>> if jim is right and we're looking at another round of companies giving upward guidance, it's going to be more fuel to the fire >> we'll see big bank earnings this week. >> what is the forecast in davos, have you looked >> the weather >> snow. >> i don't know. >> snow and cold >> anyway, make sure you join us tomorrow we'll hand it off to the gang on "squawk on the street" and jim, of course, in california today ♪ good monday morning. we welcome to "squawk on the street." david faber at the new york stock exchange, kramer is at the 38th annual jpmorgan conference in san francisco, a host of ceo interviews an including with bliss toll myers later on this

hour futures are solid, earnings phase one signing, lots of eco data our road map begins with trade optimism reigniting the record rally. the chinese delegation heads to d.c. today for an expected phase one signing on wednesday plus new ceo, same crisis. what to expect from boeing's new chief executive, david calhoun, who takes over today and the future of the 737 max. then there were four, alphabet nearing the trillion-dollar market cap club, behind apple, microsoft and amazon stocks are looking to recoup some losses from dow, the dow surpassed 29k for the first time before finishing in the red. all three major indices are in the green since the beginning of the year led by the nasdaq's 2% gain as we were saying on "squawk" a few moments ago, jim, if lulu yes, ma'am of lemon is a clue to the earnings season, maybe this rally has been justified >> we have two conference this is ek wweek, icr in orlando andi

conference in san francisco, health care. they're used to be able to say better than expected, better than expected and a lot of companies saying the old estimates we have to throw them away things are really, really cooking. sop it does happen to the upward momentum i'm seeing a lot of it here. >> all right, we're going to watch health care, of course, a big part of it, but banks are the other big part and already the street continues to give goldman some props, jp upping goldman to outperform. what is important tomorrow >> goldman, we forget the fact there's a china deal on wednesday. what an idea, listen to this how about apple and goldman, which have a credit card that's only in the united states, how about if they got permission to float that in china, just an individual goldman to chinese, using an apple card embedded base, you know what? that's worth about $30, $40 per share.

>> hmm i don't know if that's happening any time soon. >> david >> hi, jim >> david you think i flirted that idly, you think jimmy chill floated that idly? >> no, i know you were very focused for a very long time, really you're turning the other way on me? on the amex. >> yes, because it's a podcast, you don't have to two ary. i'm not insulting you. >> which they got. i know you were focused on that for quite some time being sort of a key sign that tensions were starting to abate. >> you got it, partner >> okay, that's how we're going to play it today speaking of apple, jim, d.a. davidson goes to a street high 375 now. apple is having its best 12-month return since the end of the crisis the title of the report is five good reasons why there's still gas in the tank and the five

good is a play on 5g, where we'll pay more attention in the months to come >> this is the year 5g tim cook was at the introduction of the 11 in new york, and a lot of people figured the 11 was a big yawner the 10 which people didn't catch fire with. this is very different it turned out to be a step function it turns out to be much hotter than everybody else has. it turned out to be to me death nail of samsung. 99% customer satisfaction. you can't beat it and this surprised people, what i have in my hand is why people have to raise numbers. it is extraordinary and nobody thought there could be another let's just say new product but the airpod, you get the ears, people listen in, noise cancellation, the watch, and all turned out to be different, carl it all turned out to be bigger than expected and no one saw it coming except for maybe tim

cook >> carl, the move up as we pointed out, not just shares of apple, of course, but we mentioned alphabet at the top of the broadcast, approaching $1 trillion and facebook is already up over 6% as well, those at least that part of faang netflix itself more in line with the market in terms of its gains so far this year but the accretion of market cap to these three of the largest market cap companies in the world has been extraordinary over the first week or so of trading, jim >> yes, look, another thing that surprised people is that facebook levitated here. there's no doubt, this morning, i'm raising price facebook, raising target why? because people are saying the instagram ad business is better than expected. we've got -- we haven't seen amazon amazon's been the laggard, and i do think that alphabet is

surprising that's thomas curryian the believe the cloud will be a major movement the division is changing the way we think of alphabet so there is a lot of momentum and if you to faang, apple is obviously the lead per >> to jim's point, alphabet to 1600 today they were at 1350, and then on facebook, evercorp. goes from 280 to 235 it is david calhoun's first day on the job as boeing's ceo he's facing a lot of challenges regarding the 737 max. in an email to employees "this is a crucial time for boeing we have to do to uphold our values and to build on our strengths. i see greatness in this company but i also see opportunities to be better, much better than includes engaging one another and holding ourselves to the highest standards of safety and quality and providing

outside perspective on what we do and how we do it" follows the page one store why i in "the times" saturday which they describe the culture there as being sick, engineers were torn between wanting to recommend sim training for their customers' pilots and financial pressures not to do so >> look, i think there's this interlude where greg smith, who is the cfo, was the ceo and during that interlude, we saw what greg wanted greg wanted simulation why did he want simulation because the max turned out to be at least for people overseas, who may not be 3,000-hour people like u.s., the max was different, and i think that dennis uniquely dennis mu muilenberg was hoping they'd not have to sayen will, you got to be on a simulator. guys in america who fly 3,000 hours wanted no part of a simulator. that's all changed pi that interlude they took a lot of hits.

i think calhoun is blessed by just kind of a kitchen sink period, where boeing got it together, trying to have no more leaks. i think if we can stop the leaks about something that, you know, everything bad, and that during that interlude, i think a lot of hits were taken. now calhoun has to start brooming people and saying this is the new boeing. brooming people is of the essence here >> so we have news of muilenberg's severance or lack of it on friday. he's still entitled to $62 million and a little m&a in the wake of this regarding suppliers, david >> it's not connected specifically to the troubles at boeing, the idea you'd force consolidation amongst suppliers but we have a fairly large merger of equals this morning. we'll see how the stocks perform when the open comes roughly 20 minutes from now woodward and hexall getting together own 55% of the company there's not a lot of synergy because they don't do the same

thing. one is about composite materials, advanced materials and components, so one will make the rotor, one the rotor blades, one the accuator, the other composites that would g into the wing itself but it is, jim, a part of the efforts by boeing and airbus to continue to pursue efficiency in terms of lighter weight planes, planes that can move faster with less fuel and therefore sort of they have the same teams that will approach these companies in terms of efficiencies, and now they're going to be able to present these together as a product portfolio and perhaps you could imagine in the future they start to work on things that are like the smart wing of the future, so to speak the financials though look pretty good for the combination. we'll keep an eye on shares of both hexall and woodward one interesting note, woodward's ceo was on the board of hexcel

that's how they started talking he was a board member of the company, sort of surprising. jim, overall in the numbers themselves, you're talking about a company that's going to have $5.3 billion of revenue, 1.1 billion of ebitda, and they're going to only be levered at 1.4 times so they also are instituting 1.5 billion share buy-back taking place over the first 18 months after close. we'll keep an eye on two companies you don't hear a lot about but one fairly soon. >> makes a lot of sense to me. remember, honeywell acquired rockwell with united technologies, these are smaller companies. the composite was a big problem for the dreamliner, that's been solved i think companies are natural in terms of being able to have some power in that partner position that boeing, that mcinerney put together these guys are squeezed over time when you have a little bit more

power, bargaining, a little more bargaining, the margins go up. it's a brilliant move even though they are complimentary and not in the same area composite some of this stuff in cockpit, i don't know. does it work together? i think it works together, when boeing comes calling and listen you guys have to charge less they can say guys, we're a little bit bigger than you expected we're not just going to take your pricing >> that may be true or when boeing comes calling, airbus says we need to keep it lighter, take weight out to decrease our carbon footprint one quick m&a note here. this is a merger of equals, 55% owned by woodward shareholders, 45% by hexcel, split boards, but this is something we may see more of. it's hard to pay big premiums when the stocks are at all-time highs, jim, and so this is also in some ways a reflection of that >> you keep a balance sheet intact, you can buy in a lot of stock as a result.

>> i cannot wait for boeing to do something with that precision cast parts business. it's been great for them but i got to tell you, i thought the precision cast parts at hexcel would have been a better merger obviously the board situation is telling. >> you said boeing you mean berkshire hathaway. >> sorry, berkshire owns precision cast parts david, what have they done with that other than just say listen you're a good division precision cast parts is supposed to be able to do something it's been kept very much apart i'd like to see them do some m&a >> that's interesting, yeah. i remember the deal. it was a typical berkshire deal, recall of course they keep management in place essentially, they pay the price and then they move on, but people love working for berkshire in part, jim, because they are not -- they are able to just follow their own plan and don't really have to worry too much about, about dealing with the home base, so to speak but your point's a good

one. i don't know what's going on with precision cast parts in terms of potential consolidation at least >> david, remember when arconic had something good going with parts and planes and then i don't know, you chad that curios period where klaus kleinfeld overpaid i'd love to see something happen there, but arconic's become a mystery. mnuchin was on the sunday shows yesterday and said the max could potentially take 50 basis off 2020 gdp, which is, jim, toward the higher end of estimates, once economists fold in boeing into the models late last year. >> this is the issue, when is the max going to be in air i think everybody's been way too optimistic remember, there were people who felt this would be flying last

april. i think this is a big issue calhoun will address, look, we have done everything you want but i think the push-back from the overseas faas, going to be a lot tougher than boeing expects. i think we have to stay on it. i do not see the max flying until maybe six months i know that that's maybe even auto optimistic, what i think secretary mnuchin is talking about. >> definitely got to pay attention to recertification, resumption and production and of course actual return to service in commercial flights, so that's a huge story for 2020. we'll get jim's mad dash and count down to the opening bell, hear more what he's got planned at the jpmorgan health conference we'll watch some retail. we mentioned lululemon donohoe starts at nike five below holiday disappointment but futures look good we're back in a minute

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we're going to get started with trading here at the new

york stock exchange around 12 minutes or so from now first trading day of the week, of course. what a year, though, it's been for shares of tesla so far, jim. i know that's a focus for you on our cross-country mad dash this morning. >> look, everybody is behind now, starting to catch up to the stock. opco was behind and opco comes out this morning and says listen, david, 612 price target. what do they know? actually, their estimate for 2020 is $4 and change, actually below the street, that gives them a chance to raise their estimate, raise the estimates for the year when tesla reports. david, this is an extraordinary move because a lot of people felt at one point they had to lose money in 2020 this thing is trading on earnings i don't think anyone understands it's trading on earnings, maybe $10 next year, so 600 price plus target by opco, a bump of price target i believe, david, i believe someone's going to come up with a $700 price target soon

>> you do. wait, what were the numbers then give me some of the earnings estimates for this year and next year, jim, haveif you have them can understand the mull tipple >> opco is using around 440 for this year and you're going to start talking about $10 for next year, david, $10, because china is coming online, operating efficiencies david, the bears 27% of the float, the bears don't know what to do. david, it's an earnings story, for heaven's sake. >> its earnings are going to more than double from 20 to 21 conceivably with china coming online >> you got it, partner >> despite what we think is increased competition in the market for ev vehicles >> we are seeing a lack of serious offerings, including, including bmw. caved, bmw does not have the car that is like tesla tesla is literally breaking out when it comes to assisted

driving. they are so far ahead, this china factory built in ten months, the best news out of china is going to be tesla they actually have a little period here, where you're going to get subsidized, but david, when you start talking about big earnings power, you start talking about balance sheet, no longer an issue, david, no longer an issue. >> it's amazing to watch the run that that stock has had really since the last earnings report and the opening of china we should point out ford numbers in china not good, but it is the world's largest market for autos by far and the push of course is towards ev >> yes, david, when ford and gm combined are worth less than twice tesla, wake me up. i'm sick and tired of hearing stories that the market cap is, you know, almost as big as gm and ford well, of course! what kind of year are those companies having look at ford you want to own ford sold to you.

>> all right jim, stay right there. >> all right all right, that's it >> don't go anywhere you get an "all right. >> all right ♪ yeah >> it is almost two months by the way after he completed its acquisition of celgene what is next for bristol-myers we have an exclusive interview with the company's ceo watch us live on the go on the cnbc app stick around, opening bell nine minutes from now ♪ ♪ ♪ ♪

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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 about three minutes. a big week for the markets as q4 earnings season will start really tomorrow with the banks, the chinese delegations en route to the united states for the phase one signing. jim, mnuchin did say the commitments to buy u.s. goods both ag and otherwise did not change in the translation and looking for 40 billion to 50 billion a year we'll find out wednesday what granularity we get on this fact

sheet. >> yes, look, china needs our pork actually maybe need our chicken. zowetis will tell a story, kristen peck is the new ceo, she'll tell a story i think about the fever african swine fever and how it decimated pork in china a pork buy of tremendous proportion should be in the offering >> you know, it is definitely progress when we get this sign, but jim, when you step back in terms of the relationship between china and the u.s., and the competition between these two great powers, first and second largest economies in the world, of course, it's only going to continue, isn't it? there is this belief now that we're going to have almost two separate systems as opposed to one in a sense, two separate economic systems, two ways to look at the world. that's not necessarily going to lead to greater efficiency over

time, is it? >> no, and that's why, remember, there's still a lot of tariffs on the chinese, more than 300 billion, so some people feel we have the cake and eat it, too, we kept the tariffs high which the president thinks, puts money in the pocket of the treasury, and at the same time we've got some movement by the united states, which just says listen, we're showing you good faith next phase two we have to see intellectual property being held up in our country. we have to be able to see, david, no more stealing and so far, that has not been part of the deal the people in the administration say okay, enough already we gave them this goodwill, now we need to see a change. i don't think the chinese want to change. i think president xi is walking a fine line. i think he'd like to see some change i think the people who are really in charge of china, pack in ch back in china aren't happy and don't want to do any more until our tariffs go low [ applause ] >> it's going to be a big piece of the discussion, obviously

[ cheers and applause just how quickly phase two moves along. let's get to the opening bell here and the s&p 500 at the cnbc real time exchange, the big board it's the commodity futures trading commission, the cftc [ bell ringing ] the nasdaq biotech ringing the bell remotely from the nasdaq entrepreneurial center in san francisco. jim, where you are obviously, not a coincidence given the events there this week, maybe remind viewers why the jpmorgan health care conference is not just another conference. >> yes, this is the biggest conference this is the conference the beginning of the year, of course, it occurs before quarters are reported. if you're telling a story, sometimes you just can't hide it you have to see how good things are. this has been a place where a lot of big mergers have been announced, a lot of new drugs have been announced. every analyst is here. this is the con fab of the year, and i got to tell you, the orlando icrs occurring at the

same time i think that's a mistake. you see consumer and retail stocks reporting things over there like 21 below. people aren't focused on 21 below. they used to call it five below but 21 is how much that stock is down on preannouncement. the consumer stocks not doing well ex-lulu and the drug stocks doing incredibly well. i think for instance dr. giovanni carforio could say look, the numbers are better i'm going to try to press him on that >> jim, there's always a theme at these conferences, as you say, everybody comes there, m&a certainly always can be something that is discussed as well, given how many members of the overall community are at that conference, but what would you say the theme is is it around immunotherapy "the journal" had a story about the differing ways the companies are coming up in terms of allowing customers and health plans who cover their customers to pay for their drugs where are they focused

>> the theme is the consumerization. the consumer is rapidly being put in charge. why is that? you got to figure out your medicare part d, what are you going to do? 70 million baby boomers, some people say only 50 million but not looking at how many people have to start think being this, that is the most important thing is that the customer matters immunotherapy was last year's part t last year this year is okay, it's the consumer because so many people are in medicare. it's the consumer because it's confusing and the consumer has to take charge of what they want that's why i have cvs, the charlie victor kind, at the touch point of the consumer. they can tell us how much the consumer really is in charge of their own health care. it's a new theme and it's working. >> five below on track for its worst day since 2015, looking for fourth quarter 193 to 198, street was at 202. they are blaming the six fewer

shopping days between thanksgiving and christmas, overall sales they say did not meet expectations. kind of flies in the face of lulu, though sees 222 to 225, street's at 215. >> yes, look, it turns out high end is doing well. i'm waiting for nordstrom. they could tell you that that kind of range of 5, 6, 7, 4 bucks, not doing that well i think five is trying to expand all over the place but for the six days it turned out it wasn't good enough for the customer for other companies six days turned out to be better. go back to bed, bath & beyond, a huge amount of flow to short bed, bath & beyond had good numbers during that period it's the power of merchandising. i'm sur fprised five below is nt doing better

they told you repeatedly they'd navigate this period i question whether bed bath is doing nearly as badly as people say. mark tritton who came from target is doing a far better job. people have to cover their shorts there, they're being ridiculous this thing is going to work. >> not to mention kohl's, which is trying to find some stability here around 46 1/2 >> yes >> michelle made some comments on the fireside chat regarding amazon traffic take a quick listen to that. >> i get this question, is amazon working amazon is working, this returns program is working we're seeing the traffic we're getting new customers, we are gating a younger customer, you know, and to what we expected, some of them are buying you're never going to get 100% but some of them are buying. >> jim, does that answer some of the questions you've had for her? >> no, no. they're not getting the darned traffic. they're not. these guys are living in a frdra

world. i know this because my travel trust owns some and it's killing me the customer is going to amazon, back to the store e not looking at what kohl's has i think those guys have to wake up and smell the coffee. they really have their head in the sand the plan is not bringing new people in. it was the traffic was the problem. they have to start owning up to how badly they're doing. the press releases are ridiculous they are doing i think much more poorly than people realize i put kohl's, they're not jcpenney, nobody's jcpenney, but they are -- well, maybe sears but they're not doing as well. i don't want to be mean. i'm not a meanie my name is jimmy chill, for heaven's sakes but auto i'll it happy. >> there are overall price levels that are interesting. beyond meat back above 100, david, for the first time since i think october. of course we all remember last week when it was up some 27% for the week alone, and then you've got tesla above 500 for the first time >> we spent a lot of time just now jim talking on the mad dash

about tesla and about that increase in price target at oppenheimer. the stock's gone almost p parabolic, up 5%, backing off the highs of this trading session so far in the first five minutes. its market cap is over $90 billion, but jim, that $10 number that you mentioned for 2021, which i guess is out there in print, some analysts, it got my attention >> it should if you have $10 per share, who cares about the balance sheet? that's never talked about. elon musk, i know he danced a jig but he's not dancing a jig in twitter the guy is a statesman, and i know from someone who is not a statesman, this guy really is the real deal. he is the new phase of face of executive. your car becomes an exciting place to be. howard schultz used to call starbucks which by the way suck in the airports, used to say

starbucks is the third place your car is your third place i love sitting in a tesla. my daughter loves the flatulent seat, kept pressing the button, i know it's a little odd tesla is the place to be people love to be in it and autonomous driving, oh, my, so exciting beyond meat is an ecosystem. people talked about beyond meat they're talking about india. india! there is an untapped market for them, that's right, because they're vegetarian >> yes, they don't eat cows. >> sacred. they're sacred >> well they hate cows they're sacred i don't mean they hate them. they love them cows produce the most methane. i know they're natural but boy, they are methane producers hard to justify. >> there's a lot of methane coming out from all sorts of ways the flaring you talked about so often is increasing and not even being monitored anymore by the epa? i'm not sure

>> well, look, flaring is obscene how much flaring they are trying to get to 5% flare. they told me there's 30% some guys are doing 30% and a lot of people on twitter told me you're allowed to do whatever you want but it is heavily regulated. heavily regulated by who i'm regulating it more than they are. david, i think the president may be pro-flare for all i know. >> i believe he may very well be any environmental regulations who were perceived to stand in the way of economic growth in some fashion have been or are planned to be eliminated, carl >> even as the latest -- >> or rolled back is a better way to put it. >> as recently as last week, word the president said in some cases it takes a decade to build a road >> before that infrastruk tour a the law in place in the epa started under nixons the roll-backs are significant

you nexted flaring and certainly that's going on a lot but also speaks to the plethora of natural gas in this country which we talked so often about >> right >> one would expect you to find some places that could use incredibly cheap energy, maybe start the server farms near where they're flaring all this gas and run them all on natural gas? >> the server farms don't want natural gas. david, the server farms they want solar, and the guys who do solar are winners, guys who also like hydro here is one david, i'll throw one at you how about when the president goes to davos, which you and i don't go, not because you're an old hack, david, everyone remembers that the reason why, one of the things throw a bomb and the bomb would be germany, you use our lng instead of supporting the russians with gas.

i think they'll be bombs thrown by the president, and one of them is going to be use our lng and we have enough of it that we can undercut anything that gas prom does plus shouldn't we be pro-u.s.er is success pro-russia i think the next big stumbling block is the idea the president says we're sick of europe. think of that. >> yeah, that's been an issue. certainly anybody who wants to drink french wine is aware of it >> indeed. if it's not that, it's sanders running number one in iowa, as we found out from the "des moines register" poll on friday. let's check in with rick santelli at the cme. good morning >> reporter: good morning, carl. it is going to be a big week we get some big data points and of course the signing of phase one and the more details we get on it, it actually looks like there may be some good surprises in there regarding intellectual property and how to protect it look at an extra day of tens,

long end is firm are firming up a bit, curve resteepening just a bit, short and like a two-year note unchanged if you look at a chart from july on ten-year, this is fascinating. we're basically in the middle. you look at that big move we had, so we're around, what, 214 last time we were over 2%, about 147 on the bottom, the average, the middle of that is right around the low 180s, which has really been home base. however, home base is definitely on the move. goal posts are moving in europe. look at intraday of bund yields minus 16 a close here would be the best since may as you see on this chart and finally let's get back to the dollar versus yuan. it continues to trade firm in favor of the yuan. jim, weather is much better where you're at than in chicago. >> yes, this is the place you have to be and one of the reasons why you have to be here is we have dr.

giovanni carforio, the ceo of what i call the new bristol-myers. j giovanni, thanks for being on the though >> thanks for having me here >> people come on tv and announce new things. the combination of bristol-myers and celgene. >> you and i met in november after the close, i feel better about where we are today than even in november we are a new bristol-myers squibb and a great company we are a growth company and better optioned for today and the future we have strong performance in our business >> is it the change from six big drugs in the pipeline to eight big drugs in the pipeline or earnings per share and the estimates are too low right now? >> first of all we have great performance commercially with our franchises in '19. we're entering 2020 with great

momentum we have eight launches we're preparing for, that's unprecedented. they're all first in class medicines, best in class medicines, areas of high-end medical need we have great commercial capabilities, eight launches in 24 months. i am pretty confident we'll do a good job there and in the long-term, the broadest, the deepest pipeline in the industry we have tremendous financial flexibility, we'll continue to do business development as you know we can do there are great people at bristol-myers squibb i know you were a strong believer in the deal from the beginning. there are more opportunities to be optimistic today than there were last year when we were here >> you announced it last year, stock around 45. i said you got to be a believer. this is bristol-myers next generation and speaking of that, the one thing no one talks about. you have a drug called eloquis people, eh, it's some drug we can focus on loss of exclusivity with revlon and some of the problems brisston myers has in terms of competition.

eloquis, talk about the lack of competition on what may be one of your biggest drugs. >> it is one of our biggest drugs, a leading medicine in a growing market so we've done a great job because of the profile of eloquis to establish as a leading agent globally there are further opportunities for growth we're continuing to replace warfarr warfarin, the old standard of care there are many patients not diagnosed, not treated there is tremendous opportunities for growth with eloquis and we have an early program in our pipeline, the asset has great promise and can take our cardiovascular enterprise into the future great prospects there. >> you have an amazing incredible franchise, but the pricing, i keep hearing at the hospital level, there is a major level of price increase in so-called the last ten days of

life is there any way to get that under control, and does that have in anything to do with how much you charge? >> when you look at the facts, jim, in 2018, pharmaceutical spend increased 2.5% the issue really is that over the last few years, patients now spend 50% more on medicines because of the way benefits are designed, and so what's important is to make sure that we develop policies that help the affordability of medicines for patients that's important for us. we are the number one cancer company in the world we are developing some really exciting medicines, i think it's important they reach patients, so those are the types of things, and the types of reforms that we're discussing. i think it's really important for an innovation company like br bristol-myers squibb >> i think a lot of people feel merck leaped you with keytruda

is there really a gap between you and merck or are you very close race between each other? >> well, i think the two studies that we had in 2019 in first line cancer, what we are hearing from physicians, they're very excited about it obviously lung cancer is very competitive, but the depth and durability of response of immune oncology, that offers the possibility of long-term survival it will have an important role to play and beyond that, we have a really broad program. you and i have discussed this before, the next wave of growth for immune oncology is adjuvent setting, treating early. we have three studies will read out this year, so i look at opdivo as a growing franchise. >> dr. carforio, one of the things i loved about the deal

but a lot of institutional shareholders were skeptical about is accretion you talked about 40% accretion 2.5 billion in synergies everyone is so worried, again, about the franchise that you pay too much the next couple of years could be a dramatic debt pay-down because things are working so good together. >> well, i agree, and in fact, the company has tremendous financial power and flexibility. because of the strong performance of the business, we just executed a $7 billion share repurchase program, we've increased our dividend by 10%. we are going to have an opportunity to pay down the debt and go back to less than 1.50 debt to ebitda ratio by 2023 these are all things we discussed a year ago, and we're on track with the $2.5 billion in synergies at the same time we're executing really well on the value drivers of the deal, which is the biplane that is progressing

well >> i know you're going to tell me listen, my job's drugs, not stock, but are you surprised how inexpensive your stock s given the fact that you've changed your profile and havelogical, especially because of tesla, your balance sheet is far better than people realize. >> there is great momentum in the company and when we look at the conversations we're having with investors, since we closed the deal, the value of the new bristol-myers squibb is becoming really clear my focus is on creating value for shareholders in the long-term. they've made great progress in 2019, but i think 2020 will be an even more important year. i think we're really well positioned, it will be an exciting year. >> dr. giovanni kaforio, i totally agree with you >> thanks, imwill have more from the jpmorgan health care summit all week long. keep your eye on the market, the dow is up 54 points.

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what a weekend of football the past couple days as the packers end the seahawks' season marshawn lynch gave a press conference last night when the conversation turned to money >> this is a vulnerable time for a lot of the young dudes i tell you all right now while you're in it take care of your bread so when you're done you go ahead and take care of yourself. >> jim, i know helping nfl players manage their resources long term is one of your strengths. >> yeah, coach reed late of philadelphia, congratulations coach and tammy, asked me, listen, what can you do?

he actually -- i gave him my cell phone number. i said anybody who wants help from the eagles cramer is there. he doesn't want your money, doesn't want anything. only two players took me up on it i think it is a sign they think my agent will take care of me. geez one of the agents put a lot of money, these players, made a player be in a scam, real estate scam these players need to be educated and can't let the agents do it because the agents are not responsible when it comes to money >> amazing one of my favorite weekends though is the divisional there is so much great ball as we saw in some of those games. >> it was. i have to say last weekend's games in many ways may have been a little more exciting though that comeback was incredible by kansas city down 24-0. i'm looking forward to next weekend. match-ups that you couldn't have asked for more >> jim, what is on "mad" tonight? >> by the way, the hexal deal was announced, get this, literally announced while you

had the texans up by 24. and i said, guys i got to talk to you later i think this is a comeback of a lifetime that was happening we have so much on tonight we have glaxo smith kine we have zoetis a lot of people i think will say wait a second. numbers are too low. and of course it will be extraordinary. larry can tell us the numbers are too low. i don't even think $7. i think they can do more than that please. >> by the way, that hexal is up 10%. good response. >> of course >> incredible. >> there is a lot more on the jpmorgan healthcare summit coming including lilly's david ricks. dow is up 56

♪ >> good monday morning welcome back to "squawk on the

street." nice bounce at the open here dow is up 58 as a big setup week whether earnings, china trade, or eco data on the way >> it certainly is our road map starts with stocks getting a boost from positive trade headlines as the chinese delegation heads to d.c. for the signing of that phase one deal >> we will hear more from the ceo of pharma giant eli lilly live at the jpm healthcare conference >> and what to expect as david calhoun takes the helm of boeing >> markets showing some gains this morning as the u.s. and china prepare for the signing of a phase one trade deal on wednesday. where should investors be positioned as we get into the eighth trading session of the year joining us today our guests. good to see you both good morning >> good morning. >> keith, you still like the setup here, ample global liquidity and stocks still attractive on a relative basis can you talk about that? >> sure.

i mean, the next 12 months we still think stocks look attractive as i mentioned. global liquidity is ample. we've had a lot of central bank easing on a short-term perspective i think sentiment is running a bit hot so i expect more consolidation in the weeks maybe even the next few months but ultimately the path of least resistance is higher we think and we still think recession risk is relatively low yields are slow. 1.8% that means about 48% of stocks in the s&p have dividend yields above that of the 10-year treasury and, again, we think the policies will remain accommodate if f accommodative for the first half of the year. >> it is that policy that has made life so difficult for the bears. how do you explain the bear stance right now >> well, the bear stance will mostly come from either earnings disappointments because we do have a lot priced in i mean, the bottom up intense is looking for 10% growth in eps

which is going to require quite a bit of margin expansion this year and, you know, to come and say that recession risks are low, i mean, that might have sounded good a year ago but we're nowhere close to being priced for a session anyway we're really priced for growth reacceleration if we don't get the growth reacceleration which is now more of a hope and forecast than necessarily a reality or once the fed stops goosing the system with liquidity to fight their problems in the repo market, it is a lot like what happened when the fed started to pull back on the liquidity post y2k in early 2000 just keep in mind really what changed since early october beyond say phase one which is really just about soybeans, that is when the fed posted its memorandum it was going to start to hoover up the treasury bill market, resteepen the yield curve and the process to cover up the problems in the repo market i mean, the fed has actually expanded its balance sheet at a faster rate the past four months

than it did during q3 and the fed's balance sheet has now a 95% correlation with the direction of the stock market and, in fact, in early october just before the fed made the announcement the total return in the s&p 500 was barely more than 1% next thing you know three months later it's up 30% and the only thing that really changed materially was the liquidity spigot by the central bank >> keith, the market conversation was very different this time last week really around geopolitics and the risk associated with iran is it on hold? could it come back and shock investors? >> it can certainly come down. one thing we mentioned is because of the run we've had in sentiment we are all vulnerable to the bad news but i also want to comment i think to put things in perspective, it's been a big run since september but the last two years the market is up a little more than 20% and earnings up about over 20% but you had a tale of two different years. 2018 we had 20% earnings growth in a market that was down as the

fed was tightening and then last year you basically had flat earnings and a fed that was easing and a market that was up strongly if you look and average those things together the market has actually moved in line with earnings it's just done it more with a lag and a lead >> david, i wonder, we talk about where the fed -- how they see this going we had discussion of the balance sheet and creating imbalances last week and now low rates may drive risk taking like that ahead of the great recession do you have faith the eyes are wide open over at the fed? >> well, it's not the first time they've been talking about financial imbalances for quite a while i think a lot of it was more geared toward corporate credit and the fact that the corporate sector bond spreads don't compensate investors one iota for the prospect of what the default situation is going to be in the

next 12 months even without a recessionary scenario. you know, so, yeah i think that financial imbalances are clearly a concern among we saw and then you have the contingent more concerned about the fact that underlying inflation remains so far below target at least as far as how the fed measures that. so you have the two balancing off each other it's interesting that, you know, the situation propelling the fed to ease policy and remain so accommodative, which is their measure of low core inflation, is what is precipitating the massive financial inflation in the asset sector broadly speaking in terms of the comment about the equity market i'll just say this look at the forward multiple, which is now pressing against 19 times earnings i guess you can always say, well, that looks much better than what you're going to be getting in the bond market on an earnings yield comparison. we are still pressing against the high end of the range. when you look at price to book, you look at ebitda, price to sales ratios, we're now pressing

against the peaks or certainly the highest levels we've had since the dot com bubble in 2000 so there's a lot priced into this market right now growth wise for the coming year >> keith is that what you mean when you say you do expect the market to take two steps forward one step back in 2020? >> that's correct. we've been using kind of 19p as where we might see fundamental resistance i think the other thing is you have to look beyond just the headline index we know that technology was the only sector to meaningfully out perform last year, up over 50%, up over 60% since december i think there's going to be more opportunities in these sectors that have kind of lagged behind over recent years like financials, industrials. especially if we start to see stablization in the global economy, which is our best case scenario >> all right, guys it is going to be interesting. we'll know a lot more in the next couple days as earnings and trade really take the spotlight. keith and david, we'll talk to you soon thanks >> thank you >> thank you following today's market

action which of course follows last week's jobs report capping a decade of robust wage growth and solid job creation but a closer look shows some pockets of weakness in the labor market, which could mean slower economic growth ahead good morning, steve. >> good morning. the tight labor market continues to offer a mystery to economists why aren't wages rising faster why is the work week actually falling? you would expect with a low 3.5% rate workers could bargain for higher wages and employers would give the work force more hours neither is happening the work week has declined by 0.3 hours as the unemployment rate has declined from 4.9% to 3.5% after increasing for nearly three years wage gains have declined for most of 2019. you can see that fall off there at the end jpmorgan writes the generally soft pace of wage growth in this expansion isn't too much of a puzzle, given extremely weak labor productivity growth.

but the deceleration of wage growth over the course of 2019 is more mysterious morgan stanley says even with a 3.5% unemployment rate the labor market is not so tight that it's creating sharp wage or price pressures. there are three reasons economists are talking about these are not all of the reasons. the first is substitution. you have a lot of young workers replacing older workers who make higher wages you have changes in the mix all the time in this case, you may have low wage retail and leisure jobs replacing higher wage manufacturing jobs lost because of trade finally the idea of monopsony that the employers are the only ones in town in a lot of rural areas so workers actually do not have bargaining power. modest wage growth with low unemployment gifls the fves them to keep it low but also suggests modest overall growth underpinned by modest consumer spending >> steve, thanks meantime, it is a new era at

boeing with chairman dave calhoun taking over as ceo of the dow component inheriting the many challenges surrounding the 737 max. our phil lebeau has more from chicago on what to expect on day one. phil >> well he'll be busy not only today but over the next several weeks as he not only hits the ground running but really tries to focus boeing, which has been wildly distracted over the last year, year and a half as everything has unfolded with the 737 max. his agenda get boeing back on track it's not just with the max you got the triple 7x, the new middle of the market airplane, a number of other areas. he will be making quicker decisions. not reckless but quicker there is a sense there is a bit of paralysis at boeing and he is going to streamline the 737 max process. now, he'll be visiting the seattle area plants next week. that includes the 737 max plant in renton. that's part of the beginning where he says, look. we need to get an assessment of where we are he will also be calling on

regulators, suppliers, and airlines in his e-mail to employees this morning dave calhoun said, this is a crucial time for boeing we have work to do to uphold our values and to build on our strengths. keep in mind, dave calhoun could cash in to the tune of $28 million in his first year provided he gets the max back in service and hits a number of other incentives that were laid out by the board of directors. but the big focus right now, guys, it's all about the max and they've got their work cut out for them they'll be working with the faa, other regulators, as well as trying to get the max to that final point where we can do certification flight and then from there potentially they could get this plane back in service. >> i imagine those conversations with the faa will be very important in the coming days what about, phil, boeing's relationship with suppliers, the lay-offs at spirit, and, plus, general electric being of course the manufacturer of the engine >> right well, the spirit one is sort of expected spirit has a backlog of about

100 737 max fuselages because it never cut its production rate even when boeing did they simply have way too many of those fuselages and needed to cut employment they'll cut about 2800 jobs starting january 22nd. the supply chain is a concern for boeing that's why they're going to be working with their suppliers especially those tier 2 and tier 3 suppliers in order to say, look we do not want you to layoff workers. what can we do to assist you, work with you? that's going to be a big focus for boeing >> phil, thank you >> you bet >> phil lebeau reporting for us of course on mr. calhoun's first day of work. still to come right here, don't miss a first on cnbc interview with the ceo of pharma giant eli lilly. that is going to be live from the jpmorgan healthcare conference and later, a trio of big banks will kick off the earnings season we'll break down what to expect. a lot ahead. sfx: [phone ringing]

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it is the biggest healthcare investing event certainly around kicking off today in san francisco. there are thousands gathered for the 38th annual jpmorgan healthcare conference. >> reporter: good morning, david. that special guest is eli lilly chairman and ceo david ricks thanks for being here. >> great to be with you. >> reporter: some of the news we've already seen at the conference a new company founded

to undercut the cost of your drugs and other company's drugs. they are saying they'll be the amazon of pharma what do you make of this >> it is interesting i read the press release i don't know much about their business model of course this is an idea that's been tried before. there are lower list price launched drugs in many categories unfortunately, they haven't found as much success as one might think. and i think that exposes the complexity of the supply chain and how medicines get to patients and the role is much stronger than the consumer demand there is so much innovation right now in our industry. that's exciting. we need more-on-investigation on the payment and reimbursement side i would welcome any ideas. if this is a good one let's see what it does i think big companies like lilly need to play a role, too, innovate and find new ways to make sure our medicines are affordable to patients >> does a company coming out saying we're going to offer a drug at a price of one-third to one-fifth of perhaps one of eli

lilly's biggest medicines does that make you nervous or do you feel the supply is so complex they won't be able to break through it >> that has happened before. and as i was saying it didn't find much success. ultimately, we have significant price competition when we lose our patent and go generic. i think the idea here is to create sort of me too medicines that would be a lower priced alternative. that can work but usually the primary reason doctors choose a medicine for a patient is the evidence behind it so it's a difficult to both pursue a robust r&d agenda, to have a full list of great data and to afford to charge less some have tried it it hasn't found much success we ourselves have launched a half price insulin and so far mixed results. about 1 out of 10 prescriptions for the half price version and 1 out of 5 formularies cover it. there is more than just the supply side but the demand side

problem that needs to get resolved >> you got some flack from senators elizabeth warren and richard blumenthal saying that you hadn't made it available enough in pharmacies and people couldn't get it. has that been addressed? is it more available do more people know about it can they get the half priced insulin? >> they could get it before the report came out and can get it now. they stated three things that just weren't true. one it wasn't available. two we didn't try to make it available. and, three, it was sort of a gimmick and doesn't actually affect market pricing. all of those things weren't true certainly we tried to make it available and it is broadly available through the wholesalers. we sell to wholesalers and pharmacies have to buy from them it is true for any medicine if you walk into a pharmacy they might not have it on the shelf but to the point on insulin, usually within a day they can get the insulin you want and that includes the half price ins din. so coast to coast it is available and if consumers want it they should ask for it from

their pharmacies if they don't have it at the moment they can get it the bigger issue is formulary coverage why aren't more? we'd like to see more cover it even though net pricing is the same it is not a given. we have a competitor that is a real biosimilar, the day we launched our half price insulin they cut theirs to half as well. so it did create price competition. consumers are benefiting >> this is an election year of course and drug pricing is always a huge topic during an election how consequential is the presidential election for eli lilly's business does who the next president is matter for you guys? >> of course policy matters our industry is reliant on a lot of federal policies for how reimbursement works and of course the fda regulates us. it's not the most important thing but it's a very important thing. the most important thing is can we invent new and better medicines for patients with

unmet need and i think there's never been a better time for that than right now in our industry i'm so excited by what's happening in our early stage pipeline for really tough conditions that can affect in a very significant way the health of americans and around the world. at the same time the policies by which they get to the market as we've been talking about need change and we're for change. there are a number of bills on the hill now that lilly and the pharmaceutical industry are for to reform part d, to make the system more transparent. we'd like to see those move under this president or a different one. we think change is necessary >> i want to ask you also about your pipe line and specifically alzheimers disease lilly has been committed to alzheimer's for a long time but of course you've been through so many failures, spent so much money. last year we saw biogen have a drug in phase 3 that looked like it failed and then came back from the dead and now they're saying they will apply for approval early this year did that affect the way lilly looks at its alzheimer's pipe line and the race to get to market >> well, not really.

we had, in late 2016, just missed in a big late stage study, we decided to pursue a very clear path to prove whether amaloid could make a difference for alzheimer's patients meaning we arrest that aberrant form or in the plaque form we have a drug that does that as well as biogen but to do it in a very clean way so we wouldn't have questions about efficacy the studies are still going on one reads out soon on patients with this dominantly inherited form of the disease. if that is successful i think it will be another positive sign on top of what could be a positive sign from the biogen drug and we have another as well and that data will come out at the end of 2020 or beginning of 2021. we need that answer, too we have a symptomatic medicine because symptoms of alzheimer's

are still a major problem even if we had disease modifying drugs and a specific antibody that seeks to arrest the other driver of alzheimer's. so all of that is about to read out in the next 12 to 15 months and it will be an exciting period for alzheimer's disease a treatment. >> potentially competing with dupexin, which was recently forecast to be a $10 billion drug how do you plan to compete? >> this is a slightly different mechanism. it works against the key not the lock that is thought to cause this atopic cycle which causes itching and eventually bleeding, some infections. it is a condition that tens of millions of americans suffer from and even more globally and they are still high unmet needs. we hope this medicine can resolve itch a little better,

maybe a little faster, and perhaps have a better dosing schedule for patients. we're excited. dermira is the company and as soon as it closes we'll go to work to bring that to patients around the world >> dave, thank you so much for being here this morning. a lot more coming up from the jpmorgan conference including jsk in the next hour with jim. back over to you >> meg, thanks looking forward to your coverage from the jpmorgan healthcare conference when we return, teches roll in retail for 2020. we will take you live to the annual nrf big show on how major retailers are adapting in the age of disruption. "squawk on the street" will be right back i can. the two words whispered at the start of every race. every new job. and attempt to parallel park. (electrical current buzzing) each new draft of every novel. (typing clicks) the finishing touch on every masterpiece. (newborn cries)

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time for our etf spotlight we are taking a look at the spdr ticker xrt it is off to a rough start in 2020 down more than 2% so far this month and extending its losses today by around 0.4 of 1% let's go live to the national retail federation's big show in new york with all the

highlights >> reporter: hi there. this is kind of like the consumer electronics show for retail here. and many retailers are now looking to the future. the holidays are behind them we know the future will involve an awful lot of technology infused in the in store experience and frankly the way that retailers are run this morning we heard from starbucks ceo kevin johnson. later today we'll hear from lowe's ceo as well as mastercard you can't really move forward to the future until you fix the fundamentals of what's wrong now. i spoke with kohl's ceo michelle goss here is what she said about holiday sales. >> i'm very confident around where we're going. you know, we did not meet expectations for the holiday time period. certainly didn't meet my expectations women's is 30% of our business it's 70% private brands. if we hit some speed bumps there it has a major impact on the company. we have our arms around it >> reporter: there's a lot going

on in retail ahead of the icr presentations we're getting a number of specialty retailers that are preannouncing results lululemon is one of the names that had been called out by analysts as an early winner and it does appear that was the case for holiday. the company basically now upping their forecast for earnings, for revenue, as well as comparable sales, now expecting them to be in the mid to high teens that was above the original low double digit forecast. abercrombie, american eagle, both of those names reaffirming their forecasts. abercrombie saying it had a record revenue week for that black friday week and then jeffries is reiterating its buy on american eagle. not the same case, though, for five below shares down around 20% after the retailer just warns investors, look we're not going to make the analysts' forecasts for earnings, for revenue. comparable sales, now possibly down as much as 2.5% when the street had been hoping those would be up by 3%. back over to you

>> so many stories swirling around ub today. thank you so much, courtney reagan the big week for bank stocks starts tomorrow. the ceo of kbw will join us to talk about jpm, wells, citi, rng.'ll all be on deck in the "squawk on the street" is back in two minutes ♪ ♪

welcome back, everybody. i'm sue herera with your cnbc update at this hour. prices at the pump edging higher gas prices rose by 4 cents over the past three weeks to an average of $2.64 a gallon, 33 cents higher than just a year

ago. queen elizabeth and her heirs will meet today to work on a plan for prince harry and his wife meghan markle to step back from their duties and spend more time in north america. harry and meghan shocked the world last week, announcing they will step away from royal duties and work to become, quote, financially independent. bolts of volcanic lightning were seen crashing across an ash column during the eruption of a volcano in the philippines last night. more than 16,000 people have been evacuated dunkin' donuts is teaming up with snoop dogg for a limited time menu item called the beyond dogg sandwich. it features a beyond breakfast patty with egg and cheese and is served on a sliced, glazed donut. that's the part i'm not sure about. but it will be available today through sunday maybe it's a sweet and salty sort of thing. ism' not sure. you're up to date.

that's the news update i bet it sells, david. you never know >> you know, you never know what people will eat, sue >> exactly >> thank you sue herera banks are gearing up to report earnings this week. tomorrow we'll hear from jpmorgan, citi, and wells fargo. that's a lot of market cap right there. joining us now is ubs bank analyst saul martinez. he down graded jpm and bank of america ahead of this big week we all know anybody who paid attention watched that big move up in the bank stocks over the last quarter in particular of the year out performing the s&p as we are in this year, how important are these earnings to justify the valuations that banks ascended to only over the last few months? >> well, thanks for having me on look, i think the quarter, itself, is important it's really about the outlook and whether the outlook can really justify what have been pretty material moves for the largest banks. our downgrades last week of

jpmorgan and bank of america to neutral weren't necessarily reflective of a more negative view, fundamental view of each of the stocks. it's really that we just feel like they are pricing in a heck of a lot and that the bar has been raised quite a bit. for us you really would need to see material profitability expansion for both banks to be able to justify the kind of upside you would need to justify a buy rating so for the quarter, itself, look i actually think the quarter will be pretty good. i think it'll be pretty good for jpmorgan we are actually above consensus for the fourth quarter i think the question for jpmorgan and for the rest of the group is what are they going to say about the outlook from here? and is the outlook going to be sufficient to really justify the kind of move that you would need to -- or the kind of profitability expansion you would need to justify the

material upside here >> yes, to your point, jpm, you point out trades at what almost 12 times 21 earnings, right, trading above two times tangible book value at this point obviously very different from the likes of a goldman sachs so you don't see much upside in the stock even if they do report a decent quarter >> that's absolutely right i think it will be a pretty good quarter. you know, when we down graded them last week, we estimated that to see material upside from here, their rotce which is in the 18% to 19% range wouldn't need to get well above 20% you would need to see material profitability expansion from here from an already elevated profitability level, already elevated rotce level so the quarter could be good but is it going to give us enough visibility to suggest that they can continue to improve profitability in a low rate environment, you know, from what

is already a pretty high level of profitability i think that is a hard bar to jump over for them >> yeah. all right, we talked jpm bank america to a certain extent anything in terms of wells fargo, which has had a bit of a different track over the last couple years, just trying to rebound from a significant crisis >> yeah. look, i think for wells fargo the quarter probably matters less than even for jpmorgan for the other bank really to get excited about wells fargo you need to have a line of sight that they can, you get past the regulatory hurdles that they face and start to grow and improve their profitability which has really suffered for the last couple years. one of the biggest things for wells fargo is can they right size their cost base, improve their efficiency level

their current efficiency ratio is the mid 60% range to the point of comparison most banks we cover are in the high 50% range and some are even better so the bull case is, look. they are not going to be at that level of efficiency forever and once they right size that their profitability level is going to expand materially. the problem though is the timing and when you actually get line of sight to get there. i'm not sure you're going to get that this quarter. you have a new ceo in charlie sharp. it is hard for me to believe we'll get a financial outlook or guidance that suggests that they're at the point where they'll start to right size the cost structure and be able to grow a little bit more again >> yeah. saul, we'll be paying close attention as i know you will thanks for joining us this morning. >> sure. thanks for having me >> saul martinez from ubs. let's get more on the banks now and bring in the ceo of kbw. nice to see you, tom

>> good morning. >> we were just talking. the bank stocks in particular, some of the big cap ones moved up appreciably certainly in the latter part of the year. how important is this earnings season again in terms of justifying those valuations and/or to the point saul was making pointing toward future growth in the stock price? >> so i think the first thing is, yes, they've moved up and out performed really by about 10% since mid august but i don't necessarily think it's because they rallied so much i think it's because they recaptured a lot of under performance. so if you took a snapshot today of the bank stocks what you would see is on average they're a little cheaper than they are historically whether on a p.e. basis, relative dividend basis or an absolute relative p.e. ratio so we do think they still are modestly attractive relative to the market and, also, the smaller cap bank stocks have under performed the bigger ones. those are very much so under

valued relative to the market. but i do agree with the point that really the first quarter is sort of a stopping point for the broader story, which is that there's been a negative operating leverage story here in the banks for the last six months or so as interest rates have been continuing to march down now that interest rates appear nearing the end of their lowering cycle, you're probably going to see a pick up in operating leverage and that is going to be a positive >> so it's going to reveal itself not in the print itself but the commentary that follows? >> absolutely. and i think thecommentary is going to be around where do you think your net interest margin is going because net interest income is still the majority of revenues for this group what due see about loan growth loan growth has been slowing over the last six to nine months the margin is expected to be down again it is going to be down by a smaller and smaller degree as the year unfolds and then another thing is, do not forget capital management.

we think over a hundred percent of earnings for many of these banks will go back into share repurchase and dividends, which is very favorable to share holders. >> that trend should likely continue the top five banks collectively spent about $16 billion on buybacks last year, thomas do you expect that to continue with the fed keeping rates on hold >> absolutely. the snapshot of the quarter is going to be record profitability in terms of net income dollars balance sheet is as sound as it's been since the global financial crisis benign credit quality. so the snapshot of the industry is it is in great shape. the question is what is happening to earnings momentum what's interesting, even though we talk about this, the banks will probably still grow earnings in 2019, 4% or 5%, probably still better than the market they'll have probably flat earnings for the first half of the year in a year over year basis and then they'll get better in the second half as the margin stabilizes. as long as we don't get a credit cycle that shows up or a recession, that's probably what's going to happen >> you mentioned loan growth

we're getting some cni numbers, got to go back to march now to see cni this low why? >> the economy slowed. i think with the economy slowing you saw -- and fears of recession -- you saw folks pull back some. so that is really what we think has happened so yes loan growth is probably now a 2% to 5% type opportunity for the bigger banks whereas it used to be above 5%. >> we're starting to see a return on tangible common equity i mean in the high teens for some of these institutions a number we didn't think we'd see certainly -- >> it is remarkable. also, david, what's interesting is who's doing it? we were just talking earlier jpmorgan and bank america are 16%, 17% return on tangible common equity companies. that's above a lot of the regional bafrmgs now, there are some outliers, great performers there, but the bigger banks are becoming more profitable, which is going to give a lot of credibility to the scale argument which i think is going to drive

more consolidation >> what is an appropriate multiple to book, though with jpmorgan now trading above two times tangible >> well, we downgraded jpmorgan the end of last year as well, the market perform we think it is a very high performing company our favorite of the large cap banks right now is citigroup, mainly for valuation and we think it is a similar story we've heard which is they're going to get positive operating leverage, going to grind to better profitability and buy back a heck of a lot of stock. so for that reason we would prefer citigroup right now over jpmorgan but i agree with the point that jpmorgan's results could be very solid. >> what is the bull case on the small to mid cap banks that were really left behind last year >> yeah. the bull case is that it is going to be less challenging in the future, so the smaller banks have less noninterest income, so this margin trend of stablization is actually more beneficial the other thing is the bigger banks have more global operations another story, we just double downgraded the european banks of kbw. we went from out perform to under perform about a week ago

that doesn't happen usually. and that's predicated on negative interest rates. and a continued slow economy so to the extent you're a big global bank and you're in that market, that's going to be somewhat of a head wind. >> we've had negative rates for quite sometime, though >> yeah. but the call had been that they were going to turn and that we were going to see some return and now they're doing a big ecb review, which won't play out to the end of the year, which our analysts believe means you'll see no change in what it is now. so there is a sense that you would see some change but that has been pushed further out in the horizon. and while that's happening, you're seeing roe for some of these big european banks go to high single digits while we're talking about bank america and jpmorgan at 17%. that's the difference. >> tom, always appreciate it thank you. >> great thank you. as we go to break take a look at some of the top performing names on the dow today led by dow, coke, boeing, axp, and goldman sachs of course the names we'll be paying attention to in the coming days. you can always watch us live on

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devices provided preliminary guidance for the third quarter that fell short of analysts' expectations and the stock is on pace for its worst day since november keep it on healthcare especially in light of all that jpmorgan healthcare conference headlining coming out today david, back downtown to you guys at the new york stock exchange >> thank you, dom. when we come back trump's tariff tactics we'll speak to one of the largest spirit and wine wholesalers live from the texas warehouse on the proposed 100% tariffs on french wine we made usaa insurance for members like martin.

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the trump administration's fight against a new french digital services tax, the white house proposing up to 100% tariffings on millions of goods leaving the wine industry to warn that such tariffs could lead to an armageddon of costs among those who testified, barkley stewart, executive from

wine and spirits he joins us from a company warehouse outside dallas thanks for joining us today. set the -- >> thanks for having me. >> what does this 25% tariff mean for your industry how has your industry been responding how many jobs are at stake >> so thank you for having me, number one the tariffs could be as much as 100% on french sparkling wine and champagne. and the number one point that we keep trying to explain is that we think that the largest impact from these tariffs would be on u.s. workers and on u.s. jobs and on the u.s. economy. in large part, france is able to sell as much champagne as they produce, whether it's to the united states or other parts of the world. so we think that the damage to u.s. jobs could be as many as 17,000 employees in the wine and

spirits industry and leave lasting damage on the u.s. economy. >> some pretty big numbers what's your message to robert lite heusser who in the last week has said that 25% tariff koul imcrease to 100%? who would that mean for your industry >> like i said, i think the damage would be severe there's two different sets of tariffs and i think it's important to understand there are some tariffs that went into place on october on french still wines, and those are 25% right now and they're being discussed as being raised to 100%. and then on the digital tax, there are new tariffs on french sparkling and champagne that could also be as much as 100% and that sort of doubledown is what's particularly alarming to us as an industry. frankly, you know, our industry has worked for years to try to eliminate tariffs and allow for

the free flow of goods in both directions we really hope that ambassador lighthizer can negotiate a settlement and not have to go to using tariffs. we see that as being a back and forth that only escalates and is counterproductive. >> although in classic episode of uncertainty, then, i guess i wonder what the industry does in the meantime in terms of ordering inventory do they try to minimize what they're bringing in from europe and try to highlight whatever is an equal substitute made in north america or somewhere else? >> well, i think, you know, there's a couple really good points you just made in there. the uncertainty around when the tariffs would win and if the tariffs would be applied is a huge issue there are a number of importers that don't want to ship goods right now because they don't know when the tariffs would be applied and they have to set their price before the goods hit

the water. our supply chain can be as long as 120 days for product coming from europe to the u.s >> you mentioned the 25% tariff. what has already been the impact in the marketplace since those tariffs went into place in october? and given what you've learned, what would your expectations be if question we go get the 100% n sparkling wine >> well, you know, the 25% tariffs have certainly had an impact and we've seen that the issue with the 100% is that, you know, i was having breakfast with an importer that we do business with the other day, and he said, barkley, if these tariffs go into place, it's not going to hurt my business. it's going to put me out of business you heard that over and over again in the testimony last week in front of the ustr so we fear that there are pretty

drastic consequences to this >> finally, on pricing, kwhashd consumers expect one said a bottle could go up from $70 to $140 is that what you're seeing in the marketplace, barkley >> well, you know, the tariff percentage hasn't been set yet, so it's hard to say what the impact on the shelf would be but with 100 per% tariff, you c see a doubling in prices >> we'll leave the conversation there. barkley, thank you for join us and walking us through what these tariffs could mean for your industry. barkley stuart >> thank you very much >> when we come back, do not miss an exclusive with google's cloud chief. sometimes, the pressures of today's world can make it tough

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it's 8:00 a.m. at google headquarters in mountain view, california, 11:00 a.m. on wall street and "squawk alley" is live ♪ ♪ begin the day with a friendly voice ♪ >> good monday morning i'm carl quintanilla with morgan brennan and jon fortt live at post 9 of the new york stock exchange on the cusp of a big weekend ahead. >> we begin with a tech stock rally, tesla, microsoft, apple, nvidia