good morning and welcome to "squawk on the street." i'm scott wapner with jim cramer, live from the new york stock exchange this morning. carl and david have the morning off. we're watching u.s. futures closely because they are tumbling after iran's top military commander, general qasem soleimani was killed at baghdad airport by a u.s. air strike ordered by president trump. the pentagon says soleimani was actively planning attacks on american diplomats and service members in iraq and throughout the region iranian supreme leader ayatollah khamenei promising, quote, severe revenge the president responding, with a tweet of his own, iran never won

a war, but never lost a negotiation, said the president. tensions between the u.s. and iran sending crude oil prices higher for our purposes. futures are off their worst levels, we're still expected to open sharply lower the story focuses on oil and the region of the middle east and what all of that means for the price of crude. >> right one thunging i think people havo recognize is there is too much crude. wouldn't this move the needle out to 2023. here is u.s. producers just slamming the futures already i'm looking to the futures from 6:40 a.m., thank you rusty brazil 43 cents 43 cents impact on 2023. why is that? you have major producers who are saying, hallelujah, i'm getting an opportunity to be able to sell, sell, sell and on wall street, we're buy, buy, buy, i would be very careful about that i think that the futures go down in part because, geez, what a great excuse to sell

i go away by -- i check the markets, are you kidding me? nothing happened and the market keeps going up >> these are the kind of mornings i suspect, jim, you're scanning the market looking for things that are down that shouldn't be. >> i sure am you have to look -- look, the operative thesis is going to be we're going into recession so therefore you got to sell things other than defense because you'll always see northrop grumman this is like round up the usual suspects we buy lockheed martin, we buy northrop grumman and we sell -- i don't know -- ingersoll rand. >> the airlines. >> the airlines, yeah. the airlines' trouble because we have to figure out what to do with boeing. this could be the year of boeing, by the way try to figure out the year of. two guys pushed price targets up for apple. apple is down. that's what people should be

looking at one thing i worry about is everyone is bumping their apple price target, that's been the wrong time to buy. last year today they slashed their price targets. but i am saying if you want to scalp advanced micro winners. >> bumps on apple to 330 stock above 300 for the first time yesterday >> they're chasing but i think that people are beginning to realize that the iphone 11 is not what people thought it was it is a miracle. and it is just a step function higher by the way, tim cook, periodically invents new i use noise nocanceling headphones, crying babies, i love them. they're my favorite when i'm in the plane because i love babies, but nice not to hear them. >> so all that said if there is a -- let's say prolonged escalation of tension, if not more severe circumstances in the middle east, and crude does

continue its rise, it pushes past 70 and maybe even goes to 80 as some are suggesting this morning, that's not necessarily a good scenario, not only the global economy, but the market at large, is it? >> the saudi capacity, remember how much was taken out and it didn't move things up you do need a prolonged experience to be able to get oil to move. there are -- we have oil companies that have been waiting for this forever you'll notice oxy is up this morning. occi is breathing a sigh o relief maybe they won't have issues a lot of our oil companies, see the prices they have a good opportunity and core labs, perhaps but i think that there is no reason to be excited other than gold, which i think continues its trajectory upward and the dollar, the dollar goes down so often. >> nine-week low, gold is at a four-month high. >> you're coca-cola, james quincey, right you have been waiting for this forever. he is not waiting for the assassination. let me -- let's say president

trump was right and this guy was planning multiple things against the u.s. and he's been taken out. if he had been able to do what he wanted, wouldn't that be a huge escalation? and now i hear from people, there is five more guys like that, we have seen over and over it comes to the state of israel that there aren't five more guys there is a lull. but i just wondered if he hadn't been killed, what was going to happen were they going to take out the u.s. embassy, destroy it that is the war. the war is to destroy the u.s. embassy. i think a lot of people are betting there would be that kind of activity. or you would have another one of these sieges, 440-day siege. maybe this was the guy that was planning this siege. i don't know i'm not -- you assassinate someone, it is always cause for thinking about it. if he was a bad guy who was going to kill our service people, isn't it better to prevent that i'm not being facetious. >> understand.

i understand where you're going on that. you talked about oil and, you know, high demand. >> you know -- >> in a different point in time -- >> look at the curve. >> oil would be up, on an event like this, with -- >> that's a tough thing to get. >> you can make the argument, this is the most severe escalation of tensions between the united states and iran in some time. another point in time, if the oil supply and dynamic was in a different place, oil would be up by more than 3% or 4%, don't you think? it is a statement of itself of where we are and the complex that oil is only up by this amount. >> so, iraq invades kuwait, august 1, 1990 schlumberger was up 15% before the market opened. it is up like 80 cents 80 cents think about it the number one oil service company in the world, bp, bp is arguably -- yields 6%, safe

yield. that thing can't get to 39 these stocks are unbelievably bad. and a lot of it is because you're wasting assets by millennial money managers who are trying to unload. >> oil has been unbelievably good and the stocks have been unbelievably bad >> there is so much oil -- the pipes can't handle all the oil our shipping can't handle all the oil. we block costco, it is not the costco, it is csco you have a chinese tanker not being in operation, u.s. tankers, costs a lot of money to ship all this is making a very convoluted situation with oil. and i know some people are saying that a lot of people are saying bad things about soleimani. all i'm saying is that they're not saying that this is strategic. that -- they're saying it is tactical might be strategic by the president to head off something that could really drive the market. >> before this event took place

last night, we think around 8:00, we would have come in today and it would be your first day back after the holiday, which we're thankful and happy to have you back and we would be talking about a market that looks ready to continue to go higher. >> apple up 10 points. start the day up 3 and these price target bumps, they're about 11, they're about the -- the professional -- they're about the shortages. which is just store by store, by the way. and instead, what we're talking about is something that knocks apple down, but how is apple affected who how is micron affected do you think lisa su says this is going to hurt -- she has a travel log going on, triptick. i don't mean that to be disrespectful. i'm waiting for florence because i like florence. milan. >> this could still take maybe,

you know, this happens on a friday markets digest >> good reason to sell monday, something happens this weekend, talk shows, the president escalates, market comes down more monday i would not be excited about jumping in here. we're not giving up enough when i got up, futures were down 47 quarter three. bummer i'm back though. quarter three is good time to -- i danced until a quarter of 3:00 on vacation. but i looked at things and said, okay, maybe is there a chance. man maybe a chance to buy pepsico because they're doing well with the dollar down. but, no. let's wait we should thank richard engel, he's on the to en. >> joining us now on the phone is nbc news chief foreign respondent richard engel, making his way to a region he knows better than anybody else richard, good to have you on the phone this morning can you help our viewers

understand, first and foremost, why this target is so important? >> yeah, so once again, i'm heading to the middle east because once again it looks like we're going to have a conflict, an armed conflict of some shape between the united states and iran and the reason is because of the unique importance of general qasem soleimani, who was killed by a u.s. drone strike at baghdad international airport, which, itself, shows the importance the united states decided they were going to target qasem soleimani in a car with a shia militia leader at the airport without telling iraq this was happening, according to iraqi government officials and killing him, the shiite militia reader and several other people in that convoy so very dramatic escalation and the reason it is so important and the reason there is such a concern for a reprisal from iran, which could lead to a cycle of violence is that qasem

soleimani wasn't a normal general. he was etthe one who effectivel set the military foreign policy for iran he was in charge of all of the relationships with the militia groups, very powerful myrrh wila groups in lebanon, syria and iraq he had this network, he supported this network, he maintained this network. so every time there was an attack carried out in shadowy circumstances by iran, whether one of the tankers that was seized in the gulf, we saw qasem soleimani's fingerprints on that attack and usually carried out by one of his proxies. now he's been killed iran is vowing revenge and the proxies are on alert, trying to figure out how they are going to respond. so it is not going to be a tank against tank confrontation at least that's not the kind of

war iran likes to fight. it is more likely going to be something that is deniable, lots of small groups carrying out attacks, potentially deniable attacks against u.s. interests in most likely in the region and i think that could have a -- the market seems to be showing, a very unnerving and unsettling effect on the markets, on oil, because watch the strait of hormuz >> you are a brave man and it is greatly appreciated. we don't have enough people like you. who is running iraq? who is running iraq? iran or iraq >> so this is -- going back to qasem soleimani, he managed to recognize an opportunity for iran with the 2003 u.s. invasion let's go back a little bit that's what we're talking about here this is an inflexion moment. 2003, saddam hussein ran iraq hands down, one man state, run

by him, run by sunni military basically secular at times pro american dictator. the united states overthrows him. the shia majority took over. through democracy. that's what happens when you say the majority gets the vote, the majority, shia faith and united behind shia religious leadership voted and they brought themselves into power. iran, of course, the most powerful shia state, they decided to form this alliance, overt and covert with iran and that relationship with iranian militia groups and shia militia groups was directed by qasem soleimani. he was the guy who basically allowed iran to carve off large portions of iraq and assume so much influence in iraq but, in recent weeks, i don't

know -- hasn't gotten as much attention as it has in the united states, as it has other parts of the world, there have been huge protests on the streets of baghdad hundreds of people shot by iraqi security forces. and they -- those protesters were arguing against iranian influence. they say it went too far, iran took too much advantage of the disorder that followed the u.s. invasion and that iraq had become effectively an iranian vassell state. now with this attack, it gives an opportunity for iran to change the narrative to say we're not the bad guys, we are the victims here, the united states, they're the aggressors, they're the state sponsors of terrorists so it is an inflexion point. there has been since 2003 this tug of war for 1400 years where we specifically since 2003 this tug of war over how much influence the shias have in iran and qasem soleimani knew how to

play that and play it well for the last 17 years. >> richard, you had the opportunity this morning to speak with the iraqi president i'm wondering what you can tell us about your conversation, what he's thinking about what may be happening in the region. >> he's thinking about the future of his country and worried about it somebody i've known for quite some time, i know him personally, he's very worried. he was -- the country is precarious, it is fragile, it doesn't need another cycle of violence iraq pulled it out of the civil war that followed the u.s. invasion and it managed to sidestep the arab spring and then recently had very violent protests over the nature of iranian influence in the country. he says it wouldn't take much to send the country down into a new spiral of violence and he was urging restraint on all sides, he's reaching out to

the shia religious leadership in the country. he's trying to prevent this from escalating quickly and badly because if iran takes an action, if it sends its militias back to the u.s. embassy, those were iranian backed militias there smashing the security cameras at the u.s. embassy, if it sends them back there, if it carries out an attack on u.s. interests in iraq specifically, the u.s. could respond, respond quickly and then we're off to the races. while iran likes to fight, a proxy war, the united states doesn't really know how to fight that kind of war that's not the style of the united states military the u.s. military picks targets and attacks them iran is a much more subtle deniable way of waging warfare so he is concerned that this now -- i don't think escalating tension anymore, i think some

sort of armed conflict has begun, we'll see if it stays at a low level or stays acceptable without -- acceptable to both sides without escalating to a full-on war. he's worried that this is going to happen in his own country and he says iraq has had too many wars over the last 40 years, doesn't need another one >> before i let you run, richard, secretary of state mike pompeo this morning saying the strike was in response to a, quote, imminent threat to american lives do we have any idea what kind of threat and where this secretary of state might be referring to >> not really. he -- if you watch specifically what he said, it was that they were in the planning stages of another attack on u.s. interests. so it is not clear if they believe that the u.s. was --

that qasem soleimani was in iraq or in iraq to talk about plan and carrying out some sort of future attack. there may be some legalese in here that i think the u.s., according to its own international law it signed up to would need to say there was an imminent threat to carry out and a targeted assassination like that. it couldn't do it without giving the smoking gun analogy. we had to do this because there was an imminent threat, a loaded weapon pointed at us, therefore we had to take this sort of action so there may be very specific intelligence or frankly there could be just the rational that was given. i don't know i'm not in a position to know. maybe the u.s. special -- pompeo and others will give us more detail. >> we wish you well. that's richard engel joining us

there by the phone. >> he's good to me, it's somewhat reassuring what he said if there really is iraqi government and there really are people who don't want to destroy our embassy. and there is someone who was there who wanted to, then the notion of it being targeted rather than it be, you know, again, remember, if it is precise and surgical, that is better than shock and awe. we would be down big. >> we're going to open in ten minutes. is there a point today where people, you know, are able to have the ability to step back like you suggest and look at what shouldn't be down >> not today th this is day one. day one is rarely the best day day two you start seeing the opportunity to buy pfizer or lilly. unaffected that happens between 2 and 3

hate to be as precise as i am, but tactical. >> we'll take a quick break. up next, cramer's first mad dash of the year. we count down to the opening bell futures once more as well. stocks will open lower this morning. dow would be down by 270 nasdaq by more than 100. and the s&p down about 33.5. e w " omuawk on the streetfr thneyork stock exchange is straight ahead tom: my mom always told me actions speak louder than words. she was a school teacher. my dad joined the navy and helped prosecute the nazis in nuremberg. their values are why i walked away from my business, took the giving pledge to give my money to good causes, and why i spent the last ten years fighting corporate insiders who put profits over people. i'm tom steyer, and i approve this message. because, right now, america needs more than words. we need action.

welcome back bell's going to ring in seven minutes. time for the first mad dash of the new year with jim cramer. >> good to be back. >> great to have you back. >> funny, you come back and you realize what a great market last year was and i think that barring something like this going on for days on end, we're hearing from richard engel, you're going to get a chance to buy. let me give you one. >> okay. >> if someone is itching to buy today, you buy humana. why? goldman sachs added to conviction list, it is nothing to do with -- now, are they early? well, they liked it. this is the kind of thing you buy, because it won't be down by the end of the day

so who is on at 12 >> you think the trend is up >> this group, 2021, somehow some of us who love this group are still trying to figure out the health insurer industry fee went away. how did this group get to be the most favored group this is the group everybody hated going into trump's election and now it is loved and so if you feel so inclined, and you want to buy something at the opening that is down, that could finish up at the end of the day, it is humana i'm very conscious, i'm from philadelphia, my 45th reunion, you talk really strange, so do i, humana, how do you spell -- humana is this how you pronounce it >> yeah. >> that would be the one you buy. >> you mean instead of humana? >> yes wait until it is down. don't buy it up .87. that's fool's gold and then you get a chance. >> your pick of a lot of stocks,

down off the open. >> i like the beverages and drugs. again, too early come on, you got the whole weekend. you have to do some fretting and worry. not you, you got out -- i think you guys -- >> thank you thank you. congratulations. >> still to come, how might geopolitical tensions affect the fed? stick around for an interview with charles evans a look at futures as well. we told you it would be a down open after that big gain yesterday, dow will give a lot of it back, down 270 off the open s&p down 33 1/2. nasdaq down 112. me aweouuawk on the street" in a monts cnt down to the opening bell legendary terrain in telluride,e the unparalleled landscape of park city, or the famed peaks of whistler, you've faced the hassle of lugging your gear through the airport. with ship skis, you're just a few clicks away from having your skis, snowboard and luggage shipped from your doorstep to your destination. with unrivaled pricing, real time tracking ship skis delivers, hassle free.

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you're watching cnbc's "squawk on the street" live from the financial capital of the world. the opening bell set to ring in just about two minutes time. we're going to have our eye on the major averages, but definitely keep an eye throughout the day on crude oil. wti is up about 3.5% where brent is as well and the fallout from the stocks that would be most hit by a spike in crude. >> what is interesting is that the times we had something really big in the middle east, the stocksusually telegraph it this is what i say typically happens and the smart people sell this is a time when that hasn't occurred and it hasn't occurred because what people are look at is the balance sheets of so many of these that are stretched. people are looking at the fact that no matter what seems to happen, oil doesn't go up. i focus on the saudi -- the attack, the drone attack so i would be very careful about the group. the one my travel trust owns and

bought lower is schlumberger the ceo is committed to th dividend maybe sell maybe sell >> slb up a little less than a buck this morning >> that's all? >> little less than a buck. >> how could that not -- last quarter saw some great chutes. a lot of the internationals, not the nation states, have been having to replenish so they have gotten a lot of orders i look at high quality stocks, halliburton is a high quality stock. i like the service stocks more than i like the oils themselves. >> you barely get -- speaking about the oil themselves, exxon, chevron, barely getting a bump >> the fed stocks are getting more of a bump this is the reality of the new money managers you got to put your head in a millennium -- in 1983-'84, i

went to the guy running harvard at the time and i said you got to divest coal wherever it is. got to divest it energy stocks -- the ones that -- one of the greatest trades ever. i was a millennial they didn't call us -- what did they call us then? if you were 26 in 1983, what were you generation what? >> wet behind the ears >> i hadn't thought about that anyway, i'm just saying there is just a group of people anxious to get rid of the stocks i like gold. i continue to like gold. >> gold is having a move. >> gold is real. gold is -- niko, they're growing. they have good growth, good balance sheet, dividend policy that's what you buy. you want to know what you buy, you buy ad niko. >> bellringers at the big board, contour brands, professional bull riders also here celebrating unleash the beast at

madison square garden this weekend. >> go by boot barn. >> try to stay on the bull today. >> go by boot barn great opportunity. boot barn is really great. matthew boss, half of where it is, and still loves it i bet they bought their hats at boot barn. only place to get the stuff. i have a hat, i use it to garden with i look like an idiot. >> the dow is down 1%. nasdaq new york cares, a volunteer network in annual of the coat drive ringing the bell in midtown. >> you know what we haven't talked about yet we're really lax at doing so tesla. here it is again 367,000 cars, i was look for 359,000. what a joke. sorry. what a -- ill advised way to look at a stock. the fact is that tesla has

defeated the shorts. whether you like it or hate it, it defeated the shorts what do you think? >> tesla got a price target bump i think to 515 getting a ratcheting up of expectations about the best case scenario for the stock. >> they're making a lot of cars. there have been so many downgrades of ford and so many price target bumps of tesla, you should be tempted to buy ford, but i'm not. tesla is the car of the future if they sell a lot in china, you guys should go back to yellow stone national park. you should short tesla all the way to 200 i think this thing does not stop they mack a lot of cars and sell a lot of cars. >> ford, downgrade to sell, partly to your point

that's where the action is on tesla, buy it, it is on ford, sell it. that's where sentiment is right now on the street. >> tesla makes a lot of cars and they're going to make -- people are talking about $5 earnings power. elon musk changed. elon musk is the most serious executive in autos he doesn't tweet silly things. you got to respect the man a lot of people feel i have decided i can deal with the fact he called me a hologram. i don't care i'm not sensitive. >> the other story we haven't been able to hear from you on is the remarkable tale of carlo ghosn. and his escape from -- >> that's argo. >> and lebanon >> yeah. >> well, i mean -- >> what do you make of the whole thing? >> drama incredible drama i don't know >> was that a trump --

>> does he say it like that? >> i thought that's what you were trying to do? >> oh, my. my wife is going to kill me, sounding like him -- she doesn't watch the darn show, thank heavens, nor does anybody else she is associated with, unless i have dog pictures. i think it is an amazing story the house arrest was not as rigorous i guess didn't have the ankle bracelet look, he is -- that makes him more guilty in my eyes he'll tell a story in lebanon. >> we have more details -- >> he is a serious executive at one point. a guy who ran a major company. isn't that incredible. >> we have more details this morning regarding that story from our phil lebeau hey, phil. >> a couple of things going on with carlos ghosn and they revive around whether or not we're learning more details. we have a few more regarding how he was able to get out of japan.

among those details, the fact that the country of japan, the investigators there are looking into how carlos ghosn went from the house he was living in tokyo, where he was under house arrest, went from there, 300 miles away, to osaka that's where he got on a business jet, business jet took him from osaka to turkey and from turkey on to lebanon and speaking of that business jet, the private jet company, mng jet, which operates the two jets there, they have filed a criminal complaint against one of their employees they're not naming who the employee is. but they make it very clear in the criminal complaint, they had no idea that carlos ghosn was going to be shuttled from japan to turkey and then turkey on to lebanon. as you take a look at the journey that carlos ghosn was engaged in, sunday into monday morning, we don't know all the exact times, that's the general time frame, sunday to monday, remember, he went not from tokyo, but from osaka, then to

turkey, then from turkey to beirut, and the mng jet says that employee of theirs helped carlos ghosn on that flight. by the way, carlos ghosn says he plans to talk to the media sometime in the next week so he can start to tell his side of the story. this is a little taste of what it is like outside of his house in beirut. reporters trying to get any kind of a glimpse they can through the windows or the few cars that have come and gone we'll hear from carlos ghosn next week, guys, i know he wants to tell his side of the story in terms of being accused of crimes he said he didn't commit the main question he's going to get over and over and i'm sure he'll say, i'm not talking about it, is how exactly did he arrange to leave japan because he says going to no help from his family he arranged this 100% on his own. >> apparently a report of some video that emerged or some sort of reporting he was seen living his house by himself, to back up

what he's been saying. >> i've seen that. and he was allowed to leave his house for short walks in the area or to go to the market, et cetera when we say he was under house arrest, this wasn't true 100% ankle bracelet you're not leaving the premises arrest, it was house arrest in the sense of he was seen walking around areas of tokyo. >> we'll come back to you -- while i have you, if you don't mind, tesla, we were talking about tesla, deliveries and the numbers we just got. >> look, they beat the minimum expectation. the minimum guidance was 360 to 400,000. they come in at 367,000, a little better. there were some people expecting it to be like 355, 356 i said this yesterday and stick by it today, that is not what is driving this stock higher. what is driving this stock higher is the beginning of production in sales in china and

the world's largest electric vehicle market and also the expectation that the model y when they roll that out, the margins on the model y, because it shares so many components along with the model 3 you add that into the mix with china, the potential here for them to boost margins is the reason that this stock is moving higher and why you're getting higher price targets. >> yeah, phil, could you please explain to people how amazing it is they built a factory in ten months >> doesn't happen. >> no. wasn't that incredible >> no and i think that's part of the psychological change that we have seen with some people when it comes to shares of tesla and how they view tesla. they set that target and hit that target. they were a couple of months ahead of schedule in terms of the china plant, china production you see a company much more disciplined than it was just a few years ago. doesn't mean there won't be delays along the way

doesn't mean that elon, he doesn't -- will stop making pronouncements that perhaps are a little too aggressive to say it mildly. we're still going to see that. but i think people now are looking at them and saying, look, if china pays off the way that we think it could pay off, this is huge it is a game changer and make no mistake, in the world of electric vehicles, everybody says there is competition coming, competition coming they dominate the market and until they are proven to not be the dominant automaker in electric vehicles, they enjoy that advantage >> there it is. >> before we let you go, one more thing, we'll make it a triple something for boeing >> no, i just think that they're in the process and it is a process at this point, right >> yeah. >> jim, look at the next six to eight weeks, between now and mid-february, that's really crucial to see if they make some progress there and they are working with the faa and it is likely that we do see some type of certification

flight, but one thing you're not going to see from dave calhoun, you won't see him put out some kind of a target and say, we're going to have this by this date. he's more focused on making sure they work with the faa and the faa says, yeah, this is what you need to do >> phil, look, i flew to an island in the caribbean and i can't tell you how many people said did you fly with that particular airline because they are airbus this is boeing we're talking about. it is -- boeing is a great american company it is shocking to me how people say, i want to be on an airbus when can boeing make it so that -- geez, this max, can they do something so substantive? >> i think that it is going to take several months for them to get past that. i think once it starts again and we're going to have both on social media as well as other reports of let's say somebody takes off on a max flight. every day there are dozens of

airliners that turn around for a variety of reasons they turn and go back and make a landing at the airport with the max plane, you hear people say, oh, boy, here we go, a problem with the max, a problem with the max, it is going to take them some time to get past this. that's the reality there is nothing else you can do can't brand your way out of this, you can work with the airlines to try to reassure customers. the i think it will take two, three, four months before you finally hear people stop bringing it up. >> phil, we appreciate it. lebeau handles everything. >> what do we think about the fact that the biggest stories right now are tesla, and the fact that they have been able to conquer china and boeing, what are they saying? boeing, national treasure. it has to be kept alive, no matter what. tesla is going from being a joke, according to bears to being something that after they built the -- like phil said, it

changed the -- it is no longer -- it is now like a great american manufacturer, like boeing, except it is not tainted. these are both great american manufacturers, and people like them more than all these other fabulous tech stocks people like tesla more than any tech stock >> let's talk about a tech stock, apple. >> barely down. >> giving up 300, but barely yesterday closed 330 crossed 300 for the first time ever 299 and change >> i say own it, don't trade it. when everyone chasing like this, it is not the time to buy. you know how i feel about apple. >> i know you love it. >> i just don't -- today, literally, today, last year, we had all these price cut target prices cut we had some very big down grades here we have upgrades and they love it. that's not -- the time to buy is when they hate it.

i say own it the stock barely down. >> time to buy this thing if you didn't own it or wanted to add when it was sub-150 a year ago. >> that's when people -- every time the stock is down, there are people, including some who come on the show, nice people who say the best times are behind, they denigrate to -- someone denigrated tim cook to my twitter -- listen, sparky, get a life this has changed everybody's life tim cook runs the company. tim cook runs it came out, under tim cook biggest problem, stores too crowded, high quality. >> sure. but it is -- the stock is up, like, 90%. >> being valued as consumer product company that has suddenly -- i have a lifetime value. don't forget, apple tv plus gets the game of thrones guy,

pepler -- i thought there were a bunch of clowns in -- aren't they clowns? what kind of clowns can get the number one guy they're not clowns >> layoffs >> layoffs they're not clowns they're the best company in the world. tim cook is the best ceo i want him to be named the time man of the year. but they had to -- greta is fabulous >> apple has 300 back. $3.50. >> down 5 cents. come on. give it a break. peloton is up. will you stop? >> you went to peloton yesterday, mark ma haney put out his list of internet surprises for this coming year one was the ipo duds and peloton was on his list was going to be one of the winners this year uber and lyft get profitability. >> close the stupid uber eats or

offload it to -- they love the stock higher or sell it to one of these guys with the masa son. he big hits. all you got to do is get rid of -- >> softbank. >> i know softbank i didn't want to say the -- >> make sure everybody else knows what we're talking about. >> like saying the former ceo of ge. >> not everybody has masa son on their -- >> i start calling people clowns, i get in trouble look, i just -- >> don't get into trouble on your first day back. >> no i don't. but i just think that uber has an easy plan, they just have to get rid of the 50% of the -- of what is the -- the cities that are losing money i know that business that is the crummiest -- i got guys fighting to deliver my piesia, which got an 8.2 from

one bite and crushed it. one of the best in brooklyn. i'm not kidding. the worst business in the world. people come in, they fight to have my business they make very little money. who wants to be in the -- >> the pizza i buy, my elio's pizza from my freezer. this they close that, uber goes to 45 instantly. >> bob pisani is on the floor with what's moving >> happy friday. a great example of what don rumsfeld called the known unknown. we knew about tensions with iran we did not know it would take this kind of turn though rather predictable turn in the stock market here. some, not all energy stocks moved up gold miners are moving up. gold has been pretty good recently noor a six-year high we were 15.60 or so. we're not far from breaking through that semis and china stocks, great run recently, down a little bit

here, working off some oversold conditions elsewhere in the energy patch, high data energy names, stocks that always move a lot more than the overall market, marathon, apache, devin moving here. over in london, bp and royal dutch, only 1% to 2% moves if this was 10 or 15 years ago, there be with much more violent moves. certainly 30 and 40 years ago, these would have had titanic moves back then. look at shipping companies here. shipping had a very good fourth quarter on hopes that the trade and tariff wars would lessen and we see some kind of bottoming in the global economy most names moved up. moeller which trades from denmark, down 1% matson down. kirby also very involved in energy shipping, oil shipping containers, these are modest declines we're seeing overall

here airlines, another typical thing you see here, higher oil prices, american and delta, more violent for american deutsch why in europe. air france down 6% a little more noticeable we talk about exchange traded funds. here is the aerospace, this is up fractionally. oil and gas, xop, that's the sector most affected today in the oil complex. sea, sea is the symbol and there is a global airline etf, down 2.8% fairly modest, remember, we're fairly overbought right now, here, so some big names are out there, having the chance to recalibrate a little, particularly some of the china

stocks alibaba, new high yesterday. scott, back to you. >> bob, appreciate it. >> just something. still not that expensive pioneer, pxd is the one. they could get bought. they're doing well that's the only spec i would go for. pxd. >> we're going to take a quick break. another look at the markets where we have come off the lows. by a good amount down still down 186. major averages in the red but not as bad as the sick was early this morning "squawk on the street" will be right back if you listen to the political debate in this country,

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, fair wages, and clean air and water as a right. i'm tom steyer and i approve this message. ♪ welcome back give you a look at the dow 30 heat map

one stock at this moment is in the green. what complex do you think it is from the oil complex. >> oil complex. >> it is chevron there's boeing boeing just went into the green. >> that's incredible. >> let's see if anymore do as well we will take a quick break up next it is stock trading with jim.

time now nor cramer and stock trading. >> here is one l brands, not my fave, but bank of america says we're at the tipping point for victoria secrets, they might do something good bath and body works, they say it is worth a foreigtune and it isw risk i don't think it is a good day to do investments, wait until monday at least. they're so anxious people want to throw money at the market that's never been good. you see the fear index it is at the maximum greed cnn -- i don't like that >> you've been suggesting on twitter, why buy so soon. >> yes. >> let it go down a little bit. >> yes, there's some guys, there a bunch of sparkies that want to buy right now. >> what do you have on tonight

>> i have an exciting coming up crowdstrike. >> based in sunnyvale, california >> i am a huge cybersecurity does all this does, the attack in ramming up, people want to buy north of grumman, buy cybersecurity. that's what these guys do. that's what north korea does that's what iran does. they hack us so you need companies like crowdstrike. i really like crowdstrike. i like palo alto networks, too, because they're reforming. i did not speak positively and i know they are doing great things at palo alto they're changing the company. >> great to have you back. we will see you on "mad" tonight. >> i love being back this vacation stuff is overrated. >> no, it is not. >> no? >> no, it is good to be back though that's jim cramer. see him tonight. when we come back more reaction to the u.s. air strike that killed a top iran commander. also what is ahead, chicago fed president charles evans. keep it right here

♪ good friday morning. welcome back to "squawk on the street". i'm scott wapner along with contessa brewer and mike santoli. we are live from the stock

exchange carl, sarah and david have the morning off. the markets did open lower and we're still hanging out off the worst levels of the morning, dow still down by 220. s&p also around the same percentage loss. the nasdaq able to hold on to 9,000, down a little more than the other averages, a little more than three-quarters of 1%. >> our roadmap this morning begins with the u.s. drone strike killing a top iranian commander overnight in baghdad many we tell you which sectors to watch this hour as the stock sell-off continues plus, the review from the fed reserve. chicago fed president charles evans joins us airlines getting slammed oil prices strike, and today's biggest movers straight ahead. first, we have economic data crossing the tape. ism manufacturing index for december coming in at 46.2 compared to a consensus estimate of 49. the government is out with november construction spending, up .6 of a percent

economists were looking for an increase of .4 of 1% interesting on the data there. another miss on manufacturing. >> another miss. ism stubbornly weak relative to other measures we will see how the market absorbs all of that. now down to washington and the latest on the u.s. drone strike ayman javers joins us for that. >> good morning. the president taking to twitter to offer his rational for the u.s. air strike in baghdad that killed the leader of the iranian quds force, one of the highest level iranian military and political officials. the president saying in general qasem soleimani killed or badly wounded thousands of americans over an ebxtended period of time and was plotting to kill many more but was caught. he was directly and indirectly responsible for the death of millions of people including the recent large number of protesters killed in iran itself while iran never will be able to properly admit it, soleimani was hated and feared within the country. they are not nearly as saddened as the leaders will let the

outside world believe. he should have been taken out many years ago so the president there, mike, suggesting that he believes that the reaction to this airstrike inside iran may be more muted than many people around the world expect from the iranian regime because of his political unpopularity within the country. we will see whether that remains the case iranians vowed revenge for the killing. they suggest they will respond in some way. the president meanwhile is in mar-a-lago, florida, today he is not expected to be seen before cameras until later this evening when he has an event before an evangelical group in florida. we might hear more from him at that point but that's his statement on twitter as to why he took this action last night, mike. >> thank you very much oil prices are surging as the situation in the middle east developers john kilde, along with u.s. army

brigadier general, mark kimmet good morning to you both general, i would love to start with you in terms of how we should think about what to be prepared for next steps, either iranian response, what it means in the near term for the region at this point. >> yes, there certainly will be an iranian response despite what the president's tweet said qasem soleimani was very, very popular inside of iran he was a national hero he was very effective outside of iran, too, creating turbulence throughout the region. so the iranians have a lot of reason to strike back. i expect them to i don't expect them to do it in any way that we've seen thus far. they may use drones, they may use cyberattack, but they are masters at doing the unexpected, and they have much reason to wreak revenge on the countries around the region, in general the americans in those countries in particular. >> john, we talked about the response in terms of the crude oil market

crude also had been at a relative high, right, at the upper end of its range how does it change the calculus if at all in terms of supply and demand for the world >> in terms of lost barrels right now nothing has changed, mike it is the fear premium we talk about from time to time that rises and falls with the various tensions that are inherent to the middle east. what the general is just referring to, the expected attack, where does it take us? in my view the biggest vulnerability for the world oil supply comes from iraq iraq has been and i think will continue to be the battle ground, particularly the southern export facilities in bozrah which could be easily attacked by iranian proxies which they're masterful at. >> right now would you characterize the response in terms of the market as relatively modest or muted or does this have the possibility of getting more unhinged to the upside >> i think right now it is certainly muted, to me only up $2 a barrel on this because we're in new territory here. this is an escalationthat we

never really encountered keep in mind, the attack in saudi arabia last year, late last year, there was no necessarily claim of responsibility for that. this is a direct move by the u.s. on iran that invites a counter strike. >> general, just to go through some of your bona fides you were director of operations for coalition in iraq, you were deputy assistant secretary of defense for the middle east. in your experience, if you cut off the head of a revolutionary force like this what is likely to be the response of in armed militia? >> well, i think the militia, the quds force, which is an iranian force and the militias that they control inside of iraq, i think that's where you are going to expect the response to come from they've instantly announced replacement for qasem soleimani, but nobody was better and will be better than qasem soleimani i will make one point on the last guest's comment i don't think that they're going to attack the iraqi oil field

it they understand that they have a chance now to extend their influence well into iraq, well beyond what they already had i think more likely they might go for the gulf oil, the offshore platforms in the persian gulf owned by kuwait but i wouldn't predict the attacks in bozrah, but i could be wrong >> i would -- >> a response? >> i would just say that to the extent the iranians want to try to inflict maximum economic pain on the west, that's certainly one way to do it i mean they are the resources on the ground there i, of course, have to defer to the general. >> general, former national security adviser john bolton suggesting on twitter that he hopes this ultimately leads to regime change in iran. do you think that's where u.s. policy is now heading? >> definitely not. i don't think -- i mean john bolton for years and years has been very much an iran hawk. i don't think that we're aiming for and i don't think we want to be in the business of regime change inside of iran.

we haven't done it very well in the region over the past couple of decades, but, however, if it is an organic change of the regime by the iranian people themselves, that's a different story. >> general, are you looking at this opportunity for iran to take revenge or strike back as a short-term threat, a medium-term threat can you give me a timeline on where you would see that the united states and perhaps other allies have got to harden their facilities and keep an eye out >> yes, i think it is an immediate threat the u.s. embassy in iraq has already put out a statement that says all americans need to leave iraq as quickly as possible, either through the airport or over land. i would expect a near-term response from the militias inside of iraq who have seen their leader get killed, and then maybe a mid-term attack from the iranian country proper.

>> and obviously -- i mean current, you know, u.s. military leaders must also anticipate something like this. >> yes. >> do you think it is going to go back and forth a bit or would that type of response essentially be considered, you know, to be the expected one and then they would not further escalate from there? >> look, i know the department of defense, the department of state well i know they would not have done this attack unless they had thought three moves ahead on what they would do if there was a counter response this is the advantage of the attacker at this point we have the initiative we're going to control the responses, not the iranians. hopefully, however, we'll see everybody moderate and we'll see this calm down considerably because this could escalate significantly and put the entire region, as your guest said, in turbulence >> how long do you think this really upsets the oil market i mean all things considered what just happened overnight i would say years ago would have

had a much more dramatic impact on the price of oil. a $2 move to me suggests that it is somewhat muted and may not last very long if that's all you got from the magnitude of something that we just did. >> right and it is a rational response to this, scott, right, because there's no lost oil. matter of fact, we are in an over-supplied market opec is working hard to reduce the supply overhang. back in the day, if you want to call it that, we needed every barrel we couldn't afford to lose a barrel from saudi arabia or anywhere else. we weren't pumping out 12 million barrels a day in texas or the entire country for that matter we now have a firewall thanks to u.s. production that we did not have before. however, with venezuela off line, iran off line, we are getting to the point where we can't afford to lose much more we cannot -- we can't keep knocking opec producers off the table and think we will have $2.50 a gallon gasoline for a long we are getting to the edge but we're not there yet. that's why you are seeing the price reaction the way it is the oil market's memory is

short, and we're hyperfocused on the supply balance, and it remains robust. >> all right john, thank you very much. general kimmet, thank you for your time this morning. >> sure. still ahead on "squawk on the street", the stocks to watch amid today's sell-off. first a rare interview with chicago fed president charles evans. steve liesman has that steve, what is coming up after the break? >> reporter: contessa, live in san diego with the american economic association annual conference i will be talking with charlie evans, the chicago fed president, about rising global uncertainty along with the outlook for the economy and fed policy in 2020 that's when "squawk on the street" comes right back this cnbc program is sponsored by -

let's get over to steve liesman at the american economic association conference, sitting down with a special guest. hi, steve. >> good morning, contessa. live here from san diego with charlie evans, chicago fed president. charlie, good morning. thanks for joining us. >> good morning, steve. >> i know with the overnight developments and you haven't had a chance to think too much about them, but a time this morning with rising global uncertainty how do you process that? >> it happened last night so i haven't had a chance to look at the market data. i guess oil prices are up. there must be more uncertainty and i think we just have to, you

know, see how this works its way out. i mean at the moment i think the fundamentals for the u.s. economy are good the labor market is strong, so i think we're in a pretty good position there. >> this becomes a matter how long the uncertainty continues, how long the oilprices remain high, depending on the economic effect it will have. >> that's right. >> let's talk about the outlook for 2020 these are early days of the year 2% has been the number that you've been talking about. is it still the number you are expecting? >> are we talking gdp or inflation? >> you tell me. >> both are sort of relevant there. you know, like i said i think the economic fundamentals are good labor market is strong, unemployment at 3.5% trend growth i think is 1 3/4 percent, i'm looking for 2 3/4 percent growth maybe the uncertainties will hurt us a bit, but i think growth is good i expect labor markets to stay strong

i think it is an environment where inflation should be rising up to 2% i think the unemployment rate at 3.5%, very long and successful recovery we ought to be getting inflation above 2% to show it is symmetric objective. if it goes up to 2.25% or 2.5%, that would be all right with me. >> back in november you talked about being more aggressive in terms of hitting the inflation target do you still believe that? >> well, i think that we've been under running our 2% objective for a long time and we said for quite sometime we have a 2% objective. it is metric i think after a while people have to start wondering, are you going to hit the 2% objective. you know, there are a number of reasons why, you know, headwinds have been in the way, but, golly, the unemployment rate has been down to 3.5%, the economy is doing well. the way we would normally think about what should lead to inflation, we should have seen inflation so there must be so much more at work that maybe we need more accommodative policy i think it is accommodative. i think the fomc positioned us

well for 2020. we have some risk management positioning in the current study, and i think it is one where inflation can go up above 2% that's without, you know, any oil price uncertainties which obviously put another story into play. >> still we get to june and you're still not there yet, would you be considering additional accommodation >> i think that's a fair question i think i would need to see exactly how the data is playing out. i think staying where we are is a good thing i think a lot of people might wonder, can you stay at 1.5% to 1.75% if the unemployment rate is where it is but without inflationary pressures this is a very good setting. >> charlie, it is a fascinating time where essentially you guys are feeling your way to knowing what the unemployment -- how low unemployment can go. are you willing to just let it ride down if -- keeping policy where it is, is 3% or below 3% unemployment rate something you would be willing to test >> i think it is a great

question the way you pose it, feeling our way down, i think we certainly have seen the unemployment rate fall from very high levels, and as we have gotten to certain points along the way many of us have kind of gone, oh, geez, we must be close to the natural rate and we keep going lower oh, it actually must be lower. oh, there's no inflation. >> right. >> we kept expecting we would see inflation, you know, 6% at one point might have been are we going to improve upon that you know, it was said that we ought to be targeting 5.5 and that was how long ago and we are still below this i think we need to keep our eyes on inflation, defending, promoting the symmetric 2% inflation objective, showing that we can get there. i think the unemployment rate is a wonderful thing. i think more people are engaged in the workforce. >> right. >> gaining skills, improving their relationship with the labor market, people who previously didn't have those opportunities as much. so i think structurally it is a good thing, too. but we really need to keep our eye on inflation unless inflation starts going up

to something that is inconsistent with our 2% symmetric inflation objective, i think we're pretty well set for policy. >> is it risky to run this experiment are there concerns that you have that, hey, we can just keep interest rates low, we can see how low unemployment goes, and if it gets too low we can reverse course is it a risk experiment? >> there's always risks. there's an easy answer to a question like that, there's risks on both sides. i don't see us running an experiment where we're trying to get the unemployment rate lower, lower, lower i think at the moment, setting the monetary policy with the things that we're facing, you know, 3.5% unemployment is likely to continue it might go up a little bit, it might go down a little bit, but i think it is much more likely to be stable given the growth rates of gdp we are expecting. i don't see a big risk there now, you know, you do hear many comments about the financial instability risk and with lower for longer rates that add a little effervescents in places

we don't need it we are monitoring it very carefully. i think the board of governors in washington has been re-evaluating the stance of supervisory regulatory policies and making judgments we can be in a positive sis. we have good capital, good and better capital let's let the economy continue to ebbs pannxpand. >> two areas to get to quickly the ism number came out showing contracture in the manufacturing sector what are you seeing there? >> we have seen a lot of uncertainty associated with tariff policies, not knowing exactly where supply chains can be positioned, whether or not they have to be moved. i think that the agricultural setting not being able to export as many soybeans and pork as they would like. so i think the manufacturing sector has definitely been hit i mean the agriculture effects heavy equipment manufacturers. farmers don't need to buy the combine. >> both in your district. >> exactly

we have seen those factors play out. i think what we're kind of finding is that the economy can continue to expand with a modest contraction in the manufacturing segment at the moment. the consumer is playing a strong role consumer has been strong enough. as long as that stays in place i think we can continue to see growth at 2%, 2.25%. of course, we can't withstand everything i think we're well positioned. >> charlie, one more thing talking about being well position, everybody was worried about overnight lending market over the turn -- over the first of the year. >> right. >> it seemed like that rate was well-controlled. >> right. >> does the federal reserve have to have or should it have what they call a standing -- you have been doing temporary stuff should it become a standing facility so it is there for good >> i see we could talk sometime for -- >> so it works on the economy -- >> the standing facility is something many central banks have, the ecb and ots.

>> right. >> it is something that the fed rascon templated we could decide to make a judgment to put a standing facility in place. there's a number of parameters at what the interest rate is offered at, that could be important. another alternative would be to have a larger balance sheet so you have enough reserves in the system at the moment we sort of tried to reposition our reserves so they're more ample, back to the september of last year levels. there are some treasury events, tax events coming up in the spring, and we want to make sure we have the right amount of reserves in place. but if you go after a more efficient level of reserves that's somewhat lower than we've been experiencing for sure and, you know, you might imagine having a standing repo facility could help out in the moments where dealer/brokers need access to those kind of fund. >> thanks for joining us. >> thanks. >> charles evans, chicago fed

president. back to you guys where 13,000 students are here in san diego for this conference, guys. >> yes, conference that live shot, a nice live shot, steve. beautiful. let's get some reaction to the interview ahead of today's fed minutes. alan binder joins us now, former chairman of the fed. mr. blinder, good to have you with us. charlie evans said we're well set with where it is do you think the policy is in a good place >> i think it is in a surprisingly good place. it wasn't so obvious when the fed started pushing interest rates down that it was the right thing to o now it is looking pretty good. we have the interest rate around almost exactly where the inflation rate is. so a zero real federal funds rate, which is a push which most of us think of as being slightly aggressive, not grotesquely

effective. that was a fear some had when it started moving down, but the inflation rate has not budge it as evans said. as long as it doesn't trouble and the economy trundles along at 2% or so growth, i think the fed is just going to stand pat indefinitely, as long as that lasts. >> he seemed surprised by the fact inflation hasn't budged said it oughtto be rising. a lot of people agree with him it sound like you do as well why do you think it isn't? >> i do. i wish i knew. you know, that's the $64 trillion question. that's the question that jerome powell and his colleagues go to bed every night pondering. nobody really knows the answer there are a few little straws in the wind about the composition of the unemployed, about whether workers are getting benefits that are not showing up in wages. for example, charlie alluded to

this very obliquely, but you see hiring standards falling people that don't necessarily have the greatest work experience are getting hired anyway, whereas, in a labor market that was weaker they wouldn't be. i think some of it is coming out that way but don't get my wrong, i don't think we have a full explanation of this. i think it is a big mystery. >> alan, you know, you were at the fed at this golden moment in the mid '90s we keep harkening back to. >> right. >> there was this, i guess, recognition over time that in fact unemployment could go lower than we previously thought without producing inflation. >> right. >> there were three rate cuts in '95. you know the whole history, of course does it feel like there's a rerun of the episode happening >> yes, sort of, but much more extreme. i mean back in the day i got criticized in '94 when i was vice-chairman of the fed for

suggesting we could push the unemployment rate below six. i didn't say a number like five or four. people would have thought i was crazy then frankly, in '94 i didn't believe we could go that low safely. it turns out that we could this episode is even more extreme. we have the unemployment rate down below four for quite a long time, and the fed, as charlie evans just pointed out, is still trying to push inflation up, not hold it back so, yes, it is similar but even more so these days. >> alan, you know, they spoke about the fact that manufacturing remains weak, so much expectation continues to be put on the back of the consumer. is there a point where we need to start worrying about the manufacturing prolonged weakness >> i think the answer is yes, but mostly regionally. as steve pointed out in his

interview with charlie evans, there are regions of the country where manufacturing is a bigger deal than in some other regions. so you want to think of this as mostly sectoral. manufacturing you could -- egs ku excuse me. manufacturing you could say is in recession if you are in a region of the country heavily into manufacturing, especially the source of manufacturing impinged upon by the trade mess, you are in a recession actually even though the rest of the economy is in a boom the answer is manufacturing is a relatively small share of employment it is down below 10% so one way to phrase your question is could the rest of the 90% still do well even when the 10% is not doing so well i think the answer to that is yes, if you look at the whole country. >> i'm curious since we rely so heavily on the american consumer

as the driver of this economy, will this strike in iraq last night against iran do anything to the american consumer i'm looking at gas futures right now, up more than 3% at one point this morning they were up 4.5% if gas prices rise, won't that take away some of the spending power the american consumer has? >> i think so. i think that's the biggest question right now by far because of the developments in the middle east last night we don't know where that is going, how big it is going to be as a geopolitical event. it may turn out to be quite big or maybe it won't, and, therefore, we, of course, don't know what it will be as an economic event but the direction that you are talking about is exactly right if we imagine this blows up into a very big, quote, oil shock and people see pump prices of

gasoline and home heating oil prices and things like that skyrocketing, that will put a dent, first of all, into the pocketbook exactly as you said for buying other things, but also into confidence that's the kind of thing that can shake people up. as charlie evans, i think, said in the interview, it is just way too early to make any judgments about that but it has -- it is not too early to say this has now jumped to the top of the worry list. >> right. >> trade friction has been at the top of the worry list for a long time. this has now leap frogged it. >> alan, we appreciate your time this morning happy new year we will talk to you soon that's alan blinder joining us. >> happy new year to you, too. stocks backing off in a relatively big way as oil prices continue to spike. airlines among the worst performing stock in the s&p 500, you see right there. american down almost 5%, marathon petroleum outside the airline industry down 4.5% a lot more "squawk on the

street" still ahead. stay with us

♪ welcome back, everyone i'm sue herera here is your cnbc news update at this hour.

iran usa supreme leader ayatollah khamenei warned that harsh retaliation is waiting for the killing of qasem soleimani he said he was the international face of resistance iranians took to the streets to mourn the killing of iran's top general. they gathered with signs reading "down with the u.s." and chanted anti-u.s. slogans. soleimani was the architect of tehran's proxy wars in the middle east. israeli prime minister netanyahu cutting short a visit to greece to follow the ongoing developments before leaving he said president trump deserves the credit for acting swiftly and forcefully. >> just as israel has the right to self-defense, the united states has exactly the same right. qasem soleimani is responsible for the death of american citizens and many other innocent people he was planning more such attacks. you are up to date it is a busy news day. that's the update. contessa, back to you.

>> sue, thank you for that when we come back, the sectors we are watching when we close out the first trading days of 2020. "squawk on the street" will be right back don't go away. ♪ landsca through the airport. with ship skis, you're just a few clicks away from having your skis, snowboard and luggage shipped from your doorstep to your destination. with unrivaled pricing, real time tracking ship skis delivers, hassle free. ship ahead and go catch those first tracks on fresh snow. ship skis. your skis. delivered.

the dow, the nasdaq, the s&p all over about three-quarters of a percentage point, oil up about 3.5% is an extended sell-off ahead as geopolitical tensions rice in the middle east following a strike on an air base in baghdad? joining us is investment scott ladner and john rutledge good to have you with us today. >> good morning. >> scott, let me begin with you. you come into today talking about how a lot of the geopolitical tension has eased, what with a trade deal looming and brexit in sight. does this attack on an iranian militia guard do anything to change your outlook for 2020 >> well, it certainly makes it a little more complicated. you know, we didn't -- we had a

lot of known/unknowns in 2019 that were resolved in a pro-growth fashion for the most part this throws a wrench in some of that we don't think it will escalate a ton but it is the very early stages, so it is one more thing to think about coming into the first part of this year. >> all right john, what is your take on what happened in iraq and how it might play out for your thesis for 2020 >> well, i have to admit my first thought was i have flown over that airport twice in the last month and i'm glad it wasn't today but i think it just illustrates that we are very, very fragile subject to event risks you know, the economy is fine. the growth in the market in the last year has been all fed, no profits. the profits are not looking very good going forward, so i like the idea of just being careful and being defensive lest we wake up another morning and find out three more things have gone by that means you will miss a little bit of the remaining ups

on whatever this market is, but that's okay. you know, i'm too old to make this money back. >> well, you're suggesting, john, the multiple expansion we had that caused the market to go up as much as it did this past year can't be repeated, that it is not sustainable, is that what you're saying? >> absolutely. it is entirely caused by central banks flooding the market with liquidity. they can do that, and earlier i heard steve down from the aea convention in san diego. you know, in 1967 milton friedman, rest his soul, explained to us that if central banks print money forever sooner or later prices go up and sooner or later interest rates go up, too. when rates go up, multiples fall that was the 1970s so we should be paying more attention to the multiples and in the world of private equity and real estate, read that as exit multiples if you are going to be buying something today, make sure that you look at selling it in a

couple, three years at one or two multiples lower than we have today. >> scott, i guess another way of looking at it is that profits in the u.s. are basically held flat at record levels in the last year obviously investors are feeling like they can try to handicap a return to growth today we did get another weak ism manufacturing number. >> yes. >> i don't know if it changes the market's calculus, scott, but how are you reading it >> well, i mean it is -- again, we are expecting a return to more robust growth this year last year the dominant narrative was everything was late cycle. that was the investing narrative, that was the market narrative. everybody assumed it was the case it was a starting point. it turned out to be probably a bit more mid cycle than we are late cycle we had a bit of a slowdown in the u.s., but things out of china and stimulus from both the fed and the chinese, both the monetary and physical side last year, will bear fruits this year the market obviously has a discounting mechanism so we rallied in the fourth quarter, but that rally is by no means

don't we don't think if it were to go in first half of the year before we get to the place where we have irrational exuberance or anything toppy on markets. >> john, you sort of take issue with the market, saying it is all fed, it is not sustainable the fed's policy though is sustainable and it doesn't look like they're going to do anything any time soon rates are going to remain low. charlie evans just said the economy is in a good place what is there to be negative about? >> charlie evans said he wasn't sure whether they had enough reserves in order to manage the liquidity issues maybe they should have a bigger balance sheet. in other words we're in qe4 already. >> but you are painting a picture even more so why stocks could go up, right >> yes, but only temporarily i mean printing money is not a pan s pan panacea for making stocks rise for the long term. it gives you discounted rates in the short term i don't think it is sustainable. >> scott, what do you think will

be the big driver of 2020 in do you think it continues to be whether the fed keeps hands off, whether there's liquidity, whether earnings are the driver as we've seen so many people count on, or do you think the geopolitical tensions end up being the big what-ifs that come into play? >> you know, i do think it will be a lot about the fed and a lot about policy so the deregulatory policy of the trump administration doesn't get enough credit for what it is doing to the economy the change in the fed that, you know, the change they're talking about in the fed in terms of having more of an average inflation target is getting not enough play. that is a really important policy shift from the fed if they go that way they're trying to prevent this idea that we can't produce inflation if we wanted that's pushing back against the japanese model that we know what that looks like, we know what that model looks like. if you can't produce inflation as a central banker, that's probably the most dangerous place you can be the fed is pushing back against that that means we will have a more dovish policy stance out of the

fed for a longer period of time. that's not something i think you want to fight as an investor. >> scott, john, gentlemen, thank you. happy new year. >> thank you. >> thank you still ahead, why airline stocks are getting crushed in today's session. "squawk on the street" returns with that in twoines mut

stocks kicking off the new year at records, but one top economist says it is not as good as wall street thinks. find out more on ""trading nation"s" at cnbc.com. more "squawk on the street" is coming up.

♪ airliners among those under the most pressure this morning as stocks continue to sell off phil lebeau has more for us from chicago. hey, phil. >> scott, we are seeing airline stocks down 2.5% to 4.5%, as you look at the major airlines

keep in mind that jet fuel is the second largest expense that they have after labor costs, and one reason why this spike is catching some airline stocks and hitting them a little harder is because, frankly, they enjoyed a very benign environment over the last couple of years when it comes to jet fuel prices in fact, jet fuel has been generally trending slightly lower over the last couple of years. as a result, for the airlines they've had that certainty when it comes to the cost side of the ledger sheet, when it comes to jet fuel prices. now, keep in mind, especially as you take a look at like united, delta and american, not only are they facing the prospect of higher jet fuel prices but the other thing to keep in mind, contessa, is the fact that all of these airlines are moving into a year or two period here where they're going to have higher labor costs as their labor contracts go up. so if you are an investor, you are looking at these guys saying, hmm, okay, do we expect as much growth as we've seen over the last couple of years. >> phil, how much are you

factoring in to their play in travel and leisure more broadly? we are seeing travel warning for americans in the middle east. >> right. >> we saw travel and leisure stocks under pressure in europe throughout the day. >> i don't think that's a big factor at this point primarily because the airlines, they don't see that type of an impact unless it is extended over a period of time. in other words if you go back and you look at past incidents like this over the last several years, yeah, you will hear some people say, "well, this could be troubling for the travel and leisure industry," but unless it is an extended period of time, contessa, it doesn't hit these guys that hard >> phil lebeau, thank you. >> you bet all right. let's take a look now at the markets and how they're performing today after we've been following that breaking news about the strike on an iranian general for the revolutionary guard for the quds force. the dow jones industrials off their lows, now down 200 points. looks like the s&p 500 is hoff half a percent or so

the nasdaq is off half a percent, but oil is up 3.5%. let's get to jon fortt with a look at what is coming up on "squawk alley." >> good morning, contessa. we will continue to keep these geopolitical issues in focus with an eye on tech. apple recently cracking $300 a share. where do it and the other tech powers go from he?er we'll watch that as well coming up on "squawk alley" 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, fair wages, and clean air and water as a right. i'm tom steyer and i approve this message. coach saban convinced us. we are committing to aflac. why aflac? because health insurance doesn't always pay it all. aflac!

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stocks falling this morning off lows of the session after a u.s. air strike killed iran's top military leader. crude oil prices are spiking joining us, head of geopolitical risk and former cia officer scott modell and doug terreson scott, i will begin with you give us your view on what happened and what it means for the region, how we should be thinking today about the energy complex? >> hi, good morning. what happened last night was i think a game changer for the region i think iran was in a long trial and error process of testing donald trump, they realized they got a strong message you cannot cross his red lines. i think they'll have to respond

but they'll be calibrated and careful. tendency is to think there will be a quick iranian response, major retaliation. we discount that possibility we think there's certainly risk things could miscalculate, but in reality i think the iranians will be cautious we know that they have additional attack plans on the shelf to look at more attacks on oil infrastructure, but i would expect iranian response, not a major retaliation. they do not want direct war with the united states. >> do you expect then this move that we've seen in oil prices this morning to be short-lived >> you know, i have to say before soleimani's assassination, we didn't see much geopolitical risk premium in oil after that, you've seen the price increase given the possibility that iran is likely to attack again, even though they'll be cautious about

not crossing trump's red lines, i think there's more risk, you could see prices continue to rise >> doug, crude has been going up, stocks can't get out of their own way. why can't stocks right with the price of crude and if they can't now, when will they? >> well, that's a good question, and you know, we do believe oil prices will be a little stronger, but you're right, really because big oil and boards haven't required ceos to have strategy to create economic value and counter intuitively, higher oil prices are negative for most energy stocks we think they'll continue to be until that changes simultaneous ri companies to take the pledge for capital discipline and it is corporate strategy in the

sector we're happy that companies are more disciplined and the surprise in 2020 could be if the global economy remains strong, or if we have further escalation of tensions with iran, oil prices remain strong, the companies are going to take the surplus funds, return it to shareholders that would be a good first step making energy value proposition competitive with the rest of the s&p 500. we have underperformed in seven or eight years in energy but are making progress. need to make progress, the group hasn't been investable for many reasons. >> also worth noting, talk about crude, natural gas prices are down, that hasn't helped some parts of the sector. are there parts of the group that are adhering to those kind of capital discipline principles you're talking about that are actually better positioned >> you know, they really have. in 2017 when we started this

call, we suggested companies that return capital to shareholders started to turn on capital employed at the corporate level, ceos would prosper in the market, they would need to change strategy. to the surpriseof many, including ourselves, chevron, bp, shell, conoco philips, 80% of the top ten performers in 2017, 2018, 2019, so while the stock picking up is highly improbable, we call for the ledgers to remain top 20 we think it will happen again. we think the buy side will reward companies creating value, returning capital to shareholders is like any other sector of the s&p 500. >> scott, the u.s. defense secretary mark esper said the game has changed you had the ayatollah in iran

calling for revenge and retaliation against the united states and the foreign minister calling this international terrorism. given the ratchet up of rhetoric, how are you advising clients to protect against any threat of potential attack from iran on their facilities >> well, again, i think the advice we're giving is there's immediate up tick of risk to oil facilities the iranians recognize danger of going after u.s. personnel directly i think you'll see iran be careful about that, which is why we see, we are advising clients there's a risk the iranians will turn back to what they were doing until late last year, seizing of oil tankers, hitting gulf oil infrastructure. we think sites that are significant, which caught the market by surprise, are back on the table again for the iranians we're advising them, despite

deployment of troops to the region, we think that's more symbolic and risk is going up to those facilities. >> gentlemen, appreciate your time and insights. thank you very much. >> thank you. when we come back, we'll have more on today's selloff the markets, dow down 235. we are watching it closely "sawaly"s nt.quk le iupex don't go anywhere.

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