2022 "squawk box" begins right now. good morning welcome to "squawk box" here on cnbc live from the nasdaq market site in times square. i'm kayla tausche with andrew ross sorkin. joe and becky are off today. >> good to see you >> it was a wonderful christmas. i was here immediately post christmas on this show with joe last year. i was doing it from my attic because everybody in the world had omicron. the world was very different it is lovely >> everybody has the chills. >> it was frigid in upstate.

>> i was coming from vancouver it got down to negative 30 at one point, it feels like over negative 40. >> you win you win. >> it was -- yes, a lot of folks are having a frosty christmas vacation. >> it is getting a bit better. there is thawing in the equity markets at this hour we are seeing green across the board across the globe u.s. equities in the green s&p would open up 26 dow up 216 nasdaq opening up 15 perhaps a santa rally taking shape here as we head into the last four trading days of the year >> the santa claus rally >> we will get into it with the guests the last seven days of the year. >> we're there >> still a chance.

here is the last trading week of the year dow down 8%. s&p down 19% the nasdaq is down nearly 33% so far this year. certainly there are buyers in the market for the next couple days treasury yields. 10-year treasury at 3.78 2-year treasury at 4.5 we did see yields tick up on friday after the fed preferred inflation gauge on friday. we will see what happens from here let's talk about china and covid. here is the covid policy it is changing china now ended unof tone of th remaining policies to no longer require passengers to quarantine upon arrival on the mainland that starts on january 8th

arrivals had to quarantine between 10 and 14 days this is now a five-day quarantine and followed by three days at home it will stop tracking close contacts and halt the designation of risk areas and cancel restrictions over port of goods. and china dealing with the covid infection. one hospital telling to prepare for a tragic battle as it expect half of the city's 25 million people to be infected by the end of the week. the health commission said it would halt the publication of daily infection numbers because of doubts of the data reliability. the official death toll remains low as officials redefine covid deaths to report deaths from pneumonia or respiratory failure. against that, the china's biggest cemetery and funeral operator has jumped to a 52-week high after it rose 80% in two

months >> bloomberg reported on leaked figures. as many as 250 million people contracted covid in the first 20 days of december as the flood gates opened i talked to people who work at companies with large operations in china they say it is like march of 2020 with none of the western medicine medicines. now people going to macau to get the mrna vaccines. >> everybody is waiting for the opening of china that is the other part of this the question is now they opened up, but are people at this point going to go? all because of the spread of covid. if you get there and you don't have to quarantine, but if you get covid, you definitely have to quarantine. that is its own p complication

>> i think there will be the natural immunity that takes hold after a critical mass of the population recovers from the virus. what did dr. gottlieb say? either people have it, got over it or died you may not know that's the problem with not having reliable data you may not know. >> interesting decision in terms of the metric and how they are categorizing a death we, in the united states -- >> if someone has a pre-existing conditions and also get covid and die, the official death is because of the pre-existing condition. >> probably a lot of people in the u.s. think we should have done it that way, too. news alert out of china. reuters reporting that tesla

will reduce a production schedule at the shanghai plant through january. that is according to the internal scheduled review. tesla did not release a statement for the schedule now to holiday travel. southwest airlines cancelling more than 70% of flights yesterday and 60% have been scrapped for today the airline warned that disruption would continue this week as it would only operate a third of the schedule. southwest citing fog in san francisco and staffing shortages in denver and internal technology in addition to the winter storms plaguing other airlines over the christmas holiday. the department of transportation said it will examine if the cancellations were controllable and if southwest was complying

with d.o.t. rules and customer service plan pete buttigieg tweeting they will have an update on this situation and they are looking for answers. we will see what the federal government is able to uncover here or if it is bad timing and a lot of snafus at once. >> timing or something else? >> hard to know. hard to know the pictures from bwi and st. louis. >> i will say, by the way -- >> hundreds and hundreds of people sleeping in airports. apocalyptic. >> a major shoutout from the sorkin family. i just got clear a year ago. >> yes possibly the only band wagon >> you see the clear line is longer than the tsa lines. you have to make your own

choice folks in vancouver, we were very, very late and we got to seattle. it was a planes, trains and automobiles situation. nice to see you. >> nice to make it through the syracuse airport did not have clear yesterday they moved us quickly. thank you to everybody working in the meantime, an update on the winter storm. death toll in the u.s. is 57 with 27 in the buffalo area alone. heavy snow and sub zero windchill temperatures which led to flooding and power outages and more than 1 million customers lost power officials at the buffalo airport planning to reopen today that has delayed until tomorrow now. additional foot of snow expected this afternoon in parts of the region there is hope in sight

temperatures expected to rise above fwreezreezing by the end h week >> we had family members not able to join us in upstate new york when i told my daughter i was coming here, she said you can't. the runway is too slippery i made it. we're all good >> you were in buffalo >> syracuse. >> not quite the worst >> very cold very bad traffic jackknifed tractor-trailers. we still had power generators were are fired up >> yeah. generac. coming up, four trading days left in 2022 we have the squawk planner coming up next. later, the latest on the case against sam bankman-fried we talk to former s.e.c. chair jay clayton at 7:30 a.m. eastern. you are watching "squawk box" on cnbc

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time for the squawk planner. a few data points. we get the s&p case shiller home price index and consumer confidence numbers pending home sales are due out tomorrow at 10:00 a.m. and weekly jobless claims on thursday despite the quiet week, there is data to hang our hats on

futures are in the green they have been all morning joining us now to talk markets is sylvia jablonski and efan devitt sylvia, we see green across the green, but that belies what happened the rest of the year. how does that set us up for the next few days? >> good morning, kayla it is always nice to see green on the screen going into the year and i think we all hoped we would see the tailwinds whether it was midt-term elections or se seasonality. i think the china reopen story is something that will weigh positive on the markets near term next year, we will have the same problems we have finishing off this year which is inflation and a fed that is just hellbent on

reducing it to 2% and raising rates and getting to the 5.1% with the strong labor market we have concerns going into the year over what margins will hold and the impact of the dollar and i think on the positive side, we want to end on the positive note for year end at the end of 2023, we will have a different picture where some of the stuff phases out. job market is a lagging indicator. corporate earnings may hold up because of the consumer. we will see how it pans out. the rallies are nice if you want to take a little bit off the table. the 3% to 5% dips will help investors gather acorns for long term investment. >> acorns. i like that. >> sylvia just laid out the

variables that the market will digest and a lot of those would seem to be positive factors. i think investors were served humble pie because the market didn't actually do what a lot of investors thought they would how do you predict and how do you play what will actually happen in the next 12 months >> it was appropriate we started the segment with china and 2020 and comparing to march of 2020 after what we take into account. 2020 is when we turned our lives upside down. we had a brutal 2022 in terms of equities and bond performance. for that reason, it is investors taking a breather, i believe, in the last few days of the year just to take stock and recharge to prepare for next year next year is going to see a digestion of the issues.

i agree with sylvia. we will see moderation with inflation and us factoring in the fed rate rises we have to contend with the weaker dollar. that will have a negative effect on many aspects of the u.s. economy. we're also going to have to deal with the factors coming through. the house price measures will be weak and employment numbers. >> sylvia, how do you take cover in value names do you keep more cash on hand? what is the strategy >> i think it depoendends on wht type of investor you are if you started the first half of the year defensively positioned in health care and energy has held up and then you can look for alternative solutions which is something we like and has

great growth prospects if you are a long-term investor, nasdaq is down 32% some stocks like nvidia is down. if you look at the next decade of innovation and what we invest in like ai and electric vehicles and data processing, all of this precise defense spending and things, you need semiconductors for that you need 5g for connectivity you need technology to back all these things up. the stocks down 30% to 50%, i get it, they were overvalued last year. they have been taken off pedestals. it is one of the best valuations that we have seen in tech stocks over the last decade i think investors will probably allocate there if they have longer time horizon. that won't play out in 2023, but it will if you hold on to the next three-to-five years >> do you agree with that?

>> in terms of the value stocks. most will nurse wounds from the portfolio fallout you mentioned before we see with stocks and bonds fall those clients who have done better are risk certifications which are we are seeing interesting things with the fixed income. we are expecting clients to diversify beyond traditional areas. i agree around renewable energy and sustainability play will continue to have traction as we move into 2023 we will see the pollicization with the data and see a need for the sustainable business plans we can't forget the crisis of energy security and ensure pricing will be meaningful tech stocks are interesting, but our clients are wary over what happened in tech with the

fallout, but the lack of recovery there, although we have recovery in value stocks at the end of the year and the c contagion with the tech stocks with ftx >> some situations we are scratching the surface for now, we appreciate you getting up early with us thank you. coming up on the other side, new data out from mastercard on holiday spending you don't want to miss it. another attack on the power grid over the weekend. this time in washington state. we will have the details straight ahead

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are you sitting down time for the executive edge. holiday sales rose 7.6% this year small increase from last year. the number coming from mastercard spending pulse which tracks cash and cards. we will talk to steve sadove who is the former ceo of saks. he is on in the 7:00 hour. >> one important piece is restaurant spending up 15%. >> crazy >> people are tired of cooking >> and the prices are up how much of this is volume versus price >> that's a good question. we'll ask steve.

prices at restaurants are up 9%. do your own math >> okay. >> incredible. now to a troubling story from washington state. power substations were attacked in on christmas day in pierce county knocking out power to 17,000 people. blue flames could be seen shooting into the air at one substation law enforcement tells nbc they received a memorandum from the fbi warning over attacks in the pacific northwest. police are hesitant to call it domestic terrorism they don't have a suspect. this comes a month after the attack in north carolina which left thousands of people without power. incredible images and a sad story. the idea that there could have been a warning and something done in advance of that. >> i don't know. do we know i don't think we know. >> no. still looking for answers.

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are good morning welcome to "squawk box." we're live in the nasdaq market site in times square the dow jones industrial average looks to open 220 points higher. s&p 500 about 26 points. nasdaq up 66 to the bizarre story of the day. congress member-elect george santos admitting to the falsehoods in the background and

education and history and properties representing parts of long island and queens. he said the sins are embellishing his resume. he lied about graduating from college and claims of working for citigroup and goldman sachs. i'm surprised he didn't day he came on "squawk box. he doesn't own a portfolio of 14 properties he plans to take the oath of office and join the house majority on january 3rd. kayla tausche is co-hosting. you are miss washington. what do you make of this >> unless you have a referendum, now this information has come out, and give voters a say if they care about this or whether they like his personality. >> is there nothing -- he says

this isn't criminal. is there nothing illegal about complete -- this is making up -- this is like rewriting your entire history and public basis their vote on history which is a lie. is there no law? >> i'm not a lawyer. my husband, who is, doesn't like when i play one on tv. i won't go there the congress does have various types of apparatus toing investigate these things ethics committees and the like >> can we talk about the complications/corruption of washington which is if you are kevin mccarthy, you want him in that seat. you don't want to let him lose that seat. that's a bad seat to lose, right? that seat, by the way, would go to a democrat. >> right. >> he has no incentive to say we can't have you >> right

>> unless he has morals. that would be good >> he could make decisions about committee assignments which he has done in the past when there has been uproar over things that other members have said or done. that is something he could do. he could also just refer it to one of the investigative committees >> what do they do slap you on the wrist and say thank you for playing? >> they take 24 months and dig into something and by that time they are out of office >> i don't get it. i don't get it >> yeah. >> do you get it >> where is polling on this? do the voters care ultimately? >> the voters don't care then i don't know what we're doing here anymore. >> they believe they went to the ballot box and voted for someone who had these credentials and pedigree they ultimately liked the way he presented himself and policies he stood for i'm not saying what he did is

right, it was incredibly brazen. i don't live in that district. i can't speak on behalf of those who do. >> i don't know. i don't understand how we moved to this -- >> where there are no rules. >> this is not misinformation. this is blatblatant lying. >> certainly ceos have lost their jobs for this. >> is there no sense of moral outrage? is there no sense -- kevin mccarthy has the practicality of wanting a guy in this seat and voting his way and doesn't want to give that up. i understand that. at some point, do you say i'm a better person than that? >> maybe he can come on "squawk box" and talk about that

interesting piece over elon musk elon musk's problems at twitter is tarnishing his reputation as a genius it says visitors to twitter wait more than an hour after called to see musk. he is sometimes watching youtube videos during the meetings we have hope king with us. hope, give us some hope. i don't know i'm still holding out hope not holding out hope i think the man is still pretty smart. genius i'm sure people can debate the phrase genius. maybe we can argue the twitter thing was a mistake. he would say it is a mistake do you get a mulligan here or there this. >> good morning. thank you for having me on hope you had a good holiday. i think stories are depaeendento

the time frame we look at them he is not holding up his end of the bargain and the promise he said he would deliver for twitter. maybe a year from now, the story will be different. the story over the weekend from the post is correct and saying his reputation is in question. i think the big picture for me is that it is coming into question at a really -- at the worst time for him all of the macro conditions not only here in the u.s., but abroad, are against his favor. you look at china. that's a story that is not goin away that market for evs is the largest in the world market share there is down as it is here. his reputation when it comes to twitter is impacting reputation across all of his companies. >> i would argue that and he

would argue that tesla was overvalued to begin with we have seen a lot of people hurt in the process. the larger piece i've been curious about since he bought twitter is the reputation at twitter impacts the other businesses from consumer standpoint and regulatory st standpoint and spacex with the defense contracts. how the reputational piece comes into play may matter to everything else. >> he is just talking too much he is talking too much on spaces you and i were on the same spaces together a couple of days ago where he promised he wasn't go to sell any more stock. he is leaving open all of this room for critique for analysis for the world to weigh in. that is where he is showing most vulnerable he is making himself vulnerable. >> so the other piece is and we

were on the spaces this is the conversations he had about how many shares he sold and how many shares he planned to sell. he said he was not planning to sell shares for two years and allowed for maybe in a year. i don't know where you took that we'll see what happens over the next year. my question is if he is not going to do that, do you really believe this business will be cash flow positive or you have to break even for the next year and what does it do in terms of his ability to -- i thought he would try to buy more shares or cram down other investors or buy the debt at a discount i don't know if he can do that if he is not selling more shares. >> i agree with you. just depending on the timeline we are talking about here. maybe in a year. maybe in two years i think one of the best analogies i heard about elon

taking over is you have the mr. beast of youtube taking over twitter. i know he has made a lot of comparisons to youtube you just talked about how he is obsessed with watching it. if the biggest creator on twitter can make the product more attractive for more twitter cre creators, that is where the hope is coming from i know people are debating if that view counts on anything i have been testing it as a user or somebody who likes twitter, i find it helpful that people are interested in things i am writing. i think he as a product manager -- >> hope, i'm so insecure now that the count is public i'm almost scared to tweet >> first of all, you shouldn't be scared. you have a good audience who is

loyal to you think of instagram they were giving people the ability to hide likes. as power users of the platforms, i think people are in tune with what they want to configure the product and someone who, before journalism, i was a product manager. i relate to him thinking through this stuff you interviewed reid he said it was brave to experiment in public that is something that ceos can't do and don't want to touch. that is fine elon is taking it on himself that is where he is making himself most vulnerable. going back to the analytics. people will figure out if they like it or not and if they use it, it may increase interaction and advertisers can see how well tweets are doing >> i think it empowers more of a group thinker because then you are drawn to tweets were more

views. you should look at this because 11,000 people have looked at this and there are questions of the long term. hope, you are talking about how he is experimenting behind the scenes and twitter is a private company, but tesla is the proxy here even if he finds someone else to run twitter, i wonder the timeframe to shore up the company finances as bankers are discussing putting margin loans against tesla and leveraging tesla to make sure that the debt they are holding for twitter is not riskier. how long do they actually have to figure out if this is working? >> they have basically until tesla market share gets to a precarious state as i mentioned with china and here in the u.s., the market share tesla holds with the registered evs this year has dropped to 65% from highs of 79%. over in china, market share has

dropped from 13% last year to 8% this year. there's a demand problem in question that other investors who are trying not to think about twitter at all are thinking of tesla in racing agk ford and audi and volkswagen is coming out with their models this is coming out at the same time his reputation is by twitter with everything he is doing there. there are too many, now, i think, fires for him to put out. that is one reason he has been taking to twitter space and getting on the spaces where there are a lot of tesla enthusiasts to try to talk more about that company i think the last hope for him is spacex the only private company whose private market has gone up to $140 billion something could be salvaged

there. >> hope, do you think it is impacting sales? some say it impacts positively and others say negatively. i know somebody who said they planned to buy a tesla they said i don't like this guy. i'm not doing this other people send me notes on twitter and say, you know, i was not a tesla person before this, but now i like his views on freedom of speech and what he is doing there. i'll go out and support him and buy a tesla. are there more people in the former or latter >> will see when they report and how sales are impacted and shanghai is shutdown until january. that is an impact on how much they can sell. to your point, those numbers, depending on more people emailing saying they are excited about tesla, if there are more of those, tesla will be in good shape. people have other options on the table with evs

if they were thinking about with it and dissuade about tesla, this may be the final straw and they can go elsewhere. >> thank you, hope big incentives to take delivery of tesla before the end of the year i don't know if that is good or bad. >> he has the race every quarter to get the numbers up. >> thanks, hope. i appreciate it. happy holidays >> you, too. >> i want to button up our conversation about santos. the house can only prevent candidates from taking office if they violate the age, citizenship and state residency requirements the disclosures to be problematic. >> financial disclosures. >> if he aomitted or lied. >> who has to bring that case? longer conversation. coming up, southwest air

cancelling 70% of flights yesterday as other airlines dig into clearing up the backlogs. and later, former s.e.c. chairman jay clayton joins us to talk about the ftx case. you can watch or listen to us any time on the cnbc app

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cancellations by southwest airlines let's talk about it with leslie joseph leslie, we have to talk about what is going on here. a lot of folks don't know. there is con fflation of issues. is this operational or something else >> it is operational pretty much everything that could go wrong went wrong. the massive storm last week. every airline suffering from alaska and seattle and portland with issues. it is coast to coast of the denver, chicago, new york, washington, d.c. issues all over the country. southwest had more problems than other airlines crews were out of place. one by one, the systems seemed to breakdown at southwest. labor shortages with denver and crews and pilots and flight

attendants were unable to rebook on other flights to get hotels and position p themselves it cascaded to the mess we see today. southwest says it will take days to get the operation cleared out. this is the busiest travel time. >> i get that. by the way, i had my own prevails we were talking about it i was canceled out of vancouver. drove five hours to seattle and took alaska airlines to salt lake overnight red-eye on united, i want to say. i lived through this myself. what wi don't understand is why southwest was so particularly -- all of these airlines were suffering and in a tough place they were in a worse place did they not have the act

together >> one of the things the airlines were able to do is cancel flights ahead of time what happened with southwest and listening to passengers and problems and getting information about whether the flight is canceled or not is there were delays, delays and then canceled theres were federal rules going into effect. pilots and flight attendants and planes out of place. from there, it snowballed. southwest has a different operation with the airlines. it might seem simple they fly 737 pilots and trained on one type of aircraft. they fly all over the country. whereas delta and american and united can fly in and out of hubs they were able to clean up the operation faster technology began to fail crews as irate as customers because they could not improve

services flight attendants were costing the airport with the union the easy thing for airlines to do is shut it down and start again. we have hundreds and thousands of travelers stranded because of this >> leslie, we will talk more about this in the next this with you in the next hour, and looking forward to that conversation hopefully folks don't get canceled between now and later some of the biggest technology losers of the year. a reminder, get the best of "squawk box" in our daily podcast. listen anytime we'll be right back.

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welcome back to "squawk box. as we close out 2022, big tech stocks are down but some have proved more stable this year david newman joins us. good morning to you. are the old guys going to be new again? stop going back to the old names, it's not going to work. >> i think the real question here is more about what's going on in tech over the last year, andrew, we had a huge digital transformation investment that went on from companies, and all of a sudden we are seeing all the layoffs and pullback going on, and the companies that they started, whether it's amazon's digital warehouses or e-commerce platforms, and they hired a lot

and now they are getting rid of the head counts and the projects did not get completed, and now they are going back to how do we get out of the deflationary aspect of this, and we need to get more value out of it because we can't put everything in the cloud right now. >> if that's the case, what are you buying and what are you selling? of those old names are there any you want to touch? >> well, we have seen them hold up more stable, as you suggested, andrew. you have to like some of the companies that are core technologies like sat and oracle companies cannot move off these platforms and many are helping move customers to the cloud so you are seeing with a is going on with oracle and its cloud

business nearing $10 million, and it has serious investment going on in some of the modernization technologies as well we have seen ibm touch new highs this year under new leadership, and the company has gone to cloud and ai in a big way, and it's showing to be stable and the growth has been solid. while i still like amazon and microsoft and the companies with the public cloud in the future, it will be more of a hybrid end result and we are seeing that right now, and not' everything s going to the public cloud where companies are spending back cutting. >> we have to leave the conversation there we appreciate it what is old is new again, it appears, for 2023. we will check in with you throughout 2023 and see where things stand coming up, four trading days left in the year, that's next.

and enth jay clayton, former sec chairman will join us next on "squawk box. we'll be right back. ♪ the old way of working is deader than me. ♪ ♪ we'll scale up, and we'll scale down ♪ ♪ before you're six feet underground. ♪ ♪ yes, this is how, this is how we work now. ♪

good morning are we seeing the beginnings of a santa claus rally as we get

ready for the first trading day of the final week of the year. chaos travel across the country, and southwest airlines feeling the brunt of it. and then china crapping traveler rules. the second hour of "squawk box" begins right now good morning welcome back to "squawk box. we're live at the nasdaq market in times square, and joe and becky are off today. take a look at u.s. equity futures as we have a mini santa claus rally before the end of the year, perhaps. we will see the nasdaq up 57 points and the s&p 500 up about

25 points. treasuries right now, the ten-year note, 3.779 and then take a look at oil. last week crude had its best week in more than two months it was up more than 7% things were chilly, and that's probably why and as we still talk about the sbx ftx of it all, and bitcoin, we are going to talk a lot more than that. there's a lot of conversation about the bail, the $250 million, how does he have the money? does he have the money the parents signed their house away this is totally crazy. we'll talk about all that because we have jay clayton coming up, too >> we did more resolutions as we

ate copious amounts of food. that type of thing >> and the top headlines, at least 28 people have died in and around buffalo, new york, in one of the region's worst weather related storms and flight aware, southwest canceled 70% of its flights yesterday, and all of the airlines hit over the weekend by the weather, and delta only canceled 9% of its main line flights and the department of transportation is saying it will

be complying as i was saying earlier, the sorkin family was a victim of the weather and the travel delays we had a flight that was canceled >> i think you are in very good company with a lot of people nationwide >> literally, the flights, though, if we had not landed this last flight that we found, i think we would not have gotten home until thursday. it would have been, almost, like, four or five days. that's what is happening across the country. >> this happens in some form or fas fashion every year, does it not? i was living in london and there was an inch of snow on the ground and i missed christmas with my family and everybody was sleeping at heathrow it's the season for this type of thing. i feel bad for the travelers that got nothing but a meal

voucher for waiting days and days at the airport. and then passengers at china will no longer need to quarantine, and it effectively spells the end of its zero covid policy starting on the 8th, authorities will stop tracking close contacts of covid patients and stop designating areas of risk, and the quick dismantling of rules in place for close to three years is having widespread consequences doctors say hospitals are overwhelmed with five to six times more patients than usual and china could see millions of daily cases next year and 1 million deaths china encountering what the rest of the world went through earlier on in this pandemic, and the question is how quickly the virus will move through the

population there >> and also, therefore, what the affect will be on the people from the west going to visit and travel -- so many people have been asking for china to open up, and now china has opened up and i don't know if it's going to open up as quickly as people expected >> could take sometime could take sometime. let's get over to dom. >> we are going to stay on the chinese story right now. shares of the tesla are down about 4%, and over 2 million trading shares premarket now, first tesla has to spend its production at its chinese production plant in shanghai according to a report from "the wall street journal" a report from reuters are

looking at used car prices of tesla models are falling at a faster rate than the used car market overall, and down 65% overall year to date we will keep an eye on the tesla shares staying on the china ev front, you have the tesla competitor that is down 5%, nio it's cutting itsfourth quarter company out look as the company grapples with challenges and delivery production and supply chain constraints caused by the covid restrictions in the country. and nio expected to deliver around 39,000 vehicles we are seeing upside instability in bigger names after a very rough week last week, tied in

part to more pessimism around future capital spending plans amongst other things and then it has lost over one-third of its value in 2022, so we will keep a close eye on the chip stocks. those chip stocks are seen as possibly a leading indicator for the rest of the tech sector, so a close eye there. >> we had a early guest, dom, that said that is probably a good buying opportunity. we will see. interesting to highlight dom, thank you and then senior economics reporter, steve liesman, joins us with that story >> global food prices have fallen for the first time since russia's invasion of ukraine, and global supply chains are

clearing the result has been falling overall inflation, not just in the u.s. but globally with jpmorgan forecasting sharply lower inflation around the u.s. and europe goldman sachs writing yesterday the supply chain recovery took longer than we expected but finally arrived. next year jpmorgan sees the trend happening globally and believes central banks will follow it. and they said our core inflation will begin to flow and should allow most central banks to pause in the first quarter of 2023 even as inflation remains above target u.s. data on friday showed deflation according to the three month annualized numbers, and

then whether that measure comes down will help determine does the fed raise to 5% and stay there or above 5% and stay there, or does it cut as markets now predict. key risks to the global inflation, cited by almost all of the forecasters, they cite the possibility that higher wages pass through to consumer prices >> steve, i want to ask about lower global inflation it's a double-edged sword. on one hand, yes, rates are lower but how much of that is because there's a possible recession and how does that factor into how what is going on here >> some of the decline in global prices is because of the weaker prices, and you have supply

chains clearing and what is happening in terms of energy prices they found a way, it looks like, in europe to put a cap on what is happening with energy prices there, so yes, it's a do double-edged sword in terms of part of it being weaker economics, but a clearing from the pandemic supply problems >> how much more do you think the fed needs to see before it wants to pause the fed is really focused on the coa coarser sreuss there was a report this morning in the journal that those who are losing their tech jobs are finding them very quickly, so the labor market does appear to be very tight, so the fed will want to be sure that we don't have the wage push inflation coming through and it might take a couple months before they feel secure about it.

>> were you surprised by that story, steve there's a lot of fear -- >> not at all. i have been talking about it fog the anecdotal evidence about the layoffs, the data is not showing up in terms of big increases in jobless claims we have the continuing claims going up so slightly, but the unemployment rate remains low. >> but the fascinating piece is we have been talking about tech specifically and how the valley was being impacted and whether if you lost a job in tech would you get a job in tech or elsewhere, meaning in a world where venture capital wasn't plowing into new startups, where a lot of the big companies were not hiring, and when the jobs going to be in the same space or go elsewhere >> well, i can't say, and certainly will get angry e-mails

from people who are having difficulty finding work, andrew, as is always the case, but before we went into this, we had a deficit of trained engineers and trained software engineers, and especially, by the way, andrew, what i heard, it's tough in the hardware sector, and that's a difficulty where some of your software engineers do not pass over into the hardware sector, but we went into this with a deficit, and yes, there's loosening up in the labor market valley there, but there appears to be, according to that one survey, and some day sawta shows people are losing their jobs and finding them quickly >> now we are seeing announced layoffs spread to banks and manufacturers, and you wonder how many of those workers can be absorbed by the other jobs out there? >> i think it's going to be -- it's going to be what they call

fr frictions in the labor market. that will always be the case a person who is a good truck driver may or may not be a good warehouse worker, and a person working in a bank may not go over and work at another job or industry but in general, what you have here, remember, we were talking about lowering standards before all this happened, and people were saying, you know, we didn't need to have that box checked for this particular qualification. it does appear we might get some loosening in the job market, but what we are talking about is the million-dollar question here, how much does the unemployment rate rise as the fed increases interest rates goldman sachs thinks we get to 4% if we get out of this particular rate hike cycle with a 4%

unemployment rate, we would have gotten off very cheap. we are now at 3.7, and there are predirections, and the fed is in the 4.5 to 4.6 area, and if we have just a percentage point, we would have done good and the job openings are declining, but not actual jobs declining. >> and chair powell said that himself in recent months, where you maybe see this is in the openings drying up and not in the unemployment rate. that would be the best case scenario we will see if it pans out >> you are right, it could get worst than that, but that's the best case scenario >> good to see you, as always. we will talk much more about the tech layoffs but first, we have brand-new data out from mastercard and

former sacks chairman, steve sadove will be here. look at the santa claus rally, the do you up about 225 points, and the s&p 500 up about 22 points you are watching "squawk box," and this is cnbc

brand-new retail data as we

start to get a full view of year-end spelling, and mastercard says sales ran 7.6% more, and that is across all forms of payment and excludes autos. the former chairman and ceo of sachs,takeaways in your mind from this report? >> it was different from other holidays the overall sales of 7.6% is pretty healthy and in line with what mastercard forecasts going into the season. online growth was a little more than 10% it was clearly more promotional come into the season, so as we talk about units versus dollars,

there were probably a lot of units of the excess inventory being cleared during the holiday. the restaurants and going out types of categories were performing very well, and it was also a little bit of a slowing versus what we had seen during the summer in the summer, we had seen double digit growth, and in that 7.6% range is what we are seeing now, and so it's a promotional season, and a season with ups and downs and got off to a strong start actually before november 1st, and you saw the extra prime day and it went aggressive during the thanksgiving period and you saw a deep lull early december and a pretty strong close as we went into christmas >> seems like the promotional e-mails started going out at the beginning of october and end of september this year and kept going straight through the

holiday season, steve. but there were a couple categories that declined, nota notably electronics and jewelry. >> i think you have a consumer right now trying to get out a lot. they have been living through the pandemic and we are in a post pandemic environment. when you look at categories like jewelry, for example, it's important to look at it over a period of time early in the pandemic, people were not buying jewelry but they were staying at home and fixing up their homes you then went into a period of self expression where jewelry sales were very strong in the middle of the -- toward the latter part of the pandemic. now you are lacking very high numbers, so the jewelry numbers have come down quite a bit you have had a pent-up demand,

and they look strong but it's versus 19 in line with other categories but restaurants are the winners, and jewelry looks relatively weak department stores slowed a bit they were way down early in the pandemic right now they are growing at 1% they were growing at a higher growth rate, as we were looking at it in the middle of, let's say, last year you have a little bit of this winners and losers going on. electronics were strong early on in the pandemic when people were buying televisions and staying home, and now they are on the slower side. >> they got all the tvs they need at this stage a good context to have, steve. >> well, you have the winners that were the winners early and now are somewhat of the losers, the losers becoming the winners. as we contrary out some of the excess inventory, because clearly brands and retailers ordered too much of the wrong

product. as we go into 2023, we are in a little bit of of a normalized state relative to the category performances >> how much of this is based 0 inflation, too, because the price of a flat screen tv has gone down considerably in recent months, and we were debating this about restaurants early, you have a 15% increase in spending at restaurants but inflation is 9% at restaurants, and so how much is prices going up and how much is volume? >> a large portion of inflation, and it will vary from category to category. there's unit growth on top of the inflation. try to get into a restaurant in new york, for example, and it's pretty tough there's real demand going on in the demand sector, and in the grocery sector, food and

inflation is quite high, and that's one of the highest categories for example, let's take in apparel. you had a lot of excess inventory in the system, or homes good, and too much inventory where you are clearing it out because of the overhead supply and you are seeing very heavyunit volume growth becaus the dollar growth is not there because of the discounted prices the story at the end of the season will probably be a very good sales performance, you know, solid at 7.6%. the story about what happens on margins is yet to be written, and i think you will see a heavier promotional environment. we're seeing that right now. that will probably get reflected in some of the margins >> 7.6% year over year, certainly nothing to scoff at. such an important leading indicator before we get the official data, and we appreciate you walking us through it.

steve sadove from mastercard coming up, former sec chairman, jay clayton joins us this morning check out crypto this morning with four trading days left in the year bitcoin down more than 60% don't go anywhere. "squawk box" will be right back.

welcome back to "squawk box" on this first trading day of the final week of the year we are watching for signs of a santa claus rally. any signs of it in the futures right now would be in the green, and the s&p would open up by 2, and the nasdaq by 35 a since 1950, the s&p 500 posts an a ridge gain of 1.3% during that time, and one study shows the santa claus rally has materialized four out of every five years since 1950, but we have had one, andrew, for each of the last six years and the only time it has happened seven years in a row was in the 1970s.

>> what do you think are you betting? >> i am not a betting woman, but -- >> if joe kernen was here, he would find a way to bet this on draftkings and woods ready to close out the year and set to finish 2022 near the bottom of all mutual funds, and down by two-thirds since the start of the year with the high growth companies she liked hit so hard by the fed increases as of the middle of this month on track 3,500 actively mutual funds sitting at number 3,544. if you look at all the money it made from the very beginning, it's now, i believe -- >> back near where it started. >> back near where it started, even five years ago over a real period here. when we come back, we will talk

about the tech sector and all the layoffs from the biggest names cutting jobs, and what investors may need to know and what job seekers may need to know and then the latest on the downfall of the ftx and the prospects of regulations in the prospects of regulations in the new year when we com is going through the “woof”. follow squawkpod a reliable way to help keep everyone connected from wherever we go. well at at&t we'll help you find the right wireless plan for you. so, you can stay connected to all your drivers and stores on america's most reliable 5g network. that sounds just paw-fect. terrier-iffic i labra-dore you round of a-paws at&t 5g is fast, reliable and secure for your business.

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welcome back to "squawk box. right now we are going to talk about the collapse of cryptocurrency exchange ftx. and now a judge being told bankman-fried and other ftx officials received loans from alameda, according to a transcript, and alameda hid the fact anybody could borrow money, and now two have plead guilty relating to charges in the

collapse of ftx. the board of american express, and if we talk about ftx, i believe -- could we talk for a second about the sbf of it all in terms of the bail hearing everybody is sitting around going, oh, my god, he claims he has no money, and he doesn't have $250 million, and his family is signing for it they didn't pay 10%, and didn't even put up $25 million, which is tiypically how it would work is this a sham deal? what is this >> i don't think it's a sham deal you have experienced federal prosecutors and a federal judge weighing in on this, and you don't see any real complaints from what is the experienced

community. there was obviously a determination that he's not a flight risk. i think that this part of the story will fade away >> the way i see it and the way i understand it, there was some back and forth before he left the bahamas, meaning there was an extradition issue, which is he could have objected to extradition and he didn't. as part of that they agreed to some kind of bail proposal in advance of that to try and actually figure this out he clearly wanted to get out of the prison in the bahamas, which was not so great i think the prosecutors, by the way, were worried about him being in the prison, and unclear what could happen to him in that context. there's a lot of issues that go into this. people say how is it possible, a lot of people ahead of their own trial can't get out of prison, can't get bail, and this guy can potentially steal $8 billion, if, in fact, that's ultimately

what happened here and he's hanging out at his parents' house. >> you did a great job laying out all of the various considerations that would lead to a result, you want an expeditions extradition, and you want to get to the bottom of this, and the american people are watching this and if you are a prosecutor you want to move quickly to assure people when something like this happens, you can act. all of these things weigh in the balance of these types of decisions. as far as where we stand from a prosecutorial point of view, they have their person they have what -- you refer to the transcript, and the complaint, you can see a detailed factual predicate laid out to what the charges are here >> right >> if i am in that position today, i feel pretty good. >> the $250 million number, and the public doesn't understand what bail is, and it means you

have to put up $250 million let alone the 10% piece, and this is atypical in that regard. is that just like a fictitious number for press release purposes >> i don't know. whether it's 100 million, 250 million, 50 million, the question is how many assets are at risk for the people who posted how incented are they to make sure the defendant shows up. >> here's the next piece we have ellison, and wang and possibly others who, i imagine, they are flipping, and when i say flipping, prosecutors flipping if you are sam bankman-fried, what do you do at this point, meaning do you plead do you not plead if he were to be convicted, you could see this being a madoff

situation, where he would be in prison for the rest of his life and he's only 30 years old right now. what kind of settlement could be palatable where you would say i would plead guilty and spare everybody going through years of trials and what not for what what kind of sentence would be acceptable to the public that you think would be a reasonable deal >> look, i am not a criminal defense attorney, so we're all sort of armchair quarterbacks on this >> yeah. >> and that's probably what has been discussed around the dinner table over the last few days >> at andrew's dinner table. >> yeah, we were trying to think it out, thinking through would 30 years, 40 years, 50 years be the answer >> all of these things will be the subject of negotiation, if there is some kind of plea arrangement, and like you said before, there's a ton of considerations that will go into this are we going to get to the bottom of it

are we going to demonstrate that we will see. i think there will be tremendous pressure to reach a resolution absent a trial >> the coolest irony, in the interim, customers are waiting on their money they may never get back, and people prioritizing the process, you and i both covered the 2008 financial crisis, and what did they make fromthe lehman meltdown $4 million >> somebody is victimized in a securities situation or otherwise, getting their money back in five years is almost the same as not getting it back at all. and when there are retail victims

victims -- >> what do you think there's a chance the money is there? or has it all been gambled away and gone to money heavy? >> what cents on the dollar will be recovered, and it's cents on the dollar and not dollars >> a lot of people look at finance, got $2.5 billion, and there was a payment made a year ago, and i don't know if you focused on this, and it was to buyout their stake in ftx, and do they go after that money? they can try do they have a compelling case what i said on the show is i could be a robber and go to a restaurant and spend money at a restaurant and you can't go after the money at the restaurant unless you think the restaurant was in on the robbery. >> and there's case law around when you are able to pull back money from what i would say is commercial third parties it depends on whether they know something is going on or it's a

arms length relationship crypto generally is going to continue to be tested over the next several months, at least. >> do you think this situation is unique to crypto, because a lot of people are pointing it is crypto in general is a hall of mirrors and a mirage, and the commingling of funds -- or could this happen anywhere >> i would agree with you. this is financial shenanigans we have seen as old as time, as old as markets, and use of customers' funds and the like. but there's something about crypto, particularly offshore crypto is going to continue to be tested. the fact there are not financial statements in what is the core of the crypto market look, people are going to continue to question that. >> i want to talk to you about china and supply chains, and

there's a take on what is going on there, and we have been talking about covid all morning and the good news is china is opening the borders so westerners can go without the kw quarantine rules that used to exist, but covid is spreading there like wildfire and there will be a lot of deaths, and they are scaling back production and what not what do the next couple of months look like to you? >> i would say early in '22, we had china's supply chain, and russia energy prices, food prices, and we had labor markets dislocated and inflation if you look at each one of those, they are still interrelated and still big question marks with china reopening, what does that mean? people speculate is it going to cause energy prices to increase which is going to put upward pressure on inflation? obviously a possibility. is the reopening something that

with covid, the numbers, they look pretty dreadful are we in any better place from what i would say is an energy agriculture dislocation point of view some would say so but we don't know labor, you commented on it we seem to be finding our way in a labor market that was significantly dislocated, and inflation may have peaked, but it's still pretty high there's a lot of irregular hra uncertainty out there. >> what is the clayton house view, and given you have a lot of hands in a lot of different cookie jars -- >> bad metaphor considering the conversation we just had >> you are on the board of apollo, and american express, and we were talking about mastercard numbers in the way of

consumer data, and is '23 better than now >> let me be pollyannaish here, and we have better information than in the past, and it tells us how to plan, and it's so much better today than a decade or 20 years ago. whether we have a soft landing, it's driven by the fact that we are able to coordinate across the globe. >> but that information was not good enough to know that inflation was not transitory in 2021 >> let's talk about all -- you're right i do give people somewhat of a break that you had sort of the china continued zero covid policy, and you have a hot war in russia and other things that contributed to the nontransitory -- who can predict how much money congress is going to spend

>> you got away with a whole segment without talking about elon musk. >> yes, thank you. >> do you want to talk about mr. santos >> here's what i will say, for america, for our politicians, we have the ballot box and that's how we handle those things >> this is a longer conversation thank you for coming in. wish you very happy holidays thank you for coming in. >> in person, no less. >> it's a short subway ride. >> are you in town >> yes, in town. coming up, we will talk big tech and layoffs in the sector, and why might the impending digital markets act be tough on apple. listen to us live using the cnbc app. stay tuned much more "squawk box" to come look! what's up my trade dogs? you should be listening to me.

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welcome back to "squawk box. apple and google's worst nightmare could be coming true thanks to a law in europe. steve is joining us this morning, wearing a blazer. >> yeah, a jacket. >> what is going on?

>> this is one of two major laws passed this year targeting big tech companies the dna will have the biggest impact on apple and google bloomberg reported a couple weeks ago apple is getting a new version of ios next year, the eu will designate gatekeepers, and it's written specifically to target companies like apple, google and amazon. after a bunch of red tape over the next few years, companies will have to comply with the new rules or face fines up to 10% of the global revenues, and they have to do it by march of '24. and apple and google may find ways to charge fees anyway through the app stores, something they have done to get around other app regulations in countries like south korea

it may not be a huge financial hit, because in apple's case, eu sales are only a small fraction of sales made in the u.s. and china. and in the meantime, the eu is regulating american companies for american lawmakers i'll send it back to you >> here's the question often times when things happen in europe, they come to the u.s. anyway how much of what we are seeing that is going to be forced, if you will there, will be voluntarily taking place here? do you think others will open up anything >> it doesn't seem like that, andrew, because the report said apple is building a separate version for ios just for the eu, meaning there will be a version in the eu in compliance with the eu law, and in the rest of the world it's the same old ios, and that says apple is willing to

fight it country by country in order to protect their profits >> nice to see you coming up, much more on big tech and a season of job losses in the industry. how many of pandemic-related how many can be blamed on fears of recession we'll talk about that next when "squawk box" comes right back.

welcome back to "squawk box. many of the largest tech

companies laying off employees to cut costs there are signs layoffs may continue next year tesla told employees a new wave of layoffs is coming in the new year we'll talk more about tech layoffs, let's bring in re: wong principal analyst and founder of constellation research ray, good morning. certainly the numbers are extremely large, then you have news like in the journal citing s zip recruiter. they have been able to find jobs within three months. >> tech workers are still in demand what we can see is we've gone from three jobs per applicant to 1.5 jobs per applicant since december they're still wanted the fact that we're seeing so many job openings become -- we're seeing the job openings there. we've just seen that it's in a slowdown in different areas and different sectors. you're seeing the shift from big

tech to smaller startups you're seeing from the big tech, dove kcon and big sector. >> intel said they are cutting the forces congress passes legislation that gets signed into law that will disburse $52 billion in incentives to that entire sector a lot of them did ribbon cuttings at new facilities and then to say actually we don't need 10% of our workforce. why is this happening? is the fact that other companies are doing it just becoming a convenient rationale for other companies that are looking to right size >> it's been going on since may. we've been psyching ourselves into a recession since davos people are saying are you hiring are you not hiring we just did a tech survey with digital officers, cios, ctos to see where they were with hiring. it looks like they plan to hire 30 to 40 perfection percent more, however, they're submitting two budgets to their

cfos one budget is saying all those job positions and openings you had before put a cut on them and then, of course, if we hit certain targets we're going to grow we're going to push for expansion. a lot of companies are looking to grow 30 to 50%. they're telling the street 15 to 30% and we've put in austerity measures a lot of folks don't believe we're walking into recession when we do the surveys with hiring managers, they're g gung ho. the cfos are being much more cautious. >> they're battening down the hatches for a potential storm. at what point do you think the companies will know whether that's on the horizon and what decisions they make from here. sometimes you hear from the executives, well, we're being conservative now but we plan to start hiring again in the second half of next year. where are we right now >> we're going to see that when we get to the third week of january when the q4 earnings start coming out and then of

course when we get into february when the q4 earnings for a lot of the sass companies come out that's when we'll see the shift. if the earnings are strong, we'll see 30 to 40% growth you'll see a different tune. we have to get past retail numbers and davos as well. >> the earnings story has been decoupled a little bit from what's going on in the global economy because earnings have still been really strong this year but these stocks have just been absolutely crushed, meanwhile, the global economy is softening. so, you know, who are these companies answering to, their shareholders or the broader external forces at work? >> you're absolutely right they're answering to two parts the broader focuses are around inflation, interest rates, inventory, infection and invasion those have been macro forces that are playing a huge role however, their shareholders are basically say, hey, we want you to bat ten down the hatches.

we know you're doing very well as the pe and multiples are down, the next step is seeing how the earnings are holding up. a number of tech companies have done well on earnings and punished because of interest rates. >> infection invasion and inventory. i think that is as succinct a list of what's forcing these companies to make these decisions right now. it's super interesting we will see how it plays out and hopefully the light at the end of the tunnel is coming up ray, we appreciate your time and be expertise today. >> thanks. happy holidays. coming up, after a year with more than a few wins for the biden white house, we'll take a look at what is ahead in '23 especially with a divided congress on tap. don't go anywhere, "squawk box" is coming right back

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the house whisperer! this house says use the realtor.com app to see three different estimates. also, don't take advice from people who don't know what they're talking about. realtor.com to each their home. good morning southwest airlines facing scrutiny as thousands of flights are canceled and they warn travelers of more disruptions ahead. tesla shares under pressure. the company extending a production halt at its plant in shanghai the stock on pace for the worst year on record. plus, europe versus big tech we're going to take a look at how the eu taking aim at social media platforms as the final

hour of "squawk box" begins right now. good morning and welcome to "squawk box" here on cnbc. live from the nasdaq market site in times square. i'll kayla tausche along with andrew ross sorkin joe and becky are off today. good morning to you. >> good morning. >> merry christmas, happy new year, all of the above. >> we get to do this at the top of the hour. we get to say, hi, nice to see you. >> for those of you just joining us. >> yes. >> like maybe my children, hopefully you slept in today hello to you between 7:30 and 8 usually. >> wow >> they go to bed a little later, too. >> wow >> but now that i've said it on tv, it will no longer happen ever again ever again

u.s. equity futures at this hour look to be still in the green although a little bit of the air has come out of the markets. the s&p would open up by 15, the dow up by 157. that is well off the highs from earlier. the nasdaq would open up by just about 5 points when we started the show that was up by 35 clearly investors are taking some stock about what's happening overseas in markets. asia and europe have been decidedly positive as china has announced that it will no longer be requiring quarantine for international travelers beginning january 8th. the market has seen that as a good sign. the 10-year note yielding 3.779. that is slightly, ever so slightly lower than it was earlier this morning andrew >> let's talk about some headlines making news this morning. china is ending one of the last remaining restrictive measures from the zero covid policy it's no longer going to require passengers to quarantine with

arrival on the mainland. stocks rising on that news, alibaba, jd.com and pinduoduo. tesla's stock dropped six consecutive trading days, nine of the past ten. tesla down about 65% year to date on pace for its largest ever yearly loss today's slide follows news that the automaker is going to run production at a reduced rate at a shanghai factory following the end of december shutdown what we're seeing beyond the evening on one side is we're also seeing the number of covid deaths and the wild spread of covid in china, as you might imagine, taking place. so certainly good news/bad news situation here in other ev news, shares of nio falling. the chinese electric car cutting saying the covid breakout in major china cities explaining the supply chain. developing story this

morning. southwest airlines canceling more than 70% of its flights yesterday and 60% have already been scrapped for today. the airline warned mass disruptions would continue this week as it would only be able to operate 1/3 of its schedule for the next several days. southwest cited outstanding fog and internal technology issues in addition to the winter storms that have plagued other airlines over the christmas holiday the department of transportation said it would closely examine whether the cancellations were controllable and whether southwest was complying with d.o.t. rules in the customer service rules plan bring a live report from atlanta's airport a bit later on this morning. another consumer story peloton is selling refurbished bikes at discounts of up to $500 off the new ones they're trying to boost demand following the expansion of the rental program earlier this year peloton shares down nearly 75%

this year. they're up just shy of 2% in pre-market trading on that news. certainly $500 is a pretty steep discount whether it's enough to get a lot of those customers -- >> i'm a cheap skate, as you know i never got the bike my big pandemic purchase was the tread plus which then they recalled we still have it by the way, it doesn't work at the moment we're trying to get peloton to fix it, interestingly, because they have no people anymore. >> yeah. >> maybe i'll get a bike. >> trade it in >> no, they won't trade it in. you can't trade in the tread anymore. it's done. finished but the bike -- oh, you're saying trade the tread for a bike. >> 500 bucks for a 500 buck discount maybe. >> maybe >> the question is whether you think long term -- i want to know they're going to support the service over time or it gets bought as long as the instructors are still there. >> yeah. you would think it's valuable

enough technology and customer base that someone would end be up wanting to own it depending on the price. >> the question is it's a hardware business. the question is can it be a sub business people always thought -- i think that's what the ceo who came from spotify is turning into. >> lululemon purchased mirror. >> did that work for them? did that work for them >> they've been able to merge a lot of the classes, instructors. >> they're making money off the mirror >> unclear. >> i would bet against it but what do i know only four more trading days left in 2022 here are the major averages and how they stand the dow down nearly 9% year to date you can measure yourself against this, folks. the s&p off more than 19%. and the nasdaq has dropped nearly 33% all three major averages on pace to break three-year win streaks and turn in their worst yearly performance since 2008 joining us right now is carson group's chief market strategist.

good morning, ryan help us here what do you think? '23 going to be better worse? >> good morning, guys. thanks for having me good luck to everyone out there trying to travel that is not a fun situation. the good news is we're going to get better here, andrew. lots of different things i can point out. you guys have talked this morning about some of these things the last couple of days it's rare to have two down years in a row let's put that very clearly. 1973 '74, three years after the tech bubble. we don't think we're in a situation like that. one of the key things we think like a lot of other people, inflation is going to come back. probably significantly used car prices, inflation prices very simple, when inflation is lower that next year on average, the s&p is up over 13% on average. about half of that if inflation is higher at about 6%. there's all this stuff out there but there is a lot of negativity also out there look at the record put the call ratios there's a lot of negativity. we think we can get good news. we can avoids two down years in

a row. >> ryan, we're going to play a story here for a second. you go back since '28, only four times it's been down two years in a row. >> yes. >> 1929 to '32 is four years i don't think we're like 1929 right now, at least i'm praying that's the case. gets more complicated, three years in a row, 1939 to '41 and then 2000 to 2002. could we be in a 2000 to 2002ish period that feels like the life we're living when you think about tech and the dotcom bubble and '73-'74 and that is when we had severe inflation. >> right >> yeah, i mean, you think about it, the tech bubble. we had historically high

valuations then. a year ago valuations were high. that was a concern clearly they've come back. if you are all in tech, nasdaq got 33% for the year it might feel kind of like that. the dow is only down 9 there's other factors that have been better. again, yes, inflation is high. let's be honest, the fed 15 months ago was sitting one 25 basis point. this year the fed is not perfect, they're behind the curve a little bit once again like a lot of people coming on the show saying something like that. potentially the big worry to me, could they keep hiking right into a recession we think we're going to avoid a recession. that's the thing we're worried about. andrew, we don't see two down years in a row with the positives still out there. >> if that's the case, what are you buying >> we would stick with what's been working cyclical values. look at industrials. deere, caterpillar it doesn't look like a global recession to me.

we like small caps, right? you know, economy can avoid a recession like we think, small caps is one area that could do pretty well the 12 months or so. those are areas we'd stick with. >> what do you do with what i call the legacy bull names >> yeah. >> faang stocks? >> well, we've been under weight those all years. to be honest, we're under weight those. doesn't mean you outright avoid them they're making money we're not seeing relative strength i want to see a sign of a bottom it feels like a catch a falling knife mentality. communications, big legacy names. >> what are you waiting for? what's the -- what's going to be the high sign for you? is. >> well, i mean, you know, i guess put it this way, to finally start to see some relative strength. if you look at those, technology, communications versus the s&p 500 just bottom on relative strength we're not there yet, let's be very clear that's what we want to see it's still a group we're under

weight here. >> good to see you wish you a happy holidays. we wish your history lesson proves true in this instance, which is to say i hope you're right. >> i hope my bengals keep winning also we'll see you guys take care. >> meantime, when we come back, oil prices hitting a three-week high as china releases covid rules. we'll talk energy. first, as we head to a break, check out the morning's biggest pre-market winners and losers stay tuned we're watching "squawk box" and this is cnbc

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welcome back to "squawk box. maybe a santa claus rally. dow 166 points nasdaq 14 points higher and s&p about 16 points. winter storm elliott's freezing temperatures, snow and high winds wreaked havoc across the u.s. killing dozens, stranding thousands and disrupting energy production across the u.s for a look at the impact on the energy markets, let's look at rob tummell. thank you for joining us

this happens many winters, as andrew and i were talking about earlier in the show, but, you know, what do you think is unique about this year's disruptions and how it will play out in the market? >> well, the role of natural gas. natural gas has become a global commodity now. it's been that way over the last couple winters what you're seeing especially in the northeast is you don't have enough infrastructure to get natural gas to the northeast so there's concern because of the winter storm of power outages. and that's exactly what you don't need at this point in time but that's a function of not having enough infrastructure and having the ability to take natural gas and transport it from pennsylvania to new york and new england and other areas. >> so a lot of those companies have been lobbying the biden administration to wave the jones act so they would have more vessels that would be able to transport some of that natural gas and some of those refined products up to the northeast and some of those areas you were just mentioning.

>> kayla, that would have an impact it's produced liquified natural gas from being imported into new england. if you removed the restrictions of the jones act then you can take usl and g and move that into new england and that's important. >> why couldn't you ship that by truck, train, pipeline why does it have to be by ship in this case >> so first of all, the most efficient way to transport natural gas is through pipelines. you can't do it through truck and trains and then from a

pipeline, that's the best answer there's not enough pipe lines because there's not been enough development because of the regulations in place that prohibited pipeline expansion in the new england area >> rob, you're a portfolio manager so, you know, your bread and butter is trying to figure out where the market is going to go, but i think if we learned anything in 2022 it's that it is impossible to predict. i mean, just look at december. there was an expectation that the first week of december was going to bring these big issues like, you know, the price cap going into place the reserve releases ending in december and, you know, the european oil embargo on russian oil going into place yet what we've seen is prices actually dropping so how hard is it to actually think about where energy's going in 2023 >> that's a good question,

kayla. in a day it's -- there's ups and downs like every sector. what you're referring to is oil and the fact oil prices would go up for all the reasons you just articulated. the thing that changed everything is china lockdowns continued and so the demand from really the largest consumer of oil or the second largest consumer of oil started to decline. the duration became a concern for the market >> does the china situation give you clarity with january aid marking the end vft in bound quarantine and there are hundreds of millions of people

infected with covid there? >> what we know is china oil demand grows every year. it's negative growth and i've been doing this for a couple of decades so we do know china oil demand growth will return and it will be very strong but we also know from our experience here in the u.s. it's probably going to get worse in china in terms of the infections before it gets better, right? so i think that's kind of the lull we're in right now. that's why we expect prices to rise in 2023 really driven by the increased demand from china that will come back eventually, just a matter of when. >> yeah, it's a million dollar question, rob. we appreciate you joining us rob thummel from torttoise don't mistaking stock, the focus

energy live at 6 p.m. eastern coming up, southwest airlines missing 70% of its flights yesterday and scrapped an additional 2500 today we'll take you live to the atlanta airport straight ahead a reminder you can get the best of "squawk box," you can get it live the best of the live on our podcast. follow "squawk pod" and listen any time we're coming right bac

. thousands of passengers were stranded over the holiday weekend after southwest cut 70% of its flights yesterday and has already cut another 2500 today let's go to nbc's blayne alexander at the atlanta airport. the last time i was there, blaine, called itself the busiest and most efficient airport in the world that slogan is going to be put to the test. >> reporter: and it will hold that title today for you, kayla. the absolutely for passengers who travel during the holiday season typically we have delays or travel inconveniences but for southwest passengers, the types of disruptions we're seeing now are simply unprecedented that's something the c o has acknowledged we're talking about slashing more than 70% of flights yesterday and today when you look at the cancellations compared to other airlines, it is stunning. we're talking about already more than 2500 southwest flights have beencanceled for today

compare that with just over 300 or so cancellations for other airlines across the board. now southwest airlines in a statement is apologizing to customers calling this unacceptable but also pointing to the weather saying that they did what they could do to get ahead of this, any sort of delays and inconveniences, having the proper staffing in place, but they simply can't control the weather. the dot in a statement is saying they're concerned about this level of cancellations and disruptions and saying they're going to look into whether these were controllable or uncontrollable circumstances that's crucial in all of this, kayla. southwest is one of the major airlines that agreed to reimburse stranded travelers for things like hotels, taxis, meals if flights are canceled for reasons within the airline's control. so what the d.o.t. finds is certainly going to be important in the days ahead when it comes to determining what happens with these stranded passengers. as for those who did have their flights canceled, certainly important to know that southwest

is offering either a full reimbursement or flight credit if your flight has been canceled kayla? >> thank you, blayne last year southwest had a smaller disruption but it cost the company $75 million. the toll of this one is going to add up blayne alexander in atlanta. thank you. futures looking up, at least at the moment. we're going to get you ready for the final four trading days of the year that's next. plus, we're going to talk big tech as regulations are set to take effect in the eu next year. eye popping penalties. we'll explain after this

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welcome back to "squawk box" on cnbc. a little bit of green. dow coming down marginally throughout the broadcast nasdaq up 23 points. time now with the playbook

kayla tausche is at the table. the democracy. and the global commodity and the entity >> second, the white house.

>> finally it's uncharted territory. >> the disruptions are a lot >> no small mow pay the tows >> it's a brief on congresswoman donna edwards.

>> a lot had been written off. >> i mean, it was there. >> into 2022. the mid term elections >> manufacturing it. it's the soft landing there.

>> implementation. >> it trickles through >> implementation, and how that will be there. implementation >> it's a community where the road or bridge is built up. >> they're in their communities. zblfrp the job administration. >> donna, i have a totally

different thing. >> at one point, i'm not jewish. i said i was jew-ish le. >> there are emails and tweets. >> first of all, 30 years ago the price.

a are. >> they're vote being for it >> the committee we read the papers there's a lot of stuff for herself. >> he has a lot of answering to do and i would be shocked if he ends up serving a second term zbll oh, i have one other question though which relates to it you're kevin mccarthy. what do you do because the -- there's the practical reality, which is you want this guy in that seat, right? you don't want to give up that seat because that seat will likely ultimately go to a democrat for him he's thinking this is not good news, but then there's

the other side of it, i would think, but maybe i don't understand enough about politics, which is there is some moral obligation i would think to the public to condemn this. the to say it's crazy and terrible and to try to actually push him out of the seat >> well, andrew, here's why i think that's not going to happen santos has already pledged to support for a vote for kevin mccarthy for leader right now. kevin mccarthy -- for speaker right now. kevin mccarthy is struggling to get those votes. he's not going to give up on a single one of them and i don't think that there's any incentive for kevin mccarthy to condemn him anymore than there's incentive to continue to back seat marjorie taylor greene or lauren boebert that's not in kevin mccarthy's dna. santos is going to have to lose that seat or face a tremendous backlash in what happens and

it's not at kevin mccarthy's insistence >> we want to bring in kasey mulligan t the. >> there are five gop opponents to kevin mccarthy taking the gavel. for the legislative agenda, does it matter who is in that role or do you think it will be gridlocked regardless and what does that mean for the markets and the economy. >> historically we've certainly seen good economic performance under divided government i think a lot of people want that and the reason for that is the government's not able to do much we can kind of understand what's going to happen over the next few years, which will be nothing.

and i suppose there are a variety of republican leaders who could deliver, you know, next to othing >> doing nothing though won't be an answer when it comes to the debt ceiling, which had the u.s. will run up against at some point in the middle of this year goldman sachs wrote that it thinks that the corollary to the moment that we're in right now, kasey, is 2011 where credit agencies downgraded the strength of the u.s. credit rating. we went to the brink a lot of spending cuts were demanded by republicans in order to raise the debt ceiling and i'm wondering if you see that playing out this time and how damaging you think it could be for the markets. >> well, that -- i like that analogy. that's when our recovery finally began. we had a recession that started in 2007-'08 and normally recessions last about a year and that one went on for three years and finally we got divided government and we got the

beginnings of a recovery again, divided government is -- can be frustrating from a political point of view doing one or two deals, but i think america benefits when people in washington don't do so many deals. >> but that's the big question for the economy, or at least, you know, for the big deadline coming up. don, i'm wondering if you see some sort of grand bargain that's possible between the parties in the positions that they've currently staked out >> well, here's the difference between now and 2011, and it is the composition of the republican conference. it is much more confrontational. there are greater divides. in 2011 you actually had a speaker in place who in order to cut that deal worked with democrats to make that happen. i don't really see that in this congress i do think that the debt ceiling debate is going to be one of the greatest strains on the economy,

even the threat of not raising the debt ceiling i think is really -- is going to -- could be very damaging and if you look at this congress coming up, you have a lot more vocal opposition within the republican conference to raising the debt ceiling and i think that's going to be very dangerous. it's not going to be good for the economy but politically i think it's very difficult in this environment to forge the kind of deal that you forged back in 2011 >> and finally there is the china question, which is the elephant or the gorilla or tiger, whatever you want, any analogy and you have congress and the administration trying to out hawk each other. and there's been some suggestion that some of the more hawkish positions that the biden administration has taken is perhaps in response to, you know, the expectation that republicans would be demanding

some of these things once they take the chair positions that some of these committees in the house. kasey, i'm wondering what you see as the risk of a decoupling between the u.s. and china as we cleve some of these supply chains and trade ties. beijing accuses washington of starting a trade and now technology war >> well, we do have some very serious problems in our relationship with china so to keep it static i think is a mistake. we have -- you get a side of even where the virus came from, we have fentanyl coming in from china through mexico that's changed life expectancy that's a macro variable now. we know a few months back in this calendar year china's stopped helping us with stopping the flow of fentanyl there are other countries. they're our competitors. that's the beauty of competition. there are other countries that can provide some of the economic

partnerships without a lot baggage and frankly harm that comes from that -- those -- our existing china relationship. >> you will see where congress takes this debate in the new year certainly it is at the top of the agenda thank you, donna edwards, casey mulligan happy new year. >> happy new year. coming up, big changes coming to social media regulation in europe next year we'll see if it comes to the u.s. and the size of penalties in mind. it is boggling details after the break. take a look at futures now as we head to the break. the nasdaq has turned negative futures well off the highs of the session. santa claus rally may not be ppinanymore. we'll see. back after this. mm-hmm. for 1,100 bucks? ga-a-a-ap! looks like your wallet may need a sling too. tell me about it. did that goat say "gap"? he's talking about expenses that health insurance doesn't cover. eh-ehh-eh! well i'm talking about the money aflac pays to help close that gap.

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we have four trading days left the number one question that everyone's got is what is the fed going to do next rick santelli is in chicago. happy holidays, merry christmas. hope you had a good one. >> very good >> what do you think is going to happen >> i think that the fed is going to deliver exactly what it's saying it's going to deliver it's going to remain tough it's not going to pif pot but i don't believe it's going to be necessarily data dependent so if we listen to the fed, here's what i think is going to happen they're going to get to a level, probably sooner than they're letting on, and they're going to leave it there their goal is to stick it, just

like a gymnast what one would have in the olympics they're going to stick the landing. the issue is how the market is going to react to not only the u.s. economy which definitely is slowing but how the global economy is slowing, how all of the issues go along with it. how will that affect the decision for the fed to reach a level. they're going to pause that and leave and linger higher for longer is the mantra. my feeling is is that ultimately the global economy is going to go into a recession and the fed is going to be forced to ease back a bit. i don't know that they're going to do it immediately in the first quarter or second quarter, but i think once we get into about the second half of 2023, i think it's going to be apparent to all that europe has a variety of issues, not the least of which is ongoing energy costs and all the debt they have to issue is going to subsidize and mitigate the costs. >> the same category the question i would ask you though is if you are a 12-month out kind of person, equities,

12s to 18 months out, do you look past that and think, okay, it's better on the other side? we've already had the worst of it or it's getting worse and not better >> i think if you're asking should an investor watching now who has a 14 to 18-month horizon, should they continue to invest in stocks my answer would be yes. they ought to take a number of what they would like to add into their strategic portfolio for equities they should divide it into thirds and they should try to add a third as the market continues to move lower. they should keep their powder dry for a bit, but here's where the problem arises, andrew that when the fed is done raising rates and long before they lower rates, the equity market is going to buy into the notion that the fed thinks it's done enough and it will rally early. we've seen bouts of that foolishness in this current bear

market i think if the investors around the world sense that the u.s. central bank has completed the bulk of its increase in rates to combat inflation, the equity markets will race ahead in the u.s. and they will be the global leader in that regard. >> okay. rickster, nice to see you, look forward to seeing you again. likely tomorrow morning. meanwhile, the european union's fight is heating up with a new law in place that's set to make the biggest social media companies abide by some new rules. julia boorstin joins us now for more good morning, julia. >> good morning, kayla last month they passed a law called the digital services act. the law is centered around content moderation for the world's largest social media platforms such as meta, google, twitter, and tiktok. it aims to force them to crack down on the spread of misinformation and hate speech the companies could face severe

fines if the rules are broken. though meta and google and these other companies have their own guidelines that they try to adhere to,s this will be the first time that they face strict external rules and meaningful consequences if they break down. the maximum penalty that could be handed down is 6% of global revenue. for context, that translates to about $15 billion for alphabet and $7 billion for meta. the digital services act officially became law last month but it will be over a year until it is actually enforced. by february platforms must publish monthly active user numbers. any company with 45 million monthly users will be designated by june as a, quote, very large online platform and it will be subject to extra compliance regulations. after all of this it's not until february of 2024 when the law actually begins being enforced and penalties can be handed down now probably most at risk of all of the companies now is elon

musk's twitter which has seen most of the compliance officers fired or choosing to leave the company. kayla, it will be interesting to see what happens there >> yeah, but this law has been a long time coming so how have these companies already tried to get their compliance in order and how much is still left to be done >> well, it has been a long time coming we do have more than a year before it is actually in force they have more time to get their ducks in a row twitter is in a unique situation because they lost some of their compliance administration. meta and google has youtube which is highly there of the importance they own their own rules, their own compliance it's an external organization. they're moving the regulations.

>> we know you'll be watching, julia boorstin. adfou ing up, we'll get yo rey r the final four trading days of the year, "squawk box" is coming right back and a half minutes. i didn't even get to finish my burrito. technology lets you vacation in space, but to get work done on earth... you need more than technology. you need cdw. so with the cisco hybrid work environment, we can deliver the same network experience to all your offices. space spaghetti. no. securely connecting your team from anywhere. houston we... have a solution. we get it greg, you've been to space. cisco makes hybrid work possible. cdw makes it powerful. i'm a vegas hotel. i don't want anything long term either. just a few nights of fun. some people say i'm excessive, but who cares. i just want to enjoy some late nights. and some very late checkouts.

time for the squawk planner. a few data points of note today. we will get the schiller home index at 9:00 a.m. consumer confidence at 10:00 a.m. pending home sales for november due tomorrow at 10:00 a.m. we get weekly jobless claims on thursday so a lot going on on what feels like a holiday week. joining us for a last look at the markets before they open, shawn, i want to read you something. dan lobe said i tend to be a bottoms-up analyst but 23 should be a battle of two narratives rates and inflation on one hand versus gdp on the other. i don't think camping out in the last decades darlings hoping for

a comeback will be the winning strategy we have already seen the revenge of the value nerds i think more to come you want to take that bet? >> i mean, i do think right now the market is very focused in what central banks means for a recession. if we do get a recession, how deep that is if it's mild, we may be able to make it through that without a massive hit to earnings. i think you could have a pretty good outlook for markets but if it is a deep recession that does bleed over into corporate earnings in a meaningful way, we could start to see some of the calls back and not only testing the lows we saw but even going lower than that >> right that's what is on the table. some central banks are starting to take their foot off the brake so to speak. >> where do you land on this issue? a lot of people are still

holders. they are still holding the stocks this idea which is fascinating to me. he said i don't think camping out in last decade's darlings and coming for a comeback is a winning strategy basically the value nerds are going to be in favor >> yeah. i think there's something to that especially with app outlook like the ample. you talk about some of the potential outcomes i think being diversified instead of making big bets in a handful of names will be the way to go at least to start this year until we get a better sense for ohio things shake out. i would agree that making sure you are looking at your portfolio, everything is in balance, will be an activity every investor should take >> is there any idea that those darlings, those stocks, have been so beaten down that at this point they are the value stocks? >> i think it's probably relative to where they've been at before. i think you can look at some of the pullbacks. i don't think it's just across

the board. i think there's a lot of different issues weighing on all these companies in their own unique ways. i think someone who wants to look towards going into cloud, look at amazon or google if you think some of the cloud names are coming back around if you want something more tied to the consumer, you can look at apple, netflix if you want to go into the social media platform space which is still up in the air i think there's still a lot to come look at facebook and google for that i think it's what your outcome is on specific themes. >> okay. i'm going to throw a monkey wrench into this bank stocks. i could make the argument on both sides at this point of the ball game. >> i think bank stocks, that is one where looking at some of the more diversified is the way to go once again, what is your outlook for the economy? if you think we are going to see a pronounced deep recession, you probably aren't going to want to go into the stocks in a

meaningful way because you will get probably a rise in default to slow down an activity if you think it going to be more mild, more manageable, look into some of the benefits for the higher rates we are seeing >> do you want to take a position >> i would like at the bigger diversified, jpmorgan, bank of america maybe. steer clear maybe of the regionals that are more concentrated we are seeing a slowdown out of the housing space as conditions for the housing market just got worse and worse. higher prices, higher rates. so stay away from the regionals that are very concentrated and looking at some of the diversified major banks. >> we have been talking about sam bank man freed we have been showing crypto. bitcoin just under $17,000 how do you feel about crypto and how do you feel about the exchanges. i'm thinking of the stock prices of coinbase, which have been so

terribly beaten down in direct computation with you to some degree, depending how you think of it. >> we don't offer crypto, direct crypto exposure at charles schwab td ameritrade same thing people are saying the last year or two we need more regulatory clarity that people can measure the different companies by, get better transparency. i think investors when they go out and assess the space, they have learned transparency is going to be key if they decide to put money into that, into an exchange, one of the brokerages that offer that. it will shift the focus not to which coin or asset can i get the 2,000 percent return in a month. they will look more at scrutinizing the quality of where they are sending their

money. i think there's more to come with that point. >> shawn, we appreciate it we will talk again soon. all right. china has ended one of the last remaining restrictive measures from zero covid policy they will no longer require passengers to quarantine upon arrival. travelers have had to quarantine at designated hotels for 14 to 21 days until they began cutting the quarantine times this summer the current requirement is five days of quarantine at a designated facility, followed by three days at home china will also stop tracking close contact of covid patients, halt covid risk areas, and cancel restrictions that slowed the import of goods. the country is dealing with a surge of covid infections. one hospital in shanghai told its staff to prepare for a tragic battle with covid as it expects half the city's 25

million people to get infected by the end of this week. they said over the weekend it would halt daily infection numbers because of doubt's about the data's reliability authorities are redefined deaths to include only people who die from pneumonia or respiratory failure. we will see how that situation plays out from here as millions become infected. >> thanks for helping out. thanks for having me >> make sure you join us tomorrow "squawk on the street" begins right now. >> and we do begin good tuesday morning i'm morgan brennan with scott walker carl, jim, and david have the morning off. we're looking at futures right now. a little bit of a mixed picture this tuesday morning holiday shortened week with the dow and the s&