>> i thought you said too much profits. i hear that and i don't know i go ahh i know i sound like a crazy dammist. we appreciate having you on. we're out of time. but thank you. >> thank you >> as always make sure you join us. it's time to go. markets are up join us tomorrow "squawk on the street" is next good tuesday morning i'm carl with jim and david faber. welcome to november. starting out green amid a lot of news about china planning to reopen 30 billion in m&a. bonds are rally all around the world. we begin with the new month for stocks futures point to a higher open new tea leaves from the fed and the rumors of china covid

easing >> plus, biden versus big oil. stop war profiteering or face a windfall tax and jnj-abiomed is a 16.16 all cash deal. >> let's begin with the new month of trading the fed set to kick off its two-day policy meeting jim, we have had multiple reports that disinflation has begun. bonds starting to tick below the average. >> and a lot of fiscal years, 50% of the mutual funds, had their fiscal year end at the end of october, which means that you might have seen some selloff in stocks that people seriously don't want to show they own. you see traditional bounce worst acting stock in the s&p. i think deservedly one of the things, and, david,

you know this, it's very small si simon and shoes shuster. >> we will talk a little bit later in the show. a deal many anticipated would be opposed by the government, was, and they prevailed in court. namely the -- >> if the government decides for biomed and j&j could be in that business i'm saying -- in there is no overlaps >> it's such an important deal j&j is splitting in two. >> yes >> they are going to the consumer group and they are going med tech and

pharma >> they have a cvr over seven years. you buy it right here. it's a tender offer. a nontradeable you will not see the money on for seven years who is going to be in their job seven years from now it is problematic for those who would play the stock separately, it's a big deal. it's a big strategic m&a transaction. of course it's j&j when it comes to financing, we don't think a lot about it pretty easy for them they are the only triple --

>> only duracell >> they will split next year kenview will be the computer company. >> it's scottish >> and this bullings up the company. >> that's why i like it so much. >> under its new ceo >> the feds raise, raise, raise, right? so, carl, initially the deal is going to be not creative why? because they are making so much money on its cash. one of the unintended consequences is that j&j was making so much money on its cash i was most concerned about med tech this alleviates it they have a life-saving pump when you're operating you to stop the heart and that's when most people die.

if you have something, it makes it so the heart can continue to pump this is one of the most important devices. so i just think it's a great deal for j&j >> it's a billion dollars. they believe it's early in their growth trajectory. they are paying 16 times current sales. >> i'm being honored this year up at columbia presbyterian. if you can prevent death, we are trying to prevent death at the moment of heart transplant, the moment of cardiovascular >> how about the fuller picture of m&a, sealed air, atlas, victoria's secret. well, i defer to david on this there is a lot of ways -- this is nice growth in an atmosphere where growth is hard to come by.

>> negotiating price with the volatility we have seep, next year in earnings is not the easiest thing to do. it is perhaps a bit surprising in terms of how robust it is it is down sharply, which was a record year. >> by the way, the backlogs going into next year are not particularly good. but companies need to do things and they're not necessarily just stopping in their tracks you still have prices. and to your point earlier, you have to consider the anti-trust implications in a way than you would have previously. they are both being quite aggressive still even with talt of recent losses. only one they have had is this one on the publishing deal >> that's a great point. what happened here the fall started and people start doing deals? i'm trying to figure out the timing >> that is a great question. i don't have a specific answer

for you. in the case of abuminum. >> they were try ig to bring much to get this whole >> you're not getting your all time high. >> no. >> to the point of these growth stocks >> that was very important thing. >> you're getting your 52-week high but you're done, right you're getting all cash. then you're on your way. >> johnson & johnson is a unique company. it's almost as if they watch us. or they listen and they realize, well, wait a second, we're splitting the company. and we're not giving people enough so let's find another acquisition. we have so much cash to. make the deal even more attractive which is one reason why, yes the stock is down. people have to think how much the two companies are worth, carl

that's what this is. it is about the split and making the med tech portion etter >> let's assume they start at a slightly accelerated pace. there is buyback demand. do you think the last two months will be better than the first 10 >> i do. obviously this is one of the things twhere they play a big role i've seep fire i'm saying fire and rain the rain will make things grow in the spring. what happens is, yes, we will get inflation to go down and not have the earnings he's looking for. i just don't see it. i also think the dollar is not going to be as strong. david, you think may that i'm whistling past i don't know what -- what am i whistling past stadium. >> stadium >> stadium

graveyard stadium. for you. >> is that what citi field has become >> i was trying to figure out where you were going sorry your game got rained out >> i was at the chopper. two minutes to take off. >> at least you didn't take off. >> it's 9:09 what have we not mentioned >> elon musk >> thank you >> we're going the on get to that let's do china really quick. >> i got side tracked. >> it means absolutely nothing >> china is very interesting i believe she is trying to find a way to be able to change the zero covid

the country has been able to reverse engineer the steal of our intellectual property their own mrna vaccine what happens here is, once again, americans get sucked in >> well, not just americans. b of a says luxury is outperforming european stocks this morning by the most since may. >> these are all good ideas. >> i listened to eunice's last report she said these are social media posts that haven't been confirmed talking about a potential reopening in march of '23. the foreign ministry essentially denied it. >> not aware >> so let's just remember, this is pure rumor and hope

>> believe me, they don't want you to have any more china and the supply chain of apple is will be something you will never get >> let's find out more about what we know about this so-called committee. >> yeah. if i may, i would like to jump in the posts are unverified if there is any truth at all, the interesting part is that the committee is supposed to be led not by a scientist but president xi's chief propagandaist what china needs in addition to some medical or technical solution such as chinese mrna vaccine, jim, that you were

talking about, but they need a new anywhere active. you would have this guy if this turns out to be true as the chief proof began daist. what was interesting about the foreign ministry reaction is when asked about this particular report they said, oh, we are not aware of it. but now in chinese state media there's no reporting at all of the response and it's currently not yet on the foreign ministry website which suggests there is a lot of sensitivity around the way they present this information to the chinese public >> well, okay. i want to go back over who the person is that's in charge of this the key propagandaist is something we don't have in our country. they had it in the soviet union.

isn't it odd that you have the person meant to spin thing is in charge people could be buying back their stocks why not have a sign activity let me just call it. the chief prop began difficulty lies like hell that's what they do for a living why don't they have a real person >> so the guy in charge, he is seen as being very successful because he's come up with the concept of the chinese dream being marketed as the chinese version of the american dream. that's been going very far xi jinping is studying everything i'm studying just to read the papers it permeates everything. it's a political phraeufplts you

need to not only champion your own technology he's very nationalist. this whole messaging since the 20th party of congress has been about how china is so successful we don't need those foreigners in fact, this propagandaist has written a couple of books where he's very anti-american and trying to market and messaging quite often that chinese youth are too american too westernized. and the way they can rise is to be chinese and embrace china so we need a chinese solution from the beijing perspective that means an mrna vaccine that is homegrown or at least marketed as homegrown. and a narrative to change the narrative up until now, that the crazy americans have been lying flat, slacking off, letting the virus spread everywhere.

we're the ones who really take care of our people >> yai nice, a lot of investors are trying to make decisions based on this. a lot of stocks are moving up. what is your best read in terms of when we might get some level of clarity as to whether there is any truth to some of the posts that you were referencing. >> i just asked this to the taxi driver yesterday i dare not guess most optimistic people thought it could come in march because there is a huge -- another political congress then. by that time we will see who the premier is who and the

leadership positions from the government perspective people say, okay, it has to be that and there's been such a squeeze on the economy a lot of people think we have to have some sort of lifting. but the other benefit is you are very, very easily able to track people and that's another big benefit for this regime. >> yeah. the power of the state no doubt thank you for that we mentioned some of the video that came out of shanghai disney where they had to suspend operations to comply with the prevention measures but literally kept people in the park until they came back with a negative test. >> it was pretest over 24 hours? >> i had a pcr test at someone at 10:00 and they gave it to me by 5:00. let's go over. i think the chief prop were --

prop began difficulty, you can conquer covid by just being locked down. what is even better is homegrown mrna, which they managed to get the intellectual property, they psychological it which is good because it's better to have it than not what do you do if you tell people the way to beat it is no vaccine and now you have a vaccine. so i think you need a propagandaist. >> outside of the state infrastructure >> i think when we think of propaganda we think about other regimes we didn't really appreciate silent >> i am silent i'm thinking about the poor people stuck at shanghai disney. it's the worst place to be stuck. >> it's a real small world after

all. >> guys, we will get to the president here blasting big oel and floating this tax on energy giants as they report big profits. we'll get to uber, sofi, pfizer, lily don't go away.

>> profits are a windfall of war. >> i think they have the possibility to act for the community and their country to invest in america by increasing production and refining capacity >> if they don't, they're going to pay a higher task on excess profits and face other restrictions >> jim, talked about this with andrew before the top of the hour >> it's very difficult say he is trying to address gasoline prices. should the tax therefore be on refiners should it be on the station owners the majors they do everything or companies who just produce oil like a pioneer

where does it start? david, a lot of what's happened with the oil companies they invested heavily amazon invests heavily at $50. should they be selling things therefore at 75 in order to give the country a break? when does it stop? you know, we just tax everybody? is that logically consistent what do you do do you tax eog i think the president has to be more specific. i think if you sit down with oil companies you realize they're not all the same and the refiners are where the profit margin is i don't get what he means when he says the oil companies. >> those are all fair points not to mentioned chances that you could pass a windfall profits

tax are very minimal very minimal >> jimmy carter lost his second term, people thought because of the windfall tax it historically has been a mistake. is it chevron? valero i don't know pick them out of a hat >> and 40 plus in free cash flow is incredible, those numbers >> how about aramco. say we will put a 50% tax on you. >> we will lower gas prices and make the saudis pay for it >> i'm the chief prop began difficulty >> we did talk 12 million barrels a day yesterday, according to government data that is a post covid high. take a look at futures more "squawk on the street" in a moment and your family first. i promise to serve, not sell. i promise our relationship will be one of partnership and trust. i am a fiduciary, not just some of the time,

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we mentioned the bond rally. 10-year back to 394. it was 434 just a couple months ago. the dollar down as well. in the meantime, we'll get an opening bell in about four minutes.

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all right. let's squeeze in a mad dash. we have opening bell a few seconds from now chips. >> you off ask me what is the key to this market i will give you two keys nxp, semi and onset. why them because the markets had an aversion to any semiconductors these two have to do with autos. they were good

>> toyota still dealing with chip numbers >> they said they expect it to last through much of next year >> they have done their best to meet demand. i have heard endless complaints. i've not been able to get them this is my bad look, i happen to like texas i'm inviting them on tomorrow morning to say how are they doing making chips >> we'll let you know how that goes opening bell and the cnbc realtime exchange rxo celebrating its spin-off of xpo. the ceo will join us

its diabetes care company. i don't know if you saw yesterday, jpmorgan gaming out what happens if it's 75, 50. >> yeah. i don't know about these because what happens is if you get a very hot number on friday, you'll -- it looks like the feds lost control of the narrative again. it's a dicey thing to do 50 and have a hot number. it looks like we're really political. is this market banking on a pivot. do we need signs, language >> i think the market is looking for stable waves and they can see prices going up. that is three different elements we need to say to see it go down

this is from james, ceo of morgan stanley >> we will get jolts in a half an hour. one last include before we get the decisions tomorrow we didn't touch on uber. >> i thought the interview andrew did was exceptional because what happened is that very early on they sent a critical memo saying we have to pivot. we can't constantly go for revenue. it ended in november we have to start going for ebitda one of the things that has been most, let's say, disconcert to go me, carl, is that so many companies have come public in the last few years who do not share that ethos they keep going lower. the stocks don't seem to have any interest in showing ebitda >> right >> and you want your stock to go

higher -- >> sofi, same story. >> exactly right >> i said, anthony, you know what the street wants. this is like a moment of truth do you want to continue to have your stock go down and go for growth or go for ebitda? the sofi number was very good. >> yes i guess that is what i was saying >> welsh i don't know. i don't know what to make of that >> you don't >> it's a little simplistic. >> sometimes i think it pays to be simple. i've staked a career on it >> i love you. thank you.

>> are we done with uber >> we acted ask if lily didn't happen >> the split today with lily and pfizer is interesting. >> what will happen is that will solve their problem that people always worried about in 2023 to 2024 little where i think is ridiculous that it's down. why? cur currency their major drug for obesity is granted fast track trezepitide. they have a new drug taking business from its own drug, trulicity. we are urging people in the investment club at 10:20 meeting, this is your chance to buy lilybefore you get what

will be the greatest -- one of the greatest drugs of all time it will allow you to lose a minimum of 20 pounds they have this drug weight reduction 24.7 pounds in 15 megs that's what is in front of the s&p -- the s&p the fda. it's rolling david, if you can lose 24 ugly pounds other than cutting off your head, so to speak, if you can lose 24 pounds with a drug do you not have the possibility of the greatest drug of all time >> that would be a best seller, yes. >> now the stock is down big >> you've been talking about this drug. we've been talking about it. >> it's already been reflected

in the stocks. >> i'm saying a drug for diabetes, co morbidity of obesity being the greatest reason why people die from covid. it's like versus botox it was not originally meant to make you look younger, but it has that effect. this will make you look thinner, and you will be thinner. people are selling it down now >> and potentially healthier as a result of being thinner. >> obesity is one of the key risks for heart failure. >> they read the headline and it says shortfall

i want everyone who is not a member of the investment club to sell their heads off >> it wasn't from? oh, it's june 24th >> they liked my march presentation >> they did? >> yeah. it could have been in flew especially challenge >> your pitch deck >> please sell lily. >> the greatest price imaginable everyone is not in the club, sell your darn heads off >> j&j shares are up >> predict it, buddy. >> they're flat. they're not even down. >> why don't you sell that stupidly >> first of all, it's not eye stock deal it's all cash. you can see what that stock is

doing. trading right at the price why? this contingent value that will kick inasmuch as $35 but that's over a potentially seven-year period as certain milestones are hit >> let's talk about those. >> and those milestones, yeah, there are any number of them at certain periods. one is just plain commercial, david. >> it's not tradeable. potentially not seen the money for seven years. so a lot of people don't care about that for obvious reason. they set themselves up for having an even morre robust product line in this area for when they split in med tech let's call it. >> this heart pump. >> which will be next year

>> you get 1750. >> correct >> very novel formulation. >> by the way, we're at a billion or so right now. that is banking on number. different approvals, continued growth as well but you're right again, that we'll have to see over time how it plays out >> it's all about the split. >> about 16 times revenue. >> but people have to understand it's about the split they have med tech and actual pharma they want everyone to recognize it could be the fastest growing large cap pharma company in the world. you're against merck, pfizer did you see this i thought this was funny i bumped into david simon. >> david simon

>> looking to take out summer highs. >> everyone was saying be careful of their dividend. and they were right because he raised it. >>dividend >> i said you have had 33 billion, and he said 36 billion. david simon was incredibly cordial to me, even kind >> he can be a somewhat harassable fellow. >> no, no. it was like a tarsas kind of thing. >> i remember sitting with him at some investment bank dinner halfway through salad he's like, i'm out of here. >> maybe because it was such a great engagement party. >> something i said, david >> do we have simon property group? it's worth looking at that stock. this is one of the larger reads. we have talked about the nontraded reads such as the

shopping mall read during obviously the early days of covid. everybody said that's the end of that no has not been the case at all but that gives you a larger look at how the stock has performed of course they do have a lot of a malls. it's the b malls where we talk about real challenges. real challenges. >> federal reality, shopping center, is equally as combative. they told him, meaning the street, to cut his dividend. he raised his dividend because the businesses are very well run >> tanger. >> all public reads. i talked about the b read with $70 billion in assets over time. they are not marking stuff to market every day the way you are seeing with these. >> right a bit different. be careful in terms of, you know, b read is still up for thee it seems hard to imagine

but in this case they are performing well. >> he's extraordinary. so many people were bleeding these stocks investment to what you want to call capitalism. >> we didn't get to evs on auto sales, ne-yo, tesla. didn't get to media. fox is creating a nice halo. fox is performing well, up 5.4% on earnings also, though, a few things off the call to quickly share with you. macro uncertainty. it is still too early to engage how much impact that will have on local market advertising. encouraged, they say by the continued profit growth in automotive how about political? >> yeah. >> and television. 8% revenue growth. 11% increase in advertising revenues record september. >> how much of that is dr. oz? >> some. and now disney plus to offer subs early access to holiday

merchandise. >> i told you disney was good. i told you we would be safe in disney >> not shanghai disney >> no. that's from the movie "witness." remember >> i remember "witness." it's a great movie you like to quote that i do. >> we have manufacturing on the other side of the break. bonds, the 10-year down to 394 don't go away. ♪ ♪

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news in the form of s&p global manufacturing. pmi is expecting the number to hover just above -- or just below 50 and it's delivering. 50.4 technically, it's a bit better than expectations. that follows the mid-month read, 49.9 this is not anything stellar in september we were at 52.0 before we went under 50. and last month's half month read was the first read below 50 going back to june of 2020 but it didn't survive. we still have construction spending and ism pmis at the top of the hour. "squawk on the street" will return after a short break

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welcome back. a rare win for the department of justice in its attempts to enforce anti-trust laws as they see they should be applied judge agreeing with justice of department, which had brought a lawsuit to permanently join random house to buy simon and schuster this dole was done some time

ago, back in 2020. always had a real question around anti-trust. while they may appeal, they lost and, in fact, there is a $250 million payment that may go to simon and schuster that's paramount the department of justice saying today's decision protects vital competition for books and is a victory for authors and saying reduced competition, decreased author compensation, diminished the breadth, depth and diversity of our stories and ideas and ultimately impoverished our democracy. big words there. again, anti-trust has become a significant gating issue for strategic buyers and/or sellers. although price these days probably trumps that right now

in terms of why you might not get a deal done. >> did you notice the memorandum is sealed? >> yes, i did. >> are you able -- i'm not asking you to break the law. >> i don't know. >> what is in that memo that it's sealed? >> i don't know. >> what the authors made >> possibly. >> i want that -- i want that memo. >> you want the memo >> i want the memo. >> fascinating stephen king has been at the center of that and going back and forth with musk about how much users should be charged to use twitter. >> let me tell you something about stephen king i think fairy tale, his latest, is one of his best. >> i've heard he's the dickens of our generation. >> i've read every book he's written and i will continue to do so. >> where did he come out on this, carl >> he said i'm not paying $20 a month and elon responded and said, how about $8 >> i want stephen king right here. >> that's a big price dop right there. >> you read "fairytale" because

i always have nightmares just like "dream catchers. i love him he's in your head. there's nothing like him, ever, david. all that stuff - >> maybe $1? would you pay a buck 12 bucks a year? 10 bucks a year? >> sounds reasonable. >> it's a private company. why do you care? >> we've lost a little ground from the open as yields have reproached 4 on the ten-year let's get to bob pisani. >> we were over 30, we're back down a little bit below that still a nice little rally. i want to show you, it's essentially all risk-on. risk-on is when cathie wood's ark leads the pack that's risk-on semicuttingers lead, that's risk-on. metal stocks lead, that's risk-on. china is rallying a little bit that was multiple year lows on china etf. vague rumors they may change the

covid lockdown procedures, as strange as that sounds, is leading that sector. if you look at what's interesting to watch is the vix keeps coming down. it's been down almost every day for three weeks. it's rather remarkable to see it the reason it's dropping is because we're about to get the election out of the way and the fed meeting out of the way those are two big impediments, uncertainties about to get moved away and with the market rallying the vix is moving to the downside in terms of leaders, it's obvious, energy stocks are leading. we have new highs on most of the big names here chevron, conoco, hess, exxon let's not quibble, half a percent or so. you saw president biden blasting the oil companies talking about a wind fall profit tax i'm not big on that idea myself. it's pretty easy to show these companies have made big profits this year. this is just the 2022 estimates versus 2021. a simple comparison. look at 150% increases, 130%,

138%, 70% for eog. another way you can tell the oil companies are making outsized profits is energy companies are only 5% of the s&p 500, but they are 12% of the profits in the third quarter. that's very unusual. most sectors in the market cap are close to each other. health care is 15% these are pretty outsized profits they're generating another way to look at it is exxon is generating so much profit of the s&p that it moves the s&p. fourth quarter the estimates for the s&p are up 1.6%. but if you take out exxon it's only up 0.6% exxon is 1% of the profits for the s&p in the fourth quarter. all of that at least provides some ammunition. you can clearly see why they're making these points, even though wind fall profits tax will probably not go through. you were mentioning the penguin story, as a recent author, i'm

aware of these numbers something that came out of of the penguin trial were book numbers. 60,000 books a year, only 35% of the books are profitable and 4% are the ones that make all the money. 4% of the books make more than 60% of the profits as a guy that just wrote a book, i can tell you it's a difficult process and the book publishing industry makes no economic sense at all from a purely economic perspective. carl, back to you. >> bob, i know you've been watching that deal closely bob pisani jim, what's on tonight >> small companies, eli lilly, kroger and airbnb. >> that's a b lineup >> they call me the booking magician. >> you are a booking magician. >> not a left booking magician. >> i beg to differ. >> those are three big stories. >> i guess i better go to work it's my wife's birthday.

>> happy birthday, lisa. >> yes, lisa's birthday. 35 >> jim, we'll see you tonight. "mad money" at 6:00 p.m. eastern time. when we come back, goldman's chief equity strategist david kostin is going to join us ♪♪ ♪♪

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welcome to another hour of "squawk on the street. i'm carl quintanilla with morgan brennan, david faber at the new york stock exchange. it's been a busy morning with $30 billion in m&a, rumors of a china reopening and plenty of data let's get to rick santelli >> we also have job openings, labor turnover known as jolts, that is september read we're expecting the number to be under 10 million we are wrong this is a nice beat. it's a million better than expected, 10,717,000 follows at

yet unrevised 10,053,000 an improvement there once again, this is the second reading, though, under 11 million. slight revision coming in, 10,280,000 the revision is about 230,000 higher now, construction spending is up 0.2. that breaks a streak of down two negative months in a row, down 0.7, gets upgraded to only 0.6 up 0.2 is the first positive number since june. ism manufacturing for the month of october expected to ab in expansion territory and it is just barely. 5 50.2 follows 50.9. we have yet to do a sub 50 last time it was sub 50 was in may of 2020. if we look at the prices paid component, 46.6, a nice drop very big drop. we're expecting a number closer

to 53 on new orders another 0.75-point increase in the overnight rate morgan, back to you. >> rick santelli, thank you. we're 30 minutes into the trading session. here are three big movers we're watching this morning. shares of abiomed in news that johnson & johnson plans to buy them and $35 mile a share if certain milestones are met

comes as j & j is planning to spin off some shares abiomed is up 379.40 it's a mixed story for other health care names. pfizer is higher, up 2.5% after an earnings beat and raised its forecast for annual sales of covid-19 vaccine but eli lilly is down 2.5% that's lower after a full-year forecast cut, thanks partly to more cancer drug competition and lower insulin prices f finally, check out uber. those shares are up double digits after gross bookings came in far higher than expected. 15% pop right now. we'll discuss that name a bit further in a moment. david? >> before we do that, we want to talk about the federal reserve, which is about to kick off its latest fmoc policy meeting of course, many expect more rate hikes ahead. steve liesman is with us now steve, love to also get your

thoughts on that increase in job openings as opposed to, perhaps, what some had hoped for. may have turned the market a bit down from where we were as well. >> yeah, god bless rick talking about the idea that that's an improvement. he's 100% right. it is an improvement not an improvement if you're the fed looking for things to -- looking for slack to develop in the economy. that's going the wrong way that increase in job openings suggest the job market is still tight or getting tighter compared to the estimate of 10.7 and the ism numbers were pretty good as well dave, you write to the cnbc chair bank seeing hike of 75 basis points tomorrow. stepping down is the pivot everybody is looking for to 50-basis point hike in december. still en route to a 4.5% incr increase for the fifth straight time

they've stepped down the outlook for the s&p 500, 3825 below the current level is the mark now. moving up just 5% in december '23 to 4072, a 5% increase a better increase down the road to december 2024 to 4,444. moving on, looking at the probability of a 10% increase versus decrease, it's 48% versus 44%. still some downside risk but not as much, you can see, as we had back in january when they correctly said, hey, this market is way overpriced. one thing we asked for the first time here was systemic risk, 68% believe fed policies have increased systemic risk in the system fixed income strategist for jamie montgomery scott writing in with the survey, move fast and break stuff, extraordinarily rapid rate increases have left financial intermediaries

unwilling to take risk and effectively broken many traditionally liquid financial markets. these problems will abate if and when interest rate volatility declines that is the key, indeed, volatility how much risk is there 63% say somewhat high. 9% say very high and 11% saying about normal. so looking at some of the other data that we asked b respondents pointed to mortgage markets and leverage markets, the highest amounts of liquidity treasury markets were cited as well several said financial instability is the one development that could prompt the fed to pause more quickly than it otherwise would. david? >> in talking about a pivot, steve, this idea of a pivot and the data we were just discussing we have labor markets, you know, still adding huge numbers of job openings low levels of layoffs. we haven't seen that and jobless

claims still fairly low. >> i'm not seeing it, david. let's be clear the idea of a pivot has changed. what the market is trying to get excited about. a pivot was rate cuts. then a pivot was a pause now a pivot is just a step down from 75 to 50. that's the new thing the market is excited about and upon which it tries to rally. you have the job market data dancing to a very different tune from anything going on right now. you still have labor shortages you still have huge demand for labor out there. and companies still not back to where they were. take the leisure and hospitality business you follow the airlines, some of the entertainment, hotel groups, still looking for workers. not back to where they were. we still have not enough legal immigrants coming into the country. we still have people retired early. this is a problem that's going to be out there. i don't know how the fed ends up softening this labor market

right now. >> we're going to find out, thanks steve liesman busy joining us to discuss the outlook for the fed and where to jump is in david kostin here at post 9 and who has gotten more incrementally hawkish. and numbers like this explains why. >> usually does and the real rates have moved down, which has then led to the market rallying 7% or so in the last several weeks. that would suggest to me it's overvalued -- not overvalued but perhaps more downside risk from now to the end of the year and modest return from now to the end of next year >> a couple months ago you had put out charts looking at hard landing scenarios. do your odds of a hard landing increase on data like this >> the market this year has traded entirely as a function of rate market. basically rates have risen, the equity market valuation has come

down from 21 times start of earnings to 16 times or so today. we have not yet seen any meaningful degradation in the expected level of profits if you look out now to the end of next year, 2023 the result of that, carl, i think the risk is that earnings come down. in a hard landing scenario, you can see earnings fall, perhaps, 11%. our baseline forecast, not a recession, but the slowing economy, is maybe earnings grow modestly maybe 3% i think that is the key message the idea of forecast and the direction of the equity market between now and the end of this year and next year is really a function of earnings >> energy leading the s&p again today. it's up 26% to start the quarter. it's up 65% for the year is that still a place to put money to work right now or have the gains really already been realized >> i think there's two reasons you want to continue to put money in the energy sector first, they're basicallyearnin their way to higher profits,

higher level of weighting in the equity market. that would be one of the big reasons for that basically better profits everywhere else we had disappointing results across the board in the third quarter, which are pretty much maybe 70% of the companies have reported earnings so far this year. the idea of better profits, higher margins, it's there we have not seen it in any other sector disappointing results in the third quarter. we had margin compression across many sectors, particularly in the technology communication services area. the idea of the main imbalance between the supply and demand and idea of companies returning cash to shareholders better profits and uses of cash. prioritization of returning cash to shareholders through dividends and buybacks is an important distinguishment because in a slowing economic environment, companies that return cash to shareholders outperform. >> to stay with that thread for a moment here, if the energy sector is the place you're

seeing that template plate out and not necessarily anywhere else, the idea of a market rotation taking place and that continues to push, potentially, sounds like you're not on board with this, but continue to push stocks higher from here without tech, for example, being in a leadership position anymore, do you buy into that? is there a point where that story actually comes to fruition in a more meaningful way >> well, health care, energy, consumer staples, those are areas that have more visible, less volatile trajectory of profits. that would be an area to be focusing on, number one. number two, think about this, morgan, companies that are returning cash and dividends those are strategies that have traditionally done well. those are the sectors that have benefitted, will be benefiting from that trajectory that has been the case so far. all the previous economic slowdowns, those are the characteristics of companies not really specifically to a sector but characteristic in terms of the prioritization of

the spending of cash by companies. that's been rewarded that's likely to be a case as we look into next year. >> when you see your peers on the street argue that, say, money supply is going to bring inflation down faster than many expect, i don't see you writing a lot about that do you discount it. >> the idea of inflation, when we model in profits and think about sales, inflation and nominal dollars, inflation is positive, it's a negative for margins, for corporate margins broadly speaking, that's the biggest risk we are seeing right now in the third quarter the first time margins have inflicted down wards since the pandemic, since coming out of the pandemic margins were record high levels in the first quarter they grew even more in the second quarter you had positive surprises on the earnings front in the first and second quarters. this time we have not seen this. it's the first time we've seen degradation and diminution that's something we're concerned about. i think that's where the big debate happens between fund managers between identifying

companies that maybe are better positioned to improve their margins. >> it's a concern on the corporate level, but if you want to see disinflation, don't you need to see margins collapse are pricing power collapse >> you like to -- from inflationary point of view, you are correct. you would like to see less rapid increases in prices but what are we seeing companies do so far? raising prices pretty significantly. >> we're going to see. obviously, market reacting we've lost the gains on the open we'll get you next time. good to see you. david kostin as we head to a break, here is our road map for the rest of the hour the fed in focus as stocks kick off november in the green. what another rate hike will mean for your wallet. we have more on that this hour. a market risk you may not know about we'll take a deep dive on

private credit shanghai disney park goers blocked from leaving amid covid concerns china stocks are popping amid new rumors of a potential reopening next spring. we'll get the latest from the ground there in a moment a big show still ahead don't go away. 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 on the street." we're taking a look at the transports, the ishares

transportation etf broke its two-month losing streak in october but still on pace for one of the worst years ever. shares are basically flat right now. a bright spot in today's trade, uber, beating q3 revenue expectations as gross bookings surged compared to last year still reporting a lost, due to unrealized losses on equity investments, such as its stake in didi. the rise in bookings points to a strong consumer. take a listen. >> the consumer, especially the u.s. consumer, remains strong and they're spending and moving a bunch of their spending from essentially retail to services, and we are in the service sector you're going out to restaurants, cities are opening up, you're taking ubers and uber eats growth continues at a strong pace as well >> very interesting conversation, guys i thought the fact he said that

the delivery continues to grow that they're focused on profitability in that business certainly perked my ears up. also the fact that the freight business booked $1.75 billion in sales, which speaks to all the supply chain stuff we've been talking about. this is a piece of uber we don't talk about as much but has been quietly growing. of course, the labor laws, which, david, i'm sure you followed very closely in terms of that conversation since we saw the change, reclassification. >> potential reclassification. obviously, california but nationwide >> yeah, yeah. the fact he said it was basically a return, potentially, to the obama administration, the obama era in terms of drivers and those labor laws but it wouldn't necessarily mean a sweeping reclassification of all those drivers because many are part time. >> interesting they're guiding below the street on bookings but they're making up for it on ebitda. it's interesting how shareholders are rewarding them for that >> yeah.

you know, obviously, it's adjusted ebitda. everything is adjusted these days there's rarely an earnings report that doesn't include adjustments. oftentimes compensation based stock is part of that. that was -- 482 million in stock-based compensation expense. you throw that in there and obviously ebitda looks different. we can have arguments about whether comp, because at some point if your stock is not doing particularly well, your employees will demand more cash comp so it is something to keep your eye on. >> nice gain for uber, back to 30 the kweb kicking off november after the worst month in over a year we'll fi o w aerhe nduthyft tbreak. this thing, it's making me get an ice bath again. what do you mean? these straps are mind-blowing! they collect hundreds of data points like hrv and rem sleep,

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while an earnings tool helps you plan your trades and stay on top of the market. check out this video an unexpected lockdown of shanghai disney forced thousands of guests inside the park to stay put until they could show a negative covid test.

the park closed its gates to comply with china's strict zero covid policy meantime, though, stocks in china actually up sharply this morning. you can see right there, that continues to be the case this is after unconfirmed reports on social media said that policymakers are considering ways to gradually exit those stringent covid rules or zero covid rules, perhaps as soon as this spring. let's get to eunice yoon who typically brings us a lot more in terms of trying to understand what's really going on on the ground eunice >> reporter: well, you guys will be happy to know that all of those people at the park tested negative, but the bad news is that shanghai disneyland still remains closed this is after one covid infected woman visited the park so, shanghai authorities are still not taking any chances they are hunting for any of the close contacts, telling residents they should stay at

home and undergo testing if they visited the park since thursday. now, disney is not the only multinational company that has had to face the fallout of zero covid. apple supplier foxconn has also seen an outflow of workers the company says that the production hasn't been affected, but there was an official news outlet, which quoted a factory manager at the plant in guangzhou central china who said if they're not able to retain workers that they could potentially see at least a 50% drop in production so, that is a big concern. one bit of relief, perhaps, for foxconn is that the whole city today said they were going to lift the effective lockdown. it was a bit of a surprise in terms of decision because the reported cases they had was 95, which from a global perspective is tiny for a city of 12 million

people it's still a lot larger than the original number that triggered the lockdown you guys were mentioning a bit, we were talking a bit about some of the rumors we've been hearing in the stock markets there have been unverified posts in social media that, perhaps, the government is coming up with some sort of high-level committee to be able to lay out a plan to exit the zero covid strategy by march 2023 what's interesting, if it's true, and that's a big if, is that it looks as though at least part of this rumor is it would be led by the chief political theori theorists. not an economist and not a scientist but somebody who very much knows how to shape a narrative in china in addition, to having a technology and medical solution, the chinese communist party needs to be able to have somebody who really understands

how to change the narrative to the public here. >> it's fascinating. it's fascinating that you bring up that point. i'm just curious, eunice, do we know specifically what triggered all of these social media posts and this information was it unnamed sources was it just a random post that went viral what actually caused this which, in turn, caused moves in the market >> reporter: hope? no, i'm kidding. it's very difficult to say because a lot of times we do see these rumors just cross, you know, and people then just start latching onto it it's difficult to say. but, i mean, joking aside, there are a lot of people here who are under a tremendous amount of stress with the lockdowns. and also when they look at their portfolios in the stock market and are hoping for some type of news that could help boost stocks a lot of people think despite the fact the government has been making some announcements about how they want to support the

private sector or they want to be market opening or welcome for an investment, that at the end of the day, what really needs to happen is some easing and meaningful easing of zero covid. >> i'm still hung up on the chief political theorists, this idea that information is probably the most valuable commodity. it all comes down to shaping a narrative, doesn't it? thank you. stocks headed -- stocks are not headed higher. they're falling as investors keep an eye on the fed former fed governor randy crosser in will join us to break down that outlook given we had stronger than expected data, at least jobs data. we're back aerhi ft ts. how will your business adapt to change? you could hire an office full of peyton mannings. what's up, peyton? good morning, peyton. hold for peyton. they'd huddle.... welcome to the peytonverse. such a visionary. game plan... you go. no, you go! and call audibles... double our investment in omaha! omaha! omaha! omaha!

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welcome back to "squawk on the street." i'm bertha coombs. here's your cnbc news update. in the last hour the supreme court justice john roberts

temporarily blocked the release of former president trump's tax records to congressional committee. the high court will now take up the case later this month. in chicago at least 13 people were shot in a drive-by shooting on halloween. the injured included a 3-year-old and two other children in south korea, officials are admitting responsibility for not doing enough to prevent the tragic halloween crowd surge there. the mayor of seoul gave a tearful apology as the death toll has now risen to 156 people the national police chief said he felt a heavy responsibility given adequate responsibility to the emergency. israelis are voting in their fifth parliamentary election since 2019 polls predict another stalemate with no coalition gaining a decisive majority. key issue, former leader benjamin netanyahu's fitness to serve as he stands trial on corruption charges early tally shows voters have not tired of going to the polls.

initial turnout is at its highest level since 1999 david? >> bertha, thank you. we've had had a reversal in the market after what were strong gains in the first half hour of trading. we got job openings and now we're down ever so slightly off the lows but nonetheless down after what looked to be a decent rally taking shape that first half hour of trading let's bring in mark zandi, chief economist at moody's let me just start with those numbers. we were looking for a decline of 303,000, at least economists were, in job openings. we ended up with 441,000 additional job openings. what does that say to you about the health of the u.s. economy and/or your view of a potential recession? >> well, david t shows the job market is very resilient it's hanging in there very, very strongly, despite all the things going on around it but, you know, i don't know that i'd read too much into month-to-month, particularly in

the job turnover survey because up and down and all around and i think the trends are clear businesses are pulling back on their unfilled positions we'll get a much better read on things by friday when he we get the numbers for october. the other thing in the report that i think is probably even more important but we don't pay as much attention to is the number of people quitting their jobs and that did come in a little bit. it's about 4 million still very elevated. that has to come in more that's the key to wage growth and wage growth is obviously what needs to moderate to get inflation back in. you know, it's not exactly what i would -- if i were writing it on a piece of paper, i would like to see. i guess that's what investors are saying to us right now but, you know, i wouldn't read too much into it >> now, what if you were writing it on a piece of paper would you like to see? >> well, i want to see those unfilled positions come back in. we're at 10.5 in the month of september, 10.7 million. before the pandemic, which is a

pretty tight labor market, we were at 8.5 million, something like that. that's the next step on the piece of paper and i'd like to see it come in a little more, even more than that really ideal if the unfilled positions evaporate, unemployment rises a little bit, we're at 3.5, maybe goes up to 4. that would take steam out of the labor market, get wage growth down on wage growth we got pretty good news last week. wage growth was 5% a good benchmark, if i had a piece of paper, is we need to get down to 3.5% we're headed in that direction i would like to get there a little faster. >> openings rose, hires came down a bit and we didn't pay as much attention to the ism, but prices paid 46.6 what happens if we're in a situation where we have good deflation but labor doesn't cooperate? >> well, we need a goods

deflation. that's step one in getting deflation back headed towards the fed's target the last thing we need to see on that side is new vehicle prices starting to come in. that may take a few more months but that will happen we need the labor market to soften and get wage growth down. if that does not happen. if the fed follows through on its script, you know, 75 basis points tomorrow, 50 basis points, a quarter point in january, take a look around and the labor market isn't weakens and wage growth isn't rolling over, i think at that point they'll step on the brakes some more at that point we'll go into recession. i still think, carl, we have a fighting chance here that, you know, they'll stick to that script, get us into next spring, take a look around and the labor market will be easing enough wage growth rolling over sufficiently they can pause and that's the end of the rate hikes. if that's the case, we have an

economy without recession. no matter what, it's going to be a pretty tough year. we can avoid a recession >> right you know, the other thing that's really -- for those who are looking for inflation to really come down, they end up pointing to m2 most commonly. that is if you looked at money supply growth a year ago when it was up 27, it was going to be clear to you inflation would follow and now that it's up, say, 2, it's clear inflation is also going to follow is there anything wrong with that argument? >> yeah. i don't know there's a long list of thins to think about when thinking about inflation. obviously, you know, it's pretty complex phenomena, dynamic, a lot of moving parts. money supply, you know, on the long list of things, i put that at the very bottom of the list because, you know, at the end of the day, money, the way it works, the money supply moves around, affects the availability and cost of credit affects economic growth. that's relative to the economy's

potential. that affects inflation so, that's along chain of events that can break down pretty easily any step of the way. yeah, i look at it, but i wouldn't put much weight on that i think really what we need to focus on is, in fact, things like deflation, vehicle prices, what's happening with rent growth that's key to the cost of housing. ultimately, and most importantly to get back to the fed target, goes back to the target and wage growth. >> given the fact we're out -- where on the list does fiscal spending fall within this discussion i would imagine if, depending on who wins what house and how all that shapes up and what that means for policy in 2023, that could be a real wild card here potentially for this entire discussion. >> i don't -- i don't think so i think the election -- the odds are very high that congress is

going to flip -- certainly the house is going to flip republican that means nothing else gets done so, you know, for the next two years, at least on the fiscal policy side, certainly nothing that is going to involve deficit financing. that's not going to happen that no longer is an issue going forward. i don't think it was an issue, even if democrats held onto coming, i don't think they would put anything forward that wasn't paid for i don't think it's an issue going forward. by the way, you know, with radar regard to inflation now, i don't think fiscal policy is playing a meaningful role. it did a year ago, that's a year ago. here we are a year later what we're seeing now has nothing to do with the american rescue plan or any other form of fiscal policy. >> when do we get back to more typical rates of inflation, then >> well, david, if i stick to my piece of paper, i think spriveng

2024 step one is happening. we need oil prices to stay where we are that is really critical. that will allow year over year inflation to continue to moderate as we make our way into next year. we see vehicle prices roll over. that's a big deal if that happens next spring/summer by the next half of next year, i expect rent growth and housing cost inflation to begin moderating because you can see market rents are falling for lots of different reasons. the next step on that piece of paper is wage growth labor market weakening and wage growth rolling over and that will get wage growth back within spitting distance of the fed's rate if it sticks to my script, a lot of risk around that, obviously, you know, i do think the fed only needs to raise rates to the 4.75% where it's headed. obviously, a lot of risk and

everything i said is caveated by nothing else can go wrong. that's obviously a big if. >> yeah, just stick with that. we're only in the second act here we have a few more acts to go. >> a lot of acts. >> we'll see how this drama unfolds. mark, thank you. sticking with the discussion around drama, we're going to turn to fed policy even more explicitly ahead of what is largely to be the fourth consecutive 75-basis point fed hike tomorrow. let's bring in former fed governor and boothe school of economics professor, randy kroszner great to have you on the show. i'll put the same question to that we put to mark zandi. that is the higher than expected jolts data that turned the market this morning. as we focus not only on the fed tomorrow but on another jobs report at the end of the week, what is the labor market

signaling and what does it mean for discussions under way among fed officials today? >> clearly the labor market will be a key focus for the fed and how they think about policy going forward, because unless they see the labor market starting to weaken significantly, they'll have to continue to push rates up because that will be the key thing that slows the economy down, slows demand down, which is their main tool they have is trying to slow demand down and if the labor market continues to be on a tear, that's going to be tough for them and they'll have to continue to move. >> this idea of a pivot, we've talked about this a lot with steve liesman, this idea of a pivot for which the definition seems to be changing and shifting, do you expect to see any, quote, unquote, pivot in terms of what jerome powell says tomorrow >> i think it's clear given their forecast and things are evolving wroodly along the lines they were expecting expect for

the labor market probably being a bit stronger they don't need to do 75, 75, 75 for the rest of this year and into first year of next quarter. my guess is he's going to signal that he's open to something a little bit lower and that at some point, probably in the first half of next year, maybe even the first quarter of next year, they're going to stop and assess what the impact is economy and inflation. my guess is you'll hear a little bit about that he won't make any commitments to be 50 or 25 basis points he'll leave open 75 is on the table but my guess is they're going to go to 50 and maybe 25s the first quarter and then hold there through much of 2023 >> you're getting to something the market is wrestling with right now. their hopes are obviously pinned on a softer pace of hikes, but

maybe some realization the terminal rate could end up being a little higher than what we thought. i wonder what you're thinking about. maybe we put together a series of 25s and end up well above 75? >> i think it will be dependent on how inflation and the economy evolve i don't think they have the terminal rate they set in stone. it's going to depend on how things are moving. i do think it's quite likely they'll end with a 5 handle. if you get another 50 basis points, 75 tomorrow, 50 basis points at the end of the year, you're starting to get pretty close to 5 and it would only take one or two more small moves to get to 5. i think they're going to get around there probably stop to assess. i think by that time you'll see the unemployment rate go up. the labor market has continued to be quite strong i do think we'll get the

unemployment rate moving the fed in the current forecast say peak at 4.4. i think it's going to be at least over 5 and could even get to 6 by the middle of next year. >> does that motivate them, randy, to begin to lower i'm just curious we go to 5 as a terminal rate. we just stay there for a period of time, even with unemployment rising to 5% or 6% >> i think in some sense that's the model they have in mind. in order to reduce demand sufficiently and be convinced that inflation is going to stay low and not pop back up because they're haunted by what happened in the late '70s, early '80s that the fed did try to fight inflation, raise interest rates up, inflation came down. they then pulled rates back down and then inflation took off again and they lost credibility. they don't want to do that they have don't want to get into a volcker situation -- remember,

when inflation was this high 40 years ago, interest rates were double digits. i think they're going to hold but for some sort of thing that mr. putin does or some geopolitical shock or some sort of shock in the financial markets. i think they'll hold with the 5 handle for pretty substantial amount of time in 2023 >> randy, are there any data points we talk about core inflation, we talk about the jobs report are there any other key metrics that the market should be watching here that maybe have not been -- as aggressive on the radar. there have been talks about a deficit in terms of corporate -- what's not a deficit it's a surplus but in terms of corporate america and the money on the books for companies right now, if that were to change, that would be an indicator are any of these types of things something the fed is watching closely and, thus, investors should be watching closely as

well >> for sure they're looking at all these different pieces the financial conditions tighten dramatically when the markets finally realize that jay powell and his colleagues were serious, they now adjusted their expectations. the market expectations is the fed will hold around 5% for a substantial part of 2023 now the markets have come back up it was an incredible august -- i'm sorry, incredible october. so, that's not putting the same sort of weight against consumption as some might hope but housing markets are coming down i think that's one thing to note a lot of markets are coming down very, very rapidly all of our models say everything is going to be smooth. in the real world, things move fast and i think markets all over the country, the housing prices, which have been moving up very rapidly, have either stalled or started to drop that is going to be something

they'll be watching. in addition, of course, most importantly, core inflation and employment >> randy kroszner, thank you it's tough days for big tech this morning amazon and apple, some of the biggest laggards on the nasdaq we have more on the market action after this break. with all the major averages now starting november in the red don't go anywhere.

welcome back the $1.2 trillion private credit industry has been one of the few bright spots in the market this year it's grown enormously, in fact even over the last year. but there may be some changes taking place leslie has that story for us leslie >> you're absolutely spot on the private credit industry has ballooned in recent years as regulation forced traditional banks to rein in lending and low rates prompted companies to take

on more debt but the shadow banking industry is about to embark on, quote, the most significant period of credit stress since becoming such an integral part of the economy, according to a recent report by the bond rating agency that's because, in part, this type of debt is is because thiso debt is typically floating rates. and so as the fed continues to hike, borrowers have to shell out more cash to service higher interest payments. kbra applied an interest rate stress across thousands of middle market private companies and found that terminal fed funds rate of 525 basis points would lead to a 60% increase in interest expense a. as a result more than 16% of companies wouldn't generate the needed cash flow to cover the higher payments, a statistic that doesn't even incorporate the impact on margins from a potential recession and inflation. the concern is tmay lead to

default. but so far the largest publicly 2r5 traded investors haven't noticed material area weakness michael getty said that the absolute level of interest rates at least until this point has not shown up in any kind of portfolio distress, while noting that there is a lot to be concerned about on the forward trajectory kkr reported earnings this morning and its call is currently under way. they did publish a note yesterday following a meeting with joe bay who said that this is a private credit backdrop so we thoo get more from apollo tomorrow as well >> and i was watching to see if credit begins to crack on leslie picker still ahead, more on uber. why some are getting bullish and ceo of sofi also surging on

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welcome back to "squawk on the street." stocks are wavering between positive and negative territory. you can see how it dropped off from the session highs tech trading lower at this hour. it has been a big week of earnings for semiconductor companies, many of which are outperforming so far today nxp for example is in positive territory after the company beat on earnings and revenue, but its fourth quarter revenue guidance came in a little bit light and that is # why you are seeing the stock up over 3% elsewhere you have amd and nvidia both still more than 60% off their recent highs i'll bring you amd's earnings after the bell and we'll be looking to see if data center sales fell off and if there are any lower revisions to their outlook which is what we've been seeing. it has been a challenging year with every single constituent

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welcome back a successful launch for spacex again, the falcon heavy rocket lifted off from kennedy space center this morning in a classified mission for the u.s. space force, the first flight of the heavy lift rocket after a 40 month hiatus both side boosters relanding success friday among double sonic booms. falcon heavy has only flown four times now since its debut in 2018 when it carried musk's red tesla to space

markedly modest launch kit has carried the space of the falcon nine falcon heavy currently the most powerful in operation, that is poised to change in the coming weeks when and if the mega moon rocket lifts off for the artemis 1 mission. that is expected to happen as of right now november 14th. remember, when it comes to these major milestones, tune into manifest space in the meantime, this is the end of "squawk on the street." going over to tech check now good tuesday morning i'm carl quintanilla and today markets are lower with a slew of data including pmi, jolts, construction spending did send us toward session lows. but not stopping uber as demand holds up against the macro worries. investors want to get betting on that name. and you'll hear what dara khosrowshahi told us