i should say renault plus the fortune of the wr richest person in asia details on that straight ahead it is monday, january 30th "squawk box" begins right now. good morning welcome to "squawk box" here on cnbc i'm mike santoli and kayla tausche with andrew ross sorkin. backing off after a strong week. it has been a strong month p you see the s&p down 34 points not quite 1% the dow down close to 200. nasdaq is the out performer this month. down more.

144. more than 1% at the open s&p off 2.5% dow off a six-day win streak the nasdaq coming off a more than 4% gain last week that is its fourth winning week in a row the longest since august now on pace for the best month since july obviously very fast start for stock markets. treasury yields are bouncing a little bit here. the 10-year treasury at 3.54 the low was under 3.4. lower dollar the idea the fed might be done earnings are no worse than feared is the formula. so far a happy start to the market kayla. >> there is a debate going on as to whether the fed is done or should be done we will get into that with a lot of our guests later this morning. it is a busy week for investors. buckle the up. the fed begins the two-day policy meeting tomorrow.

the rate decision is due on wednesday. economists expect the central bank to step down to .25 rate hike that isfollowed by the decisio from the european central bank and bank of england. on friday, the labor department will release the employment report after december showed signs of wage growth cooling this is the busiest week of earnings season with 20% of the s&p 500 reporting. too many to mention by name. mcdonald's and exxon and pfizer happen tomorrow. on wednesday, meta reports after the bell on thursday, alphabet and amazon and apple report after the closing bell keep an eye on the nasdaq in particular, andrew, with the names set to be released we should talk about the auto giants. some people call it renault. renault. nissan and renault

restructuring the decades long alliance it will equal the cross shareholder and reducing the stake from 40% to 15%. the move requires approval from both boards. renault would transfer 28% of the shares in the french trust voting rights would be neutralized. renault would benefit from proceeds of shared sales renault would instruct the trustee to sell the shares if reasonable as part of the coordinated process. you might remember the story of carlos ghosn think about it carlos -- i don't think he was trying to do this, but he was trying to do something closer to this >> yes >> not only got coousted from t company, but ended up on a ship in japan and he put himself in a musical box or something, right?

>> yes smuggled himself out and ended up in beirut >> i don't think if you have seen the last flight of the rise of renault and the coming of age of carlos ghosn. there was along the consternation that ghosn was spending much time continuing to manage nissan despite that renault is a french company and this is a mere holding of the company. the compensation according to the documentary was so much higher for nissan than renault that is why he did not want to sever ties with the company. it is interesting to see how it plays out and how long it will take and the trust restructured

after the fact >> it is drama and to the producers listening, find carlos ghosn and have him call into the show i would be curious. bp is trimming outlook for oil and gas demand in the latest forecast the company arguing the upheaval brought by russia's invasion of ukraine will pursue energy security with the emphasis on renewables crude prices have firmed up. they are right in the range with wti below $80. natural gas down 5%. kayla. we will keep an eye on that with opec and the fed. here in washington, tiktok ceo agreed to appear before congress the wall street journal reporting that the ceo will appear before the committee on march 23rd this is the first appearance of

the tiktok ceo to congress he will be the lone witness in the hearing. it comes amid stcrutiny of the app by congress. andrew, you have spoken with him. there was conversation yesterday with the intelligence committee saying the national security arguments against tiktok are ramping up if there say specific technical data fix, but the idea that beijing can control the algorithms and control the 200 million users of tiktok here in the u.s. can see and the fact there is asymmetry with washington and beijing where u.s. companies are not allowed to expand, but tiktok is the most popular app here. >> i think there is a practical reality that we have to discuss. one is a month from now we hear

from them. more than a month from now it means it is likely no action between now and then that may be a good thing for tiktok >> from the cfius committee? >> right we can't do business there they are doing business here that is real the question i have and i spent enormous time research and report on what it means to be separate they are building this separate entity which is effect tively living on the oracle servers i feel good about it when you hear people say they can control it, well, i'm not so sure about that part either of t the situation. there are two algorithms

the algorithm in china is a differential go r -- diff different algorithm from the one that runs here there are lots of reasons to be super china hawkish for security reasons. i don't know it depends do you think they are taking your data? that, to me, i'm less concerned about than data in the future. >> take your data in the future and is it in the interest of the u.s. government or the executive branch to allow the app to be downloaded millions more times or have using being that much more hooked into it. >> the question, to me -- >> you think the skepticism that surrounds this idea there could be a functional separation that is actually sequestered from chinese eyes is overstated >> that is where i'm at. if you are living on separate

cer servers -- now the question is could overnight, could someone call from beijing and say you need to completely redo all this could it get all redone in the cover the night? maybe. i don't know all of the people operating that would be in the united states. >> andrew, the other angle that i hear is the level of government involvement required to maintain the structure for just one company you are talking about dozens of government employees that would have to be enforcing whatever solution enseds up getting agred on if that is the route they take is that the best use of government resources here in the united states just to keep an eye on one deal in particular w there is a high number of things to look into >> i would add one element to that i think they will make tiktok

pay for that meaning, you will pay for the service. if there is a service fee -- if we have to hire ten americans to oversee this, you know who will pay the bill for that? not the taxpayers. >> 30? >> call it 30. i think tiktok pays for the 30 >> okay. >> you almost are billing for your regulation system the problem is you want to make sure you are billing so it is not self regulatory. we'll see. >> march 23rd. >> there you go. a couple months. coming up, we get you ready for the busy week ahead. fed meeting and jobs report and flood of earnings. as we head to break, check out tesla. coming off a 33% gain from last week since -- best week since may of 2013. positive comments from musk about production targets backing off slightly this

morning. part of the rush toward the old favorites among investor stocks. yoaru e watching "squawk box" on cnbc >> announcer: this cnbc program is sponsored by baird. visit bairddifference.com. ls an. i am here because they switched off egfr gene mutation and stopped the growth of tumor cells. there's a place that's making one advanced cancer discovery after another for 75 years. i am here... i am here.... because of dana-farber. what we do here changes lives everywhere. i am here.

let's turn to the markets ahead of the fed meeting this week jobs report and busy earnings week joining us now is sylvia

jablonski and michael kantopolos good morning to you both michael, let's start with the macro side of things clearly markets have kind of been excited in january or caught a lot of people too defensive. return to risk people are thinking the fed is done and the economy is in a firm patch, i guess you call it. do you differ with the markets view of how it will go with the fed almost being done and economy escaping recession >> we have a different view. we came in with the opposite of how the market is playing out. we like defensive. utilities and staples and long-term treasuries the story is not about the fed everybody wants to focus on whether the fed is done or pause or whether they will do 25 basis points more. they are not seeing the forest

through the trees. the fact of the matter is why will the fed stop? why will the fed slow down the economy? the poor economy that is starting to lose momentum with the earnings recession that is starting right now tends not to be good for cyclical equities and credit markets you get a january effect and january rally. this year will be more exaggerated because of what is going on with central bank policy we think the market is not keeping their eye on the ball. >> michael, to follow-up quickly, everyone feels the economy is slowing severely, but not falling apart yet. it is the softer indicators and some leading indicators which are the weakest as opposed to employment and spending areas and things like that >> sure. if you look at durable goods and ism new orders and you look at

pmi data and regional and national, all of that suggests we are not already in contraction or on the cusp of contraction. the labor market is the strong part of the economy, but look to every slowdown labor is the last to crack this is not unique as we go throughout the year and earnings recession takes hold and layoffs expand past just technology, you are left with a consumer drawn down pandemic sa savings and still have to deal with reasonably high inflation and now experiencing layoffs that's a terrible, terrible back drop for the consumer later in the year the market today despite forward looking isn't looking at that yet. that is where they have it wrong. >> sylvia, nasdaq up 11% in just month to date here clearly many of the stocks and

many of the higher growth areas of the market peaked almost two years ago. nasdaq peaked 14 months ago or something like that. i guess the question is what got priced in at the beginning of the year and where do you look to be positioned within the market >> good question, mike the tech stocks have suffered a bit of their rolling recession you have seen the names come down 30% to 50% off the 52-week highs. while michael made great points of choppiness ahead of us with the fed and how they stay higher for longer and consumer pricing power. i think tech will power the economy for the next decade. think about all of the new innovations from the last couple weeks. open ai will change the way companies operate. replace workers that have been laid off and jobs that cannot be filled at microsoft and aemazon.

i think for investors beyond 2024, tech is a good place to work valuations have come down a lot. earnings are okay. they are not crushing it and getting major benefits you can get valuation by buying at the lower prices. >> there has been concern expressed, sylvia, and you can understand why, there is heavily shorted stocks and ones without quality earnings and some in the market that have gone vertical, to the upside this month is that from sentiment or positioning front that you are worried about or is that the nature of how these things come out? >> it is a little bit of both. it depends on the company. when i think about tech, the larger companies microsoft and apple and amazon i like semiconductors with nvidia and amd they have a decade worth of tailwinds coming their way

they have been knocked out you have the inflation reduction act and the names to exist for electric vehicles to work and language processing to power the economy and change the way we live and work. the think the bigger tech names that are well funded and capitalized will not be as affected by the fed. and seeing a vertical company moving over time with the headwinds. >> michael, just to button up what you expect from the week and from the fed specifically. how big a hike, assuming there is one, and is that the last one? >> i don't think it will be the last one, mike, but we are getting close to done here i think they will do 25. listen, it is what they are going to do versus what they

should do. if i was chairman powell, i would do 50 just to knock down the market a little bit. you have a huge loosening of financial conditions that is unjustified. i think they will do 25 and another 25 then we see where they go. the big risk for the markets and everything going on with the rally, is that pause you get to 4% on inflation that first 5.5% lower from 9.5% to 4% is the easy part you get stuck at 4% and have to hike later in the year no pricing for that. the rates mark is rising in cuts later this year. i don't know that answer that is another big risk >> of course, the fed is warning against the scenario for inflation is sticky. they don't declare victory too soon we will see how that goes. michael and sylvia, thank you very much. i appreciate it. coming up, the fortune of the richest person in asia is down $28 billion this month

after a report by short seller hindenberg we will have that next. and president biden and house speaker kevin mccarthy will get together this week to talking about the debt ceiling we will talk to jared bernstein about that issue coming up next. "squawk box" will be right back. because investing isn't one size fits all. allspring. purposefully divergent. and it's easier than ever to■ get your projects done right. inside, outside, big or small, angi helps you find the right so for whatever you need done. with angi, you can connect with and see ratings and reviews. just search or scroll to see upf on hundreds of projects.

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overseas in india, shares of adani continue to slide for the third straight session and hindenberg accuses of accounting schemes. it would pursue remedies to protect investors before

authorities. hindenberg says it failed to address the core allegations in the report the gas and transmission stocks dropped by the daily 20% limit in today's section in mumbai the drop of the stock represents a $28 billion loss in the for t fortune of the founder in adani. he was second in the richest list behind musk, but now fallen to seventh mike. the chiefs and eagles are heading to the super bowl. the chiefs and bengals were appearing to go to overtime, but the penalty helped the chiefs to get into field goal range and the final score was 23-20. and the eagles beat the 49ers 31-7 the super bowl in arizona.

kansas city and philadelphia both number one seeds. this is how it stacked up before the playoffs it is a rerun of the 1980 world series >> you usually have -- >> see if jim cramer has a voice today. >> you usually have some market statistics of how the market is supposed to go as a result of who actually makes the super bowl and then a second stat of who wins the super bowl. >> that fell apart a few years back that got built up when there were 25 super bowls ever and a small sample size. a team from the old originat original national football league that stuff is frayed around the edges. >> correlation >> being in the dark of the market. when we come back, more on

"squawk box," we will talk about the mess in the skies with ryanair ceo. and an roger ferguson is here with us to talk about the wednesday fed decision "squawk box" is coming back with all of it right after this >> announcer: executive edge is sponsored by at&t business at&t 5g is fast, reliable and secure lily! welcome to our third bark-ery. 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. that sounds just paw-fect. terrier-iffic i labra-dore you round of a-paws at&t 5g is fast, reliable and secure for your business.

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- join dylan and me as we get personal about the environment and how we can each do our part. - watch our conversation on peacock. good morning welcome back to "squawk box" live from the nasdaq market site in times square. we have about three hours to go before we open up. we would open up down, we should say -- we open down. people get upset when you say we open up down dow off 250. nasdaq off 168 let's talk quarterly result out from ryanair the biggest ever profit for the christmas quarter and bookings in recent weeks have been robust for more on the results and

post-pandemic surge, we bring in neil sorjan, the cfo of ryanair. for anyone who thinks the yolo life is coming to an end or recession is coming, you would not know it from the numbers >> it is a strong performance. 24% traffic growth with 14% ahead of pre-covid levels. as you said, bookings have been robust the past few weeks. the strongest weekly bookings with 5 million passengers booking the week past. people are looking to get out and about. lots of savings and pent-up demand no sign of recession >> so, how does that square? i'm sure you have economists on staff or folks you consult with and others do you think this is travel specific or broader?

>> i think it is definitely travel specific. one thing we found during the global financial crisis is people didn't give up on the annual holiday they continued to travel in numbers. if there is a slowdown and there is a slowdown, the difference it time around is people are still in jobs and still getting pay increases and got 20 plus days annual leave and they want to use that to get out and about. >> is there anything to say whether ryanair is a barometer or not in the following way? you know we heard this from walmart a bit. because you offer more c competitive prices than others, there are people who are, i don't want to say downgrading to competitive prices, but the most affluent have come down a bit. are you seeing that or not >> sorry a drop in the line there

andrew, give me the question >> whether you are seeing more affluent customers move to become ryanair customers in this environment? you may have strong numbers. we heard walmart talk about this a little bit idea that actually one of the biggest markets for them is the affluent coming to walmart that speaks or says something about maybe where the economy is going in the future if you believe directionally we are moving into a tougher place? >> well, i think we have seen a lot of new customers come out way who may have done so in the past because of the performance of the last nine months. when others were struggling to get off the ground with staff shortages or otherwise, we were performing in excess of pre-covid levels some were canscelling and now they are seeking ryanair

we are seeing customers that are more afterfluent we have over 4700 euro in the beginning of the year. now we have massive market shares all over europe we are the go-to airline with 40% market share and 60% market share in ireland and 340% in poland and growing in portugal and spain. we are coming across the radar across europe. >> neil, something we heard from from the carriers in the u.s. is difficulty of adding capacity even if they want because of the backlog in production or other things where are you in terms of where you like to be for plane capacity and routes and things like that? >> we are in a good place.

we had 84 changes with the 737 max changes. we have over 393 aircraft. the issue is have 24 changed by summer we took to the decision to up size our order to 210 game changer aircraft they come in over the next three years with 225 million passengers we are comfortable with the growth opportunities we have we are comfortable that boeing has improved on the production and i have been critical of them on this show it is right i give them a positive word every now and again as well. production has improved. we would be hopeful that we have most of the aircraft in place for peak summer. >> finally, neil, you know, i'm curious and i know it maybe unfair for you to comment on this, but there is so much consternation in the united states right now about what happened at southwest and what

happened with the faa and all -- i know you are a foreigner in this land in this way, but what do you see happening >> i think the key is with the issue is fix it very quickly and make sure it doesn't happen again. we had our own issues in the past and learned from them we come out stronger on the other side the real, i suppose, litmus test is if southwest can address the issues they have and the faa can address the issues and invest and make sure it doesn't happen again. >> do you think the system, if you will, the way the faa works in the united states, which is different than the bill of rights and all of the things that happen in europe should be updated or changed do you look and say that is a better system? i wish i could operate in the u.s. that's easier. what is your take? >> there are a lot of problems in the u.s. i would love to see

in europe, for example you don't have the issues with air traffic controllers we have in europe. particularly in france and germany. there is more freedom of flying across the u.s. with the reagan era. i look at that and it is really good the real test is 50 faa and others can learn from the lessons over the last number of weeks and make sure it doesn't happen again the airlines pay for a service they expect to have the systems up and running it is very disappointing >> the final one related to customers. people think that maybe your profit margins are lower or that ticket prices are higher in europe because of the bill of rights and because of a lot of the things that you have to offer if things don't go right that are different from the u.s. how do you see that? how should the american public

see that >> i think once the american public are looked after by the airlines and get compensation in a timely fashion, refunds of tickets, they should be relatively happy to have got that and i'm not saying the issues should have happened. they shouldn't in europe, we have a different re regime we have a eu compensation which is unfair to the airlines and can be multiple fees the passenger pays there is no one right size fits all here we have been critical of the eu system in europe you know, i don't think it is possible to say, you know, what we are doing here in europe should be transposed to the u.s. and vice versa other than i would love to see the restrictions >> neil, i love to get your perspective on all of it you can give us often times a

great perspective that is different from what we get here. congratulations on your earnings, which are quite something. we look forward to talking to you next quarter if not sooner. >> thank you, andrew good-bye coming up, a new report says samsung is considering cutting chip production. we'll have details on that after the break. later, mohamed el-erian talks about the upcoming week of the earnings season. you can watch us anytime on the cnbc app

quwelcome back u.s. equities at this hour are in the red deepening the losses in the last hour s&p 500 due to open 1.5% the dow down 262 the nasdaq looking at a loss of 172 points samsung looking to cut chip production among the concern of the electronics giant will post a first quarter operating loss due to the slowdown in demand during the holiday season. the stock fell 2% in overnight trading. micron indicated lower in the pre-market kayla. china's search engine baidu is rolling out a chatbot service

similar to chatgpt this march. the company is planning to imbed it into the search service before expanding to other areas. andrew. meantime, i have not seen this yet wow. wow is the number. "avatar" sequel being the highest grossing all time. $2 billion at the global box office surpassing "star wars" to take the number four spot a lot of that coming from the imax theaters because the average ticket at imax is $25 a ticket >> premium >> if you think about how that can add up, it is incredible this, i think, means not only a

s sequel or sequel to the sequel >> there have been some sketched out. >> at the time the movie was getting paid, 250 m$250 million budget was eye popping that is good roi all things considered. >> incredible. >> and largely global. >> have you seen it? >> no. >> i feel like we're pop culture ludites here >> we need more free time is the issue. >> right yeah we'll add it to the queue. coming up, jared bernstein joins us after the break he will talk about the meeting with the president and the house speaker kevin mccarthy. to get the best of squawk on your podcastyo, u can download

and listen anytime we'll be right back. ucts like tm with floodlight, with intelligent alerts when a person or familiar face is detected. sam. sophie's not here tonight. so you have a home with no worries. brought to you by adt.

speaker kevin mccarthy will meet with president biden to discuss raising the debt ceiling to avoid default the president said he will not negotiate with house republicans on tying the debt ceiling to spending cuts. joining us now is jared better than -- jared bernstein. >> good morning. >> this is the meeting the market would hope happen for the last several weeks mccarthy said there could be no

default. medicare and social security and to a large extent, defense spending is not part of it he wants to go item by item through the spending bills and pass budgets and reach long-term agreement. to be >> well, the white house released a statement yesterday, i believe, and therein it said that the president will ask the speaker mccarthy if he intends to meet his constitutional obligation to prevent a national default as every other house is and senate leader in the u.s. history has done and as leaders mcconnell, schumer, and jeffries have pledged to do remember that in the trump years, the house republicans including kevin mccarthy raised the debt ceiling three times without any of this kind of, you know, so-called negotiation because it's not really a negotiation when you're threatening the safety and the sovereignty of the u.s. national

debt and you're potentially dealing a blow to an economy that's really moving pretty solidly in the right direction if speaker mccarthy wants to resolve this he could and zshoud do it yesterday by enacting his obligation to raise the debt creting. >> there's no low hanging fruit that the white house sees as an olive branch that you could offer to republicans at this point. >> that's a fair question, and i think that the fruit, as you call it, would require the republicans to have an actual plan that they put in front of president biden so they can talk not about negotiating with the debt ceiling there's no negotiation over holding this economy hostage as some kind of leverage to get what you want. and by the way, social security, medicare may not be on the table according to mccarthy yesterday, but many in his caucus say that

they are and that's unacceptable to this president. so let's be clear about that we don't -- >> but jared, you say -- >> we don't see a plan -- >> you say there's no plan, but i'm wondering if your position is just simply emboldened by the fact that there's only a four-seat majority this time around versus a much wider majority in 2011 you just don't think he's going to be able to accountable together support for anything on a unanimous basis? >> i have no idea whether he canca cobble support on a unanimous basis. there is no plan if you want to sit down with the president and say here's my plan for achieving more fiscal rectitude, for delivering to the american middle class, for building on the economic success ha this president has navigated thus far, for taking an economy that grew 2.9% in the fourth quarter with unemployment at a 50-year low with 11 million jobs, 750,000 of them in manufacturing, if you want to build on that economy to

continue to improve it for working americans, trust me, you have a partner in joe biden. if you want to threaten this expansion around this kind of debt ceiling political leverage, no, that's certainly not something -- >> i want to ask you about manufacturing as well as some of the data we got last week. just to tie this up on the debt ceiling. treasury says it will exhaust its creative bill paying measures by june 5th speaker mccarthy is trying to build this as a budget process what happens between june and september and what do you think is a realistic time line to actually have some sort of handshake on this? >> you know, it's an important question time lines are really critical right now. i do want to clarify that secretary yellen said that she thought june was the earliest that you could face what they call the exta.

the reason we can't be precise is the payments and the receipts can be lumpy we don't know when they're going to come in and go out. this could all be resolved yesterday if speaker mccarthy would do what he did three times under president trump, sign increase the debt ceiling and let's get back to the nation's business so we don't have to have all of this uncertainty about timing and about extraordinary measures that are becoming all too ordinary we can resolve this yesterday and we should. >> how do you aswash swaj creditors in the meantime? secretary blinken will be going there. secretary yellen will visit in the coming months. what's the message >> that's an easy one. you assuage creditors by telling the house republicans -- because everybody else is ready to raise the debt ceiling or suspend the debt ceiling to put this behind us so we can get back to the business of serving the american people, but also to reassure

global financial markets that one of the most important securities out there, u.s. treasuries, are as safe and sound as ever. again, we can get into all kinds of machinations about special deals and timing and extraordinary measures or we could end this yesterday that's what congress should do the way they did three times under prurp without any of this nonsense. >> on manufacturing you've been a big cheerleader for u.s. manufacturing industry but the durable goods order caused some strategists to say maybe u.s. manufacturing is already in a recession how do you read it >> well, that i think would be unquestionably incorrect, at least based on the employment flows. this is something we have to watch on a monthly basis the fact that china is reopening is a -- is certainly a key to any sort of global economic outlook. you know, the dollar going up and down also plays a role in this, but we've been

consistently adding manufacturing jobs month by month in a series that i found pretty remarkable, and in fact, the expansion in manufacturing jobs over this recovery, over this expansion has been the fastest since the 1950s. so our manufacturers have been doing really well plaarticularl in terms of adding jobs. i may be somewhat of a cheerleader. the head cheerleader is joe biden. one thing to keep in mind when it comes to manufacturing, the inflation reduction act and the chips act all invest significantly in domestic manufacturing for clean energy, for chips and for reinvesting in this nation's infrastructure that is a problem that experienced deep disinvestment over recent decades. that's also going to help the sector going forward. >> although the chip sector is not having a good quarter for what it's worth. we will leave it there, jared. we appreciate your time. jared bernstein is on the president's council of economic advisers andrew >> thanks, kayla. coming up, we've got two big

hours ahead. we're going to get you ready for a wild week on wall street, let's hope it's not wild but it is going to be the busiest week of earnings season. huge tech names reporting later in the week. we'll talk about it. plus, it's fed week and jobs week former fed vice chair roger ferguson is going to be with us to talk about his expectations for all of it. "squawk box" coming back after all of this. ♪ prizefighter... ...meets trailblazer. ♪ ♪ classic meets modern. ♪ at morgan stanley, we may seem like a contradiction...and we are.

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good morning investors gearing up for the busiest week of earnings season. we walk you through what to expect in the week ahead and beyond the fed prepares to kick off its first policy meeting of 2023 what the market will be looking for later this week. and tesla's stock coming off a 33% gain last week, its best week since may of 2013 that story and other corporate headlines are straight ahead 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 market

site in times square she joins us this morning from washington, d.c., joe and becky are off. take a look at u.s. equity futures at this hour still got a little bit of time to go, but right now dow off about 236 points, nasdaq off about 156 points the s&p 500 off about 40 points, the two-year sitting at 4.244, and oil, wti croude, right now 79.76, and then to the extent that you think that crypto is a sign, mike, what do you think it's a sign of the tail or the dog or the -- what's wagging what, but bitcoin -- >> it's all feeding off the same theme of animal spirit. >> $23,000, 23,021 >> down 3.4% this morning. >> kayla

we can't hear you, kayla we can see you, but we can't hear you meantime, i'm sorry about that i can see you but i can't hear you. meantime, we're going to get over to dom chu, though, in the meantime who's got some stocks to watch, and maybe some other things that we need to be focused on this morning. >> that's right. i did see kayla's lips reading i knew what was coming up, but i couldn't hear her either a massive week of earnings reports. let's take a look at some of the big analyst calls that are getting some attention ahead of all of that. we'll start with a call out of galax goldman sachs, macy's nordstrom's and kohl's macy's a buy rating $28 price target also stronger relative profit margins nordstrom gets a neutral rating and a $20 price target they cite pressure on margins, concerns about near-term cash flow generation and a sell

rating for kohl's and a $27 price target citing competitive pressures and potential ongoing market share losses. watch those retailers. they're down in the premarket alongside the market another analyst call getting attention is out of moffett nathanson which is initiating gig economy stocks like uber and doordash, both with out perform ratings. uber gets a $47 price target with a focus on bookings and a key measure of profits and focus there. doordash gets a $79 price target due to longer term positive trends in the restaurant business both of those shares down. uber down by 1%. we're going to end with a check of the biggest momentum stocks in the megacap market. two trading days left in january, lots of talk about as january goes so does the rest of the year maybe. a lot of earnings reports coming up later this week, in tech com services three of the biggest influences, kayla, andrew, michael, are tesla, nvidia, and amazon on a just year-to-date/month-to-date

basis for 2023 so far. tesla's up 43%, amazon's up 20 but remember of course tesla is down 37% over the last 12 months nvidia is down roughly 10%, 11% call it and amazon's lost around 29%, so longer term, some down trends but some big reversals. we'll see if it continues, kayla. >> and see if that which i thinks for amazon this week with earnings, which has often been a reset for that company, dom, thank you. and a gdeveloping story out of washington. tiktok's ceo has agreed to appear before congress sho chu will appear before the house energy and commerce committee on march 23rd. it would mark the first appearance of a tiktok ceo before a congressional panel and comes amid increasing scrutiny of the chinese-owned social media app by congress. mike. >> kayla, thank you. it is fed week, and markets are looking for any hint about whether chair jay powell is at

or near the end of the rate hike campaign senior economics reporter steve liesman joins us now with a preview. >> and fed chair jay powell faces a big challenge this week. he has to convince markets that rates need to rise and will rise to combat inflation or perhaps give in at least a little bit to the market's more dovish view of ra rates. markets expect a quarter point rate hike from the fed the gap stands at 64 basis points the fed raised its forecast for 2023 futures market failed to follow along. that is it decided for now to fight the fed. see who wins on that one the markets wants to be focused on the sharp decline in inflation over the past several months fedex has received two pce inflation reports. that's its preferred indicator they show a sharp slowing of headline from 4%, we're looking at a three-month annualized basis to 2.1% now. core went down from 5.4% down to

3% now that's a big drop on that measure. fed has seen two consumer spending reports where a strong october gave way to two negative months of inflation adjusted consumption right in the heart of the holiday shopping season. if that weren't enough, both the ism service and manufacturing s survey dropped below 50. that suggested contraction in both those sectors what many ask is the fed even looking at claims are running at or under the 200,000 marks for four weeks despite all those announced layoffs, job openings remain elevated at 10.4 million with the fed concerned that's requesgoing to cause inflation the question is whether the fed looks at this data and decides inflation remains the bigger risk or its assessment is now more balanced to include equal concern over sharp downturn. the market thinks the fed ought to accentuate the positive of

inflation coming down and embrace the negative risk to the economy. make. >> steve, the fed officials have spent months saying, you know, it's dangerous to declare victory on inflation early, we saw what happened in the 1970s so given that the markets are obviously -- yes, they're anticipating potential for rate cuts down the road, but the markets are essentially pricing at a little more than a quarter point before the fed finishes, rite there would seem to be little ens en incentive for them to say we're embracing -- >> at some point you can't ignore reality, right? you lose credibility over time and i think you know, i don't know that the fed has embraced this risk. to me the risk is the same group think that had them all in the transitory camp becomes the group think of we have to raise rates and keep them there for a long time. i was looking, mike, over the weekend, because we've got

nothing else to do at the spread, the range of estimates -- now, of course, as you get closer to the actual event, the estimates should come in, but earlier this year the bottom and the top range for 2023 was 150 basis points or 1.5 percentage points. it's now 70. so they're really clustered in this area where they're all together and one of the consternations on the part of some people in the market or fed observers is why aren't a couple people on the fed embracing the market view of things >> yeah, i can definitely see that question growing if, in fact, it remains this way. on the other hand, people talk about how well the markets have gotten over excited. financial conditions have loosened again as we head into a fed meeting. >> it's no guarantee the market has this right and the fed is wrong. >> we always say, the market has to price in some range of probabilities, and so there's always a chance things turn south. but financial conditions, i think it is important to note,

they're the tool, not the job, like i said. >> that's a great point, mike. let me make one other point, which is if you're a fed official and let's say this were a roulette table, you have to come in and for 2023, you have to put your money on one number whereas if you're in the market, you can spread your bets out, and i can say i'm going to bet on the tail risk on the left side of the chart. i'm going to bet in the center and the right side that's how you get this distribution over time the fed has to pick a point in time that's the difference between the two outlooks it's one piece of it you're absolutely right. the risk to the fed is they have to get this right over time and the market, you know, they can say i'm hedged here, i'm bet here i'm edged over there >> we know what they're going to do this week you all know what they're going to do next time. >> that's why we're sitting here

debating 2023, and the full year the market and the fed are together i don't know if we have the fed right outlook chart in the back there. if you have it, the market and the fed are together through june. >> right. >> there's that 490, the fed's going to 490, and it's at the end of the year. that january 2024 contract we have, andrew, that's a clean month. that shows you the full 2023 that's where the differences are. is it unusual? can the gap be closed? >> i'm just interested in how this gap closes. by the way, among the macro things we're watching this week are the earnings reports >> sure. >> it has become to me like we said earlier, the idea that all of these companies and the decisions they make about capex and hiring and firing, those are going to be critical outcomes for this economy >> steve, the fed has also said it's going to take time for the rate hikes it's already done to actually manifest in the economy. do you think that takes until june what's the time line

>> there's different time lines out there, kayla that's a really good question. when job weakness shows up is entirely unclear we don't know if we're essentially battling here some canine of sec-- kind of secular labor shortage i've said this before, but one of the things i'm going to be watching closely -- first of all, i'm watching the jobless claims, which is really telling us about the input and output. the duration of unemployment, are these folks who are unfortunately losing their jobs in silicon valley and elsewhere getting picked up and getting jobs in other places right away? i've gotten a few texts from folks who lost their jobs, and they said it took me a month and i got four offers. so i don't know how much that happens. then you take something else like that, like housing, kayla, which everybody agrees because of some quirks in how the government gatherings this data, it's going to be maybe four to six months before any decline in housing inflation shows up

meanwhile, inflation down already and some of the service sector stuff has eased off a bit. so different time lines for di different things it all comes together when we can take off in the summer vacation. >> yes, well, we will see you a little bit later on in the show, steve, for more on this. it's going to be a very, very big week. coming up, a number of companies reporting this week with exposure to china including mcdonald's we'll talk about how the reopening there could impact those numbers. and later savita subramanian joins us with her lookt athe markets and what investors can expect in the busy week ahead. "squawk box" will be right back.

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. coming up, this is the busiest week of earnings season with about 20% of the s&p 500 reporting. we'll talk market expectations and where you should be putting your money to work with b of a securities head of equity strategies savita subramanian. take a look at the soup supers, the s&p down 1%, dow indicated lower by 220, the nasdaq giving back about 146 nasdaq composite up 1 1% this month. we'll be right back.

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welcome back to "squawk box. as china's economy reopens following strict lockdowns so have american companies that do business in china like mcdonald's and starbucks both companies said to report this week and analysts focusing on how the reopening will impact profits.

joining us to talk about it is ubs analyst and recently reiterated his buy rating for mcdonald's saying it's well-positioned and defensive. let's start with the china piece of this. what do you think we're going to be hearing >> as it relates to china for mcdonald's not a huge piece of the business, right? less than 35% of overall profitability. i would think china's going to be less of a focus for mcdonald's it will be more the u.s. and europe where we think results will be strong as it relates to starbucks, you know, we would expect china recovery certainly after some of the developments this year, maybe not a linear recovery, but we should see a good recovery through the year right now there's a reopened theme that's going on with china. it's helping shares as is the momentum in the u.s. so we would expect some pretty positive commentary from starbucks given china represents about a low double-digit percentage of overall profitability for the company. >> how are you feeling about starbucks more broadly i mean, it has been on quite a run. call it the howard schultz run.

>> we think the run is probably a factor of two thingsm one is the china piece, investors looking for exposure there. starbucks one of the best ways to get that exposure with the restaurants. and the other would be the u.s. momentum a lot of momentum in the u.s we expect there will be some modest upside to the consensus number for the u.s. comp and we think you put those two things together, there is kind of the run. from here, valuation to us looks a little bit more full as it relates to starbucks hear, plus, we've got some concerns as it relates to the u.s. macro. will this momentum be maintained we prefer mcdonald's here rel relative to starbucks actually. >> where did you put yum in that mix? >> so about 14% or so let's say of precovid profitability came from china for young global. e like that one very much. like mcdonald's we think this is a defensive name where you can also play some offense we think there's sort of roadwa

sil y -- a resiliency at the same time, global unit growth will be at least 5% for yum. we think the brands are well-positioned from the same-store sales perspective we think yum and mckonld's if the group is red, we think they'll be flat to up in a tough tape. >> i want to throw out a sort of geopolitical maybe grenade into this conversation. we were talking tiktok in the last hour, and when it comes to china. and i wonder what kind of risk you think exists both in reality and in the stock of the star star starbuckses, the mcdonald's, the yums, of this skirmish, if not something worse between the united states and china, what could happen both in the context of what the chinese could dto to a company like starbucks or mcdonald's but frankly what congress could do we always talk about it as if the chinese are going to do

something to the american companies. i wonder whether there could ever be sort of a scarlet letter on u.s. companies doing business in china and somehow congress or others in washington say stop doing that >> so i guess to that point, you know, russia would obviously be case in point for what a downside scenario would be we see mcdonald's exiting russia obviously over the last several months we see starbucks doing the same thing. that's kind of your tail risk. i would say right now all the focus from a china perspective is on this reopen trade, what their recovery from a sales perspective looks like unit development or restaurant development has remained really strong for all the multinationals doing business in china, even over the last couple of years so we think right now that's kind of the theme and the focus from an investor standpoint, you know, recognizing there certainly is tail risk that exists out there. >> is that tail risk in the stock? do you sit around and say, man,

i hope washington actually doesn't do anything to a tiktok? because do we get into some kind of back and forth if, in fact, they do? >> yeah, so i would say at this point there's probably, you know, little risk from, you know, the geopolitical risk priced in at the stock if we look back over the last many years, you've seen some periods where sort of anti-western, you know, sentiment maybe has been a focus for the market in general. you really haven't seen any impact on the western brands in china from a sales perspective so again, i think that risk is hard to handicap i would say right now there's probably not a whole lot of that in the stock and in these restaurant stocks. >> dennis, dmomestically we coud remember when the group would trade tightly to wage growth expectations and things like that where does that sit right now as a lot of that has worked its way through, presumably as a lot of these companies have tried to take as much pricing as they can. >> wages obviously up significantly for the sector,

for the market obviously more broadly. what we've seen really is certainly pressure on margins in 2022, from food cost pressure as well as wage pressure. we think you're going to see a bit of a step down in inflation percent increase on wages and commodities in 2023. all that said, we prefer the names we're talking about, the mcdonald's, the yum brands that are insulated, you know, to some extent as heavily franchised businesses from some of this cost pressure. obviously we're very focused on the fran chisees within these brands maintaining good profitability, looking to continue to kbgrow the names have done a pretty good job seeing some margin pressure, taking a lot of price, high single-digit price to manage some of these costs traffic's a bit negative, for the most part same-store sales, sales trends have been resilient throughout 2022 despite some of the pressures that are out there for the restaurant group. >> we're going to leave the conversation there we appreciate it very, very much

it's a fascinating situation we're going to be keeping our eyes on these earnings reports coming our way throughout the week thanks still to come, full market coverage for the trading week ahead, we'll talk to savita s subramanian on what she's seeing as we continue a busy earnings season and later, mohammad ed el-erian tells us whahet expects stay tuned, you're watching "squawk box" and this is cnbc. it isn't really a vacation... ...is it? [birds chirping] get refunds.com powered by innovation refunds

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futures right now indicating losses for the major indexes at the open the s&p 500 has been down close to 1% all morning so far dow indicated lower by 220 our next guest says wall street is bearish on stocks coming into the year and bullish on bonds. she prefers stocks over bonds even if the path might not be too easy for either one.

let's bring in is savita subramanian. good to see you. >> nice to see you as well there's wibeen a few themes this months this year that have been different from last year a lot of risk appetite picking up earnings season not great. it seems like the market might have already been positioned for it where does that leave us up 6% in the s&p in less than a month. >> 6%. it feels like a violent move a lot of it was just really bearish positions heading into the year one of the things we look at is sentiment across wall street, sell ciders. brokers lowered their allocation to stocks last year by six full percentage points. this was one of the fastest, biggest moves that we've seen in the mysthistory of our data. they put all of that money in bonds. if you looked at the hedge

funds, hedge funds ramped up to a 40% net long exposure to regulated utilities. which is, you know, i mean, this is like the weirdest setup for, you know, investors with risk a appe appetites. our view is if everybody loves bonds and hates stocks, it's probably not going to work in the beginning of the year. and i think that going forward there's this prevailing assumption that rates are peaking out right now, and they're just going to come down. inflation is peaking the fed's probably going to pivot soon i don't know if it's that easy when you look at the inflation measures, a lot of these stickier barometers of inflation are still relatively high. i think that it's knot not a gr setup for bonds either. >> it seems like the fed's burden of proof for thinking the fed is taking care of it is pretty high. what does that mean overall for other asset classes? >> i think yields have room to the upside

quantitative tightening. we're moving from the two biggest buyers of the ten-year, the fed and china basically have left the building. and that demand vacuum, i mean, i don't know who's going to fill it and you know, if you look across the globe, central bankers everywhere are relatively tight. i think this is an environment where we can't just bet on lower for longer everything. i think we need to think about rotating out of certain low rate beneficiaries into other parts of the market. and there are lots of really great opportunities right now in our view >> i mean, there's a story you can tell just reading the market and saying, yes, people are under exposed to stocks coming into the year. but i'm seeing steel stocks hit new highs. you see consumer cyclicals doing a little bit better. >> right >> last year the s&p went down 25% from high to low while earnings were still at a record, so maybe we've positioned for, you know, lower profitability. in other words, there's a bullish case to be made right

now. >> there is a bull case to be made, and i think the bull case is exactly what you point out, which is the market has decoupled, and we've seen new leadership from commodities, which i think are really interesting right now. i mean, when you look at commodities, this is a complex that actually has supply discipline today, and i think this is a game changer for commodities and commodity stocks when you think about it, you know, oil companies are not flooding the market with extra supply they're staying very disciplined in terms of production maybe they're producing too little earnings could get smoother for these areas of the market, whereas tech, which i think was the poster child for globalization, low interest rates, everything that we enjoyed for the last 20 years is maybe in the penalty box today for a little bit longer than we all that. >> is there a valuable proposition there? they still may be too high >> yeah, yeah. what does it have to come down

to where you say there's value here. >> there's two things that we're waiting for for tech one is people need to stop asking us about tech because this is the question i get all the time in meetings is it time to buy tech it looks so cheap. so that's the first thing. and the second thing is if you look at why tech is cheap, it's because prices are falling faster than analysts are taking down earnings expectations and when we look at these -- you know, these types of value traps, that's not the time you want to buy. you want to buy when earnings expectations are being revised higher and prices haven't necessarily discounted that information, and i don't think that's the setup we're at right now. i mean, the other thing about tech companies is, you know, they're doing all the right things they're cost cutting, they're executing layoffs, but they actually over hired pretty aggressively over the last three years. in fact, we looked at the number of employees that tech companies added. they added 80% new employees, but their sales growth was only 60% on a real basis.

so they overshot employees by 20%, which i think is, you know, that's some capacity they have to work off of. >> you do mention that we've gotten used to certain earnings drivers over the past, you know, couple of decades. there's certainly one conclusion you can draw which is, especially in the last few years, companies have over earned relative to the long-term trend of profit growth. >> exactly >> i guess where does that leave us we're pushing 18 times earnings on the s&p 500 on a forward basis right now. if you take out the top six biggest stocks it's a lot lower than that. but still, what do you think we should expect for actual earnings, the earnings path from here for companies >> you know, i think we're in an environment where earnings growth has tracked something like 11% per year for the last 20 years i mean, it's wonderful, a great time to be in stocks i think we're moving to a lower earnings growth environment, maybe something closer to 7% i do think there's going to be a massive transition in terms of

the constitution of the s&p 500. so think about it, the market today is mostly tech and very little consumer real economy plays. i think that's going to shift over time, and what we like is buy real economy i think this might be the best opportunity to generate alpha in my career, but it involves, you know, not looking in the rearview mirror and looking ahead. >> so there's a lot of viewers who have followed the warren buffett play book of owning the s&p or index funds more broadly. what do they do? >> don't own the index right now. >> don't own the index. >> i would be selective. and selectivity doesn't mean you have to pick stocks. you can buy sector etfs, you can buy different indices like the russell 2000, but i think the s&p 500 right now has this major risk of being the most crowded ticker in the world. so if you think about it, passive has overtaken active in

terms of overall exposure. pension funds replaced active exposure with s&p index, everybody bought the index the index did great, and now we're sitting here with actual liquidity risk in the s&p 500, which is -- >> that's why i asked the question but then the question becomes, okay, you're an investor out there, you're not going to buy individual stocks for whatever reason or -- which of the indexes, to the extent there are indexes actively managed or passive, whatever, which, you know, how would you do it? >> i think i would just buy small cap value at this point. i mean, if you think about it, large cap growth has had its heydey i mean, we've had everything -- >> but is that buy it, set it, forget it, or is that own it and keep looking every day because in five months you might have to get in and out fast. >> i think you want to set it and forget it. you play around the corners with, you know, different areas like maybe tech works for a little while and then you sell it, but i think what you want to

do for the long haul is buy small cap value, set it and forget it. i mean, we're at a good point right now where the small cap value bench point is at record cheapness versus large cap that to me would be -- if i were warren buffett and i was looking around at all the bombed out areas of the index market it would be small cap value at this point. >> the environment that you describe really sounds a lot like the very early 2000s in a lot of ways. you had this sort of big crash in large cap growth, but small cap value, the equal weighted indexes and then really real asset plays. big commodity and emerging markets boom is that the kind of rerun that we're looking for? >> i think -- i mean, not exactly, and i think that what's also taking place is this pivot from fossil fuels to renewables. so i think we're in an environment, wehere brown sectos like fossil fuels and green sectors like renewables can both

do well at the same time, and that might be a little bit different than what we saw in the 2000s. >> sure. you have like a 4,000 s&p target which is kind of where we are. within there there's a lot of swings back and forth. >> yeah, exactly i think it's going to be kind of a grind for the year the internals are going to be really interesting when you look at dispersion of valuations right now, i'm sorry to get all quanty on you now. >> please, it's nerd hour, it's only 7:38 in the morning. >> that's right. we need a little math in our lives. so when you look at the dispersion of valuation across the market right now, bit is vey high which means there are super cheap stocks and super expensive stocks and that mean reversion is tremendous >> that's also the early 2000s, it's kind of the heydey of when long short hedge funds became kind of the superstars. >> exactly

>> so does it feel to you as if nothing else, the lows are probably in for the s&p or we can't say that >> oh, no, i don't think we can say that now i wish i could look, i don't think the lows are in for the s&p 500 i think we could swing down to 3,000 if we see -- yeah, i know, this is not our base case but let's say that the fed hasn't controlled inflation they're going to tightenaggressy the market is pricing in inflation of about 3%. we're nowhere near that number so i think that's the swing factor that could make things worse rather than better. >> and just so folks have the sort of mental accounting, the low is like 3,500 in octoberish. >> we're about 4,000 now >> 3,000 would be like a 38% drop from the peak >> it would, that's not our base case, and i think that companies are navigating this better than they could, but that's as bad as

it could get. >> got to be in the spectrum of possibilities. >> exactly >> savita, great to catch up with you. >> thanks for depressing us. nice to see you. >> coming up, we're going to get you up to speed on this morning's corporate. mohamed el-erian is going to join us. i think he's in jr. camp on a lot of this stuff. you can get best of "squawk box" on our podcast you can listen anytime stay tuned we're coming right back. and its customizable scans with social sentiment help you find and unlock opportunities in the market with powerful, easy-to-use tools power e*trade makes complex trading easier react to fast-moving markets with dynamic charting and a futures ladder that lets you place, flatten, or reverse orders so you won't miss an opportunity

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. a couple of big courporate headlines. samsung electronics considering cutting chip production. it comes amid growing concern that the electronics giant wil pooes first quarter operating loss during the slowdown in spend. take a look at shares in overs overseas trading if this were true it would sort of be following what we were hearing from intel and everybody else chip making space it's ironic given that for the last three years all we did was complain about the chip shortage >> that's right, we complained

about the chip shortage, and then i think there was a secondary concern once we got through that that samsung and others might just continue over producing and all of a sudden, we're not going to ever bottom out the cycle. this seems to be a recognition of what's been going on with other companies and maybe they'll try to rationalize production a little bit here. >> kayla, what do you think? >> well, i think that the irony is palpable, especially here in washington with the full court press from the executives that they need all of this funding that's going to be dispubursed later this year to build these facilities given that the u.s. and thousand other countries are also taking steps to limit the possibility of having another end customer for some of these chips with japan and the netherlands now joining the u.s. reportedly to limit some of these chips' exports to china to be able to kneecap china's ability to advance its military development. so you know, you're cutting off a big potential customer at the same time that you have a massive glut in warehouses and

inventory, especially here in the u.s. but the dynamic given those two factors is not a good one. >> sounds like there's going to be a lot of recriminations potentially about all this money being spent aon the chip subsidies. china's largest century engine planning to roll out an ai chat bot service. it would be similar to open ai's chat gbt this march. according to multiple reports, the company initially planning to embed it in its main search service before expanding into other areas. this is one of the reasons you're hearing a lot of chatter about the googles of the world thinking, wow, we have to pivot ourselves because if this kind of service really works in the chat universe, in the search universe, and you're seeing these guys attach it to search, what does that really mean >> yeah, it's interesting because google has been kind of on the ground floor of a lot of this research. they talk about how they have the capabilities

there's a bit of a philosophical kind of choice to be made. google's like we're going to send you to the actual links, the sources, as opposed to trying to guess what you're looking for and giving you a reasonable answer. >> i've now played with this, i'm sure a lot of folks have played with it i want a sort of footnoted version of it. >> something authoritative >> it's fine to me -- and it's so cool if it would, you know, write out the essay, the letter, the memo, whatever, but i kind of want to know where it got the information from so i can track back and say, okay, is this accurate, is this right, i want to make some choices here. >> sort of an open source database for what it's getting. >> does that remove the magic, right? the whole thing is like a little bit of a magic trick for most people at the moment if i showed you the sources, does it make it less valuable or more valuable? >> i think probably more valuable, especially for high schoolers trying to get it to write a term paper and needing

to put footnotes on it i kid, but. >> i'll tell you the next piece, and i think it's one of the reasons you don't see it at the moment long-term content creators, whether it be by the way, nbc universal or the "new york times," or the wall street or song publishers, they, i think, are going to say, hey, you want to train your service using our material not even that you're just -- you're citing the material, but you want to train it off of our material, you're going to pay a licensing fee that's going to be a pricey licensing fee, and that potentially could upend some of the economics of this. it's expensive already >> that's what they're saying. it's already less efficient and expensive. it's got to do a lot of computation, things like that. >> let's see let's check tesla this morning, shares coming off their best weekly performance since may of 2013 that was a 33% gain last week. this was after better than expected fourth quarter report on wednesday with ceo elon musk saying the company is on target to produce nearly 2 million

vehicles this year, 1.8 million is the actual guidance the rebound follows tesla's six-month decline of more than 40%, and just this morning, goldman sachs reiterating its buy rating on the stock. massive comeback, it's coming out of a pretty deep hole if you look at the chart, it's not even back up to the 2021 low. so we'll see if this was just a little violent snapback, kayla. >> when you zoom out, you can see the full picture there, thank you, mike. vp is trimming its outlook for oil and gas demand in its latest annual forecast the company arguing the upheaval brought on by russia's invasion of ukraine will push countries to pursue greater energy security over the next decade with an emphasis on renewables that stock up a little more than 1% today coming up, we dive into the digital ad spending and the impact it could have on some companies reporting this week, including snap and amazon. rngt the fed set to kick off its first policy meeting of 2023

rogefeusr rgon will join us with a preview of this week's fed rate decision. "squawk box" will be right back.

i screwed up. mhm. i got us t-mobile home internet. now cell phone users have priority over us. and your marriage survived that? you can almost feel the drag when people walk by with their phones. oh i can't hear you... you're froze-- ladies, please! you put it on airplane mode when you pass our house. i was trying to work. we're workin' it too. yeah! work it girl! woo! i want to hear you say it out loud. well, i could switch us to xfinity. those smiles.

that's why i do what i do. that and the paycheck. welcome back to "squawk box. the market is getting a better look at the state of online advertising with quarterly results this week. we're going to hear from snap, amazon, meta and google and mati

i want to talk about this soap opera that you've been writing about constantly about the awards and this -- if anyone has run afoul of the award system. i'm curious about what you're hearing out there about the advertising world out there and just how bad or good it really is >> well, the question s has it bottomed out we had the ceo of nbc universal last week suggesting that he thinks maybe the ad market has bottomed out but it's certainly not great right now. the growth rates are all down. all of the agencies are predicting that 2023 will have a growth rate significantly lower than even 2022 when we saw ad budgets really slashed last year, especially in the second half and that's coming home to roost in some of these earnings. we're going to see this week whether the impact on places like snap and amazon that really have these big bets on advertising are going to be impacted by this but it's not going to be a great

year for advertising all around, certainly not the growth rates that we saw in the previous five years. >> how do you think this impacts warner brothers discovery and the other one i was going to throw in the mix, they were not an advertising player but are trying to get into that game, obviously, which is netflix. >> yeah, i mean this is not great timing for a lot of these streaming companies that are launching advertising tiers, including netflix and disney+. disney has a big bet on at the scening as -- advertising as wel and a lot of them see their growth future in these ad tiers. warner brothers discovery has lowered it's forecast for this year in terms of the revenue they're bringing in and that's impacting all the other things that they're trying to do. warner brothers discovery has been slashing a lot of their costs based on a certain level of income that they're getting

and those numbers have not really materialized because of this advertising problem and if that continues to decline, they're going to have to start, you know, burning the furniture for warmth there and, you know, we could see some really significant -- but a lot of people do believe that the worst may be behind us in terms of planning. and that's all that matters are forecasts. >> matt, i got an unusual one for you. i noticed this headline about netflix canceling -- or not canceling, i guess, effectively canceling two shows, two films that they made it seemed very similar to actually what warner brothers discovery did and i'm curious about the accounting of it i'm talking about the her the answer -- the inheritance and housewife. >> this is a strategy reset for netflix. they were making movie after movie over the past few years. what they're finding now, is some of these movies, even ones that they've already made are

not really on strategy right now. they're going for bigger budget, higher impact, things that can be marketed on their own and generate subscribers and some of those movies that you're looking at, they're saying, these actually aren't going to move the needle for us. we're going to give them back to the producers and say, see if you can sell this elsewhere, and then we'll -- take the hit if we need to. we don't want to air this on our streamer. >> now we got to move to -- i don't know if it's a scandal is it a scandal? you've been writing about this oscar campaign for this film that is causing all sorts of consternation. how much of a scandal is it? >> it's a scandal. >> tell the audience what we're talking about here. >> there's a film called to leslie which nobody that has seen -- >> i saw it, matt. i watched it just so you know. >> now people are watching it because of the scandal

but you had never heard of it until the oscar nominations were announced. >> i follow gwyneth paltrow on instagram and she was recommending it as part of what you say was a lobbying effort. >> absolutely. the wife of the filmmaker of that movie and the manager for the actress, they undertook an extraordinary lobbying effort within hollywood to get actresses, in particular, to post on social media, post screenings, and otherwise just get out there and stump like it was a political campaign to try to get people to see and vote for this performance in the movie by this actress. and we woke up on oscar morning and it worked. a movie that nobody was talking about had won no precursor awards -- >> isn't that genius, though i admire the whole thing why is this a scandal?

>> we all admired it until we started looking at the oscar campaign rules there are rules. very specific rules to prevent the improper lobbying of the members and there are questions now, the academy announced on friday after i reported on this on thursday, that they are now investigating whether there was improper lobbying. you're not allowed to email and call people ad nauseam over and over to try to get them to come see your film. there are rules and regulations as to how you can lobby people and if they violated the rules, it's up -- they can disqualify the -- >> it is -- it is quite the soap opera, we're going to keep your eyes on our newsletter to find out what happens next. always good to see you thank you. >> thanks. mohamed el erian gets us ready for a busy trading week ahead. the fmoc expected to raise rates again on wednesday we'll hear from roger ferguson on what to expect.

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it's powerful. good morning futures pointing to hefty losses at the opening bell. it is a big week for the markets with dozen of s&p 500 companies

set to report earnings tra traders will watch the fed we'll hear about that on wednesday. is a small or medium-sized rate hike in the cards? that's the question. and another tech ceo heading to capitol hill. it's not who you might expect. the head of probably the hottest social media app in the world now going to be facing lawmakers. we're going to tell you who that is as the final hour of "squawk box" begins right now. ♪ good morning and welcome to "squawk box" here on cnbc. joe and becky are off today. u.s. equity futures at this hour have been deteriorating throughout the morning the dow would open lower by 213 points the nasdaq would be lower by

147, ahead of a major week for tech earnings later on treasury yields ahead of key decisions by the federal reserve, the ecb and the bank of england are holding steady 3.55 on the ten year at this moment the 30-year 3.66, the ten-year, 4.24 that's a potential indicator of a recession. we're going to talk about that a little bit later on. here's some of the stories investors will be talking about today. tiktok ceo has agreed to appear before congress. that's according to "the wall street journal" and a statement that the energy and commerce committee just put out he will go before the house committee on march 23rd. it would mark the first appearance of a tiktok ceo before a congressional panel and it comes amid increasing congressional scrutiny of the chinese of owned social media app. president biden getting ready to meet with kevin

mccarthy for the first time since mccarthy took the job. mccarthy said he's looking forward to talking to mr. biden about a way we can lift the debt ceiling. the white house has ruled out linking any spending cuts with a debt limit increase and last hour white house economists jared bernstein said he doesn't believe republicans have a plan and he will be asking the speaker to commit to not defaulting on the debt. and phillips is slashing 6,000 jobs combined with another 4,000 recent layoffs the cuts equal about 13% of phillips' total workforce. the stock is up this morning still down 45% in the last year. andrew >> thanks for that i want to get back to the broader markets with a little under 90 minutes until the opening bell on wall street. mike has digging into whether the market's fast start this year is the real thing or another head fake. what do you think? >> we've had three or four of

these pretty good rallies in the s&p 500 since the market peaked in january of 2021 each time, either inflation seemed like it was not under control or the fed actively pushed back against the market that actually happened here back in august. that was the biggest rally of the last year or so, aside from the one we're on right now from the october low to now, the s&p 500 up about 16% from that intraday low really a lot of people rushing back into the riskiest parts of the market, the most cyclical parts of market, being caught offsides, expecting a down beat start to this year the question is, this down trend line has at least been broken with the rally last week but it's going to take more to prove that you've got some escape velocity. it's a sideways trend for the last couple of months. take a look at the high beta stocks in the s&p 500. these are the most volatile ones, the ones that move the most in the direction the market is heading and that's up 68% just in january alone.

that's a 17% outperformance over the lowest volatility, most defensive areas of the market. semiconductors beating up internet stocks. all that stuff is ripping. is this an echo of the speculative boom or are we seeing more demand because people feel like the fed might be just about done take a look at the two-year note yield. this one is finely tuned toward what the fed is going to do over the next couple of years right here, that's where it peaked last fall so this sort of flattening out of this chart, you see we're at 4 1/4 percent, it's saying we think we know where the fed is going to finish with rates, and then it's probably got more downside than upside risk from there because the fed might have to get easy over the next couple of years this is very important in kind of reducing bond volatility which was one of the big

problems that was hounding the equity market all last year. >> it's -- okay, so if -- are you betting that it's a head fake those go to the savita piece of this before. >> i don't think it's a pure head fake which means it's based on nothing i think there's a lot -- actually some technical improvements in the market have occurred it's been a broad rally. when the cyclical stocks lead, it shows you the market is sniffing out that maybe the market isn't as bad as people feared i don't think it's a matter of up and away to the old eyes. we're having some valuation stress that is will come in at this level i think it's a net positive that so far but much more to be proven here in this week in particular, especially if the fed outright chooses to call the market out of its implied outlook. >> thank you for that. send it back to washington kayla.

>> thank you, andrew let's talk about the this week's fed decision investors bracing for another rate hike. expecting a down shift but our next guest thinks economic conditions favor a 50-point hike. joining us now is mohamed el erian and chief economic adviser to grammar c fund management it's great to see you. good morning. >> good morning. >> so you think the time is not right for a down shift why? >> first of all, i think they will down shift. they get 25 basis points i would be shocked if they did anything else given what they've signaled that's what they're going to do. is that what they should do? i don't think so i think they should do 50. several reasons for that some of it has to do with risk management, the likelihood that inflation may get sticky, and something that has to do with credibility. look, it's balance, but on the whole, i think 50 would have been better. but i think that's an irrelevant discussion because they will do

25 >> so you think that essentially they need to move the calendar up, they need to increase the velocity of the rate hikes to get inflation more under control because you see it as potentially getting entrenched as it spreads into services? >> and they have a window. you know, the tragedy of this whole cycle has been that they've missed windows they've missed two big windows, one in 2021, when they mischaracterized inflation, and the second one in 2022 when they started timid. they have another window economic data in the u.s. has been better than expected. financial conditions have loosened significantly we are back to the march 2022 levels of financial conditions overall. so they have a window. i would rather they get the hikes out of the way now than wait for later on when the economy could be weaker. >> larry summers says that the

fed especially should pump the brakes saying they're driving the vehicle on a very, very foggy night. he said there's so much uncertainty already in the economy that they need to take stock of what's already done is he wrong? >> yes, and that's the view of fed chair powell when he gives us this really powerful imagine, that we are all in a dark room feeling our way around that's absolutely right. but there's a clock ticking. so we have to balance, feeling our way around and driving down the fog with the -- what i think is the likelihood that that fog will get even more down the road so we have more visibility today than i think we'll have in about four to six months about economic growth. and many analysts on wall street have shifted to that view. >> some of the looser financial conditions that you talk about, there's just been a general sigh of relief in the markets in the last few weeks because there's

an expectation that maybe europe had avoided a recession, had avoided a worst-case scenario, but then this morning you get an unexpected contraction in the german economy, you have higher than expected inflation in spain all ahead of the ecb later this week as well do you think that now the thesis is changing about where the global economy >> i don't think it's changing, but it's illustration of the uncertainty. think of it this way, we have a range. over here is the soft landing where we all want to be. over here is the hard landing which is either recession or even worse stagflation and the data so far has been tipping us slowly towards a soft landing. and today's data out of europe has taken us somewhat back, like you said germany contracted when people expected it not to do so and the spanish, its inflation number is worrisome. so, yes, we are in a situation

where the data is important. but the reality is, that we are facing a lot of uncertainty under three things, inflation, growth and policy. we have three ficentral bank meetings this week it's going to be fascinating to see what they signal, the ecb, the fed and the bank of england. >> when will you be able to make a judgment on whether the plan has successfully landed? >> not for awhile. that's why this is really hard the problem with being data-dependent when your measures act with a lag is that it takes you time to figure out whether you've soft landed or not. we're not going to know for awhile, and that makes me back to the risk management if you ask yourself the following, i don't want to make a mistake but the probability of making a mistake is high because there are so many moving pieces in the economy which mistake is most recoverable? that's a really important

question it's not just for policymakers, but for all of us facing this uncertainty. >> the fed has more tools to be able to undo rate hikes that move too quickly versus the tool -- the singular tool that it has to combat inflation how soon do you think the fed might need to reverse course the market believes that the fed funds rate is going to start going lower midway through this year >> yes, it's very unusual to have the market not believing what has been very uniform and very consistent, forward policy guidance from the fed. like you say, the market thinks the fed is going to have to cut. the fed tells us that they're staying there for -- at the peak level when they get there for 2023 look, kelly, you give an important point. there's something else that is going on that we should be happy about. we've had half a trillion

balance sheet contraction and it's been like watching paint try. it hasn't done anything. it certainly has encountered loose financial conditions it's good that we're getting the balance sheet down in such an orderly fashion. >> we need to leave the conversation there we'll see what the fed announces on wednesday and the tenor of chair powell and the rest of the committee in that statement. we appreciate your time this morning. >> thank you very much. mike >> the new chairman of the house ways and means committee, he says he's looking to take on spending in washington. first, as we get close to wrapping up january, take a look at how some key commodities have faired this month. gold on pace for its third positive month in a role copper, it's best month in almost two years natural gas, that was one of the star performers last year, is on pace for its fourth negative month out of five. stay tuned, you're watching

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i screwed up. mhm. i got us t-mobile home internet. now cell phone users have priority over us. and your marriage survived that? you can almost feel the drag when people walk by

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welcome back to "squawk box. the stock index futures right now indicating a softer open after last week's gains. s&p indicated down almost 1% up 2.5% last week. got disappointing data out of europe overnight and we, of course, have lots of earnings and the fed meeting coming as well stocks leading the dow lower this morning, intel weakness carrying over from last week you see it there indicated down a percent and a half microsoft as well. microsoft giving some of that back nike, cisco, merck, also on the weaker side. it is considered the most powerful committee in the house of representatives dealing with taxes, health care, oversight and so much more the next guest is the younger chairman since the civil war what is on that agenda for the ways and means committee in this

congress representative jason smith from missouri good morning to you. let's just start there what do you think is on the list here and what's possible realistically? >> good morning. it's great to be with you. the focus and our priorities is to deliver for working class families the american worker, small businesses, and farmers. and i think there's a lot of opportunity where we can work with democrats in delivering for working class families and tax reform, we can also address trade policies that can help strengthen our strategic supply chains i think we have to use the tax code and trade policies to make sure that we are energy independent, food secure and also medically secured when it comes to our strategic supply chains we saw the issues during covid we need to fix that. >> debt ceiling, it's a-coming at least the debate about it

what's your position here and what do you think going to happen >> well, my position right now is what i like to see is joe biden meeting with speaker mccarthy on wednesday and also chuck schumer coming to the table. we've been requesting for weeks now for biden and the democrats to come together and let us address this let's not wait until june. let's take care of it right now. since 1985, 8 of the biggest fiscal reforms were all tied to the debt limit increase. we're facing a debt crisis the reason why we have the highest spike in 40 years, the inflation crisis, is because the more than $10 trillion of new spending over the last two years since we last increased the debt limit, we need to address the fiscal insanity. so now instead of waiting until later, if we wait until later, we're just scheduling the next debt crisis. >> i have a chairman about a

comment that jared bernstein made on the show earlier today when we asked him if there was anything that the white house or democrats could offer as an olive branch. he called republicans' bluff and suggested there wasn't enough agreement on exactly what your position is to successfully advance that position can you respond to that? >> yeah, that's exactly what's wrong with washington. don't be bluffing each other we just need to sit down, figure out where the common ground is we're in divided government. we have to work together for all americans. but first you got to show up and you got to have that meeting and conversation don't wait until june to try to play chicken let's take care of the job for the american people right now. let's see what joe biden cares about. let's see what the house republicans care about let's see what chuck schumer cares about and mind the middle ground. >> speaker mccarthy said -- >> that's how you should work.

>> -- that medicare and social security would be exempted senators have suggested that cutting defense spending when a nonstarter where is there agreement when you look at the budget process to cut any of that excess, as you see it >> oh, as you know, we have a fairly large budget. there's numerous places. but as speaker mccarthy said, we will not cut social security, we will not cut medicare. even though president biden continues even as of last week trying to scare people that that's what republicans want to do that's absolutely what republicans will not do. we want our fiscal house to be in order there's hundreds of billions of dollars of unspent covid money that is still out there that is just lingering we don't need that we're no longer in a pandemic. there's hundreds of billions of dollars of wasteful spending in so many programs that do not cut the most important programs for our seniors.

>> if there are members of your party who do decide to play chicke chicken, would you call them out the same way you would the other party? >> no one needs to play chicken when it comes to providing for america's economy. we need to make sure that america's economy is only strong and continues to grow. you can't control 535 members of congress they're all independent warriors they'll say whatever they want to say but what we can control is, is house republicans, house democrats and president biden can come to the table and get a middle of the ground negotiation to help deliver for america. >> we've been talking about tiktok where do you stand >> as one of the youngest members of congress, i'm clearly not on tiktok. i feel like that's a great way for the chinese to know everything about you

and we know that it's a serious threat to the united states. it's hard for me to understand why any member of congress would be on tiktok themselves, let alone announce whenever they're running for office from tiktok it's bizarre to me our intelligence tells us it's a great threat to our security here in the united states. >> and you think it's a great threat, just so i'm clear, because you believe that they are mining the data currently because of the prospect or potential that they could because they could use their influence to effectively influence others that are all -- that use the platform, whether it comes to politics or other things what is your particular concern? one of the things we've heard from tiktok is that they're trying to separate both the algorithm and the data into a cloud -- a cloud system, if you will, servers, that are based right here in the united states and whether you think that's viable >> you just said it. all of the above we should be

concerned. our intelligence tells us we should be concerned. and that's why every american -- that's why you see even governors across this country banning tiktok within their own state governments. they know it's a threat. it's something that we should not be playing around with let's take care of business. >> and in the same way that we've been talking about sort of the game of chicken with the debt limit and other things, how do you see that playing itself out with maybe a game of chicken with u.s. businesses doing business in china, chinese businesses doing business here in the u.s obviously there's a lot less of those. but we're going to be hearing from starbucks this week, mcdonald's there's a lot of american businesses that do business in china and what kind of repercussions you think they would face if, in fact, the u.s. was to ban tiktok. >> the priorities of the house ways and means committee is to protect the american worker, working families, small businesses and farmers our focus is delivering for

people who want to provide for americans. american worker, families, farmers, small businesses. these huge corporations who have shed their american identity and become beholden to china, we need to look at their tax breaks we need to look at the things and provisions where they have grown and where they have forsaken the american worker our priority in the house ways and means committee will be providing for the american worker, the working class family, the small businesses, and the farmers. i hope these corporations will no longer be beholden to china. >> thank you very, very much. i'm going to send it back to washington to kayla. >> thank you coming up, starbucks, one of the big companies set to report earnings this week up next, how the company is trying to get back to normal almost three years after the pandemic started plus, we'll talk more about this week's big fed decision

with former fed vice chairman roger ferguson a reminder, you can get the best dct.squawk box" in our daily poas follow "squawk pod" and listen any time we'll be right back. ♪ at morgan stanley, we see the world with the wonder of new eyes, ♪ helping you discover untapped possibilities and relentlessly working with you to make them real. ♪ because grit and vision working in lockstep

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it is back to the office for starbucks corporate employees. starting today, workers in commuting distance of the company's headquarters will be

required to report in on tuesdays, wednesdays and another day chosen by their teams. sort of laugh because last september the company asked people to come in one or two days a week, but the ceo said in a memo earlier this month that people weren't doing that. he said he would do push-ups, anything to get them in, and, of course, everybody who is actually working at the starbucks stores happens to actually physically be there so it's -- >> it's amazing -- >> worlds, universes. >> a lot of talk that a somewhat softer labor market is going to allow employees to dictate terms. >> force the issue a little bit. i don't know >> not in seattle, anyway. coming up, a central bank triple threat. decisions are due out this week from the fed, the european central bank and the bank of england. we're going to talk about all of them next with roger ferguson. stay tuned you're watching "squawk box" on cnbc live from the nasdaq market site in times square.

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♪ welcome back to "squawk box" right here on cnbc take a look at futures right

now. we are in the red. still got about an hour to go before the market is opening dow off 200 points nasdaq off 145 points. s&p 500 off about 36, 37 points. take a look at treasuries. look at the ten-year note. steve liesman is in the house. ten year at 3.570. cryptocurrencies, let's show you bitcoin right now. 23,000 bucks hasn't changed much. down about 3%, though, on the morning. china's main nuclear weapons research institute able to secure u.s. semiconductors despite american rules that guard against it reporting that they've obtained chips since 2020, but the academy has been on a u.s. export blacklist since 1997. the journal saying they were acquired from some resellers in china, but, by the way, folks,

i'm curious, raises all sorts of questions for both nvidia and others about what they knew, even though this may have come -- meaning those chips sold to a third party, the third party sells them to the government having said that it sounds like we're talking about sales of chips in volume, meaning big numbers, and you would think that if you are the originator of those sales, you have at least some understanding -- i don't want to imply they knew, it raises questions about whether they knew and you have to imagine there would be investigations of that. >> an investigation would be needed to uncover that it calls into questions some of the expert controls we were talking about earlier in the show the u.s. in october putting new restrictions in place for some of those advanced semiconductors for artificial intelligence and quantum computing to try to

kneecap the chinese military for advancement in the future and now japan and the netherlands are set to join in the fight but how difficult it is to enforce these, to make sure that there is no middleman or vehicle through which these end users in china can still obtain the chips. it sounds like from the journal's reporting, that was not the case mike >> for sure, very interesting. as the fed gears up for its first meeting of 2023, i want to take a look at potential outcomes from jay powell's news conference steve liesman joins us on set. to be clear, we don't get the official committee outlook that happens, what, four times a year. >> that's march is the next one. we just got one in december. which is really the source of the problem. i want to show you the problem and what potential outcomes would. and roger ferguson will set us straight taking a look at the fed and market gap here. we can show you how that's

worked they were apart in the summer and that led by the way, to the big speech in jackson hole where fed chair jay powell was short and sharp and really -- than they were through the late summer and the fall. then the fed went up and the market said, no, we're not going there with you and that's that gap we've been talking about, the end there the other thing, mike, you mentioned financial conditions in the 7:00 hour in the 8:00 hour, i come with a chart of financial conditions. that's how this works. this is the financial conditions index. you can see the december 14th last meeting there, things are a little bit looser from where they were, but quite a bit looser from where they were in october. this takes into accounts, stocks, bonds and all sorts of things the first outcome is the walkish outlook which is the need for the fed to tighten andrew asked earlier why the market is higher the market has been moving closer to the fed. maybe in the anticipation of

hawkish commentary you go your way, i'll go mine. i'm not concerned about the fed market gap here at all and then the third outcome is, hey, any room over there at hotel dove maybe the market has a point on inflation. i do not expect that to happen i just wanted to put up three sn scenarios for you and explain why we've had this tightening the last couple of days. >> yeah, there's a line out there that the stock market is doing what it's doing because it really thinks the fed is going to cut and i wonder if it's more just -- i mean, the market started to act better when it seemed like it had priced in the destination of rates and more in sync with where we were going to land i don't know if that's enough beyond where we've rallied too it seems like that was the first battle, make sure that the fed is no longer chasing rates high. >> one of the things that -- this is sort of important. one of the things that the fed

observers are talking about right now is this notion, is it a disagreement over the forecast or is it a disagreement over the reaction function? and the latter here i want to explain. given a set of data or inputs, do we not understand how the fed will react and i think the reason why that neutral outcome is a possibility, the fed may just see it as a disagreement in forecasts. hey, there's a lot of models on the street and there's a lot of different outcomes here. you have your idea, i have my idea let's go slow here to figure out who is right about this. if it was i think in the summer, the reason why powell had to come forward with that speech in jackson hole is there was a misunderstanding about the reaction function and powell came forward and said, folks, i am deadly serious about this i am going to hike if you don't get it, you're going to be on the wrong side of the trade. that's what happened i don't think we're in the same scenario i think -- the governor said a

week ago friday, he said it's a difference in forecast, not necessarily reaction function. >> all right, steve, stay with us for this next conversation. >> we're going to add another voice to the conversation. roger ferguson, former vice chairman of the federal reserve and a cnbc contributor it's great to see you. good morning >> good morning. nice to be here. >> the economy has been something of a roar shock test looking at the same sets of data but having different determinations the fed needs to hike faster and steeper until there's more pain in the stock market, and then you have others like chair powell and larry summers and other who is are suggesting that, you know, maybe we need to slow it down because the economy is too murky what school of thought are you in >> i think i'm more in the latter school of thought and the reason is is that the fed has moved very, very quickly, historically rapid pace.

they've gotten rates into what i think they believe to be resticktive territory. they are starting to see the economy slowing. goods inflation is way down. and so i think the fed is feeling much more comfortable than it was, you know, back in the summer and, therefore, more likely to move at a gradual 25-basis point pace just to see the result of their handiwork to date. >> how many meetings do you think it will take for the rate to reach that plateau, for the fed to look back and say, look what we've done is now priced into the economy and we can look back and see how it plays out? >> i think the fed is likely to go 25 basis points at least. and i think that will take them to a so-called terminal rate of slightly above 5%. that's a little higher than the market expects but i think that's where they likely end up.

>> roger, how much concern do you have that the fed is all bunched up in terms of their outlook at sort of right around that 5% and there's not a lot of differences? i can't really tell who is a hawk or dove on this committee right now. is it possible they're making a similar mistake to the one they made when they got behind the transitory -- in the transitory camp >> it's possible, steve. i think the difference right now is they all agree they've gotten into restrictive territory which is very important and you had from chris waller. the differences are now relatively nuanced 25 basis points more or less between them and the market. and that's not a bad place to be i think the biggest disagreement between the fed and the market is a consensus view about the fact that they expect to not cut it all in '23 and the market expects to cut i think there's a little bit of risk that, in fact, you know, there's a group think at the fed

that says no way are we cutting and as the data shows, it may be appropriate to at least have that on the table. i don't think that's likely to be on the table and i think that's where some of the risk might start to emerge. >> having been in the room, roger, does it matter for the fed to sort of say, you know what, we have this wrong we're going to do -- it wouldn't be quite an about-face but say, hey, the market is right we need to cut again is that a big deal for the federal reserve. does that undermine the institutional creditability? >> i think what's more important is being right if at the end of the day they say, well, our plans back at the beginning of '23 to not cut prove not to be a better judgment, let's go on and bite the bullet and do the right thing, that is how creditability emerges. getting there late is never that attractive but better late than never, as they say i still, however, think we need to wait and see. while the market expects a cut

i'm not in that camp i think inflation, the market maybe underestimating how tight labor markets will remain and i think that's another agreement between the market and the fed the fed is looking at labor markets that remain tight. wage pressures that are probably inconsistent with their 2% goal and i think the market may be d downplaying that difference as well. >> roger, of course, the consensus outlook from the fed in december was that unemployment would get up to 4.5% and that's implied they were going to keep rates relatively high. the way i would pull back a little bit and say here's what the market knows from history. the median time from the last hike in a tightening cycle to the first cut is five months if you go -- right. it's not because when they finished up tightening they fully intended to be cutting in six months the one in the mid '90s, you hike 50 basis points and you cut

in a few months. at least a little bit. >> absolutely. that's the reason the market has a point of view that it has. understand, however, that we have come through one of the worst inflation challenges the fed has faced since the paul volcker era, and everyone understands the big historical lesson there, which is you don't want to cut too quickly. so there are two separate elements of history that are relevant here and i think the fed having had historically high inflation and moved very, very quickly is a bit more anxious about replaying the stop/start of the '70s and early '80s that let inflation expectations get out of control that is i think a little bit of the difference here. the fed really wants to put a stake through the heart of inflation. the markets i think may not be as concerned as the fed is about really making sure they won the inflation battle. >> i understand your perspective on the psyche of jay powell and

the psyche of this board of governors, if you will, right now. the question is, what is the pivot point at which if there is a pivot point in terms of shifting that psyche, when you think you would know that. is that a -- an april situation. is that a -- something that comes later, and then, therefore, the equity markets right now are making a gamble, something on the order of close to 12 months out at this point. >> right i think the equity markets are making a gamble. i don't see how the fed can start to think of a pivot in april, particularly given the fact that, you know, if i'm right and they're doing three hikes, the last one of the hikes will be a little bit past april. so i think they get to raise 50, maybe 75 basis points the next two to three meetings and i think they sit there for awhile to understand their hand work and that is where i think i and

others might agree disagree wit market i think the market has taken a bit of a gamble here the other thing to recognize, this is a very dynamic situation on the other side as well. we have china reopening, that's very good for global growth. that might kick in a little bit of inflation in energy prices and obviously uncertainty around the rest of the world. so i think the market is too certain of a very good soft landing story and i think the fed wants to wait and see that inflation is really under control before buying into the need to loosen at all. so towards the end of this year, i think is when things start to clear, not midsummer >> roger, i need to get your take on a personnel issue. lael brainard currently leads the short list to replace brian deese. do you view that as a national transition and do you think there's any conflict on voting

for monetary policy while you're being considered for an appointment like that? >> i would trust lael brainard to use wise judgment in this case she understands what's at stake here i'm a real fed friend and i would hate to see a superior fed leader leave i think she's got the best job in the world and i hate to see her give it up >> we'll see how that situation plays out. roger ferguson, we appreciate your time. steve liesman, thank you for joining us as well mike coming up, jim cramer's first take on the trading day ahead and this week's slate of earnings it is the busiest week for s&p 500. "squawk box" will be right back. what's up, peyton? good morning, peyton. hold for peyton. they'd huddle.... welcome to the peytonverse. such a visionary. game plan... you go. no, you go! and call audibles... double our investment in omaha! omaha! omaha! omaha!

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i think you're going to want to talk eagles. a very worthy topic. and i'm curious about your thoughts on the story about intel and nvidia, the chips that were sent potentially through china, maybe through a third party, but how much risk risk you think those poses to those companies. >> i think it's a great point, because you have to shut them down you can't just decide that they can't sell overseas, because that's just kind of -- i'm not saying that's the end of the companies, but the tentacles of china reach far. intel, not as important, because they don't have high-quality chips that they say they do. but nvidia is -- you have to reckon that they're going to sell -- unless they can sell them to canada or mexico, but -- sell them to america, they'll buy them there really isn't a way to stop nvidia other than to say, listen, we don't want progress you have to literally just be

what -- what we did to asml, which is say, listen, you can't sell to them, and i don't think it's possible. you can't stop these chips from getting to china there's just nothing you can do unless you're going to stop them from making them, and i don't think we'll do that. >> between this headline and the other headline of the morning around tiktok and their ceo that's going to be called to washington for a hearing, how do you think that plays out with the reopen trade for some of the american businesses or multinationals doing business in china? i'm thinking of starbucks. we're going to hear from them later this week in terms of their earnings that has been on quite a run you look at what might be described as the howard schultz run. we also showed mcdonald's just recently i worry not just about what the chinese government may or may not want to do, but frankly, actually, the hawkish nature of what the u.s. government might

say to u.s. businesses that are doing business there >> well, it's a great point because so far, they've pretty much skated. we've not -- it isn't like we've decided to tell apple who made for chinese in china, starbucks made for chinese in china. we've not been willing to go after companies that expanded there, because they don't seem to have a lot to do with the national defense could china go after these companies, companies that are deeply ingrained into the chinese sphere i think it depends on how much more we push, versus trying to get them away from the russians. we do want them away from the russians what we offer is a clear path. you move away from russia, you join us, and we will let you be -- get more of everything except for the highest-end chips that nvidia sells. of course, they claim they can already reproduce whatever nvidia does. i doubt that's the case. it's a very big dilemma, andrew, because nvidia's so much stronger than anything they

have, and they have to get nvidia chips, and we can't let them have them but i don't know what to do. i don't know how you block anybody from getting chips >> jim, we got to run so we can spend more time with you at 9:00 if you want to gloat about the eagles, we can give you 30 seconds to do that >> one more. doesn't mean a thing one more >> you're going to arizona, i assume in-person? >> i'll gloat if we win the next one. can't gloat yet. thank you. >> jim, we'll see you in just a couple minutes "squawk box" coming right back with everything you need ahead of the opening bl.el ♪ ♪

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we are just over half an hour from the opening bell on wall street. let's talk markets now with cameron dawson, chief investment officer at new edge wealth cameron, good to see you this morning. we've kept up a bit in terms of your market view here, and i know you have been kind of keeping stocks on a little bit of a short leash, allowing for the possibility of another rally, but maybe we're getting to the extent of where it's going to have to tell us whether it's more than just one of these kind of reflex rebounds that we have had over the past year. what's your current read on that >> certainly, we have seen this rally in the beginning of the year just driven by the fact that positioning got so light at the end of 2022, and expectations got so low, which really set us up for the pain trade simply to be higher, and the technicals have improved, mike you've been talking a lot about how we've been breaking above that 200-day moving average in

key indexes. the question is that under the surface, we haven't seen the big surge in momentum from a technical basis that we typically see at the start of a big bull market, so on the short-term, we're heading into fed week, which really creates a big wild card for markets, and then as we look in the medium term, we do still continue to see those headwinds from valuation and an earnings perspective, but of course, those take time to play out. >> for sure. i mean, i guess there's another way of maybe applying a little bit of a narrative to what we are seeing in the last several months, and this would be certainly the optimistic take, which is, look, the stock market went down 25% from high to low at a time when profits were still looking pretty good. the economy, obviously, was in good shape and the fed was tightening along the way, and the economy kind of absorbed it. now we're at a spot where, while the fed's almost done, the economy hasn't fallen apart yet, earnings not great, but maybe we priced a lot of that in.

where would you take exception >> i think the hard part here is valuation, because as of friday, we were trading at about 18.2 times forward earnings on the s&p 500, and that 18.2 times is very close to the prior peaks in valuation pre-pandemic, so we peaked around 18.5 and 19 times in early 2018 and early 2020, so in order for this market to move much higher from here, looking like 15% upside for the full year, you essentially have to assume that we go back up into pandemic-era bubble valuations, 20, 21 times, plus, but the only reason we were able to trade to those valuations and simply because we were flooding markets with liquidity, so we see a challenge that even if the fed pauses from here, that's not the equivalent of growing money supply by 20% or balance sheet expansion, and so we think that valuation still is essentially

the ceiling that acts on this rally. >> certainly from an index perspective, it's tough to get around that math, absolutely i would assume -- and if you take away kind of the top six stocks in the s&p that trade at 20-something times earnings, there are pockets of this market that might be better positioned. are there any that you're more focused on now >> yeah, i think that's a really good point, which is that if you look at the equal weight s&p 500, it's still trading at slightly below average valuations, which is one of the reasons why we think that equal weight was better than market cap weighted if we were looking for some kind of index to buy into but then, from a sector perspective, we do see attractiveness within energy from a valuation perspective it's still trading at just nine times earnings, which is essentially the market saying, we don't believe that this strong profitability can continue and then we've been looking at some of the cyclical sectors that do have lower valuations like financials and materials

that were left for dead through the past cycle >> all right looking below the surface of the index, cameron great to see you talk to you soon >> good to see you >> a big thank you to mr. santoli and ms. kayla tausche in washington this morning. fun morning. we got a lot more to go and a lot of earnings this week as well we'll keep our eyes on all that. make sure you join us tomorrow "squawk on the street" begins right now. ♪ good monday morning, welcome to "squawk on the street," i'm carl quintanilla with jim cramer and david faber. post markets read on an unusually busy week. central bank decisions, including the fed, a jobs number, an opec meeting, two-year yield is back to 4.25%. road map begins with a test of that rally plus we're keeping a