also some valuation concerns, so procter & gamble down about 1% of the premarket trade on that joe, back over to you. >> dom, time to go got about 15 seconds for one final look at where the futures are. 122 now on the dow get the bond market open again tomorrow, so we got some direction, but we're green we're leaving us in the green, which is good. andrew, i'm sorry. i forgot you're still here i'll see you tomorrow because i'm all alone here on the set. >> see you tomorrow. >> "squawk on the street" is next ♪ good morning, and welcome to "squawk on the street," i'm david faber. he is jim cramer carl has the morning off let's give you a look at futures as we get ready to start trading for another week right here on wall street. you can see originally we had come in thinking we were going to be down >> at 4:00, we were looking

pretty bad i was pretty concerned took away all the fun of the eagles victory because -- oh, never mind. no sports talk today >> thank you >> i was way out of line with any sports talk. >> i appreciate that we're not going to start our road map with sports talk either >> why is it up? >> bouncing from red to green this morning >> it's based on nothing, because the notes this morning, david, there's not a positive -- >> inflation data, earnings, we're going to get a view of it ahead. but jim, we're going to talk about that we'll also talk about rivian that stock is down in the premarket after the company said, yeah, we're going to recall all of our vehicles we'll tell you why and chinese chip stocks also down sharply this, after the u.s. calls for new curbs and providing advance technology to the chinese chip makers >> did a lot of work on that one. >> good. let's get to the markets this morning, jim investors are bracing for inflation data and the kickoff of earnings

season, couple days away we we're going to get cpi thursday, jpmorgan, wells fargo, morgan stanley, citi, they will all report results on friday but let's just start with this change i mean, you know, even when you look at the "journal" headline from this morning at 7:00 a.m., futures not looking so good. we're heading into another bad morning, potentially, as a result of the increase in hostilities in ukraine, unfortunately. continued goings-on in the bond market in the uk pick your poison what happened? >> well, first of all, it's a holiday. so, bonds can't hurt us. bonds have been hurting us second, friday's reaction to both amd's preannouncement -- i don't know, it was really lame on friday, and two, the jobs number was so negative as to almost build in, say, another 50 basis points so, people are now talking about 4.25, 4.5, maybe 5 the two-year tells you that it's

going to be 5, because the two-year is going to continue to go down. so then, you start thinking, well, if it's only going to be, say, 5, then maybe it's not the end of the world if it's done slowly and what i'm -- what a lot of the commentators were saying today were done slowly but getting there, and that's better because that's less catastrophic what i'm basically saying is, it's real bad. but it's not so bad as to be -- i know it's not so bad. >> we don't know why the futures turned around, and who knows what the rest of the day will bring when we start trading 27 minutes from now >> this morning at 4:00, what was the theme? britain's panicking. russia's really stepped it up. we're really stepping up against china. ford's going to miss the quarter, got that one very early because it's a european call >> ubs, the downgrades we'll get to that. >> we got the proctor downgrade

which was vicious and horrible and mean, because my travel trust owns it. even bristol-myers was downgraded, that's not supposed to happen. what you come back to is, perhaps it's another one of the those sentiment moments where you have a trilogy here, the cc cpi, the ppi and then the jobs is it really possible that one of those -- that all three are going to be bad? worked last time what happened to ppi is not so bad. so, i think people are betting that the first of the three might be okay based on the fact that we don't have to worry about the bonds today. >> well, we are going to start to get earnings. we just looked at it >> and remember, it's the one -- >> pepsi and then a number of others and then the banks later in the week. jim, there are still those who believe that s&p earnings are going to come in next year below 200, that we're going to start to get the guidance that apprises the market of that fact we have had demand destruction from rates that we haven't seen the end of yet

the wage increases that we've talked about are still coming through, not to mention expenses are higher in general. people are traveling again >> the balance sheet of america has got -- i was areading an article today. the balance sheet for individuals is now lower than 2008 you signalled that to me last week when you said that the consumer's more strapped than you realize going into a possible recession >> right >> that's extraordinary. >> it is and so, you can -- you know, there are those who still want to make a case for the fact that if you apply 15 multiple in the s&p and you really think we're going to get a number for earnings next year that's around 200, we've got a lot more downside >> we know that going into a down year is a clarion call to raise cash we know that cash is giving you a great return so, all you can little hope for as you're bull is that the price target cutting stops and that the industrials have stimulus money from actual building of

things, but david, you don't have anything related to pcs or cell phones. and you have nothing related to china. that's a big chunk of the market that is a hole in 2023 earnings. >> yeah. coming back to the bigger picture, of course, paul tudor jones was a guest on "squawk box. you saw him being interviewed by andrew if you've been watching at all for the last half hour or so here's what he had to say about inflation. >> the fed reserve board is fighting something it hasn't seen, really, in almost four decades, which is inflation. and inflation's -- it's a bit like toothpaste. once you get it out of the tube, it's hard to get it back in, right? and so the fed is -- the fed is furiously, right now, trying to wash that taste out of their mouth. >> well, david, they have

mouthwash, and it's called rate hikes, and the consumer's now strapped i gave you that number, back to august 2008. we simply don't have a portfolio in the country >> i want to stop on this consumer strapped thing, because we were sitting here with carl on friday talking about savings rates still being high what number are you working with >> i'm using the federal reserve numbers from the tremendous st. louis fed, which is talking about $555 billion in savings, lowest since august of 2009. happened 6.4 trillion during the inflated part of 2020, so they spent it all >> that's a data point that says it's gone. >> yeah. so, remember what i said is going to end this morass the fed wants wages. >> yes, you've said that and wealth >> and wealth. >> wealth destruction. >> that's why, when i listen to paul, whom i love, i say to myself, we're like two employment numbers away from layoffs, because when you hear

all this, two pe firm people this weekend, david, they're not able to come public. if there's any cyclicality, they're all faced with -- they love variable loans. ipos out west, nothing the layoffs are just in different places in the economy. they're going to be in pe and they're going to be in the west coast. so, wages go down. your portfolio goes down your balance sheet goes down do we really think that inflation zpoing to continue to roar i mean, to me, that's a set-up for inflation peaking. but quarter -- it can't peak until rates get a little further along. >> i'm very curious again to see what kind of language we get around guidance from the companies that are reporting earnings i mean, you know, nike and fedex and any number of others have not been great over the last couple weeks >> fedex has got international problems nike has international problems. well, we have a lot of -- we

have companies that are all set up to have the same international problems there are so many companies that we didn't realize were levered to china, so many that were levered to gaming. so many that were levered to having a stable dollar so, that really eliminates so many companies you have these small cap, mid cap places that people are hiding you know that's not good the oddest thing, david, when i looked -- i did, this weekend, did a big memo for club members. the cheapest stocks are stocks like alphabet. the stocks like metaverse. they're cheapening and amazon has come down a lot >> yeah. >> microsoft's not cheap apple could still fall what i was using is an analysis of 2019 against 2019 pre-pandemic >> which is a good analysis. or at least -- >> david, stocks are lower than they were in 2019. not microsoft and not apple. >> and companies are still making a lot more money. i want to move on. >> but do you think there's anything i said that's a reason for buy something.

>> no. i haven't heard anything you said this morning that's a reason >> i'm searching like everybody else is for the futures. >> i do want to talk about automakers this morning. many of them are going to be down that is the stocks of course, they were down last week too ubs downgrades ford and general motors it cuts ford to a sell gm is now a neutral. it had been a buy. you can see, at least, what the stocks are looking like when we start trading 20 minutes from now. ubs saying the industry is rapidly moving towards vehicle oversupply following three years of unprecedented pricing power separately, rivian's getting crushed. this, you may have heard, they're going to have to recall pretty much all the vehicles they've got out on the road. that's to fix a potential steering issue won't take them too long to do that fix, but it's never good when you have to -- here we're only talking about 13,000 vehicles but it's not good >> just to go on ford, they're having a lot of problems with pe firms, in terms of being -- those are the firms that supply. they all kind of caught -- you

know, the pe firms, they consolidated, bought all these parts companies, and europe is bad. so i told you i question the jonas upgrade of ford. >> adam jonas of morgan stanley. >> have to wait for the quarter. >> well, i mean, that's just an ugly run for ford. ubs may be a little late here. >> i think they are too. >> really? down 44% now you downgrade it >> well, but i guess, look, the problem is, if you're going into recession, you can't -- i have to think of the 5% yield, i'm anxious to buy it back but i want to see the quarter. >> i want to bring in our man on all things auto as well, phil le beau, get his take on the downgrades this morning and also some of the details around this rivian recall and what the impact may be. >> david, let's start with rivian you are correct. they are recalling basically every vehicle they have delivered since they began manufacturing last year. it's about 13,000.

they've manufactured 15,000 since the beginning of last year as recalls go -- and i know some people are going to say, you're recalling every vehicle, why is it not that big of a deal? it is significant. i'm not trying to diminish it, but at the same time, keep in mind, there are no accidents involved there are no deaths or fatalities what you have is a situation, a potential situation, when it comes to the steering on these primarily r1ts where they have had seven reports, they've gone and checked and said the fastener needs to be torqued a little bit more. they believe they can take care of this within the next 30 days. now, that's the good news if you're bullish on rivian the bad news is, this raised questions about whether or not these guys can ramp up their manufacturing and do it in a smooth fashion, not only in the fourth quarter but over the next couple of years. remember, they want to start building more vehicles at a new plant they're going to be building down in georgia and they're just adding a second

shift in central illinois. so, that's the issue with riviari rivian i'm not surprised the stock is down 7% or 8%. that seems fairly appropriate. as recalls go, it is not a monster catastrophic terrible, worst thing in the world it is not good i'm not trying to diminish that. but keep it in some perspective there. and then when you take a look at what's going on with gm and ford, the question is, when do you believe that the inventory will build back up to a normal level? it's about 30 to 31-day supply right now. normal is 65 it is increasing, but when i talk with dealers, they still see a lot of people, more demand than supply. and ubs said that's going to change in the next couple of months others are saying that might be a little bit too ambitious there. >> well, i've got to tell you, phil, it must be a nightmare to have the ability to have many of your cars and trucks almost made while you still have good

consumer demand. i'm thinking about ford here but gm is really thinking very future oriented and both ford and gm are just saying, listen, wait until 2023. just wait until 2024 that's great if you're waiting for a car, but if you're a shareholder, why to i have to wait shouldn't i just get closer and buy it and just not own them now? i feel like that's what people are saying >> well, you get to the main question, jim. where's the trigger? where's the bell that rings that you know, here we go these guys are going to be ready to go off to the races it feels like they are fighting headwind after headwind after headwind, and i can understand, because when you talk with analysts, they sit there, they can point out six or seven main problems that these guys are going to be facing beyond their control, some of it being the economy, some of it being what you're seeing with pricing and inflation. so, i really think that's the question you're asking when will you know

i know nobody rings the bell when it's time to buy, but where is the bottom? that's what you're asking. >> perfect exactly right. worries me phil, you're so spot on with all this, and that's absolutely right on the rivian. amazon still wants every rivian and this was a polite recall >> absolutely. >> exactly yeah >> terrific. phil, thank you. always great to get phil lebeau's take on all these things >> when to pull the trigger, so right. >> that's in general, yeah i mean, but we're not going to know >> you know, when you said that -- think about what you said about the ford downgrade being late well, when do you pull the trigger? is it ten? i mean, it was -- it's certainly not '23 where it was so i think we can't lose sight of the fact that people who now downgrade are not going to look as good as adam jonas at morgan stanley, who hated all the way down we haven't even talked about

two. 3m and ge. these are core names >> we got to take a quick break, but we're going to have time to talk about ge, which we haven't in a long time let's give you another check on futures. we open in 15 minutes, as we've discussed. looks like here going to be down a bit, now it looks like we're going to be up we're also getting comments from chicago fed chair charles evans. overshooting rate rises as great uncertainty remains over how high rates must rise >> great >> interestingly, he will join us >> oh, nice. >> yeah. next hour. don't want to miss that. "squawk on the street" comes right back after this. your inv? at pgim, the pursuit is on for outperformance. as active investors, to outdeliver with customized strategies, integrating esg best practices into our investment decisions. as asset managers and fiduciaries, to outserve,

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up next, we're going to have jim's "mad dash. we'll count you down to the opening bell as well let's give you a look at the s&p laggards ahead of the bell we've already talked about a couple of them being ford and gm also see paypal at the bottom of that list. more "squawk on the street" after this is the planning effect. this is how it feels to have a dedicated fidelity advisor looking at your full financial picture. this is what it's like to have a comprehensive wealth plan with tax-smart investing strategies designed to help you keep more of what you earn. and set aside more for things like healthcare,

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we get to do a standing "mad dash" for the first time in a while. of course, got an opening bell about eight minutes from now procter & gamble or p&g gets an upgrade today. >> downgrade >> excuse me >> they're really coming for all the kings. i mean, guggenheim downgraded bri bristol-myers. the goldman downgrade is saying, buy kraft heinz so buy the worst and sell the best, but it says that procter is going to have a lot of problems with all sorts of -- the dollar, it's been so great, and they're losing share. i've not gotten or confirmed one bit that they're losing share. here's what i say. this is going to be a fulcrum stock. w why? yields three it is a big buyer of plastic big buyer of paper, liner board, that's coming down big buyer of surfactants, the stuff that's inside a shampoo bottle that's coming down

it's got supply chain improvements that are no longer as bad and yet they downgrade it now so what i'm saying is, down 25%, you're downgrading one of the best companies in america with a 3% yield that's actually levered to a lower producer price index. but that's where we are now. and it's discouraging as a shareholder because those are all good reasons to own. i just gave you. but there's a big give-up going on >> are they really saying to trade into kraft heinz is it actually one of those kind of -- >> well, yeah, you know, got to find a better and worse one. >> we haven't talked about kraft heinz in ages and certainly not in a very long time in any sort after positive way >> they've got some raw costs that are coming down the stock never did anything so it's a lot safer than this one procter & gamble is a well managed company. remember when nelson was on the board, 90 all the way to 150 but what worries me about

selling it is, when do you get back in t this is a quality company. if you take it to a hold, does that mean it goes to 120 or 100? at 100, it's got a great dividend and buyback i want to watch this stock because management is terrific, and if it's bad, it's going to -- a whole new set of stocks that are going to get hammered >> all right at some point, we'll take a look at kraft heinz too but right now, we got an opening bell a few minutes away. remember, though, you can catch us any time, anywhere. listen to and follow the "squawk on the street" opening bell podcast. opening bell in five minutes

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>> announcer: the opening bell is brought to you by nuveen. a leader in income, alternatives and responsible investing. chinese chip stocks, that is, chinese companies that make semiconductor chips, those stocks are falling the u.s. announced new export controls aimed at limiting beijing's ability to produce advanced military systems and other advanced systems as well the sweeping rules mean companies now need to apply for

a license if they want to sell certain advanced computing semiconductors or related manufacturing equipment to china, and jim, it's not just our companies, but if a foreign company, non-u.s. company, is using american tools to produce high-end chips for china, it too will need a license. and the expectation is these licenses are going to be very difficult to get >> right and the implication is that lamb research, kla and applied materials should be hurt >> what about nvidia what does it mean for a company like that, that has amongst the most advanced chips that are used this is not just military, but obviously, a.i., where the chinese have equalled us if not exceeded us. >> nvidia's been able to come up with a solution that they believe would be acceptable to both sides i'm not saying they disable the chips, but the chips they're sending are now gaming chips now, could someone turn gaming chips, file shares into military

weapons? i guess so but nvidia's quite confident that they've complied. i think this is much more about equipment in the same way that we've succeeded in getting asmlf, you can't really make ships at asmlf but this is a ratchet up to the point where what you're really saying is, listen, we don't trust you with intellectual property, so we're not going to let you have any. >> it is, without a doubt, another step up in terms of just the overall tension between our two countries. >> but david, it comes at an odd time you're about to have the coronation of president xi after that, why wouldn't there be some -- a little more peace he's been so tough on us, and he's meeting biden all of this is -- boeing, by the way, 737 max, and this guy is there. but this is very military-oriented and at what point does china just say, all right, enough, we understand you're not going to give them to

us we'll go into an arms race with you. i don't know if we're going to step up. henry kissinger is adamant, and i still think he's a very smart guy, that better times could occur. >> by the way, don't forget, the chinese, what they can't get, they've often been able to steal. huge theft of intellectual property there's the opening bell take a look at our cnbc realtime exchange back at our headquarters in englewood, new jersey here at the big board, dream finders homes is transferring to the nyse from the nasdaq over at the nasdaq, insight enterprises, a business-to-business company all right. >> banks banks. people are so hopeful there. >> the earnings are coming up. anything sort of on your radar that's a key to this market for trading today, jim >> i did have an interview, please don't get mad at me, with james gorman from morgan stanley. >> i'm aware of who he is. >> quite positive about the possibility that we were going to get, say, four unemployment,

maybe the fed peaks at four in terms of where it might increase rates. and basically, therefore, traces out a pretty positive scenario, given the fact that, remember, they don't have nearly the exposure because they have -- it's margin, and the customers have the stock so, it's less levered to the possibility of a recession but david, typically, you're not supposed to buy bank stocks into a recession. you're supposed to buy a stock like merck, which was upgraded today by guggenheim, kraft heinz off the goldman. everybody's so negative that it would be a surprise to see something positive we had notes this morning that say, buy jpmorgan into the print. gutsy. >> that is, in part, because -- and i know others keep these statistics handy, but i don't remember jpmorgan shares ever going up after an earnings report over the last year or two. it feels like --

>> no, i think that's right. >> it doesn't respond positively or at least it hasn't in some time to earnings. >> i think that some of that -- and it has to do with commentary there is -- >> stock is down more than the s&p for the year, about 33% so far. >> jamie dimon, ceo, has at times been incredibly cautious, at times been very worried, and that kind of transcends the numbers. that's not been the case at morgan stanley, and brian monaghan has been very positive. as has, by the way, larry fink, who's under pressure at blackrock but is that because he's too green if you're going to pull a billion, because he's too green, let me tell you, you're giving him a hundred billion because he's not too green he has been saying, i think what the policy of the country has become, which is, we have to go brown to green slowly so we don't become germany >> that's the wrong black -- we're talking blackrock, guys,

in the control room. that is a great alternative asset manager, blackstone, that i'm happy to talk about. but here, we're talking about blackrock. it's been interesting to see, this gentleman comes on "squawk box" all the time, raising a lot of money, what is it, stribe or something like that, with the anti-esg platform. there is a real battle going on here you have a number of states that are now wanting to withdraw funds from anyone who's following an esg >> i think that going into larry fink and his -- it's so wrong-headed mr. fink has thought more about the slow nature and is closer to and knows more about the oil patch than almost anyone i mean, what do we want from a fund then? do we want them to be pressuring them to be like what happened in germany, so vulnerable or do you want someone balanced who says, over time, we got the get more green david, think about the people who will be running money ten years from now they're people who have come of age in the era where we realize

that we have no choice because of the globe because of worries about the planet so, i think he's more in tune with what's going on than anyone else in large -- in this world >> right >> and it is going to be valued as a source of truth, not vilified as a source of fiction. >> no, i get that. one area that i have always had some questions about is those who are sort of esg saying, you can't invest in this company or you can't invest in that company because they don't get great scores when, in fact, if you're an active investor or have the influence that a blackrock does or other firms, you can change their behavior to a certain extent >> right >> you can get them to focus on things that ultimately you would expect will actually generate a better return over time because of the strategies they may employ that does also reduce their carbon footprint >> well, what are the two best performers so far? >> it's funny, when you block

investors from certain companies, it doesn't necessarily make sense to me when, in fact, you know, you might actually be able to influence their operations such that it would be a better outcome for the planet >> and if you look at one of the best performers of the year, certainly of the third quarter, is constellation energy, and they're trying to reduce their footprint to entire noncarbon in 2040 they're already very close, because they're a spinoff of exxon with nuclear, which is cleaner than we -- it's clean. and they still have some nat gas, but i would say, end phase and constellation have been the leaders. end phase is how to get charging stations in your home and how to make it so that you're cleaner with batteries so, those are -- if you look at those, you certainly feel inspirational. constellation got big orders from microsoft, trying to get their scope three down so, i think that -- let's just use going back to larry fink again. you've got the two leaders that

are in the quarter that are the most esg in the s&p. why not become more esg in order to be able to track that money that's obviously going to end phase and going to constellation? >> jim, you mentioned earlier that you were doing some work over the weekend and, in fact, you thought meta and alphabet were both cheap. i don't want to put words in your mouth >> it started with -- well, that happens to have excellent ir investor relations it started with the amazement of a positive piece in "the new york times." >> i read the entire piece about the lady who spent all that time in horizon, i guess, that's the name -- it didn't, in any way, make me want to go into the metaverse. >> it didn't >> no. >> it made me want to very much go into the metaverse. >> really? to me, it didn't seem aga interesting at all >> she seemed to go to comedy

clubs a lot in the metaverse >> there's a lot to go on in the metaverse. i like the metaverse but -- >> it's early days and clearly there's going to be an enormous amount five or ten years from now. lot of content >> whatsapp, possibility of monetization >> whatsapp has nothing to do with the metaverse >> i'm saying about the -- i'm giving you the pastiche that is meta >> we talk about ait a lot >> reels doing better. and i think the big problem is still core insta and whether you're getting -- you just have people not posting or posting tiktok but i found hope in the -- >> wow >> isn't it funny? >> i'll agree that it was generally a relatively positive piece. it didn't read badly for them. again, we're talking about a "new york times" piece where the reporter spent a lot of time, over a period of time, in the metaverse at night, putting on the headset, spending hours there, although not plugging in. just spending the two hours or so with the battery. >> we can certainly disagree

>> meeting a number of weird people and a lot of, apparently, kids that was sort of dangerous >> found a little roblox meets godzilla here we go >> there we are. >> but i -- if i were mark zuckerberg, i would feel gratified that there are people who are looking at this as something that is of the future. >> no doubt about that >> when i look at it, i say, okay, ralph lauren's embraced it askind of in the mall. but it really should be, if i were them, i would say, listen, this is the classroom, and i would spend more times in the classroom, creating classrooms, particularly for different languages but also for math and, you know, for skills, for engineering, for people trying to advance >> playing pattycake with zuckerberg >> it should be -- make it teaching and -- oh, geez make it athletic it's got a mirror component to it will you get that off? >> i enjoy looking at this all

the time, you and mark doing the thing. >> i think that mark's further along on this than people realize. >> we're now negative on the s&p. tell me about alphabet, by the way. advertising, interesting conversation this morning. amazon, alphabet, you know, there's so much advertising, meta, 30-something percent of all advertising goes to digital. why won't netflix, when it launches this ad tier, why is netflix not going to have success there? why aren't they going to be able to replicate, to a certain extent, the market shares already? by the way, is that, in turn, bad for the traditional media companies? >> those top ten performer in the third quarter. >> it was. many would say because of the strength of the introduction finally as investors had been urging them for years of an avod platform could be early next year i'm hearing sooner perhaps >> alphabet's got a combination of, when you look it up, you can buy it very amazon-like, but the

blue dot what people are recognizing, if you are a small business, is that they give you a report, which tells you whether they got the customer to you, because you follow the blue dot, which is -- shows you what you get up from a subway stop and find me the best french restaurant. it is a -- the roi of a dollar given to google is so much pure to everything except perhaps amazon that it really makes no sense. it's kind of like if there's only two tv stations, and that matters tremendously because twitter is not a tv station yet. but you have google and amazon, and a lot of the people who are putting money realize, it's game, set, match let's just put money with those two. and that's what's happening. that's why twitter was so interested that the risk might not be that bad in the 30s for twitter, and i'm sure you have some discussion. >> icon started as a risk arb.

he's made some money not nearly as much, by the way, as pet harbor. we were talking about all the reasons he felt the deal was going to go through, and they were going to prevail in court lot of people focused on icahn because he's icahn but he's a risk arb. he saw an opportunity there. good for him he made some money as i said, there are a number of other investors who made more. but moving on to twitter itself, you can see the stop is you can 2.2% people coming back to what happened in court last week. and feeling essentially that they are -- this judge is not going let them not close >> no. >> the representations that have been made put them in a position where, as we've said, they would end up back in delaware in court very quickly, and i think we all would know the outcome if that were to be the case. still waiting on some, you know, some data points along the way

don't know if the banks have been asked to fund yet and/or invoke their marketing period, 15 days. i don't know that they want to market this debt yet the market's not great for marketing this debt. there's going to be a loss associated with the $12.5 billion that morgan stanley is leading with a consortium of other banks. marketing means selling it down to other banks, but they would have to take a haircut in order to do that but jim, we're counting down now. and then the question becomes, really, and we'll have to start to talk more about this in the coming weeks, what is twitter going to look like, a, as a private company, we won't be talking about it any longer in terms of the performance of the stock, but more as a business, mr. musk will have put 25 of his own billions into it, not to mention the 7 he's raising from his friends. how's he going to change it? >> well, i know the company's working on becoming better at advertising. but they're not ready. not ready, which is interest,

because google is coining money. they're also not ready with using direct message as a way for, say, a bank to be able to connect to see if you're really in mexico. they have not been able to do that those are two easy thing to do against this, david, is that there really is no real way to sugar coat it. their revenues have just been bad. >> right >> now, david, one of the areas that we have to talk about endlessly, i hate to say this, is semiconductors as being just market poison. not a market laggard but a poison i mentioned something positive about nvidia no one really cares. there's a very big gaming cycle that kicks in, in january. no one cares this stock, along with amd, and intel, have been really black holes, and a lot of people in them i can make a case that there will come a time i owned amd, nvidia. >> nvidia and amd, almost

identical performance. >> people worried about intel's dividend you know gelsinger has pretty assured that they're fine but they have to spend a lot of money of capex but you know who keeps coming back as someone who was too bullish? enrique from hbq and apparently, i think felt that things were going to stay strong for a long time yields four. i wouldn't touch it. >> i want to come back to a couple of things kraft heinz is up over 4%. you mentioned at the board, when we did the "mad dash," because downgrade of p&g but goldman saying kraft heinz >> they're at least risky. >> have not been a bad performer this year, only down 6.5%. and we do have cable up a bit, which is not saying much, given the carnage in cable moffett nathan son out this

morning, saying, will there be a price war? maybe. weight of cost of capital has gone up for so many of these companies. but their targets are far above where many of these stocks are, at least in the case of charter and our parent company, comcast. >> nasdaq in q3, both comcast and charter were among the top ten worst performers highly unusual to see that by the way, the semis hadn't got there yet. now the semis are really going to be dominant in q4, i think, as being poor performers >> all right, hey, bob pisani, i think you're out there somewhere as we take a look at the poor performance of our parent company. >> yeah. >> geez. >> speaking of the market itself, take it away >> we've got good support in the 3,600 level. if you look at the decliners, ford's the biggest decliner, down about 6%, so is gm. there's that ubs downgrade mostly it's defensive names so you see merck, walgreens, boots alliance doing well.

what i care about is the risk on sectors. the market kind of moves in relation to these risk-on and risk-off sectors sectors, metal stocks, up somewhat ark innovation, down somewhat. transports, which is a key here, fedex has stopped going down last week, that's a good sign. fracks on the upside and semiconductors, the smh, that's the other risk-on sector so you see very split here 3-2 advancing to declining stocks take a look at the semis here, the semiconductor capital equipment stocks, all down day applied materials did get a downgrade over at wells fargo. the price cut there. hard to figure out how these new curves or potential new curbs on chinese tech stocks or semiconductors would matter at this point, but you see the decline there in some of these semiconductor equipment names. the bond market's not open, but importantly, bond etfs are trading, and sort of a mixed day here there's the 20-year treasury plus bond, that's the tlt, the biggest treasury bond that's out there. that's down, so it means yields

are up price indications. corporate bond down slightly and there's the short-term vcsh is a short-term bond here for the -- for vanguard, and that's basically on the flat side so, these are still trading right now. in terms of earnings season, i'm calling it earnings purgatory season it's sort of the same quarter as the last one here. so we're expecting earnings to be up 4% for the third quarter but take out energy. i keep talking about the distortion that energy provides here the profits are so great that if you take them out, it's actually down 2.6%. this is also true for the fourth quarter. so the earnings seasons trends, we've got about 20 companies reporting and it's kind of disappointing, actually. besides fedex, we have had fewer companies beating estimates overall. the earnings beats the amount by which they're beating, the percentage is smaller than historically has been, and there's a higher number of negative revisions what we care about is, what are they estimating is going to happen in the fourth quarter it's been a very high number of revisions downward for the

fourth quarter so let me show you the fourth quarter estimates because that's what everybody's trying to figure out right now energy is the big outperformer 62%. and the amount of the dollar value is so high, it's dragging the s&p up with it but if you look carefully, they've been cutting estimates in the more cyclical sectors like communication services down almost 10% it's been going down regularly banks have been down consumer discretionary also a bit on the lower side, and materials have gone negative too, down 2.1% there's a big classic risk on sector the tech sector is still expected to be up but only fractionally that is likely going to go negative this week so, again, look under the hood, and you can see a lot of things going on now, we're going to get, of course, citi group, morgan stanley, jpmorgan, david, in the next new days. friday, we'll be getting that. but i would say, right now, here, we have maximum uncertainty. we don't have the cpi numbers or the ppi numbers. we'll get them later this week and we don't have real big companies reporting earnings yet until friday

so, let's just call this maximum uncertainty. it's fine we have a nice little update but nobody's got a lot of conviction we need more data. david, back to you >> need more data. bob, thank you bob pisani as a reminder, you can get in on the cnbc investing club with jim. sign up, find out more at cnbc.com or just point your phone at the qr code on the screen before we head to a break, it is, i guess, we still do a bond report today why not? let's take a look. there, you see where we stand on yields as we said, the bond market is not actually open. that never stops us. we're here we're back after this.

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apple is still outperforming the s&p. >> the stock was downgraded. one thing you and i have to focus on all year, he's talking about 2023 earnings being down in 2022. this is the thing we have to think about because you're taught as an analyst, a portfolio manager, you can't buy a stock whose earnings are going to be down in the following year even oil stocks people are worried about. again, ipad revenues, i don't think it's that important but he talks about it headwinds involving smaller parts of the chain of apple. now, i think you said it best before i even said, which is i

was going to say, and yet it's still hanging. i always say, own it, don't trade it i like proctor i don't know when to get back in and maybe some people are saying, why is that even an issue? just get out just get into the two-year my answer to those people is they have outperformed >> what do we have on "mad" tonight? >> i'm doing my analysis of what of the quarter but we'll talk about entrepreneurship i like what he's doing. >> you love bringing him on. >> he's got a very positive and empirical perspective. i like that. >> he doesn't have to walk far much easier commute than it used to be. >> thank you. >> from this set to that set. when we come back here, we have a big interview, chicago fed president charles evans

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good monday morning. welcome to another hour of "squawk on the street. i'm david faber with mike santoli. morgan brennan is in washington, d.c., this morning, and carl has the morning off. let's give you a quick look at markets as starting to get into the day a bit here futures reversed, they were positive, but now the broader markets are lower. morgan >> we're 30 minutes into the trading session. here are some big movers we're watching, starting with automakers ford and general motors, those stocks sliding as ubs downgrades both names we have a lot more on the auto sector later this hour gm down 6% ford down 7.5% now. goldman making calls on consumer names downgrading p&g but upgrading kraft to buy

we will end with ppg, shares of the industrial paint producer sliding after issuing a profit warning for q3 citing elevated raw material costs and soft demand in europe and china those conditions are expected to continue into the fourth quarter. latest industrial name to come out with a preannouncement here. shares are down 4% right now mike let's turn back to the broader markets trying to rebound, or at least they were a bit this morning from friday's selloff on those strong jobs numbers. dow just about flat. s&p 500 down about 0.3%. paul tudor jones on cnbc earlier today discussing the outlook for the fed and the markets. >> when we get into that recession, there will be a point when the fed stops hiking. there will be a point when it starts to either slow down or at

some point it will reverse those cuts when that happens, you'll probably have a massive rally in a variety of beaten down inflation trades >> joining us is global chief investment officer bob doll. that moment paul tudor jones was anticipating is one the markets have seemed eager to try to grab for multiple times in the last few months he also said, of course, he expected we either just started a recession or maybe have one just ahead of us so, what do you think the markets have by now priced in in the likelihood of a recession and how much more the fed has to do >> well, a moderate recession is beginning to creep into the market the s&p 500 pe ratio has gone from 22 at the first of the year down to about 15 and a fraction. of course the question is, what are the real earnings? that is a legitimate question. we'll get a lot more answers

than that in the next couple of weeks. i think some slowdown, modest turn in the market there's risk to the downside with the fed and inflation story, the earnings we just mentioned, the lurking financial stresses on the other hand, you have an oversold market. as we just mentioned, a cheaper market and sentiment is awful, which is interpreted as a positive. i think we're in the frustrate the bulls, frustrate the bears zone >> right and with all those things working in opposition to one another, it leaves a lot of investors with this idea of it really does come down to whether the fed believes that something more serious needs to be done to throttle the economy than has already been done. so, for all the talk over the years of how fed policy operates with a lag, we're up, we're going to be up 4 percentage points in the short end of the rates market in nine months. and they're not waiting for any

lag effect we're in a hurry are we just waiting for the proverbial accident in that instance >> well, the history is feds or other central banks raised rates to target inflation number but inevitably, a bump in the night gets in the way and they have to stop look, i think if the fed is content with 4, maybe 3% inflation, which we could get to by early next year, given what they've already done, the supply chain problems being partially solved, if we get there and the fed says, let's just wait a while, we may be okay. but if they insist on two, i don't know how we avoid a noticeable downturn in the dmi. >> should we be talking more about quantitative tightening? this is a liquidity story and the massive moves in the market overall. even if the fed were to, say, pause or pivot, we'll say pause or stop raising rates, the qt piece of the puzzle, the fact we've seen so much liquidity

pulled out of the markets so quickly, that's not necessarily going to change, right >> absolutely. no one has a gun to the fed's head that says you must reduce that balance sheet under certain circumstances they could stop you're absolutely right to bring this up, morgan. we have playbooks for fed tightening cycles. we don't have playbooks for this quantitative tightening at the magnitude that we're witnessing in any prior cycle it is a wild card that's not positive >> would you be dipping your toes into the equity market right now or would you be steering clear, given the fact we have so many macro uncertainties? >> on downdrafts, of which we've had plenty, we are now in the process of beginning to nibble on big up days, don't chase them find some things in your portfolio you want to get rid of i almost say be responsive to the market big down periods accumulate, nice rallies, let a little go, stick with quality

>> when it comes to what bonds are offering right now, bob, you mentioned sentiment is awful we saw a tremendous flow just last week in the latest week into money market funds. so, there is a little mini stampede out of risk assets into cash if that's the case, if you're starting fresh with cash and assembling an equity and fixed income portfolio right now, are you in a better spot than we were eight or nine months ago if you have a longer horizon? >> i think that's right, given nothing else but the lower prices if that money is earmarked for risk assets, just take a while to do it you don't have to be a hero every month. 10% in over ten months, you'll be where you want to be. you're right the long-standing argument, the alternative to equities, is gone there are alternatives but that makes the game a little more

difficult. >> right although maybe not difficult to have more alternatives but maybe more difficult for equities. we'll see how that goes. thank you very much. >> all the best. in case you're wondering why the capitol building is over my shoulder and i'm down here in d.c. today, the u.s. army association's big annual conference, ausa is kicking off in d.c there are more than 30,000 folks expected to attend over the next 30 days. everything from armored vehicles and drones is on display a lot of items are expected to be highlighted we could before the week is out finally get the army's decision on the flraa decision. the flraa is a major army program, valued in tens of billions of dollars to replace the blackh helicopters it's down to the bell and

lockheed martin's defiant x. textron is the favorite and needs this one long-term viability for this business segment really hinges on this. now, for lockheed, the maker of blackhawks, an expected flraa loss is one reason the stock was downgraded it's one of a bevy modernization priorities, priorities taking on ever more significance amid this war of ukraine and rising risk of nuclear conflict, and also given the ratcheting u.s. efforts to counter china, case in point, the new tech exports we'll talk about later this hour that took effect a couple of days ago i'll be sitting down exclusively with the secretary of the u.s. army, christine wormuth later today. we'll discuss all of this, guys. and there is a lot to discuss.

both geopolitically and from a macro standpoint also just in terms of where some of these hundreds of billions of dollars for the army are expected to go as it does look to modernize its force also, one other thing, recruitment, because they missed their goals for this year. >> i didn't know they missed their goals. what are their goals where are they in terms of recruitment, morgan? >> they fell short by 15,000 soldiers for the years, recruited soldiers that's about a 25% fewer people coming into the force than they anticipated. it speaks to the tight labor market it also, perhaps, speaks to some other dynamics affecting the military both politically and also just in terms of how they recruit and the fact that so many young adults actually don't meet the criteria to even apply for an army position so, there's going to be a lot to discuss with her, guys as we head to break, here's

a look at our road map for the next hour, including chip stocks under pressure we have those details. plus, rivian shares being driven lower after recalling nearly all of its delivered models over a steering issue. we'll have an exclusive interview with the chicago fed president, charles evans we'll talk, of course, about the fight against inflation. i bet we'll talk about the economy a bit, wouldn't you? "squawk on the street" will be right back rnative investing with kal penn and older kal penn. - oh, the stock market is doing that fun thing again. - hey news from the future, you're going to live through that about 10 more times. (laughs) - oh, it's no stress. i just discovered yieldstreet. they vet investments that don't ride the stock market rollercoaster. - ooh. i think some of my gray hairs just reversed. - yeah. you're welcome. - [narrator] become an investor today. yieldstreet: private market investing. new projects means new project managers. you need to hire.

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new export controls on china could reek havoc on the semiconductor industry our seema mody has the latest. >> significant shift in u.s. policy related to china that does limit u.s. companies from exporting chip manufacturing tools to china evercore isi writing, with these new restrictions, it is clear the u.s.'s aim to crush china's ambitions to be a leader in the semiconductor industry the two chip names with highest exposure to the country, according to evercore analyst, lam research with 33% followed by applied materials with about 29% exposure other u.s. companies they highlight that could be impacted, asml holdings, kla corp and teradyne, all those names down 4% to 7% this hour. not to mention chinese chipmakers that now won't be receiving or collecting that

revenue from u.s. companies, the commerce department announcement follows amd's warning of a slowdown in the pc market last friday all of this weighing on the broader etf. you'll see the etf down double digits this year and trading at the lowest levels since november of 2020. david? >> seema, thank you. let's get more on the chip stocks overall for that we'll bring in our analysts dj, you wrote a piece last week about the possibility of this expanded china restrictions coming so, you know, who wins, if there are any winners here, and who loses as a result of this? >> yeah, typically when you have this kind of volatility, it's tough to find winners, but what we think happening is obviously the memory guys, micron, western digital, tend to be -- could be

winners in the longer term, not in the short term. as we look at the near term headwinds, that would be obviously for the semicap oems, lam. that's where we see the biggest impact as you saw, they are also targeting some super computer. the super computer is an escalation over the aig use side we think some of the cpu suppliers, amd, will also start to get impacted. that's where we think you see near-term headwinds. but the memory oems, you know, micron, western digital, will benefit. near term the worry is consumer weakness demand and supply. >> give me a sense longer term, why do micron and western dig benefit? >> yeah, i think it basically takes out a supplier in china,

kind of in the crosshairs. that takes out some supply from there. also cxmt. that takes out a fifth player on the ram side, which consolidates supply which makes it much more supply side. you think of china supply being a little less disciplined. this basically brings more supply/demand balance to the markets. that would be good for these guys >> big picture, you know, the semiconductor stocks peaked late december of last year. we've been dealing with this idea there has been -- we've gone from kind of super cycle on the upside to a glut how far are we into it whether is the market going to sniff out that forward estimates are reasonable and inventories are back into line >> yeah, definitely.

the industry, based on our analysis, is going to undergo, we think, a four to six quarter inventory correction we think the inventory peaked probably in the second quarter of this year we think it's going to experience about four to six quarter correction the inventory at the customer levels, whether it's the smartphone customers, pcs, network, they're at record levels in terms of how much inventory they built up over the last two years and then if you look at the inventory at the chip companies, the internal inventories, they're 50% above the five-year medium average the medium and the inventory has been accelerating on a year over year basis. the inventory is building at a faster rate than revenue growth. the concern we've had for about five or six months, the needham franchise has been cautious for five months, that as more supply comes online, there is more --

the supply constraints are starting to ease it's going to happen right at the time when demand starts to decelerate and as a result, supply-driven correction could last four to six quarters when you look at a potential historical precedent, in 2018 and 2019, the semiconductor industry entered into a period of excess inventory. it lasted about four quarters. in that -- during that time frame, the sales, the industry sales, declined about 5% or 6% and then you had gross margins contract for 2019 as the industry experienced the correction the challenge that we see is that the sell side estimates for calendar '23, the top 60 companies, even though they've been coming down, they still indicate revenue growth of about 5% or 6% or they factor in eps growth so, if you're entering a period of inventory -- a significant

inventory correction, revenue is going to be down next year, not up we're about -- for our franchise, we're about 20% below the street i think once estimates reflect negative growth and negative eps growth, then i believe we might see a bottom in the shares >> so given that fact, i mean, is there anything you would buy here at these levels or do you as an investor need to sit on your hands and wait for all of that to materialize with a decline in revenue next year >> i'm more opting to wait on the sidelines. i think the investor sentiment is clearly very negative it's been negative for chip stocks for the entire year however, you know, the estimates have to come down. we are seeing kind of a bifurcation in the group chipmakers exposed to smartphones, pcs and graphics, they have taken a hit already.

whether that's nvidia or micron. we're more inclined -- we're taking a contrarian view and adding slightly to those stocks because those end markets have taken the biggest hits the lead times are the shortest in the market. we think those markets could be the first ones to recover maybe in q1 of 2023 because they have cut inventory so significantly however, other chip companies that have long lead times, you know, 6 to 12 months, whether on the analog or microcontroller or auto industrial, they have not seen the order cuts yet. that's our concern the order cuts are coming. so, i would be very collective but aim to be cautious and wait for numbers to come down because i do feel we have more -- more declines in prices >> guys, we're out of time, but certainly appreciate it. thank you. >> thank you still to come, we're going to talk auto stocks, including

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watching the auto stocks this morning, rivian, gm, ford, all down in early trading for various different reasons from 8% to 6% phil lebeau has the latest on all of them. >> let's start first off with rivian because this is getting the most chatter this morning. announcing a major recall, which compared to other recalls, relative to other recalls, not a huge deal. relative to what it means about confidence in rivian and its ability to ramp up manufacturing beyond where they are right now, well, it raises more questions here's the recall. they're recalling nearly every

model that has been delivered since production last year they're checking or repairing a steering fastener. it's important to note, there are no injuries, no major accidents that have been reported because of this potential issue. but the ceo did send out a note to rivian owners say, if you experience excess sif noise, vibration or harshness from the front suspension or a change in steering performance or feel, you should call immediately. and they believe they can fix this within the next 30 days as i mentioned, the real issue here is what investors think about the ability of rivian to ramp up production remember, they missed their production numbers last year, producing just over 1,000 vehicles so far this year, just over 14,000 they're sticking with their guidance of building 25,000 vehicles this year though there are more than a few on wall street who are questioning if they can get to that level as you take a look at rivian shares since the ipo last november, i should reiterate again, they say they believe they can either check or, if needed, repair the steering

fastener issue within the next 30 days. so, in terms of nuts and bolts, not to be playing on words, it's not a huge deal. in terms of what it makes people think about rivian, that is a bigger question. clearly, investors today pushing the shares down 8.6% there is certainly questions lingering following this recall. >> yes phil, i wanted to get to you morgan stanley cut price target, his delivery estimates on tesla. now, that stock is actually a little above the flat line right now but it's had a tough run seems as if he's kind of coming a little closer to where consensus might already be he was already aggressive on the bullish side >> i think you're right. look, he has cut his delivery forecast from 1.37 million vehicles this year down to 1.31 million vehicles that may not sound like a huge reduction in the number of vehicles delivered, but what adam jonas is saying is the

headwinds tesla is facing, which he's talked about, he thinks, perhaps, this is going to linger for a while. this is where you see a an impact in terms of tlifr deliveries as well as margins, what impact that might have in the third and fourth quarter. >> phil, we've seen higher oil prices mind you, they've come down since thebeginning of summer now they're starting to creep back up. there was this investment thesis that that's going to push more consumers toward electric vehicles but we've seen the prices of electric vehicles continue to increase, too. this is something that jonas talks about in his note, this idea if tesla is experiencing demand destruction i think about the f-150 lightning from ford. 30% price increases since it was introduced to the market do we know the point at which consumers would be looking to go to evs and would say, no, this is too expensive for me right now? >> i'm sure there's a point but we don't know where that is right now. let's take the f-150 lightning yes, the price is up 30% compared to when they first

announced it would come in just under $40,000. now it's at $53,000, the base model. you're looking and saying, that's a 30% increase. keep in mind, those who have placed reservations already, they capped it at this point, they're locked into those lower prices some at 40,000 there comes a point when someone says, am i willing to spend $65,000 for an electric vehicle? am i doing that because of high gas prices or doing it because it's a vehicle i really want >> yeah. key questions. we'll watch how all of this continues to unfold as earnings start to get under way phil lebeau, thank you great to get your insights. still to come, do not miss our exclusive interview with chicago fed president charles evans. that's cominup 'rba itwo.g i traded my taxicab for a food truck and a dream. i'm larry villalobos, owner of cachapas y mas,

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here's your cnbc news updaylight at this hour. russia has leashed missile targets across ukraine russian president putin says the strikes are revenge for the explosion that damaged the bridge connecting crimea to russia ukrainian officials claim at least 11 people were killed and 64 hurt. ukraine says there were more than 100 individual attacks and more than half were destroyed before hitting their targets. north korea says the recent flurry of missile launches were the simulated use of battlefield nuclear weapons to destroy potential south korean and u.s. targets. they made the statement on the 77th anniversary of the founding ruling party. the nobel prize for economics was honored to ben bernanke the work provided efforts to revive the u.s. economy during the great recession. that's the very latest david, back over to you.

>> thank you we are about an hour into the session. let's turn to mike santoli, see how things look from your vantage point. it's funny, i said to jim earlier, and, of course you know this, we've had the same conversation day after day, seemingly to no end at this point, what does that say about the market >> yeah, i keep saying the ongoingness of the same issue is what is plaguing the market. it's the flip side, you can go back to 2021 and say the market was going up for the same reasons every day as well. right now it's clearly a massive valuation adjustment in the face of the fed feeling as if it can't yet declare victory on inflation. the market is always going to try to overanticipate that turn, always going to try to get to that moment where it feels the inflection point is here now, what's been accomplished along the way is significant to look at in the way of valuation. s&p 500 has gotten down below 16 times forward earnings at this point. if you just take every stock in

the s&p equally, it's more like 13 1/2 times coming into this week it's still the largest mega cap holding it up. that would show you progress small cap stock very cheap people would say because there's more earnings risk outside energy, earnings are down for the third quarter forecast seven percentage points in other words, it's not like analysts have been oblivious but the question is, is there going to be that much more it really comes down to how much more does the bond market need to reprice in a painful way to figure out what the fed has for us. >> it also comes down to, and we will start to get commentary on 2023 from the companies reporting earnings for the third quarter, mike. i mean, those who are negative on this market right here are talking s&p earnings that will come in at 200 or below. and, you know, in speaking to a large fund manager this morning,

demand destruction from rates is not fully priced in. wage increases continue. expenses are actually going to be higher. you know, companies that are pricing power previously during the pandemic and weren't marketing and weren't having people travel, you go on and on, and basically they get to a number that's 200 or below even at your 13 or 15 multiple, that still takes us down. >> exactly i would not argue that particular scenario is priced in i keep saying we would be kind of lucky if this is the maximum amount of pain in terms of equity pullback and valuation. sometimes you get lucky because, you know, the earnings -- the market can deal with a down earnings year if they feel like the fed's done, capital markets reopen, the credit market -- in fact, the years when earnings are down in a calendar year, it is stock market's up more often than it's down it's kind of this complex interplay of all these things. you know, it's october,

sentiment's nasty. everyone thinks there's maybe a fourth quarter rally hanging out there somewhere. we don't know from what level and whether, in fact, this is coming through or this is another 2008. >> a lot of people are hanging their hats on the fact you have midterms in less than a month, and historically that has tended to bode well for the market in the final months of the year who knows given the fact we are in a bear market here, which kind of leads me to my question, mike, if we're in the second leg of a bear market where a number of strategists have pointed out to me, historically this is when something, quote, unquote, breaks in the market, have we seen signs of that already i mean, there was a lot of talk about credit suisse last week. we also saw the stock there recover as folks came in and, you know, officials came in and said things were potentially going to be okay, or experts, i should say >> you've seen things get pretty creeky, obviously, in parts of the credit markets i would say thinks like the yen crashing against the dollar and -- the dollar seems to be globally the thing that would be

the proximate cause of something. i don't think you can necessarily handicap where it's going to pop up or if, in fact, we'll see something like that. the credit indicators are not really flaring up in a broad way at this point. that's clearly the fear. i mean, if the fed feels as if, you know, really constricting economic activity is actually the medicine and not the side effect to what they're doing in inflation, that's the necessary piece of it, then we haven't necessarily seen the full impact of what that's likely to be, morgan. >> okay. well, guys, we're going to keep talking about all of this, i'm sure for a while to come. as we head to break, with the dow basically at the flat line right now, just up nine points, here are the biggest gainers. merck up 4%. also walgreens, boeing, dow, and travelers rounding out the top five we're back after the break

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- oh, the stock market is doing that fun thing again. news from the future: you're going to live through that about 10 more times! (laughs) no stress. i just discovered yieldstreet. they vet investments that don't ride the stock market rollercoaster. - [narrator] yieldstreet: private market investing.

welcome back to "squawk on the street." i'm dominic chu. stocks right now, as you can see behind me, are at fresh session lows the s&p is down 0.75%. tech is dragging things lower. you've mentionedment so weaker areas there earlier in the show, including those semiconductor chip stocks. elsewhere in the sector we're seeing notable weakness in places like paypal and online payroll technology paycom even as others in the fintech trade closer to the flat line. cloud player also a risk to networks, solar stocks weighing on that tech sector to start out this week. keep an eye on tech as we hit session lows morgan, back down to d.c. for you. >> dom chu, thank you. after the break, do not miss our exclusive interview with chicago fed president charles evans. first, throughout hispanic heritage month, we are

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on your wireless bill over t-mobile, verizon, and at&t. talk to our switch squad at your local xfinity store today. welcome back investors are bracing for key inflation data this week as economists raise their outlook for a recession, expecting further tightening, of course. our steve liesman joins us with a special guest as well to discuss all of that and more steve? >> david, thank you very much. i'm joined now by chicago

federal reserve president charles evans. president evans, thank you for joining us this morning. >> good morning, steve >> let me start off where david was talking about the idea that we have an inflation report coming out this week what's your sense of whether or not it might show some improvement and the general trajectory of inflation over the next, say, year or so? >> yeah, i don't have a great sense as to what any individual monthly report might come in at. we've obviously been disappointed periodically. i think, though, as i've talked to business people around the country, there are a number of things that are positive for an improving inflation environment. i think the supply chain is getting better i think that, you know, chip shortages and things like that have improved. there's still labor shortages in a lot of localities that i think are making parts unavailable further down the production

line so, that's, you know, led to less improvement in some goods availability than we would like. shelter prices, thi think there a long lag there reduced increases in housing prices are going to be ultimately positive. month to month it's hard to know how the report will come out but i think, you know, longer term, we're looking for improvements i mean medium term >> charlie, your speech this morning talked about this idea in which not a lot of people are embracing at the moment, that you'd be able to bring down inflation without a recession. walk us through your thinking on that >> well, i think the high inflation environment, it came up pretty quickly. it's been quite persistent, that's true, but it started off as a bunch of relative supply price increases. auto, you know, motor vehicles went up a lot, and, you know, so

i think that it's -- i think it's likely the supply chain issues are working their way down now, the challenge is that demand is still stronger than the limited supply that we have. so, our restrictive monetary policies are geared towards getting demand more in line with the reduced supply at a time when i'm also hopeful that supply is going to start expanding because of the improvement in the supply chains and things like that with labor hopefully coming back a little more so, you put all those things together, and i think that, you know, that suggests that over the next six months we should see improvements in inflation. we're going to have to see those improvements, though, so that's the real challenge you know, we're headed -- we're at a restrictive stance of monetary policy, we're headed for much more restrictive stance before very long, and i think the issue is going to be, can we find the right restrictive stance to the fmoc can sit there for a while and let the data tell us how things are

proceeding >> but it's your contention you can do this without driving gdp negative and also with -- i mean, what amounts to a fairly benign increase in the unemployment rate obviously, it's not benign if you lose your job. but if you get inflation back down towards target in the next year and only end up with the median sep of 4.4%, that's getting off pretty cheap do you think that's credible >> well, as i said in my speech, you know, that would be sort of a good landing -- soft landing outcome. that would be very good. it's a narrow path to get there. this is my model forecast. there are other possibilities. if you add in adverse geopolitical, that would be a difficult thing to vercome i believe the scenarios where policy ends up being more restrictive and demand is rocked by -- ends up falling would be

headline geopolitical risk coming to fruition or more supply chain issues breaking down weather events or things like that. i think there ought to be some names or events associated with these adverse outcomes that would lead to much higher unemployment but, you much higher unemployment, but, you know, we have to see how this is going to play out. >> president evans, it's morgan. i want to go back to the idea of the right restrictive stance historically, when the fed tightens and tightens this aggressively and i realize we're probably going back decades to look at that, have that conversation, how long does it actually take for the policy to really take root and have a broader effect on the economy? >> so i think there's a lot of research that indicates there's a substantial lag from restrictive monetary policy to improvements in inflation. you see it earlier in the real economy, you know, employment, industrial production, real activity things, gdp probably

two to 3/4 inflation, 18 months, it takes that long. we are moving into restrictive territory, and if this is all demand-driven, i would worry that it would take longer because of those flags but i am expecting to see supply improvements bring down the highest levels of inflation that we've seen, and hopefully with inflation expectations staying where they are, which is more consistent with our 2% inflation objective than not, those are factors that would weigh towards improvements in inflation while we are still trying to counter the fact that demand is somewhat higher than supply add on the fact that if supply starts expanding, we don't need to reduce demand as much that's sort of the story line i'm thinking about. >> but right now, based on the data, which we know is lagging, depending on which data point you're looking at, the fact that

there's a lag in terms of the implementation policy making its way into the economy, how do you know you aren't at risk of overshooting >> well, we never know that. i mean we have to make ju judgments. this is a risk management situation. it's still the case that employment reports are positive over 200,000 jobs, unemployment is at 3 1/2% there's still a lot of good things that are happening in the economy. i think in various localities, it's more challenged in manufacturing, some parts are in greater shortage you're never going to know exactly, you're going to have to make judgments at the moment, the current underlying fundamentals still argue that we're headed for a restrictive stance of monetary policy, which is on the high side of what we've experienced in the past when we tried to fight these types of pressures, but it's not outsized relative to that, and hopefully we will have some time to see some reports to verify that things are getting better along the lines of my story line or it's

not happening, we see other things, you know, happening, and ultimately inflation is the most important thing to get under control. that's job one brice stability sets the stage for vstronger growth in the future it's unfortunate that if unemployment goes up at all, that's unfortunate if it goes up a lot that's very difficult. price stability makes the future better >> charlie, there's a lot of concern out in the markets that something's going to break i know you've had this question before but we've seen it happen we saw it happen in the financial crisis we saw it happen in march of 2020 when liquidity dries up how much concern do you have that what's happening in fed policy with volatility the way it is could cause some type of systemic risk that would cause you to end up reversing policy and whether or not that concern of yours is also something that should stay your hand in terms

of hiking rates. >> i think we have to be mindful of financial market volatility, and how much additional restrictiveness it might add to our intention to provide restrictiveness. it injects a tremendous amount of uncertainty as to whether or not that stance is correct so i think we certainly need to be mindful of that we regularly monitor financial conditions quarterly we have a financial stability discussion at the fomc twice a year we publish a report, you know, we look at every indication that markets are having trouble digesting certain parts of this, events that you talked about, you know, the spring of 2020 and before that in 2019, we saw some of it, well, we saw some of that coming with the fact that reserves weren't as large as they needed to be, and we started adding reserves then covid hit in the midst of all of that, the accumulation of the assets we had to provide more accommodations, support market functioning those were extraordinary events. at the moment, we don't see

anything like extraordinary events, though we are tightening quite expeditiously. that's making everybody nervous, but you go back to the events we looked at and they were really much larger than what we're currently looking at if anything, it's a little bit closer to the december 2018 episode where markets were more nervous about our quantitative tightening and interest rate increases and, you know, at that point, we did a risk management adjustment we didn't cut rates, but we did sort of slow things. we learned things from that episode. i think we're taking it in mind currently. >> i just want to ask a question, which i'm sure reflects our lack of understanding of economics and monetary policy. you talk about supply not being in the right place right now don't we need more workers to go to work to supply that side. why is that we end up slowing the labor market when the problem with inflation is a

supply problem don't we want to put more people back to work >> that's a pretty insightful comment, steve i'm not necessarily looking at needing to slow the labor market as much as we need to make sure that demand lines up more with the reduced supply i agree with you that some of the supply challenges that i am hearing about is the fact that labor is not in the right place in a whole bunch of localities that ends up being a regional challenge, a work force challenge for a lot of localities and those are big issues beyond the scope of monetary policy. we do need to try to make sure that demand doesn't outstrip the supply that we're facing here, and you know, i would hope that that can be done without too much adverse impact on the labor market it's not about driving the labor market to a particular position but it's about trying to get demand right sized and to the extent that labor reallocates

into the places it's most needed in order to meet the shortages, that's absolutely a plus i think you're on target with a lot of what you're thinking. >> charlie, thank you very much. it's a really good place thanks for joining us this morning. . >> thank you very much >> steve, thank you. interesting, they ended on the conversation about labor, and in part are markets still reacting to the jobs number from friday, which was hotter than some would have anticipated, plus the larger question of why isn't that overall a good thing. >> simply because the inflation numbers don't permit the fed, as chair powell said early in the year, you can't have a nuanced view in terms of inflation, where it might break from here we are seeing the markets hit new lows 3610 on the s&p 500, just above the september 30 yields. global yields are flying u.s. bond market is closed

uk 10-year, above 4 1/2. >> particular weakness as well in the nasdaq, which is down 1 1/3% right now. >> as you might expect and of course the dow which had been positive a little bit earlier in the session is now firmly in negative territory as well i also thought the fact that once again, it was another example of another fed official reiterating that the focus is inflation right now. it's price stability the market needs to get that message, i suppose, but anyway, while sirens aren't blaring with concern over consumer credit, there are signs that strain has started which fwgoes back to the conversation we were just having courtney reagan has that story. >> consumers are starting to worry with interest rates going higher and inflation stubbornly high it's a key watch point with the hol holiday spending season starting to begin oright now. an increase in credit growth

from 7.8% to 8.1%. oxford economics said it could be increased reliance, and could be a return to more normal use of credit cards, after consumers paid down debt during the pandemic though moody's reports that american households are taking on more debt, up $312 billion to $16 trillion in the second quarter, and while mortgage debt grew almost 9%, households are not financially stressed because non-mortgage debt remains around pre-pandemic levels. but bankrate points out that average credit card rates are at the highest level since january of 1996, sitting just below 18%. s&p global intelligence says delinquency rates ticked up slightly for most of the six credit car issuers auto loan dwefaults are ticking up slightly. debt is becoming more expensive, of course, as personal savings

rate also sits at the lowest level since september of 2008. consumers are starting to feel strained consumers concerned about the impact of higher prices even as gas prices have fallen in recent months is still relatively high. david. >> courtney, thank you courtney reagan, that's going to do it for us on "squawk on the street". tech check" starts now. welcome to "tech check," carl is off. we open with the fatigued consumer surges interest rates crippling inflation, leading to spending tech took set to take the brunt. online sales on pace for the slowest growth in seven years while the biggest retailers in the world, amazon, walmart, target among them explore alternatives to clear excess inventory. adobe is forecasting a picture for the end of the year. we'll tell