2023 "squawk box" begins right now. good morning welcome to "squawk box" here on cnbc live at the nasdaq market site in times square. i'm here with melissa lee and mike santoli joe and becky are off. thank you for waking up early. you have been doing it all week. today is an exciting one, i think. yesterday and now so much stuff happening. a lot to discuss >> the afterglow >> this is the afterglow party u.s. equities this hour experiencing -- i don't know about the afterglow. dow off 46 points. nasdaq 58 points higher.

s&p up 19 points all of this coming after what turned out to be a flat session for the dow. 1% gain for the s&p 500. 2% gain for the nasdaq the 10-year treasury at 3.422. 2-year treasury is at 4.117. check out the price of crypto. that has been our barometer of risk on and risk off it is getting closer to $24,000. $23,786 to be exact. >> that could be holding on to yesterday's gains on top of the gains before >> that is right you are up over 6% in january. yesterday, before the press conference, the market was hesitant wasn't committing. you tacked on 1% it is interesting. it takes the s&p and we touched this level in december it takes you back to late

august literally the day in jackson hole where jay powell scolded the market. >> now they are saying we are giving you the finger. >> the snmarket >> no, the market is saying to jay powell la, la, la i'm not listening. >> they will do what they have to do. he said i don't see cutting later this year. the markets don't care there is a bit of finger here. >> he choalked it up to maybe te market thinks inflation is more benign it will come down faster that, to me, was him explicitly trying not to pick a fight with the market and not intensify this days agreement. >> would i be surprised if fed officials came out in the coming

weeks and jaw boned the market lower? no that's to tomocome ongoing increases. >> plural. >> i have to say -- we have a guest who knows more than most there is a little bit of see no evil and hear no evil in the market >> maybe the assessment of the risks have changed a little bit here let's bring in roger ferguson. former vice chairman of the federal reserve and cio of tiaa. good morning, roger. >> good morning, andrew. >> mike here, roger. >> he's the better one. >> we're all here. >> i'm sorry >> no, no. not at all just give us your take on what we were talking about. essentially there is the statement and there's certainly the the message that the fed feels it is not done and it needs to be sure inflation is taken care of. on the other hand, jay powell

seemed to pass up multiple opportunities to get more hawkish during the press conference >> i think you are right on all those points i think they were very clear about one or probably two more hikes to come. they were very clear in the press conference that maybe it is just one, depending on the incoming data. they see the process of inflation slowing which is progressing nicely having said that, i think the market chose to ignore the possibility of two i think the market believes something the fed does not that is going to be such a deep change in recession that the fed has to ease. the fed is not buying into that. this is the difference of forecast where the market thinks inflation is p coacoming down ah fed forecast is one of maybe a bumpy, but relatively soft-ish landing with growth below trend. their ability to hold interest

rates high to keep inflation on a downward path. i would look at a different reaction. >> sure. one thing that, perhaps, investors might be embracing for from powell yesterday that they did not get is a focus on him saying we really think that the labor market has to soften more before we consider being done. he also really even though they are on record with the december outlook saying we will get short-term rates up above 5% we will have another statement in march he said we'll have to see how that goes. it seemed if there was a little more of a sense of we're relatively close to a destination. we don't -- he wasn't necessarily saying the market had to really reevaluate >> i think that's true i think one has to understand and i think governor waller said this the distinction with the

terminal rate built into the market and terminal rate in the last fed forecast, so-called sep, is 20 points. we shouldn't overthink that. maybe they have to do more or less a debate of 25 basis points is where we are right now so, i think jay powell is being clear and honest that the possibility of two more with the data the market is thinking one and done that is the distinction. not a dramatic distinction, but enough of a dinstinction for th markets to soften. and maybe some fed officials reviewed the market is hearing what it wants to hear that the fed is close to coming to an end and we'll see. in fact, the fed is one to two moves away from ending the cycle. the other thing chairman jay powell did was raise the hurdle

the toward restarting which i think the market may have liked as well. there are things in there for doves to like. there are things in there for hawks to like. really a difference of 25 basis points >> i see the difference which is very slight. there is a difference in the perception of how long we're at the higher terminal rate, roger. the markets are thinking the fed will reverse quickly the fed is saying right now they will be higher for longer. when it comes to that disagreement in the market versus jay powell versus the fed, where do you stand on that? >> i think the fed is more likely to be right than wrong. the reason is that i think the fed is not eager to have, but willing to have a short and shallow recession, if that is what it takes to get inflation closer to the 2% target. i think the market does not believe the fed is willing to do that i think at the end of the day,

the relatively hawkish fed that we heard back at jackson hole may still have to come out i think the fed is more right than wrong i think the market is hoping against hope that the fed will allow inflation to stay a little higher and lean in against slowing in order to avoid recession. the market is wrong on that. the fed is prepared to see a deeper slowing if that is what getting to 2% is called for. >> there is a sense out there, roger. if investors were to look and maybe they were looking at the glass half full yesterday. look, we have a nominal gdp pace at 5% or better last year. is that as slow as it has to be for a while and somehow we get lucky on the inflation front and it won't take as much pain and promised clearly things can change and things can roll over you mentioned he wanted to

foreclose on the idea of stopping the rate hikes and restarting i wonder what that resistance is based on on his part or the committee's part in years past, the greenspan era, there was more fine tuning. more we can feather the brake if we have to as opposed to the stated path and have it be unwavering for a while >> i think the issue the fed is grappling with is the question of inflation and inflation expectation. i think they are concerned if they should stop prematurely, inflation will pick up again and inflation expectations will be less anchored and that will force them to do more work you heard chairman powell talk about that with the risk management approach. the risk of 25 basis points too much in their mind is far less than the risk of 25 basis points

too little that is the stop/start conceconcern. if they do too little, they are behind the eight ball and they have to pick up the pace and they have to be more destructive to the economy than they like. that is the consideration of the pause. if you pause, do you give the market the sense that the inflation credit teentials are s strong as they could be. >> that makes sense. you know, maybe the market has to rethink the next day and not much changed roger, it was great to talk to you. thanks so much >> thank you. time for the "squawk planner. we hear from the bank of england at 7:00 a.m. and european central bank at 8:15 for data, we get jobless claims and product claims we hear from eli lilly this hour

and then harley-davidson and conoco we will get reports from amazon and apple and alphabet after the closing bell today >> we will do that after the break? >> if it translates, the biggest one-day gain >> i want to talk about the buyback s buyback. >> a lot to unpack coming up, the big earnings movers, including the jump of shares in the facebook parent meta don't miss the interview with ray dalio. you are watching "squawk box" on cnbc >> announcer: this cnbc program is sponsored by baird. visit bairddifference.com. because you've got the next generation in global secure networking from comcast business, with fully integrated security solutions all in one place.

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shares of meta are soaring the company's revenue beat estimates and lowered guidance for 2023 citing slower than anticipated growth in payroll and cost of revenue. they authorized a $40 billion share buyback. they said 2023 would be the year of efficiency. investors really latched on to that. >> absolutely. this is a company where anybody who worked how the crash happened realized it was almost

entirely within management control to change the story. lopped billions off the spending plan the revenue side was okay. better than expected, but not great. >> how do you feel about the buyback program? $40 billion. look, the conundrum is they can't buy the other companies. if you think about it, you could have bought twitter, snap, pinterest. all of them in one shot, basically. assuming the government would allow it think about that kind of money what could you otherwise do with that money that would be a productive use of the money? i'm not saying this is necessarily not a productive use. you could argue that was a productive use or you could say if you wanted to do something over ten years, where could the money go >> there is no commitment to spending $40 billion of stocks it is more of a signal to shareholders they are on your side we are on your side and listening to you and listening

to you when it comes to your gripes of the spending in the metaverse. >> i get that. if you were spending that money, what would you like to do with it >> they already have an issue where they have a profitable core business that doesn't require a lot of reinvestment. you will also invest in something that is lower return than the core business if you are google t, you don't care you will go do the other bets. it is 10% of the market cap as of yesterday's close $40 billion out of 400 it is a big number it is a different equation than exxonmobil or other capital businesses where you have that trade. >> to think this stock's $88. >> as of yesterday, consensus target price was 148

that is where the stock was. now everyone has to chase it that is why you have to pop today. >> right. take a look at shares of deutsche bank. falling this morning bank beating expectations for the fourth quarter boosted by higher interest rates. total net revenue below consensus estimate the investment bank suffered from slumps in fees. deutsche bank announcing it, too, plans to raise dividend, not by $40 billion, but the cfo said they are holding back on share repurchases for now with the uncertainty in the economy and regulatory changes expecting a buyback of $700 million. >> you see how low the stock was back in october. it had been on a run with the european financials. new overnight, shell posted the highest ever annual profit bolstered by crude prices and

demand passing the previous record of $29 billion in 2008. shell announced a $4 billion buyback program. modest on the capital return. coming up, the fed slowing the pace of rate hikes, but higher interest rates are taking a toll on the consumer what yesterday's move means for your money next. and tomorrow on "squawk box," joe and becky have the latest from the at&t pro-am. it all starts tomorrow at 6:00 a.m. eastern time. we'll be right back. lp your buss get a payroll tax refund, even if you got ppp and it only takes eight minutes to qualify. i went on their website, uploaded everything, and i was blown away by what they could do. getrefunds.com has helped businesses get over a billion dollars

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welcome back to "squawk box. the fed may slow the rate hiking campaign, but the impact is costly for consumers cnbc's correspondent sharon epperson is with us this early morning. >> good morning. you know the fed's rate hikes have hit consumers' wallets by raising borrowing costs and slightly increasing rates on savings accounts national average rate on credit cards is over 20%. near an all-time high. the average rate on the 30-year fixed rate is 6% it was less than 4% a year ago the five-year rate for a new car is over 6% savers are seeing a boost with the average savings rate a fraction of a percent. consumers need to be strategic in where they borrow and save. the rate you get is small.

rates on high yields savings accounts at online banks are over 4%. consider your car loan through a credit union average rate is under 5% compared to 6% at a bank personal loan rates may be lower at a credit union over a bank. one way to stop paying higher fees on the credit card is take out a lower personal loan. you can transfer the debt to a lower rate card or zero percent card the catch is you pay a fee of the amount of transfer, but pay no interest for 6 to 18 months or longer. it will likely be worth it, andrew >> the latest on the reports, sharon, from the credit card companies, show consumers have been cutting back on spending. we are seeing it consumer debt levels appears to continue to rise what do we need to know with relief available to consumers?

>> it is interesting to see the major credit card firms saying the consumer is resilient. they have been in the last quarter not cut back much. the consumer debt levels are rising because people are not paying balances in full every month or paying on time. one thing that may change is late fees for a missed payment consumer financial production bureau yesterday said it should be closer to 8%. it is not enforced now those that call, when it comes to lowering the rate, often get the rate lowered if you call and say i'm in good standing this is one missed payment you may not have to -- >> what do you think of the administration trying to cap it? >>trying to cap it is importan for people >> you think they will succeed >> i don't know if that will happen the jury is out on that one. >> is this jaw boning or theater? >> i don't know if it is theater. people have to say they are tying to do something.

whether or not the industry will allow that to happen, i'm not sure you know, people need it they are using their credit cards not just for travel, but day-to-day purchases because they can't afford prices right now. >> sharon epperson, thank you. coming up when we return, we have an earnings results from merck and honeywell. we have those results and reaction and more from the central bank decision. we will hear from the bank of gr england and the ecb. as we head to break, a look at yesterday's s&p winners and losers >> 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”.

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good morning welcome back to "squawk box" here on cnbc we are live in the nasdaq market

site in times square nasdaq up 171 points and the s&p is up 21 points. now kevin mccarthy says he sees common ground with president biden after an hour meeting and discussing the debt ceiling. he said the meeting had gone better than expected and the investors should feel better to avoid the first ever default on the u.s. debt. president biden is eager to work across the aisle in good faith republicans have been pushing for spending cuts in exchange for support. democrats say they will not allow the nation's responsibility to pay its bills to become a political bargaining chip it has already become a b bargaining chip. let's get to meg tirrell meg, what is merck's number? >> a slight beat for the fourth quarter. adjusted erpgs p coming in at

$1.62 that analysts were looking for. revenue ahead at $13.83 billion. the street averages estimate was 1.5. it came in light of expectation. the beat may have been driven by the drug which came in at $825 million over $400 million which the street was looking for in the forecast for the year, that is looking in line on revenue. 5 5 57.2 billion analysts were looking for $58 billion. you are seeing merck down 1% this morning andrew. >> meg, thank you. we have more news. honeywell adjusted earnings of $2.52 a share revenue fell short full year guidance coming in

below consensus here we are seeing the reaction down by 1%. for more on the earnings, let's bring in kari firestone. chairman and founder there great to have you with us. >> thanks. >> your rea ction to merck >> all of the drug companies had a great year for stocks last year defensive and paid dividends everyone needs healthcare. they also had covid related drugs. merck's problem is the covid issue. the problem for a drug company is they are not part of the big run this year. they are not getting an uplift because interest rates may be peaking or we are entering a different phase with the fed and inflation. >> do you own honeywell?

>> we know honeywell extremely well honeywell is in the cross-hairs of industrial/tech it is not a cheap stock. not very expensive they produce what no one can in terms of the type of specifications for the industrial sector on aerospace and automotive it has been a stock up and down. we think a slowdown across the world hurts them the stock could be weak today. i think it should have a good year if the market keeps going up >> meta is getting back value at a huge clhunk this morning. once the estimates go down, it has more traction. the estimates are going up $2 a year this year and next on the eps? >> that is a stock we have owned and we have been supporting. i talked about meta several times on cnbc. it got to a point where it was

u undeniably cheap all of these stocks we call in treatment. if somebody recognizes to cut costs and people they hoarded employees the most important thing for meta, $40 billion buyback. 10% of shares. there will be improvement. i think spend less in the metaverse over expenses. the expense cut was better than expected if you haven't bought it, up 75% if it opens up 20% >> a broader macro question. we debated with roger ferguson who are you listening to are you listening to jay powell and what he is saying or the market and they don't believe jay powell or roger? who is in your ear >> it is respectful to listen to everybody. >> who do you believe then

>> i think we have looked at what inflation appears to be look at the housing market look at the indicators that i'm sure the fed spent time looking at wages wage growth coming down. there is clearly an improvement on inflation we have seen it in the cpi he was going to have to address that he was going have to respond to better inflation numbers it couldn't be terrible. he wasn't going to say we will do 50 basis points four months ago nobody expected 25 basis points. micro listening to how we parse every word wasn't going to give you the signs. you just have to feel 25 basis points is better than 50 inflation is lower interest rates are not going to keep going up forever. that is positive for a market that was really trashed last year. >> they may not go forever if investors' bingo card has a

square for revival of inflation later on we saw that in spain where the numbers are going down and then they went up that's the read we got on monday that complicates the message china reopening which is reflationary i don't know if anybody is factoring that wild card in. >> here is what we know. no one has the playbook for post-pandemic. what do you do here? a bit playing it by ear, right we also saw this enormous reopening surge and hangover effect it caused recessionary issues in many sectors gaming and retail and advertising. those rolling recessions, i think, slow things down to the

point that you need to have these pauses from which perhaps there say bais a base that doest include that recession where the market is trading, assume there would be a recession and everyone was so pessimistic that there was, i think, the structure for rally i think the important question will be if we get to ,300 or 4,400, what then the market gets back to 19 or 20 times earnings and we have to decide we have to trim positions and pay attention to that. we can't assume. the market goes straight up >> and the disagreement with the bond market pricing rates toward the end of the year and what powell was saying. to me, it is the market saying it has to encompass all of the proba probabilities. if you wanted to hedge in the

portfolio, wage against the market is a good offset. i guess my point is powell will never say we're hiking now and cutting in six months. that never happens from the central banker the fact he is not agreeing with the market is expected >> he is doing a good job. maybe he started too late, but i think he is doing what should be done by a fed chair. maybe there was too much information spread by too many of the governors and too many of the ex-governors i think it is reason aable for m to be speaking the way he did yesterday. i applaud him for trying to lay the course and not -- listen he is not listening to anything but what he sees in front of him and the people he most trusts. >> new members of the committee, too. listening to different voices. >> yeah. >> kari, thanks. great to see you in person.

>> great thank you. coming up, the latest chapter in the ftx saga. judge imposing new conditions on sam bankman-fried's bail details on that next. later, don't miss the interview with ray dalio bridgewater founder. "squawk box" will be right back. >> announcer: currency check is sponsored by interactive brokers. the professionals gateway to the world's markets. to adapt in a fast changing world,

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welcome back to "squawk box. a mixed picture here nasdaq up higher s&p 500 up 21 points take a look at two dow comp components reported. both in the red. honeywell off 2% you have merck off close 4% there. we can talk about those earnings in a moment. another story that has ripped through the world of crypto. sam bankman-fried has been banned from contacting former or current plemployees of ftx or alameda. the amendment to the bail

agreement is after he was allegedly reaching out to one former employee over his testimony. a matter of policy when you are accused of these things, better not to talk to others. >> exactly you know the new encrypted messaging app. the future of prosecution. >> interesting thing here. i emergency all sorts of people use all sorts of things. they mention signal. whatsapp >> is apple encrypted? i feel the privacy effort was to do that. i need to do homework. >> it is not -- now to the story that is rocking india and the global financial markets. adani group's total losses have topped $100 billion in the past week it comes after the short seller

h hindenberg research called it the largest con in corporate history. adani evnterprises dropped to th lowest level in months they canceled the stock sale of $200 billion the founder is no longer the richest person in asia slipped to 16 from 3rd last week amazing he can be 16 and lost the money. he issued a video to shareholders he pulled the share sale because it would be immoral to go ahead with so many questions about the com company. they are trying to address these things they issued a report didn't answer all of the questions that hindenberg raised it is a lengthy report >> a shocking story.

unbelievable what hindenberg has been able to do. >> the collateral damage in india. down 9% since the december peak. all conglomerates trading sharply lower. >> i want to know the short position across the board. >> hindenberg was short in trading adani bonds. >> the question is if you are smart, you should have been short with all of the related. >> right right. when with we come back, met stock is soaring we will talk about the big buyback plan you can get the best of "squawk box" on "squawk pod. you can listen any time. we'll be right back. right? uhh...nope. intuit quickbooks helps you manage your payroll taxes, cheers!

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welcome back to ""squawk box. meta first quarter sells suggesting the ad market maying be recovering. i want to welcome back the cofounder of margins good morning to you. we have been trying to understand what happened here. the flip in the way the market was thinking about this. let's start with this. how much of this is facebook or meta specific and how much is this the ad market more broadly? >> i actually think the numbers and the market went crazy yesterday. they are not that good they're fine i think what happened yesterday is mark zuckerberg quietly suddenly but definitively deprioritized the metaverse.

if you look through the report and the release in the intro, he says ai and reels and year of efficiency never mentioned meta in the call in the prepare for the call, he says that sign. remember, the big theme, year of efficiency, they're going to cut things that don't work and i think mark zuckerberg is telling investors we're back to being disciplined, we're back to being smart about where we're going and everything about artificial intelligence, it is the topic of the moment, and they're well positioned there, and it is core to their business and they're saying that we are going to be investing heavily and they say we want to become a leader in generative ai ai and recommendations. >> how do you feel about the buyback? and do you think they're going to buy back the stock? they don't have to do it >> i think yesterday was a master class in earnings narrative management and

earnings communications because, first of all, huge beat on revenue. they were down year on year relative to q4 of last year. where as yesterday, snap was actually flat to q4 of last year but expectations were lower and they're able to beat on that side again, stock buyback, we're going to buy back 40 billion shares, as you said, they authorized the purchase of it, they don't necessarily have to, but investors are happy. i think they did an amazing job painting an entire picture of we're back to being disciplined, we're back to being investor friendly, after basically for two years saying we don't care what you think, we're going to put you all -- put on helmets and sit in virtual office meetings with no legs or whatever that whole vision was now they're saying investors, we'll listen to you. >> do you think that's off to the side, do you think all the investment made in that is a write-off to you or are you suggesting that they're just going to do that quietly and maybe folks are not going to pay attention to it in the same way because they're not going to

continue to invest in it at the same pace? >> i think he has to stick to metaverse. still said it is the priority after ai and the future of all platforms. to me there is this little tell during the earnings call when talking about what are the successes of the metaverse, he talked about how 161 million people use a digital avatar in whatsapp if you know andrew, like the digital avatar is bitmoji, the weird little customized things -- >> i got one >> i have one too. that's not the metaverse we have been promised. he used that as a sign of how they're going to marry today's platforms with the plat formz of t the future that's a huge tell he's realistic now, he's saying listening, we're nokousing on what is happening today and getting the company in order again. >> granted that absolutely seems to be the intent and the message received

ranjan, so you have a big tailwind with investors because of the cost discipline, because you literally are just reducing by billions the amount you were going to plow into the new ventures i think it is worth asking about the ai emphasis here is it simply another, like, it is a buzz phrase, we have to latch on, we have to associate ourselves with it, what really is it except, look, software is getting better all the time. that's what software does. is it anything different than that within the products and the business meta? >> i think for meta, ai, artificial intelligence, machine learning, whatever the word of the moment is, is huge for them on two fronts. one, on their actual advertising products, the big thing they did in this earnings report was show, again, that advertisers are finding efficiency again because they're able to use ai to target and recommend ads without all the personal data that is being eliminated by apple and ios 14.5 on the ad side, which is their business, that's a huge boon for

them on the other side, for the average user, ai content recommendation, tiktok has destroyed everyone on that front, has shown that, listen, maybe people don't want content from their friends and family. it is interesting. it is not that interesting we're going to take all this content from creators and show you exactly what you want and facebook is ready to compete on that side. and i think it is interesting, the chief ai scientist at facebook has been going around and you can almost see, you know, is chatgpt is getting all the love right now he's trying to scream, like, people, we have this at facebook it has been sitting in the background this whole time so they have the technology. they're well -- they're at least on par with everyone else. so now i think they're ready to show the public that, you know, we're going to use this to make our core business better >> so basically meta was able to hone in on the one topic that is the buzzword for investors and change the narrative but really the fundamental story

has not changed. they're going to cut expenses, that's changed that's what a drop to 80 bucks a share is going to do so you, listening to shareholders. no surprise they're all of a sudden emphasizing efficiency. but in terms of the shift in narrative, it is a shift in narrative, isn't it, or is it natural change and how they run their business >> i think the shift in narrative is we are going to go back to being the business that we were, but now we're using this technology we have, all this artificial intelligence to run our business in a way that is efficient for today again, we may have lost some elements of competitive advantage that we had in the past but we're going to be able to use ai to again target ads better even though we don't have data, we'll be able to target content better because people don't care about their social graph content as much anymore. i think that's the shift in narrative, but the bigger shift in narrative is discipline,

again, headline, year of efficiency it sounds kind of normally it is just a bit corporate, but in this case, it makes a lot of sense and i think that's why investors are so excited the numbers, they're fine. >> okay. ranjan, thank you. fascinating perspective on all of it. going to assess and see what happens. thanks all right, before we head to a break, let's take another look at two dow components that just reported this morninging honeywell and merck. both trading near premarket loews lows honeywell down 4%. merck off about 3% so you got about $12 of downside there, times six, it is 70 to 80 points of downside in the dow futures just from those two stocks on the net basis. coming up, two central bank decisions on the dock at the bank of england in moments and we'll hear from the ecb in the 8:00 hour.

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good morning welcome back to "squawk box" here on cnbc we're live at the nasdaq market site in times square i'm andrew ross sorkin with melissa lee and joe santoli. we have been saying all morning, little mixed picture, things are moving around here a little bit. we have got the dow off about 114 points s&p 500 up about 17. nasdaq up about 156 points look at treasuries as well ten-year note, sitting at, i'm sorry i'm looking to the -- so far over, ten-year note at 3.4 and two-year, 4.1. we'll show you the oil board as well you're looking right now at 7623 when it comes to wti crude finally crypto, over 23,000. almost $24,000, guys. >> risk is back. >> risk is back. >> that's going to cut. >> thank jay powell,yeah. >> eli lilly, the results, we

just got through them, we were trying to figure out what was comparable but here is the verdict. eps adjusted 209, that's 31 cents better than estimates of 1.78 revenue at $7.3 billion. this is the tricky part, the company is raising 2023 eps guidance to 8.31 to 8.55 a share. that's better , but the higher end of the range should be higher given the 31-cent beat. that's the inttricky part here eli lilly shares down right now on the back of the results we'll talk to the ceo david ricks at 8:10 a.m. eastern time. breaking news out from the bank of england on rates following yesterday's fed rate decision let's get to steve liesman for the latest steve? >> hey, melissa. the bank of england raising rates by 50 basis points there had been some speculation maybe they did 25 to follow the fed, but that was not the case

the bank of england is concerned about inflation, concerned about the inflation, risks are skewed significantly to the upside. they're still forecasting a recession it appears with a 1% peak to trough decline they say tight labor markets and higher than expected domestic price and wage pressures point to more persistent inflation, they're saying more is to come and more to come from the european central bank later today. as for the fed, fed chair jay powell gave the markets an inch yesterday with a nod toward approving a place in data. markets took a mile widening the gap. powell embraced for the first time the idea that a process of disinflation is under way and made no attempt to exclude a pause after march if the data continues to accumulate favorably. the result, a w widening of the gap with the futures market

pricing 50 basis points of cut and they're forecasting 5 1/8. fed in its statement forecast ongoing increases, plural, and powell added he did not see cuts this year. he continued to lean on this concern that core service inflation will take time to decline and require a weaker labor market >> we have a sector that represents 56% of the core inflation index where we don't see disinflation yet so we don't see it it is not happening yet. i think it would be premature. very premature to declare victory or to think that we really got this. >> it is likely that powell had little ability to do much more than he did. the inflation data has softened. and the fed remains skeptical about the outlook. the data confirms the market's benign view or the fed's hawkish

few and policy is going to follow the data. the danger here, a market priced wholly for the fed to be totally wrong. the danger for the fed, a loosening of the financial conditions creates a risk on and the market and that sparks inflation again. mike, it was a bit like, i don't know if you got the sense of resignation on the part of the chair yesterday. it was, like, i think it is going to rain. but you guys want to go out and play, go ahead and i think one of the dangers here is the market thinks that the fed is going to come running out with umbrellas. >> yeah, certainly, steve. and maybe running up against the limits in the near term of exactly how much as you say you can really jaw bone market direction and sentiment. we're going to take it from there, steve thank you. for more on the fed and the markets, we're joined by luke ellis. and ken rogof, professor of economics at harvard university. >> esteemed people. >> yes, exactly. it is a very prestigious table

we have here this morning. so we have it there, central banks tightening, maybe coming toward the end, maybe the economy has been more resilient than perhaps anticipated and maybe one of the takeaways i thought from powell yesterday was at least open to the prospect that the economy can prove a soft landing is possible under certain conditions what is the policy and greowth interplay you see right now? >> we're clearly getting to the point you can play it either way when you're the fed. take more inflation risk, take more recession risk. i think they're still going to go higher for sure you reach a point, i think, where the economy still looks pretty good. the labor market the inflation is not as good as they would like. so i think we're, like, six months ago i would have said pause sooner rather than later, i mean, they should get to 4%, 5% and then pause so that you

don't have a big recession i think they probably see the risk of a big recession a lot smaller but the risk of inflation lasting a lot time is bigger i would listen to what he said, not overreact to inflation reductions on the way. down to 3.5% or 4% but not down to 2.5%. >> you can't extrapolate that aggressively, i guess. from an investment perspective, tactically, it is very evident that inaggregate people were underexposed to risk and to equity markets, for example, coming into this year. nothing is really gone too wrong in the near term, where are we besides that tactical trade? do you think this was any kind of a green light for risk markets? >> okay, i think you have to think of all of this in a broadly tactical way, compared to the last ten years. we're going to trade big wide ranges what we have got is at the moment there is good news, we would see inflation coming down to a two-handle in the second half of the year that's going to make the market

feel great i don't think you see the fed cutting rates and at some point, if they are cutting rates, it means we have a real recession there is no evidence of that and we still got lots of wage inflation. if they're not cutting rates, at some point the market is going to, oh, blimy, we're in the wrong place here, we're staying up 5% and then you get a noticeable sell-off in the second half. >> and what about what is going on in the rest the world here as well we talk about how the fed is ahead of bank of england and the ecb, and, again, we seem to have sidestepped for the moment a bad european recession as well >> for the moment. i think, look, the bank of england, that's sitting there with 10% inflation and the recession started. if you think the fed had a tough time -- >> frank, are you in the oh, blimy, category then are you in the glass half full or glass -- >> in terms of recession >> yeah. >> i mean, tactically long risk assets, they're going up, enjoy it while they're going up, i think we have another big leg down coming later on when we

start to have to deal with the fact that we haven't dealt with wage inflation >> how are you going to know then as a trader when you're supposed to -- this goes with the timing game, you call it the oh, blimy, moment. you would be good to know about the oh, blimy moment, before the oh, blimy moment happens, right? >> there is a point where the equity markets -- bonds have either got to accept the fed is not going to cut, in which case you get rates higher and that's the oh, blimy, moment. or it looks like the fed is cutting but they're only cutting because you got a significant worsening in the economic situation in which case it is good for earnings. the equity market needs to look to the bond market for the oh, blimy moment but in the meantime, enjoy risk. >> it seems like the two scenarios, the one presented by the fed, which is higher for longer, that's an oh, blimy moment for the markets and also what the markets are pricing in in terms of a deeper recession than what the fed is forecasting and that's why the forecasts for cutting rates, that's, oh,

blimy. it sounds like lose-lose i don't know where you stand in terms of these two scenarios and what is happening. you're outlining a market in which it will go down. >> obviously very risky scenario the war in ukraine is still going on and maybe it is contained for the global economy. but if it escalates, then china gets pulled in, deglobalization, other problems i also would saywe probably ar going to settle on higher real interest rates over the next decade than we haveover the earlier decade people have to remember that inflation fell, but interest rates fell a lot more. and so i think the fed also has to search for where that is, which is probably going to be higher than we had it before so the 0.5 for the real fed funds rate might prove low. >> there is a line of argument that, yes, things look as if maybe we can navigate between these two hazards to some degree

of persistently high inflation and a bad recession. but then saying, look, it always looks like that's a possibility before recession you always have this moment where the fed is almost done, the economy hasn't yet buckled, and, you know, it is plausible that we get a soft landing, right? >> we're not in a quiet moment that's for sure. so, we might be in the eye of the storm, we don't know which way it is going to go. and i think for the fed they definitely suffered some reputation risk by endowing the federal government with what was basically 15% of gdp by reducing the real value of bonds. there is definitely some reputation risk. and they're probably concerned that something might happen that hurts them it could be something happens, there is a recession and they cut. but just something might happen that made inflation go up and they'll look really bad. and i think they really want to be careful of not sort of pulling back too soon, letting

that happen and say, boy, you know, you're the worst fed chair ever >> i was going to say, look, just to square the hole, looks like you lose either way also, where are markets when you have that moment of truth. >> that's the point. >> how wide is the range and -- >> i think we have to get out of this mindset that we had in the 2010s when inflation was persistently low, no economic uncertainty, you could just trade a very gentle bull market, you buy every dip. we're now in a world where we would say inflation is no longer in the 1 to 2 range in the 2.5 to range and in that world, there are points where you want to belong and points where you want to ride out i could see us getting up to 4.3, 4.4, but also below 3.5 in the year. >> it is a different environment. i would argue that 2010s didn't feel so smooth and easy to figure out along the way 2011 we had a possible debt default. we thought it was going to be

another recession. 2015, '16, in other words, in retrospect you're right, there were things we could take for granted. >> but you could have bought anything, risk adjusted, everything went up, you had to every time it went down, buy some more. that was a fantastic environment to be at risk asset owner, but if you look over the previous 200 years, that's not how it worked. >> low inflation and low interest rates were kind of reliable in the 2010s and now they're not. >> fair enough >> worried about other things, like deflation and things like that all right. good to see you. thank you so much. >> great to see you. coming up, an exclusive interview with bridgewater associates founder ray dalio he'll join us with his take on the markets, the fed, investing in china and so much more. i'm curious if he's in the same camp as you guys or not. we'll have to see. quick check on the markets mixed picture. dow looking like it is going to open lower, about 151 points

lower. nasdaq up 100 points we'll get you ug ucahtp to speed on all the earnings in a moment. "squawk box" rolls on after this

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premarket trade. you see roughly 5%, around 4,000 to 5,000 shares of premarket trading volume the industrial and tech solutions company reports profits that topped estimates, but revenues fell shy of consensus. honeywell's results were powered by amongst other things better growth at its all important aerospace unit, but expects a key measure of revenue growth that strips up the acquisitions to slow from 2022 levels those why the shares are possibly down around 5% right now. next up, shares of fellow dow component merck, also down right now. you can see just about 2.5 to 3%, around 40,000 to 50,000 shares of premarket volume they posted quarterly results on revenues and profits at both top forecasts driven in part by sales growth in its keytruda cancer treatment drug franchise. like honeywell, it is the outlook that may be dragging things lower merck is forecasting full year profits below wall street expectations shares down 2.5% we'll end on eli lilly, lower

right now by roughly 3%. roughly 10,000 shares of trading volume, mixed report here with better than expected profits on lower than expected revenues lilly helped by growth in key drugs to things tied to things like diabetes and skin treatments lilly did also raise its full year profit guidance and reaffirmed revenue guidance. those shares are down. and by the way, we'll have much more on that eli lilly story next hour in ceo david ricks joins the show lots of things to talk about there, mike. back to you. >> sure, dom, thanks so much. coming up, meta shares surging in extended hours trading after reporting revenue that topped estimates and announced $40 billion stock buyback. so, could this report turn out to be the most important of this earnings season? jon fortt is here to weigh in. and ray dalio will be here to weigh in on the markets, the fed strategy and much more stay with us

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now, the answer to today's aflac trivia question. what social app has been downloaded more than 3 billion times and is used by more than 20% of all internet users worldwide? the answer, tiktok welcome back to "squawk box. meta shares soaring as much as 20% after hours yesterday on revenue that outpaced the street's expectations, plus signals of cost cuts now and buybacks so, meta's report turning out to be the most important of the earnings season. it kind of may feel like that. what do you think? >> well, andrew, no. it is not going to be the most important. look past that monster stock pop and the assumption that meta did something amazing. they didn't. the quarter was just solid with revenue down slightly from last year, up a little in cost and currency users aren't fleeing facebook and instagram for tiktok and zuckerberg suggested they'll buy

back stock and spend less on data centers yea. but the most important report over earnings season probably comes tonight and it is probably apple. not only does apple have the biggest market cap out there, but it also gives us a read on high end appetite for phones and china's rebound in both supply chain and consumer demand. the most important likely detail, the question in this economic environment, can apple thread the needle of maintaining margins, balancing inventory and can apple give guidance. last quarter apple didn't guide revenues, just said growth would be bad and if electronic arts are any indication of what the gamings through, it is ugly out there. >> it seems to show some kind of stability. that's the good news, no >> well, on the other hand, meta's earnings were the most important of the season. and that's why meta's initial plunge was almost

exactly a year ago, when the stock shed more than $200 billion in market cap, a quarter of its value this is before the broader economic slowdown became obvious. the knives came out, critics called the unique to facebook problem with the benefit of hindsight, though, we see that was wrong. yes, continuing the after hours action, meta lost half of its value from the 2021 peak but amd and amazon lost almost as much. tesla lost more. and despite this hammering about competition from tiktok, political peril, angry users and apple ad targeting, meta is figuring things out. generating cash, and paying some more attention to efficiency maybe not enough but some more. meta should be a big signal to investors who closed out 2022 with an oversimplified thesis saying to avoid tech technology still changing the wor world. >> so now besides apple, which is going to be reporting

tonight, which of -- do you think who is going to give us the best sense of where things are headed at this point >> amazon. >> amazon. >> yeah. >> i agree with that. >> on the real economy. >> on the data center side, we got the initial signal from microsoft, things are slowing down, ratified by intel as well. but amazon is the biggest in that space, aws. there is a kind of cooling continuing across enterprise, that's a concern then, just right there, with the consumer, right, and also delivery costs we get all of that >> do you think that the meta -- or i shouldn't say the meta verse strategy has been put on hold or do you think it is just still going over here and they're saying don't look over here because we're going to be over here. >> they have been saying that for a while. they have been saying this is way out there. they still spent $13.7 billion last year on this -- i've never seen that before storing enough money at this thing, thinking they're going to create a market, i don't know. but i think investors think with all this talk and efficiency,

eventually maybe not this quarter or next, eventually they're going to pull back. >> i handed you $40 billion and you had that in your wallet right now, would you buy facebook stock or meta stock or what would you buy >> oh, come on. >> what would you want to buy? $40 billion, what would you want to buy >> if you were mark zuckerberg. >> if you're mark zuckerberg let's say there is no regulators you can buy whatever you want for $40 billion, fun game to play what with yould you buy >> that's a highly -- >> i would have to give that one a bit of -- what could facebook buy that would make sense right now? i mean, i'll tell you what i thought they might want to buy, and what drove the metaverse, something like roblox, maybe that gets you certain things you don't have. >> not twitter. >> no. not twitter. pinterest? >> if snap busted --

>> no. i mean, you might argue that takes a competitor out but facebook doesn't need -- meta doesn't need to do that >> meta doesn't buy big companies. meta buys nascent companies and grows them that's what they're good at doing. i think if mark zuckerberg had $40 billion with no regulators, he would buy all these startups in ar, in ai, in -- >> he shouldn't, though. >> i wouldn't do that if i were him. i wouldn't buy a media company either right? >> that's your next -- $40 billion, one end or the other, you tell me. >> i'll come back to you with an answer i don't know if it will be two hands, but i'll come back to you with an anser. >> thank you, jon. when we return, ray dalio joins us for an exclusive interview you can't afford to miss we'll talk china, the markets and putting money to work in this high inflation environment. check out futures right now. we're seeing dow impacted by honeywell and merck, down 144,

looks like it will be down at the open, but the nasdaq adding 153, s&p up 14.5 "squawk box" is right back that's what you get from the morgan stanley client experience. you get listening more than talking, and a personalized plan built on insights and innovative technology. you get grit, vision, and the creativity to guide you through a changing world. ♪

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welcome back to "squawk box. we're joined by a very special guest this morning, ray dalio at

the table, founder of bridgewater is here, he joins us for an exclusive interview and for the first time since he stepped down as co-cio this fall, we should talk about that as well. a lot to talk to you about nice to see you. >> nice to see you >> so, help us try to understand what is happening. we always talk about the economic machine, we have got the federal reserve as part of that machine of sorts, trying to assess what that machine is going to do. you saw what jay powell said yesterday. i think we're all trying to make sense of where we really are >> okay. well, these things happen over and over again we're now in the 12th and a half cycle, these cycles, you know how the cycles work. you're 12 1/2 cycles since 1945, 1945 was the new world order, you know, new monetary system. and you know what happens. let me take you through it quickly. you get a funky economy, weakness, and so on, so what we had, of course in 2020, with thd

and then also the move from the right to the left. distribution of wealth and so how did you do that government had to send out a bunch of checks. and the federal reserve, where did the government get the money from, the federal reserve lent it, we have an imbalance that poured a lot of money in the system you have the demand, the classic cycle, right stimulation, credit becomes dead and then inflation and tightened monetary policy and then where are we we're now in a classic spot where we have got a relatively high real interest rate, real interest rates went from minus 175 basis points to plus 175 basis points, right? you got a cash rate that is relatively high. cash used to be trashy you got an inverted yield. >> you said trash is now more attractive >> cash -- >> cash is trash

>> yes, cash -- negative 1.5, 2% real rates terrible now cash is relatively attractive >> right. >> it is attractive in relation to bonds, absolutely attractive when it comes to stocks. you have the classic movement as rates go up and money becomes tight. you lose a part of the economy, parts of the market that are the bubble parts that needed the cash flow, right so you are seeing it reflected in not only, you know, long duration stocks, those who didn't have cash, so you see the tech stocks come down, all of that come down you see private equity, you see venture capital because they need the cash. all of that comes down and then so you're seeing a very, very, very classic that we have seen these things for 12 -- halfway through -- 13th cycle, right? but what is also happening in that cycle as since 1945 is that

we then have the accumulation of a lot of debt and money, okay. so we deal with things like the debt ceiling debt ceiling, doesn't matter how much debt we have. and then you have a situation where there is -- used to be a free market supply demand, but now you got the federal reserve who is now taking it, buying it on the balance sheet, so it is not the supply demand. you got that dynamic very, very classically drawing. i don't think people are paying enough attention to the big cycle. there are short-term cycles. since world war ii, they averaged about six or seven years. plus or minus about three years. that's what we're in a classic one of those but we keep building up the debt and then there were issues in terms of the issue of the dollar and what is happening in terms of the world and the value of money. >> you say we're halfway through the cycle. which means there is another half to go, which way does that go you're saying the cycle is up here and you got to go down to

here for the cycle to end. >> of course you put up the -- you put on the brakes okay then you bring things down okay, now in this -- each one of these cycles you bring them down a little bit differently what we're -- what we have here is that there was quite a lot of bubbles in this. so you can see which sectors are going down you can see which stocks are going down, right? you see the tech stocks, you see real estate going down residential real estate goes down, but doesn't mean that families are hurt, because the household sector is in a better financial position than it ever was because it received a lot o money and they're benefiting, we say inflation and you say wages with are going up you see their sector there, they're basically benefiting so you're seeing this type of contraction. it is going down and we're having something close to a stagflation. meaning maybe 3.5, i think

you'll see inflation come down to this and then because the way it is calculated it will go up a bit. so you see that kind of environment with something close to maybe a 1% growth rate. something like that. >> can i say, very baseline question, though, right now this market depending on what you think this market is doesn't -- believes inflation is coming down, really coming down. >> i think that -- and they don't believe jay powell to some degree >> i don't think they believe -- i think what you're referring to is they don't believe what is in the curve. what is in the curve is a significant easing what jay powell is saying is steady believe steady. >> you're saying believe steady. you're saying believe what jay powell is saying >> right because it is the nature of yield curve and the discounted slope of the yield curve because

both markets are trading so when you have a bond market trading with a short fray, you can get that curve it is not necessarily because everybody is smartly plots that out. so i don't think -- i don't think you're going to see an easing that is built into the curve. so that means that you're going to see -- look, i'm not -- i'm never sure i'm right but i think you're not going to see an easing that is equivalent to building. i think believe jay powell there is no good reason. even if you look at the bond price, 3.4, 3.5, let's say you had 2% inflation, that means 1.4% real rate, which i don't think, so you look at the bond rate, the bond rate looks like a low rate of course, there are big credit spreads on that, but anyway, i think you're not going to see the easing i would say that that's probably the easiest one of the safest bets that you're not going to see that happen.

i don't know maybe i'm wrong. but i don't see. i think you're going to see a relatively steady rate that means that's not built into the curve. that's, you know, a -- a headwind >> how do you think about trades that take advantage of that discrepancy and view you believe that we will be higher for longer, even though the markets do not. >> that's right. >> markets are positioned for that latter scenario so what are the trades that take advantage of that discrepancy? short tech >> the pure play is straight on the yield curve. you could play the pure play straight on the yield curve. i wouldn't -- of course, interest rate changes have impacts on other markets and so on. but if you look at the relative pricing now of let's say cash, let's start with cash, and then you go out on the yield curve and look at that, cash is

relatively attractive in relationship to even to equities, but when i say equities, there is such a range of the type of equities that we're dealing with and then we're -- so if you want the pure play, you're in that pure play. i think the interesting question has to do with the areas that have cracked and then passing them through the private markets, because what happened, you know, the public versions of them are down. then if you take the private market, venture capital and -- you got a problem there. you got the market to market question and then a lot of these companies, then they -- they don't have enough cash and if they have another down round, another down round is really a problem for not only them as a -- as their companies, but also for those who are holding them, venture capitals and private equity so you have a mismatch, you have a basic problem there.

so that's hard to figure out exactly how that's going to play out. that's going to be a stagnant thing. i think this type of recession is not a bad recession it is a lot less bad than i thought that it would be because of the fact of how it is distributing and shrinking that credit at the same time, though, we have a real issue for the united states debt in the world because we're selling all this -- selling all this debt. you know, if you look at wealth instead of gdp, wealth is a much better indicator of things gdp is like looking at revenue how much did you sell? we have borrowed a lot of money, okay and now we're having a problem selling that money around the world. and it is also happening that this political situation, g geopolitical situation is weakening bonds. >> we're talking about what a previous fed chair called the

conundrum of lower long-term rates. that means a lot of demand for longer term treasuries at the moment anyway. and the fed balance sheet is down by half a trillion dollars from the peak and here we are not worried too much about financing things why do you think that's becoming a critical issue >> well, because if you're still looking at the amount of deficits that we're running, right? if you're still -- that's a current account, both the trade deficit, you still have to sell a lot of bonds to the rest of the world. and for a variety of reasons, besides that being a lot, and it is being monetized, okay, so who is the other side of the balance sheet, the other side is the balance sheet has been monetization, except for just the most recent moment and that just even chronologically is going to worsen then you also have the geopolitical issues playing a role in other words, sanctions have caused a lot of countries to be concerned that they could possibly be sanctioned and now the split is there is an

internationalization of the omb. a lot of trade and capital flows is in remb and you're now seeing that happen. so the amount of -- if you look at let's say the proportion of not only reserves, but sovereign wealth funds, denominated in dollars, it is a lot that is tilting in a certain direction. and then if you look at things like the question is will we deal with that debt? and there is the debt ceiling. i mean, everybody believes we'll get through the debt ceiling but the question is if you get through the debt ceiling, is that a good thing or is that a bad thing? it means a pile more debt. so the supply and demand issue for debt, it is not just an american problem it is a european problem it is a japanese problem look at the japanese in terms of

yield control and the amount at which they're producing that kind of amount of debt those debt assets in my opinion in a longer term basis are not attractive assets. cash now is relatively attractive if i was to take it through the cycle, okay, i wouldn't want debt assets just generally speaking >> let me ask you a separate question, you talked about china, you mentioned the rem mb, you talked about a potential war, economic war or physical war between the u.s. and china, over taiwan or other things, where do you think that sits in this calculus of yours >> well, we are, you know, there are five types of wars trade war, technology war, geopolitical influence war, capital and economic war, and military war we're in the first four of those wars and you're at the brink, brink i don't think we'll go over, but we're right at the brink you could have an economic war with -- a form of sanctions that

would be if it happened really shocking to the -- to the economy. world economy. much worse than the russian war. russian war had implications and a lot of different ways. if you have -- with china, that would be a problem and also the issue of taiwan i think that -- i think that you're at a point now that both sides are so scared of that, that they're working to set a floor, not an improvement in relationships, not much prospect of that. but establishing a floor that's what the last biden meeting was about, what tony blinken is going to go over there like, let's not go blow that i don't think that we probably will go below that but you can't be sure. at the same time, i think the economic competitions and so on are go to be very intense. >> last time we spoke, it sounded like you were even more -- not hawkish, but worried, more concerned that it

actually would escalate into some kind of military situation. or that china was going to try to take taiwan and that was going to sort of -- >> well, to be clear i put in my book, i think that there was about a 30% chance of a type of civil war and a 30 chance, maybe i'd say it now, maybe 35% chance over the next ten years, that you can have a military war in those areas. those are high numbers but i'm putting -- they're still not the probable things. what happened was -- so let me take the sequence. just before there was the summer, and we were looking at the ukraine, the united states was thinking about sanctions on china and how china would operate. and then there was a lot of studying about what would be the implications of sanctions be and the impoliticplications of sanctions would be economically

disastrous there was a hesitancy and then pelosi went over there and when pelosi went over there, that was the bottom in my opinion, that was the bottom of the relationship at that moment and china had to do a demonstration. it was -- and then since that point there is this element of risk so please don't take it that i'm either -- i'm confident about any of these things. as i said, maybe there is one in three chance over the next ten years of those kinds of things depending on how things transpire. and that's a very dangerous thing. the fact that i can say that, and everybody almost -- is living that is causing big changes in flows it is causing big changes in what businesses are operating where, businesses are living those places, we should talk about the good places. india is benefiting, indonesia is benefiting, asean countries

are benefiting saudi arabia and uae is benefiting so you're seeing these other places you have to see how wealth is shifting wealth, if you just look at how wealth is shifting, you're seeing big increases in some places, and big decreases in -- >> if you're janet yellen or the white house, what you would do about all of this that -- the way you described it. >> well, i think -- i think the big -- the biggest issue is that there is more spending, and i would say there probably needs to be more spending than we have income and that's a problem right? governments run the same as your household or a business in that -- with two exceptions. they can print money and they can tax. right? so, then when you spend more than you earn, the question is,

and they're going to spend more than they're going to earn, where are you going to get the money from are you going to get it from taxes and if you get it from taxes, people fight. because they don't want to give up their money or are you going to get it from printing the money and so, how do you achieve that balance because it is -- do you spend less it is a tough environment to spend less you have to spend more on defense, you have to spend more on rebuilding, the green initiative is expensive. we could -- education is expensive and so on. so, here's a dilemma that xi i sitting in that we or we as a country are sitting in so, you know, how do you solve that problem i think that, you know, if you were to let's say take the bigger picture, there is a lot of things you can invest in, invest in that will produce returns. and i think for example, i don't think we invest nearly as much in the basic things like great education, and making sure that certain areas do not have

conditions that are substandard conditions so invest in those things that are going to produce productivity education, infrastructure is a good thing other things but it is -- this is part of a cycle, a big cycle that has happened over and over and over again, where, you know, the productivity goes down >> in that cycle, can i ask, there is an op-ed from charlie monger, we talk about crypto, you effectively said crypto should be outlied. >> cited communist china as having taking a wise move. >> by doing that. >> yes. >> you've been a supporter of bitcoin. or at least curious, crypto curious. >> okay. >> has anything changed for you? >> yeah, just -- everybody -- let me say what i believe -- bitcoin, and what i pretty much

always -- i think it has been quite amazing that after 12 years, i think it has no relation to anything in other words, it moves, it has no relation, it is a tiny thing that gets disproportionate attention. the value of crypto -- bitcoin is less than a third of the value of microsoft stock you can go into industries, biotech and many other industries are more interesting than bitcoin it is not going to be an effective money, not an effective holder of wealth or exchange we're in a world in which money as we know it is in jeopardy, right? we're printing too much. and it is not just the united states all the reserve currencies, what is going on in euro, what's going on in yen. so in that world, the question is what is money and how is that going to operate so when we look at something like china's rem mb and take the

digital rem mb, i think you'll see that become more and more a thing. so, when things start to open up in an evolutionary way, people are going to start to say, where is my safe store holder wealth as you have china denominate more of its denominate more of its trade, then natural, those who are going to hold rem md -- if saudi arabia buys things from china, when they get it, they're going to hold more rem mb and so -- and i think the question over the next number of years is really what is money, not just as a medium of exchange, but a storehold of wealth. >> that sounds like an argument of bitcoin -- >> of bitcoin? if you want a digital currency, you have to do something different. i don't think that the stablecoins are good because you're getting a fiat currency again. i think that what you really --

what would be best is an inflation-linked coin. in other words, something where basically you would say, okay, this is going to give me buying power. every individual wants -- what do they want they want to secure their buying power. if you want to save. now, if you put it in bitcoin, it goes like this. who knows what happens if you put it into something, the closest thing to that is an inflation index bond if you put -- if you create add coin that says, okay, this is buying power that i know i can save in and put my money in over a period of time and i can transact anywhere, i think that that would be a good coin. but you -- so i think you're going to see probably the development of coins that you haven't seen that probably will end up being attractive, viable coins. i don't think bitcoin is it. >> i want to go back to the markets before we let you go it sounded before like you thought cash is king right now

out of all the choices that you can make where do you think the stock market is? do you think we have priced in what could be, you know, a recession or what is is a recession? did we see the worst of it in october? where are we right now in terms of valuation. >> when we talk about pricing in the recession, i think the ifirs thing you have to do, you priced in the discount rate you've changed the disrocount rate you put in the discount rate so now you've moved the discount rate that discount rate is not going to be materially changing, right? so we're not going to go back to the old discount rate and prices are not going to go back to where they were. then you have the knock-on effect on the economy. to me it looks like on that, you have something substandard growth, right? you have that -- what we call a recession, we have -- i can't tell you is it 1% growth or

something like that. it's not hurting the household sector as much as you would think in terms of that so that becomes tolerable for longer which i think keeps that. so then you look at the markets as a whole the markets as a whole look -- they were obviously -- i would say the interest rate changes obviously had to come. the impact on the other markets had to come. they have come they have been into the price. so now you are going to have probably a tightening or a tighter monetary policy than existed and that's a net negative for the stock market. but not in such a big number that it's like a big bearish thing. so when i look at the market as a whole, i would say, okay, well, now, it seems closer to fairly priced, probably still a bit high, given that whole picture. >> right ray dalio, we need to thank you. you got to come back i want to hear more about your

new life post-cio role thank you. we're going to come right back after this.

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estimates. next up, shares of estee lauder which are down 4% premarket. roughly 30,000 shares of volume. they had mixed results profits better than consensus. wednesday on canada goose. missing projections for both profits and revenues a disappointing forecast there canada goose shares down 6% right now. that's the consumer look. coming up on the show, an interview with david ricks that's minutes away. plus the market getting ready for an apples earnings report after the bell. a review of what investors can expect when the numbers hit. "squawk box" will be back after this break

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good morning the fed has spoken and raised interest rates by the smallest amount in nearly a year. this hour, though, we're watching the market impact and standing by for a key rate decision out of europe. meta platforms posting a mega move higher full details straight ahead of that big earnings report and speaking of earnings, a trio

of mega caps due out tonight we're going to find out what he thinks about what to watch for apple. final hour of "squawk box" begins right now good morning welcome to "squawk box." we're live at the nasdaq market site joe and becky are off today. we have a lot going on this morning between guests and earnings and a afterglow of the market yesterday the dow off 113 points s&p 500 up 20. the nasdaq up 187 points treasury yields right now, we just learned that cash may be king the two year at 4.082. >> all right

meta shares soaring this morning following a fourth quarter revenue beat and a big buyback announcement julia joins us now with more good morning, julia. >> good morning to you, michael. meta announcing $40 billion buyback program. it beat revenue expectations revenue declined 4%. users also surpassed expectations hitting 2 billion daily active users for the first time the company grew its user base in the saturated u.s./canada region mark zuckerberg is calling this the year of efficiency they say more cuts are in the works. take a listen. >> there's going to be some more that we can do to improve our productivity,speed and cost structure, by working on this over a period, i think we'll build a stronger technology

company and become more profitable i'm very focused on doing this in a way that helps us build better products. because of that, even if our business outperforms our goals, this will stay our management theme for the year >> zuckerberg laid out plans to make their ads more efficient, including the ads they have on reels. also what they describe as the click to message space he's also weighing in on ai, a hot topic this quarter he said it's an extremely exciting new area. he wants meta to become a leader in the space, but he said so cautiously take a listen. >> i want to be careful not to kind of get too far ahead of the development of it. so i think you'll see us launch a number of different things this year and we'll talk about them and share updates on how they're doing. i do expect the space will move

quickly. we'll learn a lot about what works and what doesn't >> as for challenges in the advertising space and concerns about the macroeconomic climate, susan lee saying they're trying to find efficiencies where they can. >> the company taking control of those things that it can directly control, the cost side as you mention, capex, being more financially disciplined what have we learned in terms of trends on the product side, the user engagement side, things like reels out of this quarter that get to a little more of the long-term market share story, against tiktok and things like that >> well, yeah, i mean that's a great question, mike that's exactly what i asked susan lee when i was on the phone with her yesterday i said, what about tiktok? what kind of threat is it proving to be and she said, look, she pointed to reels

look at the success of reels reels have been growing incredibly quickly what's notable about reels, they've been a drag on revenue and a drag on the fact that the company is much more profitable when it looks at the ads in these other formats. but reels is popular in what's helping them compete by tiktok they said by later this year, reels will start to be revenue-neutral. they see that as a key turning point, but they see reels as finding a foothold and being able to succeed in this world against tiktok there's no question that tiktok is a formidable competitor. >> did they talk about the notion that tiktok gets banned or watered down? have you heard from analysts they're giving that forecast for reels to be revenue neutral and that's without any sort of tiktok potential kicker. i'm hearing from some hedge funds that they never owned meta

before, but they owned it now because they think tiktok will be banned or watered down in some way, shape or form. >> you know, this is something that the company itself has not commented on but we have heard various analysts comment on. the thing is, if tiktok is shut down, it would be massive, not just for met tara but for snap the chances of being immediate action are low and i think the more likely scenario is it's far more likely that you see tiktok being forced to shift its sets over to u.s. ownership or to have the chinese company divest those assets. there's so much uncertainty about what's going to happen to tiktok and so hard, even though there is bipartisan agreement to get things actually done in this space, that i think that there's -- no divisive sense of

what will happen here. but any negative impact to tiktok would be a positive for meta >> for sure. thanks a lot meta opening up at levels last seen july or august. >> the biggest gain in ten years. federal reserve hiking interest rates by a quarter of a percentage point the fed says it expects ongoing rate hikes but it notes inflation has eased. >> we see goods inflation coming down for the reasons we thought and we understand why housing inflation will come down and i think a story will emerge on the nonhousing services sector soon enough but i think there's ongoing disinflation and we don't yet see -- we don't yet see weakening in the labor market. we'll have to see. >> joining us now is jeremy siegel professor siegel, great to have you with us. the way the markets interpreted

jerome powell yesterday, it was a green light for markets to go higher the s&p added on 1%, we saw the vix come in, yields come in. is that the right message? >> yeah, i think we begin to see that chairman powell and the fed are beginning to get it in my opinion. it was much more two sided he acknowledged that the housing sector is really a faulty indicator the way the bureau of labor and statistics he quotes inflation excluding the housing sector because he said it's really going down, but we won't see it in the statistics for six months. he's acknowledging a lot of the things that i've talked about and others have talked about over the last year that inflation has come down absolutely dramatically. now, will we do two more hikes there's no way of knowing that i think that the fed really only

knows maybe a week or two before the meeting that that -- that the hikes they're going to do there and sometimes they don't know listen, all we need is one negative payroll month, i don't think it's going to be tomorrow. it could be tomorrow maybe it's going to the first week of march. i think that really changes the whole narrative because he said that's the last thing that's drum tight that's the labor market. we see the labor market break in some way or another, i don't think any more increases are going to be on the table >> should we be -- should markets get all excited about that one data point, if and when it comes, though, jeremy it seems like what the markets have not latched onto or maybe what the markets don't believe is that once we reach that rate, once he's done with the rate increases, that rates will actually remain higher because that seems like the calculus -- if you want to rally, you have to believe that rates will come down i mean, that's sort of what it's

all predicated on, right, this notion that they're going to start cutting the back half. if rates remain higher, that's a different calculus than what you want to pay for stocks. >> i think they're going to go down dramatically in the second half because of the weakening economy, the control over inflation. they don't usually stay up when the fed is in a hiking system for a year, the way -- you know, the dot plot said last december i really think we're going to have a big -- large decrease in rates in the second half of the year because of the weakening economy and because of the -- of the dramatic slow of inflation and i think that's what the market is looking forward to >> so in that scenario, though, why should markets go higher if we are -- if we're going to enter an easing period because the economy is so terrible i mean, why would markets look at -- why wouldn't markets look at that scenario as opposed to

be excited that we're going to cut rates. >> as important as earnings are -- and they're very important -- the discount rate -- i mean, ray dalio was talking about it -- is just as important if not more important. if you bring down that discount rate, the market will say, hey, mild recession, or even a moderate recession for a year, i'll take that and i think that's why i think the market still has a good chance of getting that 10 to 15% gain, the forecast i gave on january 2nd, just one month ago. >> jeremy, what do you think has to happen to employment to actually bring those cuts about? we don't have a lot of time before even let's say the third quarter of this year if the final hike is in march, yes, sometimes six months later they've been cutting it seems as if the firmness of the labor market which the fed is now granting might persist, might just keep any kind of easing move pretty far off.

>> yeah, but i don't -- i don't think it's going to remain that firm i really think we're going to get a little bit of a reverse of what we had last year. remember, we added 4 1/2 million jobs and had almost no increase in gdp that's because of a collapse in productivity we get a rebound in productivity, we could have much weaker payroll numbers gdp may not do as badly as people think and firms may be able to cut excess individuals that they hoarded in the last two years in order to control costs so earnings may not go down anywhere near as much as a lot of people fear even though we would have a recessionary payroll type of data which could encourage the fed to reduce their interest rates much more quickly. >> professor, thanks so much for joining us this morning. >> thanks for having me. >> okay. meantime, send a letter to

disney shareholders this morning urging them to vote in favorite of adding peltz to disney's board. in that letter, saying that disney's plunging stock price were reason enough effectively to do it they want to, quote, restore the magic. nelson peltz says. lots of questions about future of that company and whether nelson pleltz should or should not be on the board. what do you think? >> i don't think bob iger wants him on the board. >> i don't think that the rest of the board wants him on that board. the question is, if he was on that board, how the -- >> 10 or 11 people i thought there was a sense here that he's an old gut-feel investor saw disney was at a -- it's a

good entry point where they listen to me or just things get better. >> sure. >> so you think it doesn't matter -- >> it wants to influence things, but it's not as if he has a novel plan that -- >> i will say this, though, people say it's just one person in the room. just one vote. i think that actually one person can change the dynamic of a room materially. >> that's true in ways that i think are often sort of unfelt -- >> a trillion dollars from avatar is not hurting either. >> that's true too we will see whether the magic gets restored with mr. peltz or without. >> all right disney shares up 1.5% right now. a first on "squawk box" interview with the ceo of eli lilly following this morning's quarterly results. we'llbe right back. >> announcer: this cnbc program is sponsored by baird. visit bairddifference.com.

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welcome back to "squawk box. let's go to straight to steve liesman. >> as expected, up by a half of a percentage point still continuing, when the fed downshifted. the thinking is that the ecm is behind, has more work to do. and i think the important thing is, they will stay the course in raising rates significantly at a steady pace. so the question has been, that

50 was not in question today it's what the future looks like and that statement sure sounds to me like they're going to go another 50, maybe followed by 25s after that the ecm raising by 50 basis points and ultimately signaling additional rate hike, probably as big as 50 to come, at their next meeting mike >> trying to catch-up. eli lilly reporting mixed fourth quarterly results a revenue miss, but a profit beat they raised its full-year guidance and reaffirmed its guidance for the full year joining us david ricks meg tirrell is here as well. david, walk us through the guidance change. what is driving that i guess there might have been a change in tax rate assumption. what are the main drivers? >> solid q-4, you mentioned it was a miss on the top line but it's purely the covid

revenue situation which i think the street has trouble forecasting. our covid antibodies were stopped in distribution. 10% growth of our underlying business we're expecting it to jump to 15% growth for the core business in 2023. but we are changing the bottom line guidance by 25 cents due to a tax rate assumption change that's a policy issue going back some time with the trump tax cuts there was a clause that last year we would start to capitalize rnd costs this is not a good thing for an innovative economy we're been lobbying to get that changed back that hasn't happened yet we're moving our assumption that we don't expect that to happen this year. that causes the tax rate to fall, even though our cash tax goes up in calendar '23. >> david, i think there's a ton of attention being paid to your

diabetes drug and expectations for the timing potentially and an fda approval in obesity what are you expecting for the timing there for an fda decision as you've completed or started that rolling submission? and just tell us about the dynamics you're seeing as we saw novo report with competing medicines. >> currently, we've launched the drug for type 2 diabetes unbelievable start really record-setting start for us with this net sales isn't the primary metric what we measure is the volume uptake and patient and physician satisfaction we also last year as you know reported the first of four phase three obesity studies which showed on it, you could lose 22% of your body weight which is really never before seen, before in the surgical category now we have the possibility to manage oversight and obesity

safely with medicines. so we started rolling review with the fda in q-4. we expect they will want to see another phase three study. that will be coming in q-2 we'll have all the data, the review should complete sometime in the back half of calendar '23. novo is doing well we're doing well this category is growing fast. we know that diabetes and eventually weight management is something that afflicts so many people and these drugs are incredibly effective we're participating in that. they're doing well as well >> what is the manufacturing capacity look like for this? there's been so much demand that manufacturing hasn't been able to keep up, and what do you make of the interest that you're seeing from people who may not be necessarily indicated for these medicines but there's so much use of them, you hear about ozempic and tiktok videos, this is a phenomenon. is this safe

>> well, so we're very focused on our type two launch physicians and consumers are interested in the weight benefits we do have supply constraints in our industry and at lily we've been clear about that. but we're investing heavily to expand the capacity just last year, we announced several billion dollars in new investments to support the drug growth and other similar pukts t products that are coming in our pipeline we have another one coming using the same sort of systems they go in a self-injected system which is really clean room conditions for manufacturing. very complicated so the ramp won't be as fast as any of us want but it will happen we project the exit this year with 50% more capacity than what we started with. that will continue into '24 and

'25. but as it relates to what we're selling, we're focused on diabetes we did makes changes in q-4 to our co-pay assistance program to focus that on people who are already initiated on the product or had a history of diabetes and that made an impact in some of this nonindicated use we were happy with that. our commitment is really to patients who need the medicine for what it's for right now and can get insurance coverage and who have already started the drug we'll stay on that path when the obesity indication as approved by the fda we'll have more supply at that time and expand our programs then. >> thank you very much for the update we appreciate it >> thank you coming up, when we come back from the -- from this break, we have top analyst going to be here to help us get ready for apple's big report tonight want to hear from him. tomorrow on "squawk box," joe and becky are going to be out at

pebble beach and we got a huge lineup for everybody we've got the ceo of at&t, the ceo of delta, chevron, waste management and jimmy dunne bring your putter. we're coming right back.

coming up, the political backlash to the big profits from big oil. we're going to get into that story and so much more this morning with morning joe's joe scarb scarborough. that's ahead when "squawk box" returns.

♪ welcome back to "squawk box" on cnbc. we're just seconds away from

initial jobless claims take a look at the futures here. gaining a little bit of pace to the upside the s&p 500 up three quarters of 1% nasdaq, though, shooting up 200 on that huge jump in meta in part, ten-year note yield, backing off a little bit downto 3.36% rick santelli standing by the cme in chicago he's going to be ready for the numbers. >> nonfarm productivity, these are fourth quarter preliminary numbers. hey, hey, hey, better than 3%. productivity is the special sauce for the u.s. economy so sad alan greenspan 3% is the best quarter going back to, well, the last quarter of 2021 when it was over 4% and year over year productivity is, of course, gaining a bit as well unit labor costs, a little less than expected. that should drop rates just a bit.

we're expecting 1.5. they come in at 1.1% and that is the smallest level on a month over month change since march of '21 that's excellent news. if we look at initial claims, expecting 195,000. we bested that 183,000 and, of course, bad news, good news, bad news, good news, when it comes to anything on the labor market 183,000 is the lightest going all the way back to april, third week of april of '22 if we look at continuing claims, we're expecting 1.684 million, 1.655 million. 1.655000 that is a bit less than expected and, once again, that may be putting a little pressure on rates. but they're down seven basis points here, hovering here at 335 on tens. there is a subtle revision 1,655,000. it actually equals what we had

the first week in january, right on the nose. we're going to continue to have data points. we know the ecb raised, and we know whether it was the quarter percent yesterday by our central bank in all three instances, the sovereign debt of those countries rates fell and that gives us some glimpses into the psyche of infovestors who contie to think that the worst of pricing pressures maybe in the rearview mirror. mike, back to you. >> for sure, rick. thank you so much. steve liesman joins us now with more. steve, just sort of tenacious strength in the labor market. >> yeah, there's that. let me tell you something, if you want to clean something up, you can use lysol, lye, but you want to clean up the inflation problem and nothing does better than lower labor costs

this number i'm trying to figure out. one of the best numbers we've had in quite awhile. you've got to go back to the fourth quarter of 2021 to find a number better than this 3% it had been running lower. the idea has been that people should become more efficient because of the lack of labor out there. as what mike was saying for sure, the job market is not quitting you have that strong jolts number, claims are still low i don't know where all these tech guys -- they're not showing up, all these layoffs have not shown up in the jobless claims numbers. that's part of powell's point that you can't really have a service inflation come down if you don't have the labor market loosen up. you can if you have productivity and lower labor unit costs if i'm not mistaken, i don't know if you have the two-year up there, but we were down -- we had taken out the january 18th low at -- it was 409

now it's 4.05. and, mike, just one more thing which is that when i look at the risks, the risk is still there the fed is going to go to five and an eighth and old there for awhile what has come out is that the notion that the fed may go to 6 or 7%. when you look at the distribution of probabilities on the december 2023 fed funds contract, all the risk is to the left the fed goes lower from that point. that is a really diminished risk out there. there's not a lot of risk out there, it seems, that the fed goes to 6 or 7%. mike >> steve, partially explains why you have some pricing of cuts in there. if there'sno real since that they're going to be starting from a higher point, then the rates can get lower in theory if things break a certain way. >> if you're going to throw your chips on the roulette table,

where do you put them? there's none on those higher numbers, essentially you're going to put some of them on the lower numbers there's a lot of edging going on, there's a lot of probability, distribution out there. remember, when bullard had that chart that showed, hey, we could go to 7% if we use a tailor rule, that seems to be coming down that's a real risk -- i think it would be a little fool hearted to rule out the idea that the fed gets up above 5% i think that remains a risk right now. but the idea of 6 or 7, that's a real risk that's diminished for the market here. >> yeah, and above five is getting to be a rounding error at this point given how far we've come thank you very much. now to the intersection of business and politics this morning. joining us is joe scarborough. it's great to see you. we don't have the other joe this morning. so we're thrilled to have you.

specifically because we're trying to figure out what's happening in washington, d.c., right now between the relationship between kevin mccarthy and the white house and that biden meeting and what it means for the debt ceiling and everything else. what are you hearing >> well, we actually had a positive meeting yesterday which actually should be reassuring for not only people in washington but also on wall street we've seen before where people walk out of the white house, have a meeting with a president, and then have a snarky sideswipe. that didn't happen yesterday he talked about a respectable might with joe biden joe biden did the same thing they know it's in their party's best interest, economy's best interest for them to have an explosion over the debt ceiling. make no mistake, they have two completely different positions kevin mccarthy is saying what republicans like myself used to say whenever we were going to

vote for the debt ceiling, yes, we'll vote for the debt ceiling, there has to be some changes they correctly point out, we're not paying for debt that we're going to accumulate in the future we're paying for debt that's already been accumulated on america's credit card. we got to pay it off we'll see what happens mccarthy's margin of error, though, is so small. i find it hard to believe that democrats aren't going to be able to get four, five, six, seven, eight republicans, even from those biden districts, that aren't going to want the economy to blow up at the end of the day, you know, they're going to strike a deal i don't think they're going to blow up -- blow up the economy at the same time it's going to be a really political high-wire act for kevin mccarthy -- is is this going to be a three minutes to midnight situation? how much control does kevin mccarthy have over some members of his party >> it's always three minutes to

midnight situation they always wait until the last second because mccarthy can't move too quickly if he moves too quickly, you're going to see the five, six, seven republican -- going out and ending his speakership so they're going to exact some pain from joe biden, probably from the markets but then they're going to get pressured from their contributors at the end of the day. and they're going to do what they always do, they're going to fold at the end. but they're going to make joe biden, they're going to make -- the markets are going to make everybody sweat it out a little bit first. >> tell me if this is political theater or not one of the big issues we've been talking about on this broadcast has been the remarkable profits and earnings we've been hearing about from the big oil companies. of course, that has created a lot of wrath in washington, specifically, from the white house about windfall profits, taxes and the like the question whether that is

theater and a lot of hot air and talk as we would expect from politicians, or do you think there's something different here this time. we've seen windfall profit taxes take place in europe >> it may be different this time i hesitate because i remember back when i was in congress, i had an extraordinarily conservative rating, 95% acu rating i remember one time i dismissed royalty relief for the oil companies as corporate welfare, as socialism for multinational corporations and i got run over by my own republican party i think maybe i ended up with three or four votes at the end of the day so big oil companies have always gotten royalty relief from republicans and democrats alike. they've always got preferential tax treatment. there's populism, pop list that

are sweeping across great britain and the united states right now. they'll talk about windfall taxes, what do the -- what do the republicans do they've always been the protectors of the big oil companies. they've always been the protectors of royalty relief same thing with preferential tax treatment. but their base doesn't want it now. so the question is, when push comes to shove, will they start siding, as we've seen like josh hawley and ted cruz siding with bernie sanders on some issues. dogs and cats living together. will that happen here? it could i doubt it yet but you have a republican party that is increasingly hostile to the u.s. chamber of commerce, increasingly hostile to big corporations this may be the first real test

to see how much they're willing to stand up against some of the biggest -- yeah, biggest corporations in the world. >> i got another one for you i don't know if you saw this yesterday. there was a fascinating piece in axios. there was a piece about how the inflation reduction act, the cost of it could be in certain parts of it four times higher because ev companies, including -- not just the teslas of the world, gm, everybody, are taking -- are going to take so advantage of it which may be a very good thing in so far as pushing clean tech faster, but it's going to cost something like four times more and i wonder how you think politically over time that is going to be construed. we were talking to pete buttigieg about this yesterday are people going to say that's great that so many coordinations took advantage of it and pressed ahead, or are they going to look back and say, you know what, we didn't need to provide all of these incentives because this is where the world was going

anyway the u.s. government gave too much away. >> i would guess pete buttigieg would have said, they didn't give too much away. >> exactly >> it is interesting, though that's where we're going the markets are headed in that direction anyway it does seem if you look at these numbers, that the incentives were too generous and it's going to make an expensive bill even more expensive and like you said, the real question is, was it necessary? that's where consumers were moving anyway. again, this is one of the real challenges when you put those sort of incentives in these bills and they distort the marketplace. and right now i think you're right. as this continues and i think, again, with the command for evs going up in the coming years, the price tag is going to keep growing. i think people are going to look

back and be asking, why did we incentivize something we didn't have to incentivize to the degree that we did at the end of the day, it just drives record debt up even higher. >> by the way, where are you on pete buttigieg he was somebody, his star was rising, rising, rising, so articulate, we love having him come on and talk about all of these issues given everything that's happened in the skies over the past six months between southwest and the faa, lots of questions i'm curious, since you talk to so many folks in dc, where he stands right now >> well, i mean, i think he's in a strong position. he's getting kicked around again for -- what's happened with market forces. we all were frustrated trying to fly around last year i remember when we first got him on the show after, you know -- after everybody's flights were getting canceled in june and july, i asked him some tough questions, pushed him around a little bit rhetorically, and he

had all the right answers. he got on the planes. he was flying. and we had him back this fall and, my god, you look at the difference between how traveling by air was this fall compared to this past summer it seems to me all you can do in that position is stay as engaged as possible. there's some legislation i know that he wants to push that he's going to have a hard time getting through the house. but i think he's done -- i think he's done a good job he's stayed engaged and the guy is going to be criticized no matter what he did. >> joe scarborough, always good to see you, my friend. >> it's great seeing you too thank you. >> see you soon. coming up, jim cramer's first take on the trading day ahead. and then toni sacconaghi will join us. we want you to play some -- play

you something ray dalio told us do the last hour here's what he said. >> what's in the curve is a significant easing and what jay powell is saying is steady believe steady >> you're saying believe steady. you're saying believe what jay powell is saying >> right

let's get down to miami,

florida. jim cramer is there. he joins us now. jim, i guess, first of all, what brings you to miami and what's catching your attention this morning? i imagine meta might be among those things >> well, this is where you have to be when it's going to be minus 5 in new york on saturday -- unbelievable institution that i've always loved and i can't believe i'm here and i thank the network we have an unbelievable crew it's amazing i'll tell you what catches my eye. something you said at five after 6:00 that the economy is where it was after jackson hole it's like a clean slate. we know the fed still has more work to do i thought that observation was spot on is what i'm thinking about. >> yeah, where does that bring us -- you could play that both ways and say, okay, here we go again groundhog day, let's say situation, or it's a -- we kind of fought the wars and we've absorbed what maybe the fed had

to throw at us the last several months. >> i think it's the latter i think some people say they gave us too much of a punishment and he's got to cut rates. i don't want to think that at all. i think through the worse. you know what does worry me, there's two groups of stocks that are flying, tech, and that's led by meta but there's the stocks that -- let's use bed bath & beyond. they're about to file bankruptcy or carvana, the stock is doubled. the higher quality stocks are getting hit. the lower quality stocks are running. crypto is running. so i think that some of the lesser quality names are running and we also have, of course, tech and i don't like it when the junk stocks really because it usually leads to punishment for everybody. right now we're okay let it run. >> it feels like they're not really consuming all the objectiooxygen the way they were a couple of

years ago. apple, amazon, which one is more interesting, later >> well, i think you guys talked early on about discipline and we know that mark zuckerberg used the term efficiency 16 times if amazon does that, if amazon says, let's be efficient and make money, there's pay for it apple's always been doing that, so the people read through will looking at a little company that's a supplier, they can't mention apple's name, but they did say that inventories, and i think you'll like this, were down 20%, and we're almost through the inventory correction you and i both know that means people are going to say, wow, even if apple isn't good this time, we know they're ordering a lot, or else we wouldn't have this inventory correction ramping up, and i like that, but i'm really interested to see if amazon doesn't grab some zuckerberg and take themselves higher >> certainly room for that they've made similar noises in the past jim, enjoy things down there see you in a few minutes in the 9:00 >> great observation i'm not kidding.

i just stopped trading when i heard what you had to say. sometimes i get lucky. we'll be back with t toni sacconaghi on apple ahead of tonight's earnings. it's an entire trading experience. with innovation that lets you customize interfaces, charts and orders to your style of trading. personalized education to expand your perspective. and a dedicated trade desk of expert-level support. that will push you to be even better. and just might change how you trade—forever. because once you experience thinkorswim® by td ameritrade ♪♪♪ there's no going back. 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

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apple set to report earnings

after the bell tonight it's perhaps the most critical of all the f.a.n.g. stocks for the markets and for tech watchers joining us now, toni sacconaghi, bernstein senior research analyst. you say you're ambivalent about apple and you fall in the camp of, earnings estimates need to come down. is there anything that apple can do in this report that will change your mind about all that? >> sure, and good morning. look, i think there's a tremendous amount of uncertainty, more so than usual with apple, around this quarter, and somewhat around the year so, for this quarter, apple had production delays. they also had an extra week, and so i think it's been difficult for analysts to really land on the number that they feel comfortable with, but more importantly, regardless of the quarter, investors will focus about apple's outlook, so if they had production issues this quarter, are they bullish that they'll catch up on, you know, poor production last quarter and

have a strong remainder of the year i think there's a near-term question there, but i think there's a broader question, which is, did apple benefit from the pandemic their operating profit was $65 billion in the year before the pandemic last year, it was $120 billion, so you had this huge company that effectively doubled profits through the pandemic, and there's a big question, you know, will we have a lull? we're seeing a lull in the pc market we're seeing a lull in other areas of consumer spending, and so i think that's a big question there is consensus is sort of thinking apple will grow 1 or 2% this year, and i think that's the question, whether apple will go through a digestion period this year and potentially next year even, following tremendous results over the last couple of years. >> you also made the point about apple's valuation, and certainly that, from your standpoint, hasn't been helped by this 12% run we've seen in shares so far just this year

but in 2019, you say apple's valuation was much, much lower i mean, i think it was, like, 16 or something and now it's in the 20s. so, that factors in. for you, it's harder to see estimates coming down and apple holding on to that valuation >> yeah. look, i think apple, over the last three or four years, has proven that it's a more diversified company than just a hardware company the services business has really grown. they've had good gross margin strength but to your point, when apple bottomed in early '19, the stock was trading about 13 times earnings, about 10% discount to the market today, apple's trading at a 30% premium to the market and trading about 24 times earnings, so it absolutely has proven that it is a more durable and more comprehensive franchise of businesses than it was four or five years ago, but its valuation have mucvery much refs

that, so the combination of a relatively healthy valuation plus uncertainty about growth this year and next year, i think risk-reward is pretty balanced on apple at current levels in >> in terms of the uncertainty for growth, is any part of that uncertainty surrounding services ro revenues in a recessionary environment? >> certainly i mean, i think the biggest areas for, you know, potential weakness or softness in apple's business are hardware-related, particularly iphone, which we think will be down in the mid to high single digits this year on a unit basis and on max. but i think it's a good question, and services, you know, the two biggest drivers of services are the app store, which is tied to gaming, as well as advertising and its payments from google, and there are real questions about both of those markets as well, and so those two represent 60% of services, and there's a question about how

well will advertising ultimately hold up this year, particularly if we have more of a softer economic backdrop, and also gaming, in light of the fact that consumers are -- appear to be spending less time with their pcs. >> tony, longer term, on iphone, there has obviously been this debate out there as to whether deferred sales are really lost or whether the upgrade cycle is just going to reaccelerate or, in fact, if it's just been elongated to this point. i mean, are we still going to be indefinitely on this, you know, every couple of years, they try to refresh the demand and people are poised to upgrade? what's the pacing of that look like how does it change the way the longer term financial profile looks? >> right so, if we look back over the last eight or nine years, apple has done about, on average, 220 million phones per year but it's been as low as 190, and last year, was as high as 240 so, we've been in a pretty

consistent range apple's install base has grown, so if we have had consistent sales and a higher install base, that means that people are keeping their phone on average for longer and i expect that that will likely continue to occur, particularly as phones become more expensive i think the big, big long-term question is, do consumers ultimately shift to another platform going forward i know metaverse is a bad word right now, but ultimately, wearables are becoming more prevalent. apple's expected to announce a headset at some point this year, and the real long-term question for iphone is, do users spend more time accessing the internet through other devices? that's what happened with pcs. pcs went down when people started using their iphone now and that's really the secular long-term question for apple and whether it can get ahead of it with its own headsets. >> toni sacconaghi of bernstein.

take a quick final check on the markets this morning, green across the board now, the dow, the nasdaq up, and the s&p 500, up about 40 points i want to thank you, melissa lee, for hanging out >> pleasure. >> mike santoli for hanging out all week and waking up early god bless you. we're going to be joined by joe and becky from pebble beach tomorrow morning, so make sure to set your alarm. we'll see you tomorrow morning "squawk on the street" begins right now. ♪ good thursday morning, welcome to "squawk on the street," i'm carl quintanilla with david faber at the new york stock exchange cramer's at the university of miami in florida as part of his college tour futures are steady after wednesday's fed-driven rally data today, pretty constructive. labor costs were light got the two-year yield