gold and the like and oil has done really well and what energy stocks themselves have in store for the year, if it is going to be a true value come back or continuation, they have already really value stocks had a nice come back, continuation of that and whether energy plays a big role. >> a key question. energy is the best performing sector for the month of december so far you can peg that back to this whole idea of inflation trade, the hopes that we get this phase one u.s. china trade deal put on -- well, it is on paper, but signed and made official in the coming days. key to watch what does it mean at a time when

debt is increasingly coming into focus from public market investors where the u.s. shale producers are concerned. >> look at the majors, exxon and chevron, they haven't done anything. >> they haven't. very little leverage they're kind of -- they they're viewed as a cash play. i think the big question is, talk about the main value, they're out of favor and they have gotten beaten down, but the earnings base isn't that high. doesn't look like they screen out that cheap unless you get a snapback >> flag that as we sit here and talk, in the last ten minutes, since those opening bells, we are seeing the major averages all tick lower the dow right now is down about 91 points and the nasdaq, which we mentioned at 9,000 before the opening bell has slipped back below the level. looks like it is at 8957 right

now. so mind you i realize we're still holiday week here, some low volumes, but we are seeing the averages move lower as we talk. >> nasdaq is entitled, right up 11 of 12 sessions, maybe just did 1100 yard dash. >> it felt like thursday and friday if you needed to be invested by the end of the year, you tried to get it done maybe get a spillback from that. everybody sees the same numbers about how, you know, we had a great run, the market looks stretched, sentiment is getting a little bit toppy and so maybe front running of the potential january. >> how about this notion if you do have a good year in 2020, it is going to be top heavy because of all of the second half noise, election, you have further -- >> front loaded? >> front loaded. what you make you better make between january and, say, the start of the summer. >> i think that's very plausible. it feels very consensusy i don't know what that means

the technicals of the market show the trend is still higher so i don't know if that means that, you know, you already front lo look at the way that the options market has been pricing poteen concentrated around march, and then around the election march is super tuesday and then the election. so who knows if that means everyone already assumes it is going to happen and it won't or we have to be on guard for that. >> all right, bob pisani watching all of it, more on what's moving this morning >> markets running up against some resistance, scott it is about time it should be apple, mcdonald's, disney, big winners on the year. all a little weak today. look at some of the sectors, banks have been holding up pretty well. move up in the yields this morning here big leadership group in the second half of the year. energy holding up a little better big rally since the tax law ended there. semis, there is the profit taking going on. take a look at some of the banks

here once again, small smattering of new highs today. citi, jpmorgan, pnc, new highs, key corp. moving up. it has been a great year for the banks, but not in first half of the year most of the bank rally here, look at the stocks here, new highs, citigroup, bank of america, jpmorgan, nice gains for the year look at the index, the kbe, the bank etf and really that was sort of flattish and underperforming the overall market until about here. this is october. that's when we saw a yield started to move up number one and the fed announced these new liquidity measures, it is -- not qe, don't call it that october 11 that was right there and there you see the bank stocks started coming over, breaking out of the technical pattern, the top there we saw throughout the year. so bear in mind, the banks did really well, essentially in the fourth quarter as far as where we go now, let's call it a classic santa claus rally. i think that's a fair way to characterize what is going on.

quiet low liquidity market, low volume this is what goes on here we're leveraging the existing up trend out there for the last couple of months the good news is we got a hopeful macro backdrop no recession in the united states, the consumer is strong and there is some hope from a global bottoming in the economy. that's a little bit murky, that's a bit of a problem maybe in the near future the bad news is we're way, way overbought here. if you look at -- i look at relative strength indicators, two week basis this indicates how difficult or easy it is for the markets to move forward over 70, overbought. close to 80, way overbought. this is at the highest levels in two years now. the s&p 500, 78. what this means, it is very difficult on a historical basis to push forward with the same moves seeing in the last several weeks. that means we're meeting resistance, healthcare, china has been on a rally as well on the trade talks overall. one issue here, global bottoming

story, it is difficult to call, a little bit murky we saw on friday japan retail sales and industrial production kind of disappointed some of the south korean numbers over the weekend were a little disappointing. so this global bottoming story is a little bit iffy right now and the evening, tonight, we'll get china's pmi and nonpmi numbers. we'll see industrial production numbers, eurozone pmi out there. and, yes, industrial production is a small part of the global economy. people still watching. we have been below 50 for several months now really since probably august we'll keep an eye on all of that the question is a lot of people say, well, don't worry about the fourth quarter it is the first quarter that really matters and we know that some of the governments will come off and say it is not a big thing. the question is whether investors give us the benefit for the doubt here on that here we are, we're very, very close to closing at a new high for the s&p 500. i think the key thing here is we have the best year in 3249 is

what we need to close that, close at 3249, the best year since 1997 still a pretty darn good year, up about 28% morgan, back to you. >> thank you might be a holiday week, but no shortage of potentially market moving data this week. for more on today's movers, let's get to frank holland at the nasdaq >> the nasdaq starting today off in the red even falling back below 9,000. after breaking an 11 day win streak on friday tesla, that was the best performing stock in the nasdaq 1100 last week today, falling more than 4% on concerns over battery production issues at its gigafactory out in nevada its partner says the labor shortages have been addressed. to faang stocks, tough day with the exception of amazon. amazon up half a percent so far today and now to healthcare and also biotech stocks, they started off strong, now

walgreens, boots alliance, the only ones in the green, up fractionally the nasdaq off to a tough start after a very strong december up about 4% for the month. morgan, back over to you >> thank you. when we return, the 2020 playbook on defense sector as we wrap up what has been an eventful year for the group. as we head to break, take a look at the movement in treasuries this morning, as well, "squawk on the street" will be right back

welcome back as we get ready to wrap up 2019 cnbc is taking a closer look at what investors can expect in the new year it is time now for the 2020 playbook on the defense sector 2019 was defeigned by more military modernization, more mergers and more tech talk as

cloud took center stage and google faced ai blowback 2020 will be the year those technologies are adopted an the year the might of the military extends to the final frontier. first, peak defense dollars. the 2020 u.s. budget increased defense spending by 3% but don't be surprised if that begins to flat line thanks to pentagon reforms and outcome of the upcoming election. still international demand will keep growing and the u.s. will keep buying more aircraft, ships and missiles including hyper sonics which will continue to get attention as more prototypes are developed. second, space force launches the sixth military branch from science fiction to reality new service in over 70 years will receive a tiny fraction of the budget with recruitment efforts, headquarters and collaboration with the reinstated space command on the manifest and third, consolidation continues. or dealmaking at least

expect united technologies and raytheon to sell some businesses l3harris may shed assets and speculation will continue about takeover targets, aero jet rocket dyne. so of course, 2019 was another strong year for defense stocks, even with all the issues, the pain of being born out by boeing which is a top holding for many of the aero space and defense etf. it's basically in line with the s&p. the xar, aero space and etf up 39%. the expectation is to continue to see these names run at least into next year because the earnings growth potential is really there. >> it's interesting because they're also defensive in addition to exposed to the defense industry meaning within industrials they're less exposed to the global cycle and see if

perhaps the preference to other types of industrials and then of course as you mention it always becomes kind of a campaign story whether properly or not they trade on president's sole election into the office. >> even though they might not be as affected, might be more insulated by global macro developments things like trade talks, et cetera,they're mitch more insulated from that but the presidential election is going to be one to watch that said, the fiscal 2021 budget proposal we're expecting that in february at the earliest and if we get that before the end of next year before the presidential election that could mean more defense spending into the following year despite who wins. >> exactly all right. as we head to a break, take a look at which names lead the s&p 500 this morning halliburton as we mentioned is among them "squawk on the street" will be right back ♪

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good monday morning. welcome back to "squawk on the street." i'm scott with morgan and mike we are live from post nine at the new york stock exchange. carl, sara and david have the morning off. take a look at the markets right now. pretty much the lows of the session and the first half hour of trading dow down triple digits 118. just shy of half a percent s&p, we came into the day best gain since 2013, hoping for the best since '97 the s&p now is down by more than 14 points. nasdaq giving up 9,000 it is the biggest loser of the group. road map starts with stocks falling on this second to last trading day 0 of what's been a record breaking year for markets. >> plus with the new year comes new laws from sports gambling to

privacy and pot. big implications for policy, the economy and your portfolio. >> tariff threat, 100% on billions of french imports could hit u.s. importers we'll talk to a largest wholesaler and distributor of champagne in the u.s. but first the dow and the s&p off fresh record closes on friday so how should investors position in the new year? what's the risk for a recession in 2020? joining us now securities chief economist chief and both here at post nine. good morning. >> good morning. >> we've emerged in the last few months from another i guess recession scare, global slowdown, captivated the markets. we have come out of it what does it say about this expansion? have we just kind of deferred the end of it for a little while or status quo at a 2% economy?

>> absolutely. it's surprising how resilient the economy has been despite the trade war creating uncertainty. if you look at discretionary spending, spending by companies, consumers, it's relatively low and we don't have a major imbalance in consumer spending and cap-x front and we think we look good going into 2020. >> no major imbalances but you could turn it around and say it means that corporations and consumers are not necessarily spending as heavily as you expect right now and therefore no reacceleration of the economy? >> that's probably why as you said 2% economy. nothing really much to the upside and the thing to the downside we worry about throughout this year seems to be fading to the background and doesn't mean no risks on the horizon but looking ahead with the fed on hold, it is a relatively boring environment and difficult to finmilestones that are important guide posts

for a construction. >> are the markets roughly priced for that type of scenario how would you look at the global markets and say where there's opportunities or where maybe there's some strengths that haven't been recognized yet? >> yeah. i agree with the notion that 2% is what we're likely to get for u.s. growth next year. we could see an improvement in non-u.s. growth an likely to have global growth perk up on the margins so i think a difference that we are going to see we had a really bad year in earnings with u.s. earnings pretty much flat in declines overseas i think a thing to see next year is a recovery in corporate earnings and spark a rotation so, you know, it is a market where the u.s. has dominated, where growth stocks have dominated, where the big mega cap tech companies have dominated and i think we could see a bit of a rotation next year driven by that ncrease in corporate profits and emphasize things like more value oriented

stocks, cyclicals and we think the dollar is likely to weaken a bit an give a boost to foreign markets much more cheaply priced compared to u.s. markets. >> better value outside the u.s. at this point? >> yes. >> higher risk >> there's higher risk but reflected in much lower pe ratios so if you get a pop in global growth we'll see non-u.s. forces respond more favorably than the u.s. which at this point is priced for a pretty good outcome which we're likely to get. >> how much does all of this hinge on monetary policy not just here in the u.s. with the fed on hold but around the world. >> basically more or less everything because the fact that we pivoted from very hawkish going into the year from the fed especially and now we basically have a dovish environment and almost everyone agrees next move from the fed probably to the downside we think they'll be moving sideways the rest of the year and the answer to the question is both a lot of money printing

abroad, more qe in europe and support of interest rates low abroad supports risky assets in particular and at the same time equities benefiting from that so monetary policy is a role. >> you think the next move is a cut? >> we think that they'll stay on hold but given some of the risks that we have been discussing throughout this year, most importantly, of course, the trade uncertainty, is it all gone a lot of uncertainty with the election, market pricing in fed fund futures is arguing more for a cut than a hike. >> a tidbit related to that is in 2019 we saw 50 central banks cut rate farce total of about 100 interest rates cuts so i think that's likely to boost the recovery that we are seeing in global manufacturing which is going to be a key driver for next year. >> the fact that we see nearly every asset class, the globe over, higher this year, how much of that is due to the fact that

you have seen so much of the stimulus pumped into the market? >> a lot of it is due to the stimulus i think some of it is due to the decline in trade tensions that we have seen at the end of the year here and some of it is due to the signs that we are seeing that the global manufacturing sector is bottoming and starting to increase. >> we have seen the fundamentals retier yate. the rates on credit cards moving up credit rates at the ccc widening out. not that everything is perfect but some things moving a little bit underneath that we are beginning to look more at. >> the things you point out, obviously, late cycle features to the economy and to the markets. >> exactly. >> the fed on hold, the investors celebrated this idea to cut three times and go on hold indefinitely but to get inflation higher, the market doesn't seem to think inflation is going to go higher. is there a potential for

surprise there you think the way the economy is structured globally and the forces to keep that from happening? >> big problem for the fed is expectations short term inflationary expectations going down and long term inflationarc expectations going down and it stays surprisingly low despite as you say that we are so late in the cycle and see more pricing and wage inflation and just not spilling over to consumer price inflation and why the fed thinks so much about the framework. everything around why isn't inflation continues to be so low late in the cycle. >> what kind of returns do you expect for stocks in the u.s.? double digits? >> yeah. 2019 is obviously going to be a tough act to follow but as i think i saw you point out earlier in the show, when you have a big year you typically the next year you have up more than 70% of the time and get above average returns but thinking returns probably going

to be closer to their historic average than another eye popping year we have pulled forward some returns from 2020. >> because of what in the coming year makes you somewhat concerned at least why have we pulled things forward? >> we are up 30% right? we know that that's not the type of year that you experience very frequently so if we get a 10% year next year we should be thankful of that what are some of the risks certainly the election is one. right? moving from geopolitical risks to domestic political risks and then, of course, you know, there's the risk that we are misreading things. things look great at top of the cycle. there's a possibility that we're not recognizing that something more sinister is coming on the horizon. that's not a base case view because i think you would see canaries in the coal mine ab i'm not seeing them.

>> dollar index weaker again this morning. >> we think the dollar will go down some of the issues is the fed has been the highest yielding currency for a long time and now cutting rates lower then we should see both as rates have come down and also growth globally basically stays flat and the rest of the world picks up that should narrow the gap because the rest of the world coming up will be creating convergence and pushing the dollar downwards. >> all right thanks a lot for the conversation. >> thank you. okay we are closing out what's been a banner holiday season for retail but the decade is anything but kind for the sector. a number of household names shuddering what can we expect for the decade to come and as we head to break, a look at the top performing stocks on the s&p. "squawk on the street" will be right back don't go away. at leaf blowers.

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broader s&p 500 year to date while the u.s. consumer certainly remains strong, no, ma'am not all names are performing broader and more narrow retail groupings there's overlapping winners and losers carbano up 191% year to date meantime cue rate down and gamestop shed about 54% in 2019. more narrow retail etf is amplify i-buy focusing on the online players in general that etf up for the year and in this etf and the top ter former year to date. a platform system that many of the retailers are using online to run the businesses and up 18 % in 2019 and the worst component here

>> it seems like the conversations you have had especially in this key holiday shopping season seeing bankruptcies, store closures in 2020 what are you keeping your eye on >> we are not done figuring out the ideal retail consumer wants and how they come together we talk an awful lot about the retailers doing it well like a target with an awful lot of buy online pick up in store happening and it might work better for target with the staple items and the birthday gift you forgot that may not be the case with every retailer so it's not necessarily that in the end we are going to see 50% online, 50% in store for every name some will sort of lean more than others, depending on the sector and how close shoppers to the names in the neighborhoods. >> forgive me for a moment i want to point out three major

averages taken a leg lower the dow down about 180 or thereabouts right now. s&p and the nasdaq following suit in terms of selling and despite suggestions, reports on tape that you could have a signed phase one trade deal with china within a week according to peter navarro and south china post saying it's close, as well. apparently not doing much for stocks the dow approaching a 200-point decline, michael. >> yeah. we kind of checked off the trade box at this point. the premise of this rally is that that is no longer necessarily very much in limbo i don't think that's a surprise that it has not necessarily kin markets from these lows but also it is just a matter of i think pent-up selling after a strong month and four-month stretch to witness here and it's very routine and because the market not going down at all in this month it seems like more. >> yeah. to your point, looking at the

worst performing sectors in the s&p right now, 10 out of 11 in red, tech stocks, communication services and consumer discretionary. >> just to wrap things up with you, do you have any indication talking to investors or those that you speak with that some of the real laggards in retail have their day in 2020 because they have gotten too attractive some of the specialty retail store, been a tale of five or six retail stocks that have done well everything else is left behind. >> it is pretty amazing. i wouldn't be surprised to see some consolidation and some of the stronger names buying the players with good ideas but not the scale but yes. i definitely think there's shake-outs jcpenney is a question and the share price fallen so precipitously and a big footprint and losing name like a jcpenney with a big ripple

effect in the sector with the players that have these lease clauses tied to anchor stores and could be an issue. >> the flip side of good ideas and no scale is lots of scale and nothing new. >> absolutely. >> i think you have a lot of chains in that boat right now. right? >> yeah. >> also just fascinating, you laid out the names that performed the best and all tied to e-commerce in some form of fashion and speaking to the role of tech playing in terms of winners and losers. >> absolutely. investors are impatient just like with the ipos where you see growth but no profitability. right? with some of the e-commerce names, yes, you have pretty astronomical growth and can't do that at a loss forever. >> appreciate it. >> e cigarette maker is having a vaping problem of its own. >> certainly an ironic twoist that many see as a key figure in the epidemic

they cannot stop the own employees to stop vaping at work according to to a report, former ceo kevin bumgarnerings sperns d laying out the punishment for continuing vaping, a warning and kase lated to possible termination as a fourth violation. keep in mind it is illegal to vape and use them in the bay area office and the states as a whole. employees apparently vape at the desk and hallways, even in meetings still one employee compared the bay area office to what you might see on "mad men" replacing traditional cigarettes burns replaced as ceo not long after sending that memos latest numbers estimate 4 million high schoolers and more than a million middle schoolers use e-cigarettes

as of today, 54 people have died and more than 2,500 gotten sick from vaping since the cdc began to track the data this year. back over to you. >> all right frank, we appreciate that. we mentioned how the markets are taking a leg lower dow down about 200 points. nasdaq hit the hardest was up 11 of 12 days looking at the individual names, tesla, we had news and discussed it earlier a huge winner especially over three months stock's off 4% ap apple is lower >> so on the -- if the best performers in the s&p year to date just ranked, about only three out of the top 50 are positive today so all it shows you is sell the winners, maybe buy the losers dynamic in, prototypical january action and it seems as if maybe getting a jump on it right now. >> seeing the 1% drop in the

nasdaq right now continuing to move lower below that 9,000 mark also one s&p sector in the green is energy, energy names continuing to move higher at least today in the midst of this red. >> what do you think of the debate, mike, over value versus growth i mean, there are real believers that the value trade which has -- >> what triggered that energy stocks? >> it has legs. >> i think that first of all i think that you have to push against the idea it's a zero sum game, that only one kind of stock can work at a given moment so if you define value as more sick lengthally oriented companies -- >> industrials. >> absolutely. a lot of industrials also trading at higher. toolworks with an all-time high on friday and not as if they're undiscovered but if you looked at the absolute cheapest appearing stocks in the market you're buying a ton of disrupted

businesses and that's the leap you have to make chain retail like we were talking about, or certain energy stocks, things like that, that's your trade and so it's a tougher case to make to say the cheapest will work better. >> growth is still going to work even high growth there's a call today on crowd strike with an 80 something percent upside over 12 months. >> those are the stocks that people look for. >> all right major averages having a worst day in four weeks. for the new year comes new laws from sports gambling to privacy and pot. implications for the economy and your portfolio - [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

there is the s&p 500 heat map. there's a lot of red on that board this morning two thirds of 1% the s&p declining this morning, a loss of 21.5 points

energy is the only s&p sector moving higher so some of the names in the green from the energy space and a lot of red on the board this morning individual donations to charity falling for two years but while chair itible giving is down it is certainly not out let's check in with kayla taysha for more. >> the federal government is suggesting the drop won't be as steep as expected. take a look at the data, the joint committee on taxation expected giving to cause outside education and health to hit $30 billion in 2019 before rising to $34 billion in 2022. but new data out last week raises estimates to 33 billion and 37 billion respectively, a 9% increase. fidelity managing donor accounts says the improved outlook is

partly thanks to the stock market's rise. >> if you have a high income year, again, bunch a lot of your giving for the next two, three, four years into one year itemize that gift and then over time you can sustain your giving. >> the chronicle for philanthropy say it is beneficiaries are higher education and biggest, most well-known organization but united way says it is feeling the squeeze. >> the middle class donors who are impacted by this tax change, they tend to give to basic needs charities, human services charities, disaster relief charities, those sorts of charities so the change in tax law affected middle class donors. >> with the tax law in effect for only two years and volatile market activity from one year to another we won't really know the impact for a while morgan, we are waiting for that official data from the irs. >> kayla, thank you.

when we return, a record run for stocks in 2019 will we see more of the same in the new year 2020 playbook on the markets is straight ahead that's here on "squawk on the street." don't go anywhere.

welcome back, everybody. i'm sue herera iranian-backed militia said the death toll of the u.s. military strikes in iraq and syria risen to 25 and vowed to extract revenge. the u.s. attack represents a new escalation in the proxy war of u.s. and iran to protect u.s. interests in the middle east north korean leader kim jong-un calling for positive and offensive measures to ensure the country's security before a deadline for denuclearization talks with the u.s., cob veened

a weekend meeting to discuss that situation. chinese state media says three researchers involved in the births of genetically edited babies sentenced for practicing medicine illegally, the lead researcher given three years in jail and failed. the babies twin girls born in november of 2018 and a u.s.-born giant panda settling down in the new home in southwestern china after a month of quarantine. he was born in washington in 2015 and he moved to china in november bei bei is adjusting well and in good health we hear. you are up to date that's the news update this hour >> sue, thank you very much. appreciate that. watching the dow down a little over 200 points right now. pretty much at the lows of the session. obviously, some pent-unprofp prt taking going on if nothing else.

up 400 points in the s&p 500 since the august low to coming into today so giving back 20 or so of those 400 points meantime, the bulls as we mentioned had big reasons to smile in 2019 thanks to those new record highs for the indexes but what might the new year bring? bob pisani has the 2020 playbook on the markets >> reporter: oil stocks bounce rates go up and the direct listing craze will peak. three predictions for 2020 first, against all odds energy stocks will outperform the s&p 500. it's been a lost decade for energy investors with oil stocks up just 6% in 10 years but a combination of high dividend yields and relatively low earnings multiples makes oil companies more attractive in 2020 bank of america, for example, believes exxonmobil to move up 50% to $100 as it sells assets,

expands production and doubles the cash flow by 2025. second, lower rates in 2020? not necessarily. many central banks don't seem to want it. shifting political winds in germany will lead to the passage of large scale stimulus programs there to boost its slower economy. european bonds back to positive territory forcing money out of u.s. bonds and into european bonds all while pushing u.s. yields higher and keeping the bank rally here going. finally, the direct listing craze will peak when airbnb goes public it is all the rage right now private equity investors disappointed with ipo returns this year pushing direct listings to cut costs to allow employees and private equity to sell shares but no one asked the buy side direct listings spotify and slack underperforming the overall market and a disappointing airbnb debut will convince many allowing early

investors to sell all at once may not be right for everyone. >> our bob pisani joins us here on the desk with more. seeing a little bit of giveback today. but it is interesting in terms of overall set-up for the market, market anticipated good things in the first part of 2020 now we have to see if they come through. >> on my prediction on energy there, you and i have been covering this a long time. there's a remarkable flip flop of technology and energy over the decade for example, in the 1990s tech was really big, energy was terrible in the 2000s tech was terrible, energy was really big and in 2010s, technology's been huge and energy is awful. this is -- mean reversion we have been studying is a real phenomenon and i think there's something to be said for looking at energy as a play in 2010. this prediction game and you're in the prediction game, too. very interesting, mike you can stick your neck out or

play it conservative i like challenging people a little bit so i think it's an interesting way to go. look it is about time look at the stuff down today bio tech's had a huge run. home builders, sxeconomy conductors had a huge run. we are way overbought. >> definitely. >> direct listings of a peak - >> i thought you would - >> got my attention a little bit in part because honestly the class of 2019 for ipos for the most part isn't that great and not been direct listings. >> there was only two. so remember we were talking in february of $100 billion year, maybe this is the great year that beat 1999, 2000 it didn't happen obviously been a bit of a disappointment a lot of the people that i talk to, which is the buyers of the ipos, have a problem with direct listings, concerned of being able to essentially dump a lot

of stock on the market at one time they like lock-up periods. we're the guys to buy this and they want the right to dump it on there's a legitimate gripe about the cost of going public to 5% or 6% of the proceeds to a bank just to float the shares is an awful lot of money, much of this is negotiated i don't think the guy floating the stuff is going do go away in 2020. >> no. but i feel like the door is kicked open. >> yeah. >> i don't think we're anywhere close to a peak in direct listings i really believe this is a movement, a legitimate movement, in the valley that's coming east sort to speak. >> if you get a large number of them that don't do well in the first six months without clock-ups you will haclock lock-ups you will have a problem. they won't dump all airbnb stuff

available immediately and a prediction to use a direct listing and see about that but i think that there will be some kind of limb tagss itations to e it. >> the special acquisition companys that are starting to increase. >> i'm a genius, successful in the field. trust me i buy something for you a year from now and we have no idea what it is and it turns out, mike, you studied this, too. hedge funds love this. lock up the money for a year you get to charge 2 and 20. >> private equity with the dayty quote essentially because it's a private equity kind of thing. >> appreciate it. >> pleasure. once we ring in 2020 there's new laws to go with the new year find out which ones we're talking about what they could mean for you when "squawk on the street" returns. - [narrator] at southern new hampshire university,

we're committed to making college more affordable. that's why we're keeping our tuition the same through the year 2021. - [woman] i knew snhu was the place for me when i saw how affordable it was. - [narrator] find your degree at snhu.edu.

one of wall street's biggest bulls sees signs of a potential pullback percolating in the market more "squawk on the street" is coming up.

after we ring in the new year a number of new law gs go into effect in the u.s let's go to contessa for the important changes on the books. >> it may not be exactly sex, drugs and rock n roll but in 2020 sin is in in new hampshire, starting today, in fact, gamblers to place their sports bets for the first time through draft kings states from coast to coast to liberalizing the gambling laws and sports betting is authorized in 20 states plus washington, d.c. the district and seven states are moving to launch their

sports betting operations no 2020 with legislatures hoping it pays off in tax revenues it certainly has for massachusetts collecting $500 billion since its 3 casinos opened in the past year and a half or so and without sports betting. massachusetts is still grappling with sports gambling legislation as are maine and ohio. in illinois, the new year will bring a new law legalizing recreational marijuana, it is the 11th state to do so. only 35 stores in illinois authorized the open statewide and yet the industry anticipates the marijuana market in illinois alone will be worth more than $2 billion. that may in part because of pot tourism, especially from nearby states where weed is still outlawed and following the rise of the #me too movement, we have laws of sexual harassment training in the workplace and 32 states have

no sexual harassment training required in illinois the 'em employeers provide the training at least once a year. it's also getting rid of the statute of limitations for major sex crimes and crimes against victims who are minors and in 2020 victims of revenge porn can petition to force their images to be taken down and then receive damages from the person who posted it so definitely illinois making headway protecting victims in all manor of scenarios morgan >> new laws and developments to watch as we come into not only a new year but a new decade. contessa brewer, thank you. >> sure. the new laws carry implications and here to break it down further, former chief economist to joe biden jared bernstein and jim pathakoukis. good morning to you both jared, contessa was talking

about the idea that sin is in. we have also got some more worker related laws that take effect in 2020 and i imagine fuel that potential at least from consumer spending standpoint including fact that more workers be able to be eligible for overtime pay, as well how should we think about the impact that that could have? >>yeah let me drill down on that a little bit because washington state enacted the most ambitious overtime rule in the nation, that is they raised the threshold under which your salary must include overtime pay. now, the obama administration trying to do that on a national level. it didn't happen the trump administration actually did follow through with the rule but their threshold very low i think half of washington state so this is an important thing to watch. what we have here and contessa, got us into a really small share of what's going on in the states is this dynamic where states

experiment, they become laboratories of policy we have seen it with minimum wages and cannabis, with sport betting. by the way, a lot of people getting high and betting on sporting events? i don't know might not end well. >> jim, we want your thoughts on this, especially given the fact that we have unemployment at a what nearly 50-decade low what does this mean for companies and consumers? >> 50-decade low like to follow up on laboratories for experimentation and seeing that in california which is sort of taking the lead trying to deal with the digital economy. they have the new privacy rules to go in place which at least for big companies will be a defacto sort of data privacy standard and will i think puts more pressure on congress to do something if -- unless they want the states setting the rules there's interest in congress doing something. they have been unable to figure

something out. if not this year i imagine soon there's more pressure to do that on a federal level. >> yeah. by the way, i think i said 50 decade i meant five decade. >> i may have said 60 decade i also meant six decade. >> all right jared, i want your thoughts on the new privacy legislation set to take effect in california, as well could have huge impacts on the tech sector and companies collecting data in general what does it mean for that state and companies operating in the state and whether it could become regulation to find the way across the country more broadly? >> yeah. i looked at that one with great interest, as well. from a consumer standpoint i think it's quite important there is a growing consensus and interestingly a bipartisan one that we cannot allow these companies to regulate themselves that they have got to really rein in the practices regarding how they handle people's data.

now, from our perspective, what does this mean to the company's profitable, market cap i don't think it's going to be nearly the kind of ding that some people worry about and, in fact, i would argue that absent some kind of smart regulation we're just asking for more and more trouble from this sector and it's also i think germane, again, with this kind of state level experimentation starting at a sub national level and see what works and eventually, eventually we've really got to regulate the data practices from a national level. >> we can see what happened in europe what happened in europe is you saw they were supposed to hurt concentration. they earn courage more market concentration with big players of facebook. not sure if jared wants that they led the less venture capital spending on start-ups. there's downsides to the law and activists rarely talk about. >> do you think we see more face-offs between california and the federal government this year

>> yeah. you know, you have this, you have the stuff to do about the gig economy. at some point i imagine housing is a bigger issue also on the federal level gibb sort of the affordability issues in california they are on the cutting edge this is where the big tech companies are located and as long as they're in the spotlight and will be the face forever then california will be in the spotlight, as well. >> i would like to say something about california from a progressive policy standpoint, california has been a fascinating kind of microcosm policy experiment undertaking the progressive policies that you hear the left leaning politicians in washington talk about and yet their unemployment rate is low, their economy is stronger, gdp growth is strong. >> wildly unaffordable cities. >> the housing -- no you're absolutely right about the housing. the housing thing has not been involved and jimmy's right about that i would call it a housing crisis

for middle and low end affordability but in terms of the experimentation point california is a really interesting case study for - >> terribly unsustainable tax program. great model. >> the economy's chugging along. >> we'll see what the tax system does if the market goes down but whatever. >> gentlemen, always a lively discussion with the two of you we preeshappreciate it. >> new year. trump administration considering tariffs on french imports. we get details from one of the largest wholesalers and distributors of champagne in the u.s. but first over to jon fortt. >> we know tech's been doing well and talking about what? nasdaq near 9,000. but where does it go from here and what's going to determine which tech companies have strategic advantage in 2020? we'll take a look coming up. ♪

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welcome back if stocking up on the bubbly ahead of new year's eve, look at the price tag. might want to stock up this year, the u.s. threatening 100% tariffs on french champagne, cheese and other goods joining us, senior vice president of wine and spirits wholesalers of america michael, good to talk. >> good morning. thank you for having me. >> talking about a host of products, not just champagne, that's the focus with new year's eve a day away talking french wines, right? >> yes now i can hear you okay, yes >> we're talking not just about champagne, that's obviously the headline, talking about a number of other products that consumers are going to potentially have to pay higher prices on >> yes

we look at the category, champagne, prosek oh drive that with consumers they've led both not to become a celebratory occasion but something they drink on a daily basis. consumer trends show they're both enjoyed on a daily basis, any type of tariff on the products will force consumers to look at more domestic options should the price increase. >> what are the chances of tariffs paid directly by importers are eaten at that level, or are we expecting them to be passed on to the consumer level? >> so currently the tariffs are being essentially eaten by suppliers, but that's not feasible for business i am told into 2020. consumers will be left holding the bill we represent about 400 family owned businesses who bring wine and spirits to market, vehemently opposed to tariffs on

wine and spirits from the eu >> michael, what gets my attention is the fact that you have american wine makers that are speaking out against the tariffs because of what it would potentially do to the distribution chain, supply chain for them as well break that down for us >> well, you look at america's wholesalers, about 400 family owned companies throughout the united states, many of which have built a business on importing european wine and spirits. for instance, there's a member out of new orleans, uncorked, who brings in all of the french wine, that supplies all of the french themed restaurants in new orleans. then you have larger distributors like the one i'm at today where they're bringing in a lot of french wines and champagne. what wine and spirits wholesalers are about is consumer choice. right now, wholesalers bring in unprecedented choice to the consumer if you interrupt that, you interrupt what we consider to be

a wine and spirits renaissance consumer choice, free trade has to be championed >> i guess my point on this is the fact that you would have actual american wine makers speaking out against this, you would think the wine makers would benefit from this, but instead if you see a reduction in the number of american distributors and wholesalers, that will hurt them as well. >> so the consumer is not going to decrease their demand the consumer will notice if there's increase in price, they'll look at domestic options. you look at california wines, you look at oregon, washington, there are some really good product that will move in quickly, could take share from the european wines and frankly spirits impacted by tariffs, should they go into place. >> michael, among all of the products potentially impacted by tariffs, it would seem that wine, it has certain markups in there, it is not very attached to the cost of production in terms of retail pricing.

can it not be absorbed somewhere on the distributio the tariffs? >> well, right now when we look at wine in this country, it is lagging behind spirits right now, there's a real demand for american whiskey, specifically bourbon wine is decreasing according to sip source data. so any type of impact on a price of wine would put it at a disadvantage, so when we look at wine that's already decreasing in sales and you increase the price of those products, they're going to continue losing market share. this is especially with millennials looking for value in everything they consume. >> michael, we appreciate it stock up yourself on the champagne. happy new year see you in 2020. >> happy new year to you major averages are lower now. we have "squawk alley" up next don't go anywhere. - [spokesman] if you've tried college but never finished,

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good morning it is new year's eve in shanghai, china, 11:00 a.m. on wall street. "squawk alley" is live

♪ ♪ good monday morning. welcome to "squawk alley." i am jon fortt with me at post nine, morgan brennan and deirdre bosa carl has the morning off we begin with the markets in the middle of the biggest drop in four weeks, with only two trading days left in the year. tech stocks also a part of today's selloff, with all faang stocks in the red, but the overall sector poised to close out the best year in a decade. and joining us now to see what