aggressive in raising rates. plus a developing story out of the eu. the european commission president pledging overhaul energy markets with measures including a tax on fossil fuel profits. wednesday, september 14th, 2022, and "squawk box" begins right now. ♪ good morning, everybody. welcome to "squawk box" here on cnbc i'm becky quick along with joe kernen and andrew ross sorkin, and we are live at the nasdaq market site this morning we're going to check out the futures right now. maybe the best thing we can tell you this morning is at least the beatings have stooped for now. yesterday was a brutal day we're talking about a decline of the dow of almost 4% it was a drop of 1276 points

remember yesterday morning at 8:30, we were looking at the futures up by about 250 points until we got that higher than expected consumer priced index number that came out and surprised everyone, made them start wondering what the fed was going to do. i think the market's instant reaction is, yes, the fed's going to have to raise the rates higher and keep them high fehr longer than a lot of participants had been hoping for to that point. the whole story of mission accomplished is over didn't work out. inflation continued to rise up over year over year. this is what you saw in the market here yesterday. the s&p was down by 4.3% the nasdaq was off by 5.2% by the way, guys, this was the worst day we've seen since the early days of the pandemic have to go back to june of 2020 when you saw something like this with the point losses. this was the seventh largest

loss for the dow. >> it's very painful, and the vix still didn't get to 28 it got to 27 and chaifrm back in june it was 35 or so it scares me now if people are right of returning to 35 on the vix. i don't know what that looks like on the averages. >> i don't know if we're sy systeming yet. most of this is mechanical trading. >> i don't know about that the inflation was systemic. >> that piece of it is system it, but i think it -- >> food, 13.5% >> i don't know if steve liesman is going to be on with us later. but in terms of trying to figure out housing costs because housing costs went up. rents, especially, were higher if you start looking at housing prices, how do you factor mortgage prices into if you looked at the mortgage yesterday, 30-year mortgage, it's jumped again. >> that should over time -- and i think we were talking about that yesterday, because that's

the instrument the fed actually has, should help rent but it will take a while to filter into the system if the price of homes do come down. >> but you're still paying a higher mortgage rate -- >> this becomes the conundrum. if you think three or four months from now things are really going to come down, which i think people think it will, it's not that rents are going to somehow go down. they're just not going to continue to go up. >> maybe yes, maybe no maybe rent at that point looks like a better option than getting a mortgage at an interest rate of 6.5% plus. >> they may go a full point. speaking of things filtering through over the period of months, i think we now know that prices at the pump don't really tell you everything about the entire economy and how energy prices sort of filter through to everything, even food. so just having lower prices at the pump, everything costs more

because of wait costs to do things with energy, and i think we're still seeing that. >> we didn't look a some of the yields. >> let's talk about some of the yields absolutely. yesterday's selloff was broad. all 30 stocks closed in the red. all the s&p 500 sectors finished lower. the biggest loser is communications the big drag were tech names like meta. meta platforms plunging 9.6% and tech companies losing more than 9% qqq dropping for the worst day since 2020 they're tracking the most highly valued non-financial companies listed on nasdaq the top ten include amazon, microsoft, meta, alphabet. down nearly 6% yesterday apple plunging more than 7%.

meta and nvidia plunging the two-year yield hitting its highest level since looks like 0u 7 ten-year at its highest level since june the 30-year bond reaching a level we have not seen, i believe, since april of 2014. >> have you ever seen anything like that? up 250 yesterday morning we were all feeling pretty happy. and stores had written there was a huge long position based on what was going go a friendly inflation number to go to plus to minus, that's not just a point move. that's even a percentage basis. >> why did everything miss this? it was always going to be a minimum of a 75-point basis move. >> inflation was moderating. >> you know what >> the biggest lesson to learn is never trust a politician.

we believed inflation -- they had a party yesterday over the inflation reduction act. >> i'm just saying others did not believe it there were people who came on our air over and over again who said this was going to happen. >> most people were talking 13 weeks of declining gasoline prices >> it's professional optimism. >> yeah. joining us to talk about is former fed vice chairman roger ferguson he's a distinguished fellow for national economic is and he is a cnbc contributor roger, as a former fed vice chair, i'll ask you to wear that hat for a moment here, what's the fed think when it sees this? we were hoping we could say inflation had potentially peaked that's not the case, and i think people are looking at a much longer gain now. that may have been what jay powell was thinking all along, but i think the market is finally catching one that. >> i think you put it right,

becky. jay powell and others have been saying long way to go, do not want to be deceived with short-term moves, and the market was hoping against hope and against reality not only that inflation was peaking but that would allow the fed to lift up a little bit, you know, and maybe move a little more slowly. so i think now finally the markets and the fed are much more closely aligned the markets are now expecting what's called a ferm nall rate where the fed stocks are somewhat higher. and i think they're starting to hear rates are going to stay high for longer than maybe the markets had originally expected yesterday. but from the fed standpoint it doesn't mean their job is done, but it's on a better line. >> nobody is saying mission accomplished yet, that's for sure when we saw the numbers come in at 8:30, you saw the fed move

drastically. it was suggested they would move 85 basis points next week. what are the odds of a 100-point basis hike at this moment? >> i think it's not impossible, but the 75 is more likely. number one is primarily it's priced in, so we'd go with that, so to speak. secondly, 100 would be, i think, very surprising and would be, you know, quite disruptive to markets. i think what the fed would like to see is for the markets to take on board the lesson without creating massive turmoil in markets i think 100 would be more disruptive than the fed needs at this stage to make sure it gets its message across and make sure the markets transmit the tightening and financial conditions they want and do so in an orderly way. >> roger, let's keep your fed hat on, but let's also add your

formerle ceo hat and think about inflation expectations that is the game that's what chairman powell has been saying for a while. when workers see that inflation prices are up another 8.3% year over year, they could very easily make the case to their boss, hey, you've got to raise my wages because u i'm basically working for less buying power than i was a year ago. that's the type of wage price inflation spiral, and that's what everything worries about these days see a lot of cases where workers have agreed to 14% increasings you even seen price hikes that people are anticipating paying from a lot of different companies, and you see the california minimum wage increase for fast food to $22 an hour what does that tell you about

how persistent the inflationary numbers are going to be? >> first it tells you they're going to to be quite persistent. if one looks at that, it's been tight labor markets, most recent data has shown that, you know, participation is in stuff. one, labor markets are tight two, as wearing the ceo hat, you're absolutely right to say that in my surveys and conversations, they still see quite a bit of pricing pressure in the pipeline, and so they were not in the inflation has peaked camp the market was hoping for there is some good news which most recent surveys do suggest expectations are still contained over the long period of time, but i think really tishly high slightly above the 2% number

you put your finger on exactly the biggest risk the fed is concerned about. we may be seeing the beginning of that or seeing how sticky inflation is, even if inflation expectations have not moved. so the fed has got both problems sticky inflation and the risk that it starts to build in with expectations it's a very difficult and chiaming time for the fed right now. >> i think one realization for the market yesterday was that the fed's job is to try and choke the economy to a certain extent without killing it, and yesterday it got a little more obvious that they're going to have to do that for longer the odds of a policy error or a fed miscalculation, some miss step, i don't know if it's fair to blame it on the fed as much as to say the fed is going to have to squeeze the economy a

lot harder, and that could lead to a recession where are you in terms of concerns at this point >> first, chairman powell did talk about pain, the needing for growth i think the odds of recession are very high, and i've said that a few times on the show, and it's nr exactly the reason you talked about with inflation being sticky as it is provingen to be, the fed will have to continue to raise rates aggressively, hold them higher than markets had expect, and frankly -- holefully a short and mile lee session but i've said to you several times, recession risks are very high at this stage. >> roger, can i ask yo a quick we chl chlle how does the cpi

take housing costs into effects in terms of measures rent and house price? is that a separate line that doesn't get picked up anywhere >> no, it looks at the real value of houses, which has been going up but has slowed a little bit and gets to what's called owner occupied rent or owner representlet it's mainly the valuation of houses. what's driving the market is the big imbalance between supply and demand so i don't expect to see owner equivalent rent or the other is going on that's pretty sticky it will tang a long time to play through. >> my only question is if you're somebody sitting in the house with a 3%, 3.5% mortgage rate, you may not want to move with a

6 president -- 6.58% mortgage rate >> i think it's really, you know, one cease as opposed the kinds are dated. your know, i think even as mortgage rates go up, we're not liej will to sigh that that's going to be another bun of the fed's problems, i think. >> roger, great. great to see you. >> we've got a lot more. european leaders taking action to address the unfoelgd deal crisis chl this morning before we head to break, take a look at the biggest market movers. starbucks up, bath and body

works, and salesforce also moving higher. you're watching "squk"n bcaw o >> announcer: this cnbc program is sponsored by ibm. ibm. let's create to satisfy cravings from tokyo to toledo? so you partner with ibm consulting to bring together data and workflows so that every driver and merchandiser can serve up jalapeño, sesame, and chocolate-covered goodness with real-time, data-driven precision. let's create supply chains that have an appetite for performance. ibm. let's create.

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xfinity customers join xfinity rewards and get an early access code to play the open beta. early access begins september 16th, first on playstation. visit xfinity.com/rewards. welcome back to "squawk box" this morning, everyone if you're just waking up, the futures looking better than the close yesterday. remember the close was down by more than 1250 points. it was a serious down day across the board. by the way, the dow was down under 4% s&p was down over 4% and the nasdaq over 5% this morning some greene arrows. not huge gains, but declines in the declines dow futures up by 142 points,

s&p by 22 points and nasdaq by 81 if you want to talk about the faang stocks, you can see they're indicated up, but less than 1% across the board. let's talk about other news out of europe. the european union president talking a deep and comprehensive reform regarding the energy market they talk about a five-point plan that involves a lot a target to reduce peak hour energy use and emergency credit lines for companies. in the an eun state of the union commission meeting, the president said it would provide approximately $140 billion. coming up, the twitter whistle-blower said the social media company highlighted profit

concerns. before heading to break, cryptocurrency, not as bad aits could be you're watching "squawk box" on cnbc >> announcer: this cl nbc program is sponsored by baird. visit bairdifference.com ge profe smarter wash technology. fully optimized cleaning, no more guessing. this is smarter cleaning. this is ge profile.

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the relief that comes over people once they know they've got a guide to help them through, i definitely feel privileged to be in that position. ♪♪ it seems it comes so fast. it's time for "executive edge. let's get to washington where eamon javers has more on the whistle-blower testifying before congress lay it on us. >> he blasted twitter for a failure to take precautions with user data. here's what he said.

>> twitter leadership is misleading the public. lawmakers, regulators, and even its own board of directors what i discovered was this enormous company was a decade behind the terms of industry standards it makes it vulnerable to exploitation, causing real harm to real people. >> twitter rew e responded sharply to his allegations after the hearing saying, quote, today's hearing only confirms that mr. zatko's allegations are riddled with inconsistencies and inac inaccuracies he painted a company riddled with foreign agency intelligence he said there was wat least one agent working from chk china and

india too. he said they allow access to thousand behind the twitter scenes data and doesn't have good systems to track who's accessing what even if they're trying to get into the accounts of the very senators sitting ontown committee all of this comes as elon musk has been using the whistle-blower complaints to get out of buying the troubled social media company the judge included last week muff kc include trial testimony from zatko that trial set to begin in october. they voted to approve a deal to force muff tock complete the acquisition. one other alarming allegation zakko made is the federal trade commission is in over their heads and they don't have the resources to take on the tech giants, and as a result they're allowing them to grade their own homework as he puts it guys >> that's a great analogy.

would you assume government agencies would have not only th staffing but the expertise that's probably not a big surprise >> yeah. i mean, look, the long term -- the term we've used for years is regulatory capture, when a regulatory agency is sort of captured by the industry it regulates, people go back and forth, there's a revolving door. everybody knows there's more money to be made on the industry sigh you get that but in this case, the sure scale and size and pace is so overwhelming they just can't innovate and change as fast and keep up as fast as the tech companies can. >> they're a moving target what we give up for what we get, you know, what were you expecting? that they weren't going to that keeps moving around >> right the real problem they have is

you set these rules of the road for technology and the technology changes the companies you were thing of when you imposed the rules are all gone and there's a whole new set of companies and now you have to adjust the rules before the new rules are in effect. it's a question of speed and they don't seem to have the speed, and that's what zatco was saying yesterday. >> you weren't able to stop by the white house yesterday for the inflation reduction act party, were you? >> no, no. >> you weren't invited >> i heard james taylor was there though. >> i heard he was. >> i heard james taylor made an appearance. >> he did, he did. all right. we have that going for us. thanks. when we come back, stocks coming off their worst day in more than two years. have to go back to the early days of the pandemic to see the type of action that we saw yesterday. when we come back, we'll talk about the type of action you can

expect today right now, the dow indicated up. the dow futures by about 10 points s&p 500 futures by 20 and the nasdaq by 75 as we head to break, let's take a look at the winners and losers when you talk the s&p 500. i think there was only one stock positive in the entire s&p 100 >> maybe. >> that's what you saw, yesterday's losers nvidia, down by about 9.5% semi-conductors got hit pretty hard meta was down. stay tuned you're watching "squawk box" and this is cnbc >> announcer: executive edge is sponsored by at&t business at&t 5g is fast, reliable, and secure is going through the “”. but seriously we need a reliable way to help keep everyone connected from wherever we go. well at at&t we'll help you find

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good morning and welcome back to "squawk box" live from the nasdaq market sight in times square i'm afraid to look futures are still up we were just talking about it. after a day like yesterday, you get a little bit of a bounce like this. sometimes, you know, as we say,

the market's always investigate a lot of these head fakes, but sometimes that's not a great sign was it overdone? yesterday was a couple of tenth of a point here and there. when you went -- it was just a couple of tents of a point here and there. it with us supposed to be 8.1, and it didn't come down. >> it was up by 0.1% versus down 0.1% >> if you look closely, there are some real troubling things the devil was in the details, but still a 1500-point move from where we were in the morning. >> but that's because this is a harbinger of what the fed has to deal with and what they're doing. i think we all realize you just can't come out and say, we've done it, inflation is coming down. >> they can't tiptoe up to it and turn it down they need to kill it, which could be bad for growth, for gdp and everything else and corporate earnings and margins that's -- stagflation, i wish

they never came up with that t >> that's lousy. >> it's the worst. it's the worst for both worlds there you can see 343 on the ten-year i i think sheree is on later the two-year, 3.78% more inverted. >> i think microsoft is down more than 6% from yesterday. >> a will it'll bit of a bounce today. a little less than a percentage point. let's talk about another story on the front page of "the new york times" right here now to the latest. >> a lot of pain for them yesterday. >> it's about the congressional stock trading mess we've been talking about on this show for a very long time

the report tracks tens of thousands of trades from members of congress and their families they found that 97 current senators and representatives reported buying and selling stocks that conflicted with their work or congressional committees joining us now, an old friend of the program, kate kelly from "the new york times. congratulations on the story let's walk through the details of how bad it is and most importantly there's the perception of bad, which is to say, perception of conflict, and then there's, of course, the issue of real conflict i'm curious what you found in terms of the distinction between the both of those? >> first of all, thanks so much for having me. it's a pleasure to talk about this analysis. i think i have to say up front, we did not find anybody that we know that was insider trading. if we had, we would have said so clearly. you know, in this case, what we're looking at is a lot of perceptual conflicts, and, you

know, some situations, pennsylvania republican congressman mining kelly comes to mind, that have been investigated by congressional ethics officer and referred to the committee on ethics for further questions and further reviews. so there are transactions that have raised eyebrows for the most part what we did is take a look at the combination between a congressman or senators committee assignments, and the stocks and sectors that they or their medial family members were trading that a reasonable person could argue dovetailed with those committee assignments. northward, if you're on the committee and you're trading raytheon or grummond, that could be seen as a potential conflict. you could be seen as having a conflict of interest publicly. >> what percentage of folks do you identify as doing this said to you, you know what, it wasn't me, i didn't do the trading

myself i use an outside firm that does all this it's a completely hands-off situation or i have a spouse that did thisle but they do that professionally, and so it's a different -- i mean, how -- what kind of explanations did you hear, and which ones were believable to you and which ones weren't? >> we got a large part of people saying my broker does this or my husband without my knowledge there's a small handful who said i do this, i own it, i think further restrings are ridiculous steesh cohen of tennessee had that tone. tommy tuberville of alabama had a little bit of that tone. most people, the vast majority -- i should say tuberville trades through a broker but he thinks it's quote, unquote ridiculous most say they have no power of it. >> we spoke with rthose who say,

not me >> the potential law we featured in the story is called the trust in congress act. there are at least 67co sponsors including a number of republicans. so that's a decent chunk of people who say everybody should divert before they start service in arronest. in pretty short order you have to either divest or put your assets in a qualified blind trust. there are some ten, 12 different bills floating around the senate and the congress with various approaches to this issue and you might be surprised by the range of sort of political thinkers that sponsor these. josh hawley has sponsored a bill ben sass and then you have moderates. you also have elizabeth warren

who co-sponsored a bill. this is the only one who co-introduced a plan with her partner steve daines so there seems to be anecdotally speaking a lot of support and even want tate tichbly speaking, i don't know, 80, 90, 100 members out of the 535 who have actually attached their names to some legislation. >> so if you're ooh going to handicap this, you think something's actually going to get done here? >> i think it's questionable i mean as you knowing the clock is running out on this congress, and there's a lot on their plats. midterm elections are going to be a huge time suck. there are compromised efforts ostensibly going on in both chambers 'zo lofgren has been asked by house speaker nancy pelosi to put together a democratic compromised bill that would take a number of issues and address them not just sort of of the qualified ones, but some other

enforcement mechanisms, closing the gaps of reporting mech mechanisms to bring that to life rk andrew, if you have a relatively large trade, you report that as between $1 million and $5 million of value you could drive a truck through that so as a constituent or journalist or someone interested in transparency, you want more details than that. they're looking at issues like that >> the folks who said -- the folks who told you there's just no way, i want to trade, got to trade, need to trade, would they say, i can't take this job if i'm not allowed to trade what's the thought to you? >> i don't know if that's true certainly the senate is where you have wealthier people. it seems to me there are two tough places

one is if you're marrying to an investor, which is the case of nancy and paul pelosi. tina smith is married to a guy who is a professional medical device stock investor. show's been in the senate for only a few years the idea that your spouse would have to quit their career in order for you to do a public service job while extremely important may only have two years of job security is tough another is ro khanna his family made him the single biggest filer that we found. his family traded 10,500 times in the course of our three year period he had as a result a ton of conflicts with his committee assignments because of the sheer vacuum and because they air trading. in his case his wife and young

children have assets from his wife's side that came into the marriage in 2015 and they're traded by brokers without direction. his view is that's ethical i am not involved. my wife is not involved. it's a diversified trust but if you say this can't happen, we'll comply with the loss it must be said, andrew, two-thirds of americans polled on this issue want to see literal bans on individual stock trading. i think the public view on this is pretty an ambiguous reporting. they don't want to take it urp because guess who imagines the bunt these guys hey, kate, thank you. >> thanks, andrew. when we come back, why elon

musk thinks the fed should be cutting rates right now joochbd the fed and much more. stay tuned you're watching "squawk box," and this is cnbc go gorgeous reliable grid. go emerson software. go science people. go breakthrough meds and safe science. go space age welds for super silent cars. go big. or go home. from software that delivers new cures at warp speed, to technology that makes clean energy reliable, emerson innovation helps make the world healthier, safer, smarter and more sustainable. go boldly. emerson. this is not just laundry. this is laundry that's smarter than the dial. this is ge profile smarter wash technology. fully optimized cleaning, no more guessing. this is smarter cleaning. this is ge profile.

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wearable training optimization tech. uh, how long are you... i'm done. i'm okay. we'll see about the 1250, 1300 loss we saw yesterday meantime elon musk weighing in on a fed question. a tweet reply in a chain started by cathie wood she tweeted a few days ago talking about inflation in the pipeline citing decline in prices from covid peaks, gold,

copper, lumber this morning she followed up, dropped 2.5% is he talking 0 .25 pay sis points >> 25 basis points look that's the call you're going to hear from every politician who is worried about the economy getting hurt from every ceo who's tired of getting squeezeded on some of these prices that's why the prices on the fed is going to increase dramatically as the pain started to seep in, they won't have unanimous support. >> we have to figure out what we want do. we want them to stay strong? >> you've got the break in function. >> i'm waffling. i dom want to kill the economy. >> if we could get to three, this would be good.

>> you'll settle for three >> yeah. >> do i hear -- >> that's what jason furman said using one model he ran it would take two years of 6.5 years of unemployment to get back to 3.5%. >> i think roger ferguson would be saying that. >> roger has been saying for a while it's gone up there was a lot of hope in the market, a lot of hopes that inflation would be peaking, and that wasn't the case. >> hopium. >> hopiumcontin? >> yeah. christina, let's talk through because it's been tough for the chips for a couple of weeks at least, if not longer than that. this was just another big hit yesterday too. >> yeah, yeah. the chips were the biggest drag on the dow, but -- or i should

say on the nasdaq. the slowdown you're referring to is primarily in consumer elect electronics, and that's been no surprise we've talked about it for the past couple of months. it signals the weakness might be spreading across enterprise and model. western digital, for example, not only pointing that memory and storage prices have deteriorated in recent weeks but the china market is cold across all segments. that caution echoes a recent warning from seagate on softening cloud demand the enterprise segment starting to show some cracks. speaking of enterprise, intel continues to lose data center market share to amd it touched its 52-weak low yesterday in its selloff its stock is down much worse than the semi-conductors during

that exact same time fraichlt weakness in consumer, maybe you'll ask, what about auto. bernstein points out that chips are now shipping at less than 50% above historical content trends and overall channel inventories are reaching record heise. they're worried, giving double ordering risks you're wondering where should you hide as an investor. wedbush points out foundries like unc and the semi-conductor are tracking weapon and that bodes well for globalfoundries what isn't boding well, the macro. you've got the expected fed hikes, exports to china, and that could mean continued choppy waters ahead. coming up, the pulse of the

retail investor after yesterday's big selloff. first as we head to a break, check out this morning's biggest premarket mover. stay tuned you're watching "squawk box" right here on cnbc this is not just laundry. this is laundry that's smarter than the dial. this is ge profile smarter wash technology. fully optimized cleaning, no more guessing. this is smarter cleaning. this is ge profile. as a main street bank, pnc has helped thiover 7 million kidsng. develop their passion for learning. and now we're providing 88 billion dollars to support underserved communities... ...helping us all move forward financially. pnc bank: see how we can make a difference for you.

tough day yesterday for stocks hotter than expected cpi inflation data sending the broader market spiraling deep into the red the dow and s&p 500 losing 400 each, the nasdaq down more than 5% for insightis on retail investors, let's bring in the ceo of ig north america. jj, how scary and how much fear

really gripped individuals yesterday? enough to where you start to make some type of a soft or bottom or do we have further to go in terms of complacency in shaking it out. >> i don't think there was a ton of fear yesterday. what's interesting to me is that it was still -- it was a big sell-off, don't get me wrong but it was very orderly. and, in fact, what was interesting to me is we saw some of our traders come in at the end of the day to start buying some of the index-based etfs we had this conversation a couple months ago, how there isn't any great individual story. so people are looking for something to invest in and it's been things like qqq and spy at the end of the day, i think many people thought, hey, this is maybe a little bit overdone i'm not saying they're necessarily going to invest in those longer term, but i think a lot of people bought those for a

shorter term bounce and it was interesting to see those orders come in in the last 15 minutes or so off the trading day. >> how was volume yesterday and what do we want? do we want not a lot of volume or do we want just lots of volume to signify that someone finally threw in the towel. >> you're always hoping for some volume i don't think we're in a place yet for a sort of washout. yes, for a washout, 100%, you need this big volume day or two where people have absolutely thrown in the towel and given up i don't think we're there, joe i think we're more in range-bound trade, if you will we're back to levels we traded with on september 7th. it's not -- yes, we gave up a lot of ground yesterday and you hate to see these big down moves in one day it's the old market adage, the market goes up the stairs and

goes down out the window and yesterday was certainly down out the window with all that said, it's somewhat of a range-bound trade. you have so much harder to work to get to the upside as you look around, what's that one story or two stories that are making me run and buy equities like that and i don't think we're seeing anything that makes clients want to hop on and say i have to own this stock or this index or whatever it may be and so because of that, it wouldn't surprise me to see us continue to bounce back at least through the next fed meeting and into earnings. because the earnings season is going to be very, very interesting. the one thing i'm most interested as we head in, i know it's a little bit away yet, how is this strong dollar affecting it we haven't heard a ton about that >> we are about 10% above the lows i guess, the 3600

and when we hit those lows, we had a certain idea about where the fed was heading and how persistent inflation was going to be. you would have to think that the prognosis has worsened since june in terms of how -- we're going to have to maybe go further, bigger hikes, more persistent inflation and yet we're still 10% above those lows so does that -- is that good or bad that the market is kind of hung in there as conditions have even gotten more concerning. >> i think it's good because there is optimism, if you will, going forward. i also think thatthe market is finally getting the message. chairman powell hasn't really been that wishy-washy on we're flighting inflation certainly over the last couple of months with that, you know, he's talked

a lot about it over last couple of months that he is going to do what it takes to fight inflation. now, of course, we all know, that he has to do so without completely upending the economy. but it does certainly seem to be that the message is out there. in my opinion, does the market want to hear what he is saying now the tough part about this is -- and, again, you talk about it on a regular basis. how does he do so threading the needle of not completely slowing the economy? because i think one of the things that's lost sometimes on the market is that this doesn't happen overnight you raise rates. it's not like two weeks later, everything else is great it's going to take six months to work through the system. >> thanks, jj. >> have a great day. >> i don't think you got a lot of tasty trades. they may taste like something, but i'm not sure -- >> it's like tasty cakes, joe. it's beautiful. >> i know they're like tasty cakes. but you're hoping for a good

taste, not a taste that tasted like yteayesrd anyway, thanks. >> have a good day >> we'll be right back with powerful, easy-to-use tools power e*trade makes complex trading easier react to fast-moving markets with dynamic charting and a futures ladder that lets you place, flatten, or reverse orders so you won't miss an opportunity

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trading day ahead. plus, news on the housing front and what the mortgage market is telling us about the state of housing right now. opec sticking to its forecast for the global fuel demand citing signs of major economies fairing better than expected despite raging inflation. we're going to break down the moves in crude and take a look at symome of the names in the sector "squawk box" begins right now. ♪ good morning welcome back to "squawk box" right here at the nasdaq market site you're watching cnbc i'm andrew ross sorkin it's been quiet a wild ride in the markets. the dow looks like it would open up higher this morning but it was down by about 4% yesterday 1,276 points the s&p closed down 4.3% and the

nasdaq plunged 5.2% and the nasdaq 100 was down 5.5% things are looking a little bit better you're looking at the ten-year note of 3.447. but we will see where this is all headed, becky. >> we've been watching all of these things this morning and obviously this is the market getting to the realization that the fed is going to have to raise rates higher and keep them there for longer than had been anticipating it's setting off different moves. for more on this, we want to get over to dom chu. >> becky, to your point, there's been a lot of focus right now on what's happening specifically with the large cap stocks out there. they have such a mathematical influence on the way the things like the s&p 500 and nasdaq composite function given their market cap if you look at the mega caps and the nasdaq 100 overall, it is

apple, microsoft, alphabet, amazon and tesla each of those stocks were down 4 to 7% in yesterday's trading if you look at them right now, maybe the bulls will feel ages better about some of the fractional gains that we're seeing apple up half a percent, same with microsoft, alphabet, amazon and tesla. not a lot of huge activity to the upside, but still a little bit of stability right now i want to highlight that both microsoft and alphabet are two mega cap names that are 1 of 11 s&p 500 stocks, mega cap--wise, that are within 5% at or near their 52-week lows go to my twitter feed for the rest of the 11 those are the stocks to watch right now. also watching what's happening with key areas of technology

trade. the semiconductor etfs has seen sharper moves. but it's over the course of the last couple weeks that we've seen a nice move rihigher off te lows keep an eye on semis and cloud computing software another place to keep an eye is the consumer-focused consumer discretionary type names carnival cruise lines. over the last week it's been a mixed picture. just in the last couple of days, many of those consumer names have taken a huge hit as buying power comes into question again. andrew, becky, joe, this idea here of inflation being part of the story is still going to play out until the data says otherwise. i'll send things back over to you. a couple headlines to bring you, talk about inflation. here's an example of what's

happening. amazon planning to invest $450 million effectively for pay and benefits to help their delivery drivers this for the holidays. >> we're going to diana. did i -- did i go sideways >> the headlines are pretty compelling i can understand your -- >> the reason i wanted to talk about -- >> they're unbelievable. >> you think about the holidays coming up and the fact that they're going to have to spend all this new money in a way that they weren't planning on, i imagined, beforehand that includes 401(k)s and education. these are additional costs that get pasted through the system and we keep talking about how prices are going up. this is one of those examples. >> definitely. shelter inflation. diana is an expert we got the latest numbers on mortgage demand. your stature and importance is growing on a daily basis i'm not kidding.

>> there's a plus side, right? you want to talk mortgage demand, let's talk mortgage demand it keeps going down as mortgage rates go up. total application volume dropped to 1.2% last week and that's according to the mortgage bankers association seasonally adjusted index that did include an adjustment for the labor day holiday. it increased to 6.01%, that's for loans with 20% down. that was the first time the weekly average crossed over 6% since 2008 it did cross higher for a few days in june on another index. as a result, re-fi demand was 83% lower than the same week one year ago with rates above 6%. only about 452,000 borrowers could benefit from a refinance

that's the lowest number on record mortgage applications went up 0.2% rates shot higher yesterday as we got that hot cpi number a separate read put the 30-year fixed yesterday at 6.28% joe? >> is this in it none of your purview seems like leading indicators how long does it take for us to see the effect of this where we could actually see some welcome news on inflation from what you talk about all the time? six months >> we're starting to see home prices come down that doesn't exactly correlate with inflation the one part of the housing market that we're seeing having an impact is rents and apartment rents we saw for the first time come down from june to july. that's because people are paying so much for everything else that they can't pay so much for rent.

landlords are losing their pricing power, they're losing tenants. rents are still up, but they're at much more normal increases than the crazy five times what's normal that we've been seeing in the past year. that part of the housing market is as for home prices, that's going to take awhile we always talk about the supply-and-demand issue. >> some of it seems stubborn and some of it seems like it could shift on a dime. and labor inflation. some of these things -- >> which goes into the homebuilders >> more -- >> that's why the builders can't lower prices >> exactly diana, thank you. coming up, a breakdown of yesterday's market move in both equities and treasuries. and later mark mobius on whether or not there will be more pain for investors. here's a look at some of the big tech names meta down 60% from its high.

amazon and alphabet down more than 30% microsoft now 28% off its high and apple 16%. "squawk box" is coming right back >> announcer: this cnbc program is brought to you by truist wealth [watch: speakers connected.] but to connect to all your clouds, you need more than technology. [watch: 50 feet to pin.] well that's not fair. you need cdw to implement vmware cross cloud services. a portfolio of multicloud solutions. it'll simplify workflows, speed innovation, and secure all of your applications. how did you get here?! [watch: the backdoor is open.] vmware makes connected multicloud possible. cdw makes it powerful.

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markets trying to come back from yesterday's big sell-off. the dow is now almost 16% from its highs. the s&p off by about 18% the nasdaq now down by about 28%. joining us right now is emily roland, chief strategist yesterday i think the markets got a bit of a rude awakening in terms of the inflationary numbers and what that might mean for the fed. how are you playing this out you've been more in line with expecting some of these things >> good morning, becky, and thank you for inviting me again. i think yesterday's inflation number was not at all a surprise i've been telling you and joe in recent weeks, we're going back to 350 on the ten-year treasury yield because inflation was going to stay high and yesterday it happened. it's going to continue to be that way

the question, becky, is what does the fed do? on september 21st with everybody expecting 75 basis points, 1% seemed on outlandish but now that a 1% increase seems to be increasingly the case, i want the fed to increase by 1.25 percentage points on september 21st that's the only way powell can stay ahead of the market rather than be a follower as he's been so far here is the problem, if he had had the proper policies in 2021 fighting inflation, we wouldn't be in this situation today to gain back credibility, he really has to crush the economy, increase the unemployment rate, and it's not something we want but that's what he's leading up to and that's essentially what he has to do

1.25 percentage points to show that he's in charge. it doesn't just matter if he keeps -- that will not bring inflation down he has to act. >> paul raised it more than 125 basis points the market right now thinks that he's going to do 75. there's a small portion that thinks maybe 100 roger ferguson doesn't think 100 basis points is going to happen. doesn't think that's likely. do you honestly think 125 basis points would be considered next week and would that fix things is that sending a signal that they're going to take a hard stance on all of us? >> great question. 1.5% will not happen it's something that i want to see happen, but not with general powell being the chairman of the federal reserve. if he doesn't, we are going to have this kind of discussion ongoing for the next year to

year and a half. inflation goes down one month and picks up and goes again and we will be talking about the fed continuing to increase interest rates. why? remember, powell said last time he wants to avoid the 1970s phenomenon of raising the interest rates, going easy, and inflation went up and then stayed and that prolonged the problem and made it difficult for volker today. he's precisely will be doing that if he doesn't increase by 1.25% this month >> emily, i know you're very concerned about what you've seen in inflation too what do you do as an investor at this point >> yeah, becky this certainly raises the odds of the fed needs to be more aggressive i agree with that. it also raises the odds that there's going to be even more damage to the u.s. economy so we are concerned that economic growth is continuing to

decelerate and these inflation fears are going to translate into growth fears. i know it feels challenging for fixed income investors on days like yesterday where we see rates backing up, but we're looking at 3 to 5% on high quality bonds is an attractive entry point right now to reduce the u.s. economy heading into a recession. guess what in a recession, bond yields go down we think even though we will likely see some choppiness, eventually, we want to gravitate towards bonds. we're embracing higher quality sectors, more decfensive sector. shift away from the things that we want given higher commodity, food, energy price, more towards the things that we need. utilities, infrastructure. we want to own companies with great balance sheets, good return on equity, ability to maintain margins

really getting active here both on the fixed income and the equity side. >> so the pain we've seen in technology stocks, the high-growth stocks, isn't enough at this point to entice you, emily? >> i think you got to be really careful where you go within technology obviously we know that the s&p 500 is basically a giant technology etf the u.s. market is the tech market and we want to be careful there. we want to avoid those growth at any price companies. we want to avoid companies that need to tap the capital markets in order to grow and we want to embrace quality. look inside the balance sheets, look for companies with more durability profitability, strong free cash flow and we think that those technology companies can do fine even in an elevated rates environment. >> i know emily has talked about this too, just the idea of shelter costs coming down. that takes a long time to work through, anywhere from 12 months to maybe 18 months i think

jeremy siegel said yesterday if it takes that long for housing prices or shelter costs to come down, it means that the inflation numbers are going to be high for a long time. i think the bigger question is, what do you do with wage inflation? that's where things get a little scary. people have pretty good ammo to go before the boss right now and say you've got to pay me more money because costs are so high. how do you see that playing out? even if they were to do 125 basis point, that's not going to deal with that. >> becky, we are in a wage fight already. you can point to the latest inflation number and you will make a lot of sense when you're asking for a wage increase that is going to push up prices. the only way in which that is going to be avoided is the fact the chairman and his colleagues have to be really tough. so i have, again, a history lesson for general powell if he

would only listen and that is that having allowed inflation to go to this extent, he simply does not have the luxury of going very gradual in terms of interest rate increases. he said at one point, he will bring the inflation down without causing too much pain. it is simply not going to happen and that's the lesson we have from the 1970s and he's almost repeating the playbook of miller in 1979. >> that's harsh. nobody wants to get compared or contrasted with that fed chief those are really strong words. what gets you to that point? >> because i've been saying the same thing i didn't have anymore listen when i said throughout 2021, inflation was going to stay high and we had the transitory

argument then, becky, look forward, he said in november that he thought that it was going to be -- inflation is going to remain somewhat permanent but no tightening of monetary policy until mid-march then we're still gradually in terms of interest rate increases and quantitative tightening to come to the $95 billion a month level. it's taken several more months the factors would say to me that it doesn't seem to be any urgency in bringing down inflation at all >> emily, when you take all of those dire predictions, i mean i know you're concerned about this i don't think you are quite as concerned as him when you hear those things, does it alter anything you're thinking about the future for any asset class at this point? >> well, i think that the challenge to that argument is that, you know, mary daily once said that fed policy is like a tanker ship. it takes three or four quarters for the impact of the moves that

the fed is making either tightening or loosening to be felt by the economic data or the earnings data. i think that the fed may actually benefit, yes, over the short term, they need to move aggressively and we've seen that repriced in the data, in the bond market. but i think that that affords the fed the opportunity to pause and wait and see what the impact is almost certainly, the fed is raising rates to the point that something is going to break. and we believe that the unemployment rate is going to rise we believe that the wage growth that we've seen is absolutely going to moderate. we're already hearing anecdotally about layoffs. we think that translates for more pain at the unemployment rate going into next year. we got to focus on the leading indicators becky, we talked about last time how friends don't let friends use lagging economic data. that's exactly what the fed is doing right now. we got to wait until the

economic data bottoms in order to add more risk to portfolios and that's the way we're positioned today. >> thank you, both we think >> thank you, becky. >> thanks. coming up, mark mobius is going to talk about where this market may be heading. and kyle bass of hayman capital is going to join us. take a look at some of the carnage in the chip sector nvidia now down 29%. we're going to see if they're going to bounce back or if there's some mored downside. so much for the chips act. "squawk box" coming up right after this. time now for today's aflac trivia question. what is the average price per pound for turkey at supermarkets the answer when "squawk box" continues. e size of that- gaaaaaaaaaaaap!!!

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that's about 60% higher compared to 2021. welcome back to "squawk box" this morning we have a couple big corporate headlines, amazon planning to invest $450 million to increase pay and benefits for delivery drivers. it includes education and financial support. amazon starts hiring for the holidays it's restructuring its shipping network after expanding too rapidly during the pandemic. this is going to be one aspect that you're seeing in the form of wages. one of europe's highest courts upholding the biggest ever antitrust fund against google they issued a penalty back in 2018 they determined google broke the rules by requiring smartphone operators to include a bundle of google apps. the court reduced that fine to $4.1 billion

one of three penalties the eu has hit google with since 2018 and twitter shareholders deciding to hold elon musk to the offer. the case between musk and twitter is scheduled to go to trial on october 17th and this comes, of course, after that whistle-blower speaking in washington yesterday >> mark your calendars much more on the markets still to come we're going to hear from mark mobius on what he's seeing from a global perspective. and hayman capital's kyle bass will give us his take on yesterday's sell-off, the fed and much more. you're watching "squawk box" and this is cnbc

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♪ welcome back to "squawk box. check out the futures ahead of the ppi report due out at 8:30

this morning so that's coming and we now see that the triple-digit gains that we had early on is even more anemic now up 39 points on the dow. these are like flat numbers. up 22. >> the good news is, it's no further declines. >> not now not yet. not yet. don't blink. crypto, this morning, as you can see, kind of flat as well which is not surprising. totally correlated with risk assets. >> even more so. yesterday bitcoin was down 10% at one point. >> it had crept up it correlated but even a bigger beta, delta -- why can't we use our own letters for things like that the futures are up some of the dow leaders this morning, if you want to take a look at marginal gains under 2%

on salesforce. less than 1% on dow and merck. over on the nasdaq, take a quick look before we get to our next guest, starbucks, asml and workday. our next guest predicted further pain for u.s. markets. glamorous tech will be in trouble. joining us now is mark mobius. founding partner of mobius capital partners we know how great tech is in terms of growth prospects. i think you're not disparaging the industry itself, you're just saying when things become overly loved, that they just get overpriced and in an environment like this, there's they have more to give back, main. >> exactly there's so many companies in the glamour period that when ipos

with no earnings and with, you know -- no prospect of earnings so these companies are supposed to get bond when we have higher and higher interest rates. but in these tech stocks, there are companies growing rapidly, having a high return on capital, et cetera. we have to really differentiate. but, unfortunately, just like you've seen with the emerging markets index, because china went down, the index goes down everybody gets very negative on emerging markets and the same thing is true with the technology area. >> monetary backdrop from your viewpoint as a global investor, you have to monitor the central banks around the world but how is powell and the fed, how is he being perceived globally right now and are the problems pretty consistent around the globe, are they worse in the united states do you think he sticks to his

guns do other central bankers have the fortitude to stick to their guns have you ever in the past? >> no, they haven't. they follow the leader the u.s. increases money supply because covid, the big covid scare, which was overdone, as usually, when you have these kinds of crisis and everybody started printing and so the use, increased money supply by 40% and everybody filed suit and you see the results in europe you've seen the results in japan. and you've seen a similar situation. the problem with these other countries is that their debts in some cases are on u.s. dollars or now more and more increasingly chinese -- the chinese have been lending like crazy in the emerging markets. they have a debt problem as well but the money supply situation is really the key. i'm surprised when people talk

about cpi at 8%. but reality, it should be like 30%. money supply has been increasing at such a rate and money supply is really inflation. it's a devaluation of the currency >> yeah, but that has slowed and a lot of people point that out when they come on, mark. they did get that under control. do you think jay powell will be data-dependent or do you think he's debt set on taking a queue from the '70s and paul volker. will he go higher than he needs to just to try to vanquish inflation? >> yeah, i think it's a good point to look at the history you remember that volker was looking at 15% inflation, cpi was at 10 plus, then he went up to 20% at one point.

so i mean the game plan for the fed is to raise interest rates higher than inflation. that's why when they raise by three quarters of a percent, no surprise for me. they're headed for 9%. if anyone inflammation stays whe it's at, we're going to see 9% or maybe even more interest rates. that's the game plan we got to count on that until we learn something differently. >> that's going to be a period of years that stocks are going to be under pressure then, i would think. >> yes the good news is that in this whole list of thousands and thousands of stocks, you have some real gems you have a lot of companies that are able to raise their prices in excess of inflation and have this incredible pricing power, good returns on capitals, no debt those are the companies that will really do very well and mind you, if you look at the

correlation of interest rates through the stock market over the history, the correlation is not very high. there have been periods when high interest rates were accompanied by very good stock markets. so we have to watch this carefully. >> most people don't use that cpi number for where the fed has to go, mark. they look at tips and other things and they think we need to get above 4 or 5% core inflation by the fed. you really think we need to get up above what the printed cpi number is? where we are right now, how -- that would take how long to get there, even with three 75-basis-point moves >> if they go up 1 or 2% at each meeting, then they can get there quickly. it seems to me that if they really want to do something and have some effect, they've got to

have much bigger jumps in their inflation talk and you can see, again, taking a page for volker, what he did he was pretty ruthless in raising rates and it had the effect of bringing down inflation. of course, with lots of pain but the problem i think the fed has is that they're not accounting for the cryptocurrencies you must remember, cr cryptocurrencies represent 3% of the money supply and on the margin, the trading that takes place in cryptocurrencies, ignoring that, it doesn't make any sense. it makes it more difficult for the fed to do anything about it because they don't have control over the cryptocurrency world. >> well, paul was very tall. you're saying 1% is on the horizon at some point? and you said -- did you say 2%

possibly in a single meeting for the fed that could -- i don't -- i don't think that's possible. you're too far away from the united states, i think are you sure >> i think it's quite possible again, if you look at the history and i think the fed is looking at the history and they realize that they got to do something quickly and more effectively. obviously -- >> did he do a 2%? i know i was there, but i don't remember whether he did a% 2% or not. that would be very dire, things would have to get really a lot worse for that to -- they're barely talking 1% and most people say they won't even go to one because it sends the wrong signal you think things are going to deteriorate from where they are now to where they're forced to do that? >> i think so. i think the game plan is you want to beat inflation, you got

to raise interest rates. they're not looking at the stock market they shouldn't be looking at the stock market working according to their rules and regulations. they should be saying, look, we got to have stability. in order to do that, we got to raise interest rates and that means it would quickly and otherwise try to hit it as quickly as possible. otherwise it can get worse despite the fact that fuel prices are down, if you look at the wage situation and look at the labor situation, it's a really very inflational -- in america, there's a shortage of workers in many industries that's another fact that you have to look at. it's not just about fuel, about oil prices >> you're talking about a really hard landing, then, that the fed would need to orchestrate and there would be more pain than i think we're anticipating in the economy. do you think we need to do anything -- that's demand.

there are many people that think we need to do things with supply and that is -- and that's sort of the opposite of raising rates so people can't start businesses, people can't invest, capital gets more expensive. all those things makes supply even worse it's counterintuitive that that's the right move. would you suggest that tax cuts or deregulation or some means to increase the supply or just kill the economy with higher interest rates? >> well, that's a very good point. i think if you reduce the regulation, if you reduce taxes, that, of course, helps the economy tremendously and then companies can live with high interest rates high interest rates, we've seen many cases in the past where the economy was doing well with relatively high interest rates if you combine the high interest rates with cuts in tax rates and

less regulation, of course, that would help to a great degree of course you'll be working at cross purposes the administration will be doing one thing and the fed will be doing another thing. but that's okay. at the end of the day people will be happy. >> i guess what you would suggest investors do is stay global and look for companies with pricing power that aren't in the glamour world reasonable valuations, pricing power, and don't stay out completely because some companies can still flourish even in this environment is the united states first on your list, middle, back of the pack give us an idea globally >> yeah, no question the u.s. is great because you've got companies that are global. i mean, i consider some of the emerging markets are in the americas, american stocks. and many of them are big in emerging markets that's number one. liquidity of the american market

is tremendous. then you have to start looking at some of the emerging markets like india, taiwan, even qudespt the problems with china. there's many of these that have great opportunities for growth you have to have a mix with u.s. first and then international second but there's great opportunities out there. even with a bear market. we are in a bear market. you have to admit that and now it can get worse i would say probably if you look at the indices, we could be down another 10, 15%. but that's no big deal we're already in this bear market and there's some opportunities. >> all right thanks, mark we need to -- you know how you can look at a web camera, anywhere in the world. where would we set one up for you today? >> i'm now in dubai. >> you're in dubai

you've been in dubai a lot of times when we have you on. but you could be singapore -- >> oh, yeah. i just came from a month-long trip to italy, france, all of the u.s., mexico so i'm doing a lot of traveling. next week i'll be in spain >> how was that dollar pretty good, wasn't it are you feeling flush -- >> the amazing thing is, if you look at hotel rates around the world, they're high. if you go to london today, you pick up the phone, you want to get into the sheridan, that's 500, u.s., 600, u.s. rates have gone up. >> can't get workers they're not full occupancy half the lorooms, you've got no one to clean them. always good to have you on, mark >> thank you. >> people over here don't stay stuff like you just said. >> i was surprised at 125 basis

points. we've got news to bring you about softbank because it's considering launching a new giant start-up fund again this after its last fund is now down. and then we're going to talk energy with helima croft you can always get the best of "squawk box" on squawk pod. stay tuned beep. beep. what up, barry? hey, chuck. aren't you supposed to be on the course? i was, but i need a new driver.

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softbank is reportedly considering the launch of a third vision fund as it tries to start a new chapter following the poor performance of its two earlier funds. "the wall street journal" says that the firm would probably use its own cash softbank is reportedly also weighing putting additional money in its vision fund too instead of starting a new fund the fund is worth 19% less than the investment that went into it employees would like to see this happen because it's a way of restarting the clock you can charge fees again without having to make up for the lousy performance -- if it's

your own money, it's not everybody wants to start a new fund every time they've had a lousy performance because you can't get back to the point of measurement until you make up for the losses that are there. >> if you're a shareholder of softbank, we're talking about softban softbank money you're taking softbank money as a publicly traded company -- >> it's not softbank money if it's publicly traded. >> right it's the balance sheet of the company. and the question is, do you take that balance sheet and is this the moment where -- there's an argument to me given that the stock market is down right now -- >> do over start fresh. >> if you were going to invest, this actually would be a more opportune time -- >> you have to make up for the losses that we need on your behalf. >> the question is about, do you start it as a separate fund, do you double down -- >> i get why you want to start a separate fund.

the question of whether he would put that money in softbank too is kind of convoluted because he put a lot of money into that, but it wasn't his money. it was softbank's money. if it goes down, he has to repay them he has some incentives themselves for putting the money in the second fund, then he would not have to necessarily have to pay money to soft bank >> too complicated for me. >> this is just from reading the "journal" story this morning >> my understanding, there was some soft bank balance sheet in the first two funds. >> he had personally -- not his own money. >> he owns a massive stake in soft bank. >> he personally said if it didn't come back, there were losses there, he would have to put money into it. there were questions to that at least that's the elusion from the wall street journal. >> the dow was just down. >> oh. futures up by 5 points up by 3 points after a loss of

more than 1250 points yesterday. how it started this morning, up 150. how it's going, flat >> yesterday's move in the market and it was the worse day and the dow suffering its seventh largest point ever it was the fifth largest point loss ever. this morning the futures are flat up by about 7 right now for the dow. we are going to get another read on inflation oh, good that's coming at 8:30 this morning in less than 40 minutes' time producer price index will be released we'll get the numbers, wlle' get the instant market reaction. "squawk box" will be right back.

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to play the open beta. early access begins september 16th, first on playstation. visit xfinity.com/rewards. >> down a little we're talking about. rbc capital markets. the gas station was a sign what's really happening? >> i mean, in terms of oil prices, i mean, you absolutely have had -- you've noted

consistent decline, fears about recession have weighed on oil prices i think as we go into the remaining months of the year the key questions are going to be, you know, what happens with the supply picture the u.s. has been putting a lot of oil on the market with the spr that's set to wind down. we have the decision coming in december the eu sanction set to take effect the price cap plans potentially launching and that's going to determine whether we have, you know, russian barrels continuing to flow to key markets in shah or whether we have a potential multi-billion barrel disruption. there are lots of things moving and we're in the stable zone one day we're down a bit because of recession concerns. the next day we're up because demand is up. >> can werelit at this gate th last couple of months. the question i'm trying to grapple with, i think we're all trying to understand, how much of that increase was a function

of the higher oil prices prior and if they aren't, then what is really moving -- you know, has that been a wage story is that something else where do you see the energy piece of this, to the degree you see it at all, in the numbers we saw yesterday? >> when you think of food prices several factors leading to the run up in food prices. remember, ukraine is a major grain producer russia is a major grain producer we had real concerns about a global food crisis because russia has been holding ukraine grain hostage. when you want to talk about energy, natural gas is a very important component of fertilizer so that is a clear feed through and we want to think about one of the reasons why we've had higher food prices, this fertilizer issue is really key and that's going to be persistent the national gas story remains very, very frightening so one of the real impacts we're going to continue to watch is

what happens to food prices. we're having issues with fertilizer plants having to curtail output so that is going to remain a big concern. >> finally, if jay powell continues to raise interest rates, which i think he will, whether it's 75 basis points or 100 basis points or something else, even that expectation has pushed down oil prices >> right. >> how much farther can they be pushed down if, in fact, some of the worse case scenarios in russia an europe don't happen? >> i mean, look. this is certainly weighing on the market there is a fear of demand destruction. where we're seeing real problems in demand is a place like china and their lockdown policies. the question is going to be as we head into the remaining months, it's very, very policy driven does china potentially lift lockdown what happens with russia in turns of output? >> we want to thank you for joining us and telling us how it is and how it shall be

thanks >> market historians telling me. vulker did 2% on a saturday night. it's been done coming up, hayman capital's kyle bass

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good morning here we go again new inflation data yesterday was consumer prices, today we'll bring you producer prices we'll bring you the market and the reaction futures had a historic market drop we'll tell you how bad the pain was. we're going to ask tech stock main t. muenster about the tech stocks the final hour of "squawk box" begins right now. good morning welcome back to "squawk box. down 50 now on the dow we're trying to rally up but we have succumb to some of the

selling pressure from yesterday. we're at the nasdaq and we're live i'm joe kernen along with becky quick and andrew ross sorkin here it is it's red now across the board. it was green all morning but now down about 6 points on the s&p, 45 on the dow, 15 on the nasdaq. quick look at treasuries i wish i had a crystal ball to know what that board looks like in six months. i think that would give me a lot of insight. >> money >> huh >> money >> a lot of banks. set back to the future, too. >> yeah. back and bet on whatever stocks. >> oh, i would love that put them out of business >> anyway, for some context on the selloff and what we're seeing this morning with the reversal on the futures, let's get right over to cnbc's senior market commentator mike santoli. when we came in this morning, we said, well, at least the market is not falling anymore

you can't say that anymore. >> no, you can't really treasury yields says that in the last 20 minutes yields did tick higher in advance of the ppi data. there's a new high for this cycle. we're in the same mode as yesterday where the market is trying to catch up to where they think the fed has to go to catch up to august inflation numbers here's the s&p 500 etf it's very unusual, first of all, to have a 4.3% daily loss. that's extraordinary it's equally extraordinary to have that kind of loss only going back one week in time because you did have the 5% rally over the last five days. if anything it shows you the instability of this market and we did get the rally off the 3900 area. that's 390 for the etf based on oversold conditions. the market tried to make a stand there and rally. maybe if nothing else, that's the level that we might first have to test here. so far it's staying out of this

trough that was from the june lows down 7 or 8% from here you're going to hear more about whether we need to revisit those. yields seem to be in charge. take a look, since the first fed rate hike what's going on with long term treasury that's the tlt, as well as housing-related stocks this has been the first front in the fed's effort to try and restrain the economy, the most interest rate sensitive sector has been housing it's almost a mission accomplished as far as the retrenchment people talking about the rent measures of the cpi are essentially anchoring to former housing values it does take time to catch up and get into the cpi so far you've seen that's one of the absolute clearest effects. the other thing in terms of the yield setup is, yes, we talk about the 2-year versus 10-year treasury yield as some kind of indicator, potential indicator

the three-year seems to have more robust statistical value. this is not yet inverted although the three-month build yesterday did have a huge surge in yield there's not a lot before you do get to inversion right here, these were three periods where the yield did go below zero the three-month yield was higher than the 10-month yield. that was between 6 and 18 months ahead of the onset of the recession in the prior cycles. who knows if there's any kind of pattern to it. keep that in mind. by the way, if we're going 675 basis points with the fed, the three-month forward window is capturing a lot more up side to yield. so that's why people feel the three-month, probably a matter of time if we get those rate hikes will be pretty high and presumably the 10-year treasury yield may not go up. therefore you might go below zero >> we've had some pretty severe calls for the fed to raise by

even bigger numbers by 100 basis points mark mobius was talking about it what would that look like? historically i guess it has been done what would that look like with fallout across the markets how would that shake things up a bit? >> first of all, it has been done at a higher level of absolute yields. my gut and everything that the fed officials have said is, one, they probably like the fact that we are off balance and trying to guess at just how aggressive they have to be. i've said before that powell, like a pitcher that sometimes comes inside, he wants to be effectively wild he doesn't want people to get too comfortable with the idea. on the other hand, yesterday's number more or less ratifies where the fed already was. they've been the ones saying we don't want to anticipate this and assume the rate was going down the market had to adjust to

going 75, maybe 100. what's interesting to me, if you look at the bond market, the implied rate pattern, they're saying whatever the peak level is, let's say 4.25 on the short-term rate, it will probably be reached by the early part of next year. they haven't moved it out too much in terms of time when they get to the target level, it's just getting there faster. that's the adjustment that potentially markets are going to have to make. >> mike, thanks. >> i was sort of hoping they would be data dependent. >> if they are -- if they are -- >> now it's bad. no, data dependent, i thought data was going to be better, not worse. if they're data dependent, they may go worse. >> most economists thought the data couldn't be better. >> what do you mean? >> i just think the sense of most economists was there's no way you were ever going to get this situation resolved this quickly. >> well, everybody was o wrong side of it yesterday, that's the only thing. if economists are ever more

right than the market, that'll be the day. >> yesterday was the day >> i don't know whether -- i think a lot of economists -- that's why the administration felt so comfortable saying that things are under control, because of inflation i think everyone -- a lot more people got surprised, just by definition, on what happened with the market yesterday. it's obvious for more on the markets and where the fed may go from here let's welcome kyle bass, hayman capital. what was it about the report, the cpi yesterday, that was so troubling to investors >> first of all, good morning, joe. i think that if you look at the numbers from yesterday, you see that we all know that we have energy costs have come way down due to the administration deselling an unprecedented amount from the strategic oil reserve. gasoline prices have come down used car numbers have come down

modestly some people were expecting a negative number. what it shows is wages are pretty sticky, rents are pretty sticky and those increased i think we lose sight of the fact that the fed's balance sheet prior to the global crisis wasn't even a trillion dollars they hadn't even printed a trillion dollars going into mid 2008 and then we quadrupled the fed's balance sheet from the financial sheet. we were at 4.1 trillion, now we're at 8.8 trillion. we've doubled it the fed is responsible for all of the inflation and now we're hoping that the fed can get their hands around it and while they went way too big or they printed way too much money going into covid, i'll give them the benefit of the doubt here. none of us knew how bad that virus was going to be as far as our economy's concerned, but

know we have a scenario where they're raising rates so significantly. they've taken it from 0 to 2.5 we're talking whether they're going to do 75 or 100, which has kind of panicked levels of raising rates. when you raise rates, it doesn't show in the economic data for 9 to 12 months i think they need to be careful. they overdid it on the way up and i think they're going to overdo it on the way down in a major way. >> if it's just a -- you know, the open spigot of dollars that's causing this, which is what you're describing, what's wrong with gold? and why is the dollar so strong? that causes people to think of other things, kyle, and other people point to how much money we spent fiscally that the fed has enabled. and then the people that defend that spending will come back and say, it's supply chain, it's,

you know, putin and there's these one offs that aren't -- you just said it was solely due to the fed printing too much money. i just don't see why is the dollar so strong and why is gold just dead in the water >> gold is -- so we'll start with gold. private crypto came about and had a multi-trillion dollar market cap as an asset class i think a lot of the, quote, inflation money went into kind of the new digital gold and it became highly speculative. so i don't think gold's -- >> how about the dollar? is that a bigger than thy neighbor is everybody else worse? >> the dollar is a function of the differential in interest rates. like you look at the differential between u.s. and japanese rates or u.s. and european rates u.s. and asian rates, 1-year treasuries traiting 390. 10-year are trading 3 1/2.

go look at where 10-year german bonds, 10-year japanese bonds, all of the money around the world is coming to the u.s. around high yields if you go back to bernanke's helicopter speech, i've read it probably ten plus times, it's important to note, he said if you get to the zero lower bound you need to get as far away from it as quickly as you can we've been at zero rates for essentially 12 to 14 years and now we're aggressively raising rates. you brought up the vu lca r days debt to gdp was 39%. today it's 100%. on balance sheet debts are almost 24 trillion every 1% hike in rates costs us, let's just say for the ease of math, 240 billion. we're spending 12% of our national debt on interest as of july and now we're talking about raising another 75, 75, and 25

or whatever it is when you think about the fed pods and you look at where the other folks are, we're somewhere between 4 and 4.5% i think that will bring our economy to its knees the fed's targeting unemployment and payroll employment i think, you know, some say we need to get to 4.1%, 4 1/2%. some saying in white papers written recently, 6% these are crazy times that we're talking about, joe vu lca r can't live today because it will break us as a country. i don't think we can raise rates without having severe negative consequences in the next 6 months. >> we've had people talking about the amount of spend being that we did during the pandemic. not the fed, the fed enabled spending the recovery act there were people already screaming about all of that, and then since then we've done chips

and then we've done the inflation reduction act which, you know, supposedly is going to actually cut the deficit over ten years. then the student loan. we've been layering on trillions in additional spending but none of it is done yet. does this put us on our back foot for the future? are we actually engendering more in 2023, 2024 and 2025 from what we're spending now because we're dealing with what we spent in 2020 that's the inflation we've got now? are we still manufacturing more? >> i mean, in the short term, joe, when the price level moves from let's say -- let's say the price level was at 100 pre-covid, the real price level today is like 1b340. we all know how much impact the net effect of the impact of that printing has been on our own

balance sheets, our own savings. but what the fed has taught politicians is that it's okay to spend and it's okay to spend recklessly and frivolously when was the last time you heard the words tea party used i mean, we just forgot about the tea party. we forgot about any kind of fiscal balancing because the fed just taught politicians that they will be there now they're trying to rein it all in they're reining it in so aggressively that i don't think they'll be able to take a trillion off the balance sheet before they have to stop i don't think it's positive for risk assets until they stop. so i'm afraid we're going to see more days like yesterday. >> are you afraid -- what are you more afraid of or what would be worse, stopping too soon or going too far? >> i think they're going too far too fast i think that these mechanisms take time. fighting inflation is a process. look, we think -- think about this we've got, what, the rail

workers potentially going on strike as of this weekend looking for material wage gains. the nurses are asking for 27% wage hikes over a 3-year period. they're being offered, what, 10%? we're going to be somewhere in there. union contracts are multi-year contracts. you can't negotiate for higher rates until those contracts expire so this is a process that can't be fixed in just a few months. this is a process that takes a long time. again, the transmission mechanism of the fed raising rates takes a decent amount of time again, 9 to 12 months to show in the real economy we've taken rates from 0 to 2 1/2. we're probably going to 3 1/4, 3 1/2 next week. when you think of the delta from zero, that is a massive change think about this, every 1% means 230 billion in interest expense to our country you know, the debt again costing

us 12% of our annual budget today, and we're talking about raising another point and a half, two points from here i think that the vulcar days can't happen today i think you're going to see in the next 6 to 9 months, you're going to see an extremely sharp recession. >> i don't know if that whole party yesterday at the white house, seems tone deaf, doesn't it, kyle i don't know that doesn't give me a lot of confidence in what's happening but, anyway, they need to -- maybe i can send them a video of this, to someone you don't sound very positive. thank you. >> i just think they need to be more careful, joe. thank you. >> all right we're tuned in to the real world. thanks, kyle. coming up, the number of the morning, we're going to have more breaking inflation data on the way. august producer price index due out at the bottom of the hour. we'll bring you the report and

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welcome back to "squawk box" this morning the futures were up a little bit more than this earlier this morning. we were talking about the dow by about 150 points now it's barely up, up by 23 points s&p up by 5. the nasdaq up by 19 after a huge selloff yesterday. we've told you about the point prices the nasdaq and s&p down significantly, too the nasdaq, in fact, off by more than 5% yesterday. a little more context on that selloff from yesterday each of the three major averages had its worse day on a percentage basis since june of 2020 it was the fifth largest point loss for the s&p 500 in history and the 7th largest point loss

ever for the dow home depot led the dow lower it contributed to about 129 points to the down side yesterday and only 5 stocks in the s&p 500 finished higher including agriculture chemical names like corteva, cf industries and mosaic. they're the best performers up 30% each. coming up, a deep dive into the latest carnage in the tech sector not having fun after yesterday's unexpectedly hot cpi print loop. gene munster, loup we've got a ppi number coming up too. more inflation data and economists expecting producer prices moderated slightly last month. we'll know in a few minutes and we'll bring you the official number at 8:30 stay tuned you're watching "squawk box" on cnbc this is ge profile smarter wash technology. fully optimized cleaning,

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all right. welcome back to "squawk box. this is cnbc and we are just a few minutes away from new inflation data this time we're going to be getting august producer prices yesterday it was the cpi ahead of this number though let's bring in our expert panel. we have lindsey piazza sarat selfie and of course our

own rick santelli and steve liesman. guys, we have never done a panel for the august ppi, i don't think. we are playing this up in a big way because this is what the market is keying off at this point. we're watching to see what's coming with this steve, i'll give you a quick second to give us a setup of what we're seeing, what consensus estimates are. >> it's minus 01 on the headline number and then when it comes to the core it's plus 0.3 take out trade also 0.3 what we're looking at, becky, is the possibility once again, line up the pins, see if we can knock them down in terms of some relief on the headline obviously looking essentially up the pipeline they see different stages of production if there's any relief in sight the market is coming and inflation is not going away tomorrow the world is not going back to the way it was before the low 2% funds rate

trading this morning with a 440 handle on the funds rate that's a pretty dramatic swing from the fed ain't gonna do it to this is where we are now. >> just rapidly yesterday at 8:30 a.m. eastern time when we got those numbers on the consumer prices. the ppi is, of course, going to show us the inflation and how it's hitting producers of all of those issues further up the pipeline. rick santelli has that number. rick. >> yes our wholesale inflation read in the form of august producer price index hitting the wires and exactly as expected on headline as steve pointed out, minus .1 1/10 of 1% by the way, all high water marks are from march of this year. 1.7 was that high water mark strip off food and energy core, 1/10 hotter.

up .4 of 1%. high water mark in march up 1.3. if we strip out food, energy and trade, it's up .2 exactly matching expectations and exactly matching up .2 in the rear-view mirror up 1% was the high water mark in march. now let's take the wide view year over year, ppi headline, final demand up 8.7% 1/10 lighter than expectations and definitely below 9.8% in the rear-view mirror high water mark, 11.7% strip out energy, it's hotter by .3, 7.3 in the rear-view mirror 7.6. high water mark, 9.7, as i said, all in march of this year. and finally, year-over-year ex food, energy and stratrade up 5.6%

.2 light in the rear-view mirror which was 5.8. high water mark there, 7.1 so there's very little doubt that we have, in my opinion, probably had peak inflation. the issue is how far and how fast it normalizes closer to something we recognize and maybe more importantly, for people to understand, a couple of three years down the road seeing it up .2 or 2% is very likely we're measuring the rate of change what probably won't change is the level we reach once we normal normalize. there are revisions trickling in we'll go over those after the panel, back to you >> hey, rick speak to the market reaction not just what we've seen in the last minute or so but what we've seen throughout the course of the morning. dow futures at this point are negative we were up 50 points 2 1/2 hours ago. s&p futures are barely hanging in there nasdaq barely hanging in there and what you've seen with

treasury yields this morning, too. >> well, we were at 3.80 on the 2-year we remain there. those are 15-year highs. if we look at the longer end, we are 3.47 we were a whisker below 3.46 before the number hit. maybe the 10-year and 7-year are the two most important they have not, i underscore, not taken off their mid june high yield closes in the case of the 10-year it was around 3.48. i can't stress how important that is. many viewers might not understand how technical analysis can fuel strategic trading activity but, indeed, it does i think we learned a lesso yesterday. subtle changes in cpi still well off its worst levels can have outsized market impact i think that dynamic is going to continue but there's hope there's hope because at some point down the road when we get a better cpi or ppi number, even marginally better, we could see an outsized reaction in equities in an

opposite direction from yesterday. >> excellent point any components you want to point to while rick has been looking at a lot of those headline numbers? >> yeah. he did a good job giving those numbers there. so the big story here, 3/4 of the decrease in prices on the final demand attributable to gasoline prices. that's -- you know, kind of saw that coming. at the same time, becky, i'm looking at final demand for services, i have to put my glasses on, up 0.4% in august. that's the fourth consecutive rise a bit of that is the trade component which is a weird component that most economists kind of look past. so i think this is an okay report when it comes to looking at what's happening up the pipeline when you look at intermediate processed goods, raw goods. you are seeing some abating of the inflation pressure in the pipeline i think what may be happening, becky, is a kind of a divorcing, so to speak, of the input costs

and the final costs to consumers. there's a whole lot going on on the consumer end from passing along higher wages, you know, with the labor shortage to the ability of companies to pass along and keep those price increases. so it is good. we have some relief in pressure on the producer price side just not sure how much that matters at that moment on the consumer side. there's still concern as you saw yesterday the core numbers still going up inside the consumer numbers. that's the thing the fed is going to focus on. >> lindsey, when you look at this number added to the cpi yesterday, what's your take away i like rick's point. hopefully we've seen the high water mark but that doesn't mean it's coming down to reasonable levels any time soon. >> from the fed's perspective, this is a promising report i don't think it's enough to shift expectations back to a smaller expectation of 50 basis points, but i do think it's

enough to remove any sort of outsized pressure for the fed to make a materially larger increase of 100 basis points or more from the policy perspective this allows the fed to stay the course, but with inflation still at a four decade high, this does continue to exacerbate pressure for the fed to remain on this relentless pathway to higher interest rates but from the consumer's point of view, with gas prices retreating, again, this does offer welcome reprieve on a monthly basis, but it's not enough to offset those rising costs in other key areas we see food prices yesterday up 8 housing costs up .7. from a consumer standpoint we're still seeing this mounting level of pressure from a price standpoint, and this is going to add that downward momentum to not just the consumer but the overall broader economy. >> sarat, what do you do as an investor after that huge drop yesterday? >> yeah, i mean, you know, you've got to look at companies that are going to be able to

deal with rising input prices. so, yeah, gas prices are coming down, but if you look at wages that are still going up and, you know, your average worker is saying, hey, i need to kind of come back to where we are. so i think companies that have high labor components and have high kind of rent components are going to have a hard time. we're focusing on companies with operating leverage in this case it could be some of the software companies because their costs are not as high as some of the other labor costs and actually you have to look at them as demand i think what the fed is trying to do is not just, you know, bring prices down but also lower demand if demand comes down, that's going to actually bring the economy stable which is kind of contrary to what people think. i think you've got to look at companies that are doing well. software companies like the oracle's of the world. financial companies are holding cash, morgan stanley, bank of america that are going to have great up side in terms of interest rates i think at this point, you know, companies that have cash flow outside of five years are going

to have a harder time. right now investors like us are focused really on really good companies with balance sheets and cash flow positive and if you're pie in the sky, you're going to get hurt even more given the news we've had in the last 24 hours. >> steve, you did a really good job yesterday morning pointing out how the fed futures had shifted instantaneously where 80% chance is that the fed would raise by 75 basis points next week but that the extra 20% were people calling for 100 basis points we've had commentators calling for even more than that. 125 to 200 basis points. is that something that the fed would ever consider doing as early as next week >> no, but i would point out rick and i have not had more fun watching this for 20 years i think he's been watching it longer than me a set it and forget it, it's a

ronco number, like the old toasters that you had. this is now moving on a daily basis. in fact, that reminds me i wanted to update my number 4.41 still not really a big change there. when it comes to the probability of 100, a lot of respect for the market they're betting their money, 37% chance of a 100 basis point hike becky, what i want to do is emphasize what i said earlier which is i wouldn't get that hung up on the increments here the real debate in the market, i think debate for your portfolio is the destination and this idea setsing in which get on this number for a long time, this 4% number, which the market just didn't want to hear. they kept living this, you know, utopia where we're going back to 2% ladies and gentlemen, you cannot click your heels and go back to 2% funds rate kansas anymore that's not going to happen the real debate now is 4%. i don't know if rick has an opinion on this.

could be the floor, becky, and this debate is whether the fed has to go to 5% or 4 1/2 but the market has been dragged, i hate this metaphor, but literally kicking and screaming trying to get to this place and maybe now it's there you don't know if it's a permanent number you know, they could change on a dime tomorrow, but the idea that 4.40 is now the peak rate suggests to me the market is settled on this idea and gotten rid of its resistance, the idea of just how far the fed is going. that's the important number for your portfolio >> there's no place like home. there's no place like home rick, you got any thoughts on that >> yes i think that steve is exactly right. pay close attention to the t bills, 3-month, 2-year the big yield curve we want to pay close attention to is 3 months to 10 years having said that, i don't necessarily disagree with the terminal rate being around 4%, but i think what many are more concerned about is where the

long end rate's going to end up. considering how the curve's going to have a bend to it you might see rates achieved in 2 and 3-year notes that you do not see in 10-year notes or 30-year bonds. i think that is almost a bigger strategic trade going on in the marketplace than the torm nal rate on the short end and fed funds. >> hey, steve, one of the things that kyle bass pointed out was how expensive it's going to be to fund all of our debt as rates go up. that's why you worry so much about the impact on overall gdp. what does that shave off of growth i don't. why are rates going up

because inflation is going up. what does that do to the government it goes up it's a dynamic process it cheapens the debt for sure. >> rick? >> cheapen >> sarat, very quickly, was there anything you bought yesterday as a result of the cpi being hotter than expected anything you sold? >> no. i didn't act on any of this. i think this was something we were expecting we kind of ran up in the last five days and this number was something we were really paying attention to one quick thing i want to mention is now that we're looking at 4, 4 1/2% in the 10-year, the markets readjusted quickly to the value, the pe on the s&p. while we were close to 18 to 19, i think you're going to get a reset. that's what you saw yesterday, a flush out. the valuations are going to have to come out. as investors, you have to pick

companies whose valuations are important. when the 10-year keeps on going higher. >> sarat, you just said that this was expected and i think it was expected among some people but clearly not the broad majority of the mark what had you done there to set yourself up for this if, in fact, this was expected? >> so our portfolios are really move much more towards financials that are going to do better with longer term interest rates, at least on the spread. more health care, more defensive. we've cut back on the high valuation stocks, really companies that don't have cash flow, we're under weight technology we're long investors so this is hurting everybody, but the opportunity now is to really find kind of companies that are going to grow with inflation pricing power. you can look at the visa/master cards. as people spend more money, they make more money. you have to look at that and kind of focus on how valuations matter and who's going to have more earnings and cash flow coming through the next at least

6 months to 12 months. >> want to thank our panel lindsey, sarat, of course steve and rick good to see everybody. thanks for wrapping that up with us when we come back, we'll get jim krimer's first look on the ppi data then loup's ceo tells us about the latest sector selloff. you can always watch or listen to us live using the cnbc app. stay tuned, "squawk box" will be right back

get down to the new york stock exchange jim cramer joins us now. no surprises really today, jim, in ppi, but we're not -- we're not up 1200. i mean, that's not allaying any of what we saw yesterday what should bulls hope for by 4:00 for the market to do in your view? >> i think the bulls have to hope that rates stop going up for just a couple days, particularly on the short end, because we're at that moment where you have to think, okay, 4%, that's better than almost any stock i could own. i get my money back. it's beginning to be too competitive versus many stocks so i think you need to see the -- you need to see these rates lower. you need to see the 2-year go to 3 1/2, otherwise, joe, if it's 4%, you and i know we'll do better owning those bonds than

risking owning a stock, and i think that's a big worry >> if inflation isn't well above 4%, then you're just -- >> right. >> -- spinning your wheels it seems like >> i think the people feel there's been an acceleration in inflation, but when i come back from talking to starbucks and talking to costco, inflation peaked in their world and if inflation peaks in the world of costco, it's going to peak elsewhere, except for wage inflation. wage inflation, i don't have an answer for you yet i think we're all struggling to find out where people went >> hey, jim -- >> and also, by the way, young people don't want to stay at one place, they keep job hopping, getting more money. >> jim, great interviews out in seattle. >> thank you. >> i'm curious, you talk about starbucks, you talk about costco the other piece of this is shelter and rents. we've been trying to make sense all morning about what's going to happen to rents longer term as rates go up does that mean actually rents

will come down because prices of homes will come down or because the cost is going to go up to a lot of the homeowners that are then renting them out, does that shift? that money is so critical because that's disposable income that won't be used potentially in the future of the starbucks >> well, i think what's strange about rents, i think you're right to cue on them because they're so intractable that's perhaps what helps destroy the purchasing power that it seems powell wants to do jay powell is in a real jam here he's got to make all of us feel like it's too dangerous to own stocks and we've got to worry about our nest eggs. i do feel we have to worry about the price of rent. rent doesn't show any sign of slowing yet. i know that diana olick ran a great piece yesterday about some places where it's peaking. it sure isn't peaking in any of the markets that i'm in. >> all right, jim. i ask you, what do stock market investors want we need to watch the 2-year now? >> yeah.

2-year's so comfy. it's a lovie blanket >> thanks. we will see you in just a couple of minutes. "ua b" gs.uy >>sqwkoxwill be right back

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welcome back to "squawk box" this morning big tech getting positively slammed in yesterday's market selloff with apple, microsoft, alphabet, amazon and meta losing about $500 billion in total market cap. here to talk about what is next for the sector gene munster loup founder and managing partner gene, you have remained throughout a lot of this a bull and yet here we are and there's questions about whether the multiples on big tech can remain, persist or going to continue to go down if, in fact, you think the fed is going to continue to move against the market what do you think at this point? >> andrew, thank you you have to look at the near term versus the long term. the near term it is still a tough market i think even for big tech across the board in tech, we saw that with the reaction to big tech yesterday down 6.8%, the nasdaq was down 5.2%. that, i think, speaks to the

near-term risk typically these big tech companies fair better when there is some concern as an area of safety, but i think investors are acknowledging that as rates continue to go up it's basically going to be almost impossible for these stocks, whether they're big or small tech stocks, to work. >> does that -- if that's just a falling knife, is it like get out of the way, then, or what? >> well, that is the next piece here i see that as this bottom forming, this is something that i have believed for a long time from summer through fall we are going to be forming the bottom but there are three important numbers that i think outweigh the negative aspect around rates and ultimately are why i remain positive on tech and some of the big tech more specifically and the three numbers are 30, 6 and 10 30, 6 and 10 30% was the growth for the top five big tech companies last year, revenue growth, this year it's going to be 6%, the current street estimates are for 8%

growth i think they come down for the back half of the year. but next year we should say a step up in growth. and we know that rates are important, we also know that anticipation of accelerating growth is a formula for tech stocks to go up and so despite all the vortex that we are in, despite a belief that i think they are going lower here, if you are going to put a stake in the ground, where are they going to be six months from now i think they will be higher, 12 months from now i think these stocks will be measurably higher. >> we've got folks out there saying a recession is looming. if a recession is looming that would hit earnings you don't think that would also hit the stock price? or you think it's already baked in >> i think a lot of it's baked in i think when actually recession hits, it's hitting right now, i think a lot of that gets baked in and ultimately -- >> it's not hitting right now. we are not in a recession yet for real, unless you think we are depending on how you measure it, right? >> right i was -- i was thinking that

from a market perspective we are there, but to your point, you know, is the definition have we crossed that threshold, no so what happens when a recession hits and i think the answer is going to come down -- i talked about those three numbers, the answer is going to come down to that 10% number for next year that's a revenue growth number for the five big tech. if that number is higher than where it is for 2022 for this year, again, i think the numbers are coming down for the back half of the year, september there will be misses it's going to be a mess on the september quarter and december guide. but to answer your question if that number for next year, that revenue growth is higher than it is for 2022 i think these stocks go higher even in the face of a recession. >> okay. and i know timing is like a very bad game to play, we always say do not time the market, do not time the market. would you own these stocks right this minute? i mean, if you really feel it is almost invariably going to be a lower situation, do you want to own them now >> the answer is more broadly

no we're still 35% -- our fund is still 35% in cash. we were 50% in cash two months ago, so the bigger picture is to be 35% in cash i think speaks to how conservative my view of the market at least over the next two months there are a couple i think you can own. i think apple, the iphone, the watch, they are already a month out, this is for the lead times, this is, i think, a formula or an indication that demand is, i think, kind of at what would be a strong cycle, given the lead times and i think that what they're doing around hardware/software services is something that is going to continue to power earnings higher i think apple is going to be in a great spot. >> gene, the 65% that you're saying is invested, have you rejigared what that looks like over the past three months >> we have we've added to meta, we've taken our position up in meta in part

because we think that -- we think that reels is going to get on its feet, we think tiktok eventually is going to get banned, give it two years, it's not here for the long haul. >> banned? take a step back you just said we think tiktok is going to be banned >> yes the reason is that ultimately there's a -- begs a question of why is facebook and its property banned in china. the reason is that chinese government doesn't want influence on its people and how they think i think that that similar view is going to take hold in washington, we're going into a presidential election, there's going to be themes that both sides of the aisle are going to rally around and i think a separation from china theme is going to be a common theme it does cause me just to step back and think why when -- the chinese essentially -- i'm not a conspiracist, i don't think they're tracking, tiktok tracks

data and wants to figure out what an 18-year-old is doing in the afternoon but i do think they want to have some influence on how people think. >> your view is tiktok gets banned, instagram pulls all of that traffic into reels, would you, therefore, be long snap does that capture some of this >> probably. by the way, that's not our soul investment thesis on meta, i led with that because it is a point of differentiation for us, but that's not our investment thesis on meta. i think they have 40% of the global internet population, i think that they're going to figure out what's going on in terms of regearing their ad attribution after the ios changes. but just to go back to the point about tiktok, i do think that that does kind of benefit across the board and i would just say tiktok is going to be a political punching bag in the next two years and i think meta will be a beneficiary of it. >> gene, we want to thank you for helping us through with this this morning. >> thank you. >> we have watched the tech stocks continue to fall and we will see which way they head

today. >> thanks, andrew. a final check on the markets you have seen the futures this morning rebound a little bit, dow futures up by 53, the nasdaq by u. up by 53, too, and the s&p up by 10 that does it for us today. we sure hope to see you all back here tomorrow. right now it's time for "squawk on the street. ♪ good whence morning, i'm carl quintanilla with jim cramer david faber is on assignment we are on rebound watch today after the worst decline for stocks since june of 2020. some signs of stabilization but rates continue to kree higher. two year 3 a 3 fairly steady after core ppi is in line although core was a tenth hot. that's where we will begin with markets and inflation. stocks trying to recover from the selloff today, as of yesterday's close the dow is off

about 16% from the all time