okay now it's looking around saying maybe they don't get too bad and there's an end to this some day the storm runs out of rain that's a great country song. we've got to go, sarat they're giving me 15 seconds >> okay. thanks, joe. >> we'll have all those numbers next time we talk to him, hopefully, and we'll get an update make sure you join us tomorrow -- i was trying to count my teeth 30 maybe "squawk on the street" is next ♪ ♪ good tuesday morning welcome to "squawk on the street." i'm carl quintanilla with david faber and mike santoli at the new york stock exchange. cramer has the morning off longest streak on the dow since january. chair powell on the hill in front of senate banking in about an hour. yields have backed off a touch our roadmap begins with awaiting the fed chair set to testify in front of the committee on the state of the economy in the next

hour >> it seems to be meta's year of efficiency, planning another large round of lay-offs as soon as this week dick's sporting goods smashing same-store sales expectations for the holiday quarter. >> let's begin with jerome powell the fed chair set to begin the first of two days of testimony on the kmeerks appearing before senate banking tomorrow he'll go before house financial services the watch is on to see what powell might say about the road ahead for inflation and interest rates. of course, we'll bring you live coverage including the q&a with lawmakers later this morning some people will say maybe, mike, he wished he had the jobs number in pocket instead of having to talk ahead of it. >> you'd have a lot more clarity in terms of what type of tone. clearly the streets on alert for powell explicitly opening the door to a larger half-point hike in a couple weeks. not sure he wants to be too prescriptive about this.

more or less saying we have more to do, the job is not done in the last meeting they said it would be multiple hikes to come. in other words, no one is considering the last one to be the final one. it's a delicate one. there is some sign that january was to some small degree an outlier. you've seen softening up, the linkedin, help wanted, looks like it's moving in that direction, but maybe not clearly enough the stock market, another update yesterday. counts, but there's an asterisk, because it was up barely, like 7 points apple up 2% and counted for that and more of it you did have a little change of character where small caps and cyclicals kind of backed away. we are right in the middle of the one-month range. neutral going into what powell has to say. >> we'll talk with art cashin in a few minutes about levels tested and pushing some of the equity bears to at least explain

what happened last week. >> right to give credit to some degree to the market for looking through some of the near-term issues a lot of the evidence says, wow, the october low has a lot of credibility built up just because of what's come since then last week market held where it probably had to to keep the benefit of the doubt for a little while the fascinating thing is the way we keep dialing forward when the expected rough stuff is going to come the journal has this piece, the recession is always six months away. >> the good dough recession, page run. >> that sounds familiar. in 2018 we overanticipated a recession. in all of 2019, it was late cycle, when is it going to happen so that is why i think a lot of the textbooks would tell you, well, you probably are due for something in the next couple quarters based on when the leading indicators dipped lower. you know, i think you can have a bullish case that says what do

you think was happening last year hen the s&p went down 27% at peak profits. we were trying to price in a coming recession and probably did part of that work. >> i don't know, mike. the conversations i have over and over again, and maybe the other argument against it is going to be beneficial for the market, but they are inflation is going to be thicker than we think, too much liquidity in the system still it's going to be hard to slow an economy that's still going fairly strongly. the fed has to be focused on unemployment and they're not there yet, and we're going to go much high ever add whateverout want to that conversation, whether it's moynihan to a less extent, jamie dimon and we get above 6%. therefore, we're going to have a bad second half of the stock market >> it's completely plausible it's a different bear case than we were contending with coming into the end of last year which was inevitable slide into recession. it was more the ice than the fire, and now you have a high pressure economy that the fed is

going to really have to bring out more ammo to fight that's the scenario that you're talking about right there. what is interesting, and brian moynihan talking about what their base case, recession takes hold the third quarter everyone has initially a short and shallow recession. i think one of the reasons people feel like it might not seem all that terrible is that you've basically, in terms of nominal gdp, you're up 4.5 trillion, twice more than in the last three recessions. that's nominal a lot of that is inflation that's where the revenue comes from again, everyone thinks it's going to be a soft landing for a while before you get a recession. everyone thinks the recession is going to be mild before it hits. we all know that so far the market is not seeing clear and present danger of earnings falling apart as fast as -- >> what happened to russell yesterday? >> n unwind of the

outperformance we got for a while. i don't know if there was something that actually happened, except apple was up like 3 points on the day it's kind of this -- mega cap growth got buyers. everything else was definitely in profit-taking mode. >> katie huberty with a nice chart about alpha wise consumer confidence poll at morgan stanley. 45% see their situation getting better, most optimistic read since summer of '21. adam jonas with a note today saying even we didn't realize how strong auto sales would be, if you take units times price. it's kind of difficult to explain where that demand is coming from. >> to the aggregate sales in dollar terms at a record people always remind us that autos are the biggest consumer product and biggest manufactured good in the country. it's hard for terrible things to

happen to ag gdp when that's happening. the downside is people are pay are mo n they want to, taking on more debt than they want to to actually afford a car. you can talk your way around any of these arguments the most bullish people are the ones who look at the action of the tape and say the pullbacks have been controlled we've held the support levels, the volume has been better on up-and-down days and seems as if you have good breath to start the year >> that's a good way to get into art cashin today talking about the fed and what to watch in today's trading session. art, first things first, the most important thing is happy birthday. >> thank you very much thank you. >> to mike's point about the tape and what it's trying to tell us, what did you make of that test the last few days? >> i agree, and i think that's a perception that a lot of people picked up, but i do think it was kind of accidental

we were at the 200-day moving average, 50% retracement level a lot of technical key indicators were right there. very conveniently out of the sky came salesforce. it almost single-handedly turned everything around. so you can't argue with the outcome. a test is a test but i'm not sure that it was tested as fully as i think it might have been. so we'll see that -- powell is going to speak, and the viewers should watch very carefully his prepared statement that's the only thing he has total control over whatever the questions are, he's going to bob and weave and try to respond to them if he walks in to the senate this morning and says so himself, what kind of message do i want to send the markets and

the public, it will all be in that prepared statement. and by law, tomorrow's prepared statement must be exactly the same to the comma and the period so very carefully look at the prepared statement first, and then we'll see how the market reacts to the q&a. >> sometimes those statements get painted as boilerplate how prescriptive do you think it's going to be and how much will you be looking for things that he maybe didn't say or didn't include >> well, i'm assuming that he can't say too much about rates because he's got to wait for the new data to come in. but i do believe that since they started to decelerate and went to quarter points, they can't go back up to 50, and the reason being that leaves people to say, wait a minute, did you misread things when you decelerated or has something new come up that you moved away from it

i think the fed will try heaven and hell to avoid going to 50. so i think i want to watch what he's going to say about longer i think this higher for longer, i think you'll hear a lot more about longer i don't think he can give you a specific date, but i want to see it be kind of implies that we're going on to mike's point about about the sales holding up, take a look, however, at the oil loans. people are now taking out seven-year loans to buy the autos so they can make a tolerable payment. it is not an unvarnished victory here i'm going to watch levels. you've got to get up above 40.85 to get credibility if we get to 4% in the ten-year, that's going to start to put pressure on the market

if they do move down -- particularly if they move down below 4,000 in the s&p, i think people are going to cry that that's a bit of a technical reversal so a lot of o things to watch today. >> sure. in terms of that interplay between stocks and bond yields, you've obviously had a lot of sensitivity to the higher thresholds and yields. we got up to 4.2 in the ten-year and that caused some issues. i've seen calls that say if you look back to the 2000-2003 period, for the pirs part of the bear market, higher yields were bad for stocks the second half of it, when the fed started easing, lower yields were not accepted well by stocks because of what it meant for the broad economy. can we look ahead to something like that or do we think the inflationary environment means higher yields are the challenge? >> i think it's all -- it's

relativity we're dealing with. it's hard to say the last time they were at this specific level, the dow or the s&p was here because things change it's a matter of market tolerance, if you would, michael. they change from day to day. for me to tell you that 4% is horrible, we might adapt to that at some point, and you have to go to 4.20 to have the same kind of reaction. so there is a kind of real tift tift n the market. i think 4% makes the market a little nervous you get back up to 4.10, it puts pressure on stocks here. >> art, i wish you could see the viewer comments about the olives are going to marinate. i hope you have a great time

celebrating tonight. >> yes we have many ice cubes to marinate before the day is through. thank you everyone. >> we'll see you soon, art cashin. when we come back, meta's year of efficiency the company said to be planning thousands of additional lay-offs we'll talk about that on this day where we're getting a senate bipartisan bill to ban tiktok. the next hour, exxonmobil's darren woods on cnbc futures lttemd ahead of the feds testimony coming up in about 45 minutes. don't go anywhere.

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i want to discuss my management theme for 2023 which is the year of efficiency. we closed last year with difficult lay-offs and restructuring some teams when we did this, i said clearly this was the beginning of our focus on efficiency and not the end. >> that was mark zuckerberg, you may recall, on meta's earnings call that was last month as he declared 2023 to be the year of efficiency for the company he seems to be living up to it the latest news is that meta is reportedly set to announce a fresh round of lay-offs. that, at least, is according to bloomberg saying the company may cut thousands of additional jobs as soon as this week that would be on top, of course, of a 13% reduction that was announced back in november that was, what, 11,000 jobs.

you go back to october 24th, frequent guest with scott on the half had that open letter didn't make much of it remember this was a controlled company. zuckerberg seemed to be listening to him and to other shareholders who were calling for significant cuts in head count and expenses gershwin at the time calling for what would have been a 20% employee-related cut in expenses they're probably there already they may exceed that at that point. maybe they'll go well beyond that they seem to be focusing a lot more on ai specifically within meta perhaps as opposed to simply metaverse itself. fascinating to see the change that zuckerberg has sort of taken the company in the response in the stock market has been quite significant, really since you see those early november lows and moving off of there right with that first

announcement of the head count reduction at that time again, they're going to go well beyond what would have been what the ask was from some of the shareholders >> obviously shareholders wanted this for a while now, the value of your shares going down by two-thirds in a very short period of time. even if you control the company, that's still your net worth going down two-thirds. i think all that plays into it it was somewhat the rare company that had it truly in its own control to say we're going to throttle back on the investment side and we're going to take care of costs. it has been fascinating because the market has rewarded it it's actually a higher multiple than alphabet now. it's been years since it was cheaper than alphabet. >> the point at the time, carl, was even a 20% reduction would only take you back to where they were at 2021 levels of employee expense. that didn't even get to capex

which we know how much they've been spending. >> a big piece about that and a big piece about salesforce efficiency and changing the number of people on teams. >> this is what happened to financial services after '06 when they used to pay out 50% of revenues to everybody on wall street now it's like 30 to 35. >> i come back to musk at twitter. if anybody has put a bplaybook out there, say what you want, they've got about seven people running the company. when we come back, live coverage of the fed chair testifying about the economy lots of questions from senate banking about inflation and rates as at least the premarket will hold most of the rdcas close to the vest with futures not close to the flat line don't go away.

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got some new data showing a rebound in used car prices our phil lebeau has got that today. >> carl, check this out. this comes from mannheim, the used car index that every month comes out. this chart says it all in february, they say used car wholesale prices went up 4.3%. you see that uptick at the end there? that's an indication of where we are. they're back to where they were prices the middle of last year, not at the record high at the beginning of last year, but heading in that direction. third straight month of higher used car auto prices here's the deal, the tight supply of 3-year-old models is pushing up prices. we've had three, four years where the auto industry has constricted how many years they're making that means you don't have the usual supply of 3-year-old vehicles going into the used car auctions

as a result you saw prices move up from january to february. the used car supply, by the way, the number of vehicles for sale, it actually dropped in the month of february according to mannheim as you take a look at carmax, lithia, sonic, all these guys are noticing this increase i've talked with dealers that have said, oh, we're bark buying because we know the spring sales season is coming and we want to be prepared. gm, ford, sill land tis, the reason we're showing you this, they have increased the amount of vehicles that they're manufacturing, but the inventory is still 40-day supply according to j.d. power. that's well below what is a regular market the regular market, 60 to 70-day supply what we're seeing here is what many were hoping they wouldn't see. that's an increased in used vehicle prices clearly inflation is still with us. >> phil, i've seen some estimates that there's something like 5 million -- cumulatively 5 million kind of vehicles that represent a shortage,

underproduction from 2020. obviously a long time to catch up what does that mean in terms of new car pricing and people's ability to spend and how you have to be creative to get people into cars >> i don't know if they have to be as creative you heard art cashin talk about it people are willing to take on the seven-year loan. we're even hearing eight and nine years people want the lowest monthly payment possible mike, to your point regarding the supply of used vehicles, look at the vehicles that were basically cut within the last four years a lot of sedans, smaller vehicles, moderately priced vehicles what's in the used car market primarily, not that there aren't more expensive vehicles in there as well, but that's the heart of the market if you wanted a camry or corolla, you can still find them, but the automakers have

restricted the market so much, it's pushing prices up we'll switch gears from auto to airlines, we received a note that merrick garland, the attorney general, ahid of the doj antitrust division will hold an antitrust at 11:30. gee, i wonder what they can be announcing i think we all know what they'll be announcing. we expect the doj to file a lawsuit to block the spirit and jetblue merger guys, back to you. >> you expected it we all expected that not real surprise. the question i guess is what are the companies going to say do we have any sense to what they're going to do. >> their argument, david, and i've talked with robin hayes, ted christy, a number of executives at both airlines. they all say the same thing, we will bring down prices by combining. the efficiency that we'll be driving into the system is good for the marketplace. the counterargument which we knew the doj was going to make is oh, no, no, no, you're going

to strip out seats and those spirit prices that are here are going to end up being jetblue prices up here, and that's not good for the consumer. that's going to be the argument from the doj >> when you're talking about creating the fifth largest carrier in the u.s we'll see what garland says. phil, thank you. ou> opening bell coming up in abt four minutes don't go anywhere.

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watching consumer names, dick's sporting goods comes up with good comps, more than double the dividend, double beat a number of touchstones on the consumer today morgan stanley saying walmart membership near an all-time high, amazon solidly a topic >> on the other hand i noticed key did a big roundup of broad line and hard line retailers in saying yes, things look fine, but we're still expecting -- [ applause ] it's the same story where

consumer confidence is in the middle dick's looks like opening at a 52-week high people thought it was just a pandemic move. really earnings coming back and coming strong. >> i think ceo is going to be on "the squawk" next week [ bell ringing ]. >> we'll talk to the company ceo in a few minutes the atlantic ten's conference, men's basketball kicking off in brooklyn today we are in march. >> exactly maybe every day we'll get a new conference you mentioned the amazon call which i think is interesting it really points out just how the faang complex has gone its own way. amazon has been consistently a mess and the worst of all of them from point to point over

the last two years there was a lot of talk, goldman, really what big picture is wrong with the stock. it kind of is that they have mega scale in and not great business which is the e-commerce side, the street is not giving them credit. they've never earned, when are they going to earn of course, on aws, what was the act that was going to follow the ramp-up there, and the multiples have come back down. amazon has been on the down swing. apple's top side was for two years. netflix and meta had the huge dumps where they lost half their value. google has been a grind lower. it gets to the point of there's no longer a monolithic category and style of stocks that we either own or don't own. it's very, very company specific and the valuations are pretty unique to each in terms of what matters. >> could throw netflix in there, too, as they are getting commentary this week about the impact of password sharing data. the paramount news yesterday

about potentially being in talks to sell a majority stake in b.e.t. >> yeah. that's a possibility there had been some talk some time back before they merged showtime into paramount plus that they might want to sell that that was never clear to me about why there would be a buyer maybe there was. it doesn't matter. that deal didn't happen. maybe b.e.t. does. this goes to the lack of free cash flow right now at paramount. fairly significant amount. they pay a dividend. so they're in a difficult position here in terms of maintaining the dividend while really running what will be not particularly positive cash flow for some period of time. they've obviously talked about getting back to break even at the very least on their direct-to-consumer buy next year to be fair, they did have the best numbers from any of these businesses for last quarter in terms of at least subs always a question of quality of subs they have the walmart deal, what

are they really getting paid for that but the numbers are numbers. they do have a lot more subscribers than they did have we'll keep an eye on that. of course, the bigger question that looms is does it still have enough scale, and will it ever have enough scale? that continues to be a key question. >> you know, all true. on the other hand, it's such a relatively modest market cap of 14 billion that any asset sales all of a sudden look material. remember, they were thwarted in terms of selling to publisher for over $2 billion. they still want to sell it again. >> blackrock headquarters i think -- >> it's going to be a material number even though it's not a huge asset in the industry scheme of things of course, there's plenty of debt so it's not just the market cap. >> the enterprise value -- 29 to 30 billion you need to look at it with

warner brothers discovery as well you can say oh, only $37 billion market value you've got $50 billion in debt correct me if i'm wrong. enterprise value obviously is the important metric here, not just market cap. >> it's closer to 85 or 90 billion, enterprise value from warners brothers meantime, airlines, phil lebeau talking about the garland presser later on ual up, evercore ups delta to buy. looking at unit revenue and pretty muted q1 activity, at least price action in gasoline or jet fuel. we just talked about how the consumer appears to be holding on to things they want to spend on travel is one of them. >> the stocks have come in a fair bit i think that's a big part of the evercore delta call which is that it has lagged ual and american in this last little stretch of time.

yet they all look cheap. it's another story, you don't buy cyclical stocks on low pes, except that the es are continuing >> also, the idea that one of your low cost challengers trying to get bigger might face challenges of making that happen. >> it doesn't seem as if that's an imminent threat in terms of overall pricing structure at this point for sure. >> we've been talking a lot about how much cash ev companies consumer that gets me to rivian this morning. stock down almost 8% on news that they did sell it was priced last night as convertible, $1.3 billion, also the ability to go up another $200 million i don't have terms at this point, but of course the potential dilution is impacting. they need the money. you've got to raise the money to make the automobiles when you're deeply cash flow negative as they are, lucid is, as the

automakers ramp up hey had already been hit by coming in below delivery targets. >> they need the money over time for sure i think they still do have a pretty solid net cash position. >> from when they went public. >> exactly it's been sitting there. these are green bonds. you can have this special class of renewable energy-related financings also a super volatile stock like that, issuing a convert is pretty attractive. converted has embedded value, the option is high you can monetize that. rivian is twice as volatile as the overall market it's a weird corporate finance lane plus you have an albatross that gets create zbld a decent amount of assets in these convert strategies. >> yeah. in terms of the bond math works for them. >> the stock math not working

today for rivian what's the all-time low there? i don't know >> 15? >> just about that >> right around there. interesting reports today about gasoline demand in barrons actually think oochs the notion that gas demand has essentially peaked jpmorgan takes a look at why they argue 45% has been priced over time. 34% is work from home, the need to commute has been dramatically altered. and 19% is the shift to evs on a week where we're going to talk to exxon in a moment will we ever get back to -- >> total miles driven has not budged in many quarters. i was looking at that. once you have people come back a little bit, back to work, it's pretty stable. and then, yeah, over time, no matter what happens, the fleet gets more efficient. >> the aggregate mileage of the country is better. so it's a good news thing.

everyone is saying when are they going to build new refineries. who knows if that sounds like a good risk-reward longer term in terms of spend even though eight months ago it seemed like you really needed that who knows. >> senator mark warner was a guest on "squawk box" this morning. it's a bipartisan effort he's one part of an attempt here to pass a bill that conceivably would ban tiktok in the united states under national security grounds. this is not a new debate it has been on going for a very long period of time. take you back to the end of the trump administration where it appeared that perhaps something similar was about to occur remember bytedance, the owner of tiktok was trying to figure out various ways to make sure the app would still be available here in the u.s. take a listen to what warner had to say, and then we'll take a look at shares of snap and meta afterwards >> what brought us to this is not just tiktok. we've had this whack-a-mole

approach on foreign-based technology for years back. a few years back it was the russian company, and now it's tiktok we're saying from china, russia, iran, svenezuela, cuba. we're going to give the secretary of commerce the ability to do a series of mitigation up to and including banning. >> take a look at shares of snap they were up sharply yesterday, and adding to that gain again this morning some almost 7%. you can see it right there, the movement that stock has had in a short period of time, well 22% over just the last week, in part because it was seen as a significant beneficiary were tiktok to suddenly disappear from the phones of millions and millions of users here in the u.s. meta shares are also up.

perhaps in part on the continued adherence to efficiency. remember it is the year of efficiency, and these reports of job cuts we discussed earlier. as well, mike, it may also be up in part because this is a bipartisan effort that can't be ignored. >> for sure. it is an interesting calculus to try to figure is there just an aggregate amount of short form video that's going to exist in the world that we're going to consume in north america if tiktok is not available and you have to take it off your phone, it's going to my great to snap obviously the advertisers want some conduit to those same types of users it does make sense we'll say snap is the kind of stock that it goes on these wild runs at times, it's been heavily shorted. it's still even after, kind of popping. 70% off the lows, down 70% from the highs. there's a lot of option value embedded in there in case they get any incremental spilled revenue.

to me it's a little more reactive and emotional than it is a real determination of how much of that tiktok revenue is going to flow elsewhere. even if we get to the point of banning. >> i haven't got an updated value on bytedance tiktok's owner, based in china but it has u.s. ownership, code two, big hedge fund, general atlantic, big private ek tir firm board seats as well for both of those. it would be a real blow if they can't figure out a way to maintain tiktok here in some fashion. obviously they have this project texas where i that talked about moving all the servers to oracle in austin, texas we've been following it for some time, carl it's not clear where we stand at this point again, we'll keep a close eye on warner's efforts >> i was going to take a look at bank of america. thinking it might be up today, with mike mayo reiterating why he likes it, why it's the

low-cost consumer banks, why deposits are sticky with the largest banks. it's down 1.2% the financials have had a little bit of a struggle here it's no longer really much of a rate story it is really about kind of have you seen the best for credit low unemployment is great but can only go one direction. >> capital markets are horrible, too. >> terrible. good bond issuance and everything else. >> everything else when you talk to the likes of some who -- again, anybody in this, as i try to, it's just dead and continues to be dead. it's not an unimportant contributor for the earnings for some of these big banks. >> for sure. meantime we're watching the jobs number, of course, on friday linkedin with interesting statistics about the hiring rate they argue it's down 6.5 month-on-month it's the biggest one-month decline since 2020 hiring they argue is now down 31% from april of '22 when the

declines began and down about 28% year on year obviously we're leaning heavily on some of this high frequency how many millions of u.s. workers might be self-employed, more than we think take a listen. >> the labor environment, even though it's not showing up in the unemployment rate, the labor environment feels looser for us, about 70% of drivers are saying they're coming on to the platform because of some of the inflationary effects they're feeling. they need to augment their earnings, and we're very a good platform for earnings augmentation >> that said, consensus for friday is still 230. i've seen a couple 300s. joe bruce well la says that would take to discussion about 6% terminal. >> i would think so, especially if you don't get big downward revisions to january the help wanted, ziprecruiter,

linkedin gives a glimmer that says maybe january was a little bit overheated you have one-off stuff happening, not just weather. things like heavy spend from the social security income adjustments, inflation looked hotter because of annual resets of certain prices. who knows? we'll see if we're in for a little bit of a giveback in general in terms of labor market strength for february. >> just about 15 minutes away from the comments from the fed chair, and of course, q&a to follow after that. in the interim, yields are lower across the board, although not quite back to session lows yesterday when the ten-year got to 3.91. we'll take a break and be back in a minute.

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a lot of anticipation about this particular hearing given the conflicting signals we've gotten about the economy in recent weeks, and even given some of the data that we're not going to get until later in the week we will hear from the fed chair in about 13 minutes. 'lbrg wel inthat to you live

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more ahead of fed powell testifying on capitol hill post nine, krarm and ceo craig arnold 100 years is impress ive. >> thank you it's momentous for a company to be around 100 years. it's an important milestone for our company and pleasure to be here and celebrating on the new york stock exchange. >> did wonder how many thank you for the answer 32 the current age here, you have an infrastructure act, you have an inflation reduction act you would seem to be poised to benefit from both as you said on your recent earnings call, $88 billion set aside for power grid updates and ev charging incentives how big an opportunity is that and over what time period do you see that playing out >> the great thing about our company, we are positioned to take advantage of what i would say are some of the most significant secular growth trends in our lifetime energy transition, digitalization of the economy,

electrification, all big secular trends that will benefit the company. to your point a lot of government stimulus spending on top of that that will further accelerate our growth. we haven't seen the impact, we think it's still to come, but will play out over the next three to five years or so. >> three to five years what is you see. when you talk about electrifying the economy as well, which, obviously, we all know about, digitalization also, explain here, because again, something you discussed during your recent conference call exactly why eaton is well positioned and how that works >> great think about it the world today continues to generate process and store increasing amounts of information. we're all more connected than ever one of the big growth segments for eaton is data markets. it's one of our biggest end market and we serve the data center market. in addition everything we make today is becoming more intelligent. all the legacy devices we made, they all have micro processors

and connecting and streaming data that gives us the ability to sell higher value add in the components we sell and we have an opportunity to monetize the information and the insight coming off these devices through selling data as a service or selling software. >> you sell data as a service right now? >> absolutely. we're in the early stages, but really exciting opportunity for us to really think about how you create insights from the information coming off of the millions of devices that we have out in the marketplace. >> how sensitive are your end markets right now to exactly the day dense of the economy at this point? what are you seeing and hearing back from customers? >> our end markets, i would say r quite strong right now and despite all the discussion around potentially some sort of recession this year we think 85% of our end markets see significant growth this year i think if you think about the trends that are going on in addition to these secular growth

trends, there is a reindustrialization taking place today inside of the u.s. we are a big benefactor of that. every time you think about a new semiconductor plant, ev plant, new battery plant, the numbers are just staggering today in terms of the amount of investment that's going into u.s. manufacturing, into u.s. market in general. that's a big benefit for us. >> do you worry about the grid how do you answer concerns about the long-term load on the grid, even those at the household level thinking should i get an ev, can i count on my charger in five or ten years? >> i would say we are helping utilities solve some of the big challenges with respect to the aging grid we have and there does need to be quite a significant amount of investment that goes into modernizing the grid the great thing for eaton we provide all the components, hardware, software, services, utilities need to get ready for what's coming at them. it is significant if you think

about lalexis fiing electrifyinh economy, everything and every access of the economy is becoming electrified and that will continue to create challenges for the grid and we are there to provide answers and solutions for our customers. >> do you see us as being behind the eight ball or approaching anything near crisis down the road >> i don't think we are approaching a crisis i think there is work that needs to be done i think there are investments being made today by the utilities. there are investments being made today by various actors in this value chain. i do think it is -- we have to approach it with a sense of urgency. >> back to the economy because you do have an interesting sort of perspective you said on the call you were feeling better about '23 than you had been as little as a month ago. why? >> if you think about the end markets we serve and one of the things we pay attention to let's

call it the nonresidential construction contracts, so macro data in terms of how much investment is going into infrastructure in the country, and those numbers were quite large at the end of the year, up some 50% for the year. we continue to see very strong demand in our orders we see very strong demand in our negotiation pipeline, that precedes orderers. i markets continue to be strong despite what you're seeing in the macro data, more around consumer products. >> that picked up to encourage you more >> absolutely. end of the year in a much stronger note than we anticipated. we were anticipating a good year for 2023. >> good year in your 100th at the nyse thank you. >> pleasure. great to be here with you today. >> when we come back the fed chair testimony on the economy followed by q&a. there's a look at senate banking this morning we'll get that to you on the other side of this break

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good tuesday morning i'm sara eisen with carl quintanilla and david faber live for you as always from post nine at the new york stock exchange moments away from fed chair, jay powell,'s report to congress going before the senate banking committee. we're going to take you there in a moment stocks are higher ahead of powell the dow up about 16 points following gains from yesterday s&p is unchanged let's get to steve liesman with that breaking news on powell steve? >> thanks very much. fed chair, jay powell, before congress would suggest rates could go higher and get there faster and longer than anticipated. he tase says it's going to higher than anticipated and says restoring price stability will require a restrictive policy stance for some time the historical record powell warns against prematurely, loosening policy, quote, we will stay the course until the job is

done he goes on to say the decisions made meeting by meeting and the full effects of tightening have yet to be felt in the economy. he talks about the recent data where he says the january data partly reversed the softening trends they'd seen last year and reflects unseasonably warm weather suggests that even if you take out the warm weather it still suggests inflation is running higher than expected on inflation, powell says the process of reducing it has a long way to go and likely to be bumpy. more on inflation he says, it's moderated somewhat, but well above target he expects housing inflation to decline in the year ahead but little sign of disinflation in core services ex housing on the economy, powell says there will be a softening in the labor market this year while wage gains have slowed, powell says they have remained above levels consistent with the fed's 2% inflation target. the u.s. economy slowed

significantly last year and as for consumer spending it is rising this quarter in what he calls a solid pace there's been recent indicators that point to subdued growth in spending and production, but overall he says the labor market remains extremely tight. there it is. the possibility of a higher rate, the possibility of getting there faster and the idea of staying there for a long time. back to you. >> we're seeing the market reaction, not taking it well stocks sliding yields pairing some of their earlier losses as hawkish. i'm not sure what market expected after we've had a string of positive data and a lot of fed hawkish speakers but that's the news here. >> yeah. sara, he didn't adopt the full-out max hawkish ideas of governor waller but did come away talking about how january was like a game changer. as you know, sara, both in how

the january data exceeded expectations on growth and went back and revised december. waller called that a game changer. it's interesting to me here that he is embracing the possibility of faster rate increases, returning to 50 basis points i do want to check while i have you here, sara, what's happened to those probabilities okay this is really interesting you've had an increase in the probability of a 50 basis points hike in march. it had been, i'll give you the number here, 23%, it is now 37%. i've been following this for a few days now, the probability of a 50 in may, sara, i'll tell you right now that had been at 41% it was elevated and now it looks like it's at 70%, the probability of 50 basis points rate hike in may that would bring us right up to

5.25, 5.50 i don't know if you have the fed rate outlook chart able to bring it up, but i can tell you what the numbers are. the new peak rate is 5.60, new record, for that contract. year end, 5.44 that's a new record for that contract and then also, sara, something we've been monitoring is the back end of this into the 2024 and that's for june of 2024, 4.80 across the board you've had a rise now in the outlook for the funds rate as the market positions itself for the possibility of higher rates for longer if the data indicate that's what fed needs to do. >> got it. thank you very much. stronger dollar, weaker stocks, dropped 100 points, down 148 or so on the dow. we were up 15 before powell. steve liesman thank you. we'll turn to you as we await that q&a from chair powell before the senate banking and continue the conversation about what this means for the markets.

goldman sachs chief u.s. equity strategist david kostin joins us on set great to see you. >> nice to see you. >> anything here change your view you're 4,000 for the s&p which is basically what we are are you monitoring the may and june rate hike probabilities of what to do with stocks. >> what matters is what the market prices and in the equity market the market is pricing the idea that the economy is strong. why do i make that conversation? because cyclicals relative to defensive stocks, would imply, ism closer to 54 so the equity market embrace the view the economy is continuing to grow. i visited clients in asia, the market is essentially flat and fully pricing the economy doing well the four nos, no recession imminent, no earnings growth no change in valuation and you have no net money flow into the market and that would drive a

view the market is basically fully priced around 4,000. >> drives the view that fed has more work to do, and that's what we got from fed chair powell's testimony they could speed up hikes, go higher for longer if the data warrants, and if that's the case doesn't that pressure the market multiple? >> many investors are anticipating already that fed could be tightening as high as 6% goldman sachs economic view is probably 5.5%. there's a risk to the upside to that but that's already priced in the equity market and anticipated. >> much of the conversation with investors is about how companies are going to prioritize their spending and the idea of companies continuing to buy back stock, pay dividends, gets rewarded historically in an economy is that slowing, not a recession. that's what the fed would be trying to do, slow the economy, get inflation corralled and consistent and the market is pricing that right now. >> speaking of companies, dick's sporting goods out with results

this morning i had a chance to talk to the chairman of dick's, a former ceo, still there very much executive chairman i think is the title. we talked about, first of all, doubling their dividend to your point today, really strong sales growth look at the move in the stock today. we talked about the consumer he says no sign of a slowdown. he see his consumers are resilient although his category is less discretionary than people think you need higher soccer cleats for your daughter who has grown you will buy that. here's what he said. good shape very interesting, david, wanted to run this by you on inflation, he doesn't see any higher prices coming in their categories for the rest of the year doesn't mean prices are coming down, but not going up anymore and the supply chain is fixed. >> it's interesting. last night we had dinner with 20 directors of independent public companies an the discussion was pretty wide ranging, went on for a long time and one of the topics was about the consumer and the separation between the higher income versus lower

income consumer and what companies were seeing in terms of their spending. some of the credit card companies, some of the board members were speaking about that activism the number one talk of conversation, given the amount of conversation that has taken place, how companies should spend cash, the topics inside the board room and we were having conversations about that, including what investors are thinking about, the intersection between money and the product, product being the companies and money being the investors. >> is that bullish for stocks, more activist, pressure on profitability? >> depends on -- >> and cash. >> it's a near term catalyst for pushing prices higher in some instances, but not necessarily for the overall market largely reflects this issue. >> return to capital, that's interesting it continues to be a key sort of focus for so many investors. is it reflective of the times to your point, as opposed to earnings growth itself >> theidea that margins are

still coming down, but there are still high levels, there's a high quality problem how do you spend $3.2 trillion of cash? that's essentially the challenge that managements are facing. you see the energy companies, for example, highly under valued in my opinion, they're among the cheapest in 30 years and one of the issues they have emphasized returning cash to shareholders with dividends and buybacks. we can debate whether that is a good or bad use of cash for companies, but investors historically have rewarded companies that do in that a slowing economic environment characteristic of what we have now. >> let me get your reaction to the market environment i mean, you know, right now we're getting a sense that maybe he goes 50 basis points, the fed goes 50 basis points in march, higher sooner and there longer does that change any view you have of the equity markets second half this year and first half next year >> the principle risk in the middle of the year is the debt ceiling and whether that gets

addressed or not circumstance mo -- six months out the fed hiking for longer than anticipated would be on a margin less positive for the equity market but dramatically more at risk, not so much because gentle expectation we have is fed is going to be hiking to a level and then hold at that long level and sort of anticipated as we think about it. >> basically think about it right now we're sitting here at the beginning roughly early part of the 2023, the market is focusing on 2024 earnings. that's one of the things i find interesting in my client conversations is that they're already kind of rolling forward and the argument is essentially, david, a rationization for why they own stocks at what is historically a high valuation, high this year, but next year's earnings expected to grow, they will be higher backing into the valuation. that's essentially what is a conversation therefore, by how much earnings might grow next year our view by 2024, grow 5%, consensus up 11,

it's too optimistic. the gap there is related to margins and goes to sara's point about pricing power and can companies push through the higher input, which is an inflation story goes back to the fed tightening to slow this thing down that's basically a tug of war there that's happening. >> you've been below the street on your recession odds you have to feel good about how the data has come your way does anything about his testimony or what friday may tell us change your sector playbook >> well, my colleague and the economics team have been right in that regard in terms of lower than generally expected probability of recession embrace that view from an equity strategy perspective, that would -- depends on what the q&a happens this week, after friday employment numbers look like, but broadly speaking a lot of that is priced in the equity market back to the observation, cyclicals versus defenses and the relative performance of that, carl, is a useful met troik say what are equity investors thinking about the

prospect of economic activity and they are decidedly of the view, based on the share price performance, that the economy is doing okay fixed income market, price something different, but the equity market is broadly embracing the view in fact, that's consistent with my conversation with investors. >> so just ignore the yield curve? >> well, valuations are higher to the extent rates go higher it's a headwind for equities. >> david, good have you here. >> thank you. >> good to talk to you again the chief u.s. equity strategist at goldman sachs. >> 10-year yield pops. one key part of the inflation story is energy. brian sullivan with a special guest this morning hey, brian. >> hey, carl thank you very much. that is the ceo of exxonmobil. darren, thank you for joining us at cera week david faber is participating you had the documentary, for anybody who hasn't watched, i urge you to check it out, a

great documentary by david and the team thank you for joining us. >> thank you good to be here. >> aside from the obvious interest around energy this year because the stocks have done well, definitely a lot more smiles here now, this is about decarbonization. you know there's people watching that say, how can the ceo of one of the world's biggest petroleum and chemicals company realistically talk about climate change, decarbonization? what's your message to the american customer, we can be a part of hopefully the solution >> i think it's a misconception to think it's an either or equation it's an and equation we can do both it's not different from any other part of our past history where we respond to society's evolving needs it's become clear there's a need to reduce the emissions, and decarbonize our energy system and we can do that and we are doing that our focus is on not only meeting the needs today of energy that plays a critical role in society and economic growth and people's

livelihoods, but at the same time reduce emissions. we're demonstrating we can do both of those things i don't think that we have to choose it's around how we leverage our core capabilities to do both. >> you admit exxonmobil and others in the industry have done in the past a terrible job at messaging and also performing and getting it done. what's the commitment for exxonmobil to work towards some of these climate initiatives >> if you go back in time our industry as a whole and our company more specifically works very hard to address our footprint and our impact on the environment. we've done that historically for many years the focus around driving emissions down has been -- if you look at where society is at in that pace, we're very early in that journey. i would tell you exxonmobil has reduce uds its emissions faster than if you look at the commitments made under the paris agreement than the nations put together we have been driving and making progress in that space you're starting -- you're at an

early stage and there's a lot of work that has to be done i will tell you a lot of technology that has to be developed to make that all possible so i think it's a question of where we're at in the journey. >> i've met some very smart people who are not in the energy world but people with masters, ph.d.s, who look me in the eye and say ten years the world will not use oil and gas anymore and i think nobody is projecting that we had the president come out and acknowledge that oil and gas will be around for a while and indeed will be needed for the transition this is -- feels like there's a realization finally at the highest levels there that the hydro carbon is not going away any time soon. >> yeah. i think, you know, obviously, there are aspirations to decarbonize and the point i've been making we have to move from an ideology, aspiration and hope, to a plan for how we manage this transition and do it in a responsible way to continue to meet the needs of people

today and hope economies grow around the world today while addressing the needs to decarbonize. we've got to have a plan that works us through that and involve industry and governments and academia. >> a lot of people here, i know david's back at the nyse and has a question. >> during the course of our number of interviews for the documentary we talked about your initiatives to reduce carbon since then you've been talking about the opportunity from the inflation reduction act and a number of people say why haven't they increased their targets 17 billion over the next few years. darren talked about the potential here in terms of putting the price on carbon that was needed on the ira. why aren't you going up? >> so, the $17 billion that you're referencing, david, is really what is built into our

plans based on what -- when we developed those plans. we've got a low carbon solution business that's out actively trying to grow that business and recently signed the world's largest customer agreement to store co2 and we're actively working that pipeline. my expectation is, as this business opportunity grows, that that number will grow. i will say, what's critical, the ira is incentivizing the business to find opportunities, but if we don't get the permitting sorted out, can't get wells permitted it's going to stop dead in its track the government has an important role to play not only with the ira but making sure the permits are coming along to execute on the ira, store the co2 and actually reduce the soelciety's emissions. >> is there an update to share on the houston hub, for example, and what is the broad-ranging plan there in terms of carbon capture? >> yeah. sure houston hub is alive and well.

we have a number of companies interested in participating in the houston hub and we announced engineering work on the first stage of that, which is what we're calling our baytown blue hydrogen project, the largest in the world, the large ammonia plant will feed into that system and establish the baseline capacity to start storing co2 and bring other industry participants into that we're starting that. it's on the ground we have engineering under development. >> okay. outside of that as well on the regulatory side there's a couple issues that will come up with the president's proposed budget tomorrow that is the issue of taxes also the issues of permitting. we had a seminar here as well. talk about both. there's a discussion about corporate minimum taxes. your effective tax rate is 33% the highest that i found i think apple and microsoft are 19 and 15%.

the industry, in other words, the oil and gas industry is paying a lot in taxes. but you're also fighting europe about the so-called windfall taxes. what's the proper structure here and why take on the european union for taxes there? >> so i think i just want to reiterate the point you made we made $56 billion last year in earnings and paid over $50 billion in taxes so we're paying a fairly large amount of taxes today. the challenge we see going forward is, and the other point i would make is, if you look at the last five years we've invested $120 billion, roughly $24 billion a year, to support those earnings, and so while the numbers are big, the tax number is also big as is the investment that we're making. so we have to think about all those things in conjunction with one another. the taxes that we're seeing in europe disincentivizes industry to invest more to grow production would would lead to additional security for them that policy in the eu is wrong and believe it's illegal which

is why we're challenging it in court. >> permitting. we can build all the solar farms, refineries wind turbines we want. if we can't get the permits for power lines, pipelines, whatever it may be to the end user, they're worthless. we seem to have forget than part jonathan who is here spoke about it last night. what is the proper role of permitting in the u.s. government because i'm looking at power demand and supply statistics it's terrifying. some day the lights may not go on. >> yeah. i would add to that the permits we need to store co2 underground to address the emissions, if you look at two states where the issue of those class 6 permits, took five and six years to get them done. we had the state of louisiana has had an application into the epa to make those decisions. it's been over 500 days waiting for some res tlugs that.

-- resolution to that i would add that to make this go and achieve the objectives of the biden administration to reduce emissions permitting has an important role to play to make sure we're evaluating all the implications of progress but let's stay focussed to make sure we're developing these projects and get them approved to get this going and the business up and running. >> david met you in person, good to meet you as well, thank you for this and the documentary which everybody should watch have a great conference. david, carl, sara, speaking of permitting, the biden administration is going to be making a decision about this giant conoco phillips project in alaska called willows, and could come down any day. we will speak to the ceo at about 1:30 p.m. eastern time today on the exchange. it's going to be a tell as to what the white house may do on other large future projects. so it could get really any hour or day now on that decision. back to you.

>> busy week for you, brian. sara, racing back home, last call tomorrow, appreciate it let's get back to steve liesman as we await the q&a from the fed chair, continuing to watch some of the market pricing here with the 10-year kissing 4 once again. >> yeah. and the 2-year reaching levels not seen since 2007, according to our data team carl, i thought i should tell you what was on my bingo card and what was not the idea that inflation would be a bumpy road, i had that the idea there would be ongoing increases, i had that. rates will be high for some time and the decision will be made meeting by meeting, all was in there. what i didn't know and thought was a possibility but didn't actually have was the idea of him saying that if the data indicated we could go to a more rapid pace of increases. i think that shows a chair that is kind of like, i don't know, maybe itching to hit the 50 button rather than the 25 button it's going to take a little more

time and that's what's interesting to me, carl. i will give you fresh pricing. what's happened to the probability. now it's 75% for 50 basis points rate hike in may we're not quite, if you look at the long-term rate chart here, of the funds rate, we're not at 6%, but there's like a 1 or 2% probability we reach the high. the terminal rate is still in that 5.5 to 5.75 range. >> basically, steve, if the jobs number comes in good on friday, and then the cpi number comes in elevated, the next week, they're going to go 50 is that the bet? is that what you think >> nobody has asked me that question, so i haven't had to answer it. i think that's a distinct possibility. can i just amend your question, sara, by saying, if the job number comes in hot with high wage increases in there, and if

the -- my big concern here, honestly, one of the most important data points today was when you had on at 9:00 with my good friend phil lebeau talking about used car prices reversing and heading higher remember used car prices coming down was a part of the disinflation story the fact that that is going away could pressure new car prices and goes along, sara, with the theme that i've been watching from some economists about the idea that the goods disinflation process we have we had is maybe coming to an end and a if we're going to get more disinflation it's going to have to come from the key sectors of housing and services ex housing. i think you might be right let me tell you, there's -- it's weird the way the market trades with only a 40% probability of -- of 50 in march looks like the bet on the 50 is in may i'm not sure why that's the case i'm going to answer your question in the affirmative thinking about it live here on

air on national television, sara, i think if you get a strong jobs report and a bad inflation report, yeah, 50 is going to be on the table at that march meeting. >> and does that, to you, connote some kind of waffling among members of the committee, steve? i wonder if you think the market sees that as sort of not linear guidance or flow or direction or speed? do you think it shakes market confidence >> i think that's another good question, carl i will say this, the data did change substantially in january, and i'm going to put myself right in the group of folks who dramatically changed their opinion of what was happening. not only did we get stronger than expected data, they went back and revised the progress that we thought had been made. so i'm guessing now that we've seen the data, the move to 25 was premature. >> yeah. let's get to the q&a, steve. thanks >> rising and supply chain

disruptions, russia's bestiality in ukraine, won't get better because of interest rate increases. every indication this post-pandemic economy is different. should we be worried the fed is trading this economic period as it has in the past instead of reacting differently >> thank you, mr. chair. so we've been aware since the very beginning and have said and discussed this on many occasions there are some differences this time in particular, we have not seen the kind of supply side collapse that we saw at the very beginning of the inflation outbreak the outbreak of a war which had significant affects on commodity prices a year ago. all that is different. there are, though, similarities. there is a mismatch between supply and demand. you can see that in the goods sector still you saw it in housing prices going up over 40% since the --

since before the pandemic and you see it in the labor market where we have 1.9 job openings for every unemployed person. we're well aware that this particular situation involves a mix of cycles, sorry, of forces, not all of which are tools can affect there is a job for us to do in better aligning demand with supply >> understanding you have limited tools to address inflation in our conversations, in the past show my concern about continued rate increases that may not address the root cause of inflation, they hurt workers, i just -- many of us contend we can't follow the same playbook next question, last year three banking regulators issued the community reinvestment act to account for changes in our banking system does the fed remain committed to work with fdic and o.c.c. to finalize a rule and when will the rule be finalized? >> we remain committed and i

believe we are in broad agreement with the other two agencies on the provisions to the rule we're in the process of writing all that down and that will take some time and after that, of course, it will come to the board of governors for a vote and that will involve briefings and discussions. i can't give you an exact date. >> as quickly as possible? >> yes it will be some months. >> thank you banks weather the shock of the cow covid-19 because of the fiscal response provided by congress. we see a spike in loan delinquencies and overall risks. banks are plowing billions as many other corporate leaders always defend it by people on that side of the aisle, into stock buybacks which makes me concerned if there's a downturn in the economy, banks could end up with too little capital, and i'm worried about any potential rollbacks of safeguards or regulations. can you assure me the fed will keep capital requirements strong

and exercise more long-term, forward thinking corporate ceos that seem to be focused on the short term >> ike assure you as to the first part we'll keep capital requirements strong. >> i didn't expect you to give me an opinion about your looking more forward than companies that look at the short-term benefits of stock buybacks. mr. chair, when you testified about the risks posed by crypto assets, stable coin and other possibilities how is the fed auto evaluating the risks of crypto related activities by your supervised institutions >> this is something we've been active in this area and i will say we believe innovation is very important over time to the economy. we don't want to stifel innovation or want congratregulation t stifel incumbents and that kind of thing we're watching what's been

happening in the crypto space and, you know, what we see is, you know, quite a lot of turmoil, we see fraud, lack of transparency, run risk and things like that what we've been doing is making sure that regulated financial institutions we supervise and regulate are careful, taking great care in the ways they engage with the, you know, the whole crypto space and give us prior notice we've issued, along with the fdic and o.c.c., a number of, you know, issuances over notices to that effect. >> thank you and i will close with this i've long pushed for the fed to prioritize workers and for the leaders of the fed to reflect the diversity of our country we've made progress, but our work is not done we have a new opening, i understand, it's not your job to appoint the new fed member, we have a number of upcoming vacancies at the resevere banks. i support senator reed from

rhode island and other colleagues pushing for diverse voices at the fed. >> thank you. >> obviously, the chairman and i both have strong passions about challenges we faces as a country. one thing we agree on is the importance of having a strong capital markets as it relates to making sure that the americans have the ability to continue to grow their businesses and to solve their challenges and, frankly, i hope we get there building on the same comment that chairman had around capital standards is where i'm going with my thoughts today i think back on the last few years it's hard not to recognize the extraordinary efforts our financial institutions of all sizes, frankly, undertook to administer a program like ppp, weathering a shutdown of our global economy, i welcome your thoughts, but from my viewpoint our banking system was resilient, our financial institutions stepped up and delivered aid to support families and businesses every single day

that's why vice chair barr's broad comments around wholistic review of our capital, troubled me so much we should be laser focused on our economy and addressing the needs of everyday americans trying to forge a new future and helping them open the door to opportunity. as you and i both know, capital and quality must be continually scrutinized, but increased capital does not necessarily provide an increased benefit and requiring banks to hold capital that is not risk based and appropriately tailored to a bank's size, scope and activities can cause more harm than good. at a time of record inflation, where everyday needs are more expensive, we should not be pursuing actions that are harmful, rather, we should be supporting the engine of our economy, small businesses a, while i remained concerned by the vice chair's comments i am

hopeful you will ensure the review is appropriate, keeping the impacts on our banking system front and center. we must promote and further the growth over economy and thereby our people anything less should be unacceptable to that end, will you commit that any ongoing capital review by the federal reserve will follow the law and that any follow on regulatory proposals will be risked based and tailored to an institution's size and complexity and not a one size fits all? >> yes i can easily commit to that. we're strongly committed to tailoring and that will be -- i can say anything we do will reflect tailoring, which is a long-held principle for us and now a requirement. >> thank you very much two weeks ago i sent a letter with chairman mchenry to chair begins her regarding the sec's climate disclosure rule urging him to rescind his proposal and reminding him that the sec is a market regulator, not a climate

forecaster much like congress designed the sec to protect investors to maintain fair, orderly and efficient markets and facility capital formation and not to advance progressive climate change policies. congress designed the federal reserve to promote price stability and maximum employment not to play politics to that end, i find worrying the fed's announcement of recent actions to consider climate-related scenarios coupled with remarks by the vice chair of supervision as attempts to incorporate broader esg policy into the financial services system. banks have and to account for weather related risks in their risk management but efforts that attempt to predict climate change far into the future, fall outside the scope of their authority importantly, the level of speculation required in these models should highlight their arbitrary and capricious

vaccinnature at a time when our economy is suffering i expect the central bank to focus its time and resources on bringing inflation down, not on policy outside of its capacity i noted in my opening statement, a recent speech you've given about the state of the fed and how you should resist the temptation to broaden its scope and address social issues. do you agree that federal reserve does to the have the authority or statutory direction to use its monetary policy or supervisory tools to weigh into the esg or other climate policies >> i do. as you know, there is a tightly focused role that we do have that i believe that we have, but i would agree with your statement. >> mr. chairman, i have 20 seconds left i'm going to defer my earlier questions. >> thank you, senator scott. >> senator menendez is close here he is

senator rounds. >> thank you, mr. chairman mr. chairman, first of all, welcome. it's always good to have you in front of our economy as you know, both core and headline inflation have remained persistently elevated and over the past 12 months average hourly earnings fell by 1.8% about 4% since president biden took office. to make ends meet as prices increase more americans are leaning on credit cards. at the end of 2022, credit card debt hit a record of $930.6 billion, and 18.5% spike from a year earlier an average credit card balance rose to $5,805 over the past year, the fed has acted aggressively to tame inflation, and yet we are still seeing price increases as we've discussed this several times, i recognize it's been an ongoing discussion, but i

believe that this further proves that we have long been feeling the effects of a policy induced inflation resulting from decisions by the biden administration, primarily cutting off the resources necessary to improve an increase domestic energy production i continue to be concerned if you attempt to use the tools that are available at this time for the fed, i believe we're going to have a challenge to address specifically the challenges brought out when you have a policy promoting higher prices with regard to energy, as opposed to what you're trying to do which is to bring down the total overall costs. i wanted to ask, i guess, you're going to think this is something we've heard before, but do you believe that you currently have the monetary policy tools to actually reduce inflation? and i just put it in this perspective. in january of 2021, the cpi was

1.4% when the biden administration began. in january of 2022, and this is before the russian invasion of ukraine, cpi was at 7.5% today march of '22, cpi is 8.5%. wouldn't it be fair to assess a lot of policy or inflation we've seen here may very well be due to policy decisions by this administration >> senator, not for us to point fingers. our job is to use our tools. you asked whether we have the tools to get this job done, and we do over time. there are some things we can affect, but over time we can achieve 2% inflation and we will. >> in other words, you've got a limited number of tools available to you, and the limited number of tools that you have, are designed to impact simply the reduction in prices

and so forth, and yet if there are competing interests out there that are pushing prices higher, you don't have the wherewithal to decide one tool versus another based on whether it's policy induced or whether it is a matter of a shortage in supplies from outside or whether it's war related >> that's right. our tools essentially work on demand, moderating demand. so that's what we can do. >> so if there were policies in place that actually helped to reduce inflation, in other words, by that, i'm going to look at energy alone as a good example, if policies were in place that were actually allowing energy prices to come down in the united states, then you would have less of a need to use the very blunt tools that you do have right now with regard to increasing rate increases, that is a fair statement sir? >> in a sense it is. on energy -- >> i'm not trying get you into a policy discussion with what the president is doing on his energy

policy i just want to make it clear that you have to respond to what's in front of you, and it doesn't matter where the inflation is coming from or what's driving it up, you're simply trying to bring it back down to the 2% number, with the only tools that you've really got? >> yes i will say, on energy, energy has tended over time to fluctuate up and down and is not mainly affected by our tools, so the things we look at are really things that are tightly linked to demand and the u.s. economy those we can affect. >> just the fact that you've been increasing -- you've been increasing interest rates and yet inflation continues to ride up, would suggest, just as you've just indicated, that when you have high energy prices it's tough time pact that part of it with the monetary policy that you've got available to you? >> so we're really -- we focus on everything, but we also focus on core n particular, which doesn't include energy prices and what's happened is core inflation has come down, fwhouts where near as fast as we might

have hoped, and it has a long way to go. >> thank you one last question. last june, vice chairman of be supervision michael barr testified before the committee he would defend the use of the aggregation method as an alternative approach to the ics proposed as a final compatibility criteria set to come out later this year can you confirm that you share vice chair barr's views on this? >> i will confirm but get back to you on the status of that. >> thank you, thank you, mr. chairman. >> thanks, senator rounds. senator menendez from new jersey. >> mr. chairman, i want to take this moment to remind my colleagues that there are more than 62 million latinos that call the united states home. we are the largest minority group in the country we account for nearly 20% of the united states population we contribute almost $3 trillion in gdp latinos have no representation

in the federal reserve's leadership in the 109-year history of the federal reserve there has never, never been a single member of the board of governors or regional bank president who has the lived experience of being latino in the united states. in practice, that means that voices of nearly one-fifth of our country's people are repeatedly drowned out when the fed is making critical decisions on economic policy decisions that affect latino family can afford their first home, buying a job that pays a living wage, send their children to college, save for a comfortable retirement or get a loan to expand their business. right now the biden administration has a clear opportunity to make history with its next nomination to the board of governors it has identified a number of highly qualified latino candidates who have dedicated their careers to the fields of economics, who are committed to the fed's dual mandate, who will preserve the independence of the

central bank the administration has rightly nominated and advocated for a number of diverse candidates with similar qualifications at the fed and elsewhere. despite having five opportunities over the past two years to nominate a qualified latino economist to serve at the federal reserve, this administration has repeatedly chosen not to. representation or lack thereof does not happen by accident. it is a choice and i hope the administration makes the right choice with this nomination. mr. chairman, would you say that it is a truism that the united states dollar is the reserve of choice for the world >> yes, i would. >> and that brings us enormous benefits, does it not? >> yes, it does. >> 12 years ago, republican house brought us to the brink of defaulting on the debt for the first time in history of this

country, jeopardizing our credit in the world economy i'm getting a sense of deja vu because once again, republicans are recklessly demanding draconian spending cuts to programs that hardworking u.s. families rely on in exchange for allowing the treasury department to pay for spending that congress, including most of them, have already voted to authorize. do you want to talk about spending cuts, seems that the budget is the time to do that, but not to put the full faith and credit of the united states as risk. chairman powell, can you talk about the catastrophic damage a debt default would inflict on the economy? >> so i guess i will start, if i can, by saying these are matters between the executive branch and congress we do not seek to play a role in these policy issues. at the end of the day there's only one solution to this problem, and that is congress, whatever else may happen, will happen, but congress really needs to raise the debt ceiling.

that's the only way out in a timely way that allows us to pay all of our bills when do, and if we fail to do so, i think that consequences are hard to estimate but they could be extraordinarily averse -- adverse, and could do long-standing harm. >> well, i think that's a mild statement of what would happen i understand -- i didn't ask you to engage in congressional executive branch roles i asked you about the abstract question of what happens if you have a be debt default isn't even this constant fight putting into question the possibility that the united states will not honor its full faith and credit have consequences in the economy? >> in principle it could i think markets tend and observers tend to watch this and think it will work out, and it has in the past worked out so it needs to work out this time. >> seeing your testimony before

the committee, is it fair to say you'll do whatever is necessary to tame inflation? >> we have a -- we serve a dual mandate and we will do what we can, everything we can, to restore price stability while serving maximum employment. >> that means additional rate increases does it not? what other tool does it have >> we have the shrinkage of the balance sheet will continue to it's rate hikes. >> when does that part of doing anything necessary to tame inflation come into conflict with your other mandate of maximum employment >> not now when we have the lowest unemployment in 54 years, and where we have, you know, a labor market that is extremely tight, extremely, but in -- that time couldcome, but it really isn't now. we're very far from our price stability mandate and, in effect, the economy is past most

estimates of maximum employment. >> thank you, mr. chairman. >> thank you, senator menendez. >> senator kennedy of louisiana is recognized. >> thank you chairman powell, thank you for being here thank you to you and your team for helping to save the economy and the pandemic meltdown. for what it's worth i'm generally supportive of the actions of the fed right now, and i'm not going to ask you today to blame anybody when congress spend money, it stimulates the economy does it not? >> it would depend on whether that's funded by tax increases or not, so if there's a spending that's not accompanied by taxes would have a net at the margin stimulative effect. >> and when congress borrows money to spend even more, that

stimulates the economy even more, does it not? >> at the margin, yeah. >> okay. >> if congress reduced the rate of growth in its spending, and reduced the rate of growth in its debt accumulation, it would make your job easier in reducing inflation, would it not? >> i don't think fiscal policy right now is a big factor driving inflation at this moment, but it's absolutely essential we slow the pace of growth, particularly for the areas -- >> let's try to unpack this then i'm not trying to trick you. you're raising interest rates. you're raising interest rates to slow the economy, are you not? >> yes to cool the economy off.

>> one of the ways you measure your success, other than fluctuation and gross domestic product is the unemployment rate is it not? >> yes one of the measures. >> okay. so, in effect, ai'm not being critical, when you're slowing the economy you're trying to put people out of work that's your job, is it not >> not really. we're trying to price stability. >> you're trying to raise the unemployment rate. >> there are a lot of -- >> i know you don't like the phrase let me strike it you're trying to raise the unemployment rate, are you not >> no. we're not trying to raise it we're trying to realign supply and demand which could happen lieu channels, for example, just job openings. >> let me put it another way, okay the economists did a wonderful study. they looked at 10 disinflationary periods in america going back to the 1950s.

disinflation is what you're trying to do it's a slowing in the rate of inflation. am i right >> yes. >> in other words, prices don't go down. they just don't go up as fast? disinflation is when prices actually go down you're trying to achieve disinflation, are yo disinflation, are you not? >> yes, we are. >> based on history in the ten times that we got inflation down, disinflation since the 1950s, in order to reduce inflation by 2%, unemployment had to go up 3.6%. now, that's history, is it not >> i don't have the numbers in front of me but, yes, the standard has been there's been downturns when the fed is trying to reduce inflation. >> right now the current inflation is 6.4% and the currents unemployment rate is 3.4% now, if history is right, i'm not asking you to, again, blame

anybody, but if history is right, unless you get some help, in order to get inflation down from 6.4% to, let's say, 4.4%, the unemployment rate is going to have to rise to 7%, based on history? >> that's what the record would say. >> and to get inflation down to 2.2%, based on history, a immutable fact, unemployment would have to go to 10.6%, would it not >> i wouldn't -- i wouldn't -- >> that's what the record shows -- that's what history shows. >> yeah. i don't think that kind of a number is at all in -- >> i know you're reluctant to admit it, and you don't want to get in the middle of a policy dispute. but i think it's undeniable, it's undeniable that the only way we're going to get this sticky inflation down is to attack it on the monetary side, which you're doing, and on the

fiscal side, which means congress has got to reduce the rate of growth of spending and reduce the rate of growth -- of debt accumulation. now, i get that you don't want to get in the middle of that fight. but the more we help on the fiscal side, the fewer people you're going to have to put out of work, isn't that a fact >> please answer. >> sir >> it could work out that way. >> yes, sir. thank you. >> senator reed of rhode island is recognized. >> thank you, mr. chairman thank you for being here today we saw in the wake of covid the globalized supply chain disrupted significantly. and we're in the process, in some respects, of rebuilding the supply chain with emphasis on sourcing in the united states. what extent did that disruptive supply chain contribute to inflation? and to what extent will the new,

if you envision it, the new supply chain that is located in the united states and other friendly countries affect inflation? >> so, the initial outbreak of inflation was all about spending on goods where people couldn't spend on services. so, goods spending went way up and the global supply chain, many, many goods are imported. the global supply chain just collapsed. that was the source of the original inflation it has now spread over the last two years to housing, and also to the rest of the service sector to your question, we are seeing goods inflation has been coming down for some time now it's still too high but it's coming down. housing services is -- in the pipeline, you see the new leases being signed and what that tells su in the next 6 to 12 months, we will see that come down but this big service sector that's everything else, which is financial services, medical services, travel and leisure, all of thosethings, that's really where the -- that's the

source of the inflation we have you n-- now, that's where the challenge is now. >> is there anything you could do that would target that service area without affecting the other areas? >> there's not really. our monetary policy tools are famously powerful but blunt. >> a different topic that is, as you're probably aware, the fifth circuit delivered a ruling in the community financial services association versus cfpb that the cfpb's funding mechanism is unconstitution it's a bureau of the federal reserve. both board of governors and cfpb rely on the same source of funds and draw on those funds virtually the same way if the governor board would be found unconstitutional, what would the implication be for the country and monetary policy?

>> it would be very significant. i have to say, we have significant responsibilities, but i would be reluctant to comment on a case that's before the supreme court. >> but it is -- it is certainly something that you've had people examine for possible ram fictions >> yes central banks tend to be self-funding because of the way they work. that's a key factor of our independence >> we've gone back and forth on the impact of rate hikes on workers. you've indicated previously that wages have not been spiraling upwards, necessarily, and inflation are currently stable, but the impact on increased interest rates are usually felt more by low to moderate income people is there any way you can work yourself out of that dilemma >> so, where we are right now, of course, is very low

unemployment wages have been moderating and they've been doing so without softening in the labor market, without rising unemployment, really that's a good thing. so we really don't know. the current situation is a combination of more typical supply and demand issues and also just things we haven't seen before, like the war in ukraine, like the supply chains you mentioned. we have many unusual factors i don't think anybody knows with confidence how this is going to play out >> thank you very much, mr. chairman thank you. chairman >> thanks, senator reed. senator britt of alabama is recognized. >> thank you, mr. chairman chairman powell, it's great to have you here today. over the past two years we've seen the highest inflation of my lifetime driving up cost for american families across the board. according to the u.s. department of labor, the annual inflation rate in 2021 was 7%.

and in 2022 it was 6.5%. according to the u.s. department of agriculture, the cost of food went up 10% in 2022. and the real effects of that is moms and dads across this nation that are working to put food on the table for their kids, for their babies, had a harder time doing that this has devastated hard-working americans causing a kitchen table crisis in every corner of our country. as the price of food, energy and housing have all skyrocketed in response, the federal reserve has raised the federal reserve fund rate more than four percentage points. being far from transient, inflation has remained persistent, high and well above the fed's long-run goal of remaining under 2% in the coming year, what factors and indicators are you paying attention to as you and the federal open market committee decide on whether to increase

rates? >> so, i would say a couple things to that first, we're going to be looking at inflation in the three sectors i mentioned. the goods sector, the housing sector and then the broader service sector we need the inflation that's already under way in the goods sector to continue and that's really important. in the housing sector, we just need the time to pass so that that reported inflation comes down and it's effectively in the pipeline as long as new leases are being signed at relatively small increases. we'll be watching very, very carefully, though, at the larger service sector, which is 56% of consumer spending and more than that of what's currently inflation. so, that's one thing we'll be watching very carefully. also we raised rates very quickly last year, and we know monetary tightening, policy has delayed effects, it takes a while for full effects to be seen in economic activity

inflation, so we're watching carefully to see those effects coming into play and we're aware that we haven't seen the full effects yet and we're taking that into account as we think about rate hikes. >> so, when you're looking at this, obviously not to get into a policy discussion, but if there were an increase of energy production in this country, do you feel like that would help drive down inflation >> well, i think over time more energy would mean lower energy prices we are very focused on what we call core inflation because that really -- that is what is driven by -- really by demand our tools are aimed at demand. >> understood. but i feel like the cost of energy is not what you pay at the pump it affects every good across this nation. i would like to ask you about labor participation. when you look at the unemployment rate, and we've heard my colleagues discuss people having to be displaced in order for us to maybe get to the inflation rate that we would like as a nation, i would like

to focus on labor participation rate right now it's 62.4% if there were a an increase and people coming back into the workforce, would that drive us down to the 2% you would like to achieve? >> remember, those people coming into jobs, that would be great because the economy clearly wants more people than are currently working. of course, those people would spend more so it wouldn't be a zero sum game, but it would be great for them and the country if they would come to the workforce. >> amen. i believe increase in capital requirements on financial institutions would have a chilling effect on the economy and the availability of financial services last week i joined many of my colleagues sending you a letter that if the federal reserve decides to have a wholistic review of capital standards as we heard senator scott talk about earlier. is the federal reserve concerned that the impact of economy of increasing capital requirements on financial