brian sullivan, star of tonight's big debut. it's wednesday, march 8th, and "squawk box" begins right now. ♪ good morning, everybody. welcome to "squawk box" here on cnbc we're live from the nasdaq market site in times square. i'm becky quick along with joe kernen andrew is off today. let's take a look at things. new day, new beginnings, believe it or not. you're going to see right now the dow futures are up by about 47 points, the s&p futures up by 7, the nasdaq up by 3. yeah this all comes after jay powell's congressional testimony sent stocks skidding

treasury yields roaring higher here's what he had to say. >> the latest economic data have come in stronger than expected which suggests the ultimate interest rate is likely to be higher than previously anticipated. if the totality of the data were to indicate that faster tightening is warranted, we'd be prepared to increase the pace of rate hikes. >> game on from the fed chair. stocks actually tumbled after those comments the dow closed 575 points lower. it actually closed below its 500-day moving average the s&p was down by 1.5% the nasdaq was down by 1.25% and then you've got treasury yields all of a sudden, the 2-year skyrocketing you see the yield at 5.041%. the 10-year, 3.976%. here's the big deal. you're talking 500 basis points. that 's the highest we've seen

since 1981 >> the more you raise short rates, the more effect it has on the economy, which makes you think that essentially -- >> here comes the recession. it's not always right, but it's the steepest we've seen since '81, more than 40 years 4rks 2 years. >> he'll testify some more and then we'll talk. >> a lot of things to think about. jay powell will be testifying tore remember yesterday was the senate the chair of the house financial services committee, representative patrick mchenry is going to be joining us at 8:00 a.m. eastern. i can't wait to hear what he thinks about this. >> give me liberty or death. >> different. >> he's the son of -- no, mchenry is the son of. >> son of son of son of. >> mchenry means son of. i'd ask him that, but i think no

relation to patrick. so many things to think about. maybe mester was ride. now he's saying, maybe we should have gone 50 i understand we've always said if you take men sillen, you don't keep taking quarter doses if you've got something, so get there faster i thought -- and i would defend them, you don't want to get there faster because you're waiting for data to come in. >> you don't want to overreach. >> you don't want to overreach. >> yeah. >> the other thing i immediately thought of was, okay, how much does he know about friday? >> if you believe him. he was interviewed, i think, at the washington economic club recently i think if you believe what he said there, sometimes he may find out a few hours in advance. he does not know at a this point. >> what does he know, dribs and drabs about next week's cpi and ppi? >> no more than others he'd probably read in and not to mention a lot of different companies talk to all the

different fed heads, the different regional banks so they know those things. they know more than we do just because -- >> okay. what he's saying now is based on -- >> what we already know. >> -- what we already know. >> yeah. >> okay. >> is there potential hope for a what we see? >> maybe we shouldn't assume that it's going to be really bad. we know -- we've heard -- i don't think that he deliberately would try to knock the stockmarket down, but we have heard people say, look, you don't want to -- it's inflationary, makes people feel good, like they have more money. because they're working on it, they're not disappointed when it recalibrates if you look at it, here we are back to around 400 s&p they're doing a very good job of threading the needle you

don't want to have october lows revisited, but you don't want things getting out of hand all in all, it looks like they're trying to walk the fine line to a soft landing the "journal" today has a key piece, keep it up, jay powell. this is your job they're pointing out and driving home it really is a service side, and that's different this time housing is going to be a mess. i don't think you're seeing input costs necessarily. commodity prices aren't the problem. it really is people going out, people going to restaurants, people flying on planes, needing to hire people and pay them more to service all these people who want to go out and do these things so it's pandemic-related, but now maybe i'm going to become a believer this really is an issue with service because when you get the wage price where people keep asking for more money with wages, that's when things can

spiral. >> i'll slightly take the other side of that if it really is services and people thinking i want to go out and get all these things, if they run out of excess cash like a lot of bankers told us they will probably by this summer, that could solve part of the problem itself, but i don't think the fed can be complaisant in the meantime. the expectations are at this point they'll exceed 50 basis points when they meet later this month or next month. >> do you think it really reflects 600 points down on the dow? then, again, we just talked about it in the immersion it does. >> it means they're going to have to do an about-face. >> if it gets to a 150-basis-point inversion s that just a hard landing? >> when's the last time? >> i don't know. we're over 100 now is that saying, all right, it's going be a hard landing, there's

going to be a recession. we don't have one now, that's for sure do you want one to come? >> if it means it gets us back to equilibrium, right? you don't want things to get too far out of line in any sort of situation. that means keeping things in the lane. >> it's a sophie's choice for those affected the most. >> we're going bo-to-be back with bad unemployment rates. >> you don't want people unemployed 5%, 6%. >> but you don't want the wage increases to be -- you don't want the standard of living to go down essentially. >> starbucks doesn't help with the price they charge for coffee that's my segue. ceo howard schultz, in tough times you don't pay 5 bucks for a cup of coffee. >> no. >> you don't need olive oil and corn pop -- what was it?

golden foam. >> no. >> yes. >> you're lying. >> no. >> who's doing golden foam >> olive oil -- >> it's not actual gold. >> no, no, no. it's -- you -- >> they took the beans and put olive oil on it? >> no, olive oil infused coffee. it sounds gross to me. that was a big thing when you were out >> i didn't know about that. did you remember ten years ago, eight years ago when we were at smy still over by 30 rock, the whole thing was butter in your coffee >> was it? >> do you remember that. >> no. >> this is similar we almost sent someone over. i think it was introduced over in europe. we almost sent someone over to be there when they introduced this whole new thing

nope 's like 2.0. >> do you use that as a counter? >> it has health benefits. >> do you use that as a counter trend where we're headed when people started putting gold flakes on their sundaes. >> it's olive oil. >> it looks like a sign of excess. >> it's more expensive and, oh, if calories, another 160 calories >> it adds 160 calories? >> but it's healthy. it's the right type of fat. >> 160 calories. >> at the time, i said if the barista serves me coffee with the golden foam on it, i'm sending it back. that's just me i don't want golden foam on my coffee >> it's just olive oil drink up. ceo howard schultz has agreed to testify. >> don't eat yellow snow. >> yeah.

that decision came you were out that week it was a long -- yeah, starbucks, big intro it came as -- >> not as big as this intro. >> ber any sanders was scheduled to vote on whether to subpoena schultz who previously declined a request to appear, in a statement starbucks said through the agreement reached today, our testimony will seek to foster a better understanding of our partner's first call carmen wong ulrich tur and priorities. 290 starbucks locations have voted to eunize, but none of the stores have agreed to a contract with starbucks yet >> do you know what that reminds me of? olestra. >> does anyone use olestra >> no, i don't think so. it got too much bad pr from the anal leakage. >> i wasn't going to say that

again, but that is exactly what -- yeah. >> olito i want to come up with a different name it was only in high dosages. >> a net subordinate went in and said, hey, i've got a great idea, i've got this come bound boss wow, that soups too sweet to be true, well, let's go with it coming up -- >> alito shaken golden foam brew. >> golden foam. >> i'm looking at the picture. it's not really golden. >> it's the term golden foam. >> there it is it looks pretty good when using golden foam i think of yes yellow snow. >> yellow snow, i know coming up, we're going to talk about the movie on sundries following fed chair -- >> you missed me, didn't you >> i for investigate this whole

story. it was a little bit hard. and we're going to get you ready for his testimony before the house committee today. committee chair patrick mchenry is going to join us at 6:30 a.m. eastern on what he plans >> announcer: this cnbc program is sponsored by baird. visit bairdifference.com adapts to different oxygen levels and starved it. i am here because they switched off egfr gene mutation and stopped the growth of tumor cells. there's a place that's making one advanced cancer discovery after another for 75 years. i am here... i am here.... because of dana-farber. what we do here changes lives everywhere. i am here. what do you see on the horizon?

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topping 5% for the first time since july of 2007 and the inversion with the ten-year, its widest since 1981. i said before, if you're watching something other than this show, you're not really hearing about inversions, but it may not be for everyone, but it should be. james camp is going to tell us why. he's managing direct at eagle asset management in inversions, jarjs like everything else, they may be overpredicted recessions, but the logic of why it happens does make you think there's a slowdown coming because in the long end, there's so much lower in yield than the short end, it looks like long-term the fed is going to be successful in orchestrating a slowdown is that how we should view it? >> yeah. i think yield curves have a pretty good track record of

predicting slowdowns and recessions as you mentioned, the three-month to 10-year started in october it's usually the start of the three 10s and the recession, which would put you somewhere in the third and fourth quarter of this year. >> do you think, james, the resiliency we've seen in the labor market, even in the stocks and the stockmarket, which some people say isn't listening to jay powell, is that good or bad? doesn't that allow the fed to do its work and maybe thread the needle to a soft landing, o sit bad the economy is staying so strong because it means we're going higher and longer? >> i think the markets misread powell all along and yesterday's comments were trying to put a damper on risk assets at the start of the year. at the end of the day, inflation is the biggest it's progressive, affects everybody.

powell is going to sacrifice other parts of mandate, and i would argue a third part has been missed prices to get it back to a long-term trend. et that's going to take a heavy lift and it will have to be higher and considerably longer than people were originally ready to believe. >> the chance for 50 basis points next time is what in your view >> 50-50 and if he goes -- if the committee goes 50, it's going to be a cob session that the february move was a mistake, so i think it really is going to be a very interesting, you know, series of meetings here coming up our take on where the fed ends up has always been in the 5.5 and 75% rairng that probably peaks around june, joe. the reason we say that, we're going to get some pretty easy cops on the headline funds they're not going to be materially slowing over the next quarter or two and that keyeds the fed on the brakes for a while. >> we thought we were in a

period before friday and before next week with the inflation d data we didn't have a lot to go on other than housing i was optimistic the number may start cooling. i was optimistic that whatever fed chair powell is seeing might not indicate what he said yesterday. do you think he has intermediate data points that he's been getting about inflation? i was going to wait until next week do you think he knows things about those numbers, or do you think he has an idea that this friday number is going to be pretty sharp, door you think he's basing everything on the rearview mirror that he said yesterday? >> i think forward looking inflation data is going to look like it has inflation data to i. by the way, i think that's a very good thing. we probably would have a lot of people, and rents around the country are pretty prohibitive for most it's always a precursor.

but having said that, the labor market tight in wages and all those things, we're hearing from margins pressing we're hearing on higher and higher labor costs coming through, and i think the labor market tightness and the wave inertia, if you will, of that, is pretty sticky. >> james, actually the strong labor market, the higher wages that they're seeing could actually mean that rents don't continue to slow down or they pick back up i've read some stuff recently about that. >> becky, you're quite right the extrapolation in any economic data series is always dangerous i can see the labor market is confusing. there's a lot of disparate issues going on there. part of it is, frankly, getting people back to work, the engagement, and breeze into, you know, more travel and leisure and the like and that's a process that continues and

creates friction friction means higher costs. >> james, thank you. have we talked before? >> i've had the pleasure of joining you both on set a couple of times, so it's good to see you both again. >> good to see you too. >> at the nasdaq >> we were in your studios unless you've moved in the last year or two. >> we were upstairs. we're downstairs now. >> we'll check back with you in a couple -- who knows when. >> we'll look forward to whenever that happens. you all be well and have a great rest of the week. when we come back, a new report on a growing trend in the u.s. economy single women have taken an outsized role in the labor force, but the pay gap with single men has actually widened in the last decade we've got more on that story next. at 7:00 a.m. we'll talk about the sell off yesterday

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a new survey out today from wells fargo shows that single women are becoming a more influential part of the american economy and yet their increased impact on the jobs market has still not improved the pay gap in relation to men, meaning that single women often remain more financially fragile than other parts of the population. joining us now with details from that report is sarah house lay this out what exactly do the numbers show >> right so what we see is single women are a growing share of the u.s. population, so they've outpaced the growth in single men in the past decade. they've outpaced the general population as well and really where the growth is coming from, it's from the rise of nerve married women so the fact that women are increasingly marrying later and also not marrying at all, you've

seen the overall share of -- or at least the overial number single women is up 20% and that's having repercussions on their financial arrange managements and with the labor market as well. >> i'm looking at the numbers. never married women working full time earned 92.1% of what the men earned what do you think happened >> well, i think part of the better pay gap that we saw around 2012 reflected just how dower the situation was for male-dominated industry like construction and more manufacturing. but when we look at where we were before the great recession, it's really little change. i think particularly when it comes to never married women who have taken less time out of the work force it speaks to the

persistent factors out of the pay gap, like which industries women are going into and perhaps it's why industries pay less and why women are going into those industries. >> why do you think that is? i think that makes a big difference it's one thing to say they're earning less it's different when think go into different industries whoochl i do you think they go into difference industries >> i think it has to do with how they're encouraged along the way. in school, for example, they don't always get the mentorship that men do, some of the encouragement to go into some of these better paying s.t.e.m. industries some of that's beginning to change. i think part of it could be cultural in terms of when you have a very male-dominated industry it can be an intimidating place for women to go into but even when we see women make inroads into certain industries, we see the relative pay of those industries go down versus industry as the are still largely dominated by men so there seems to be something that the literature shows that women's work just tends to not be valued as much, which leads

to this persistent pay gap, and can make it difficult for women to build wealth and also spend as much as single men. >> some of the more recent studies i've seen looking at populations show women are outpaining men when it comes to college. so it's probably not an education system, sit, or sit -- college is one thing, but if you want to break it down by liberal arts versus s.t.e.m., maybe that shows a different picture? >> i think that's part of it we've seen it as one thing that helps contribute to the narrow pay gap in recent years, but it still comes down to what is the degree of the industries that women are going into, so i think the educational aspect of this has been a help, but it hasn't been a panacea to the wage gap by any means >> okay. sarah, thank you all right, coming up, the

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good morning and welcome back to "squawk box. we're live from the nasdaq market at time square. the future looking different after a big drop yesterday the dow dropped more than 500 points down. you're going to see right now it's indicated up by about 51 points the s&p indicated up by 7, the nasdaq indicated up by 37. fed chair jay powell, he's on capitol hill. this week he told the senate yesterday the fed's prepared to speed up rate hikes if needed.

>> the latest economic data have come in stronger than expected, which suggests that the ultimate level of interest rates is likely to be higher than previously anticipated if the totality of the data were to indicate that faster tightening is warranted, we would be prepared to increase the pace of rate hikes. >> he'll be back for another day of round 2 in front of the house financial services committee joining us now is patrick mchenry, chairman of the financial services committee what did you make from yesterday's testimony? he giveth, he taketh away. maybe it will be a different message. maybe he'll be the good cop today, congressman, or do you think what he said yesterday was needed medicine for the markets? >> i think it's needed medicine. the main thing is the main thing to the fed they have to tackle inflation and return to price stability. look at the cost of food for the average american family. look at the cost of goods that

every american family uses dramatically up. inflation and inflationary policies have a massive negative economic impact and we have to address that, and the fed has to be laser focused on its job number one, which is price developing. >> it reminds me of trying to figure out where the covid -- where the coronavirus came from. a lot of people said we don't need to know why do we keep looking in the pachlt i can't help it with inflation either i'm going to ask you because i think it's important why we're here because it matters. is it because of the reopening after the pandemic and now we've seen that everyone wants to go out and a lot of those industries didn't have enough people, so you're trying to bring them back after a lot of people retired that's one thing or is it -- and i'm going to ask leader jeffries. i'm going to to have him on later in the show. do you think spending -- let's see. i guess the deficit, we added $16 trillion to the deficit in

the last six years so under trump, $8 trillion, and in the two years -- you can check my number. two years under president biden. so 16 trillion, and the fed enabled that obviously with rates so low is. that why we're where we are, or do you think it has to do with the putin price hike or whatever externals we had >> we had higher inflation coming out of covid as a direct result of transfer payments from the federal government those things that were enacted by democrats controlling the house, the senate, the white house, fueled the economy. that put jet fuel on already hot economy coming out of covid and that's why our experience of inflation was greater than any of our peers in the globe -- across the globe that was the additional items of federal spending coming from the house, the senate, the white

house controlled and unified approach by democrats. those partisan bills have inflamed inflation and made the fed's job much more complicated. i think we would have -- we would see high inflation coming out of covid like the rest of the world, but nothing to the tune of what we're currently seeing and so it is -- the brunt of inflation is borne by my colleagues who spent $5 trillion. >> let's say you run up the deficit with tax cuts or increase the deficit with tax cuts. >> this is not true. we actually have higher tax rates -- we actually have 1.9 trillion dollar higher tax revenue than before -- >> right. >> $900 million more. >> it didn't activate the cuts >> we actually have higher revenue today than before the tax cuts and jobs act by the tune of $1.9 trillion, and even

in washington, that's a massive amount of money. so this whole thing about blaming it on the tax cuts is patently absurd. it has nothing to do with i. it has everything to do with the spending. >> it did add to the deficit and if you believe the $31 trillion and the interest payments on the $32 trillion is part of the reason, you know, that we're sort of in this mess, you know, it doesn't really matter where the deficits come from, i don't think. it's just that i know we're going to hear from viewers, you let these republicans talk about what we did the last two years, and it was a lot of spending in the previous forum t previous administration go ahead >> yes and look there's bipartisan blame for overspending, but what we've seen in the last two years is record spending. the last congress spent more money than any congress on record then they're saying the republicans want to cut taxes. look, the tax cut and jobs act more than paid for itself. we have higher revenue today

than before the tax cuts and jobs act and $900 billion higher than the ceo predicted we would have in federal revenue this year so we don't have a tax problem we have a spending problem what we're going to hear from the president is we need to raise taxes and dramatically increase spending. that's what his budget is going to say when it's released tomorrow. >> when would you say enough i think the infrastructure bill was bipartisan, right? and i think part of the american rescue plan, was that totally all democrats, congressman >> the inflation reduction act and the -- >> inflation reduction -- >> it was already on the bills. >> right so when the c.h.i.p.s. act -- i don't know about that. did you go for that, the c.h.i.p.s. act >> no. so we have $4 trillion in two partisan bills, inflation reduction act and the american

rescue plan. these were on partisan lines, and that' increased spending ata substantial amount it's up 40% from precovid. so we have to take stock of our fiscal house we have to take stock of our spending we have to have a holistic review of the social safety net programs to make sure they're solid for long term. we've got important fiscal house work to be done. >> president biden is going to say, okay, we're going to raise medicare taxes on people who make over $400,000, i don't know we're going to do some things with pharmaceutical prices, and the problem is fixed but the journal kind of takes them to task on. that it's not one thing about the underlying problem that's addressed, and this isn't going to work. we're going to have the same problem again. you can't keep raising taxes on people who make over $400,000 to pay for everything it doesn't work that way what should we do? >> no. and in a competitive world, we shouldn't turn to tax increases.

we've got to make sure we outgrow our way through this deficit challenge. that means we've got to focus on economic growth for the long term that means smart policies, bring it to a reform to enhance our growth we need to really focus on that to compete with china for the next generation. >> so when we have leader jeffries on, i'm looking forward to it. if you have a good question, i'll play the sound bite for him. you guys all like each other sort of. it's weird you do have some differing opinions >> we like each other. >> huh >> we like each other. >> yeah. somehow it happens. >> we can have disagreements i love seeing you all disagree it's fun to like each other, have mutual respect to have mutual debates with like to have real debates here in washington. >> i'm just telling you, when

leader jeffries comes on, the stuff he says is going to be so different from what you just told us that it's going to be almost a parallel universe, and i don't know what viewers at home are supposed to do. so what's your reaction? >> i look forward to -- >> let's give him a tough question let's put him on the spot. and next time i'll put you on the spot. >> sure. we can try. >> how can we put leader jeffries on the spot. >> do you think you own the results of the economy you can't just pick and choose you can't say i like the good bits and i don't like the bad bits the bad bits right now are inflation, and that's all i hear about when i'm traveling and when i'm at home so inflation is the number one economic issue that the american people are facing and it's solely at the foot of unified democrat control here in washington in my view. >> we're going to hear -- what i keep hearing, is we reduced -- we'll let the president speak.

we've reduced the deficit in record amounts by not spending a bunch of pandemic relief it's hard to cut a $4 trillion deficit. we've added more jobs than anybody else ever in history, and really we're now above where we were prepandemic. i don't know if that's creating jobs when people come back to work. >> right this is like an adult showing up at a little league game and saying they can crush them, right? we're coming off the pandemic in federal closures of the economy, and you're saying, wow, we created new jobs i mean, come on. give me a break. when you say we went from record deficits when the economy is shut down? i mean give me a break so some of these things are just cherry picked. the same political trite that we always get out of washington, people are sick of this. the fact is we have a crucial problem and an economic challenge. >> that's perfect.

the last three sentences, maybe we'll pay. is that too tough for leader jeffries >> look, we can have big disagreements and we do. i don't think we should have financial regulators doing social policy. i don't think they should be doing climate policy i'd like to have that debate what we know about the two parties is republicans doan want to raise taxes, democrats do democrats want to raise spending, republicans don't. and i think these things are the crux of the big economic debate, but we have a lot of other things to focus on in congress as well. >> great having you on, congressman, as always watch. you're going to see yourself i'm going to try to do that if we have time. >> for better, for worse. >> see you later, thank you. when we come back, we're going to to talk to house minority leader hakeem jeffries as we mentioned. that's coming up at 8:00 a.m.

eastern time we'll talk about jay powell's testimony, the debt limit, and what he thin autksbo what congressman mchenry said a reminder, you can get the podcast on your favorite podcast app and you can listen to us any time we'll be right back. se workday to transform your business. but it still doesn't make you a rock star. so unless you work with an actual rock star. hi, i'm ozwald. hello ozwald. pam, you are a rock- i wasn't going to say it. ♪♪

warren buffett's berkshire hathaway has added to its largest stake in occidental petroleum. berkshire bought nearly 5.8 million shares of oxy and a few trades on friday, monday, and tuesday, those purchases worth more than $350 million mark the first time since september that berkshire added to its stake it now owns 200.2 million shares worth $2 billion since yesterday's close. it has plans to buy another $5 billion worth of those shares.

on "squawk box" on monday, ox extend idental's ceo spoke with him >> i love listening to her. >> she's hard core she knows her stuff inside and out and knows the technicals of the business. >> she does. when you ask her some of the sort of out there low questions, she's like -- just like she's like, i'm not going to even address that we need buffett too. we need this stuff we need it please keep doing it if you like, you know, living in the 21st century instead of the 19th century, there are certain things we need we're not ready. you're going to have blackouts you're going to have people who really can't -- in less developed countries, if we go hard core, it's going to be

rough. it's going to be rough for a lot of places. >> what i like about vicki, she understands technicals she's done every single one of those jobs. >> she was pretty blunt, too, and didn't mince words i was impressed with her warren is too. the biggest holdings, huh? >> yeah, it is. when we come back -- by the way, he said he bought all of those shares after listening to her conference call. you listen to the conference call he listens to that conference call and others. >> great minds i thought the same thing great minds. >> yeah. when we come back, elon musk says that twitter is close to being cash flow-positive we have that story after the break. and a programming note, yeah, get this big night. you can catch brian sullivan's new show it premieres tonight cnbc's "last call," it's going to explode the ierntsection of money, culture, and policy, at 7:00 p.m. eastern time

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the ftc is intensifying an investigation into twitter's data and privacy practices the probe focusing on whether twitter has enough resources to protect its users privacy after the mass layoffs and budget cuts ordered by elon musk after he took over the company. under a consent degree from 2011 it was expanded in 2022. twitter is required to conduct regular security audits and keep the ftc informed about how it handles sensitive data the agency is now questioning whether the company has enough staff and resources to keep that agreement. "the new york times" reports that the ftc has requested a conversation with musk and has sought to interview former twitter employees who worked on privacy and security at the company. meantime a house subcommittee released a staff report last night accusing the ftc of

overreaching and harassing elon musk's twitter that aligned with musk's comments yesterday in a tweet he described the probe as a shameful case of weaponization of a government agency for political purposes and suppression of the truth i've got to tell you, that's initially -- you can say we're worried about privacy, but that looks like a trojan horse to me that they think there's not enough censorship. it kills certain parts of the political class that they don't -- god, it was such a great thing to have when they had all those allies in twitter. completely suppressing anything that a certain segment of the political section wants to come out. okay, we'll do that, yeah. and now those people are gone and they don't have the censorship that would be great. if you could control every major media organization and just have them report what they want. >> there's all kinds of things

we're hearing about what major media organizations have -- >> i was thinking about that every time -- and there's an article in "the journal" today from homan jenkins he's pointing out, say what you will about fox their anchors there at least had an idea what was going on. you look at other things on the left, the crazy stuff, they didn't even look at themselves about whether it was true or not. they didn't look at themselves about collusion. they don't even ask questions about the 51 people. oh, it's russian disinformation. they have never copped to it they have never copped to it >> we're not going to get to talk to her but -- >> i think physician heal thyself. the left is in no position to throw stones. >> all i would say is it's pretty ugly when you see behind the scenes what happened. >> two years we thought trump was putin's guy. two years adam schiff told us

that and not one mainstream media outfit questioned anyone michael avenatti was on with that guy at cnn 92 times brian stelter in charge of his presidential campaign, do you know >> that i don't know. let's get back to yesterday's powell-fueled sell-off joining us is the markets reporter at "the wall street journal" and cnbc contributor. man, you can look at the markets or look at the equity markets or look at what happened with treasuries this is getting increasingly pressing when you look at that -- the spread between the 2s and the 10s, over 100 basis points i think it was 106 this morning. >> that's right, becky what a remarkable move in the treasury market. i think you're right, that's not the only thing you need to look at this morning. i think what it's telling you is that the market's ongoing game of chicken with the fed has come to an end. treasury investors, stock investors have been forced to take powell at his word and have

come to terms with the idea that the fed is going to raise interest rates higher than they initially thought. at the end of the testimony yesterday, investors were saying, look, we think rates are going to go to the 5.5 to 5.75% range. that's significantly higher than what people were pricing in just at the start of this year. >> so what do you think, though? the market is finally buying what jay powell is saying. what happens if we get maybe a cooler number when it comes to the jobs report on friday or a cooler number when you're looking at inflation next week do we change our minds again two case scenarios one is we get numbers in line or cooler and the other is we get numbers that are hotter than expected how does it play out in the market in each of those scenarios? >> i think we've upped the ante for every single one of these reports. the jobs report or even the testimony in a few hours which traders will be glued to

what we have learned is the bar is lower to accelerate the pace of federal rate hikes. i think what we're seeing is investors coming to the terms with the idea that u.s. stocks are just not the only game in town anymore you have treasuries. you have money markets at 4% and we've seen that in the stock market this year where i think investors are getting tired of buying every small dip in the market as they were for much of 2021 and 2022. for example, investors have pulled money from u.s. equity funds for nine straight weeks to start the year that's the fastest pace since 2016 i think that's one key thing to watch the rest of the year. >> thanks a lot. good to see you. and furthermore -- >> we're at the end of the hour. >> fox news exposes dimma lea of pos post-objectivity journalism.

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bouncing back a little bit, just a little bit after a big drop yesterday. china warns of a path to conflict and confrontation with the united states. we will talk to former commerce secretary penny pritzker about the president's push to complete and decouple. plus taxing those making $400,000 a year or more to help fund medicare. we will debate the president's proposal the second hour of "squawk box" begins right now. good morning and welcome back to "squawk box" here on cnbc live from the nasdaq market site in times square i'm joe kernen along with becky quick. andrew is off today. becky now agrees with me -- >> no, no, no, no, no, no. no, no, no, no, no

i agree with the way you said it just now >> i'm not defending fox news. >> when you put it in that context, what we're reading right now. >> homan jenkins, he's not defending fox news either. he's just saying in an era of post-objectivity journalism, which "the new york times" ushered in because you needed it with a guy like trump. you don't need to be objective with someone so evil in their view, they ushered it in this is what you get >> look, he is defending fox by saying that. >> no, not really. he's saying that none of the people that did all of this other crazy stuff ever copped to it was wrong never have any self-introspection that you're right. >> and my legal point was the legal defense is -- >> it's not a false kwifequival. the futures are up 17 points if

you need to know on the dow. >> by the way, the dow was off yesterday by more than 500 points a lot of concern about what fed chair jay powell said when he indicated that the central bank would consider speeding up the rate of rate hikes steve liesman has dissected every angle of this and he joins us right now with more on what this all means that was something to sit and watch. even those of us who were expecting a little tougher tone probably weren't expecting that tough of a tone, steve. >> yeah, i had a lot of these on my bingo card but not necessarily a clear statement that the pace of rate hikes could increase and he made clear that a higher funds rate is likely and the fed will stay there for some time and the fed could hike at a faster pace. here's a look, we're calling this, becky, the fedo meter, showing the outlook for the pace, level of hikes we have a 56% probability of a hike the peak funds rate seen at

5.63 that is 16 basis points higher than it was before the speech. all we know about duration is he and other fed officials have said this, they intend to remain restrictive for some time. we'll update this as kata comes in so the focus on wall street is what does the data have to look like for the fed to hike 50? is it now the default position barclays says the bar for march is lower a jobs number above 200,000 would be enough for that 50 and to raise the fed projection from 5.13 to 5.60 over at evercore our friend says we still lean 25 because we think the next batch of data will be sufficiently cooler and the fed will apply a reasonable standard for evaluating this evercore's comments emphasized what powell made clear the decision is not preset, it depends on the data.

that depends on jobs on friday, inflation next week, retail sales. does powell need to walk back or soften what he said yesterday? i think given that most important part of the remarks were in the statement, i don't think he's got anything to walk back joe? >> we had a long discussion about all of this. i was looking forward to talking to you about it because you would know aren't there little dribs and drabs of inflation data that jay powell might know that the rest of us don't know, or not if he was more hawkish, and there are some people who said that he didn't say anything that new yesterday. but if he did say something new is because he knows stuff about what's coming or is it just sufficient with what he has already seen for the past month that he got that way, do you think? >> i don't think he has information we don't have. i reported before that the fed might get a piece of the employment report earlier in the

week because it needs it to calculate another piece of data that it puts on. but he does not, i don't believe, get a look at that jobs number until thursday night before the number comes out. >> what about weekly inflation data from specific areas, like whether it's services or any of that. >> yeah. >> would he know if the pce was going to stay much hotter than we thought or reaccelerating would he know that right now >> i don't think so, joe what i've tried to do is to kind of bring forward some of the high frequency data that i know the fed is looking at. >> yeah. >> none of it is official data there is some high frequency inflation data we report on that. there's high frequency employment data, we report on that they have some conduits to some credit card data that we don't have but we do have some high frequency credit card data to answer the question more fully, what he said in any event was there were two things that moved him to where he is now

one was the strength of the january data that appears to have gone into february. but a bigger part was the revisions which told us that the progress that we thought had been made on inflation really was revised away there were a lot of folks, including myself, that looked at the three-month annualized inflation rate which had been going down for six months and said you know what we have to do something. this shows the fed is being too tight and too hawkish. turns out that was not the case, a lot of that progress was revised away >> all right, steve, leave your ifb in, mohammed is here ifb is this thing in your ear. let's bring in mohammed alarian. i don't know whether all things changed yesterday, probably didn't change for you, you've been pretty hawkish.

but for me the reason they were going 25 basis points is because they were data dependent and that sort of threw me for a loop yesterday you would take the full dose of an antibiotic. you wouldn't take it in a piecemeal fashion if you wanted to take care of something. they were obviously doing it, you know, in 25 basis point moves. now they're saying maybe we need 50 so they're no longer data dependent or do they know something? >> joe, they are excessively data dependent, excessively so t you get flip-flopping. >> something is going on with your audio i got most of that, mohammed we're going to keep trying but if they were data dependent all along, how did they get down to 25 basis points was that a mistake that they

only went 25 last time >> it was a mistake and i told you that before they went 25 i told you they should keep at 50 >> so at this point you think faster hikes and a higher terminal rate or can we just go faster to get to, you know, hopefully not 6.5% do you think 5.5 does it and we get there quicker? >> so they have a dilemma now, joe, what do we do now if you go back to 50, you're negating all the policy guidance you gave a month ago if you stay at 25, you fall further behind on the inflation front. so it's a situation, it's a hole they have dug for themselves they have to quit digging. the whole point of forward politic guidance is for smooth market adjustments

that's why the fed is so transparent. instead since the day after the fomc meeting, what has happened? the 2-year has moved by over 100 basis points the 2/10 has inverted by another 40 basis points to levels we haven't seen since 1981 and all the narrative of this inflation has been replaced by, and i quote chair powell here, us being very far away from price stability. that's not a way to run monetary policy, and they need better strategic and structural anchoring of what they're doing. >> steve wants to ask a question and then you need to tell me just how bad that inversion -- what that is forecasting for the overall economy. i think it just makes it tough to envision a soft landing, but go ahead, steve. >> mohammed, i was just going to ask how -- i don't know quite how to put this. do you give the fed any leeway because of the dramatic revisions to the data?

i get what you're saying, it would be nice if things were smooth and i completely agree with what you're saying regarding the idea that policy guidance should make things smoother and give the market time but you know what, things change, and the fed changed pa because things changed and if they didn't, i think you'd say they didn't pay attention to the data. how would you respond to that? >> first, they knew that before they downshifted to 25 that didn't stop them from downshifting to 25 first thing, that's just a fact. the second thing is also a fact that new monetary framework adopted in 2020 is a world of insufficient aggregate demand. we are in a world of insufficient aggregate supply. so they lack the framework for monetary policy. thirdly, a risk assessment approach to policy at the last meeting, and that's what i said with you and wrote it before the meeting, would have suggested that the balance of risk is such that it's better to keep 50 than

to go to 25 prematurely. so, steve, i am very sympathetic with how fluid the economic situation is i'm very sympathetic with how difficult it is to exit a regime of suppression but let's not have a new layer of policy induced volatility on top of these things, and that's what we're getting it's flip-flopping of policy guidance >> i agree with your points two and three, i just think there was a lot they didn't know in december and i guess in january your point is that they had an idea that things were strengthening as well. i don't really have much of an argument, except that for almost everybody involved, every forecaster, every wall street person i talk to, the strength of the economy, the persistence of inflation has been a surprise to them. >> yeah, and, steve, you've

heard me say inflation is going to prove sticky because the world we're living in is a world of problems on the supply side the labor market is not functioning the way we want to see it functioning supply chains are being rewired. globalization is changing. these things are real, these things are multi year, and that's the reality we're living in so, you know, we can be excessively data dependent but mustn't lose sight of the bigger context, otherwise we're going to continue to confuse markets, continue to confuse companies, and the result of that, to go back to joe's question on the curve inversion, is we're going to have a recession made at the fed. there's no reason why the u.s. economy should go into recession other than a fed policy mistake. >> every time we get excited about the 10-year, steve, not going to 5%, it's like doesn't it say really scary things about

what might be coming this way, something wicked this way comes? do you view it that way, steve >> no, it does and i just want to say i really like mohammed's risk management idea that the fed, because the risk was to higher inflation, should not downshift i have not thought that through and i think that's a compelling argument >> yeah. >> we can have discussion and debate and i can change my mind. isn't that the way things are supposed to work >> it is i just -- don't look for me to change my mind no, i do mohammed, thanks thank you, steve. up next, former commerce secretary, penny pritzker, on u.s./china decoupling and the president's plan to tighten investments in china we'll be right back.

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the chinese foreign minister warning that the united states and china or on a path toward what he calls conflict and confrontation unless the united states changes course. for more on the impact on business we want to bring in former u.s. commerce secretary penny pritzker she's the founder and chairman of psp partners and the chair of the smithsonian women's history advisory council secretary pritzker, it's good to see you this morning thanks for being here. >> thank you for having me, becky. it's great to be here on international women's day and it's great to talk about the smithsonian american women's history museum this is a new project on the mall for the smithsonian to create a museum to tell the st story of american women. too long american women have been portrayed in a supporting role to men. this is a highlight the role

that women have played as doctors, as lawyers, as scientists, as innovators, as entrepreneurs, as supreme court justices, as philanthropists, so we're very excited about that project so thanks for having me. >> glad to see you and i'm glad to hear about the project too. i want to talk to you about china today because this is front and center you know the chinese government very well. you know and have had a long relationship kind of watching things as they have changed over the years. i didn't realize, but you've been skeptical for quite a while about the relationship between china and the united states and have shown concerns. i read an article that you wrote back in 2018 that was based on what you saw changing in late 2016 maybe you can tell people about it you had who was the vice premier at that time of china over to visit and you sat down and had a very candid conversation over dinner with him. you warned him that what president trump had just done to get elected was in large part

based on issues that china had played a hand in do you want to lay out some of those concerns and what you told him at that point? >> the real challenge as i see it, becky, is, and as i explained then to the vice premier and then really believe now, china is our top economic competitor and what has happened over the years and has only heightened recently is there's a real lack of mutual trust between the two countries and that makes for a very dangerous situation not just economically but on the national security side and what you're seeing is a bleeding together, and this is what i predicted for the then vice premier, is that you'll see a bleeding together of our economic and national security issues and with the most recent incidences, whether it's the spy balloon incident or it's the declaration by china and russia that they have a no limits

partnership. and now the threats that are real as relates to certain technologies, particularly ones that might affect lots of americans like tiktok, you're seeing more and more tension in the relationship both from an economic standpoint and a national security standpoint those are bleeding together. and that has come -- becoming more and more evident as you see the most recent bill that was proposed, i think, yesterday, the bipartisan bill that basically says we need a systemic approach to how we're going to address technology-based threats to american security from countries that are -- such as china, such as russia, such as north korea and iran and then you're also seeing the white house react by saying we're going to have an executive order basically scrutinizing investments by u.s. companies into china in areas that are

potentially a threat to our national security. investments in things like ai or in decryption and other areas. >> i think that article you wrote clarified things for me. you pointed out to him that we have looked at china as a developing nation for a very long time and we didn't hold them to things they had promised, didn't hold them to the standards that developing nations are held to. they have had such success that i think all of us here expected that they would eventually fall into line and be a good player that's not the impression any of us have gotten i was surprised that they were surprised to hear that from you. did they not understand that at all? >> well, i think that -- i don't know that we didn't try to hold them to account. we did very much and that was very much a top priority but they continued to press their situation. and i think that this inevitable

outcome of higher and higher tension, more and more challenge on both the economic and national security front was one that i tried to explain what would happen and how it would evolve and, frankly, sadly, this is where we're ending up and i think he heard me, but i think they have still chosen to proceed along the lines that they have. and we've got to remember currently what's going on in china. they have also got a real economic problem in their own country. so i'm not saying that the national security is to divert from that, but let's not forget that they have got the worst economic outlook in china in 25 years and they have also, you know, got an aging and declining population base. none of which is good for their homeland situation, none of which is good for their own economy. so it's a really complex

situation that has led to what i predicted to for the then vice premier. i said you'll see the economic issues and the national security issues starting to conflate. >> and i think you said we would see competitive cooperation become confrontation that was five years ago and that has played out what do you see happening next >> one is hopeful that diplomacy can come into play and that you could see an effort to try and bring the situation from as tense as it is down to something that is more stabilized. but frankly, i think that's going to be tough to do given the lack of trust. and so how this plays out, i think that you'll see the bipartisan bill in congress gain steam. that's one thing congress agrees on is our challenges that we face with china and their threat to national security

i think you'll see the white house take further action giving the commerce department authorities to look into investments made by u.s. companies into china you're seeing already major u.s. investors in the united states asking themselves whether they should continue their investments in china the challenge will be there are other countries standing by who might step in and make those investments, so we can't think that our pulling back is going to necessarily leave china without investment >> secretary pritzker, i want to thank you and i want to thank you also about the focus that you are bringing to women's history. we really appreciate your time today. >> thank you so much, becky. thanks for having me coming up, president biden plans to announce a plan to increase taxes on those making $400,000 or more a year in an effort to help fund medicare we'll debate that proposal in just a bit as we head to break, we'll look at the biggest losers in the nasdaq yesterday amid the

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in his budget, president biden plans to announce a plan to increase taxes on those making $400,000 or more a year as well as small business owners robert frank joins us now. recent history, robert, you should get right up to 399, you know what i mean if you are able to ask your employer for an exact number of what you want to get paid. i mean 400,000, the minute you're there, they want you for everything, don't they every single thing they suggest is that 400 number to be like retailers, 399.99.

>> it's a marginal tax rate so it's every carl above $400,000. >> then don't stop there and take off in august and just go home >> yeah. and let's talk about this latest plan there are actually two tax hikes as part of this medicare plan. the first is an increase in the medicare taxes for those earning more than $400,000 a year. that tax, which is split with employers, would go from 3.8 to 5% and it would not be capped by income so tax analysts say basically this creates a new top federal tax rate of 42%. now, the bigger change would be applying this tax to active business profits right now business profits from pass-throughs, partnerships are not subject to this nitt tax a growing number of lawyers, real estate investors, money managers, label their pay as business profits rather than wages to get around this tax biden calls this a loophole.

but proponents say closing it would hurt a lot of small businesses it's expected to generation over $200 billion in revenue over ten years. now, sources say biden may also consider increasing the top marginal tax rate from 37 to 39.6%. if he does, the new top federal rate combined with the medicare increase would be 44.6%. that means if you lived in california, your combined state and federal woruld be 57.9% and if you live in new york city, it would all add up to a top rate of 59.4%. joe. >> not if you live there, if you work there >> it's not going to happen, i guess. >> right >> robert, but should i get nasty mail when i say that i don't want to work till july 31st for uncle sam in new jersey or new york? do you get bad mail for that don't you think 50% -- i

guess -- you know who really whose fault it is, these billionaires, i guess, because that's who the demagogues always point to that don't pay any taxes. because the vast majority of people are paying above 50% in new york and new jersey and california >> and let's remember, you know, putting that into context, it is easy to look at the billionaires and some of them who just borrow against their stock and never pay income taxes but the top 1% in the most recent irs filings paid 42% of all federal income taxes you look at the state levels in california and new york, it's the same thing, the top 1% are paying a record share of taxes so, you know, fair share is all in the eye of the political party and the beholder. >> yeah. >> but that's the numbers. >> some people think it would be -- that fair means where everybody has a stake.

and i'm not saying that people that are on the low end of things need more -- need a tougher life, obviously. but fair is in the eye of the beholder. >> well, they do pay taxes. >> social security. >> they pay property taxes and lots of other taxes. >> i understand that we are talking about income tax in this case >> yeah. >> but should we -- i mean maybe ads need to be taken out on billboards about what you just said because obviously people don't know that. do we have a progressive tax system, yes or no? >> yes we shouldn't even have to say that but it's been questioned so much recently that we have to say it. >> we should buy some billboards or some time on "squawk box," i don't know that might be self-serving, but a few billboards 1% paid 42 -- they do have a lot of income, obviously the 1% has probably a lot of the income. >> they have around 23% -- 23,

24% of the income and they're paying 42% of the federal and state income taxes so it is a very progressive system >> thank you. >> with income taxes >> okay. for more on president biden's budget and tax plans, we're now joined by former representative donna edwards of maryland. i can't wait to hear what congresswoman edwards has to say add former u.s. senator judd gregg who represented new hampshire as senator and governor donna, it is progressive, right? do you agree we could do more on the ultra wealthy, but at this point if the 1% pay 42% of total taxes, it's a progressive system a, ta system. >> only if you don't count the loopholes, that's how progressive it is. look, i think this is a sound proposal it affects 1.8% of all taxpayers. that means 98% of us roughly are

not going to be impacted by this tax. that includes many small business owners as well. and again, it's about 1.8% increase that would fund medicare through the year 2050 otherwise we're running into a real problem in 2028 look, i just signed up for medicare last night, so i have a vested interest in this conversation and i think it makes -- it makes real sense and again, we're talking about 1.8% increase and a 1.8% of all taxpayers in the country >> judd, i hear the loopholes all the time i need a better accountant i don't have any loopholes i mean i am over 50% what is congresswoman edwards -- do you have these loopholes? >> no, and it's really a straw

dog argument because 85% of the income tax is paid by the top 10%. you just heard that 1% of the population pays 42%. loopholes or not it's an incredibly progressive system and it basically means that people who have income are paying the income tax at a disproportionate rate if they're high income earners. but this proposal is cynical, it's political the president knows it's not going to go anywhere but it's always easy to say, well, we'll tax the other guy and spend it on us that's essentially what this is. the congresswoman essentially said 1.2% of the people are going to pay for the health care costs of the entire country that's over age 65 i mean it's pretty absurd. if you want to correct medicare system, and it needs to be corrected, it's going bankrupt just like the social security system, then you have to have a bipartisan plan. you can't just do it on the tax side, and it has to be a plan that involves controlling the

rate of growth of the system through managing health care better and at the same time there would probably be some revenue items. if you really want revenue items -- but you just don't throw out one of these red meat proposals. we're just going to tax everybody over $400,000 and that will solve the problem but it gets votes. in massachusetts they passed a referendum to put a surtax on everybody making over 400,000. people are happy to vote for it. but it truly is cynical in my opinion and it's political and the president knows it's not going anywhere as his party knows. well, we tried to address the problem but couldn't do anything about it that's not the answer. the answer is pull together a

bipartisan group, like the simpson-bowles group and say go to work, get this done, come up with a solution. the solution has to be to control the rate of growth of the program as well as some sort of revenue. >> congresswoman, do you think it's reasonable f f for us to ao that, to do it in a bipartisan way and to solve it? >> the president has put his proposal on the table. the republicans have no proposal there's no proposal from them on the tail then you'd be able to form some sort of negotiation. one of the things that we haven't talked about is part of the president's proposal also is to allow medicare to negotiate prescription drug prices, because that, again, then brings down the cost of the program and direct costs that seniors are paying for prescription drugs. it actually would help all of us who are paying for prescription drugs. and so i think that you have to

look at this proposal in its totality and if republicans have something else to offer that would then form a way to negotiate, then they should put it on the table. they overwhelmingly said during the -- in the state of the union message with their applause that everybody supports making sure that we shore up social security and medicare well, put the proposal on the table to do that democrats have done it and it's time for republicans to come forward with one as well. >> listen, we've got to address this medicare thing because this is really -- you know, if you talk about something about an idea that's stupid, that's it. basically the medicare system, you're talking about putting price controls into producing drugs. price controls deliver two things, scarcity and less innovation i mean if drug companies can't find capital, they can't invest in exploring and finding new

ways to make people better and you reduce the ability to address the diseases which we have in this company and it's the drug companies that are the leading forces for getting things done to make people better and we just had the covid experience to show us that it was the american drug companies that solved that problem. and now you're seeing big movement in places like alzheimer's. the concept of having the federal government tell the drug companies what their prices are going to be, that is price controls and price controls lead to rationing and to reduction in the ability to develop new drugs. >> well, the veterans -- >> it doesn't make sense i would like to finish my thought on this because you say the republicans haven't thrown out an idea. for 40 years republicans have had their heads banged against by the other party on the issue of social security and medicare. any time any idea is put out, they get clobbered the only way you can do this, the only way is not to throw out the ideas but to put together a group that has authority,

legislative authority, that's bipartisan, that's responsible in fact i'd love to see the congresswoman on it, she's a very responsible voice sit down and come up with solutions and then have those solutions brought before the congress unamendable so people can't hide behind their amendments and pass it and that will solve the problem >> all right they're playing us out congresswoman edwards, thanks. senator, governor -- governor twice? senator twice. senator senator governor governor judd gregg. thank you. when we come back, stocks to watch ahead of the open and tonight the premiere of brian sullivan's new show called cnbc's last call he's going from first call to last call. it's going to explore the d tersection of money, culture anpolicy it starts at 7:00 p.m. eastern tonight. you do not want to miss this big shoutout to brian. we're all going to be watching you should too stay tuned, "squawk box" will be right back

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welcome back to "squawk box," i'm dom aninic chu mere are some of your morning movers occidental is up 3%. the oil and gas company has

warren buffett as a huge investor they bought another 5.8 million shares paying around $350 million for the additional shares berkshire was also occidental's biggest shareholder and owns nearly a quarter of the company at this point. those shares up about 3% on the earningsfront, crowdstrike is higher by 7%. the cybersecurity and cloud company reported quarterly results after yesterday's close that topped analysts estimates helped along by more demand by companies that want to protect their infrastructure crowdstrike gave a more upbeat current quarter and full year guidance adidas is down 2% in german markets. it swung to a net loss in the fourth quarter due in part to higher supply costs and a slowdown in china sales. but the bottom line was hurt by adidas ending its partnership with controversial rapper kanye west, now known as ye. so adidas shares down 2.5%

i'll send things back over to you. >> thank you, dom chu. coming up next, the ceo of grayscale on the firm's case against the s.e.c. over its etf application. also an outlook for digital currencies check out crypto prices this morning. a little bit of a sk oriff going on in the last couple of sessions with the markets in general. 22,000, just barely hanging on to that level for bitcoin. we'll be right back.

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the u.s. court of appeals hearing all arguments against the sec over the agency's denial of its application shows it on the rise since the hearing kicked off yesterday many how's it looking? >> coming out of oral arguments yesterday, we were really appreciative of the opportunity to have our case heard in the d.c. circuit court of appeals, walked away very encouraged from yesterday's argument i think it's really a function of having the best in class legal team that we possibly can. they've been consistent throughout this process. the etf application, the litigation, the oral arguments and we're hopeful that the court will be persuaded by those arguments and at the end of the day it never been clear. investors want access to bit coin >> what is the argument that you make and the sec makes about the

relationship between bit coin futures and the spot price what do they say it's harder to keep an eye on spot than it is futures? what's the basic premise >> the bedrock of the case is that the sec has continued to deny spot coin bts >> what do they say? >> they say there's not enough of an ability to detect fraud and manipulation as we know and you guys know, the bit coins futures market is a derivative of the spot market. ne they have a 99% -- the argument are arbitrary and capricious >> normally -- the entire world

nows what derivatives are now. tip clich you think if that's the tale, it's easier to watch the dog than the tail. do we just need more on crypto why would spot be more difficult to oversee than a derivative >> we don't need more regulation for this issue the largest bitcoin fund in the world publicly traded since 2015 while there is good momentum in washington around crypto-focused legislation, there is no new legislation required to bring it further into the regulatory perimeter and have the sec do what it's supposed to do, which is protect investors and bringing it to an etf wrapper

would further protect investors. >> if you convince the ftc, you don't even know who oversees crypto at this point >> there are a variety of commodities product via gold and otherwise and there's certainly etfs for gold and other commodities. there are a lot of other precedents out there that the crypto market finds itself in. al a alameida is in chapter 11, they're under new management that as a fiduciary is trying to

recover anything they can. that flies in the face of what we're trying to do with gbtc, that's the best long-term product structure andthe one that's going to unlock the most value for instructors, including folks like alameida. >> it says you weren't even allowed, that it violated the trust agreement with ftx and ftx debtor shares would be worth 90% more than the current value if you hadn't violated the provisions >> our fees have been consistent throughout time. >> it will still trades at a 42% discount that is a shocking number. the idea that you guys keep charging fees for that you say your fees are high and

you're paying top dollar for your lawyers, you got to be kidding me how do you plexplain that away? >> i said before we are committed to lowering our fees >> people are still sitting there losing their fees. >> the fees have been consistent throughout time. >> consistently high >> the constructs that surround operating a vehicle like this is different than that of an equity-based product >> i appreciate you coming on and talking about this but the fee structure is a crazy situation for investors who got in and believed you from the beginning. >> believed they were getting exposure to bitcoin through a registered -- >> a tt a 42% discount >> it's presented an

opportunity. they'll see that arbitrage take place. so you're not constructive on the oral argument and the prospects -- >> that's why you went from 47% discount to 42%. >> i do think the reaction we're seeing in the market from investors is positive based on oral argument. the oral arguments were well received and we're hoping they'll be persuasive to the court. >> i never want to cut anyone off other than we have to go to break. thank you. >> good to see you guys. >> when we come back, the house minority leader is going to join us we'll talk about immediately i don' biden's budget proposal.

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we got this. let's partner for all of it. edward jones good morning fed chair jay powell with this latest hawkish message to senators >> it's the ultimate rate that may well be higher than we were at the summer. >> today is take two powell will address the house financial services committee we'll ask judy shelton about the message to the markets

ahead of that, let's go to an interview with house democratic leader whakeem jeffries. final hour of "squawk box" begins right now good morning welcome back to squawk box right here on cnbc we are live from the market site in times square. andrew is off today. right now there are some green arrows the dow just turned negative, indi indicated down 5 points after tough comments from jay powell when it looks like they're going

to raise rates higher and faster than anyone anticipated. if you've been watching the treasury market, yields have pushed up pretty significantly yesterday. in fact, the two-year note today is above 5%. the ten-year is is at 3.96 president biden is set to unveil his 2024 budget proposal tomorrow topping the list, tax increases on high-income americans joining us for more is hakeem jeffries mr. leader, it's very good to have you here. we appreciate it how ruff doing today >> good, good morning. great to be with you >> let's talk a little bit about the budget because this is the lead story in the the "new york times" and a lot of other newspapers this morning. people are looking at this wondering what to expect and already we're getting some pretty big details we've been talking this morning about medicare in particular, shoring that system up but doing

it by raising taxes. i want to wonder if you'll weigh in on that >> it's my expectation that president biden's budget is going to invest in the future sustainability of medicare and social security, invest in education and job training, invest in research and development, invest in transportation and infrastructure, invest in technology and innovation, invest in the creation and preservation of affordable housing and overall just invest in the health, the safety and the economic well being of the american people as part of his wonderful effort to build an economy from the middle out and the ground up. >> one of our reporters dug into what some of those increases will be and what it will mean for new yorkers in your district just pointing out that with these proposed tax increases, if they were to go through including medicare taxes going from 5% to 3.8%, new yorkers making $400,000 or more could be

facing a tax raid of 59.6% when you add up the state and local taxes. do you worry about that? >> i worry about the overwhelming majority of the people i represent in the 8th congressional district like the overwhelming majority of the american people will not experience a very, very modest tax increase in order to extend out the future of medicare right now according to the congressional budget office, the medicare trust fund is slated to be insolvent by the year 2033. so president biden is taking a very responsible step to try to extend it out to 2050 in order to make sure that tens of millions of americans can retire with grace and dignity, folks who have paid into medicare throughout their entire lives and have an expectation that it will be there for them in their golden years >> no question that medicare is

a very important program and that it needs to be shored up. i guess the bigger issue is what happens because this is already being declared dead on arrival, it's not going to pass in the house. what do you do what kind of compromises do you look for do you find any common ground? what are you thinking so far >> we always want to find common ground wherever and whatever possible but for that to happen republicans need to show us their plan president biden has been very clear. he's going to release his budget tomorrow it will be in the public domain. the american people will have an opportunity to fully roo eview congress can debate it but we haven't seen a plan from house republicans. in the past their plan has been to dramatically cut taxes for the wealthy, well off and well connected, often unpaid for. unfortunately that was the reality in 2017 and it has not

delivered the benefits for the overwhelming majority of americans that have been promised we've seen budget plans in the past that have sought to appeal the affordable care act. to have a reasonable debate, house republicans need to show the american people their plan >> it's great to have you on i begged the speaker to talk to you and he was funny he goes when hakeem is on, just remind him that he had 100%. don't rest on -- when he was minority speaking. look what happened a couple years later. anyway, we just had the former senator gregg, former governor of new hampshire, he believes this is essentially drug pricing

and that will hurt innovation, coming out of the pandemic, they saved us collectively but we developed that vaccine very quickly. are you for drug pricing don't you think that hurts innovation and that these companies need capital to deal with alzheimer's and all these diseases that are going to get worse and worse as the population ages? >> big pharma has done incredibly well in terms of profitability. and they were partnerships that were facilitated by the u.s. government during moments of crisis, including the pandemic, but there were investments that were made in veech and development over decades paid for by the taxpayers that have put us into a position where some advancements can be made by entities within the pharmaceutical industry. now, here's what i'm for

here's what democrats are for. we are for the american people paying $35 per month for things like insulin as opposed to approximately $4,000 per year for a drug that has been in existence since about 1922, where there's no additional research or investment or innovation that needs to be made and no reason that the american people were paying thousands and thousands of dollars so we have to strike the right balance and build upon what has been put into law, including giving medicare the ability to negotiate lower drug prices on behalf of the american people. that is a basic principle in capitalism, which means you get to use your bulk price purchasing power to negotiate lower prices walmart does it, target does it, best buy does it, the american people should have the act to do it as well

>> the other thing that the senator was pointing out was for decades the social security and medicare have been the third rail and you say republicans don't have a plan and whenever they talk about even broach the idea of trying to make both of these programs more solvent, you immediately, president biden go to you want to cut social security and cut medicare. there needs probably to be a more not only bipartisan but a more fundamental change in some of the provisions that we have to really make it solvent, really make it work. and we never get that. we never get a bipartisan effort you say you want to be bipartisan and actually leader mccarthy -- i'm sorry, speaker mccarthy was saying that he's worked with you and trying to work with you on other things. he was kind of checking off all the bipartisan things.

why not both sides approach this as adults and try to work something out that preserve these programs instead of what looks like demagoguery >> the speaker and i have worked together for the good of the institution. i look forward to continue to have forward-looking conversations to try to do what's in the best interest of the american people. there will be times as speaker mccarthy has indicated that we will strongly disagree my overall point is for us to have a reasonable conversation to try to find common ground, and the republicans need to show us their plan. president biden is going to do that tomorrow. it will be in the public domain. but we believe in a well-regulated market-based economy that has been a tremendous engine of growth and prosperity, helped to build the

greatest american middle class -- greatest middle class in the history of the world and now we have to make sure we preserve that. part it hof oit is a strong soc safety net that is going to be a big part of president biden's budget. we can have a discussion about how to make that sustainable but we need to see a republican plan many people are reasonably concerned that the reason why we don't see a plan is because it's too extreme for the american people to absorb >> congressman jefferies, we'll get this budget tomorrow and we'll hear a lot more about this maybe we should talk more on the economy, though. yesterday we did hear from the fed head, jay powell, speaking before the senate where he was talking about how the fed is very likely going to have to raise rates higher and faster than people had been anticipating you know the pain that that does put on people everywhere inflation is a horrible problem,

needs to be figured out. if we are talking about raising rates, increasing bothering costs for americans, for businesses, trying to do that while inflation is higher and the concern that that could cause an economic downturn, what do you think in terms of what you're watching with the fed and what your concerns are with the economy? >> let's think about where we've been and where we are now. when the american rescue plan was passed by democrats in the house and in the senate, we were able to rescue the economy and save it from a deep recession, set us on a path, shots in arms, money in pockets, kids back in school to emerge with an economy that's stronger post-pandemic than any other economy in the western world. yes, there are challenges that need to be met around inflation. however, when you take a step back and look at the economy, more than 12 million good paying jobs created during president biden's first two years in office that's a record.

unemployment at around 3.5%, a record 50-year low more small businesses have been created over the last two years than in any other time in american history that's extraordinary now on top of all that, the deficit has been reduced during president biden's first two years by $1.7 trillion more needs to be done. we recognize that. president biden is going to lead with building an economy from the middle out and the ground up as opposed to the top down to make sure we continue to build upon the great american middle class. that's good for everyone that's good for democracy, it's good for the wealthiest amongst us and it's good for america >> we had patrick mchenry on earlier and we said, you know, we have leader jefferies coming on what would you say when we have a pretty good idea you talk about the jobs that you say were

created, the deficit being reduced and the messaging from the biden administration here's what he came up with and you can respond in a second. >> this is like an adult showing up at a little league game and saying that they can crush them, right? when we're coming off the pandemic and federal closures of the economy and you're saying, wow, we created new jobs come on, give me a break when you say we went from record deficits when the economy is shut down? i mean, give me a break. some of these things are just cherry picked, the same political tripe we always get out of politics in washington and people are sick of this. the fact is we have an inflation problem and an economic challenge. >> that we hear from both sides all the time what do you make of what he said we finally got back to where jobs were but i think it's a little strange to call it creative when you reopen an

economy and the jobs that are lost come back >> when you look at where the american economy is compared to any other developed economy in the world. the facts are clear, we have emerged in a stronger position that's not fantasy that's not fiction that is fact and the reality is when you look at what democratic presidential administrations have been able to do consistently over time on issues like fiscal responsibility and job creation, tens of millions of jobs were created collectively during the presidencies of bill clinton and barack obama and now of course president biden while at the same time engaging in very fiscally responsible behavior. president clinton inherited a deficit and turned that into a surplus. barack obama obama inherited two failed wars and an economy in

deep recession and wound up reducing the deficit by $1 trillion and i've already cited the biden economic record. this is a result of policies that lean in and create the best possible economy for the greatest number of americans >> let me just ask you about some breaking news that just came out adp jobs report came out that number was stronger than expected for the month of february, a gain of 242,000, the street was only looking for 205,000. this is one of those good news, maybe bad news scenarios it gr it's great to hear but it does raise the question whether the federal is going to bring down the economy. do you worry the fed will bring rates too high and cause the economy to come in and fall into a recession? >> it's a very reasonable concern because what we don't want is the fed to trigger a recession and then set us back so there is a balance that needs to be struck here in trying to

tame inflationary pressures that have impacted the economy. i know year over year over the last six months inflation is down but there are still concerns that it is ticking upwards in the wrong direction those are reasonable concerns to be addressed in terms of monetary policy, but we don't want to go too far in triggering a recession. we'll see what the fed does and i'll be in a position to be able to comment more intelligently thereafter >> the inflation that we do see, leader, i think -- and i don't want to relitigate trump and what you call the tax cuts or republicans, so 8 trillion added to the deficit during the trump years, four of them. another 8 trillion added in the first two years of president biden's administration that 16 trillion puts us at 32 trillion and many people say that's why inflation is so high,

a 40-year highs, since the 80s and it does hurt low-income people more than the rest. the reason the fed is looking to raise unemployment just to get inflation under control. do you at least concede that some of the inflation is because we overspent, both the prior administration and the current administration to get to $32 trillion in terms of debt? >> let's understand one thing in terms of the debt situation that we find ourselves and, by the way, we're going to have to raise the debt ceiling, do it responsibly. it was done three times without fanfare in the prior administration and it should be done in this particular instance to avoid a catastrophic default that will hurt the u.s. economy, undermine the present dollar and really hurt small businesses and

every day americans. but, yes, it's reasonable for us to have a conversation moving forward about how we continue to reduce the deficit and bring our debt into a better situation that's what president biden has been able to do, what i believe he will continue to do and we look forward to having that discussion with our republican colleagues but they have to have a plan in order to have a legitimate debate. >> we appreciate your time today, sir >> thank you >> we got february's adp employment report, which we were talking about. steve leasisman joins us with t details. >> it's sort of on the edge of being stronger than expected i've got an estimate of 205 for total private and they came in at 242 so a little bit on the up side

i think it so unclear the relationship of adp and who has got it right, i don't think we're going to change their outlook here they're still way below the 517 that the bls reported last month. by business size, large businesses still out there hiring, according to this -- go to the next screen guys, 160 for those employers larger than 500, 148 for those in the medium and small children, they take it on the chin because they have the hardest time finding employees curious on manufacturing, one of the sector that's supposed to be hurt by higher credit cost construction down, that makes sense to me and then on wages we

did come down a little bit but it's still pretty high up 7.2% for those staying in their job and 14% for those job changers i think this is good news because more jobs is good news but, you know, it's hard to say because, as you know, the market process is bad news but i don't have to do that if i don't want to, right? >> i don't know. i think we keep the most common expression here now is it is what it is and i guess it is it tough to argue that, isn't it >> jobs is good, right >> it is there's no doubt -- >> more jobs is better >> and you might able to do more on the inflation front if you have a resilient economy even though it does seem like you got to go higher, it is good if we have a good economy. up next, top teaysakwa from day one of jay powell's

congressional testimony. former fed nominee judy shelton is going to join us. you're watching "squawk box" on cnbc help make trading feel effortless and its customizable scans with social sentiment help you find and unlock opportunities in the market with powerful, easy-to-use tools power e*trade makes complex trading easier react to fast-moving markets with dynamic charting and a futures ladder that lets you place, flatten, or reverse orders so you won't miss an opportunity what do you see on the horizon? that lets you place, flatten, uncertainty? or opportunity. whatever you see, at pgim we can help you rise to the challenges of today, when active investing and disciplined risk management are needed most. drawing on deep expertise across the world's public and private markets in pursuit of long-term returns... pgim. our investments

shape tomorrow today.

a little more than an hour until the opening bell on wall street >> we'll start with a check on shares of oxidental petroleum.

berkshire hathaway is a big investor paid around $350 for it. it was occidental shares tesla stocks down 2 million shares of volume during yesterday's selloff. ev maker a downgrade from hold to a buy they say some of tesla's position is now baked into the price given the recent rally we've seep here. tesla share down 1.5% and we'll end with bank stocks on the premarket move here today. generally more tepid for

fractional these were some of the biggest losers in yesterday's session in the heels of powell's testimony. keep an eye on the bank box given testimony day two. >> thanks very much. we are just a few seconds away from new trade deficit data. this is on the heels of adp that is a little stronger than expected rick santelli standing by at the cme. take it away >> we're looking for a january final for trade balance. it's going to be a deficit but a much smaller deficit than we had over the last year we're expecting 68 billion with a minus sign, minus 68.3 billion, almost spot on with estimates. when you put that into the mix, we notice that last month's 67.4 minus was the smallest deficit going all the way back to

september of 2020. so we are making progress and i'd like to high lie that the ugly watermark was in march of last year at minus 106 billion so definitely we have made some progress has we see. now, if we look at the pressure r treasuries quite quickly here, every treasury has lower yields, higher prices than yesterday's when you look at 2s and 3s, 3s join the two-year maturity yesterday in closing above their fall high yield close. yesterday it was 5.65% about a week and a half ago it was 4.275% why are these important? because it crawling down the curve in terms of the intensity of the shorter maturities buying into more of the fed strategy so to speak, whereas the long end

continues to buck that and we see the yield curve inversions do underscore that, minus 109 basis points at the moment so there's definitely a notion that investors are betting the worst of all the pricing issues are behind us and they're putting their mouth is the fed is sticking with its original bet that it wasn't transient and they're not going to budget in terms of their aggressive strategy until they are convinced that inflation has fallen becky, back to you >> rick, i know that the spread is something that you can look at the inverted yield curve and think, okay, it predicts five out of every two recessions or something. but the wider the spread gets when you're looking at over a hundred basis points like that, do you think it is signaling at that a recession is coming is it a more likely indicator? >> you know, i don't quite look at it in those terms

i look at it as why are investors so convinced the economy is going to be less aggressive down the road than it is today and that obviously all roads lead to the fed. as to whether we have a recession or not, i look at manufacturing and some of the slowdowns i see and think of things like seasonality. it's exactly the same post-co-described post-covid as precovid i think investors betting down the road we'll see significant progress on pricing. the world when you set down an economy and open it up -- >> that's a really excellent

point. data dependent but we don't know how good the data is or how reliable we only have a little bit of time left but we'll come back to this discussion another day. steve, this is an amorphis. we had a capital goods increase. i don't see a recession in these numbers. we import a lot of stuff i haven't seen the china trade deficit. it widened a bit i don't think in is going to

have a big impact on trade numbers. it seems in line with what economist himself expected depending a little bit on pricing. the oil pricing was $70 a barrel, down from september at 75 but it's been up since then i don't know, becky. it's hard to see the recession in the data that everybody is sure about but then again you have guys like barry who talk about the calamity that's happening in the real estate market so right now broadly it doesn't seem like it's happening >> it depends on where you sit of course on all these things. thank you. >> yeah. >> when we come back, form are fed nominee judy shelton will join us to talk rates and the latest message from jay powell as we head to a break, you can get the best of "squawk box" in your favorite podcast. we'll be right back.

fed chair james powell said for day two of congressional testimony, this was chairman powell speaking with senators and moving the markets, eventually what happened anyway yesterday. >> the latest economic data have come in stronger than expected, which suggests that the ultimate level of interest rates is likely to be higher than previously anticipated

if the totality of the data indicated it was warranted, we'd be prepared to increase rate hikes. >> joining us is a senior fellow at the independent institute it's good to see you, judy it been a while. do you think given the economic backdrop is a more hawkish stance justified in your view? >> i don't think it's justified. i think that the fed's model is not working. it certainly not working the way fed policy makers thought that it would last august when chair powell said that the fed was going to aggressively use its tools to try to eequilibrate demand, that

would cause more unemployment for as he likes to say softer labor conditions i think what we see now is people going back to work productively, growth has been decent, record low up employment demand is sustained and instead of questioning the assumptions of the model, which goes to the very constructs the fed has about the relationship between economic growth, inflation and unemployment, they're doubling down so their formula is really collapsing into an axiom of the higher the interest rate, the lower the inflation. and that could be exactly wrong because i think they're affecting supply more than demand so it could prove damaging rather than helpful to resolving inflation. >> i think even members of the

panel itself would say, look, there's only so many things that we can do. we don't really have a magic bullet or a targeted approach to try to bring inflation under control. so it's only half -- if you're only 50% effective but that's all you got, i think that's what they would argue, that this is the tool they have so that's -- they can't control supply that's up to the biden administration and congress, isn't it i mean, what can the fed do about supplies >> but the down side of continuing to hike rates is that you're adding to the cost of doing business the cost of capital for small businesses and corporations is extremely important. so if you're causing unemployment, you would have people who are now producing good prand providing services ot

of work but still receiving whether it severance payments from the private sector or unemployment benefits, money that feeds demand but no longer contributing to supply if you're causing businesses to have to increase the cost of capital, that's going to go to the bottom line because they have to pay employees more, they know that, they're prepared to do that but that's going to ac exacerbation inflation also. if the fed went to astronomical rates, to 10%, but if the fiscal continues to feed inflation and aggregate demand, then there's nothing the fed can be doing that's helpful they're actually hurting so i think that the fed need to acknowledge the role of congress in this and i know that chair powell has kind of shrunk from

doing that, unlike former fed chairs, certainly volcker was willing to say that balancing the budget was imperative to getting inflation under control. i don't hear that coming from the fed. and so i guess we have a situation where to show respect for the fed's independence, congress doesn't criticize the fed. it was pretty mild yesterday, i expect it will be again today and in return chair powell does not criticize congress for overspending or weigh in on fiscal matters >> an interesting take you're saying not only are they not helping the supply, but since the cost of doing business goes up, they can actually hurt supply even more than it's being affected right now and raise the cost of doing business and that's not helping with their efforts. it's almost hurting their efforts. but, again, in terms of what caused the inflation, people

argue about it you think it the fiscal spending and aggregate demand being raised to address that, what is in the tool box right now, other than what they're doing don't you think inflation would continue to be a big problem if the fed did not try to cut demand >> if i thought raising interest rates 100 basis points would resolve the inflation, i would be all for it. but i don't. i don't think that's happening and the fed has abandoned its former framework and in august 2020 the federal believed that low unemployment is not inflationary. now it gone back to its model from the 1970s, and now the fed's model says that low unemployment is incompatible with reducing inflation. i think that economic growth is not inflationary i think that low unemployment is

not inflationary if it's productive if you have people working and they're increasing output, they're increasing supply, just because the fed likes to say it doesn't impact supply doesn't mean that they should be only concentrating on demand, where i think they're marginally effective at best, but i think the fed underestimates its impact on supply i think we're seeing some companies give up or new companies can't be started because the cost of capital has gotten so high so, yes, i think that the fed can actually be doing damaged i wish they would go back to a framework that encourages productive economic growth >> what do you make of the inv inversion, judy? do you think short rates go to 5 1/2 or 6%, do you think that finally causes the economy to go

into a slower period and will it be a manageable soft landing or are the chances increasing for a pretty tough recession or no landing? maybe the economy is that strong >> well, i think that the numbers and the yield curve is really impacted by the market wrestling with forward guidance from the fed, which is proving not very reliable. and i'm concerned that the fed could actually induce an unnecessary recession. i mean, if you look at it, we've had normalization in one fell swoop. we went from zero rates to now what some might look at as even a positive real rate of interest i mean, if markets show an uncanny belief that the fed can

bring it back down to two, i think the last reading i saw was 2.61 inflation in the next couple of years, that's what the tips difference is suggesting. at the same time if you were making 2% on a riskless asset, that would be historically searchable and normal, you'd be at about 4.5%. so i think the reason we saw financial conditions easing last last year was because the market said, you know, this actually works. i'm not advocating the zero interest rate environment. that was not helpful to productive investment. that did not contribute to a growing economy. and so i think by coming close to normalizing, you are giving people a chance to be gainfully flo employed and a chance to have genuine economic prosperity. and now because the fed is married to a model that isn't working out as they thought, they're ready to jeopardize all that

that's why i think they need it question the parameters of how they're judging how to respond to the economy instead of pursuing this path that i think could prove damaging and needlessly >> all right very good. judy shelton, thank you. a lot of different varying opinions on what we need to do but here we are. thank you. >> thanks for having me. when we come back, the rnf jim cramer we're going to get his take ahead of the open on wall street you're watching "squawk box" and this is cnbc es like a lot of businesses did. i heard about the payroll tax refund, it allowed us to keep the amount of people that we needed and the people that have been here taking care of us. see if your business may qualify. go to getrefunds.com.

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my bills. in today's world, i would urge people to get financially savvy. it is my home. it is the greatest job in the world. let's get down to the new york stock exchange. jim cramer is back. jim, i hope you had some well- deserved time off. we missed you. >> we went deep-sea fishing. we banked everything on the tuna, and it was remarkable because it was like an aquariu , and again, i threw them back. i want to make that clear. but i have to tell you, those of you who are anglers, wow. >> did you get to snorkel at all? forgot we were just deep sea. you can only fish about -- it

takes two hours to get to where the fish are, but my colleague got a 185 pound tuna and outlasted the tuna. >> wow. that one did not go back. >> no, that one did not go back. it was just remarkable, a remarkable trip. he is the smartest guy in our business, and we did not talk about business while fishing. >> everybody needs a break time and again i did not know what you are thinking because usually, i'm watching you, and this morning, i had to take to twitter, and you wrote, we don't want the future is up. it is that simple. explain to me. >> look, you see, jamie said to me, look. we're going to six. i think we are going to six, but everything seems to work out. nobody goes on there.

senator warren is right. we don't want people to lose jobs, but we have to get inflation under control, and it's difficult as long as you have all these marginal companies being bailed out. that unlike what i have seen in my career. again, i don't want to wish anyone to lose their job, but they have to in order to get this thing under control. >> jim, we're glad to have you back. i'm glad you got a little r&r. >> thank you. >> and we're going to see you in just a few minutes. we'll be right back. ♪seems impossible to face♪ ♪a lovely day (lovely day)♪ ♪(lovely day) (lovely day)♪ ♪(lovely day)♪ a bank that knows your business grows your business. bmo.

for more on this, we want to bring in any wool filament, the head of derivative strategy. so, this is definitely a shock sticker market. explains that why that makes especially sense of right now, amy. >> good morning.. i don't think that is anything new. you know, the angle we are taking is actually more from the derivative sense, so one thing we really have seen is even though volatility levels

are quite low, despite everything that's going on, the reason is because of the correlation. eventually, what has happened in the past 10 years, the only stock that really mattered warrior 10 stocks, highly correlated, driving all the factors in the market, making huge contributions to returns, something like 80% of s&p return can be attributed back to those stocks. that is really changing. you're seeing a lot of dispersion in the market . correlation is going down, so how do you make money? you can't just close your eyes and go by the s&p or the q. you have to go back and look at alpha . forget we have watched some pretty severe movements just yesterday. you can look at equities, treasuries. those are severe moves based on anything that is done at any time. what do you see in terms of investors trying to protect themselves, maybe hedge

themselves a little bit against what the feds may or may not be based on the numbers that may or may not come in when we look at these economic data points? >> that's a great question, and to be honest, this has really mystified me. the market and options right now has really mystified me because we have seen some outlandish rates, volatility, and you know, when you look at equity volatility, when you look at options, investors aren't hedging that much. what metric we like to follow is essentially if there is a three standard deviation drawdown in a market, what does that cost you to buy protection on that? that is treading at the 5th percentile, quite low across the last five years. that cost is really quite an expensive still, and i find that shocking, given what we have seen in the rates market that disconnects between that and equity volatility. it is really staggering. >> you think it signal something? is that because investors know

something more, or you think they are missing an opportunity there? >> you know, this is really the key source of debate, i would say, in every client meeting i go to, and i will tell you most say this is actually complacency. when i asked them about their sentiment, they said they were quite bearish. they think this is complacency in the market. then i say, are you hedging? and the answer is no, so i think how do you explain that? i think some of that is still positioning, underinvestment. do i buy a an option or do i park my cash in a 5% yielding asset, and that's probably okay. that interplay dynamic is there, but look. if we get a surprise out of the feds, i do think you get that gap down in the market. >> that is a really interesting points. amy, it's great to see you today, and we hope to have you back here soon. >> good to see you. let's take a final check of the markets before we hand things over.

dow futures are up by 25 points. nasdaq is up by 14. s&p futures come up by about two and you're also watching the 10 year right now yielding just below 4%, so 3.912. again, with my testimony coming, the buckle. big news tonight, 7:00 p.m., last call. make sure you watch it. make sure you are back with us. ♪ welcome. what go to squawk on the street. market, firmly in the 50 basis point camp. adp comes in hot. our roadmap will