futures open to a mixed day on wall street. we're going to show you what is moving >> plus hong kong lifting more restrictions as the u.s. is considering imposing new restrictions for travelers from china. and southwest is apologizing to this week 's flight cancellations. it is wednesday, december 28th, 2022 it is almost new year's. "squawk box" begins right now. good morning and welcome to "squawk box" here on cnbc. we're live from the nasdaq market site at times square. i'm melli is lee with andrew ross sorkin and kayla tausche.

there was a decline in yesterday's session. treasury yields, they seem pretty tame this morning the 10-year note trading at 3.84%. we w're seeing premarket values. shares are up by almost 3% this morning. an update on the travel chaos this week. southwest airlines cancelling nearly two-thirds of its flights yesterday, warning maas disruptions could continue through the week it could reset its operation to get planes and crews where it needs to be, but that has left thousands stranded and overloaded customer service systems. ceo bob jordan releasing a statement last night, apologizing for the situation. >> i want everyone who's been

dealing with the problems we've been nation, whether you haven't been able to get to where you need to go or you're one of our heroic employees caught up in a massive effort to stabilize the airline to know we're doing everything we can to return to a normal operation please also hear i'm truly sorry. >> reporter: the department of transportation will examine whether the cancellations were controllable and whether the airline was complying with its customer service plan. here's transportation secretary pete buttigieg speaking with nbc news last night. >> what they've pledged is they're going to take care of their customers. they told me in their words they will go above and beyond their written customer service plan. i'm going to be holding them accountable for doing that. >> now the senate committee on commerce, science, and transportation says it will investigate. and senators ed markey and richard blumenthal want

passengers to be credited for their hotel stay and food and dissrupted holiday plans >> how do you put a price on disrupted holiday plans. >> missing christmas with your family it's priceless. >> there's a consumer bill in europe that's must stricter than what they have in the united states. >> what do you get there >> you get a whole bunch of things but when weather plays a part, you still don't get -- what i can't figure out in this instance -- usually i'm the first person to be frustrated by airlines, but i've also -- and i just had a whole airline situation myself a couple of days ago, so i lived through a planes, trains, and automobiles kind of situation to get back to new york but what should they be compensating you if weather is the case >> i think it depends on which alphabet soup purview this agency falls into. if it's d.o.t., it's probably some sort of remuneration.

if it's the consumer financial protection bureau, they have the power to levy more in the way of financial. there was a stat last year, southwest had a much more modest complication and it ended up costing the company $75 million. that's at least the snowball point. >> there's going to be a lot of backtracking concerning memos. boomberg looked at memos, coordination of planes and cancellations. there's going to be a lot of that sort of thing the question is what should be the cost to market cap we saw a huge decline in southwest shares we saw declines across the board, but southwest getting punished much more because the rhett of the airlines resumed normal operations this week. southwest is still facing thousand of flights canceled even through thursday at this point. i think that's the question for investors. is this something you look through, something that's going

to be more lasting, especially if there are hearings. it keeps it in the news. >> reputationally what this does to the brand southwest had a loyal almost cultish following, people who loved the policies of the standby tickets, buddy passes, and boarding regimen there are people who love southwest, flying southwest. being from the dc area, i know people who fly out of baltimore, washington international because they love to fly southwest when people see this and see this happening to the brand, what is the impact on that over the long term? do people make a wholesale switch to another airline? you're seeing some of that on social media already. >> i found -- am i wrong on this -- southwest is different, i think, but for most people, with the exception of loyalty programs on credit cards i think consumers are actually not that loyal. >> i think they go to the price. they decide by price. >> they go to the price and the schedule and that's pretty much

how people buy it's funny because a whole bunch of people yesterday said why don't the other airlines come on and match -- if you're canceled, we'll run an ad campaign that you fly at the same price. but the good will that you capture from that is fleeting sadly in the airline business. most people go on to kayak or priceline or whatever the thing is, find the cheapest thing they can find and call it a day i don't know if that's sad or not sad. >> but there's a reason why spirit airlines is not more beloved, right it's not just about that at the end of the day. >> that is true. i'm cheap, but i draw my line. >> i do too. the city of hong kong will

stop vaccine passes. hong kong claimed to reopen its border with mainland china january 15th we talked about how china's going to be opening up on the 8th. the city's chief consecutive said the covid rate is high but there's sufficient medication to treat it hong kong still has mask mandates still in play there's already a black market that's emerged in hong kong and elsewhere for things like paxlovid and other vaccines that historically have not been available. in the meantime as china does open up, others arewary what china may be bringing across the border the biden administration considering new covid restrictions for travelers from china. is this is where we were going with this conversation yesterday. u.s. pointing to japan requiring

testing. they want to be able to identify any potential new variants and prompt measures to prevent the spread as china opens up, there's the practicality of given just the wildfire of covid there, you know, how much that matters, which is to say our westerns and others who are desperate to get back to china and to troofbl china are going to say, you know what hang tight maybe we'll do this in march. >> yeah. the u.s. obviously is weighing its own restrictions at dr. scott gottlieb a week ago on "fast money" said with the lifting of these restrictions in the spring, we could see a mini surge or more covid coming here because of the spread of it. >> yeah. i mean the transparent data appears to be at the heart of this recent move, and japan and

malaysia saying we're going to do this too. i remember reporting on the restrictions we had for travel here in the u.s. and the requirements for testing and vaccinations for people coming in from overseas and administration officials saying, lookinger even though a lot of people in our country are vaccinate and we have treatments, polling showed that when the delta variant reader its head in the sum over 2021, a majority of voters from both parties blamed international travelers, and it was an escape g.o.a.t. and they said, you know what f this is where people are placing blame, we don't want to be seen as letting the wildfire spread so they're going back to the same playbook, yes, there's a public health benefit but political benefit as well. >> we're headed to davos, switzerland in a few weeks. >> i will not be seeing you until a few weeks after that.

>> last time i caught covid, i caught it there as it happens.sg about it. >> you're boosted and you caught it. >> i got it in the briefing room i said, you know what? i'm going to be safe here. i got it anyway. meantime in china a "new york times" report points to how a surge in covid cases is pushing hospitals to its limits. those remaining are forced to do the job of five or six or more co-workers some facilities have given up requiring doctors and nurses to test before work in order to ensure there are enough staff members on the floor one doctor in the city of wuhan told the "times" her ward was operating with two nurses, down from 10 to 15.

retired doctors are being asked to return to work. medical staff members tell the "times" rules change so fast, there's no time to stockpile medicines or avoid overcrowding. we'll talk with the bureau chief at 6:00 a.m. and later dr. scott gottlieb. futures right now have given away some of the gains accept would open up by 9, dow by 87, nasdaq up by 23. we'll also talk with amc ceo asking the board to freeze his pay for 2023 as the stock at auns. th'sll coming up you're watching "squawk box" on cnbc oh, i can tell business is going through the “woof”. but seriously we need a reliable way to help keep everyone connected from wherever we go.

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stocks posting a mixed session yesterday as investors look for a santa claus rally it might be elusive. our guests join us now welcome to both of you the story yesterday seemed pretty straightforward this china reopening was going to be a boon for travel companies, markets overall, demand for oil, and for chinese companies too. now today with some of these new

restrictions there seems to be a wrench thrown into that thesis, so where do we go from here? >> what we've been saying as long as the fed is rsing rates, expect episodic volatility we've had issues with china for the past few years has really disrupted supply chains you have two markets the stocks have to come down that's a larger part of the market cap we think market is are going to stay under pressure, but the bull is already running. there are pockets of the market where we're seeing stocks near or at record all-time highs. we're seeing it in energy, industrials, materials, and in health care. so it really depends, i think, where you're invested and how

you're going to feel about the markets. >> when you look at the overall indices, the charts you were just showing with the last few days of december, i mean, we can hardly call this episodic volatility all three major averages were basically flat lining if you can see it there for anyone looking to in vest during these final few days of the trading year, mary ann, where do they go >> i think the value part of the market is where you want to be that's where the valuations are. that's where the leadership is leadership always changes when you're in a bear market and go into the next bull market and that shows up near the tail end of the bull market that's where you're seeing energy stocks perform really well and industrials, you're seeing defense stocks perform really well. you're seeing pharmaceutical stocks perform and metal stocks. so i think those are the pockets you want to be in. now, markets can stay volatile

we only have three trading days left in the market so that's not a lot of time to position there's not a lot of liquidity but i think if you actually dial the cost average into the markets, but the time you're at this juncture next year, i actually think people are going to be happy as long as they don't own those growth stocks. >> so, kevin, on the fixed income side, it seems it's still being driven by what the fed will do in 2023, whether we're going to get the three 25-point basis hikes or a pause and reversal where are you on all of that >> kayla, we think that the fed is looking for the opportunity to get their credibility back, and so we think that we're going to see the terminal hedge fund rate go from 5 to 5.25, and we're going to see yields go up. that has been a big thing. the treasury market has been pricing in a recession for the

last month or two, and you saw yields come down significantly while the credit markets have actually been very stable and have shown no sign of any, you know, scarcity or have not shown any signs of credit problems so the credit part of the market is saying there's going to be growth and so we expect yields to be higher and seeing the 10-year go back up to 4.25. >> in a matter of weeks, kevin, we've seen the tenure go up by about 40 basis points. lost the last anchor in the world perhaps with japan throwing in the towel, some saying giving up the yield ban on the control range is a step toward normalization of policy next year. so i'm wondering how much higher will rates go seeing as every major central bank in the world is moving toward tightening? >> i think you're absolutely right and you hit on a very

important point because with japan being the largest holder of treasuries, we're taking a significant buyer out of our market, and especially at a time when the fed is actually practicing quantitative tightening and they're allowing their balance sheet to roll down and with treasuries especially, they're actually having to allow more treasuries to roll off of their balance sheet because prepayments on mortgages have st. louised down so much they haven't been able to reduce the amount of mortgages on their balance sheets some of when you look back to the 1970 to 1980s era, you saw that the inversion of the yield curve was about 80 basis points so this is why we think that the fed is going to actually go to the upper limit of their fed funds target range of 5 to 5.25, and that will -- and then you'll see rates adjust further

so i think the tenure has another 40 to 50 basis points that it could go up over the course of the next, you know, 6 to 12 months. >> slipping ever so slightly today. we'll see where it goes from here kevin, mary ann, our thanks to you. happy new year. >> thank you. >> thank you. coming up, we're going to talk about nonalcoholic beer it's not a new idea but something a lot of us at the table liechlkt trying to embrace a noor low alcohol lifestyle we're going to talk to the ceo next you don't want to miss it. as we head to a break, looking at the premarket winners and losers of the s&p 500.

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welcome back to "squawk box. 2023 almost here, and that means dry january may be on the way for people cutting out booze to start the new year our next guest has captured a 55% portion of nonalcoholic beer and landed a deal with a beverage giant joining us now is athletic brewing co-founder and ceo bill schvelt. it's great to see you. you have a bunch of fans at the table talking about the beer or i should say the nonalcoholic beer or i should say the seltzer infused with hops. that actually was the winner around the table here. do you want to tell them what you think? >> our household wants you to double down on day pack. i don't know if it's possible. it sells out pretty quickly,

which is a good problem to have. >> so we're walking into a dry january for some folks the question that i have just about the whole -- i mean you've had this enormous growth you now have this new investment how big a market do you think this can be, and what do you think has changed? literally in the past two or three years for your business to grow -- i was on the story also and i think folks might have heard it a year or two ago i showed up at a party, somebody handed me a brew i thought it was an alcoholic beer i said it was really good stuff and i asked what it was and they said the joke's on you it's nonalcoholic beer people have had nonalcoholic beer forever. >> thanks for having me on i really appreciate it nonchoilk bill was 0.3% of the beer category and an afterthought to something that

is exciting and aspirational and reframing how modern adults think. it's over 2% of all beer sold at grocery. but at some national chain retailers who brought in, it's over 8% of their beer category it's emerging onto the scene in a big way. >> how much of this is a brand thing versus, you think, a taste thing? and the reason i ask this question, i've also been fascinated by another business called liquid death. i do noenlts you're familiar with it. >> sure. >> it's a seltzer water that looks cool it's like a brand. they're killing it just destroying -- it's an amazing franchise that they're building it's a can of seltzer water, but kids are drinking it at parties because it looks like beer. >> because of the name, liquid death. >> it looks cool. >> for sure. >> how much of this is a

branding issue versus the taste issue. i know it's not the -- >> it's really got to be everything these days. there's so many great small businesses out there it's got to be a world-changing product that gets people excited that with marketing and branding it's exciting. distribution is as important as everything it's really got to be the whole package. they've got the invest in the entire business. that's what we've really done with this latest investment. it's about $175,000 total we've invested in our facilities on both coasts in the country, san diego and connecticut, to be a totally differentiating producer no one else is doing that. athletic is really pulling it forward. as you said, we're a 55% share of craft noncolic beer, but we're passing the biggest of the

brands our practice this year to become the number one player overall, there are big multi-nationals making huge bets on this category. >> not all companies have been able to make it, bill. i have been a fan of a low abb, a company called house which was unable to complete a sale of the company. they had an investor pull out. the banker cited issues with distribution, transfer of licenses, and some investors and vice clause. that company is going away i wonder how you overcome some of those hiccups obviously no abb is slightly different. what do you see happening in the landscape as other companies try to chase the trend. >> yeah. it's a well rounded business john, our co-founder, is an incredible bury master they've built a distribution like right down to the street level across the country jamie, our coo keeps it all

going from the supply chain logistics and everything we're super lucky to have an incredibly talented team across the country, but we're lucky to have great support we love heineken and other small producers doing the category, and there are other things coming with corona zero. athletic wants help building the category a lot of bars and restaurants are excited. >> heyi hey, bill, long term s hope to be at nasdaq one morning ringing the bell with an ipo is your hope to sell the company? do they have an topgs buy the company locker term? what's the future look like? >> so kdp's a minority investor. it's a very limited partnership. we've got a great adviser and they're taking a footstep into a

dynamic white space category every option's on the table for us with my background, we'd love to talk to you on a more regular basis. >> bill, look forward to seeing you again and look forward to drinking some of the good stuff in january and forever but the seltzer with the hops, that's been my more recent win sneer game-changer. >> game change sneer thanks, bill. >> never had it. >> it's not a six-pack it's a four-pack and not cheap, either, by the way. >> i have no yearning for beer. >> no, no. >> alcohol or nonalcohol, the flavor. >> no, no, we'll get you the seltzer. >> you do guava and sparkling water. >> it doesn't sound refreshing >> maybe on a 20-degree day.

>> there's something celebratory about it. >> i'll try it coming up, the latest on the surge of covid cases in china. we'll talk with the bureau chief next and later more fallout we're learning how the company funded its stake in robinhood that's sparking a three-way jurisdictional fight stay tuned it's hard to run a business on your own. make it easier on yourself. with shopify, you can have everything you need to streamline your shipping, returns, and product storage, so you can focus on growing

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good morning and welcome back to "squawk box" live from nasdaq market in times square. we're looking at green on the screen, but the santa claus rally we're talking about may not pan out. dow jones up about 71, 72 points nasdaq up about 13 points. the s&p up by 17 points. this comes days after bay shij shing said it would not require inbound travelers to quarantine that change will start on january 8th. joining us now, jonathan cheng, "wall street journal" china chief. thanks for being with us just from the conversations we've had, it went from people couldn't pay their mortgages because they were locked down and could not go to work to a

situation where they all have covid now or nobody somebody who has covid. what is the feeling on the ground about what has happened in china in terms of lifting the restrictions so abruptly >> yeah. i think you've captured a lot of that ambivalence, which is they've gone from one end of the spectrum to the other and there's a bit of a whiplash. this is what people have been waiting for. if you're asia be owner, own a restaurant, related to the tourist industry you were praying for this day, and all of a sudden it came almost sooner than anyone had expected it. and so if you're one of these people whose livelihoods was taking a beating during this three-year-long zero covid lockdown, you're happy but if you're one of the families who has an elderly person in the household, then you're not so happy about it because the likelihood is that, you know, grandmother -- your grandpa or whoever hasn't gotten

a vaccine in china because that's the lowest sort of population in terms of vaccination. for many of them, it's the winter here in china it's cold. many of them are in the hospital if you go there like i have in the last few days, they're a bit of a nightmare you see people in the hallways because they can't get a bed with oxygen tanks and things there's a mix of ambivalence here. >> what's china watchers' take on this as far as management was this all part of a mastermind plan because it was sort of like a win/win situation. they responded to say we responded how you wanted, so they win on that front, or they could say, look what happened when we lifted all the restrictions we had in place this is why we had the policy in the first place.

>> we put out the story that captured the second half of what you express. insofar as they're allowing criticism online, it'sfingerin pointing to all the people who said we need to open up. there's a little bit of we told you so, now look at this on the other happened, there's a big question why china didn't do more to prepare. they had three years to do it. vaccination rates could have been higher, especially among the ellerly. again, you visit any hospital, you go to the ers or icus, and you'll see, you wonder why more hasn't been done it makes you think why their hand hasn't been forced, and epidemiologically they couldn't stop this particular strain because this omicron variant as we ewell know is much sneakier than its predecessors. >> no stockpiling of medicine as we were reporting earlier, john thachblt weeks ago there were images of people out shopping,

ice skating. you're on the ground living it every single day i wonder if people are starting to self-isolate all over again without some of these restrictions and what you think will be the case for the upcoming chinese new year so people could travel for that holiday. >> yeah. it's a great point, and actually i think it varies depending on where you are in the country i'm in beijing i can tell you from early december when the measures first lifted, beijing immediately became a ghost town because i think anecdotally we don't try to stop statistics you know, anecdotally everyone will tell you beijing seemed to get it first everyone was wiped out i don't know how i managed to be spared everyone in the capital was out for a week to ten days, and you saw images from shanghai and further south in china where people were packed and the malls and restaurants and everything, and now it's sort of the other

way around here you go out and the restaurants are full here in shanghai talking to my friends and colleagues, nobody's on the street. you have a little bit of a mixed picture throughout this very big country. >> will beijing allow western vaccines or will vaccine nationalism prevent them from accepting help we've heard from the ceo of moderna on "squawk box," theory talking with chinese officials who knows what's going to happen what are you hearing >> i mean a lot of people were hoping this would have happened a year ago, two years ago. it's not to say it's too late at this point, but, you know, the ramp-up time that would be required to get those vaccines approved and into the country and into people's arms, i think, is a real -- it's a bit of a long timeline there, and what china hasn't done even with its own vaccines is really to send the message that you need to get vaccinated even with this latest wage, you haven't seen much evidence of a new booster campaign to me it doesn't seem like the

obstacle here necessarily foreign or domestic vaccine. it's just that the vaccine messaging has not been as strong as it has been in other countries or as strong as it has been earlier in the pandemic in ch china. >> jonathan, great to have you thanks for your perspective. coming up, freeze my pay that's what the amc ceo is asking his board to do as the stock price plunges. details next. later, aneesh chopra joins us to talk about the house banning tiktok on government devices. >> a reminder you can watch or listen to us any time on the cnbc app

amc entertainment ceo has asked his company board to freeze his pay increase for 2023 they announced another equity

sale and plans for a reverse stock split. in a series of tweets he says the company will grant large salaries but he doesn't want more when shareholders were hurting. he asked most amc officers to forgo an increase in salaries. remember in the beginning of the year the stock was 26 and change it's now $4. >> he also made $50 million in total for the last three years so he's socked some away. >> the smallest swrie lynn for him. >> it's a nice gesture, but a stronger gesture would have been to take a pay cut after your company loses $10 billion in a year in market cap. >> you ask what happens to him >> what happens to him do the shareholders love him

hate him. >> >> i think they still like him. >> i think if he were able to say he knows the valuation made no sense a year ago. >> probably. >> right i mean this is the conundrum he's facing. elon musk used to say all the time, my stock is overvalued now people are upset of course, it's overvalued he said it wu overvalued do you take a pay cut based on the valuation? that's actually an interesting question or do you take a pay cut based on the operations of the business what world are we supposed to live in? the fairy-tale stockmarket >> i think people are paying more for gas and retail and rent, they're holding stock for two, three years, go down to 4

bucks a share, and that ceo is making $18 million in a year i'm just saying the perspective of that is -- >> what do you think his actual salary was when he says freeze my -- >> i'm not sure what the division is between salary and stock. >> and also if stock is a huge component of it, one of the things that happens all the time is we talk about some number that's oftentimes based on grants that have to hit numbers. >> right, right, right, and it may never hit. his base salary in 2021 and 2020 was in the half million range and the rest was in equity divisions. not all of that is tied to certain bench markets. >> the question is -- >> three years >> was it 50 >> they're eye-popping numbers on purpose. >> but sometimes it's the

opposite sometimes it's 50 and changes to 100 and no one talks about it afterward. and sometimes the 50 is really like 10. they don't talk about that either. >> a lot of times when they get these equity payouts, they have scheduled payouts every single quarter. soilt's almost impossible to -- >> that's the real conundrum. coming up, new details from ntcourt filing that says alameda le sam bankman-fried to buy stake in robinhood we're going to talk about that when we come right back. >> announcer: executive edge is sponsored by at&t business at&t 5g is fast, reliable, and secure oh, i can tell business is going through the “woof”. but seriously we need a reliable way to help keep everyone connected from wherever we go. well at at&t we'll help you find the right wireless plan for you. so, you can stay connected to all your drivers and stores on america's most reliable 5g network.

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got some new days from the ftx soap opera that is the bankruptcy court records now showing that founder sam bankman-fried and former executive gary wang borrowed more than $546 million from alameda research former alameda chief caroline ellison signed off on that loan. that robin hood stake is now at the center of a jurisdiction fight between antigua, nuew jersey, and delaware separately, there's an investigation. bloomberg reporting the u.s. authorities have managed to freeze just a fraction of those stolen funds unclear if the theft was an inside job as bankman-fried suggested in interviews before his arrest or the work of a hacker exploiting vulnerabilities as ftx was collapsing joining us to talk about all

this and so much more, axios business editor. dan, happy holidays. n nice to see you. what do you think? let's just go to the base question how much money, ultimately, do you think creditors and investors and others around the hoop that think they are due will get back when all is said and done >> a fraction. i'm not going to give you a number, but it's going to be a fraction, and it's not going to be a very large one, because what we learned yesterday, the robin hood thing seems to be emblematic of everything, right, which is sam kept taking money from different pots and we've talked the word ponzi scheme a lot, and this hasn't followed exactly what a madoff did, but he kept taking from different pots and with the robin hood shares, not only did he borrow from alameda, alameda then claimed to own that stock because they used that as collateral to get a loan from

blockfi so it's the same assets being used over and over again, which is why ultimately the folks who are owed money aren't going to get all of it >> how many years? if you were sam bankman-fried, we're talking about this yesterday, and you have all these other people pleading guilty, what do you think is the right answer here? >> for bankman-fried, i mean, the question is -- this is something you don't know and i don't know, has he finally internalized that he has done something wrong? maybe you'll disagree with me, but i thought during the interview you did with him, during some conversations a colleague of mine had with him prior to the arrest, he really seemed to believe his own b.s. to a certain extent, that he had made mistakes, but it wasn't criminal and i don't know if the guilty pleas of gary wang and caroline ellison have maybe helped him see the light a little bit, and that's the real question is he willing to admit something, and then secondarily,

is there even going to be a plea on the table clearly, prosecutors view him as the big fish in the top of the food chain, and sometimes they don't let the top of the food chain off. >> right one of the other things we've been questioning is what you think the sentences are going to be for the likes of gary wang and caroline ellison, meaning, as part of these plea deals. >> i mean, you would think it's going to have to include jail time for both of them. i'm not an attorney or a prosecutor, so i can't say for sure, but i would assume it's going to have to include jail time it's possible we won't know for sure until there's a trial date set and the information with sam starts going forward >> i'm not thinking as one or two-year jail time situation, unless you're arguing this was done under some kind of duress or something >> no, i don't think that, but they are cooperating, and it's a question of how much do prosecutors need their cooperation and the information they're able to provide? >> what's the ripple effect, dan? have you been hearing from

shareholders and vc and private equity firms that invested is there shame going around that they believed these kids running around moving money from pot to pot. their latest round of funding was october and i think it was $32 billion valuation. did everything collapse in the past, you know, two months that could be the case but should there be any kind of trail? >> there's not enough. you've got people in silicon valley who invested in this without doing their due diligence but this is just emblematic of the last couple years where you would see a hot company and everybody would rush in, and so long as there was one reputable name behind it, in this case, squoi yeah, everybody shirked their due diligence. >> thernos just happened

do you think there will be shareholder lawsuits what is the ramification for holding these investors accountable, especially when you're talking about pension money going into big vc firms, et cetera. this is not just rich investors. these are people investing on behalf of everyday people here >> the answer, most likely, is money. that's the reality when you see the letter, for example, sequoia sent out shortly after ftx collapsed, they apologized, but they also emphasized how their overall returns have been very strong. there will be certain firms that invested in ftx that are going to struggle to ever raise money again. one thing to remember is i think if you're these vc firms or investors, you're paying a lot of attention to this case against bankman-fried and evidence that comes out because the more that comes out that shows he committed fraud, and that he lied to them and maybe took efforts to cover up his tracks, which is a little bit what ellison and wang have said in their depositions or their

informations so far, the better ironically that makes you feel as the vc firm because you can go back to the investors and say, we did our research, we got conned they made up documents they lied to us, which is arguably the theranos excuse, which is, she lied to us, switched the boxes, and ultimately, you do rely on the founder's word a lot >> dan, happy holidays look forward to seeing you soon. thanks >> coming up, today's biggest stock movers futures pointing to a slightly higher open. the dow looking up the nasdaq higher by 25. plus we'll talk to dr. scott gottlieb about the potential new covid rules for travelers from china. "squawk box" will be right back.

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good morning, three days and counting until the end of the year, futures pointing higher as we make our way toward the opening bell still, all major averages on pace for their worst year since the financial crisis tesla feeling some serious pain as well, shares pointing higher at the moment, but that comes after a more than 10% drop yesterday. plus, the top analyst for the reasoning behind his buy rating. and southwest airlines pledging to make things right with customers after a chaotic holiday weekend. the biden administration and members of congress now calling for action as the second hour of "squawk box" begins right now. ♪

♪ good morning, and welcome back to "squawk box" right here on cnbc. we're live at the nasdaq in times square, i'm andrew ross sorkin, joe and becky are off today. take a look at u.s. equity futures at this hour little bit of green on your screen right now, dow up about 100 points, nasdaq looking to open 20 points higher and the s&p 500 up about 10 points treasuries, we're looking at the ten-year note sitting at about 3.824% the two-year, at 4.341, and as we think about the energy complex, right now, you're looking at wti crude at $79.26 melissa? >> plus the three-week highs there. the latest on the chaos at southwest airlines more than 2,500 of the carrier's flights have been canceled

today. the airline warning that mass disruptions will continue throughout the week, following that winter storm-induced breakdown over the christmas holiday. u.s. transportation secretary pete buttigieg telling nbc "nightly news" that consequences from bad weather are one thing, but this recent spate of problems at southwest is, "the airline's direct responsibility. ". lawmakers will look into what caused the weekend's disruptions. another developing story the house of representatives banning tiktok from all house-managed devices in a message to lawmakers and staff the house's chief administrative officer said the app is considered high-risk due to a number of security issues and must be deleted. this mimics a provision in the new omnibus spending bill that president biden is set to sign in the coming days, and it comes, andrew, as a broader review of tiktok here in the u.s. is getting dragged out into the new year reportedly, there's some conflict between treasury and

the justice department and the pentagon as to how the app should be treated here and whether a potential ban or a sale should be extended beyond government >> are you going to do your tiktok dance during the broadcast? >> we were practicing during the commercial break >> i have no idea what you're talking about. >> that's a joke >> dead pan right there. i like that. >> is there a tiktok dance >> i think -- >> >> you can't just put that out there. >> there's dancing on tiktok >> you make up your own dance. you do a little -- >> you learn the choreography it have for that, we're going to go over to frank, who's going to do his dance for us he's got the top market movers, and he's going to be doing his own moves. show them off. >> how you guys doing today? i don't have a dance, but the dances on tiktok are fantastic >> let's get some snaps, frank it's not that hard >> a snap dance? like this? i don't even know. >> you got it. >> well, we should probably do

the movers at this point i feel like we're all doing our own joe kernan impressions let's start out with tesla, moving higher in the premarket this morning, up about 2% after falling more than 11% yesterday in reports it would extend production slowdowns at its shanghai plant tesla shares are on pace for their worst month, quarter, and year ever. a lot of kconcern over elon musk running twitter. we're looking at the whole mega cap tech complex right now apple, just down fractionally right now, but yesterday, hit a 52-week low, so we're looking at the whole year when it comes to mega cap tech. apple, the, quote, unquote, best performer of 2022, only down about 27%. you see, google down 40%, amazon down 51%, meta down 66% for the year, not shown here, netflix actually up about 20% in q4. interesting story there. also watching chinese internet stocks in the premarket. kweb chinese internet etf rising 5% on a lot of optimism over

china reopening. jd.com up 0.5%, alibaba up fractionally the kweb down fractionally something to watch throughout the day. melissa, back to you >> frank, thank you. frank holland. our next guest says the options market indicates investors are worried. joining us now is the writer for markets live at "the wall street journal. good to have you with us put/call ratio is often considered a contrarian indicator so this spike might be a good thing >> in one way, the options market is flashing red right now with the put options trading relative to call options hitting a high, so people are positioning for a potentially bigger drop in the stock market after an already terrible, terrible year for wall street. what is really interesting is that a lot of this activity has been concentrated in ultra-short

dated options. i was looking at some of the data from yesterday, and eight out of ten of the most actively traded contracts in the entire market yesterday expired yesterday alone, so that means people kind of closed out their books before heading home. as you pointed out, though, some people do view this as a contrarian indicator, meaning, people are asking, are traders so bearish right now that it's actually a bullish sign for the market and it's a good sign for returns moving forward >> is there any sort of seasonal aspect that should be taken into consideration? normally, do people feel more bullish at this time of year the put/call ratio may not be this high. i'm curious if there's any history on that. >> you know, i think in general, people seem to really be taking risk off the table heading into the year, and we're seeing that in several sentiment indicators. the aaai survey recently showed bear sentiment hitting a nine-week high margin debt levels hitting the lowest level since july 2020, so

i think this time around, it's tough to compare with prior years, given that wall street is looking at the worst year since the 2008 financial crisis, and across the board, it looks like people are reluctant to take big risks out there before they close out the year >> yeah. it is amazing, too, gunjan, and you know this more than anybody, that options trading has been so active this particular year, and the top ten put trading days in history have happened in this year, and i'm wondering if that gives the put/call ratio any more credence because such high volume is behind it. >> that's right. i mean, the market has been booming this year, and i think going into 2022, if you had known that the market was going to be down this much, i think a lot of people would have said, i think people are going to back away from some of those speculative bets, but what we're seeing is that people are still, you know, hungry to trade options. volumes are on track for a

record, and you know, the fact that the top ten trading days for put options in history have occurred this year just shows you this huge shift that's occurred in the market, because what was trading last year was calls. calls, calls people wanted to make those big yolo bets on gme, amc, on tech stocks, and instead of that, we're seeing people kind of take a more cautious stance in the market, and that's leading to this really high put/call ratio. >> yeah, volatility being sort of dampened. it's amazing to think that the vicks right now is at 21, so premiums really cheap. it's cheap to take a bet people aren't reaching for bullish positions. they're reaching for bearish, but volatility being muted, i'm sure, plays a role as well in terms of people trading options cheap. >> that's right. i mean, volatility may be muted, but think about these huge one-day moves that we're seeing. like, after cpi, after fed days, in november alone, the nasdaq,

you know, had 3% days, 5% days, some of its biggest moves in history occurred after the cpi meeting, after the fed meeting think about the huge move that we saw in tesla stock yesterday. so, these types of one-day moves create a ripe environment for options trading, and i think that's led to some of these elevated volumes where people are, you know, stepping into the market to maybe just play a one-day move, play a move through friday of this week. >> since we have you, what do you make of the tesla move we saw an 11% decline on very heavy equity volume, equity trading volume, like three times the average daily volume for the past 30 days i'm sure in the options market, it's typically the top traded option in the entire u.s. market what are you seeing there? >> i mean, tesla options are one of the biggest casinos on wall street and main street that is a favorite among options traders, and volumes have still been elevated this year.

what is interesting is that tesla options have still been really popular this year tesla stock has still been really popular this year among individual traders it's been one of the top buys among individual traders so, stock left, you know, the ten biggest u.s. companies by market cap yesterday after that 11% slide, but it's fascinating to see it kind of retain its popularity among this investor base, and i think a lot of people are looking at the stock and saying, it's down 50, 60, 70%. this goes for tesla and the megacaps is it undervalued now? and i think that's one of the biggest questions facing investors right now. >> gunjan, great to speak approxiwith you, thank you coming up on "squawk box," we're going to talk cannabis, the fda looking into whether cbd is safe in food and supplements. after a break, we'll speak with former fda commissioner dr. scott gottlieb stay tuned, you're watching "squawk box" on cnbc

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welcome back to "squawk box. the fda is examining whether cannabis-derived ingredients like cbd is safe in food and supplements. it's gearing up to make recommendations. joining us right now to talk about this, as well as china's covid surge, dr. scott gottlieb, former commissioner of the fda,

serves on the boards on pfizer and ilumina. let's talk cbd it has become one of the most popular -- i mean, the popularity just exploded, but do you have medical concerns about it >> well, look, there are medical concerns this is a substance that's approved as a prescription drug in a highly-concentrated form which was approved by fda, i believe, in 2018 for the treatment of intractable seizures i think fda can act here to regulate cbd and i think they will the best outcome would be for congress to pass legislation i don't think that's going to happen what's more likely to happen is the fda is going to advance a regulation at some point that allows for low doses of cbd to be deemed a dietary supplement, so you basically have cbd in the market in two formulations, a prescription in high concentrations and a supplement in low concentrations.

fda's never done that before there's no substance that exists in the market in that way, but if they went through rule-making, they could do it. that said, even if they promulgated a regulation that allowed for low-dose cbd to be in dietary supplements, there's no legal pathway for it to be added as a food additive there's a law that prohibits the fda from adding the active ingredient of prescription drugs to be added to food. so for cbd to be marketed as a food additive, congress would need to pass new legislation >> dr. gottlieb, we spoke together about this issue of a cbd regulation years ago when cannabis was just becoming legal. and you talked to me about the cumulative effects, so for instance, if you use cbd supplements or cbd lotions and you're using cbd everything, what happens then to that exposure because you're piling cbd on top of cbd. do we have a better understanding of how that works and what the cumulative impact could be

>> well, look, i think i was at fda at the time that i talked to you about this, and we were having a public meeting to discuss these very issues as a prelude, potentially, to rule making we never got that rule done. it got held up by omb and i it want it would be controversial in this administration too, because it intersects with how the fda or other agencies might one day regulate thc, but there is a cumulative effect we know this substance has an impact on the nervous system, and that it does affect mood that's why people want to use it the problem with putting it in food is consumers will have no way of reliably knowing what dose they're consuming or be able to keep track of it, and we're dealing, again, with an active pharmaceutical ingredient if you order a shot of cbd in your morning coffee, it's hard to know how much you had, let alone how much you can safely consume and how much you're going to have throughout the rest of the day. that's why we don't put active pharmaceutical ingredients in drugs in food because you have no way of knowing what deose

you're going to get. >> no one wants to have a maureen dowd moment, that's for sure i want to ask you about china because you've been reporting some of the new measures that japan, malaysia, the u.s. might be taking with regard to travelers arriving from china. what inning do you think we're in when it comes to the spread of the virus on mainland china and the ability of the u.s. to actually get data from china as it pertains to the spread there? >> well, we don't have good information on china i suspect that's why the administration is talking about putting some travel restrictions in i think they're going to impose travel restrictions, testing requirements, until the point at which we have a better insight into what exactly is spreading in china it appears to be a variant that's a derivative of ba.2. it's more contagious but appears to be less pathogenic. there was a study out from a lab last night that was pretty good analysis of that they also have bf.7 spreading,

which appears to be a derivative of ba.5. people who have had a bq.1 infection may still be susceptible to that, but the fact that we don't have insight into what's spreading is probably what's prompting the administration -- >> what would you do doctor >> look, i don't think that the restrictions on travel at this point work there's plenty of infection all around the world i think if you're going to do it, the rationale would be that you don't know if variants are spreading in china that are more dangerous than what's spreading here, and you might want to put some limits on the ability of those infections to get out of china. until you have insight into what's spreading, this could be a prudent measure. the reality is, i think china's going to be in this much longer than we perceive they have different variants spreading in different parts of that country this isn't going to be one wave of infection, it's going to be multiple waves of infection that happen simultaneously, so it could be very protracted and if you read some of the reports coming out in the south china morning post, which covers this

fairly well, the situation there is pretty dire their hospitals are overrun and they're in the early innings of this >> doctor, when you think about supply chain issues, for example, coming out of china, and we're seeing factory shutdowns and all sorts of things, the irony is, here's china opening up at a time where all of this is now happening maybe that's a function of the opening up in some regards but you know, i think kayla asked the question about what inning we're in. is this something where you say to yourself, especially, by the way, if you're a westerner, you know, a lot of business community thinking, i'm going to go to china? well, are you going to china now? are you going in march, june i mean, when you sort of think through the different waves, what does that look like >> well, look, i think there's a perception that china is having a big wave of infection and they'll get past this. these are the early innings, in my view, and it's because i believe they have different variants spreading in different parts of the country, so you have bf.7 in one part, xpv in

another part, and this could be a situation where they have multiple waves in different regions of the country with different variants and they're going to have to cycle their way through this i think these are the early innings. >> does that mean more back in february 2020 in the u.s., which would then put you out six month to a year? what are we talking about here let's get a calendar out >> well, we had successive waves, but we had some lulls in between those waves. china's going to experience this all at once because there's multiple infection already spreading in that country, so it's hard to put a timeline on it, but i think this is at least a six-month situation that they're in where they're going the to have continuous spread a lot of companies have been moving their supply chain out of china over the past two years, so i suspect they're in a better situation than they were two or three years ago. that's true of the pharmaceutical sector. but i don't know for other

industries >> dr. gottlieb, does the world health organization or any other global body have the ability to compel china to disclose this information? if travelers or if countries could say, well, it's spreading in this province or spreading at this facility, we are going to avoid that for now, but it's safe to go here, then the transparency of that data would help a lot in the ability to make some of these decisions, so is there any possible way that information can be obtained? because you just said there's a perception that the virus is spreading. we don't know actually what the real data is >> well, yeah. i think you nailed it. that's the problem we don't know what the variants are that are spreading there we've tried to get china to share that information this isn't the uk or france. we will get that answer. we'll get that answer because the administration is going to put in place testing requirements they're not just going to test travelers into the u.s they're going to test travelers into malaysia and thailand they'll test waste water on airplanes coming out of china.

that's going to be a give a very good snapshot in what's testing in china we'll have the information because we're going to take it, not because china is sharing it. >> doctor, just to put a fine point on it, because we got to go, your view, though, is that even if this does spread outside of china, it's not as pet pathogenic >> right now, the data that came out on xbv, at least, which is what's spreading there, is it's very immunoinvasive. we could have a wave in the u.s., but there's already xbv in the u.s. based on the data that came out, it appears to be less pathogenic, very contagious, so hopefully it wouldn't cause a major wave of infection, but i don't think china's going to be the reason we get seeded with xbv. the question is, is there something else spreading in china that we haven't seen yet so far, we don't believe that's the case, but that's the unknown. that's why you see the administration taking steps here >> doctor, very good to talk to you. thank you. >> thanks a lot.

coming up, you thought december was important for retailers. up next, find out why january could be pivotal as well we'll talk potential sector winners. "squawk box" will be right back. >> announcer: time now for today's aflac trivia question. how many decks of playing cards are produced each year the answer when cnbc's "squawk box" continues what do you... got there? a hospital bill for me? mm-hmm. for $1,200? ga-a-a-ap! did you say "gap"? yeah, he did. he's talking about expenses that health insurance doesn't cover. ga-a-a-ap! uh-uh. aflac! that's why there's aflac. it pays you money to help close that gap. aflac, huh? don't tell me he high stepping. af-lac, af-lac! he stole my move! get help with expenses health insurance doesn't cover at... aflac! ...dot com.

>> announcer: now the answer to today's aflac trivia question. how many decks of playing cards are produced each year the answer, according to the united states playing card company, more than 100 million decks are sold around the world each year, including 20 million to casinos >> welcome back to "squawk box." we're about to close out a make or break month for retail e ezersers, but january is shaping up to be important too good morning >> good morning, kayla january performance is often overlooked after a busy holiday season but this year, it could decide which retailers put up a strong quarter or a disappointing one. it will also set the tone for 2023 one major factor to watch is

discounting. major retailers like target and lululemon started with higher than expected numbers. consumers are also expected to tighten their belts after holidayspending sprees holiday sales rose 7.6% year over year according to data from mastercard spending polls. that's only slightly higher than the 7.1% annualized inflation growth we saw in november. some retailers could have a more pronounced pullback. walmart expects to see a boost in traffic in late december and january as shoppers become more price sensitive. and then there's the added benefit of people cashing in gift cards and making new year's resolutions. target is working to drum up sales with fresh merchandise in january, including a lot of workout clothes. >> thank you appreciate it. we will talk to you very soon. coming up, the questions that keep investors up at night. where is inflation heading in

the new year it's the big one what does the fed have planned for interest rates we're going to get into all that next when "squawk box" returns

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welcome back to "squawk box. an update on congressman-elect george santos, the republican jewish coalition saying it wouldn't invite santos to any future events. santos embraced the jewish and catholic identity but in an interview with the "new york post," santos said, because i learned my maternal family had a jewish background, i said i was jew-ish. santos likely to be seated as a member of congress on joanuary 3rd. republican leadership hasn't weighed in, if you can even fathom that, on any of this. complicating matters is the speaker's race, kevin mccarthy running for speaker, can't lose more than four republican voters i'm more than just jew-ish i'm jewish >> like one as opposed to -- >> and i would also say the forward had an article yesterday where he didn't say, i'm jew-ish. he said, i am a jew.

so, you know, the guy's just a serial liar. let's just call him for what he is why we have nobody in washington who has, like, any morals who can just say, out loud, he's a serial liar, i can't work with a serial liar, i don't even -- i understand it from a sort of practical, rational perspective, sort of. but not really >> i don't understand it at all. >> no, i'm saying, i sort of understand the disgrace of kevin mccarthy and everybody else who doesn't want to say anything >> we briefly referenced yesterday the corollary in corporate america. remember back in 2012 in dan lobe removed the ceo of yahoo, because he said on his resume that he had a computer science or engineering degree that he did not have >> ceos get fired for this >> because that is the right thing to do. >> correct >> and it says volumes about the house of representatives to not say much >> in this case, the board of directors that has the say is the voter and the american people who live in that

district unless there's a referendum. >> i know we have viewers, and i got those emails yesterday, so i'm just going to say it there are folks out there who say, why are you going after santos when you know, biden, 30 years ago, plagiarized a paper >> and i got emails on the other side saying i shouldn't be playing devil's advocate here. >> i'm going to say, that's despicable and disgraceful too are they the same thing? i don't think so, but i'm not sympathizing with plagiarism either >> this is not one little thing. it's a series of things about his whole being, his whole worthiness >> the persona that he put forward to the voters in his district is false. >> 100%. what i don't understand -- look, the law is the law, and unless they are going to find what i think are financial violations, there's nothing that can actually be done about this. >> the new york a.g. has said she's going to be looking into this it could be a federal crime if he lies by omission or comission on his financial disclosures when he is seated.

and kevin mccarthy could choose to strip him of committee assignments, not let him do things on the house ethics committee. >> if the guy had any grace at all, he would just step down >> he has no conscience. >> he has no conscience to begin with the whole thing is just -- it's a disgrace >> it's a shame that the people who voted for him on these false premises can't do anything about it >> correct >> there's no provision. >> there are people, clearly, because we're getting the texts and the emails and the tweets and that, who say, you know what i don't care by the way, there are people out there who say, i don't care. i like the way this guy thinks and votes, and that's what i'm dealing with right? >> move to long island, cast your vote. >> what's funny is he might have been elected if he didn't say all those lies we'll never know who knows? >> i don't know. >> moving on, we spent most of this year talking about inflation and the fed's intentions on rate hikes we'll get ready to do it all again in 2023. the central bank's first meeting

of the new year is just a few weeks away, and investors seem more rate hikes in the cards, at least three of them. joining us now to talk about the economy in the new year, betsy stephenson, professor of economics at the university of michigan and a former council of economic advisors member under president obama. and michael strain, director of economic policy studies at the american enterprise institute. good morning to both of you. betsy, i'll start with you we are seeing disinflation in some categories, in rent, in energy prices, in used cars, but then there's also still very high increases in the price of things like food, both at the grocery store and when consumers are eating out, so net-net, what is the consumer feeling right now? >> well, i mean, consumers hate inflation, even when inflation's not running very hot, so i'm sure if you're asking me what the consumer's feeling, it's not exactly my expertise to opine on feelings,but i think they're feeling pretty frustrated and they'd like to see inflation

come down farther. you know, the process of bringing inflation down, it's slow, but we're clearly moving in the right direction so, inflation is coming down you know, when you said sort of net-net, taking it all together, prices are coming down i was just talking to a friend the other day who was very excited to have filled her tank with gas at $2.75 a gallon she was feeling pretty buoyed by that i think there's a lot of consumers out there, when they go to feel their tanks, are feeling pretty buoyed, but they go to the grocery store, and i don't think we're going to see food prices coming down. we're going to see the rate of increase really slow, and prices stay the same for a while. >> michael, the market is suggesting that the fed could be moderating its interest rate hikes this year, but chair powell has said he's going to go to 11. that's a spinal tap reference, not the reference to the fed funds rate, but is there a risk that he could get more hawkish

because he's already said, we have more tools in the other direction than we do to tame inflation. we would rather overdo this, overshoot the mark and then print more money and put more into the system if we need to. >> yeah, i think the fed has been extremely clear that they are focused on a 2% inflation target, that they don't want to repeat some of the mistakes of the past, and that they're going to keep the level of the federal funds rate pretty high for long enough to convince them that inflation is coming down now, what could change that, one thing that could change that, would be the unemployment rate rising to a level that the fed feels is too high. that will be a qualitative, subjective judgment. something else that could change that is significant volatility in financial markets i think we could have both of those or one or the other in 2023 something else that could change that is that the economy goes into recession sooner than

people think i think, you know, my expectation is that the recession will likely begin in the middle or in the second half of the year. maybe that happens earlier, begins in january or february, but i think rates are going up markets expect rates to go to about 5% i think that's too low i think rates are going to go substantially above 5%, and then i think they're going to come back down when the economy softens and when inflation looks like it's closing in or at least on a clear path back down to 2%. >> betsy, what do you see as the guiding principles of the fed in the next six months? there's carnage in the housing market there's a suggestion that maybe the unemployment rate might not actually get that high and that where you would see the fallout in the labor market is in job openings and some of the j.o.l.t.s. data. what are you looking at? >> i think it's important to realize that the fed sees themselves as having sort of two tools right now to bring

inflation down one is bringing rates high, and the other is keeping them high for longer, and i think one thing we're going to see for sure is, you know, for a while, markets have priced in that we might see some cuts in rates in 2023 i don't see any cuts in rates in 2023 i don't know, you know, i personally think they need to be careful not to bring them too high, slow and steady is the right process right now, because we are seeing inflation coming down, and we do want to try to avoid that recession i don't think, you know, michael just described the recession as if it's definitely coming. i do not think we necessarily have to have a recession i think it's quite possible we could avoid it, but there are a plo lot of risks out there there are risks in the global economic markets, what happens in china, what happens in europe, what happens with russia and ukraine, what happens with the price of oil, all those are risks to the u.s. economy, but another risk we have are internal risks, is that the fed raises rates too fast, too high,

and as a result, we have a fed-induced recession, and i think the fed is working hard to try to avoid that, but that's definitely a risk. but they'll also point out that another risk is that people come to expect inflation at 3%, 4% and they just can't get it below there. and so that's why they're going to, i think, hold the line, and they're not going to bring rates down until they're really convinced. >> michael, the final word here. for the better part of a year, the biden administration has been trying to manage expectations of the american public, saying, with all of this going on, the economy will be moving toward steady and stable growth what do you think that actually is for gdp 1.5% >> oh, i expect growth in 2023 will be below that, and you know, the fed wants growth to be above zero the fed wants the economy to be growing. but the fed wants to be growth significantly below the economy's underlying potential to produce goods and services as

a way to kind of bring demand back in line with supply and slow prices down and i think they're going to get that i think we're going to see the unemployment rate go up in 2023, and i think the unemployment rate will increasingly need to go up. the, quote, nquote, easy part of getting inflation under control is behind us right now, we have a lot of inflation coming from the labor market, and that's going to require employers to cancel job vacancies, first of all, but i think it's going to also require some layoffs, and people are going to feel that >> that next meeting, january 31st we will see how it plays out, and what the fed says then for now, betsy, michael, our thanks to you both coming up, the latest on southwest airlines' christmas weekend nightmare. the carrier still trying to get back on track. stay tedun you're watching "squawk box" on cnbc

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responsibility >> has it crossed the line or not? for more on this meltdown at southwest in the travel holiday chaos, i want to bring in mike boyd boyd group international chairman what do you think? crossed the line, mike >> i think what we've got here is a situation where we have had a weather event that we have never seen before, and they just didn't have a robust enough reconciliation system to make it work now, that means, i would agree with the secretary, we need to look into it but let's keep in mind, all airlines were affected southwest was affected more, because they just didn't have a system strong enough as was needed to really do what they needed to do to make up for this mess >> so, what's the answer, mike i mean, some people have said, oh, we should have, you know, consumer bill of rights programs that are similar to what is in europe i don't know if that would have protected people if this really was a weather event. but it's true. if your flight gets canceled and you miss christmas, it's a

thing, and it may be priceless >> it's a thing. i don't know of anybody, probably, on either side of this video that doesn't know somebody or directly was affected by southwest in the last week or so, so it's huge a big issue now is, how are we going to deal with this? what we need to do is make very sure that southwest does have systems in place they haven't needed a system that robust in the past, so now they're going to invest in it. but let's remember, all airlines were affected. go up to toronto, it's still messed up there. southwest just didn't have the same systems in place to inform the customer and remediate the failure. there's not much you can do with the second, but the first one is -- >> but mike, bigger picture, because this is about southwest, but if you are arguing this is happening to airlines across the country, and it was in part because of the weather, obviously, what kind of remuneration should consumers get? by the way, i was supposed to be an air canada flight back to the

united states. it got canceled. i almost -- if i hadn't done a sort of planes, trains, and automobiles situation, i probably wouldn't be on the set this morning >> this is a big issue get stuck for three days in burbank and can't get out until next week. a family of four, what do you do airlines aren't required, necessarily, to reimburse them, but at what point does it become the airline's responsibility because of weather on a case like this, where southwest might not because end-of-month lack of pilot time, they might not be able to get back into full swing, probably until january 2nd or 3rd, is that something that we need to look at to see whether or not they owe something to the consumer that's up to our friends in washington to determine. >> well, but i'm asking you to determine -- help us determine it, and what you think the right answer is here and what regulators should be doing, what do we ultimately do to profits if, in fact, they had to have more robust systems, not just electronic systems but maybe more staff and other things in

place for situations like this obviously, that would impact margins. >> it would in a major way look, airlines knew what this business was when they got into it and there was going to be a weather issue. i don't have a lot of -- i have no sympathy for airlines that say, well, it canceled due to wea weather. well, if my car breaks down and i can't get to the airport, my ticket is forfeit. there's got to be a lot more quid pro quo there i could say, it's weather, but the airlines knew when they got in the business they were going to have to deal with weather there's going to be some issue with compensation at some point under some very strict rules because airlines have been way too observant of their own rules that they'll pour on a customer. >> so, you think new rules should be put in place how severe should those new rules be we can talk about the impact on southwest itself, but investors in all these airlines, we got american, united, delta, alaska air, their stocks on the screen. you're looking at southwest and

alaska, off by over 1% what do you think? >> it could be potentially devastating. this would have been devastating if all the passengers had to be recompensed for three days in a hotel, it could be incredibly expensive. but it's something i think the airlines are going to have to consider, because they're the ones in the business they're the ones who know what the situation is they're the ones that know that airplanes can't fly under certain conditions so, there should be, i believe, something there, but it has to be very tight. >> is this an insurance program that needs to get put into place? the other piece of this is, we can scream about regulations, we can scream about compensation, and then we can all watch prices go one way up >> they're going to continue to. they almost have to. consumer's going to demand it, buttigieg is going to demand it. every politician today is dusting off his soap box, so i think what we're looking at now is airlines are going to have to be proactive in this and try to

take some control of it to say, in the future, this is what we're going to do. if they don't, congress is going to do it for them and say, if you're delayed more than ten hours or eight hours, you owe them -- >> the big question i wonder is, does it become an insurance package that you buy as an add-on or is it going to get forced into every ticket? it going to t forced into every ticket that becomes a big issue. >> it does your idea of insurance makes a lot of sense a lot of people will say i can't afford that. right now the airlines, and it's not just southwest, they've got to start to think about a strategy to get through the next two weeks. >> mike, nice to see you happy holidays hope all your flights take off and land on time thanks coming up, tesla's terrible 2022 why the stock plummeted at the end of the year and what has to go right in order for the

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tesla having a terrible, horrible, no good, very bad everything, on pace for its worst ever month, quarter and year joining us to talk about what is going on is senior equity research analyst byron nelson,

who has a $225 price target. great to have you with us. you stuck with your buy rating it's down 69% this year. i would assume you think it's closer to the bottom at this point. what is the primary driver of this tremendous decline we've seen, in your view >> sure. thanks for having me so obviously there's been a lot of attention surrounding tesla's sell-off but to be clear, this is a broader ev sell-off. if you look at tesla's competitors, rivian and lucid, those stocks are down far more on a year-to-date basis than tesla. so we think sentiment has really become overly negative and the recent sell-off has really been k exacerbated by year-end sell-off tesla loss over 11% of their market value in a single day yesterday. and, really, what news was there

out there, except that they're planning to take additional downtime at their shanghai factory over the chinese new year in late january so we think that's really overdone to see that kind of sell-off on that type of news. and, by the way, the china factory is only one of four factories that they're currently operating. so we think this is a really good buying opportunity following the recent sell-off. >> what was remarkable about yesterday's sell-off was the volume behind the 11% decline. it wasn't just strange light volume days ahead of the new year it was three times the daily average volume over the past 30 days, which means there's a lot of conviction in that decline. if you think that it's china mostly, that bit of news behind the11%, once that gets better, i would think that's something to look through. but then you still have the outstanding issue of elon musk's

distraction, the possible damage to the tesla brand, the high interest rates, which elon musk himself tweeted about. the y and 3 are some of the most financed suvs, evs in the market these are things that don't go away even if the china lockdown is solved. we just heard from scott gottlieb, he thinks these could be waves of covid that could be disruptive to the supply chain. >> we think the pendulum has swung too far in the direction of fear and there's really -- tesla is not being given enough credit for some potential positives that are ahead one is we think they could announce a buyback they've alluded to that in the last few months. it would likely be in the magnitude of $5 to $10 billion the company's balance sheet was recently upgraded to investment grade by s&p so they're in a different

situation than other automakers given their balance sheet strength and free cash flow. and the other thing is their evs, the lower price versions of the model 3 and y will become eligible for a $7,500 federal ev tax credit on january 1st, so next week those lower priced versions will be available for the ev tax credit because of the inflation reduction act. so we don't think the market is focusing enough on those things and the sell-off has really presented a compelling entry point. >> the tax credit is huge. great to speak with you, thank you. >> thank you. coming up, we'll talk about another monster tech company, apple, and why it's held up well against its techrere bthn, and what is ahead in 2023. "squawk box" will be right back.

good morning southwest airlines ceo apologizing for a week of travel chaos, but the cancellations continue we'll tell you how much the schedule has been slashed this morning. >> covid whiplash, hong kong lifting restrictions, but the u.s. is considering adding new rules for travelers from china.

>> plus, playbook for 2023 we'll tell you what apple has planned that might make you consider the stock for your portfolio. the final hour of "squawk box" begins right now ♪ good morning and welcome to "squawk box" right here on cnbc live from times square i'm andrew ross sorkin laura is in for joe and becky this morning take a look at u.s. equity futures at this hour the dow will open up about 115 points higher, the nasdaq up 37 points higher and the nasdaq up about 14 points. treasury yields right now, the ten-year note sitting at about 3.807% southwest airlines ceo bob

jordan apologized for the travel chaos this week. they said mass disruptions will continue in the coming days. according to flightaware, southwest has already canceled 2,500 flights this morning that's about 62% of its schedule the biden administration is considering imposing new covid rules for travelers from china because of the sharp rise in cases there, and the lack of transparent data being reported from beijing officials pointed to new rules in japan and malaysia that require negative covid tests for arrivals from mainland china you heard dr. scott gottlieb say that's the only way we can get the data there are new restrictions, including a rule for inbound travelers to take a pcr test the city is eliminating social distancing, but keeping a mask mandate in place while some changes take place in early january, the hong kong

restrictions will be lifted tomorrow. let's look at pre-market movers. >> good morning. we're going to begin with an upgrade on a quiet week on wall street generac shares are up with a price target of $160 a share, implying about a 76% move to the upside generac a power equipment maker. they're down more than 75% vaccine maker moderna, shares sliding double digits over the past week. shares up fractionally this morning, a reversal from when i was checking a minute ago. there are reports that the company is fighting a shareholder proposal, demanding the company open up its mrna vaccine to countries and provide better pricing you can see shares are down 14% for the week a crypto check, kraken is closing japan operations we're seeing crypto across the

board right now for the week -- excuse me, for the month, q4, we're seeing bit counsel is down, ethereum is down, solana down more than 70% in q4 it's so bad, people are calling it terrible, very bad, no good year back over to you. >> thank you very much, frank holland. let's get back to the markets as investors are about to close out 2022. joining us is edward jones senior investment strategist mona, it's good to see you tesla, amc, southwest, all companies that are moving on headline news, but for a thin trading week, what are you doing to position yourself for 2023? >> thanks, kayla it's certainly an interesting time for investors usually we would be looking forward to a santa claus rally but heading into 2023 the

dynamic is a little different. we are seeing tax harvesting, more than we've seen in the past, which makes sense given the losses investors have endured. we're still facing headwinds entering 2023, we can't fight the fed. the fed has told us it's not done raising rates and we expect at least two more rate hikes in 2023 then we're facing a potential econo economic downturn, and probably the global economy will slow as well in that environment, markets have put in a lot of work to the downside but probably can't ignore this pending downturn and these pending last few rate hikes from the fed. all of that being said, i think as we head toward the back half of 2023, that's when we're facing a probably better environment for investors, perhaps inflation continues to moderate, the fed pauses and maybe global central banks pause as well. the economy hopefully

stabilizes as we head toward the back half, we think there's a credible case that the fed could start signaling at least rate cuts we're well above the neutral rate around 5%, so they could think about moving back toward neutral. >> but that would still be months before that happens, mona, and you say equity markets have put in a lot of work to the downside, which is a nice way of noting that these indices have had their worst year since 2008. i'm wondering at whatpoint you think the correction has been enough and that they're going to start moving up from here. >> yeah, absolutely. look, i think could we potentially retest the october lows i think that could be a credible case as well we don't think necessarily we have to move well below that in order to stabilize and then look forward. keep in mind when we look historically, markets are forward looking. even if we are in a recessionary period, markets start to rebound three to six months ahead of the

end of the recessionary period what we're seeing from a size perspective, markets are defensively oriented and we would expect that to continue as we head into 2023. so probably value over growth, those defensive parts of the market hold up relatively better as we look toward a potential recovery period, that's when the recovery playbook comes into play and that's when you start to see potentially quality growth, cyclical parts of the market, longer duration parts of the market start to outperform as well. so right now, keep doing what we've been doing in terms of style, size and sector, but we could start thinking about a recovery playbook perhaps by the second half of 2023. >> you say a mild recession could take hold in the first half of next year. what does a mild recession look like >> historically since 1940, we've had three deep or prolonged recessions and those include the 2008 and the tech

bubble back in 2001 period those were characterized by a bear market that was over s&p draw down over 40%, they lasted two to three years inlength. we think a mild recession is something like three quarters on average and probably looking at not as deep of a negative gdp print. and so in that case, in fact, we are starting from a position of relative strength. the labor market is in pretty good shape the consumer is holding up as we heading past the holiday season. and of course savings rates have depleted, but have started from a place of strength as well. we think all of these factors provide some cushion and we know consumption is about 70% of the economy and we won't see something like we saw in '08 or 2001, and, in fact, if they're in a three quarter recession, about halfway through, markets can start thinking about the

recovery ahead. >> we're seeing a little green on the screen today. we'll check in with you in the new year we appreciate it >> happy new year. coming up, delete tiktok, that's the order from the administrator of the house of representatives to lawmakers this week. we'll talk about the potential security risks straight ahead. >> and later, playbook 2023, we'll talk apple after the stock closed at its lowest level since june of 2021 is it buy time "squawk box" will be right back.

welcome back to "squawk box. taking a check on futures, session highs here premarket s&p up by about 12, the nasdaq up by 29, this after the 1.4% decline we saw yesterday. the house of representatives has banned tiktok from official government devices it's an order that mirrors a provision in the omnibus spending bill passed last week that will ban tiktok from all federal devices. joining us with more is former chief technology officer for president obama. currently president of care journey. it's good to see you >> thanks for having me. >> federal devices, just only recently got the capability to send text messages as part of their data plan. how many devices do you think

really have tiktok on them and is this more of a symbolic move about where the government stands >> this represents sort of a policy signal, but the main attraction is going to be how the committee on foreign investment in the u.s. works to mitigate security threats with tiktok so we're going to see states and other government agencies acting as employers, basically encouraging employees not to access certain products and services, tiktok being the most recent i remember in my early days in the white house i couldn't access any social networks from government computers that's not particularly new. >> but the review has been going on for the better part of three years and now it seems that congress and states are taking matters into their own hands so if it's sending a message, what is that message and does it light a fire under the committee to announce a conclusion sooner rather than later? >> i'm confident the committee is focused like a hawk on this issue and they're largely likely

working on mitigation measures for security risk. as we know, they're raising two primary risks with tiktok. one is u.s. user data being exfiltrated in some way, shape or form by those in the communist party in china so there's a concern about data privacy and use. and then separately it's the actual algorithms themselves, the heart and soul of tiktok, which might be manipulated for potentially political purposes, especially if there's an opportunity to infiltrate or influence u.s. policy toward, say, taiwan. >> but behind the scenes, there are reported conflicts between where different agencies stand, with the journal saying the pentagon and justice department are now pushing for an outright sale of the u.s. operations of tiktok, while the treasury department had been placated by simply a data localization policy or something to that effect so how do these debates play out behind the scenes, and which, if

any, of these agencies holds more clout in the debate >> well, the process is run by the treasury department but it's got a heavy national security voice at the table i would say generally speaking, just for the viewers to understand why we're in this predicament, there was a u.s.-based company called musically acquired by tiktok, and normally the companies involved in a merger are proactively inviting them to view the transaction and render a judgment frankly, if they had done that back in the acquisition of 2018, 2019, i'm not sure they would have had much of a challenge it's unclear at the time how much of a national security threat it was. because they didn't seek that opinion, they have the ability to look backwards and say you never asked for our help, so there's a little bit of an opportunity for more prolonged negotiation. my best estimate is we're going to see a lot more data

localization strategy, with some focus on what we can do to make transparency around the algorithm itself, which is the heart and soul of the intellectual property. that's probably where the debate is right now. >> bite dance didn't seek the machine because it didn't need the threshold to require the review so i'm wondering, going forward, toavoid a situation like this in the future, how much more stringent do you think they're becoming and what do you see as the merits of the policy being weighed right now to have treasury or another agency evaluate any outbound investments into a chinese company by a venture capital or private equity >> my instinct right now is that if you look at the life in the real world, you're going to see more investors addressing risk in any m&a transaction sooner, even if they don't necessarily meet definitions so a lot of washington lawyers

might look at this as the employment act, but it is likely the case that given these concerns and the ability of unwinding transactions, which we've seen several times earlier in the last couple of years, regardless of what's on the letter of the law, the spirit of the law has more latitude to look backwards so my view is more organizations have embedded that process into m&a when looking at foreign-owned corporations. >> it feels like the government is putting a finger in the dam when it comes to suring up the security violation think about all the businesses, the publicly traded companies, corporate espionage is a huge issue. do you think there's greater awareness amongst publicly traded companies in the private sector about this risk not too long ago we were so concerned about china infiltrating and stealing our intellectual property and here

we are with tiktok on every advice i'm exaggerating, but this doesn't seem to be on the radar. >> well, actually on the cybersecurity front i think there's a lot more interest in intellectual property protection on corporate data warehouses i would say most cios and their i.t. security leadership are focused like a hawk on that protection it's been a perennial issue in u.s.-china negotiations to put more teeth on negotiations to minimize the corporate theft i think famously microsoft office suites are 90% less the license rates going back when i was doing my time in the administration, and so that issue remains a priority but the national security threat separate from the commercial risk is the growing issue now. i think, frankly, it's the algorithm, the core intellectual property that puts china in direct competition with the u.s. >> aneesh, can i ask you a

national security question relating to tiktok, which is do you -- a, do you personally use tiktok >> no. >> would you have it on your phone? do you think it's demonstrably dangerous? and if it really is, why do you think apple allows it on iphones, for example do you believe that it does, because of its own relationship with china >> well, let's unpack this a little bit number one, i trust senator warner, chairman of the senate intelligence committee and he's come to the conclusionthere is in fact, a level of risk that's particularly sensitive and high on the application. >> aneesh, do you know this to be true? >> no. >> look, sequoia thought that ftx was a fine company and therefore a lot of other people said, if they think it's one thing, then i think it's one thing. what do you actually think >> i think the data risk, that is to say exfiltration of my

kids' data into chinese servers is a likely phenomenon we have to make the assumption that the communications platform will end up resulting in communications, traffic finding its way into the chinese communist party's assets i sort of feel like that is an accepted premise the question is how much harm will that cause my kids if they happen to know what they like and don't like on tiktok the bigger concern is sort of the social media disinformation, and if you think about the algorithm and influence. so if we're worried about russian interference in u.s. elections, imagine if we have some kind of engagement with china whether or not this is going to have some influence over our kids and the younger generation in terms of their views. so it's the misuse of the algorithm, which is more like -- on paper they're not doing anything wrong, but they have the capacity to do wrong all else being equal, where do you come out i think that's where my heroes like senator warner have come

down. >> we'll leave it there for now. we appreciate your time and expertise. former chief technology officer of the united states andrew. >> thank you next, to infinity and beyond there's a billionaire space race moving up. upgrading satellites early this morning. we're going to talk about competition for the next investing frontier 'lta autt ghafter this

welcome back spacex launching another starlink mission this morning. joining us for more on the space race is christian davenport. he's author of "the space barons, the quest to colonize the cosmos". let's start with what's happened this morning and how important that is. >> it's huge space x is charging ahead. this was their 60th launch of this year. they put another batch of starlink satellites in low earth orbit. they've got close to 3,500 of these satellites flooding the orbit. they tweeted the other day they have about a million customers around the globe they're continuing to move into different countries and markets. it's a real race they know they need to get these satellites up, get them up quick. they've been doing that, and also they're looking with a

whole new program to move into national security markets with this as well they see this as a huge revenue stream for them if they're able to pull it off >> what's the bigger business long-term? starlink or spacex itself, meaning the rockets? >> well, i think starlink. if they can become an internet provider for the world, that could be potentially a huge business it's risky launching rockets, they're charging $60 million a launch, that's a big business. that's pretty good particularly if you're saving the rockets as they do and not throwing them away, as had been the tradition. if they can move to having the entire world as their customer, or moving into markets from rural places into the united states, to africa, places in europe, going direct to phones, airlines, military applications, as they're trying to do, that's

the real growth, i think that elon and spacex are looking at in the long term it's a lot of risk, though. >> how much room do they have ahead of just about everybody else, including jeff bezos, the owner of the "washington post," your employer? >> they've got a huge lead right now. there are other companies that want to do this that are pursuing it. amazon obviously one of them they also have a license from the fcc to do this they need to get their satellites up. they're moving ahead on this they've got launch contracts out to many different companies. they're working on getting a prototype and all of that out. but they haven't put their system up yet. so spacex is already out there doing it if you talk to amazon, they will tell you that this is a big enough market that there's enough for two or more players and they're not concerned about it and that there is some benefit to coming in second and

seeing other people make the mistakes and not repeat those and go in a more sort of careful and deliberate fashion but spacex is out of the gate. they've done it for years. they've got all sorts of customers and they're moving fast so there's a huge gap between them and everyone else right now. is it possible that others can catch up yeah, but we're going to have to see. >> given all the government contracts that spacex relies on and maybe that it's a monopoly, at the moment there's no competition, there's a lot of folks that have come on our broadcast over the last several weeks and months around what elon musk has said or not said on twitter that have raised questions about whether that's going to impact government contracts in the future. what do you think of that? >> no, i had an interview a couple weeks ago with nasa administrator bill nelson and asked him that he said he happened to run into the president and coo of spacex and confronted her and said, do i have anything to be worried about here with elon spending

all this time at twitter is this a distraction for him? not sfrurprisingly, she told hi no, everything is fine, what do you expect her to say? look at what they've done. three launches in 34 hours earlier this month, another launch this morning. their 60th of the year they've got one more planned before the end of the year. >> christian, look, i'm an dmiener and in awe of what is being created with elon's attention or without it. the question i'm asking is, given some of the rhetoric, if you will, on twitter from elon musk himself, whether you think that could impact the way legislators and others allot money to companies like spacex, whether there's political retribution, if you will, for perhaps positions being taken or not. >> without a doubt the government contracting

process is supposed to be beyond reproach. >> you would want it to be i'm just saying there's a reality to, unfortunately, the way things work. >> right and whether congress gets involved and what sort of restrictions are put in place. absolutely, you have to be worried about that. >> is that a speculative concern or a real concern given the reporting you've done? >> i don't think we've seen anything come out and have a concrete legislative policy reaction that you can draw a direct line to that, to something that elon has tweeted. is there rumblings, are there talkings, is there concern among the people i talk to on the hill and in the space industry as a whole, which, by the way, also want spacex to succeed because they are, as much as nasa, if not in some ways more than nasa, the public face of the national space enterprise, absolutely

and this isn't the first time, andrew, that there's been concern about elon's behavior and how it would impact its government contracts i don't know if you remember, but a few years ago when elon took that puff of marijuana on the joe rogan show, the former nasa administrator, jim bridenstein, was very concerned about that and he ordered a safety review of the culture at spacex, saying, look, these guys are going to be launching our astronauts their lives are in spacex's hands. and he's taking a hit of marijuana on this broadcast? that was of great concern. could there be some sort of review coming up as a result of what's going on right now? yeah, absolutely >> keep our eyes on this story it's an ongoing saga christian, i want to thank you for joining us this morning. coming up, your playbook for the new year

apple hitting its lowest level since june of 2021 is now the time to buy "squawk box" will be right back.

welcome back to "squawk box" here on cnbc

futures pointing to a higher open with the s&p looking to add 7 at 9:30 a.m. eastern time, the nasdaq up by about 18 and the dow looking to add 61. russia has banned the sale of oil and petroleum products to those that put a cap on their sales price. they're still allowing russian oil on the markets to maintain stability. much of russia's crude exports are selling at market prices below the imposed $60 cap primarily to countries like india, china and turkeythat haven't agreed to join western sanctions. let's talk tech stocks apple shares hitting a 52-week low but analysts say there are potential catalysts for growth on the horizon >> apple shares are also wrapping up their worst year since 2008 on top of that 52-week low. production problems weighing this year but potential growth catalyst coming next year,

particularly in services in fintech they're expected to launch apple pay later and will offer a high-yield savings account for apple card customers. advertising is another area to watch. new app store ads launch this year and apple is likely to look to other services across its platforms like apple maps and tv+. on the hardware side, the big question is if iphone demand holds into the next quarter after missing shipments in time for the holidays this quarter. also expecting that long rumored augmented reality headset in the second half of the year. that would make the first major new product since the apple watch launch back in 2015. it puts apple in more direct competition with meta and tim cook and company it will make a compelling case for the device that meta has failed to do so far. the dollar is expected to remain strong for the first half of the year that hurts apple's services businesses and app store

spending has been falling all year, which apple blames on a drop in gaming sales, andrew. >> steve, i mean, when you look just at how investors are supposed to think about this for '23, what's the answer here? >> look, right now we're facing this environment where everyone bought everything in those first two years of the pandemic. there was a huge demand, especially particularly for apple. by the way, apple warned that the mac business is going to drop significantly year-over-year because there's just such a huge influx of demand in the year before. so there's that issue and whether or not they can keep demand going on the hardware side and then all these attacks from regulators like we were talking about yesterday on their services business and then that strong dollar has just forced them to raise prices in places like japan and europe. >> i just wanted to ask you one sort of curveball question we've been talking about tiktok

all morning and what's going on with the u.s. government related to tiktok. i raised this question a couple minutes ago. is there any pressure on apple to try to ban tiktok itself from the u.s. government and the sort of cross-currents and complications and conflicts of the relationship that apple has in china >> this is so complicated. look, we know that apple has sometimes had to kind of, for lack of a better term, compromise on their values when doing business in china. but tiktok is a different case because as long as they adhere to those app store rules and apple doesn't have any evidence that they're purposely breaking or accidently breaking those rules, then it's allowed to stay on the platform. i'm not aware of any kind of rule that says, you know, customer data can't be stored in china in the app store so if it's not violating the rules, apple kind of gets to wipe its hands clean big developers like tiktok, andrew, and facebook and twitter and so forth they talk to apple on a regular

basis, usually a weekly basis, these major apps that are a big part of the ios app ecosystem. they're in constant talks with apple, for sure, to make sure they're complying with whatever rules apple has. the treasury department might have different ideas. >> steve, thank you. >> sure thing. let's get back to the broader markets and the fed treasury yields, rather tame this morning yesterday they were trading a little higher. right now you can take a look at the ten-year yield we were at 3 points, 3.5 or so as if investors didn't have enough to worry about, inflation and recession that looks to be driving stocks is foreign bond yields steve liesman and mike santoli joins us what are you seeing, what are you watching >> so it's really quite remarkable kind of stealthy the way this has crept up on us the first thing i want to do is

show you what's happened to the outlook for european interest rates, and especially the ecb, when they were hawkish a few weeks ago and then what's happened to stocks in the interim. one way to look at the 12-month ibor, you can see data shot up to 330 from around 280 so a pretty big change in just a 12-month outlook look at what's happened to stocks in the interim. so we've counted so you don't have to, about a 50 basis point rise in the spread between the german and u.s. ten-year and that's accompanied a 6% decline in the s&p 500 i don't know if they're at that equilibrium level where we've now factored in this idea that european, japanese rates are going to be higher, u.s. rates have gone up, so stocks have to adjust relative to the risk-free

rate but this is an ongoing process and it's been a major factor with stocks over the past several weeks. >> rick, just when people thought that the ten-year yield would stabilize and maybe not go as high, we had japan throwing in the towel and now there's talk this is just a precursor to normalization next year. we've lost the last anchor for ten-year treasury yields >> i think they'll be wrong on both ends. that's all it means. right around 341, 342. it was good support, right around 3.5%. technicians were all over it many called for basing transactions right at that level and it worked. 4.25% is a high close for this cycle and many see very good resistance, right around 4%. 3.5% to 4%, come on, we can make this so much easier. last year closed at minus 18, so they're up 268 basis points on

the year roughly treasuries closed at 151, so we're up about 230 basis points on the year. that pretty much summarizes it we went from $18.5 trillion of negative securities two years ago to about $270 billion and most of those are in the pockets of japanese investors. everything has changed that is completely making a readjustment go on there's not only competition with other sovereigns for money and that's bringing our rates potentially higher as well, along with technical issues, but then there's the competition you don't necessarily need to be in the equity markets. and there's just a world of other issues going on. when you think $18.4 trillion and $270 billion in such a short time from negative to not negative, think of all the derivatives, contracts, bank loans, all these issues that need to be readjusted into a

more profitable zone >> are you saying, rick, that you're worried about the corporate debt that's out there that previously relied on zero percent interest rates and now are faced with a stark new reality where they have to pay for their money and their business model might not work? we certainly heard some more alarms grow louder and louder as the days have been passing toward the end of the year. >> i think it's a really good thing. i think zombies are great for tv, not necessarily great in my portfolio. but as steve liesman is well aware of, that 2024-2025 is most likely when we're going to see a lot of re-upping with regard to maturing corporate securities that are going to have to be thrown back out and refinanced a lot is going to depend on the path of interest rates between now and then >> melissa, tomorrow i'm

preparing graphs and charts and lots of data to show folks about what i'm calling the foot race between the fed and the corporate bond market and where this refinancing happens and what to look out for because it really is an important question about whether the market is right here or the fed is right because if the fed is right and you're high over the entire period of 2023, and you bring that number into 2024, that's when the trouble may start because 2023, as we'll see tomorrow in my fabulous charts and graphs i'm going to prepare, 2023 is relatively light when it comes to re-fi in the corporate bond market. so we're going to have to watch that space very carefully. right nowthe issue is the sovereign area, and my question is how high we go. as you saw on that ten-year chart we had earlier, we had been at that 420 level on the ten-year, so i don't know. rick will know where the

resistance is, where the support is right now but there is some adjustment that needs to take place and what we have to be asking our favorite stock strategist is whether or not we have established a new equilibrium between the risk-free rate on the ten-year and the stock market or if there's more adjustment to go i can tell you if the ten-year does go higher, there's going to be more adjustment. >> for sure. they're playing our tune thanks, guys we look forward to the report tomorrow steve, i love a good graph. coming up, the russia-ukraine war, no shortage of geopolitical risk to the global markets in 2023 the world according to atlantic council's fred kempe we're going to talk to him next about the risks and challenges ahead.

welcome back to "squawk" making headlines, djokovic is back in the game he was banned last year for refusing to get a covid vaccine. the champion is going to be playing at the adelaide international. i wanted to make sure the pronunciation is -- >> perfect i'll never forget you trying to read the teleprompter when the fed was in there. >> it's probably broken up into, like, five syllables >> andrew said, you know him in other covid related

headlines -- >> i appreciate that. >> it's like joe is not gone. >> thank you, i think. >> hong kong chief executive john li announced further easing of covid measures in the city. inbound travelers will no longer need to provide a mandatory pcr test the city is canceling its vaccine pass program and will focus on more targeted measures for elderly vaccination. they'll remove social distancing measures meantime, the u.s. government is considering new rules for travelers from china officials citing worries about infections surging on the mainland combined with the lack of transparent data. japan and taiwan have announced plans to require a negative covid test for travelers arriving from mainland china and quarantine in the case of a positive test. joining us, fred kempe is the atlantic council president good to see you. let's start with china

what does the swift reversal of zero-covid and the fallout we've seen, tell us about the ability to manage such a complex situation. >> there is one word for what's going on in china with zero-covid and now the reversal, and that's fiasco. it's not that they've shifted the policy, it's that the policy has failed, collapsed. zero-covid brought them slow growth, but not much else. and suddenly they were stuck with slow growth and protests, the start of riots, and a situation where where a new omicron variant was ravaging the population so now they're going in a new direction, but this new direction could be a humanitarian disaster. they said on december 25th that they had only ten new deaths from their opening but if you look at other indicators, it could be as many as 5,000 they're just not keeping the statistics any longer. and it really has to raise some questions among investors whether you can trust any statistics from china, whether

it's unemployment, whether it's gdp growth, but certainly not transparency on covid for right now. let's see how this unfolds but i thinkthe u.s. and others are right to take a look at some sort of a regimen to take a look at people coming into the country from china. >> there was always inherent skepticism, at least about economic data, that was coming out of china, and investors here relied more on some of the anecdata that were coming from the western companies and multinationals that were operating there, so how much harder does it make it >> well, they've changed the policy, but they have to save face, and the all-powerful ruler, xi jinping, is in a great deal of trouble, not just from this but also from his slowing economy, also from his crackdown on technology, and so to get this policy to work, they'll need mass immunity, herd immunity, and in the meantime, i think they're going to hide some

statistics >> there is the war in ukraine, fred, which the u.s. treasury secretary has said ending that war remains the single biggest thing that the administration could do for the global economy, but then you have ukraine standing firm in its position that only the 1991 borders are a reasonable solution here putin says that he will negotiate but only on his terms. so, how and when can this conflict actually end? >> well, first of all, let's zoom out a little bit, because i think 2023 is going to be the year where the potential of a double shock, the geopolitical shock and a macroeconomic shock, is as large as anything i've ever seen. we have world recession staring down our tlehroats it might be milder in the u.s., but in some parts of the world, it will be devastating, including debt crises and spiraling debt in ukraine, we're still in a situation where it's the worst land war since 1945. we still have the greatest threat of nuclear incident since

the cuban missile crisis the situation is that putin would like to stretch this out so that he can not find an off-ramp from the war but a rest stop where you can rearm and rest his troops and go in for a new offensive. that's against the ukrainians' interests. my own view is the u.s. has to throw not less at ukraine but more at ukraine, more air defense, more offensive weapons, because the defeat of putin is not just of interest to europe it's of interest to the world, of who's going to set the rules for the coming decades in terms of the global system is it going to be the west and its allies as has been the case? >> what is the precedent for the moment that we're in with geopolitical and macroeconomic instability at once? is there one >> you really have to go back to the 1970s where we had a situation like this or even further back to the 1930s, and so the precedent's not a happy one, but there's an opportunity here in the sense that authoritarians are on their hind

feet, so the worst of the autocrats -- and last year at this time, we would have said they're surging, beginning of february, you had xi jinping and putin talk about a no-limits relationship, but now putin's in trouble because his military has been failing xi jinping is in trouble because his economic policy and zero covid has been failing and then the ayatollahs in iran are in trouble because of their overreach in terms of their crackdown on women, so you have an opportunity, if the west gets its act together this quyear, y could turn this crisis into an opportunity. >> we appreciate your time this morning. fred kempe, happy new year to you. coming up, the final countdown, three more opening bells left in 2022 we'll get you ready for the day ahead. first, check on this year's best-performing s&p 500 stocks stay tuned you're watchg quk x"n bcin"sawbo o

welcome back to "squawk box. we're looking at a higher open across the board here, although the nasdaq has given up a lot of its premarket gains. s&p looking to be up by about two points back and forth on the nasdaq meagan, chief investment officer

of verdons capital advisors, joins us now great to have you with us. i'm curious if you're in the consensus of a better back half of 2023 for stocks and whether or not the china sudden reopening changes the trajectory of that first half of the year at all >> so, i think that, yes, the second half of the year is probably going to be a much better one than the first half the first half is really going to be choppy i think we're going to have to deal with the consumer they're going to pull back as they're absorbing higher inflation and what the fed has done this year as far as china's reopening, it is an optimistic thing for the long run, but let's not forget that they're still struggling with a health crisis right now, and they are behind the curve in regards to where the rest of the developed world is, as far as immunizations in that country, so i think it's still not a country i would invest in at this point i think you'll see the first half still them trying to work out those quirks as far as reopening. it's good long-term, but i'm not super optimistic there in the short-term >> i guess i was asking, in

terms of the impact on u.s. corporations, i mean, we were just seeing the light at the end of the tunnel in terms of supply chain issues, and it feels like with these waves of covid going on in china and no end in sight, at least at this point, that we could just be another lockdown of a port away from yet another snag >> and i don't disagree. that's something we've been dealing with this entire calendar year, but yet we still have seen a significant improvement in the supply chain, so i think companies are finding other ways, other areas to fix that supply chain, and then don't forget when it comes to the supply chain, the biggest impact there is just the slowdown of that buying, that pent-up demand buying, especially on the good side that i think will continue to improve the supply chain in 2023 >> are you making any moves going into next year in terms of tech stocks or is it still too early with the ten-year yield seeming to levitate? we're up 40 basis points or so in the past three weeks but we have apple at a 52-week low,

tesla down 60% this year, just to name a couple >> i think it's still way too early. we think interest rates are still going to rise in 2023, not just obviously the fed funds rate that's a given but also long-term interest rates. that's been a negative for those technology stocks. there will be an opportunity, i think, in 2023, to look at quality technology, but you got to be really careful there's still some price discovery on what valuation multiple these companies warrant, and right now, i just don't think that's very clear. >> megan, we're going to leave it there thank you so much. let's take a quick final check on the market, show you where things stand we got about 45 seconds before we hand it over to our friends on "squawk on the street." dow looks like it could open up higher about 39 points s&p 500, up about 3 points things have come down. the ten-year note looking at 3 p3.835%, the two-year at 3.349. let's look at oil right now, wti

crude, $78.89. bitcoin sitting around $16,500 somewhere around there kayla, thank you for hanging out. >> thank you for having me i'll see you in 2023 >> i'm back tomorrow, as far as i know >> we'll see you tomorrow. >> happy new year to both of you. >> hope everybody gets where they're supposed to get. >> especially to kayla, hopping on a train soon. >> join us tomorrow. melissa will be here i will too "squawk on the street" begins right now. ♪ good wednesday morning, and welcome to "squawk on the street," i'm morgan brennan with scott wapner and mike santoli. carl, jim, and david have the morning off. we're going to take a look at futures with 30 minutes until the opening bell and you see some green on your screen, although we're fading this premarket rally here. the s&p is poised to open up about 3.5 points the dow, up 36, and the nasdaq, hanging on to gains here