ppi expectations yesterday but the market's up somehow. earnings season is also ramping up we'll hear from blackrock, delta air lines and walgreens today. we'll get you ready for tomorrow's bank earnings blitz plus, fallout from the u.s. government's chip bank earnings blitz. plus the kip crack down on china. thursday october 13, 2022 and squawk box begins right now. good morning everybody. welcome to squawk box here on cnbc live from the nasdaq market site in time square. i'm becky quick with joe kernen.

nasdaq is up by 21 and s and p up by about 16 points. yesterday it closed as lowest levels since november of 2020. it was slight declines yesterday. the s and p down by about a third of a percent. dow only down by a tenth of a percent and nasdaq down by nine points. still it's a slow and steady bleed. s and p 500 down six sessions in a row. everything is riding on the cpi. during yesterday's session the fed minutes reiterated, stop me if you heard this before, officials expect high interest rates to remain in place until the price comes down. that is the chatter, what everybody knows and expects. when we got the hotter than expected producer price index this could be a longer haul than before. cpi coming up. the ten-year note yielding 3.9%.

lower than closing yesterday. the two year at 4.3% a little higher. >> how do you know you're not going to overshoot >> on raising rates? >> where we are right now how do we know this isn't going to work if we go another three quarter. >> if you are looking at inflation so stubborn and persistent and do it by continuing -- look, it's two terrible choices. kill the economy with higher interest rates or spending power eaten away by inflation. >> we talk a about how attractive 4.3 or 4.4 is. how do we know this isn't enough >> we don't. >> you go further and you overshoot. >> people think it's -- the fed thinks it's not enough. well, they are also looking at some of the -- look how tight

the employment picture is straight up. >> stop raising. >> you don't want them to raise? >> no i want them to go fifty. >> no would be interesting. the problem is the market would react as if that's what they've been waiting for. they are trying to quell human behavior. if they go 50 bases points the markets will havety they broken them and it'll be off to the races again. this is what you watch with bank of england. what's going to happen is the bank of england going to close the window and say no more guilt purchases. they have their own treasury secretary arguing against the central banker. >> we have a big plan. you said 2020. guess how old barbara walters is >> how old >> 93. >> guess who doesn't look 80 don't say me. >> who who? >> joy behar. >> she does not look 80.

>> did you see the president and first lady. i hope on my birthday, not for nothing, but they did a long video they played on that show yesterday. i mean, they love her. >> a view watcher. that's what you do after the show >> no, it's on twitter. the person who sent it to me wasn't saying this is awesome. it was like, i think they use the word, cringe worthy. it's like a minute long. they were really, really nice. >> happy birthday. >> not quite that. dr. biden didn't do that. in the meantime let's get everybody ready. a few quarterly reports of note before tomorrows official kick off to earning season. black rock, delta airlines and walgreen's happening before the opening bell. an interview with delta ceo ed bastian coming up about 7:10

a.m. the main event key inflation data at 8:30 eastern time. set your alarm. i don't know what to do. economists expecting a rise of.3% in september up from.1% a month ago. meaning inflation is running at an annual pace of about 8.1%. that's the number to beat. since the last cpi report came in hotter than expected the s and p 500 down 12%. $4.6 trillion wiped out of market cap. we'll bring you more predictions throughout the morning ahead of the number. when the number hits all hell is going to break loose. >> could there be a cool surprise i don't know. maybe, there always could be. >> they'll just come in as

expected. >> that would be nice for a change. today's inflation report of interest to anybody who bought government backed inflation bands. >> you were a big fan of these. >> i bonds people are excited about a two year that is yielding 4%. i-bonds we're going to see the add justment. september cpi figures are the ones used to compute the rate starting in november. if it comes in as expected the cpii-bonds will start paying about 6.4% beginning november 1. look at the current rate 9.6%. that was the huge unbelievable price. i argue 6.4% is incredible when you look at things like 4% on a two year. you only have to hold this a year and then you can do whatever you want with these things. 6.4% guaranteed in a government bo bond is pretty unbelievable. savers loaded up on these when

at 6.9% in may. bonds may through act will earn the 9.62% for six months before adjusting to reflect the data. you can still get 9.6% on $2,000. >> you're in the middle for a year >> it's october. if you buy now you can still get 9.6%. zbr for six months >> for six months. >> then the next getting you 7 and a half percent. ten grand. what's the maximum >> ten grand per social security number. if you have a tax return, if you overpaid you can use some of the refund to buy another $5,000 in paper versus electronic. >> i got work to do at 9:00 a.m. when the show is over. get on that internet. >> i think i tried and it was hard, right? >> you have to go to treasurydirect.gov. you can set it up.

you can do that for every social security number in your family. >> your children. it's hard to think there's actually -- that most people are going to earn, i hate to say it call it a blended rate. 8% over the next 12 months. it's like a guaranteed thing for ten grand? not a bad way to make all the other numbers look partially better. >> nothing makes sense for me for how i think about things. i sweat out $5 bets. it's like say i'm watching and i might win $40 on five. when i don't it ruins my day. i spend $200 at the supermarket and it ruins my day. i have bitcoin at $62,000. if i was going to worry about something and look at stocks mutual funds. you know what i'm saying.

that $600 of interest in a year that you're talking about. >> it's incredible. yeah. >> it is. >> for a kid who has a savings account you're putting it in for them and doing those things. >> we try to take advantage of it. but i'm saying it's not going to solve my problems. >> it's not going to solve your problems but it's a great savings investment. >> i understand that. he's a mega-gazillionaire. >> it's a good example for my kids. if you have this money and save it this is what you get back. >> you buy one of your shoes with the interest. you don't even have two. >> a dollar saved is a dollar made. >> growing up we all had savings accounts. you got five, six, seven percent. that was an exciting thing and you learn to not spend.

we have not had that in my children's entire lives. this is a thing you can learn to say this is what happens when you save money instead of spending it. >> i understand that. it's all true. speaking of inflation that $600 is going to go on this. get ready to pay more to heat your home this winter. according to the governments winter fuel outlook the coast o heating your home with natural gas is considered 30% hire than last winter. heating demand is expected to be higher because of a forecast of slightly colder weather than last winter. >> by the way, if you bought them in december of last year it was $964 on the year because you get 12 months at 9.64%. if you buy now you get more than $600 on this. >> what shoes do you wear? what are those expensive things? >> they are not. >> you have a pair of expensive shoes? >> i mean they are pricey but,

first of all, i buy them on a thing. i haven't bought new ones in four years. these are called taboot. it's a good brand. >> have you looked at what a tie costs? >> i have a brand for that, too, that is cheap. do you know a brand called tie bar? >> i do. >> my view is you're going to spill on tie anyway. i'm going ruin the tie anyway. the idea of spending two or $300 on a tie is a crazy thing. when we come back black rock is set to report after a quarter that saw several states divest funds over concerns. what could be a noisy quarter after this. plus tomorrows bank earnings

blitz. four of the biggest banks set to report. you're watching squawk box and you're watching squawk box and this i ♪ ♪ wow, we're crunching tons of polygons here! what's going on? where's regina? hi, i'm ladonna. i invest in invesco qqq, a fund that gives me access to the nasdaq-100 innovations, like real time cgi. okay... yeah... oh. don't worry i got it! become an agent of innovation with invesco qqq

millions have made the switch from the big three to the best kept secret in wireless: xfinity mobile. yeah... oh. don't worry i got it! that means millions are saving hundreds a year with the fastest mobile service. and now, introducing, the best price for two lines of unlimited.

just $30 per line. there are millions of happy campers out there. and this is the perfect time to join them... see how easy it is to save hundreds a year on your wireless bill over t-mobile, verizon, and at&t. talk to our switch squad at your local xfinity store today. i want to take a look at the

company that typically stayed out of the headlines but the last couple of years generated news and controversy. leslie picker joins us with more. >> the big question as blackrock sets to announce momentarily how much will it affect. treasurers divested or pledged to divest more than a billion dollars from blackrock funds in an effort to punish the asset manager for what politicians believe to be left leaning products. blackrock responded by saying the actions by some state treasurers d not reflect the actions of the broad population of its clients. earlier in the quarter 10 state attorneys general have been urging the scc probes the objectives and potential conflicts with pfiduciary duties

saying as performance deteriorates we believe the potential for lost fund man dates and regulatory scrutiny recently increased. as such ubs downgraded blackrock from neutral to buy. in earnings today expecting a contraction in eps and revenue compared to the third quarter. shares have plummeted nearly twice as much as the s&p 500 this year amid the turmoil in equity and fixed income. >> leslie, thank you. we will see what happens in seconds because blackrock results are out. when they are we are going to dig through them and bring them to you momentarily. joining us now for more on the markets ahead of todays cpi report is joann phiney.

you sound optimistic about where things stand, pricing and value out there. prices come down significantly and you say there are risks for pockets of areas you see earnings that turn down but think there's potential bargains out there, too. what do you like best? >> yeah. good morning becky. with the inflation uppermost on people's minds i think there's incite to be gleaned from that. the expectation that core inflation, likely remains high because rental costs are so high. that's starting to feed more and more in to price indices. what that tell us is homeowners, you know, aren't selling. mortgage rates are high. they like the mortgages they have. they are not putting their houses on the market. where are people going to live pushing up prices in the rental market. that tells us home builders really beaten up. one we really like because of the entry level and first level up house building are going to

face robust demand for a while. the headlines are about high mortgagen rates constraining existing homes on the market. 5.8 times forward earnings is a good opportunity. on the flip side folks in their homes are going to be renovations. look at home depot not as cheap but good outlook. >> you like names like amazon and mcdonald's. again, people have been looking at those in the case of amazon, at least as a pandemic darling. you think this is a stock that's got room to run. >> yeah. when you think about amazon headlines have been about the retail side and that's slowed down. that pandemic darling. but when you look longer term the biggest opportunity for amazon is really in the cloud. they are one to have biggest, the biggest provider of data center services and expanding because data traffic is continuing to increase and companies are finding greater efficiencies using the cloud than internal servers.

that's only going to continue. you're looking for a secular growth opportunity that come down a fair bit. this is good opportunity for amazon or google look at the growth when the cyclical opportunities are looking more challenging. >> you heard from pepsi yesterday. obviously, their pricing power was phenomenal. do you think a company like mcdonald's has the same leeway or people trade down during an economic downturn? >> there's a few ways to prepare clocks for the downturn and we've been doing that. one is to own companies like mcdonald's more resilient during a recession. customers that go to mid rangs restaurants trade down like mcdonald's to save money. that proved in the past. they have working on their loyalty program. that's done well for them. they have more resilience in the customer base. they've passed on price increases even as customers

within mcdonald's shifted down a little bit in terms of total spending. t.j. maxx is another good opportunity. they pay a dividend. t.j. maxx more so than mcdonald's. that's a way for clients to protect them during the downturn is give them more yield than typically get and that is helping them ride out what we're seeing here. >> joann thank you. good to see you this morning. >> you bet. we promised blackrock's earnings. $9.55 per share. that's estimates of $7.07. revenue did fall 15% from a year ago. that's primarily due to the decline as you might imagine in the financial markets. the stock right now off in the premarket about 1.5%. coming up an in depth interview with a man known as mac the knife.

former morgan stanley john mack. the crisis and his take on crypto these days. wee talk about that next. as we head to a break take a look at the biggest premarket winners and losers in the s&

welcome back to squawk box. former morgan stanley chairman and ceo john mack out with a new book titled" up close and all in". i spoke with john mack in an interview. he reveals he has dementia.

we'll hear from him about that later this morning. first we asked him about what led him to write the book. >> well, a lot of people said to me john, you ought to write a book. you've had an up believable career. you got the firm through the crisis. you've been very successful. it kept coming up and coming up but it really started about three years ago where we started working on it. it's been in my ear for ten years. >> what do you want people to know >> i want people to know that in business it's critical that you have to make tough decisions. not all your decisions are going to be right. when they are the wrong decision you pick yourself up, get your team together, you get a new plan and go forward. i think in business oftentimes, especially with less experienced managers, there's a tendency to say, this didn't work. i don't know if i want to do this and they kind of give up. in my view business is kind of

knocking on doors until you get the right door to open. >> talk to him about weather. he thinks wall street will become completely digitized in the future. >> i don't think it goes away but changes dramatically. take crypto. it's hard for me to understand why does it have value. so 50 years from now maybe that'll be a huge way that monetary transactions take place. it's easy to wire. you don't have to worry about putting it in a bank. it's on the computer. you have to make sure it's insulated and protected and no one can break in to it. fifty years from now i think things will be more electronic and driven more and more by input from humans in computers on how to trade, take risks and don't go over their limits. >> you owned some bitcoin? >> i do. >> you own it now?

>> i'm in a company called current. the young man who started this company i put money with him. zoe cruz who you know and met before. i'm invested in her. then through my family office we have positions in crypto. >> we're going to have more of that conversation with former morgan stanley chief john mack in the next hour including that call that he had with tim guidener in the midst of the crisis. there's four letter words used. >> john is so polite. >> in the 8:00 hour john mack opens up about his personal struggle with dementia. it's a fascinating and important, sad conversation. hopefully one i think a lot of folks can learn from. >> he looks really great. >> he looks great. he's in great shape. he's totally with the program. i think it's interesting to know when you've been told you may not be in the future. i think it can weigh on you in a big way. >> heavily.

>> no intervention possible. we're making strides. >> we're making strides. there's a little bit of progress but not enough. >> that's something we need to deal with not just for people like john mack but for society. >> yep. >> the aging population. we're going to be -- >> we all have loved ones. >> loved ones. >> the cost on society. >> it's going to be staggering as we've made progress in the other parts. when i was young 70 was the average age. now it's got to be almost 80 and headed higher. along with that the physical and the mental which might not keep up. come up we have a recap of what the markets learned from yesterday's fed minutes and the potential impact of today's inflation report on the path of

rate hikes. that's coming up next. we do this all throughout hispanic heritage month celebrate our cnbc teammates and a contributors. here is wealth advisor courtne my grandfather immigrated to the u.s. speaking only spanish in hopes of obtaining a better life for his family. two generations on he achieved those goals. a strong work ethic, knowing if value of dollar, savings all things instilled upon me. as i look to instill the values on my children, peers and clients i want to stress the importance of investing and a make sure your money is working as hard as y aoure to create generational wealth for your generational wealth for your family for years te? a new way to transform our agency. strategy to execution. oh, looks my laces have come undone.

a business card? yes, for ey. tech expertise? $2.5 billion invested. impressive. okay, you've convinced me, i'm back. just gonna... get this...

good morning. welcome back to squawk box everybody. we are live from the nasdaq market site in time square. delta airlines posting results. fill labose joins us with the numbers. >> these are in line with expectations. delta a top line coming in with revenue of 12.84 billion. expecting 12.87 billion. earnings per share a buck fifty-one but a three cent impact from hurricane ian. the streak was expecting a buck fifty-three. margin of 11.6% in the third

quarter. we saw the revenue increasing. we saw the demand increasing. that's going to extend in the fourth quarter. this is why the shares might be moving higher that morning. the q 4 guidance once again giving guidance on earnings per share basis. that's what delta is doing. they suspended that during the pandemic. the company expects to earn between a buck and buck twenty-five in the fourth quarter. the consensus in the fourth quarter was 79 cents a share. much higher than expected earnings per share guidance. revenue up 5-9%. most analysts expecting revenue up 1-5% with operating margin of 9-11%. coming up next hour we're going to get better perspective on the demand that is out there. not only for lee sure, transatlantic. ed bastian cee of delta airlines we talk about the q 3 results and the guidance for the fourth quarter. delta essentially in line for the third quarter.

fourth quarter guidance better than many people were expecting. back to you. phil, thank you very much. let's take a look at the futures futures right now. dow futures ended up about 140. the nasdaq indicated up by 26. and the s&p which has closed down for six sessions in a row now is indicated up by about 17. we we'll see if they can hold onto that at 830 time:30 when we get consumer inflation number. we should take a look at the ten year guilt. it looks like at this .4.302%. yields kind of hanging around. steve leaseman is here. we can talk to him in a little bit about what's happening if they are going close the window tomorrow and what that means for the players involved. now we talk about the move and the guilt previewing the cpi data today. senior economics reporter steve

leaseman. julia coronado president and founder of macro policy perspectives. steven you were probably in. julia i'll be with you in a second. i was making my case for the notion that we don't know how much the current increases in rates have been steep and quick. >> right. >> isn't it possible that there's going to be a pretty good affect from that and we just don't know and it would be so easy to go another 75 and be like, oh my god. we didn't need to do that making me think we should do 50. why am i wrong tell me. >> first the market tells you you're wrong but only because the fed is telegraphing the market. >> i don't like the demand destruction idea. >> i think there's an argument for the fed to go slower. the problem from the fed's perspective is that they just don't see the progress in the inflation numbers that allows them to come off of their

rhetoric and the thrust of what they've been saying. which is we need to get in front of this. i think 3% or what are we at three and a quarter. it's probably neutral right now. the next move in restrictive makes sense. the question is how far they go. i think there's a point or a case to be made for a pause at some point to see what's going to happen. especially when you start to layer in the systemic risk issues out there. >> julia with all that said saudi arabia didn't help, did they >> no. the ongoing destruction of demand coming from commodity prices is going to be a challenge for, in an inflationary environment where those can pass through in second and third round affects. but also it's very challenging for the outlook for the consumer. wages are high but they are not

keeping up with inflation. ultimately that should help the fed do its job as consumer demand cools in response to the loss of purchasing power that should add pressure, price sensitivity. what we've seen, what we saw in the pandemic is consumers lost all price sensitivity and were willing to pay whatever it took for a used car. we're looking for the return of that price sensitivity. consumers demanding deals and bargains and, you know, really putting pressure on companies to pass through some of the relief they've been seeing on the supply chain front through to the retail level. we haven't seen a lot of that yet. we've seen a little bit of that. we need that to broaden out. it's a slow process. the labor market is still strong. consumers still have money flowing in their pockets it's just losing value. ultimately we do expect

consumers to go on buyer strikes and show more resistance to ever higher prices. in an inflationary environment where we keep having these energy and food shocks, companies are trying to pass that through. it's a little bit of a tug of war right now. >> you talk about commodities, obviously, julia. i'm thinking rail strike and then maybe there maybe other workers that saw what a their colleagues or coworkers were able to negotiate. they are going to come back and want similar things. is this going to be something that's getting let out of the bag right now and that is a persistent pressure on higher wages? unions don't represent much of the country but everybody is going to want to get paid more, i think. >> i characterize that and i think the fed's in the minutes

characterized that as a risk and something they are cognizant of. we are in this inflationary environment. the labor market is tricky. it is strong. on the one hand, on the other hand the labor share of gdp hasn't risen. we are seeing real wages decline. it's not strong enough yet to deliver that kind of game for workers. you know, but it is a risk and it's a risk in an inflationary environment where people are attuned to inflation. it is a topic of conversation. you can go to your employer and say, look. you see my commuting cost and housing costs are going up. it's a reasonable ask. it's not something we've seen on a broad basis yet. really it's the lower wage

workers that have had the most bargaining power. middle and higher wage dynamics look very normal. but, you know, it could broaden out. >> steven i'm trying to identify what's going to be the sticky part a year from now. >> sticky is the new transitory. can i change the conversation. there's a big story in guilts. andrew bailey stared down the market. it's the early days to make that call but did he look moral hazard in the face and say go away. you look at the guilt this morning and it's down substantially. bailey said you have three days to get this done. it depends if i'm german or american. remember that movie three or three. >> here we are. >> it's now one or two days and

apparently they did step in and buy more. it looks like it's working. a really interesting story in the journal today op ed in the journal bringing it home in the sense. is this something we have to worry about? the essential question being have regulator, officials, the fed, given markets enough time to get out of the way of the train that's coming of higher rates? have markets effectively adjusted to that that gets in to the sense of whether or not there's a systemic risk in the united states. yellen yesterday saying she has concerns about liquidity. >> the fed officials have been talking saying this is coming. the market didn't necessarily believe them. this is where credibility matters. you can say things and if they believe you they act

accordingly. if they don't or waiting for you to pivot puts the fed in this box. see how things are going and look around. but if they do that they are going to have market players questioning whether they really mean it when they say it and testing resolve again. that gets them back in that problem spot. >> i think that's right. i think there's another aspect to it, which is, the extent to which the banks as regulators are doing the other side of the trade as banks as monetary policy centers. andrew was involved in the whole frank thing. in my recollection whoever came said this is the way britain does it. it's important to note -- >> we copied what they did >> an important point you'll notice that bailey and the bank yesterday came forward saying we don't regulate pension funds.

where did you hear that before aig. same thing. the thing that blew up was not the thing we were responsible for. >> it's the pension fund manager fault for all the leverage. >> joe asked the question earlier what's going on understood beneath the scene maybe they don't know. getting back to exactly the place we started. another reason to go slow to give markets time to settle out so you don't blow something up in the process of setting monetary policy in the place that it probably ought to be. >> we use to is pension plans. they are mostly gone. we went in this country we realize the risk of defined benefit. you can't guarantee someone not knowing what the rates are going to be. we do go to divine contribution. >> again, this is the idea. back to public policy being at fault here. they are expecting these pension fund managers to be able to meet

these numbers with this amount of money that we're giving youg now. you have to turn it in to this amount of money later which is why they went to l-d-i to make the numbers anticipated or expected to make. you can't, there is no sure thing. >> it's not a private sector obligation not a government obligation. i don't think the government came forward. you have to do this. >> there's not a guy working with him in barnum. >> so the meeting would say barnum and bailey. >> this is a circus. >> george. >> in the reporting i have to do on this story i will run that down. >> julia thank you. steve we have a lot to talk about with you today. thank you for being here. >> pleasure. when we come back delta airlines shares jumping.

stocks up 5.3%. we talk through the quarter with the ceo ed bastian coming up at 7:10 a.m. eastern time. squawk box will be right ba ♪ ♪ this is the moment. for a treatment for moderate-to-severe eczema.

cibinqo — fda approved. 100% steroid free. not an injection, cibinqo is a once-daily pill for adults who didn't respond to previous treatments. and cibinqo helps provide clearer skin and less itch. cibinqo can lower your ability to fight infections, including tb. before and during treatment, your doctor should check for infections and do blood tests. tell your doctor if you've had hepatitis b or c, have flu-like symptoms, or are prone to infections. do not take with medicines that prevent blood clots. serious, sometimes fatal infections, lymphoma, lung, skin and other cancers, serious heart-related events, and blood clots can happen. people 50 and older with heart disease risk factors have an increased risk of serious heart-related events or death with jak inhibitors. this is the moment. but we've only just begun. speak with your doctor about cibinqo today. an innovation from pfizer.

under advanced chip tech to china. ones that could harm the semiconductor supply chain. to ease concerns the commerce departmented granted several exceptions. it won aprooefl to receive goods to factories in china without additional license. samsung secured a one year

license for their facility. the wall street journal reporting u.s. suppliers including kla and lamb research pulling staff from the top memory chip maker ymtc. check out shares of applied materials. the chip equipment maker warning revenues misthe forecast for this quarter and next because of the export rules that went in affect this week. we're looking that at a little over 1% now. coming up we get you ready for f tomorrows bank earning blitz. four banks set to report. squawk box coming righ you'll ge. nice, but i can't accept it. unless every business gets the best deal. on every iphone. uh, actually... we already do that. the plumber with the ascot! big bjorn, little bjorn, too! the caterer who really cares. every business should get the deal!

we make a good team. every business gets at&t's best deals on every iphone. including up to $800 off iphone 14 pro. (♪ ♪) ♪ icy hot pro. ♪ ice works fast... to freeze your pain and your doubt. ♪ heat makes it last. so you'll never sit this one out. icy hot pro with 2 max-strength pain relievers.

welcome back to "squawk box. tomorrow is an unusually busy day, even for the kickoff of earnings season. we're going to get a blitz of bank earnings.

joining us right now is an rbc capital markets head of u.s. bank equity strategy good morning to you. let's talk about what we can expect and to the extent there are tea leaves to read from these earnings one of the reasons everyone is focused on the bank earnings, not just about the banks themselves, but what it says about the larger economy what are you seeing? >> we're going to see trends tomorrow first and foremost you're going to see net interest revenue growth be very strong for these big lenders because rising interest rates, as you know, has benefitted their margin or their spreads. that's going to be the top line revenue growth for the industry. the cross currents of that, however, is we expect them to start building up their loan loss reserves for the anticipation of an economic slowdown next year or recession which would lead to higher credit costs they need to start building up reserves ahead of time

and then third because these are the big banks reporting tomorrow, we're going to see the capital market revenues. as we know, the investment banking revenues should be down about 50% year over year but trading revenues would be up 5% on the year-over-year basis. >> what are you expecting, what's going to take the most, and how much should we take away from that? >> it's going to be interesting because this is a new methodology that was put into place in 2020 and, unfortunately, because of the pandemic, it was a very hard read on how it's going to work so what we should anticipate is that the banks with longer duration assets such as credit cards, receivables, they will probably build up loan loss reserves more meaningfully than someone who has shorter duration assets so the longer the duration of the asset, the higher the reserves because there's a greater likelihood that you're going to run into a recession. so the consumer lenders should

probably be building up the reserves storm >> if you could own one or two banks into these earnings reports, who do you want to own? if there's one or two banks that you have no interest ever wanting to own, what are those >> there you go. what we would say is the right side of the balance sheet is also going to be critical tomorrow what i mean by that is, who's got the best deposit picks with rates where there are, good core consumer deposits, consumer checking accounts are not going to see the rates rise quickly. if you look at regional banks, names like pnc are names to own. they have very strong consumer franchises and very strong loan books as well. and then on -- staying on the sidelines, i think the capital markets area is still a real struggle you have to stay on the sidelines with goldman and

morgan stanley. >> where do you put the big ones >> good question i would say bank of america, since they have an incredibly strong consumer banking franchise in the united states, that will benefit them -- >> and that will outweigh any of the capital market pieces? >> exactly that's the critical part there absolutely. >> okay. appreciate your time and perspective this morning we'll see what the numbers look like tomorrow, thank you. >> you're very welcome, thank you. coming up next, delta ceo ed bastian is going to join us in an exclusive interview straight ahead. that stock getng bstti aoo after some upbeat guidance for the quarter. "squawk box" coming right back ♪♪ ♪♪

be ready for any market with a liquid etf. get in and out with dia.

good morning queue the countdown clock. the markets once again are on inflation watch. the august cpi report just about 90 minutes away. earnings alert, quarterly results this morning from walgreens, blackrock and delta. plus john mack in his own words, a far-reaching conversation coming up as the second hour of "squawk box" begins right now ♪

good morning welcome back to "squawk box" right here on cnbc we're live at the nasdaq market site in times square i'm andrew ross sorkin along with joe kernen and becky quick. u.s. equity futures at this hour ahead of some big data that we're going to be getting at 8:30 i would say mark your calendar, but we're already on the date. so you have to set an alarm or stay tuned dow up about 156 points. all of this could change nasdaq up 32 points. s&p 500 up about 19 points you're looking at the ten-year note sitting just at 3.888 the two-year at 4.295. we've also been talking a lot about the energy complex in oil. crude sitting at 87.35 we could take a look at currencies we were debating that with steve liesman a little bit earlier today. you can see -- we can show you where the pound is at 1.153

and crypto, bitcoin is under 19,000 $18,666. >> there you go. we've got earnings coming from walgreens. nice to see you. >> nice to see all of you. walgreens posting a dusted fourth quarter earnings of 80 cents per share. 32.5 billion in revenues slightly ahead of expectations the company reports in three different segments, u.s. retail pharmacy, international and the new health care division u.s. retail saw 26.7 billion in revenues which is just slightly ahead of estimates same store sales were down 1.1% and pharmacy down 8.8% hit by lower covid vaccine and testing volume they administered about 2.9 million vaccines in this

quarter compared to 4.7 million. revenues of 1.5 million missed estimates. uk boots was up by 15.2% and the u.s. health segment revenues of 622 million was also a bit below estimates. growth was about 34% that's down from what we saw comparables last quarter and they're spending a lot there on expanding clinics. they're now at 156 clinics next to stores on pace to reach 200 by year end. and they also acquired remaining stakes in shields specialty pharmacy that they didn't already own. for fiscal 2023, the company is forecasting full-year earnings actually coming down to 445 to 465. that straddles the midpoint of

what we're looking at on estimates. especially flat with this year the ceo saying in the release that it will be a year of accelerating core growth and scaling the u.s. health care business so they are spending a lot on the health care benefits >> and stocks up one and three quarters percent >> thanks, bertha. let's get to dom chu. >> let's talk about what's happening with shares of blackrock which reported results over the past hour the world's biggest asset manager reporting profits top estimates. results for both of those lines were lower than the same time last year. market volatility has many investors on the sidelines and the downturn in markets has reduced the amount of assets managed by blackrock

those shares still up about 0.2 of 1% in the market trade. let's talk american express. they're getting down rated to a sell they cited among other things, a customer base for card spenders that could be less willing to spend during more economically challenges periods so they're saying, this could have an impact for the recession, really does become full-blown and then we're going to end on shares of las vegas sands up, just -- now it's down about two-thirds of 1% they did upgrade that stock to neutral from underperform. they still think that there's some uncertainty around the operations, but the risk is less than what it was ten months ago and some of that is already priced in. those shares going between gains

and losses i'll send things back over to you. >> thank you very much we'll see you a little later. we have a live interview with delta air lines ceo ed bastian. we'll talk about the company's latest quarter, travel demand, which has been incredibly strong, labor issues, and much more. first, let's check out the futures. still in positive territory. gaining even from where we were earlier. dow futures up by 165. s&p up by 20 the nasdaq up by 29. stay tedun you're watching "squawk box" and this is cnbc ♪ ♪ ♪ ♪ introducing ihg one rewards.

seventeen hotel brands. six thousand global destinations. one loyalty program that lets you guest how you guest.

welcome back this is "squawk box," everybody and we're watching shares of delta, they'relifting off this morning after the airline offers an upbeat forecast right now that stock is up by 2.9% phil lebeau joins us from atlanta with delta ceo, ed bastian. good morning >> good morning, becky we'll talk about that forecast for the fourth quarter on a quarter where delta earns $1.51 a share. there was a 3 cent impact from hurricane ian. ed bastian joining us on "squawk box. let's talk about the third quarter, specifically the demand that you've seen it's not slowing down, is it >> it's not. thanks for coming down, phil before i start talking about that, i want to thank our

people our people delivered an amazing q-3. the most difficult summer travel season on record and we, at the same time, delivered our all-time highest revenue performance for a quarter in our history. and even more importantly than that, we did it on only 83% of our scheduled capacity so the demand environment is really strong. the reliability is back. our team has done a lot of work to get the quality of service back over the last 45 days, and we're going to exude the three days that hurricane ian impacted us, we operated 120,000 flights on the mainland we had a sum total of 108 cancellations. the fourth quarter is looking really, really good. >> you've given guidance the street was going into day expecting 79 cents a share

better than expected guidance relative to analyst estimates. is the fourth quarter -- which is typically a busy one, how much of that pent-up demand carries over to the first quarter. >> i think the demand is going to continue. one busy summer isn't going to quench all the demand for travel our planes have been 90% full or more full every day since the first of april and that continues into the fourth quarter as well the holiday booking period is strong we're seeing more business continue to return post labor day and those business bookings are continuing to approve. initially markets are coming online we're a bit of a counter cyclical recovery story. as we restore our business, as the demand gets back, as people finally have a chance to move their spending from buying stuff to investing in themselves and experiences, that demand continues strong and i think it's going to be a really great

tail wind into the new year. >> you've been around the block a time or two. you've seen recessions and the impact it is not only on delta but the airline business and demand if we slide into a recession, whether it's later this year, early next year, you think it's going to be different than past recessions and the impact on delta and airlines, correct? >> i do. i think we're in a counter sick -- cyclical recovery. our goal is to get back to our full capability. it's going to help us lower our costs. one of the things you want to do in a recessionary environment is bring your cost profile down we're seeing it in q-4 there's a ten-point reduction in costs from q-3 to q-4 a recession in the airline business helps reduce fuel prices, which is good. our consumers are strong business needs to get back on the road with their customers

and i think that's also another difference that we may see in this -- if we get into a recession. everyone i know is traveling by the way, if there's any cfo who's not with their customers, someone else with them >> let's talk about labor. where do you stand in terms of adding staff i know you've had a big push in the last year, but there are a lot of questions about whether or not, a, you can increase the way pilots are moving through the training process so that it can help you further add your capacity back in, and then you've got a pilots union that is holding informational pickets every five or six weeks. where do things stand in terms of potentially getting a contract done? >> two different stories total labor picture is good. we're back pretty close to the levels that we were in 2019. we fired over 20,000 people since the start of the last year and now we're removing -- we're getting out of the hiring mode and into the production mode when you're hiring that many people, the training and the experience and the recruiting, it takes a lot out of your

existing compliment, not just your new hires next year, it's going to be full, ready for production and deliver to your customers. with our pilots we're doing a great job at the table our pilots are the best. we're working hard to make sure we do that we laid out, i think, 22 or 23 of the 28 sections of the contract we're in that range. we get closer and closer, and i'm optimistic we're going to get a good deal done with our pilots. >> you have a huge order with boeing as we've talked about in the past, there's a provision that this max 10 has to be certified by the end of this year. sometime in december is the current law. otherwise, it's going to have to go through a new process and there's discussion in washington about putting a waiver in there. if they don't get a waiver to extend certification for the current max, cockpit configuration, the way it's set

up, communication, does that impact your order at all >> well, on that, a couple things we have a plan "b" and we've discussed the plan "b" with boeing and i'm not going to talk about it but there's -- delta is provided for in either case -- >> the plan "b" doesn't include dropping the order, does it? >> no. we're not going to start taking that plane for another three years. we have time to see how this plays out. i'm optimistic it's going to get certification. it's not going to get certified by the end of the year but there's so many airlines who want that product to just arbitrarily put a different type of safety warning on that cockpit. the pilots don't want a different warning. they want it to have symmetry with respect to the existing 737 procedure. i'm optimistic we're going to get to a good answer >> becky >> i know you said you can't give us the details, but you gave us a pretty interesting hint there, that there's a plan

"b." give us a little more detail around what that entails you feel good no matter what >> well, the max order that we did with boeing a couple months ago is an important order for the airline. it's a large order it's over 100 aircraft when we consider options we probably will execute we can't put that much capacity at risk without answering that question in the event it wasn't certified, we decided what the alternative would be i can't go much further than that, but delta is protected. >> in terms of aircraft you announced earlier this week that you guys have made an investment in joby. operating some of those for delta at some point in the future we've talked about it, realistly, can we expect to see these in '25, '26?

>> we're thrilled to be doing that deal with joby. delta is not going to be an operator of the product. we don't want to operate it. we want to invest in the service and the airport -- >> when someone books a ticket, you'll offer that option >> we will they've got the bust balance sheet and structure of any of the providers. everyone was pursuing us and with joby, what you're going to have is a continuation of the investment we're making in the airport infrastructure we invested billions in l.a., new york, many of your markets to help customers get through the airport and the ground experience in much better light. joby is going to take you from your home to the airport it's going to improve your experience >> ed bastian, ceo of delta, on

a day where they're roughly in line with q-3 earnings but it's the guidance on fourth quarter that i think is going to get the most attention today we'll send it back to you. >> thank you for bringing us that interview. coming up, we got more of our in-depth conversation with john mack, including the most important ten minutes of his career, how we kept the bank alive during the financial crisis first, check out cryptos this morning bitcoin, now traitding about $18,714. stay tuned, you're watching "squawk box" right here on cnbc. >> announcer: which airline was the first to ban smoking on l al of its flights the answer when cnbc "squawk box" continues look at the size of that- gaaaaaaaaaaaap!!! is that a goat?! you talkin' about me? gaaaaaaaaaaaap!!! i think this goat is saying “gap.” must be talking about the expenses health insurance doesn't cover. so who's talking about the money

aflac pays to help close that gap? gaaaaaaaaaaaap!!! aflac! aflac! gaaaaaaaaaaaap!!! it's about to go down, baby! aflac! aflac! stop that goat! get help with expenses health insurance doesn't cover at aflac.com

now the answer to today's aflac trivia question. which airline was the first to ban smoking on all of its flights? the answer, delta air lines. the airline banned smoking on its flights globally in 1995 >> we want you to call jamie.

>> let me ask you a question 35,000 jobs just disappeared in the city between aig, lehman and bear we made a deal with jamie. you think that's good public policy >> john, we're looking at the whole system here. >> the chinese are leaving we're talking to mitsubishi. >> i got to go get me a japanese translator. >> tim guyger is calling again. >> you tell tim guyger to [ bleep ] me i'm trying to save my company. >> it features john mack john mack out with a new book titled "up close and all in", lessons from a wall street warrior. we talked about those moments during the 2008 financial

crisis >> tim said, look, i want you to call jamie dimon, he'll buy your firm and i said, well, look, i believe the japanese are going to come in and put money into it he said, you can't wait for that i want you to make the call. he kept pushing me and i finally said, i won't do it. i'll take the firm down first and i hung up on him and literally my board [ bleep ] their pants on that move and i tell you, i can't -- i don't know what caused me to do it i just thought it was just the wrong thing to do. >> there's a moment in the story in september of 2008 where your secretary is telling you that tim is on the telephone and you told her what? >> she came and said tim guyger is on the phone and wants to talk to you. i said, tell him i'll call him back she comes back in and said he wants to talk to you right now

i said tell tim guyger i'm on the phone with the japanese. he can get [ bleep ] that was it. >> and what did she tell him >> i hope she told him that, but i don't think she did. look, we were trying to save the firm i didn't have time to talk to a bureau bureaucrat i needed money, and he wanted to merge. >> they said that was the most important ten minutes of mack's career and i asked him about that >> he sent me an email which i have framed, he said this is the best ten minutes of your career. and he said, i learned more on this situation and the phone call than i have in my entire career and he's been a great leader and a great supporter and a really good businessman and how he turned the retail business around but i think in the room, i think

my board supported me. clearly james and others did but let's be honest, we were all on very thin ice and at the end of the day i got lucky. you can say, yes, it goes back to the culture and the japanese being trainees at morgan stanley. there were a lot of things that lined up to help us. but at the end of the day i had no power over the japanese it was about the culture they had seen at morgan stanley and they wanted to be a part of it that's what saved the firm >> and wall street, of course, john mack, known as mack the knife, we talked about how he th thinks about the culture today and whether everybody will be getting back to the office. >> i think to be able to walk on a trading floor and see people's faces and what's going on or go down to investment banking and pop your head into a meeting on are we going to finance a deal

or not finance a deal, i think you need people in the office. even though technology is at the point -- there's a much easier to gather information, there's nothing like walking down a hallway and just poking your head into a conference room with meetings going on, pick up what are they dealing with, what are the risks, what can you do to help and what advice can you give them, i believe personal contact is really important. >> what do you make of where we are in the economy today i ask because some people worry and wonder whether we're headed towards another 2008 >> i think given what we went through during the crisis, i think regulators are much more involved in dealing with companies and looking at their balance sheet and what kind of risk they're taking. also think there's a lot more liquidity in the market than we had 20 years ago during the crisis i'm pretty comfortable with a combination of access to

capital, liquidity in the market, globalization, and the fed and the s.e.c. all over these companies and the risks they take. >> you can watch a lot more of that interview on cnbc pro or on our podcast. and john mack will open up about his personal struggle with dementia he's been diagnosed with dementia i'm glad we got this interview on tape. we were worried and he was worried about just how that was progressing and as you can see, he was as with it as you can imagine. but there are moments and he has his moments, i think over time, hopefully we'll have a library of tape of people like john mack before things -- i hope things don't go in a bad direction. but i know it's something that he and his wife and family are worried about. >> that's the prognosis, that type of time frame we're talking about? >> at the time when we first started talking about doing this

interview over the summer, that was -- those were some of the issues -- and he talks about it openly in the 8:00 hour, it's a personal conversation about what that diagnosis was like, what that's meant for him and his family and we'll show you that tape -- >> i'm not familiar with -- i guess they know specifically what -- because it's not an alzheimer's diagnosis, it's a dementia diagnosis, but what is it that they're measuring that it's weird that they would know -- it's declining fairly rapidly? >> and he talks about it he knows and there are moments when he's talking -- >> it's not am llloyd plaques. >> when he talks about his board and they basically crapped themselves because they couldn't believe the didn't take that deal, that's a moment of fiduciary responsibility

i think we're going to make this work with the japanese, it could have gone either way -- >> i think he knows it could have gone other the other way. today it looks like a brilliant move >> it's a bolder move. there's more risk on the table doing that but it was his fiduciary responsibility. >> it worked out. >> we're not interviewing mack this is the interview that you've been -- >> john mack john mack. are you -- >> get a camera on our mack. we have a different mack >> so this was john mack behind the scenes he's very -- >> pearls of wisdom. >> yeah, he does you're worth it, mack. still to come, former -- >> this guy could have a book too. >> hair product recommendations, things like that former fed advice chair roger ferguson joins us to talk about

inflation ahead of today's cpi report that number, oh, no, just about an hour away we're going to handle it we'll deal with it whatever it is we'll bring you live coverage. stay tuned you're watching "squawk box" and this is cnbc what if you were a major transit system with billions of passengers taking millions of trips every year? you aren't about to let any cyberattacks slow you down. so you partner with ibm to build a security architecture to keep your data, network, and applications protected. now you can tackle threats so they don't bring you to a grinding halt. and everyone's going places, including you. let's create cybersecurity that keeps your business on track. ibm. let's create

♪♪ age before beauty? why not both? visibly diminish wrinkled skin in just two days. new crepe corrector lotion only from gold bond. champion your skin.

♪ good morning and welcome back to "squawk box. live from the nasdaq market site in time square checking the futures, 200 points now. hour away, though, becky, from you know what -- >> from that all important number we're counting down to the consumer price index it comes out in just under an hour's time. joining us to talk about it and much more is roger ferguson. he's also vis chce chairman at e business council the two organizations have a survey that's out this morning it shows that ceo confidence fell deeper into negative territory heading into the fourth quarter it's actually down for the sixth straight quarter nearly all the ceos say they're preparing for a recession in the united states and in europe. but despite lower growth

expectations, they say wage pressures persist and hiring plans remain robust. so, roger, let's break this down they're pessimistic about where we're headed for the economy, but they're saying they're keeping their hiring plans in place. the fed hears that and thinks what >> i think the fed hears that and thinks two things, one is, to some degree, the message that everyone is delivering is being delivered by ceo, that pain is likely on the horizon. but this data confirms what they're seeing in the most labor market statistics which is labor market is still tight. and i think what the fed has said overall, inflation pressures have not really abated very much. that's something else that our ceos say and, therefore, i think they'll continue on their path of one more tightening at 75 and then we'll see what happens after that but the report is consistent

with many of the things i've heard. >> yesterday's ppi number, this morning we heard from delta, and the ceo said there's no slowdown that they've seen at this point. we hear from other places, there's the risk of breaking things in the markets if you continue to move higher. but inflation not showing any signs of letting up. the job market is still strong and that must be what they're focused on >> i think that's exactly right. i would say there's one thing that came in our survey when we asked them whether or not -- across all of the ceos surveyed, whether or not demand had picked up and it's clearly stirring a little bit the last time we asked has demand increased for your company and your sector, 38% said that it had only about 20% demand is strong but i think there's evidence of the beginning of some slowing in demand for a number of companies. not necessarily the travel area, but certainly some other areas

but also -- >> for -- >> inflation is still there. >> for a long time, you've been telling us that you're very concerned about inflation, that you think they need to raise rates, but you're concerned that we are heading towards a recession. where do you put market stability at this time by looking at the uk? >> that's a result of a unique set of circumstances, a fiscal plan that was not well received by markets it doesn't appear to have spilled over significantly here into the u.s it looks as they have ample liquidity here in the u.s. to get big trades off i think the fed should be watching financial stability but inflation and recession seems like the two more likely issues that they're confronting over the intermediate to long term. >> we heard president biden this week say he doesn't think we're headed for a recession if we are, he thinks it will be a very mild one.

we heard from the treasury secretary yellen who says, yeah, things look okay for now do you think they're saying what a president and a treasury secretary would be saying? you have a different perspective. >> i think to some degree they're saying what current conditions look like and right now things look reasonably good. the discussion of recession, i think, is a reflection of how strong the fed has to be in its movements. and, you know, their expectations, they're going to have to create some pain i don't think they necessarily used the recession word at the fed either if you think about interest rates rising as rapidly as they have and likely continue for one, two, maybe three more moves up i think there's an expectation that tightening will tip us over into what we all hope will be a short and shallow and mild we session in the u.s. and that's what the ceos are expecting. >> from the ceos perspective, if they think bad times are coming, even if they still plan on having jobs continue to hire at

this point, is there any self-fulfilling prophesy for what happens here? if the ceos get nervous, does that change things >> what's interesting about the survey is the ceos are clearly nervous but they're talking about capital expenditures, long-term hiring plans i think the ceos are really in a little bit of a bind as we've heard from a number of them. things seem to be softening, but it hasn't softened already and i think there are -- they are going, i believe, learn the lesson of how hard it is to hire employees and so i think they're going to try to hold on for as long as possible for other places to do cost-cutting but there will be some cost cutting, some pain, and it will be more surgical, which is part of why one thinks this might be a mild recession. >> thank you we'll talk to you soon we have that number coming out in just about 53 minutes. in the meantime, futures have been picking up you're going to look at the dow

futures up by 300 points >> okay. coming up, we got a tech battle and john ford is going to be joining us with this week's on the other hand, and he's going to talk about the story of microsoft, apple and, yes, chips. let's check out this morning's biggest winners and losers "squawk box" coming right back after this i may be close to retirement but i'm as busy as ever. and thanks to voya, i'm confident about my future. voya provides guidance for the right investments. they make me feel like i've got it all under control. voya. be confident to and through retirement. if you wake up thinking about the market and want to make the right moves fast... get decision tech. for insights on when to buy and sell. and proactive alerts on market events. that's decision tech. only from fidelity.

welcome back to "squawk box. futures right now, 345 something leaking? i don't know what happened on a percentage basis from 150 to 350 is not that much, but it's moved rapidly higher in the last 20 minutes. >> truss is looking for a u-turn for the tax plans -- >> that's why you see stock markets moving >> who blinked >> they didn't -- sticking with that notion, even though it was -- it wasn't going to happen. >> somebody had to blink it was either going to be the pension funds, it was going to be the bank of england or it was going to be the government it looks like the government is the one that's caving.

>> we'll see. >> at least for now. >> you want to look at some of -- in the u.s., the dow leaders. there you can see the big one is walgreens which had earnings earlier from bertha. >> microsoft unveiling its new line of surface pcs, including 5g models with arm-based chips from qualcomm. intel's days -- or amd's and intel's days of dominance in the pc world ending or not who is here? jon fortt is here to weigh in on both sides. >> that's who you get on a thursday you get me and, yes, andrew, arm-based chips have bone into the pc business this is a big moment it was experimental for years

until apple put the m-1 chip in the macbook air showing off battery life, raw power. since then, apple has spread arm-based chips across every cultur computer in the lineup but one why is this happening? phones and tablets have gone more powerful, engineers have gotten better at designing chips with multicores. now that technology is coming into pcs and by designing chips, operating systems to work together, apple and others are reaching new levels of performance. on the windows pc side, qualcomm is pushing into the came offering on-base chips for the new 5g version of microsoft's surface pro9 it's a leading global supplier, qualcomm has tons of experience powering mobile computing devices and it's well-positioned

to displace amd and intel. >> the big question to me is, qualcomm is going to be pushing intel and amd out of pcs that's what we think is happening. isn't the window just a lot different than apple ultimately? >> well, andrew, on the other hand, arm isn't going to take over the whole pc market the windows part is too complicated and they are fighting back. apple has caused a huge splash, but there are lots of reasons that microsoft and others can't use the same playbook. main one is, every apple on base chip is designed to work on a mack also made by apple. and practically every mack made by apple is running a recent version of the mack operating system made by apple that's a high level of simplicity and control on windows, it will be the awesome. qualcomm and samsung and others will make different chips for pcs. dozens of pc makers will make slightly different machines

around those chips that's complexity. that's not entirely a bad thing. the diversity in the windows pc market means we get specialty gaming pcs, workstations, that takes longer to switch to a new architecture amd and intel are embracing the multicore model. big changes coming, but it won't be all or even mostly arm-based chips for pcs. >> one, is intel going to come back but the second question i really have that relates to all of this is, so areyou saying this is about chips themselves are the arm chips that much better, or is it a software issue? >> it's a combination of the chip designs themselves and multicores and being able to add in ai, add in graphics functions and turn them on and off depending on what people are doing. optimize for the flexibility

and what was the first part of it >> whether intel can come back >> there's a first part of the second question. whether intel can come back, it's still possible. but this macro environment makes it challenges because they have to spend these tens of billions of dollars on fabs they got to pay out a dividend what are you buying intel for? got to pay out that dividend so profitability is important. they're having to prioritize and kind of belt tighten in order to spend a lot on these capital projects at a level we haven't seen. >> it's very wishy-washy i need to know what you really think. >> which one did you do first? >> the -- that's the -- amd and intel are on the way out >> okay. i thought he -- >> of consumer pcs. >> he always sells me on the second one >> is that just last-in, first-out? >> that's a statement on you

you believe the last thing you heard. >> you just agreed with becky on that >> the last thing he heard >> yeah -- >> that's the joke >> i'm easy. you're going to do my request on the most important on the other hand at all? >> you got me. i'll think about that one. >> to be or not to be. >> i'm cribbing off of shakespeare this whole idea. hamlet did it first. maybe halloween i'll come in here dressed as hamlet -- >> he took his time. and then he screwed everything up >> yeah. >> people died >> just don't bring my uncle in here >> scary >> john, thank you. coming up, we got a top imf official who is going to be joining us live and it's perfect timing for that because we are watching what's been happening with the british pound right now. it's up by 1 1/3%. our colleagues reporting that uk

officials are working on a u-turn for liz truss's tax cut plan the pound is now up by about 1.5% i just want to put a little context on this, sky news is saying according to sources that the uk government is in discussions over which bits of the mini budget might be scrapped but the markets hear that and think, okay, the truss government is the one that's blinking here. it's not going to be the bank of england. if they're going to go back to quantitative tightening from easing, you're going to see a stronger pound we'll talk more about this because it's moving all of the markets. dow futures are up by 288 points we got continuing coverage when "squawk box" comes right bk.ac a? of course - you're a cio in 2022. but you're ready. because you've got the next generation in global secure networking from comcast business. with fully integrated security solutions all in one place. so you're covered. on-premise and in the cloud. you can run things the way you want - your team, ours or a mix of both. with the nation's largest ip converged network.

from the most innovative company. bring on today with comcast business. powering possibilities. - [narrator] if your business kept on employees through the pandemic, getrefunds.com can qualify you for a payroll tax refund of up to $26,000 per employee, even if you got ppp. and all it takes is eight minutes to find out. then we'll work with you to fill out your forms and submit the application. that easy. getrefunds.com has helped businesses like yours claim over $1 billion in payroll tax refunds. but it's only available for a limited time. go to getrefunds.com powered by innovation refunds.

welcome back to squawk box. we're watching the futures. we've seen a significant turn over the last twenty minutes or so. this is happening as we've gotten headlines from different news service. bloomberg reporting the truss government is about to do a u turn. we have our colleagues at sky news that are a little more nuanced in this saying according to sources they are looking at bits of the minibudget that could be reversed on. as a result, you're seeing global markets take off. dow fiechs indicated up about three hundred pounlts. nasdaq up 75. s&p up about 35. if you look at the pound that's the significant mover. it was ip about 1.5% a few

minutes ago. 1.4%. the truss government is the one that blinks the bang of england will not. they will go back to quantitative tightening boosting the pound. the pound got crushed when the bank of england tried to come with to the rescue with pension funds. it's on the way back. if they are closing the window tomorrow this is what you're going to see. gilt yields come down significantly. prices stabilizing coming up. yields down on ten year and thirty year. the ten year is at.614% and all of this is driving markets around the globe for the better part of the last two weeks. at 8:30 we know about time d diallation and the news cycle that could be off. this is a small part it's big the past couple of week, obviously, with the gilts freezing up and everything else. if we got a hot cpi number you think that's going keep the markets in the territory

>> no. it means the federal reserve is going to raise rates even more so it doesn't matter what the bank of england is doing. it offsets the gains. >> are you guessing we have a hot number you think it's going to be a hot number >> no. remember, all my predictions are based on hope. i'm hoping it's a cool number but i'm not saying it's going to be hot or cool. i have no idea. you want me to do a john fort. i can do either side. what do you think it's going to be >> i'm worried it's going to be hot. i think you saw the administration and the white house yesterday starting to -- i don't know. i know people ahead of a number like that if you start to sort of try to put out certain messages beforehand it's because you're anxious. >> i don't want this job. joining us first deputy managing director of the imf. you have so many things to consider and think about.

this is a incremental positive, i guess, what we're hearing coming out of the uk data. we just talked about the cpi coming at 8:30. that could be interesting, right? >> these are incredibly fragile times, highly volatile times and you see this in the market on a minute to minute and hourly basis. we'll see what the numbers look like. i think it's fairly clear inflation is going to be high. in terms of relative to the feds target. in some sense this one number i don't think is going to make that much of a difference to what the fed is signaling at this point. >> we talked earlier, gita, there is a lag affect when a bank tightens. all of the, not leading or lagging but coincident

indicators show inflation is up. do you think they need to stick to that to handle what we're seeing this hot inflation we're seeing around the world, really? >> i think the odds of calibrating it too much or too little at some point is there. these are real risks. there's so much uncertainty. the global environment is changing so rapidly that, you know, i think that should be expected. with that said if we go with the path the fed has signalled we are comfortable. we think that path is what is needed to bring down inflation durably. yes, it will have pain in the sense of raising the unemployment rate to this extremely low level of 3.5%. but that is what is needed to bring down inflation. otherwise you're going to be in a spot tackling run away inflation and that's not where you would like to be. >> what is the imf view, gita,

on supply side of remedy versus killing demand the central bank used. i'm mentioning that in light of what happened in the uk. that was not adding to debt equity ratios or debt to gdp in the uk. it was not a huge amount and we have a higher debt ratio here in the united states. truss tried to address some of the supply side concerns with taxation and other things and you saw what happened. >> without a doubt improving supply always helps. making sure that you have an environment to have high levels of productivity and high levels of supply absolutely helps. but at this point the question is what kinds of supply can you bring on as quickly as you can we'd like to get more people back in the labor market that have left following the pandemic. we'd like to see more sources of

energy supply on the market. but this is not happening very quickly at this moment. i think countries do have to deal with addressing the excess, the high levels of demand they have in their economy. the energy crisis, for sure has to be moderation and demand to address it. we certainly need to put systems in place to be able to get more supply but it takes time. >> the imf, obviously, in a perfect world you would want rates to stay low for developing countries and to spur investment, it seems counter productive this is a blunt tool we have to use. it's the least bad option? >> we absolutely want to see full employment around the world. we want to see investment. we want to see growth

everywhere. we have environment that inflation is too high. history teaches us that environment if not corrected lead to more risk and even worse spill overs to emerging and developing economies in the future. bringing down inflation has to be the number one pry you i can. >> gita thank you. we appreciate it. coming up a massive hour ahead. the latest read on inflation. the september cpi report is out in just under less than a half hour. don't go

. breaking news. uk bond yields are falling. the pound is rising and u.s. futures have jumped significantly. the report out that britain may be reevaluating the controversial fiscal package announced last month. plus up to speed and ready for the number of the morning. cpi inflation data is 30 minutes away. here comes earnings. new results from delta a airlines, walgreen's and more. details straight ahead as the final hour of squawk box begins right now.

good morning. welcome back to squawk box on cnbc live from the nasdaq market site in time square. i'm joe kernen along with becky quick and andrew sorkin. everything is in flux given the recent news out of the uk. number of the day, cpi, maybe number of the week. although it is start of earning season. we have a lot of numbers to talk about but we'll be waiting for, waiting for 28 minutes from now when we hear about inflation. >> ask us then. we'll tell you if it's the number of the month. >> like last month. down 12% since last month. >> yes. corporate earnings ramping up this morning. starting with delta. airline stock rising on the strength of a really up bate fourth quarter fourth quarter forecast, i should say. adjusted earnings for third

quarter two cents light but delta says hurricane ian caused a 3% share impact. we spoke to ed bastian last hour asking if strong end year demand would continue in to next year. >> i think the pent up demand is going to continue. one busy summer isn't going quench the demand for travel we've seen. our planes have been basically 90% full or more full every day since the first of april continuing in the fourth quarter, as well. >> you know how full things have been if you've been on a plane. delta air lain shares up four and a quarter percent. delta reported record revenue the third quarter. the heist sales of any quarter in the company's history. dow component walgreen's boots alliance shooting higher if you check out those shares. up by 4.4%. profit and revenue about what the streak was expecting and raising long term sales target. one nonearnings mover shares of digital world acquisition.

planning to merge with former president trump's app truth social. google approved the app for inclusion in app stores. shareholders have yet to approve the merger. government bonds as we've eluded to are rallying this morning as yields fall. the bank of england is set to end emergency bond buying program tomorrow and all ahead of the big cpi report that we have this morning. this man, these maniacs are cheering. i'm surprised there's not more of a crowd steve but you are here. that's the story and we're sticking to it. >> there's so much going on. it's remarkable what's happening here. let's talk about the rallying gilts. >> i'm not hearing you. >> i didn't turn the mics on. >> he could have been talking to anybody back there when he leaves the set. you should turn your mics off.

>> the story of the morning the rally in gilts and pound causing stock futures to surge. the bond program looks to be stabilizing. markets around the world with one day left before the retracting the lifeline. unconfirmed. i stress unconfirmed reports from two news agencies possible changes in the government's physica fiscal program. you have the ten-year gilt with 417, right >> yeah. 417. >> the high is 450 a few days ago. the pound is rallying up a percentage and a half. the highest level since october 6. that's help the ten-year note rally in the u.s. and s&p stock futures surging up more than a percent. market, however, could turn in less than 30 minutes attention away back to inflation. inflation forecast to decline.

core and food and energy that's what the feds are focused on. the numbers we're looking for is 0.3 the test mat. it going to bring down the year for year rate from 8.1 to 8.3. the bottom line you want to focus on 6.5% on core. that's where the fed is especially focused. >> cpi was 8.1 yesterday >> yeah. >> it's correlated very well. here are comments from the feds minutes yesterday on inflation. saying it was unacceptably high. delining more slowly than anticipated persistent near-term. expected to decline in goods prices and focus on the service sector. goods inflation less food and energy high but it's come down sharply from the double digit peak.

at the same time, that chart is not right. rising house prices we were focused on the gilt. all this raises question about financial stability. back to where we were the start of the bank of england. is the fed going too fast and create a situation where it has to reverse course either on the qt side or the rate side >> are we at a point we're going talk about that now or do you think that is, if in fact they've gone too far, that's a conversation that takes place two or three months from now you see what i mean? >> andrew, you know, as well as, i do, you can go to bed at night and everything is fine and wake up in the morning and it's not. >> right. >> when it comes to liquidity issues. we want to be careful. right now we're hearing modest liquidity. i think there's a legitimate thing to say we don't know where all the bodies are buried. every derivative out there.

apparently regulators in england did not know about this derivative problem ahead of time. they weren't on top of it. you have to be very careful. the u.s. banking systems will capitalize, markets functioning. there is a large shadow banking system, i say a shadow bank system in the united states that's made larger by increased regulation in the banking system. >> right. nobody wants to be in the banking system. >> you can go back to the beginning of dodd frank where fed officials themselves said, as a result of what we're doing here it will push more people out in to the shadow banking system. >> but that was a strategy. part of that strategy was if we put them in the shadow banking system the view was that's fine because they are not going to be holding technical deposits and we're cool with that. if we get in trouble are we cool with that? >> the question is it systemic

you worry about it if it becomes systemic. >> you remember the mistake we all made which is that -- >> i've got lots. >> when it came to the financial crisis the one that sticks out to me was we thought that the banking system had off laid the risk to the shadow banking system but in a variety of ways, too big to fail, it came back to the banking system. maybe they set up firewalls. >> aig didn't preserve anything. that's the question. >> what about the off balance sheet vehicles of citi group and all that came back and had to take that stuff back in ways they thought. i don't know. maybe it's smaller. maybe it is better. >> the bank of england didn't learn what ldi stood for, did they it was bailey. george bailey going ldi, what does that stand for? did they just find out

>> that's what happened in the crisis. what is clo? what is cv squared. i tried to find a guy in the financial crisis, not just what these things were but how important they were in the financial system. the fed didn't know that at the time. let me make one quick point. you've got yellen out there talking about this idea of having liquidity problems. there is an ongoing debate right now about how much reserving through the supplemental ratio banks have to do for treasuries they hold. there is an argument out there that if we have a situation where we haliquidity issues. e warren made this toxic. >> if you put money in a saving account you get 0.01% if you put it in your brokage account you get 3%. >> that's a terrific question

and one that leslie picker reported. it raises substantial questions about a, how competitive the banking system is. the other big problem, becky, is think about yourself. you set up your account, i'm guessing 100% right automatic deposit. would you know how to figure it out? >> i could figure it out. >> i'm not going to do that just as soon as i change passwords. >> i can take the money as soon as it's there and put it in. >> are you doing that now? >> i have been. >> the trouble is you really are not helping me on this becky. the trouble is the generally phrase of economists is deposits are sticky. they are not competitive. you are not going out every day, week or month. >> 3% versus 0.01% is a big

difference. >> people will be competitive and get a change. people believe that arrangement to be sticky. steve, thank you. >> sorry. >> no. it was worth every second including the yelling. you couldn't hear the yelling but producers thought we should keep moving. we'll get back to broader markets with s&p and nasdaq. s&p seeing the lowest closing since late 2020. mike is down at the new york stock exchange. what are you seeing? no real question about the trend long term and short term with the six-day losing streak but the market seems coiled here and looking to maybe spring for daylight. why do we think that obviously, you saw the upside twitch at the bank of england headlines but anything that seems like a glimmer of hope there's deceleration in inflation is going to find a relatively oversold market. we had the lows now premarket up

about 3620. we basically had a market with fewer individual stocks making the lows to the fresh index lows. that's maybe a silver lining. we know october is place where significant market lows tend to occur. a decline is extreme by bear market standards. the market was looking for an excuse to get relief. the problem is a month ago when we got the cpi number the s&p down 4% in one day. that's why your apprehensive here. one year stocks against bonds and gold. stocks and bonds the same story across the capital going up. gold the eye of the beholder holding up better outside of dollar. other currencies gold looks pretty good but real yields going up. gold is no haven in that environment. it's about real yields and central banks in control and if

they are doing the right thing or not. utilities seemed a haven a while ago. they've fallen out of bed the last couple of weeks underperforming. health care among the defensive groups on year to year basisout performing. yield hog stocks gotten hit. i think it's a good thing when you see surrender in places people thought they could hide. >> mike, thank you. we're going to come back to you i'm sure throughout the day as we watch the markets. coming up breakingeconomic dat point wall street and maybe the world is waiting for. counting down to the consumer price index a femitew nus away. don't go anywhere. you're watching squawk box and this i

it seems like things are falling apart lately. the economy. the market... everything. but upwork lets you strategically hire talent to weather all ups and downs your business might go through. look at all that talent. ♪♪ the new iphone 14 pro is amazing. the camera is incredible. and you'll get our best deal. nice, but i can't accept it. unless every business gets the best deal. on every iphone. uh, actually... we already do that. the plumber with the ascot! big bjorn, little bjorn, too! the caterer who really cares. every business should get the deal! we make a good team. every business gets at&t's best deals on every iphone. including up to $800 off iphone 14 pro. (♪ ♪)

pst. girl. you can do better. at least with your big-name wireless carrier. with xfinity mobile you can get unlimited for $30 per month on the nation's most reliable 5g network. they can even save you hundreds a year on your wireless bill over t-mobile, at&t, and verizon. wow. i can do better! yes you can! i can do better, too! see how easy it is to save hundreds a year on your wireless bill over t-mobile, verizon, and at&t. talk to our switch squad at your local xfinity store today.

welcome back. chairman and ceo john mack is out with a new book this week called up close and all in life lessons from a wall street warrior. mack reveals he's diagnosed with mci. in an interview we talk about that diagnosis. >> i was talking to jerry spire. jerry said to me john you told me that two times. it dawned on me am i repeating myself so, i went and talked to a number of neurologists and when sent me for testing. the test was i would look at a

graph of a ske makt schematic ae paper off and redraw it. clearly there's cognitive issue. it's not out of control or bad. we're going to put you on medication and that's what i've done. i believe if you have a problem you go at it. i'm not embarrassed about it. it's like, you know, i got the flu. okay. i have dementia. let's deal with it. >> how are you feeling >> i feel great. i try to workout. exercise, try to stay busy. i have a wonderful partner in christy. i have a family auchs working with me on investments and what we do and what we sell and what we buy. i try to stay involved with new york presbyterian hospital which i've been involved with for years. i try to stay active. would i rather go back 25 years and be back at morgan? yes. i loved it. it was fun.

the people were great. and there was a feeling that you were right at the cusp of globalization. the friends we made in japan and what we did in china and europe. i miss all that but, look, you can't do it forever and just move on. >> proudest moment could be career, could be life, could be family, could be whatever. >> the proudest moment is my family. i work 24/7 and christy really grew and nurtured our kids. i try to do it when i'm around. she really ran a household and our family i'm really proud of. without love and mentorship she had that wouldn't have happened. i'm most proud. i get emotional. i'm most proud or lucky of my wife. i know what i've done and i know people say you're successful and

that's great. but when you're successful in your heart nothing better. my life is a ten. even if tomorrow, i can't pronounce or spell or do anything. it's been a ten and it's because of her. >> and she was right off camera as we were doing that interview. the book is worth the read. you can watch the entire interview on cnbc pro. check out the book. it is called, up close and a all in. >> can i just say i love john mack. he's always been such a gentleman. and so considerate and kind and thoughtful even while he was doing a titan of the world job. i admire him greatly for saying what he said about going after this. no need to be embarrassed any worse than a broken arm or anything else speak out about this to have other people potentially follow what he saw. he didn't know it was happening.

look for early signs and attack him. it wish john and his wife the best and i'm inspired by what he said to you andrew. >> he explained how you can measure. i googled that immediately to find out the tests that you can do. you can do genetic testing, obviously, to see it's in your family but rapid eye movement testing. there's all kinds of ways. what he said show you something and a couple of seconds later try and repeat it. cognitive tests it helps to do. wordles and all these things. >> it helps to have a baseline. some testing from family. you need a baseline to tell if there's deterioration. >> i use to be better at jeopardy. that's all i'm going to say. >> at what >> jeopardy. that's not a test. that's not an endorsement one way or the other but there are things i know i can't come up with immediately. it makes you wonder. >> and the jumble.

>> i do them all. >> it's really touching to hear from john mack. >> not for whom the bell tolls. it tolls for thee. coming up new inflation data. don't go awhe.nyer much more on squawk box straight if you're loud, be louder. if you stand out, stand strong.

and if you got the devil on your shoulder... take him for a ride.

let's take more in the move in the pound and gilt. steve sedrick joins us from london you've been the story for a while but especially day. what are you seeing now? what's happening >> this is a crisis becky. all of you know is a crisis on multiple levels. a market crisis for all uk assets. we talk about the footsie under pressure in recent sessions. the pound i just want to take a step back for viewers. do you remember the days before brexit when the likes of boris

johnson told us 140 plus. the pound almost hit parity in the last few sessions it's run a little bit from lows so it's a sterling crisis, as well. a crisis of government bonds and how they are going to finance their debt to commitments going forward. look at the gilt yield. 28 gilts 4.6%. we saw 30-year gilt hit multidecade highs of 5% at the depths of this crisis. you have a asset crisis, a little crisis and pension fund crisis. we're talking about liquidity investment now. there are concerns about the liability the pension funds have and what hedging they've been putting in place in order to cover those liabilities and the fact that gilts fell aggressively creating a new level of crisis. i want to tell you the latest in terms of politics, as well. u-turn after u-turn could be in the offing. they u-turned on cutting taxes for the wealthiest income earners in society.

now there are reports that after meeting with mps, listening to the likes of the ifs and people who said we have real problems in finding the money to pay for all those tax cuts, as well. that's created a host of financial market turmoil. there could be, according to reports from multiple sources including bbc, another u turn in the offing. this time maybe on corporation taxes. you've got a very young government. i saw young government because, of course, the conservative government has been in power for circa 12 years. liz truss is the new prime minister, a prime minister only 30 days. goodness me we've had three different chancellors in the last three months or so. a crisis of politics but if liz truss makes a u turn today what is the prospect for her as british prime minister and what is the prospects for her to check up. playing on multiple levels

becky. >> the rumors she's going to do a u turn and the market is moving making it hard not to do that u turn and not take a blame for this. steve thank you. we'll talk much more about this. when we come back the number of the morning, the week and maybe the month. we'll see what happens. this is the september cpi. that read on consumer inflation. we're going to get it next. the panel of expertstainby sndg to break it down. stay tuned squawk box will be righ vercome anything. ♪ ♪ to be... unstoppable. that's why the world's largest companies and over 30 million people rely on prudential's retirement and workplace benefits. who's your rock?

- [narrator] if your business kept on employees through the pandemic, rely on prudential's retirement and workplace benefits. getrefunds.com can qualify you for a payroll tax refund of up to $26,000 per employee, even if you got ppp. and all it takes is eight minutes to find out. then we'll work with you to fill out your forms and submit the application. that easy. getrefunds.com has helped businesses like yours claim over $1 billion in payroll tax refunds. but it's only available for a limited time. go to getrefunds.com powered by innovation refunds.

. welcome back. we are a few seconds aa way from the september cpi number. the last time this happened it was not good news. it was a hotter than expected number and since then we have lost $36 trillion. 4.7 trillion out of the u.s. market down 12.1% on the s&p 500 since that time. this time we're expecting a number month over month of 0.3%. let's get to rick santelli. >> let's start out with cpi for the month of september up four tenths on headline. double the expectations and that is the highest since, well, june when it was at its peak at 1.3. that was the highest since 2005. if you strip out the all important food and energy also two tenths hotter up 6/10 that's the hottest since june when it was up 7 fents. high water mark in april of 21 up nine tenths. year over year numbers 8.2.

hotter than expected but cooler than the rearview mirror 8.2. until a revision following 8.3. the high water mark was 9.1 in june going back four decades and finally year over year strip out food and energy also hotter than expectations. up 6.6 following 6.3 and 6.6 is a new high. the old high was 6.5 in march back to 1982. in 1982 we went all the way up to 9.3. even though it's a new high water mark it doesn't change the comp back four decades to 1982. if you look at yields they are just skyrocketing almost back up to 4% in tens. now let's go to initial jobless claims. two hundred and twenty eight thousand up nine thousand until a revision to two hundred and

nineteen thousands. continuing claims one million three hundred and sixty eight thousand. close to expectations. very close to the rear view mir roar one hundred three hundred and sixty-one thousand. yields shot up to 4%. two-year note yields back up to 432. this is a hot number and with the expansion on that 6.6 on the core. we know it's about food and energy. this is definitely going to peak the heres of our central bankers, domestically and globally. it's going to make the drollar index hotter and may complicate derivatives. there are two things you can't control. discon would you say volatility when gilt prices and yields get crazy you can't make periodic adjustments and option volatility. no way to compensate for depth

jumps. if your models are replicating the pattern of payout based on options volatility moves up or down in a dramatic way and little to do about it but take a hit. becky back to you. >> take a hit is what we're seeing in the markets. rick stay with us. running through the boards. after the number hotter than anticipated up 0.4% month over month core. exfood and energy cpi 0.6%. we immediately saw a massive shift in the futures markets. the dow futures now down by 300 points. up by about 300 points before nasdaq off by 276 and s&p down by 58 points. if you've been watching yields this is a story. tenure a push above 4% at 3.97%. the two year at 4.43%. very significant moves completely reversing what we heard on this expectation. these rumors that are out there

that liz truss's government might reverse, calm down yields earlier across the globe. this is a whole new thing. expectation of what's going to be happening with the fed not able to take the foot off the gas at this point. let's bring in the panel to talk a more about it. bet si stevenson a university of michigan professor of economics. nancy davis founder and chief investment officer. neala richson. steve and rick with us, too. steve talk us through the numbers the things that jumped out. what caused higher inflation >> the service sector. a big rise in rents but even take the rents. everybody says that's a lagging indicator. there is nothing here to tell you there's reason for the fed to pivot. i can tell you now one number here that is maybe the most significant. i've not seen this number before rick will back me up or shoot me down.

483 on the peak funds rate april 2023. i'm making sure that's the high watermark. yes, it is. april 2023 we were 468 going in to this. new funds rate 483. nothing in here, everything the fed, look, they had been medium term to long term wrong. short term they've been right coming forward. meser took heat saying you can't say inflation peaked yet. well you can't say inflation has peaked yet at least in these numbers. we can argue about whether or not the feds watching the right numbers or not. but you look at the service sector numbers in here and you see them rising. there has been a little bit of relief on the good side. >> any signs what the fed is doing is working at all? >> that's another question. look, it's probably too early. you should think it would be but, again, what you have is you

have -- if. >> fs if it's too early that's the opposite. >> take your whole show in account. you have the delta guy on. what's he telling you? >> traveling is going out of style. >> no weakness in october. >> no weakness in october. what's happening on the job side is they don't have the pilots and they don't have the stewards to et, to add to capacity. so what happens -- whatever you want to say we need russian pilots to come over here. >> all the things that go in to this number. how much did the fed of that input did they know for the last two, three, four weeks they've been strident. they don't know the actual number. >> i don't think taino the actual number. >> they know a lot of stuff coming in. >> i think they've been using a variety of sources including anecdotes talking to people. you less to -- we talked to

charlie evans. they say we're talking to a bunch of folks. >> were they doing the same type of beating the pavement when it's transferred >> they were. >> it didn't show up >> joe you and i are both somewhat on board. you can understand how ten years. >> it gets transitory it depends on the time frame. >> ten years of undershooting their target and thinking we have low inflation around the world. you project that. >> we had a debate on this set two weeks ago. barry was sitting where you were sitting. >> you're crazy. you're not looking at the numbers. >> right. >> he's seen the strength in hotels but also looks at real estate and big problems happening there and the markets. this is causing serious market turmoil. again, dow down by about four hundred points for the futures but the best performer of the three major averages.

nasdaq down two and a half percent down. 1.3% for dow and s&p off by 1.6%. let's talk nancy about what you would be doing as a chief investment officer looking through these things. these type of movements are incredibly severe. this reaction and the idea the fed is not going anywhere. what are you thinking right now? >> i think the thing to stress to your viewers is that inflation expectations in the future are really contained. even though we keep getting these prints that 40-year highs future inflation expectations whether you look at inflation protected treasury market or the yield curve, the market is priced for a disinflation transitory. the fed might have retired that word but the market has not. the market is complacent fed hiking and policy rates is going o to cool inflation in the future. i think that's where the opportunity exists for investors. it's not priced in future expectations and the fed hiking

policy rates to steve's point isn't going to put more airline pilots in the skies. it isn't going to do anything to fix the service side and the job market. it's not. it's notdoing anything to address the supply side. >> yet betsy it's the only tool the fed has. >> the only tool they are using. the balance sheet is a big variable out there they could do more with. they really haven't been aggressive enough about reducing the balance sheet. >> that would be a huge drain to liquidity at a time we're worried about liquidity being an issue in market stability. >> that's why the fed is in pak l and it's a great time to buy inflation protection. they have to at some point use the balance sheet more, ease off. we're on the brink of financial crisis right now in europe with what's going on in the uk. >> betsy, just your thoughts on this. does this change your economic outlook? jamie diamond saying we could

look at a recession in the next six to nine months. you see numbers like this and know the fed has to keep its foot on the gas pedal. what does that mean? >> you know, obviously this isn't a report anyone likes to see and, at the same time, i want to say we should never overreact to one report. what do we see here? we saw really fast inflation in services. if you look at services less energy was up .8 for the month. shelter up .7. so what's going on we're just seeing, basically, services across the board. prices are going up. why are prices going up? real wages have fallen because of inflation and yet the labor market is super tight. how do you hire people when you're paying them less in real terms than you were paying them a year ago or two years ago? what's happening is we're getting wage pressure and that's happening in sectors where large share of costs are workers. that is going to pass through to

inflation. there's some of these industries like education where we knew this was going to happen because the seasonal adjustment just can't really correct for the kind of pay raises that teachers and other education providers needed at the start of this past school year. we sort of expected that. things like veterinary services were up 1.9% this month. vets are sick of taking care of your dog and cat at declining real wages. that process has got to slow or we end up with something that looks like a wage crisis. i don't think we're there yet and not that surprised we're seeing these kind of corrections in wage buss but this is what everyone is worried about and why we need to do what we can to increase labor supply. >> let's do reality check. imagine this is six month from

now and look back on the september inflation report and said darn. if only we'd seen x in here we would have known inflation was coming down quickly. this is the same mistake the fed made. is there some argument to be made, you do have people as andrew mentioned like barry coming forward jeremy seigel coming you missed the big story. i'm reversed on my thinking i can't see in the data yet but maybe you can help me. >> the big story, steven, fortunately in many i view is not optimistic that we're missing. the big story is formed by housing. this is a market that has been chronically undersupplied by the decade now. it's because of whole host of reasons we could go in to. we called our friend diana. the issue we're missing is the labor market. this is a market on the vurj of

undersupply. not just the next six months but maybe the next six years. this trend started before the pandemic. >> i have to interrupt you. it's a huge issue. we're addressing structural problems in labor. structure problems in the housing market with cyclical monetary policy from the fed. we're cutting off our knees despite our face. >> i have another question for you. >> the fed hiking from rock bottom zero levels so the impact of the fed policy is going to take a little bit of time to catch up. we're not starting from 3% federal funds rate. we started from near is zero. around the world it was negative. there are places to go on there but if you look at the jobs market itself this is an undersupplied market. not just with people but skillsets. the skills that companies are demanding now. that's why you're seeing the dynamics in the labor force

participation rate. there's not enough people and enough skill to accommodate demand. what does that look like for the fed? it looks like a 2% target that's increasingly a relic in the context of a shrinking work force. >> one of the stories we've been talking about, by the way dow futures are off 460 points. one narrative we've discussed is people weren't coming in the job market because they didn't have to. they had better savings now than before the pandemic struck. we've been thinking as the savings are depleted people would come back. do you not believe that? >> people are starting to come back at the margin and some have to. what we've seen is that people are make different household decisions than they did before the pandemic. maybe they are not working one or two jobs to save for a down payment on a house that is increasingly out of reach. maybe child care has gotten so

expensive a two-income family is subsiding on a one income because they can't afford child care. there are decisions made because of long term covid symptoms people can't work. some are voluntary, some are involuntary and then an issue of skills not keeping up with what companies demand. maybe they are looking but they don't have the right skill set. there's a lot of issues that are, i think, structural that are also keeping inflation, even in cyclical terms elevated longer and more persistent than any of us want. >> becky it might be useful to look at the ten year. that's a yosemite type chart going on. maybe rick wants to weigh in. >> rick, you were talking earlier about your time when you were dealing with derivatives and how things you can't control that you don't expect to see move like this can have a serious impact. we watch this play out with

gilts. what are you seeing that sets off alarms for you here? >> there's a sea of derivatives out there that have all the similar adjustments and tweaks that need to be made almost on a daily basis. i see that we haven't heard or seen any major explosions but they are out there. see, the point here is that all these structural issue that is we are discussing, they are real. they have to correct. and just take housing, for example. why do we have supply at a decade low probably because of the 07, 08, 09 cred crisis. why was that caused? everybody tells you because of greedy bankers but that's not the case. bankers are always greedy. they are lions. lions eat meat. the government left raw meat around and they ate it. the point is many structural issues we created ourselves. we had 18-20 trillion dollars of negative securities around the

globe that's when all these derivatives were born and central banks knew it. they knew if your pension fund, for example, pension tentity you have long term liabilities. interest rates are negative how can you possibly make a balance between your asset and liabilities. they need to be matched. hence we grew a sea of derivatives to address that. now we see this starting to smoke. some are going to start on fire. but the point, becky, even though we all know it's wrong i agree with the professor at what a are, a year and a half to two years prices will be significantly lower because structural issues cannot be fixed by the fed only time will fix them. energy won't be fixed in two years and what's going on in europe will not be fixed in two years. >> the dollar at the highest level now since september 28. you saw big moves on that. see the dow is down by 500 points. nasdaq off about 3% in the futures this morning.

the tenure again above 4%. two-year note jump well above. look at the two year again. 4.042% for the ten year. the two year at 4.495. >> becky on the feds fund rate. what's happening this morning is there was a huge probability of 75 come up in november. they've dialled in a 75 for december. with a 69% probability according to my refintive machine here. that's a flip. it was 60/30 the other way. that's how you get to the current fed funds. let me find that number. 489. i'll tell you who is looking better and better each morning is larry summers. >> i want to ask the other question. can he salvage a legacy or stuck

because of the transitory phase where they missed it. it's hard what he's doing. no one is going to like what he's doing. the market is getting killed. eventually a medium hard landing or hard landing. >> the only question is the extent to which anybody remembers what he did correctly at the beginning of the pandemic. make sense of which that offsets a mistake a made at the other end. >> can he get inflation under control? >> if this ends up being a one to two year thing and a mild recession i think it can. >> at this point, you wanted a fifty basis point. is this how a hundred. >> i'm not seeing any trade at all. >> does that do it does that do the trick >> no. i wanted to pivot the conversation to what becky was talking about is it working?

the fed pivoted in november. whoever earlier was talking saying we've gone from zero to three at a speed that's faster than joe's porsche. if you had an ev structural pro don't you need to start thinking about supply-side? >> but you can't solve structural problems overnight. it's even slower than trying to solve the demand >> let me tell you something i'm not really reported as well as i should have the last two fed surveys we did, do you want to know what the number one thing, other than raising rates, that economists and strategists and forecasters said we should do to reduce inflation? >> fix the supply chain. >> take a guess. no >> immigration reform. >> boom. winner, winner, chicken dinner, right there. the best thing we can do right now, hire american workers, send them over to embassies overseas, start processing those j-1, b-1,

t-1 visas and bring us the legal immigration supply to the united states >> you will find people on the right and the left who will say this >> you are so correct, becky, because i have been talking to the cato institute as my main source on this david -- i forget his last name -- david was telling me, we are down an estimated 1.25 to 1.5 million legal immigrants in this country biden administration is doing a somewhat better john than the trump. >> rick, we could take the boot off the throat of the oil producers, couldn't we i'm saying that for one of our guests in studio that could help. >> we could, but we won't, joe just like immigration. immigration isn't going to get solved you know, it's like cancer research the problem with cancer research is it's how many billions of dollar industry. if you find a cure, what happens to the research? all these big issues that we've been dealing with for decades that our government officials on both sides don't fix, believe me, they're not stupid people.

it's not fixed because they don't want to fix it steve, i agree with you. and i agree there should be litmus tests for immigration we should try to pick people that can come here and plug some of those holes hold you breath for that as well >> guys, stick around for a moment our panel, we are going to get back to you in just a moment one point i want to bring you, the social security administration just announced that it is going to have an 8.7% benefit increase for 2023. that's the highest cost of living adjustment for social security in 40 years trying to keep up with inflation. that is also the highest we've seen in 40 years >> when you talk about running out of money for social security, that's how it happens. okay, i want to get down to the new york stock exchange for a moment want to get jim cramer's take on all of this. jim, i mean, you know, i don't even know what -- how do you even begin to trade this in the equity market? you just want to be in cash at this point, forget about it? >> what clowns thought this was going to be cool i mean, it's wages, food, and housing. we've made no progress whatsoever

so, those who are buying stocks and don't realize that the futures are going to take all the stocks down, are just beyond my ken i don't know what they're doing. and the people who bought stocks based on britain, they're even more stupid than the people who bought stocks, you know, betting on the cpi being cool. honestly, i just don't know what to say, how people could be so wrong. >> but jim, we always talk abou timing the market and i always the problem with timing the market is you got to be right twice to get out and back in >> you don't get out on this i think the two-year goes to five, maybe five and a quarter that's going to cause some pain. there will be some blow-ups, people on tv saying it's armageddon, then you get a good chance to buy a lot of stuff, but don't do it yet. don't do it until you see some progress in wages or food or housing. these are the stuff that we see every day.

>> i don't even think we're on the trajectory for that progress >> not yet, no we haven't broken the price of the housing people they have not said -- the sellers have not said, you know what i got to sell lower. they're holding where they are the food producers are trapped a lot by, say, fertilizer. it's going to take a whole new harvest because fertilizers from belarus and russia and ukraine and you're not going to get any lift in wages until we have big layoffs. we can't even get the layoffs that we thought at intel so, if you are granular and you do the work on the companies like i do, you knew it was going to a hot number. so you're kind of confused about why these people got in, now they're going to get out because i guess they're hedge funds and they don't know what they're doing. who takes action four minutes after? they have to get blown on. but yeah, i think you're right take a long-term perspective warren buffett will take a long-term perspective and say this is all nonsense, and he's right. can we strip out the politics? congress spent too much money, fed started too late

there's a stipulation for you. the mets didn't make it to the next level okay, so what? giants look better i mean, these are the kind of stupid things that i hear, and i don't mean to denigrate every panel. everybody's brilliant, and i always say to david faber, everybody's nice, but the fact is that wages are too high, and you can job hop. food is too high, costs too much at the supermarket housing is too high because people haven't broken price. that is not political. that's just the way it is. so, let's get away from the politics and accept the fact that the three major issues have not been solved by democrats or republicans, and let's move on and stop thinking it's a great time and start recognizing things are hot but stop saying it's the democrats or republicans >> do you know anybody that's having a great time? >> yeah, the clowns who bought the futures this morning based on london. they don't even know what a future is. these people are so not making the playoffs i would fire the coaches of every single one of these funds who are buying, but we don't know who they are. they're nameless but there are such things as stupid and smart, and i don't know why people always want to

say democrat and republican. go back to when you were at school you remember the people who didn't do well and they didn't -- there were people who did well and people who didn't there are teams that do well and teams that didn't. it was wrong to think this was going to be a cool number. it just was wrong. and you know, that's okay. people make mistakes they made a lot of mistakes and they're going to lose money, and they should have waited, but no, they had to jump the gun, because somehow they think in history you had to jump the gun, which, by the way, is not true >> jim cramer, we will see you in just a couple minutes on "squawk on the street. >> emerging people, stop being stupid it's very hard, but the first amendment protects stupidity i remember when madison put it in jefferson fought over it got in >> fair enough stupid is as stupid does joe? >> thanks, andrew. get back to our panel. president of global strategies, sri, i think last time you were -- you didn't say

definitively, but the highs in yields on the ten-year might have been in are you changing that today? do you still think that we're near a high? >> i told you that we are going to crest at 4% on the ten-year, joe, not like a fixed number but in the neighborhood and i still stick with it. can it go to 4.10, yes, but can it go to 5%? no so i think we have reached a level that incorporates inflation that is taking place, it is not at a price i think it's built into the bond market but here is what is new. in my notes to you, ahead of today's interview, i said, the bank of england set a great example for jerome powell, what the governor was doing in london was essentially to sell the treasury he's not going to pick up after their misguided policies he says he's going to back off after friday the question now, in terms of

controlling inflation, keeping bond yields at manageable levels is if general powell can do that, and i doubt it very much in london, we have independence of monetary and fiscal policies. in washington, d.c., we do not that is a big difference in terms of integrity of monetary policy, joe. but yields-wise, i think 4% is about the top that i see for the ten-year >> and why, sri? you keep hearing that the fed, its tools really can't address some of the persistent problems that we have, which is what's so frustrating. so -- but you figure, just demand eventually is going to roll over and the markets, and the wealth effect, so many things are happening, you think eventually something slows down demand >> exactly, joe. i have been saying inflation is going to be higher and higher, demand is not going to be destroyed yet, but at some

point, you can never fix the precise point, but i think we are reaching the point where demand destruction is going to dominate over supply uncertainties, and that's what is happening so, when you have a severe recession, yes are you having a stagflation yes. both of them are part of the script the only thing unknown is what is the top for inflation, and what is the top for the bond yield? and i think we may be reaching both of them at this point it's a judgment call there is nothing that is going to tell you that this is the absolute peak. >> we had our panel stick around appreciate that. but now, i don't know, somehow it's 9:00. thank you, sri, and our panel, nancy, betsy, nila, steve, rick and ari. and let's get a final check on the markets this morning it's not really part of the panel, but man, has he made his presence known >> i'd like to have him on across from you. >> oh, no. oh my god, no.

down 450 points now on the dow nasdaq down about 300. it was amazing i mean, just that brief moment when we were happy about the uk, wasn't it? it was fleeting. >> it was fleeting here we go, though >> make sure you join us tomorrow, every day, right, it's something. >> every hour. >> every hour. "squawk on the street" is next ♪ good thursday morning, welcome to "squawk on the street," i'm carl quintanilla with jim cramer and david faber live at the new york stock exchange futures plummet as september's cpi comes in double expectations, 0.6 on shore shelter, medical care, food, all bringing us a new year on year cycle high yields are up. cpi numbers, jim, we talked about how this would run hot, but shelter up 0.7, medical care up 1, food away from