if folks want to take a look at the numbers. the dow futures indicated down by 511 s&p 500 down by 83 and nasdaq off by 147 the cpi number showed an increase of 0.1% markets had been expecting down 0.1% year over year, 8.3% we'll pick up with more coverage. >> the light at the end of the tunnel is a train. >> there you go. we'll see you tomorrow good tuesday morning welcome to "squawk on the street." i'm carl quintanilla and david and cramer is in seattle energy costs not enough to offset higher prices on shelter, new care, stocks open red. the two-year above 3.7 we'll begin with the hotter than expected cpi jim, you just had a discussion

about it's hard to pin the increase on any particular category pretty broad based >> well, at the same time, isn't that why the fed's talking about raising rates? i mean, one of the things that really astounds me is let's say this number showed a decline in almost every single aspect of what we saw, i think we'd be saying i cannot believe the fed is raising rates .75 they're going to throw us in a recession. what the fed is saying let's make it so that housing is not so hot can't do all that much about food we'll make it because you can't buy a lot of autos why do people think the fed was going to do .75? did they think the fed would say, you know what, weaker number, let's cool it? david, when i look at these things and i look at the futures down, all right, are the people who do this risk on, risk off nonsense really still in charge after we've seen this is the year of the stock picker

david, i need three stocks that get hurt by this i just need three stocks give me two stocks give them to me, please. >> so you're just blaming rapid fire traders who are looking at cpi numbers and reacting as opposed to actually reacting to, what, the macro economic picture as it really stands? jim, we were expecting a down number we got hints we might finally be taming inflation and then we see that the index for all items, less food and energy rose .6% and it was only up .3% in july it's going in the wrong direction. >> ilet's talk about empirical data two hours ago we did a significant peace about rents. that is something that could be happening in the high end areas. when you talk to gm and ford, what they say is they're worried about financing going higher i think that's going to happen

the price of homes is coming down is food necessarily an issue what we know from tiyson food, beef and chicken, they weren't able to raise prices when i look at these things, i say, oh, wow, the fed is going to raise .75 and it looks like things are going to be leveling out? i want .75 the discussion of 1.0 is panicking. how about if we can say -- carl, this is what's so significant. if we have tame inflation and we heard that the fed's going to be .75, the whole discussion this morning would be about recession. can we just cool it and say there's going to be some inflation, less likely chance of recession and then instead of selling everything we actually look at what we're selling is this the time to sell jpmorgan on this >> it may well not be, jim, but at the same time, as you well know, there are a lot of algorithmic trades that are set up to react to things like this, including that cpi number.

i would just come back to the fact that we do know, at least according to powell and other members of the fed as well, that they're willing to overdo it, so to speak, in terms of raising rates to really tame inflation i mean, there's now people talking about 100 basis points instead of 75. >> well, look, the 2-year is in a price that i think is pretty significant. 3.6. that does signal that you're going to have a .75 rate increase where i listen to a lot of people who come on air and their reluctance to mention individual stocks has to do with the fact that they don't cover individual stocks largely economists i'm stuck with individual stocks why? because our viewership is stuck with individual stocks our viewership is not high speed algorithmic traders. our viewership says, you send that down, give us a chance to buy what we missed last monday and we're going to pick among the rubble carl, when i see the crawl, the things being sold out underneath, i have to tell you,

i don't think any of these companies is actually going to be worth less after today. i suggest we all watch oracle. they had a very good quarter i know it's not a high growth stock but i think it's interesting. i also key on disney david's going there and i think the discussion will be about how well they're doing, not about, hey, you know what, i'm really worried about the 10-year. i'm really worried about the fed funds. these are bargains and they may not be bargains initially. i hit them again why? that's all i know to do. compare that to the commentary

b of a, at&t, visa, constellation, match i mean, the airlines they are not sitting at -- united's words, it's almost like summer didn't end. that's how strong air traffic and air passenger traffic is right now. >> well, that's what i heard from expedia yesterday i think it's obvious that to me, the consumer is wrong, but it's also obvious to me that doesn't mean the consumer will be strong why did powell start talking about .75? is it because he felt the numbers were going to cool honestly, again, i want to put it in the words of people who would have come on air and said, you know what, cpi is cool and the fed is doing .75 i'm talking about a first class disaster as the consumer rolls over i don't want this number i'd say in retrospect it does say that powell was right with .75 and it's right there. they have another .75.

i'm looking at individual stocks and just saying, okay, that's why they've been at these levels, particularly tech. and i've got to tell you, if you're a banker and you look at these levels and you think the fed is going to go .75, i'm going to raise numbers for every single bank. they report first. so i struggle with the idea that the futures should still be in control after the disastrous performance of motte people who do algorithmic trading it's always impossible, carl, to judge. i like to put things in sports terms. russell wilson crushed it last night and it's so great that when denver came to seattle it was just a monster defeat. geno smith was everything that we thought oh, wait a second, they actually had a game and that didn't happen but, you know what, forget about the truth fantasy is better than fact. that's who those guys are. david, i know that we don't want to say, wait a second, this was a great number because it's not, but, david, i also have to tell

you, i mean, that's why the fed decided to do .75. i think if anything the fed saw the game last night before us. >> understood. >> powell, visionary >> those who do not want to own stocks here, are choosing not to buy many of the names you perhaps feel are worth buying at this point would simply say there is further weakness to come and that there will be softness in the economy that will show itself from the diminished earnings from many of these companies. why would i want to own equities when they're going to get cheaper? simple as that. >> utilities, which i follow, are not raising rates for electricity, they're coming down natural gas has come down a lot. i cover the home builders. they're incredibly petrified that high end homes are coming down along with the rest we heard this morning on our own network that rental was coming down have we heard food is coming down why don't we see what costco says it's entirely possible jay powell was not able to solve the

ukrainian question which is about 7% of our calories maybe the ukrainian army is going to solve that. i look at these and do i say do i want to be so stupid as to say every single part of that rally last week is gone? i looked at some of the tech stocks after this and i said to myself, i just spent a day at amazon web services yesterday. do you know what adam slipsky who runs that company, the one thing he mentioned, the possibility of the fed go going .75. >> right i get it i get it >> we should, carl, go through the numbers again quickly for people who made mention. the food index was up .8%. that was the smallest monthly increase since 2021. food at home rose 1.1% food at home, 7.1% in august and medical care gets more and more expensive all the time, doesn't it maybe that translates to looking at those things. >> medical care, up .8

jim, we might start to get relief in new vehicles up .8. food up .6 the most concerning thing i think for a lot of people is going to be shelter, up .7 fitch is out right now services inflation is the biggest concern, jim, fueled by that acceleration in rent. it looks like it's got quite a bit further to go. you talk about housing getting knocked down people are going to have to rent instead. that's sort of locked them in a box. >> well, you know, was diana olick's piece just fiction one of those things we did just say, listen, her piece on rental was something we should completely dismiss and focus on these? i like diana olick i think she does a good job. i don't think she made up the report she didn't say i'm reaching into my fictional bag i think it's a possibility if you listen to what oracle had to say about cerner, big health care company, things might be getting better over there.

people aren't going to cancel trips. that's service you can't change that. that is something that is post covid, carl, people have been locked up. the idea that the autos, you continue to finally get the semiconductors and therefore flood the space of autos is not included in those numbers but is certainly the truth now. and then what i think will happen, this whole -- what we're going to hear is the endless debate of .75 versus 100 that's a red herring you have .75 that's what the two to three-year says. i'm tired of taking my cue from the futures because they have not been right if i look at the banks and i say, oh, my, i am really worried about owning citigroup, carl, because of this, don't people realize that what you have is going to be able to get .25, maybe .3 and the bank's going to be able to get 3.5 not unlike 1981 and 1982

i think most of the future traders were in diapers back then, pampers, huggies, depends on your choice that's when greenspan said we have to reliquify the banks. we don't have to reliquify them. david, history is not bunk it's true that you can say history repeats itself the first time, obviously whatever marx wanted to say, the second time a farce. the dow is down 500 points it will be down 600 because these people like to make themselves look right. that's been something i've been saying for ages. i just think that the whole rally was not a bogosity. >> a bogosity. >> i made the word up because it caught people's attention. >> yeah. yeah like pompanous of love same thing

making it up >> talking steve miller? >> yeah, of course. >> if i have one question i would like to ask what is pompanous? who is maurice >> we don't know >> maurice is part of the scene which went broke he says in a tweet that fed funds are now seen peaking at 4.27 in april. it's also how long we'll be there. on rates before the fed hiking 4% so 75, 75 and a 25 >> it does sound like -- >> oh, geez. it's like the nfl. the nfl. you want to predict. that's got billions of dollars and how long the gamblers work i'm listening to different

gamblers they watch the fed these are all gamblers, carl i find the gamblers are often wrong. >> well, you saw the b of a fund managers today, cash levels 6.1. that's the highest since you strip out 9/11, jim. that's an all-time high. savita saying s&p 500 is probably the worse thing you can own. probably the most crowded ticker in the world >> well, look, then let's look at individual stocks caterpillar was up, now oracle was up now oracle is down that stock sells at rock bottom multiple they'll buy back another million shares of stock as soon as they can. they can't do it today you know what, it's interesting. to come up with the level of minus 575 on the dow is there someone now who says,

you know what, i think it's minus 640. is there really someone who could be that challenged intellectually i think those people are on intellectual vacation. >> understood you've made that very clear. >> i've just changed my mind i hate the market. that's what they're like that's what they're like. >> yes, that is the market that we live with, jim. we live with it every day. you're talking as though you haven't been a part of this market for decades i mean, yeah. >> i thought the cowboys were going to win for heaven's sake >> i'm sure you did. >> three times champion in the "mad money" league and i thought the cowboys were going to win. that's just as effective carl, we are trying to predict something we can't predict i will tell you this, jay powell said this number is going to run hot. he's going to do .75 i think's going to do .75 if it runs hot

that is empirical. that is not guesswork. we seem to act as if this little bit of inflation, more than we thought, is a great reason to sell disney down to 108 i did not go to college to get stupid james khan >> i hear the music. does that mean we're going to break? >> i think -- >> is it that -- >> i don't know. >> we don't know anymore. >> i think we've exhausted this subjects matter if we could make an audible. >> no. when we come back and talk starbucks how much that should be down. 3 points because it's all different here i want a triple cappuccino, hold the wet, there, because of this number everybody's view is changing about their lives because of this number. no geno smith won last night. >> there we go we will go to break. >> how does that happen? >> we have a lot, jim. we'll dive into oracle big day for twitter.

peloton with the runway. big day for starbucks. jim in seattle for that. this testimony, what to expect from the whistle-blower and a lot more as cpi does run hot more "squawk on the street" in a moment texting for backup? no she's totally in charge. of her portfolio and daniel g. she's building a greener future and he's... running a pretend restaurant. and phil? phil has questions, but none of them are about his portfolio. digital tools so impressive, your money never stops working for you with merrill, a bank of america company. new projects means new project managers. you need to hire. i need indeed.

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fake accounts. we're going to bring you live coverage of the hearing. remember, of course, these accusations did not focus on the area of contention between elon musk and twitter, namely the number of bots on the platform that really was not as mucha focus for him as it is on general security of the platform itself many of the questions that at least were put to the ceo by the committee on the judiciary deal with that. we'll see what zatko was asked and what he answers about the policies and procedures for protecting user data from insider threats posed by foreign intelligence, training, guidance, instructions given to twitter employees. carl, it goes on from there as you might expect as well including obviously whether they deceived the ftc again, they do regular audits

and have completed one since mr. zatko left the company this may be musk's i don't want to say last chance but certainly one of the last chances they have to really raise some questions that will perhaps give them some traction in delaware court. it's not clear that they've gotten there yet >> yeah. i was going to say, the history of congress eliciting original ideas or facts is checkered, would you argue? i'm not sure what grassley and durbin can add to this it's very much unclear it's going to be anything but theater. we're going to listen and want to hear what mr. zatko says, that's right perhaps some good questions will be raised. unclear, jim this thing is on track for the october 17th in delaware court so we're talking roughly a month from now at this point no talk of settlement yet but that can happen very quickly won't take long if, in fact, the two parties should decide at some point that that makes more

sense. but, jim, you know, meanwhile, shareholders obviously approving the deal as expected why wouldn't you 5420 versus 15 i think i'll take 5420 if i can get it, whatever the chances may be >> senator durbin is a person that a lot of retailers are looking to to be able to end the massive fence stealing and fencing online, including amazon yesterday. he's trying to get legislation, we believe, that would make it so that fencing would be illegal, but what's so important is you have to drop all of that. could there be anyone more important than mudge i mean, mudge, i'm not talking sludge, i'm talking mudge. he will go forward he will do this. we'll forget it in about 48 hours, which is a little bit shorter than meta verse when we have whistle-blower there. it's not relevant. you know what, david, maybe all of this will end when elon musk gets in there while he's

launching rockets and also doing something with cars. this is probably something he can really focus on, too what do you think? >> it could be it could be. he's going to have to take a little time to get to pose very soon i think it's scheduled for quite soon. >> can we get there, david have you ever been >> he'll want to settle before he gets to pose. have you ever been deposed you know at the beginning of the deposition carl they ask you to say where you live, give your name will musk do that? will he answer that pedestrian stuff? will he yawn what will he do if he's faced with the same thing that 340 million other people have to do? i can't believe he's -- i think he's going to give his addresses and then the deposition is going to be over because it will take the whole day. >> we'll find out. it's going to require a little bit of digging to get into that deposition meanwhile, two year, 3.73.

almost 3.74. we'll get cramer's mad dash and countdown to the opening bell. don't go anywhere.

let's get to a mad dash. cross-country yet again as we get you to count down to the opening bell oracle reported earnings, jim. what did you think >> well, first i just saw howard schultz. reminder of titans in our time speaking of another titan, we have larry ellison last night basically blasting the hell out of the bears safracatz. we think she's a heavy weight. they're growing all of their cloud at 45% so i guess because of this cpi number we are supposed to sell oracle you're going to be selling it back into a darn buy back. the right to be stupid is in the

first amendment. i think it's something madison put in for remember madison >> yes, i do. >> smart fella. >> hamlin gets all the credit. he had nothing to do with that first amendment. >> back to oracle for a moment the numbers themselves, the cerner acquisition going in the right direction. they haven't really integrated it yet >> not yet cerner is an opportunity they mention amazon web services is just growing incredibly once again, there will be people who sell amazon because it's part of the s&p. i want to take the other side of the trade. let them dissipate their selling by 11:00 and take a look at amazon i just discovered within the last 72 hours that the web services business is crushing it >> what do you mean? you didn't know they were crushing it previously what did you learn from the

interview you didn't know going in >> very good point i think there are a lot of people who felt that we are beginning to see a slowdown in some parts of the internet but adam continues to hire we know that larry ellison said last night he cannot believe how fast amazon web services is growing. does that mean we should necessarily buy a stock? no, but it does mean the futures may be knocking it down to a level where it's worthwhile. >> well, he did tease some high profile defect shuns from aws to oracle in the coming months so we'll see what kind of wins oracle can put together. overall, guys, obviously some pronounced weakness here in the wake of that cpi number. we'll see how much can be unwound. martin newton technician said maybe the rally getting a little bit extended 200 s&p points in about 4 days

certainly on inflation is going to help accelerate that. let's get the opening bell the cnbc real time exchange. at the big board, it's endeavor celebrating the brand opening of a digital arts center and henry schein distributor of dental and medical supply so, jim, after a series of pretty strong days, 8 to 1, 9 to 1. we expect it to be pretty negative at the opening. there it is. >> certainly look, if you look at where the s&p is, we're going to repeal 50% of the rally that tends to be where you should be buying if you felt you missed the rally david, you and i -- look, we've all been around a long time. let's say -- look who's ringing the bell, henry schein it makes a consistent medical supply company it should not be hit endeavor, i don't know about you, david, ari emmanuel has not

texted me or called me but it's only 9:30. i think he can't call me while he's still up there. you know, i mean, i'm just saying there are a lot of companies that are doing quite well that are being thrown away right now. you should just pick your spots. i am saying amazon is getting half the gain. isn't that where you're supposed to buy when it comes to profit taking, coming down? david, i don't think i'm the one who is saying absurd things. i think the futures market is saying absurd things >> you made that very clear. you made that very clear over the last 30 minutes. you're going to have an opportunity though if you want to buy to -- >> every second. >> at roughly 2% less than you would have paid yesterday with the nasdaq down 2.75% right now. of course, we've talked about that two-year hitting heights we haven't seen i'll ask you the last time we

saw two year at 3.74 you have to go back to pretty much '07 the 10-year earlier this morning, would take you back to june we did hit 3.48 this summer. >> right right. >> wouldn't you sell that chart? that's a spike that's a spike how can you not want to buy 3.75 if you are going to raise .75. .75. is there any chance this is an opportunity to buy these notes why does it have to be an opportunity to tell them that's a parabolic move. i sell parabolic moves whether they're in stocks or treasury. that's a good point. the question is what are the reverberations going to be in the broader economy? what's it going to mean. jim, housing is obviously a very important part of this economy you've talked a lot about it

diana olick talked about rentals. sorry. >> isn't that what we're actually hoping for, is a decline in those things? that's what -- we want .75 we want a decline in those things they're certainly not rece reces recessionary we're going to have a slow down, no doubt about it. pick your spots by what is hurt by this and sell and think about what to buy. yes, am i a broken 45, maybe even lp? okay, i can't change my mind it's 6:33 here it's 9:33 and i look at apple on the 14 launch and i can't get one. i've got this phone because i lost my phone. wow, i guess i shouldn't buy the 14 because the consumer price index ran a little high. carl, it's a little counter

intuitive to think an average american is going to use prime less amazon is over valued and the price to earnings ratio should go lower carl, isn't that what's been happening since november how many times can we sell these things >> well, i guess a few, but i guess, you know, jim, s&p is pretty much back to the 50-day it doesn't sound like you expect us to go back and retest 3900 or maybe you do >> look, i think there will come a moment at some point this year where we'll come down. i think many of the lows are put in there's some parts of the market that are over valued i have repeatedly mentioned nvidia at 40 times earnings. we're looking at nvidia. admittedly china is going to, i think, hurt them i cannot accept the fact that i

hear this morning it's down. costco is going to tell me food is stabilized. i deal with almost every utility company. they are not going to be having increasing electric rates. we know that natural gas is coming down. there are things that happen that change there are things that change. >> that's a great point. for example, we do have gas prices here down 13 weeks. haven't done that in three years. goldman, cutting their forecast on european nat gas. in their view they have successfully solved the puzzle how to get through a winter. the issue will be next year when storage goes back to 20. you have to get some demand destruction. >> and going to be dealing with what are going to be consistently high prices for energy and what that's going to mean for manufacturing on the continent and certain sectors they're going to have to slow

dramatically >> oh, yeah, goldman has called the situation dire we haven't mentioned ukraine page 1 of the journal -- timely, the "times" 40 local russians calling for the resignation of vladimir putin bloomberg with the piece about how the possibility of a collapse in the russian military is now something people are actively trying to gain out. >> well, in the second month of the 1994 incursion into chechnya the russian army did collapse and everyone thought that this russian army was the brand new, more disciplined army. they chose this to be a police action they did not send their major divisions like they did in the successful war gets chechnya in 1999 i think a lot of us felt, i did, too, i thought they would send the elite group. obviously they haven't sent the

elite group. good, dow down 600 got that one right i am surprised, david, there are so many people who actually talk openly about putin being in trouble because you'll probably be killed if you say that. so those people probably have had to think about making that charge because putin has thrown people -- no, someone jumped out of a hospital window recently. i felt that suspicious i don't know about you i thought it was suspicious. >> defenestration is a common occu occurrence it has nothing to do with anybody actually pushing. >> has there been a dictator who would survive such adefeat now of course we're hearing -- i've gotten inundated by hedge funds saying, jim, you have to talk about nuclear war you absolutely have to talk about the russians going nuclear. i say, okay, i just did it >> i know.

i mean, that was coming up yesterday. now we have to consider the fact what does putin do if he actually is losing then we have discussions as you just brought up. the idea, could there be a real change in power. it seems inconceivable in some ways until it happens. those things do. >> right >> clearly, carl, it would be a residential real positive with some change in leadership or one would expect it would be a positive significant positive very early to be talking about that >> carl, american express was up 2.5 points at 430. american express is down a lot i listened to peter kernan at expedia. american express was having a great quarter. their numbers with visas are great but we have to sell it because that's what you do when the fed raises rates even though that's exactly what we expected to happen.

so i would say to people at home, please, don't sell into this don't -- you know, please stay the course the cavalry is coming in the form of many of the numbers that were red hot cooling carl, there's a possibility that when you break down the cpi there will be some numbers that will still be high thank heavens it's a little bit higher or we'll say the fed is going to put us into recession to stop inflation. if the fed was saying we have to wait and see, carl, then i'd say, you no he what, the market deserves to be down this much. but the fed is saying, listen, we basically knew this number was running hot. you didn't we're going .75. we'll go a little bit more if necessary. i think people just -- everything is gospel because the 10-year note went to 3.4 but the 2-year is at 3.7, therefore we have to go into recession. every number tells me it's unlikely to go into recession. i'm still believing in jay powell largely because of in a period

between october and december of 2018 he's been dead right on everything it does not accrue at all to him. it just doesn't accrue i question that. >> you raise a good point, jim, especially given that a couple of macro desks the last 24 hours, jpmorgan is the big one arguing economic data and investor positioning are more powerful than fed speak. this is colonovic. it's increasingly supportive of a soft landing and more likely a hard landing john golovic says there will be a collapse and the fed has to stop in, say, the next four to six months. >> well, if russia starts losing the war, they have to flood the world with oil. >> they are losing the war let's be clear starts losing the war? they've been losing the war. they're definitely losing the war. >> okay. let's say -- all right i was trying to be negative.

never mind forget it. i don't want to be negative. let someone else be negative i am in a town right now, let's accept this, i am in seattle i don't know if people stayed up a quarterback who was a second rate quarterback who played for your team, david -- >> yes, he did. >> -- he was just abysmal. i thought it was an affront to gino's, he won things happen. these people could be wrong. the people making these bets could be wrong i want to take the other side of the trade. i'm not changing carl, i'm a broken record. i'm positive i can't -- i'm positive. i'm sorry. >> somebody just said that you're a broken 78 yeah geno smith was not abysmal he wasn't given enough of a shot i saw him play some good games with the jets. it didn't go his way. >> he did? i never saw that. >> it's the jets what are you going to do

>> yeah, it's sad. >> the thing i wanted to come back, didn't russell wilson look snoeld. >> no, he didn't look old. he didn't look old he was right here with us the other day. >> carl is the expert. >> he looked fabulous. >> we're rooting for him although he got booed pretty bad. they weren't booing the team, they were booing russ. >> once again, we're down. we're going to try to stabilize. guys, you know what i'll give you? i was in europe last week and my electric bill, carl, my electric bill is up three times from a year ago i thought that was significant and the eu -- i said, listen, we'll give you 40% of putting in solar panels wherever you want to because electricity is just crushing the economy i am a believer that europe is going to be in a bad recession carl, i'll give you that negative i'll just give it to you >> right well, some argue that the more dire it gets over there, the

closer we will feel in any external -- negative externalities from severe economic stress in europe. >> we used to be very much involved in europe and then after 2011 i think we've done less and less. jpmorgan sells a lot of exposure there. charlie sharp is not -- from wells fargo is not looking at the price of natural gas in europe, which did fall 44% this week david? >> guys, yeah, i just -- i like to sort of come full circle on things so i did want to cop back to this company, aploven i know it seems strange to mention it now but i spent a lot of time talking about that bizarre bid they made to try to acquire unity which was in a deal to acquire iron source. applovin making it clear that they did see iron source a threat perhaps their shareholders were

unaware of that. when they went after them, you can own 5 pe5%, 49% of the vote, 55% of the economics your ceo can be ceo of the company. they were in a strange position. anyhow, we've been waiting i think weeks and weeks and weeks for them to finally throw in the towel but they did jim, this was odd to say the least. not to mention what took them so long the stock just went down and down and down as their shareholders said, what can you do now come up with an all cash bid kkr is significant here. not showing as much financial acumen as one might expect at least in terms of navigating a difficult m&a situation and they're back to doing whatever they do. >> john rokatella did not want to sell. you remember him from ea, ceo of

unity. by the way, at least recently a big holding of arc but i just look at you and i think that's part of the problem with the market. the company is losing a lot of money. i don't want to own that stock i want to own companies that are making a lot for instance beings ta, take a o at microsoft down 8%. if i have a choice between orange microsoft or meta down 9 because there's a survey saying reels doesn't do as well and i've spoken with the reels people, i don't think they're making up numbers. those are profitable companies microsoft has a high multiple. when you look at the multiples of the faang names, they're rock bottom david, i think they're quite interesting. >> rock bottom is the key question, isn't it, jim? you say rock bottom, others say, oh, no, i'm going to get an opportunity to buy them in the future when the numbers come down their multiples adjust for that

or simply the earnings come down even more. so, you know, i don't know, jim, that's what the rest of the market is saying >> down 14 >> yeah. let them sell off. i'm not in any hurry to buy. i just think that by 11:00 when you finish with european selling -- look, it's not going to be an off day bad numbers. i'm saying there are a lot of people who were saying i cannot believe i missed this rally. now i guess what they're going to turn around and say how smart they were that they missed the rally. that's not been human behavior typically, david, the human behavior is saying i'm getting a chance to buy what i missed at better prices. i think that's not bad, david. i think that's not bad provided you buy companies that are making money and don't sell at high multiples companies that are losing money, this is not an opportunity >> we are holding 4k that's something of note you do mention meta. that is the biggest s&p loser at the moment of course, the story this

morning in the journal about the disparate between time spent on reels and time spent on tiktok it's like night and day. >> it is >> jim, you're there for starbucks. maybe we should talk about what you expect investor day to be like. >> well, this is a handoff to lackspin and simon i'm going to be speaking with howard they're re-inventing the company. one thing that took everybody by surprise is that starbucks has become a cold brew company that was something -- you can't pivot that quickly if you don't have enough ice machines there are a lot of things about starbucks that i think are blocking and tackling. one of the things that was most upsetting to howard schultz, how much money they were using to buy back stock instead of improving the company. so a rational approach is to take that money, pay your employees a little bit more, figure out how to make your stores faster and then proceed obviously you've got a china problem there, but starbucks is

for china, buy china i'm looking at the company thinking, it was 84 not that long ago maybe you can get it back there again. that would be a good price >> we'll watch starbucks >> yeah. i mean, it's interesting, jim. it will be interesting to see what locksman is able to do in terms of re-engineering the store format, what they need to do given the change in consumer behavior what they want out of a starbucks. >> the other thing, jim, we talked about in your absence unfortunately was his history at mckenzie and pepsi and his background in consumer package goods and how that might change maybe corporate strategy at the margin given some of the issues they've had with kitchen complexity >> yeah. i think that's a great point, carl you need someone who is an international figure, who has turned around companies, who

understands with rekka that you can take companies that are doing poorly and turn them around within three years. i think it's an exciting choice, david. it is interesting to see some of these companies being turned over, the reins being turned over to people who are not american almost in a recognition that america isn't necessarily the next frontier. other countries are. i think it's very smart. companies that are doing this i think are going to end up ahead, not behind >> okay. interesting. guys, in the time we have -- >> you don't >> i don't have much more to add on starbucks at this point and i'm looking forward to your conversation with howard and that's about it. >> that's nice carl, that was nice of him. >> i wanted to talk about peloton. >> i look forward to david's conversation with disney. >> as you should as you should. that's going to be a very interesting conversation with bob chapik. >> we didn't do emmys, hbo, netflix and a few others.

>> a few others. "succession". >> "succession" is the best show there is. >> ted lasso and apple. >> they have started to spend the money. they don't have a library, so to speak, but they have a lot of decent programming you have to watch that toran, it's good. peloton, john foley is out entirely now not the chairman he is still basically has control, 40% control of the vote still. but he says, see ya later. as do a number of other senior managers i don't know, jim. you know, you talk about opportunities. obviously we've talked about this stock a great deal because it was sort of a reflection of the covid economy that reigned for a period of time and, perhaps, mr. foley actually believed was going to be sustaining for a longer period of time. that wasn't the case but at 10 bucks, i don't know.

what do you think? >> the balance sheet's not that good, but i think the plan that we're seeing to have much more individualization, barry mccarthy, is that plan they used for netflix. i don't want to jump in front of a speeding train, but i want to make one point that's been left out. i met john foley he is very nice. >> we have ceo mccarthy who presented yesterday at the conference, the one i'll be attending as well in a day or so take a listen. >> say what you want about john foley, he's the reason that i'm here today and he's the reason peloton is here. he invented the connectedness category, which didn't exist until his vision for it. >> see, he also said he's nice >> yeah. >> he agreed with you. >> barry's mean, but i like him. >> tough, tough. i don't know if he's mean.

>> tough, that's a better word i keep selecting these fifth grade words because it doesn't seem all that long ago david, rescue me. >> i'm here for you, except you're far away. you're out there on your own, big boy. >> oh, wow chapek's beard makes me want to buy the stock but the tear makes me want to sell it >> guys, as we go to break, let's take a look at the bond report we mentioned the two-year, 2.75 -- sorry, 3.75, highest since 2007 yields up across the board as for markets, as we said, holding 4025 or so all dow names are red except for proctor, just went green meta, the biggest loser on the s&p.

we lost about everything trying to pay for prescriptions. we spent our whole pension but couldn't keep up. so my husband just stopped taking his medicine.

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jim, we kind of promoed what

you've got coming up, but it sounds like a big show. >> howard schultz on the handoff. we'll get, i think, some emotional, i'll say, closing comments from howard and then craig jelinek, he did an appearance on our show. we'll learn about food inflation. we will miss howard. and craig is super >> yeah. well, not -- still with us for a while, right april or so. we look forward to seeing that transition he's clearly going to be there to mind the store into the spring >> yeah. and i wish david good luck in his very interesting interviews coming up. >> thank you thank you, jim you'll see many of them on thursday morning, when i will be in our san francisco bureau. >> i look forward to taking the red eye. i bought an extra suit, be able to come right to the set because i keep getting younger >> yeah, i think it's really good for you to get even leslie.

i advise that. >> thank you you're kind of my doctor carl, i always regard him as my doctor. >> oh, yeah, we all lean on david for medical advice >> jim, we'll see you tonight. back here in the morning jim cramer in seattle. don't forget "mad money" tonight at 6:00 p.m. eastern time. in the meantime, the twitter whistle-blower about to testify on capitol hill. we'll stay on top of the selloff as the dow is down 620 still hanging in there above s&p 4k if you wake up thinking about the market and want to make the right moves fast... get decision tech. for insights on when to buy and sell. and proactive alerts on market events. that's decision tech. only from fidelity. your romantic night out... involves a +4. you know the most exciting part of la... is the hotel pool. you know the only thing better than this trip, is the next one.

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650. s&p down almost 100 points here. although we are holding above thursday's close of 4006 obviously driven by cpi running hot on both headline and core. and that's where we begin this morning.

investors want liking what they're seeing on the inflation trend. treasury yields rising two-year back to a 15-year high. steve liesman joins us on the print and what the fed may do. hey, steve. >> good morning, carl. yeah, this august inflation number marked a huge disappointment for the market. it hoped the u.s. had hit peak inflation. that's not the case. bets were being made the fed could possibly do less rather than more rate hikes instead the expectation this morning for a much more aggressive central bank. here are the numbers you can see just by looking at it versus the estimate how every part of it disappointed. headline was higher rather than negative year over year was higher than expected by 0.3. the core, which is what the fed is following and what everybody -- is the key to policy right there, double the expectation and the year over year shooting up how did this happen? take a look. we got the expected decline in gasoline prices. energy down. food came in hotter than expected

housing, hotter than expected. i put a parallel up there as some indication. there had been expectation these big inventory stories we this is going to help reduce prices. it did not do so so that 0.2 on the panel, didn't get help from the goods, all leading to sharper pricing. take a look at what we're looking at right now by year-end the fed sees the market over 4% that's 175 basis points of tightening expected over three meetings and the peak funds rate leads to an expectation of 4.27%. i guess it's 4.29 right now, up from 4% before the meeting i think it's unlikely, but the immediate market reactions was to price in a 20% chance of 100-basis point hike at the fed's next meeting that illustrates how the market's hopes were dashed there was a 20% chance of a 50 the move from the fed having less risk -- risk of less fed to risk now, carl, of more fed. >> steve, stick around we want to bring in mike santoli

on at least the market response. we're now down 720 mike, a lot of discussion, trying to hold 4k here as we're retracing the retracement of the retracement. >> yeah, exactly that's what happens here in these trading range markets. i've been saying when the s&p is down 3800, 3900, the chance to -- the perceived chance of an economic softer landing are seen as remote. at the higher end, 4200, 4300. we're right in the middle here gave up basically half of a five-day 5% or 6% rally in the s&p 500. really no shadings of subtle subplots in here this is basically a market caught wrong-footed and thinking a lot of market based measure inflations, inflation going down, used car prices, even listed rents there was some assurance that the leading indicators were pointing the right direction it did not manifest in the official data in the past month. it's stickier.

look, high aggregate amount of wages. those wages rising is playing into the economy that refeeds the fear that the fed is going to have to just reduce the aggregate amount of money people are earning, which people will be out of work or wage growth slowing down clearly, that's not the most welcome reason to actually have the fed get more aggressive. on the other hand, that is a little bit of a buffer in a weird way, services inflation is wages so, to me, maybe that's why the market is holding for now as well as it is. >> steve, i love your take as well on that just in terms of how the fed is going to view this and mike's point on wage inflation and the like >> fed has to slow the economy, david. that's what it said, that's what it thinks, that's what it sees when it looks at this and it has to do it through the job market as well as housing there's another subtle issue going on here, david, which is this concern that maybe the data is going to lag what the fed sees and decides to do

if you look at the housing inflation, it has lagged overall inflation. it was up, as you know from talking to people, but it wasn't in the index now it's in the index. it's going up. we do hear stories about a recession in the housing market. the trouble is the market not only has to deal with more fed, but it has to deal with this idea of a fed mistake. and i look at what happened this morning. you did have rates rise across the spectrum but you had the two-year rise more than the ten-year the concern the fed plunges the economy into recession maybe does more than it has to do because the data and the response in the indices lag what they're looking for. >> plus, mike, a lot of what's happening today is unwinding, as you've argued, a stretch bounce to the upside. there were pieces yesterday about call buying, $80 million trades looking for 4300 by year end. hopes that maybe retail sales could outpace cpi later this week so, a lot of that enthusiasm is

being undone. >> well, we're eight months into this whole market retrenchment and it's become very whippy. those extremes have been developing with smaller and smaller incremental moves in the market what i mean by that is, when we pulled back after the mid-august high in the s&p 500 down to 3900, we were, you know, 8% or something above the june lows. you still had the same kind of very desperate sentiment readings and negative positioning and everyone playing for more downside. that was an emotional extreme reach for the smaller relative move then you bounced by 5% and you already started seeing people getting a little overexcited that's kind of what happens when you've been within this range for a while, the pendulum is swinging you're kind of looking at the shadows on the wall. you don't really have the actual information. and that's what -- that's what it does. plus, this idea that the fed's going to have to go farther than whenever that moment is, the economy necessarily can handle that's been inherent, i think, in what we've been dealing with

this week. certainly that risk has gone up. if you scold investors for saying, why are you looking for a fed pivot? the fed isn't going to tell you they're looking to fullback, the fed isn't going to pause, because the fed is talking that way when it is time to pause whether it's this time or next time or in six months, they'll be striking a hawkish note when the data are already going in their favor. that's why i think the market keeps going for it and missing that bet. >> steve, finally, are we going to spend the next few days talking 75 versus 100? is that a real conversation? >> i think the market's going to have it, david you know the momentum that gets in these things. the market has had the momentum towards a 50 they were crazy on this idea of peak inflation, even though we knew the thing mike mentioned, which is really important, that we still have wage inflation to come through we haven't seen help in housing or help from inventory i think it's going to be out there. i don't think that powell is inclined to do it. i think what powell wants the market to understand is not this

question of 50, 75 or 100. it wants the market to understand the end point when you put up the fed outlook chart, they're headed to 4%, 3.75, 4% they'll get into a restrictive zone however they get there, david. you know you can do 175 basis points and infinite number of ways you can go 50, 50, 50 on 25 or 150 basis points, whatever you need to do it's not the steps that matter so much. the fed wants the market to internalize the destination. that destination is 4% it's a restrictive destination for the economy. >> got it. yep, the ultimate destination. thanks to you both, steve and mike let's turn back to twitter now. whistle-blower peiter "mudge" zatko is set to testify before the senate judiciary committee in fact, starting right now. you can see him sitting there, listening. i think that's mr. durbin

speaking let's bring in former ftc commissioner mosul thompson. good to have you back. you've shared insight in terms of what is the investor focus, what any of this is going to mean for the trial that's going to take place a month from now in delaware. one of the things in the letter from the judiciary committee agarwal but today's testimony was about whistle-blower disclosure tamz, the ftc asked if it fully deleted data of users and twitter misstated those accounts were deactivated. is this something investors should be concerned about? >> only to the extent that they allege some sort of larger behavior on behalf of the company that they engaged in some sort of fraud and deception. you know, one of the things i would be listening for, if i were the ftc, is zatko made some claims about foreigners having

access to data, including a couple of indian government individuals. i'd be interested to see whether he details that, and if these were things being considered at the time they issued the second consent order in may in that consent order they said they wanted to limit people's access -- company employee access to data and consumer data so, is this along the same lines that they were concerned about or that the ftc heard are about? i'd like to hear zatko go into more detail to find out if this was something that might have been considered. in addition, whether the company deliberately misled or hid information from the ftc or auditors that were supposedly being reported to. >> deliberately misled, is that an important component,

deliberate >> it would seem to me they would be acting in bad faith and that, does it indicate they have to dig deeper. is there some larger behavior on behalf of the company that would indicate that the information the ftc was getting was incorrect. >> what about the s.e.c., another regulator that could play a role here, is there anything that might come up that perhaps the s.e.c. would be looking at in terms of the allegations that, you know, they used statistics at twitter that were -- i don't want to use the word fraudulent, but gets to a level the ftc would take a look? >> that would indicate there's something material going on that's a larger attempt to mislead the marketplace, is to the value of twitter this all plays into what happens in delaware. it seems what's happening in delaware seems to be a narrower question because at the very least, what the court decided last week because they weren't going to postpone the hearing, so that means at least the chancellor has some views of the

issues being presented to her and how she's supposed to decide that. >> your background is ftc. do you think the real -- what's on the line today is regarding twitter and ftc running afoul of regulation or twitter and a musk purchase >> well, it depends on who you talk to. i think for the -- for the senators, they're concerned about the larger issues, about foreign players being involved in our platforms there's a hearing about something similar tomorrow don't forget, this is the committee who looked at the russian interference into our elections. that's what they would be looking at the fkc has a narrower point of view, and some information may be disclosed today that will prompt them to take another look >> yeah, we're focused, as you might expect, on what this will mean for the trial and/or musk's ability to sort of make his case, which has seemed somewhat unlikely

but, you know, the larger takeaways in terms of what's going on in major technology companies shouldn't be overlooked in regards to internal controls or lack thereof. >> one of the problems you have is if those are sufficient, especially in light of the scale of the information coming across these platforms. so, people are going to have to look at that. >> i'm sorry to cut you off. i do want to listen into the opening statement we're getting from mr. zatko. >> let the record reflect the witness has answered in the affirmative and now i appreciate your attendance here and the floor is yours i think your microphone may need - >> all right thank you very much, sir chairman durbin, ranking member grassley, members of the committee, i appear before you today to answer questions about information i submitted in written disclosures about cyber security concerns i observed

while working at twitter my name is peiter zatko but i'm more often referred to as my online handle as mudge for 30 years my mission has been to make the world better by making it more secure. from november 2020 until january 2022, i was a member of twitter's executive team in my role, i was responsible for information security, privacy engineering, physical security, information technology and twitter global support i'm here today because twitter leadership is misleading the public, lawmakers, regulators and even its own board of directors. what i discovered when i joined twitter was that this enormously influential company was over a decade behind industry security

standards. the company's cyber security failures make it vulnerable to exploitation, causing real harm to real people and when an influential media platform can be compromised by teen ablers, thieves, spies and the company repeatedly creates security problems on their own, this is a big deal for all of us when i brought concrete evidence of these fundamental problems to the executive team and repeatedly sounded the alarm of the real risks associated with them, and these were problems brought to me by engineers and employees of the company themselves, the executive team chose instead to mislead its board, shareholders, lawmakers and the public instead of addressing them. this leads to two obvious questions. wide did they do that and what were the problems and vulnerabilities identified and that's what i'm here to talk

about. so, first, why did they do that? to put it bluntly, twitter leadership ignored its engineers because key parts of leadership lacked competency to understand the scope of the problem more importantly, their executive incentives led them to prioritize profits over security upton sinclair famously said, it is difficult to get a man to understand something when his salary depends on his not understanding it this memberntality is exactly w saw at the executive level at twitter. so, what are the problems i discovered two basic issues first, they don't know what data they have, where it lives or where it came from, and so unsurprisingly, they can't protect it and this leads to the second

problem, which is then the employees have to have too much access to too much data and too many systems you can think of it this way it doesn't matter who has keys if you don't have any locks on the door this kind of vulnerability is not in the abstract. it's not far-fetched to say that an employee inside the company could take over the accounts of all of the senators in this room given to the real harm -- given the real harm to users and national security, i determined it was necessary to take on the personal and professional risk to myself and to my family of becoming a whistle-blower i did not make my whistle-blower disclosures out of spite or to harm twitter far from that. continue to believe in the mission of the company and root for its success, but that success can only happen if the privacy and security of twitter users and the public are

protected. and accepting an executive position at twitter, i made a personal commitment to mr. dorsey, the board, the greater public, and myself that i would drive the changes needed at twitter to protect the users, the platform and democracy that's what i'm continuing to do here today i stand by the statements i made in my lawful disclosures and i am here to answer any questions you may have about them. thank you. >> thank you, mr. zatko. i'll start the questioning as i mentioned, each member will have six minutes to ask you questions. those of us who are not expert but rely on the internet every day for -- >> we will monitor the q&a with zatko and see what he tells the committee. certainly, david, an emotional opening statement. >> yeah, somewhat surprising to see him almost tear up talking about the fact that he obviously didn't do this out of spite but because he thought that he had

to and going on to talk about they don't have an idea where their data is, where it lives, where it came from unsurprisingly they can't protect it love to bring our former ftc commissioner mozelle thompson back in with us. give us your reaction to what you heard in the opening statement. >> i think those are pretty broad allegations. that may be his sense of it, but i would be interested to hear what the company's response is because obviously they must have some protections or else they wouldn't be this far along in the consent order without any red flags or alarms. now, at the same time, i'm a little -- ail though he's allegg these potential acts as breaches, did they actually occur? did he indicate foreign actors or improper activity occurred on his watch? and how did he respond to those?

i would be curious to hear that. i'm sure the ftc and also the s.e.c. is going to want to hear about that, too, to the extent he's also opened with this allegation that there's a larger attempt to mislead the public. >> right >> unclear whether senators will follow up on that key question, though, isn't it >> that's true. >> oftentimes this is about theater more than anything else and they have an opinion -- or at least a viewpoint they simply want to get through to their constituents. >> i'm always reminded, someone gave me this advice when i came to washington, that when you appear before a senate or house committee, it's about the senators and the house members and what they have to say. >> right, right. the ftc itself particularly, because you know the institution well, do they employ outside auditors to do these kind of auditors is there any question of their competency, frankly, in understanding what's going on at these companies and whether they're adhering to the standards that have been set >> absolutely. absolutely

you know, one of the things that happened in this case, if you looked at the initial settlement agreement, the consent order, it required that twitter for ten years engage in regular biannual audits that had to be provided to a third party. i don't know who the third party was, but i presume that that third party also has the ability to understand the information they're getting and to ask questions. >> finally, back to this bigger picture question i asked and we had to cut you off because we had to get to his opening statement. what does something like this say about what consumers can expect from these enormously complex companies that control so much of their data? >> well, it's always a difficult expectation to have a company with that much traffic be able to control everything, especially when they're a platform based on other people, third-party posting on your

platform it's always going to be a challenge and always going to be rapid moving the traffic is absolutely enormous but, i also think that it's an opportunity to educate the public about their own role in controlling the information that's out there and that's going to be really, really important it's a thin line here. >> always appreciate you taking time with us >> thank you. get you back to the market dow's down 070 a 2% decline on on the cpi food, shelter, health care costs, more than offsetting the decline in gas prices and leading many now to expect an even more hawkish fed going forward. here to join us to talk about it, former atlanta fed dennis lockhart as well as ubs management david leftkowicz. the white house is arguing the

price action in the country, in their words, essentially flat the last two months. did today's print give you new cause for alarm? >> to some extent, yes the core number, month over month, which i think is the most important number to follow, doubled from 0.3 to 0.6. that's not a good direction. it's one month, as everyone says, but it's still concerning that we're not seeing deceleration, at least for one month over month we're seeing some acceleration at the core level. >> david, how about you? >> yeah, i think the market reaction, carl, is pretty understandable the inflation data was a lot hotter than most people were thinking, what we were thinking as well. and you've seen a commensurate reaction in the fed futures, now expecting more fed hiking, and

obviously that's a challenging back drop for the equity market. so, i think the moves we're seeing today do make a lot of sense. >> okay. why did they make a lot of sense? >> i'm just saying in terms of the fact that the core inflation was -- and we know that's less volatile than the headline, and the headline was -- was aided by the fall in energy prices, but the inflation pressures, at least this month, are still pretty broad based obviously, that's a challenge for the fed. >> dennis, goldman today increasing their expectations. they see 75 this month another 50 in november another 50 in december takes the year-end rate to 4.25. does that seem reasonable, in your view? >> yeah, i think it's quite plausible. i certainly expect 75 next week.

i doubt that we're going to see 100. i don't think they will take that kind of move, but i think 75 is pretty sure. where we end up year end, 3.75, 4, 4.25, will depend on inflation data in the fall too early to say but it's quite plausible what goldman has predicted. >> one common view is we're going to be looking at job losses i think it's b of a sees declines in employment pretty much through september beginning in january, february do you expect that to be somewhere in the realm of the possible that we lose a couple million jobs in the first two-thirds of 2023 >> well, you know, i haven't thought that question through, and certainly haven't put a number on it i think the unemployment rate, the u3 unemployment rate as well

as the u6, the two most important of the unemployment rates, are likely to rise. likely to rise above 4% as we go through this process whether or not we see 2 million, i'd have to go back and study that question. >> david, let me come back to you and ask the obvious here, which is, well, all right, given your view, where do you want to be in terms of what equities are worth owning at this level >> the yeah, david, within -- i would say within the equity market, that's where we have some more conviction i think we're probably going to be looking at a fed that is going to have some pretty restrictive monetary policy wherever they end up in terms of getting to the terminal rate, so to speak it's going to be pretty restrictive. i think that's going to mean continued downward pressure on earnings growth more broadly i think you want to have a defensive bias here.

we have preferences for consumer staples and health care. we also like the energy sector, which looks cheap. we don't think there's that much downside in oil prices after the recent fall. i would also highlight growth stocks still look pretty expensive and vulnerable, especially in the context of interest rates so, i would say value stocks and the defensive bias >> finally, dennis, new york fed inflation expectations yesterday got a lot of people excited. down four months in a row. lowest since october of 2020 the hope being that a lot of these inflationary expectations weren't getting embedded do you think that brings new peril to what we think is going to happen down the road? >> certainly if we were to see particularly gasoline prices start to rise again, i think those expectations might, you know, might turn out to be the

good expectation numbers, might turn out to be fleeting because i think the public is very, very influenced by gasoline prices. so, for now, i think the new york fed's expectations survey is encouraging i think it was encouraging to policymakers they certainly don't want to see expectations become unanchored they could be very fragile depending on what happens in certain key commodities in the fall >> yeah. that's going to make things interesting policywise as we watch energy going into the winter months. pretty fascinating day both in the macro print and the markets. dennis, david, appreciate it very much. thanks, guys >> thank you >> let's turn to another important component of the market overall, the housing market diana olick is watching the reaction in mortgage rates and home builder stock. >> bond yields are jumping on the cpi number and mortgage

rates loosely follow the yield on the ten-year treasury rates don't move exactly like stocks we get a daily average, which isn't out yet, but mortgage daily news is reporting it will hit a 14-year high today look at where the rates have gone this summer the 30-year shot over 6% in june very briefly, pulled back in july and august, and after the fed chairman's recent remarks saying he would continue to be aggressive on inflation and that could cause some consumer pain, rates moved higher again over 6% last week. just under it yesterday. again today we could match our exceed that 14-year high we saw in june, which is when the housing market really turned on its heels. when rates go high, home builder stocks go low. pretty clear in this etf of itb of 30-year fixed stocks of the biggest names down 4% even toll brothers, a luxury builder, housing starts and new home sales have fallen sharply on higher rates, even though

supply is very low and there is some demand out there. a note on that, supply was improving slightly, but sellers are really now pulling back because of these higher mortgage rates. an owner who currently has a rate under 3% isn't likely want to trade to 6% just to move to a different home unless they absolutely have to back to you guys. >> good point. i know as well you were reporting earlier on the rental market not an unimportant market. one we've seen significant increases in until, i guess, very recently. >> that's right. you don't see it in the cpi number yet because it takes about six months for that to filter through we are seeing rents, apartment rents, that is, start to moderate back to normal increases. they're still higher month to month, but back to 4.1% as opposed to five times that earlier this year. year other year you're seeing the gains shrink as well because landlords don't have the pricing power given the inflation hitting the consumers and their

retention rates, they're seeing a lot of renters not able to stay so they aren't able to charge such high rents anymore there's a bright spot, right >> thanks. we'll be right back as we continue to watch the of markets down about 740 here. still flirting with a sub s&p 4k print. for the time being, 4,003. your shipping manager left to “find themself.” leaving you lost. you need to hire. i need indeed. indeed you do. indeed instant match instantly delivers quality candidates

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markets continue to react to the cpi print that ran hot this

morning. dow down almost 750. s&p holding 4k joining us on the phone is ubs director of floor operations, art cashin it's a good day to touch base with you how do you characterize the selling this morning >> well, i think, as you know, carl, because you usually see my daily comments yesterday i was looking to a possible interim high. this morning, early predawn, it didn't look like that was going to happen. this does look like it's working out. i think what you're seeing, and you alluded to this somewhat earlier in the program, there were rumors around about institutional call buying. there were people said to be making large bets, that the number was going to be favorable. and i think that's what you're seeing it's not so much the number came out and it flipped the economy on its head. i think what we're seeing here is structural within the market.

i think those guys were caught offbase. they're probably leveraged you had an absolutely horrendous on the washout on the opening. numbers are wild as you also alluded to, we're facing a near-term test here at 4,000. in a couple of days we might be retesting that 3900 level. so, we think you're into a seasonal pattern we think, thanks to our friend jonathan stevens, we're looking at an analog to 1962 in the dow jones. we're about a week ahead of that pattern. and that's going to make for a very bumpy october keep your seat belt fastened is my advice. >> right we know about seasonality in september and sort of midterm tempos in midterm years. do you think, though, that the classic midterm post reaction for fourth quarter could be as strong as history suggests

well t could be. if it's an analog to 62, the democrats may be happy because while they lost a handful of seats in '62, it was an interim election for them and they held onto control both the house and the senate we'll see how that goes. i'm more concerned, carl, about in '62, october, saw the cuban missile crisis i hope that's not an analog with taiwan, as the two most powerful nations on the face of the earth go nose to nose over a large island off the boundaries of one of them. it's scary and tempting both to look at. i think visit the internals. have you to watch the technicals here you break the 4,000. if in a couple days we test the 3900, that will be critical

because you break 39d00, then yu get down below 3800 and beyond that it would be dragons. >> art, you seem to think we're going to test 3900 >> it's my gut feel. i think we may even go back and retest the june lows, although i don't get many of my friends agreeing on that certainly the 390 is just so tempting you're pulling back below the 50-day moving average again. it's very much about the technicals it's not so much that that one number meant the economy went topsy-turvy. it meant a lot of guys who were making a preliminary favorable bet got caught offbase and they're leveraged and they had to purge it out on the opening and i think my yard stick tells me we'll probably have a minor

downswing now that will last several days and see where we go. >> what's our next data point, art, we're going to care about or is it just going to be the fed itself >> well, it probably will be the fed itself they're in this island period. nobody's going to be speaking up you are going to have to watch what's going on offshore, you know, very unique circumstance the central banks all around the world, with the exception of japan and, perhaps, china, are hiking rates and hiking them at, you know, the bank of australia jumped 75 basis points that's almost unheard of for those people so, i think the key datapoint will be what the fed does itself, but we'll be getting hints around the globe and watch what looks to be an imminent recession. david, i'll give you another wild card.

also keep an eye on ukraine. i mean, if they come back and look as strong as they have in the last three day says or so, if we get -- force the russians to the table with an armistice, that changes -- excuse me. that changes a lot of things, including the price of oil this may be a geopolitical market as much as it is one about interest rates. >> finally, art, for a fed chair who got beat up quite a bit for missing the underlying trend on inflation last fall, how much credibility do you think he gets back post jackson hole and post a print like this? >> well, i think he will by what they do over the next couple of months get that credibility back but you're absolutely right. the word transitory has hung around his neck like an

albatross ever since he said it and he's got to get away from it i see what i see, i know what i see, and i'm going to react to what i know. and that's a bit of a tough fight. you're right that is important to the market. >> have you been surprised at how many macro strategists, art, have been calling for, i guess, leaning toward the soft landing scenario and away from global recession, jpmorgan, pretty constructive comments? again, this is all pre-cpi, but credit suisse talking about inflation moderating why do you think some of them are so optimistic? do you think they're being seduced by the decline in energy costs? >> yeah, no, i think the energy costs have gotten everybody offbase here you know, they've been going down people see they're going to influence the election people assuming that will filter

through. when they're going up, we always talk about how important they are. when you buy food, it gets delivered by truck energy is virtually everywhere and i think it is -- it's not an economist by any means but assume if you were forced to guess ahead of time, well, i kind of lean toward it weakening. luckily, i'm not an economist and i haven't been leaning that way. >> finally, art, back to the '62 comparison, take me through. you said we're a couple weeks behind what do we have to look for next here >> no, we're actually a week ahead. >> excuse me, a week ahead sorry. >> and we -- the next swing or the bottom can be somewhere around the autumnal e al al equx

25th, 26th if we're looking at that '62 analog, we want to see what happens around the time of the autumn al al equinox when they d be due for one more try to the upside before they go into an ugly october. >> yeah, mercury in retro grade also, art. we have a lot of things working against us art, thank you >> yeah. you have to get your telescope out, carl. we'll be ready. >> we'll see you next time. >> beware of the autumnal equinox. we're continuing to monitor the twitter whistle-blower on capitol hill >> the twitter whistle-blower known as mudge

he's a hacker who spent a tumultuous period of time inside twitter. he was brought in to address some problems at twitter he's laying out a disturbing picture of a company that simply had no idea what kind of data it was collecting on its users, who had access to that data and had wide open security procedures inside the company for employees of all kinds to access data they really had no business ak setting. he's saying the company was just not intimidated at all by the ftc, the federal trade commission in fact, viewed foreign securities regulators and other regulators as much more scary to twitter than the american regulators who were simply outgunned in terms of the size and resources of the big tech companies. and the ftc he said were allowing twitter and other companies to grade their own homework this is a disturbing picture of a company. you're seeing questions from senators suggesting that m

mr. agarwal, the ceo of twitter, out to resign if these allegations are true inside twitter. we'll wait to see how this plays out in terms of the musk acquisition attempt. obviously, a big day here for twitter. a lot on the line. they have said mudge's allegations about negligent security practices inside twitter are simply a false narrative. mudge is up there talking about potential spies, foreign intelligence agents for india and china working on the staff at twitter and twitter not having any ability to detect them or do anything about it, guys. >> i will tell you, for the purposes of the trial itself that will begin right now in delaware, october 17th, it's not clear that there's much that he's saying here or has said previously that is going to have a great deal of bearing on chancellor mccormick and what's going to go on in that courtroom. that said, obviously, the broader ramifications, not just for twitter but for tech overall. and for the stance of many senators, both on the right and

the left, you know, i'll go to you and sort of say, how does this fit into the broader framework of the concerns that congress has had for some time in terms of data collection, in terms of consumers and how much risk they're taking, et cetera >> look, this is one of these hearings you rarely get on capitol hill this has been fairly bipartisan so far you're not seeing the back and forth ping pong questioning we normally see between democrats and republicans on so many other top,ices in this case you're seeing both parties hammering in on twitter's security issues. republicans, i think, a little more concerned about the communist party of china and what their access is here and whether twitter took appropriate steps to allow chinese entities to be able to advertise on the service, even though twitter is not available in china influencing operations -- influence operations aimed outside of china there's some concern there on the republican side that you don't see necessarily on the democratic side, but this is a bipartisan group so far this

morning. bestill have a ways to go and we'll see what else develops as these other senators begin to ask their questions of mudge here. >> what extent, if any, that they're pointing fingers of the ftc, of that regulator to effectively regulate companies like twiter? >> mudge did that directly heed the ftc is outmatched they don't have the resources, they don't have the personnel and the ability to regulate twitter in a an effective way or other tech giants. he said the ftc allows twitter to grade their own homework. he compared american regulators unfavorably to the french regulators and said twitter was much more afraid of the french than the american regulators saying the american regulators seemed to issue one-time fines and twitter viewed those as getting a speeding ticket, not something that was going to cause a systemic problem for the company, not something to really worry about. >> thank you >> you bet

meantime, mike santoli is back on set as the selloff is picking up a bit of steam. art cashin did say, 3900 looks to retest and we're 90 points away from that. >> 90 points it was only a few days ago the way this market is just kind of shutling from test to test is a little jarring the main premise, i think, of a lot of that, one, it was a very oversold market. again at 3900. beyond that was this notion that you're looking at fed funds future expectations. you're looking at the leading indicators of inflation that suggests it was going to be more benign clearly, that's been up-ended with today's numbers interesting thing to me, though, even with the market building in more fed rate hikes, they have to stay more aggressive, they'll be in line with the hawkish rhetoric it's not moving it out very far in time. it's effectively saying that peak rates are looking more than 4% on the short end but it will still be first quarter or so of next year.

it's this weird dynamic where the market keeps insisting we're within sight of where rates are going to plateau, even if they have to go higher and it's going to be a higher plateau than we thought before it does really contrast with things -- you were talking about what the banks have been saying at conferences, consumers seem fine guess what, nominal incomes are high, they're spending the money. it's kind of making its way through the banks. we're not seeing severe credit issues yet we still have this very hot/cold economy and market trying to read it. >> yeah. we were just mentioning earlier this morning, some of the commentary coming out of conferences from visa and amex and b of a, arguing the consumer is spending flattish, deposits aren't going down, so it a stronger than expected retail sales number good or bad >> it's not great in terms of the fed reaction it's good, i think, in terms of

people's capacity to absorb a little bit of a slowdown but if the fed really believes that it's some combination of even tighter financial conditions, which means markets down and a softening deployment picture, which they seem to think is going to have to be an ingredient, however you're defining it, then it's tough to say that corporate earnings will remain unscathed i also think, if you see b of a saying the nominal gdp is whatever it's been, if inflation is 8% and we're eight plus on a year-to-date basis or eight minus a little bit in terms of nominal growth, of course that's going to make its way through your accounts. that's what it is. you're looking at inflation and saying it's going to help consumer spending. >> any relationship we should be aware of between the two-year, which has hit a level it hasn't seen in quite some time at 3.75 and the market overall >> yeah. the two-year is where it all comes together in terms of not just how far the fed goes but how long it stays there within that two-year window

i'm also looking at the three-month treasury bill relative to the ten-year that's the one the new york fed has this one factor model to predict recessions and that's what it is does that invert that's usually historically been a bit of a leading indicator it has not yet inverted. >> not yet inverted but got close today. it is interesting. it is backed up. market volatility is another thing that has been very elevated for months right now and you can measure it statistically or just eyeball the intraday moves if there is an illiquidity and massive uncertainty about the fed and some people think quantitative tightening is going to have an effect on that, too, or the anticipation of it, but it is very tough for the overall markets to get in a comfortable spot when fixed income volatility is that high. it is the stuff that is supposed to be the cushion in your portfolio. it reduces leverage and market making kind of capital in the system that can act as a lubricant. >> i'm thinking back to earlier in the summer i think the three

of us were on set and you made the point the ten-year above three was a point of stress but we've been making headway with it above three the past few weeks. >> exactly somehow that relationship has loosened up a bit in terms of the 3 threshold. some people say you have to look at what the real yields are. there is no doubt about it that we were at this level of yields in june at a time when the nasdaq was a good deal lower so it is not the complete skeleton key to figuring out exactly what the growth stocks or overall indexes should be doing. they can't run away to the upside can't be making new highs and have the stock market just kind of absorb that because it is going to say that's going to pinch housing even more and have the economic effects i really don't think it's about, well all of a sudden bonds become more attractive bonds probably do become more attractive, but bonds becoming more attractive, being a negative for stocks, doesn't jive with yields keeping it going higher because that means

people are selling the bonds, right? so that is not the reason stocks are going down as yields go up it's because you're net selling bonds. >> true. although that yield on a two-year could be something -- >> for an individual calculus starts to look good. you look at what corporates are giving you, 5% how much more are stocks going to give you? >> actually a real return potentially available. >> certainly nominal return available. >> that is actually -- thank you for correcting me. there is return available. >> genuine return as opposed to inflation. >> correct there is a great piece on the tape today about how crypto lending now pays you less than the safe debt. thanks, mike >> there is an alternative. cruise lines and travel as you might expect also getting hurt this morning. let's get over to seema modi for a check on that. >> this is interesting the august cpi report did show travel prices are still cooling for now. the index for airline fares continuing to decline in august, decreasing 4.6% after falling

7.8% in the month of july. but the fact that the broader number of cpi is still running hotter than expected is weighing on travel related names, big hotel operators, marriott, airlines are lower cruise lines are down sharply on this notion the federal reserve may have to be a bit more aggressive to tackle inflation which means the cost of service debt which the cruise lines are sitting on a lot of is going to go up. that is why they're down over 4% on that concern. ubs also putting out a note it is trimming the sales further. turning to online travel, expedia's ceo peter kern sharing a rather optimistic outlook on the path for travel, the recovery he is seeing with jim cramer last night. as you can see the stock is down nonetheless over 4% right now as booking holdings worth noting, while the hospitality names among the worst performers today, still up for the week and the month

we'll have to see if they can hold on to those gains, carl. >> pretty remarkable commentary coming out of the travel companies specifically the airlines just this week. thank you. we're watching the market. dow down 870 it is going to take you back pretty much to the middle of last thursday's session. stay with us

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if this market sniffs out inflation is rolling over we could be in for a big shock >> i think once people realize the fed doesn't have to keep increasing rates and will soon be taking rates down it's kind of a buy signal for markets.

♪ . good tuesday morning welcome to "tech check." a lot more on the conference this morning this hour more live testimony from twitter whistle-blower answering questions from senate judiciary. and john >> two big interviews. first we have the ceo of palo alto networks, one you definitely don't want to miss.

nikesh arora and then former google head of commerce and now pinterest ceo with us. coverage will continue all afternoon. >> we have to start with the market reaction this morning all eyes are on it the reaction to the cpi number having a big impact on stocks nasdaq flirting with a 4% drop this morning for more on how we're trading let's bring in cnbc's senior markets commentator mike santoli. the nasdaq is down 4%. >> this was kind of the sweeping away of this rally we had only a few days ago so, clearly, a little bit of over anticipation of a benign cpi number we got exactly the reverse in fact, in a lot of the ways that folks expected it to be a little bit more friendly, some of the core elements may be cooling off to some degree that did nothappen so really, essentially, you know, invalidated a lot of the premise for this rally now, it is hitting the big

nasdaq stocks harder that is partly because they are the big index names and did have a better run off the lows. partly it is just because higher inflation means higher nominal growth it means kind of less of a premium on the more steady growers and obviously you have the discount rate effect where people are worried about more expensive stocks getting hit harder in an inflationary environment. all of that stuff seems to be at play the question for me is does the sell-off become more disorderly? does it look like there is a real breakdown below the recent range of 3900? we are not there yet but it is a pretty kind of grinding, relentless decline so far today, below 4000 i think you lost a certain amount of kind of technical and options based support that was in place for a little while. >> does it make sense? i mean, the dovish argument this morning is you are basically getting a tenth over the course of two months, right >> exactly. >> which is within the white house view