and more than 75,000 kaiser permanente employees could go on strike today. we'll tell you what the healthcare workers and support staff are demanding. wednesday, october 4th, 2023. 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 with joe kernen and andrew ross sorkin. and here we go. let's look at the fallout in the markets from what has been happening in washington. reverberation felt across wall street on this. you have the dow futures up by 20 points. s&p futures flat. the nasdaq down by 8. this comes after a down day for the markets. the dow had the worst performance since march and

pushed the dow into negative territory for the year. joining the russell 2000 at this point. you got the dow industrials under pretty severe pressure. the s&p and nasdaq up by 10 and 25% for the year, respectively. but they have seen their gains whittled away over the last several sessions too. the vix hitting its highest level since the turmoil in the regional banks earlier this year touched at about 20. haven't seen that in a while. gr granted this is not the serious fear factor you get into, but we had an incredibly low vix for quite a while. you're going to see that elevation, concerns about what happens next and people asking what are the odds of a government shutdown come november 17th. that's the new deadline that is there and without a speaker of the house at this point, those odds jumped significantly. you also see that playing out in the treasury market where the yields pretty much across the board hitting the highest level since 2007 once again. you got the ten-year now at

4.815%. the two-year, 5.15%. and the 30-year, almost at 5%. >> how does it always sort of line up like that? the fed, be careful what you wish for. they wanted higher rates. are they -- have they lost control of the long end at this point? a word i saw for it this morning is the long rates are unmoored. they're not attached to anything. they weren't moving. they weren't moving in tandem with everything. this might mean in my view it might mean they're done because the market is doing the work for them. and it is going to get nasty in terms of mortgages and everything else and the soft landing scenario, this could change that outcome in that it is going to slow things probably more significantly. >> i think if you ask at this point of whether or not they're able to keep the government open come november 17th, next week

they got a leadership vote, but they're still not work on the appropriations bills over this period of time. >> that didn't help yesterday. that excrement show in the house did not help the markets. that wasn't it. it was rates. but maybe that -- >> i think this goes to -- >> it is a hideous feedback loop. the one other thing -- oh, i don't think cuts are necessarily -- suddenly, to me, suddenly to me they may be cutting next year. >> you also had a really strong jolts number yesterday that speaks to the strength of the job market and that is the fed looking at that, that's the potential for another hike coming from the fed and definitely pushes off the idea of a cut. >> that filet mignon, they may have overcooked. >> i don't think the fed thinks it at this point. >> i know. that's the worry and who knows

what the -- how the market ends up. and, you know, a piece in the journal about no guardrails. there is no guard -- there is no civility, there is no -- it is gone. everything is -- that was unbelievable -- did you watch that yesterday? >> why don't we go to washington and talk about it? >> 95 -- we can talk about it. we don't need to -- but we can, but 96% of the caucus, that's very strange for it to be -- you know why we're in that position? because we didn't -- the republicans did not win the margin they should have. why did they not? we know why. why did we lose the senate? republicans? we know why. >> donald trump. >> yeah. we know what all the -- remember perdue in georgia, don't go out, all these things. this is the post -- go ahead. we can go to emily. but we digress. >> let's talk about it because let's go to emily in washington right now.

kevin mccarthy ousted as house speaker. emily wilkins joins us with the latest. >> good morning, andrew. as you have mentioned, mccarthy became the first speaker to be voted out of his job yesterday. and as you also mentioned it was kind of a small margin. only 8 republicans joined with all the democrats to oust him. so, mccarthy did have the backing of much of his conference, but he announced last night that he would not attempt to run for speaker again, which means that the race now for speaker is on with votes expected wednesday of next week. one name that has been floated that we're watching right now is steve scalise, the house majority leader. and until yesterday he was mccarthy's number two. and he seems to be getting a lot of buy-in at this point. matt gaetz told me yesterday he thinks that scalise will make a phenomenal speaker. tom emmer, the number three republican, also said he would back scalise. now, of course, scalise hasn't announced he's running, but he did speak with reporters last night on the lay of the land.

>> clearly within our conference we have a very tight majority. always knew that getting things done is going to be difficult with a tight majority. no matter who is the next speaker, the challenges still remain, but i think the opportunity is there to continue moving forward. >> lawmakers said they would love to see congressman jim jordan or even former president trump in the speakers chair. whoever gets the job is going to face an early test. you alluded to it. they have little more than a month to avert a government shutdown. and at this point, that is going to be -- that was a really high order, even before we came into this drama with not having a speaker. and certainly now it is going to be an even bigger challenge for whoever winds up getting that gavel next. andrew? >> emily, thank you for that. so now, now can we talk about this? to matt gaetz -- here's what i was going to say to you, you're

saying matt gaetz is a mess. >> i'm saying that he has nothing to do with what he was saying. >> matt gaetz is a spawn of donald trump. >> yes. >> that's what this is. >> trump came out yesterday and said after basically urging matt gaetz and saying shut the government down and do this, do that, and he comes out and in typical fashion and says why can't republicans get along, why aren't they attacking the biden administration, why are they fighting amongst themselves, when he totally pushed them along and pushed matt gaetz along to go this route. and the reason, you know, the weird thing is a lot of the pac money that mccarthy had raised elected a lot of these -- of the eight. >> that's the other piece of this i was going to say that is so ironic. there is a whole view, should the democrats not vote him out or this or that. the democrats look at kevin mccarthy and say, look at who you spawned.

and look who you aligned with. >> he didn't really align with them. if he aligned with emthem, the government would be shutgave th. after 15 votes, it gave power to one of them to throw him out. >> wasn't the problem with one. it was the problem that the margin was only six. >> but the problem with eight. >> if you had 30 or 40 had vote margin, it wouldn't matter whether it was one or five that challenged you. would wou it wouldn't have happened. when you can lose four or five votes and you get 100% of democrats -- >> he has to hold his caucus together too and members of the far left didn't want him to cut a deal with mccarthy. >> no one is expecting -- there

is no way they step up and help the -- >> i think -- >> you don't see the republicans bailing out nancy pelosi? that would never happen. that would never happen. >> the democrats wouldn't support -- >> i appreciate that. what i'm asking is why we don't think that the center of the republican party is not more aggressively saying, look, this stuff over here is completely cray cray. and similarly for the democrats. >> did you watch yesterday? >> you should have seen what he said last night. >> i saw what he said. but now after for months and months and months and months for the past three years defending all sorts of craziness. >> who's that? >> we're talking about mccarthy. >> you're just talking about trump again. look, he -- >> because the speaker from the middle, everything he did was from the middle. he got the debt ceiling working with biden. he got the thing over the

weekend, with the shutdown, once again, that was -- that's what -- by definition, the extreme maga, he did not satisfy the extreme maga types because they're the ones that ended up rebelling and throwing him out. so he did -- >> he satisfied them every day up until this past weekend. that's basically -- >> i mean, there was a fine line to walk to not alienate 40% of the republican base. there is a fine -- a tough -- he had to toe that line, obviously. but, i mean, you and trump, i'm not defending him at this point, but you had, you know, serious pbs since day one. the russia collusion thing. no evidence for biden, no evidence on that either. but, i mean, people that have tds has been since first day, since before the first day of the trump presidency. >> i think the whole tds moniker

is completely unfair. and unfair -- >> you're judging mccarthy's entire tenure from not -- when trump tweeted saying, not saying that's just horrible, you're a terrible person, that's why? that's why mccarthy was maga to you, extreme maga? he wasn't an extreme maga speaker. that's why he's ousted. >> well, i think that in this final instance that was the case. but he was -- i think he was willing to be flexible. that's a very polite way of putting it. he was willing to be very flexible. i think there is no moral core -- on both sides -- whatever code you think he had around character has disappeared in politics. i say that across both sides. i don't think it is a both siderism thing because i think there has been a unique situation recently as it relates to trump, tds or whatever you want to call that, and look at that and say, okay, i think

anybody who is -- >> you're indicting about 40% of the republicans. >> unfortunately -- >> if you're comfortable in that, that's fine. >> i'm not suggesting that -- >> who is the leader of the republican party right now? >> that's a good question. >> no, it is not a good question. >> who is? >> probably trump. >> trump. >> what is the speaker of the house who is a republican, what is his position supposed to be when that's the reality of the situation? >> if that's the reality and you're saying you don't like that reality, why are people not standing up and saying -- >> i don't know. i can't go out to the heartland and tell you there is a lot of reasons why he still has this much support and you know what a lot of them are. but how that plays itself out, we got chris christie coming up, he'll be able to tell us how it happens and you'll have a lot of -- he'll have affinity for what you're saying and vice versa. but, i mean, the reality of the situation is i think he's still

at 57% or 60%. >> he is. >> there are a lot of our viewers, you don't need to throw every one of them under the bus because they have a different viewpoint about policy than you do. and don't think that character, which is definitely in question with this guy, in the white house right now. >> i'm not suggesting that everybody is a saint. i think there is levels of sainthood. >> physician, heal thyself with biden inc. coming up, red flags in the bond market. jeff gundlach warns the yield curve is deinverting. very rapidly. that should put everyone on recession warning. that's weird. when it is inverted, predicting a recession, deinverts, maybe it means we're closer. >> about to snap? >> about to happen. we'll dig into that move next. and later, gop presidential candidate, just talked about him, chris christie will join us cahy.e ouster of speaker mcrt we'll see if we can get him to say donald duck. and the turmoil in the house of

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the market is oversold at the moment. and in anticipation of treasury supplies and in anticipation of higher for longer in terms of the fed and the fed's own quantitative tightening program. i think maybe 5% caps it for the near term.

it depends on our inflation, depends on economic growth we'll see going forward. >> that was pimco co-founder bill gross on last call last night. his warning comes as double lines jeff gundlach cautions that the yield curve is deinverting rapidly and should put everyone on recession warning, not just a recession watch. remember how that works with the tornado. i think a tornado watch means the conditions are right, a warning means it is already happening. he warns that a tick up in the unemployment rate could spark a recession. carol slife, chief investment officer at bmo, the equity angle on all this, along with fixed income. does the -- does the fed need to go up again ever in the near future? >> i don't think so. but they can go one more time.

what is -- >> why bother? are long rates unmoored now from the fed? >> i would argue the fed message of higher for longer, the long end of the treasury market heard it loud and clear. this -- i would say this very recent move in treasuries has been a little bit more dangerous. we already were in the hard landing camp. i think moving the treasury market, the disinversion of the curve, i think that makes a hard landing a lot more likely. what stops this ultimately will be either some sort of financial accident or ultimately the lags do play out. we're not in the camp that the economy has become more productive that the economy can handle much higher yield rates. you're looking at yield rates 2.5% on the ten-year. that will hurt businesses, will hurt consumers, will take some time. so i do think we're nearing the end there. but i would say volatility is

high and conviction is low. it is hard to call the exact -- >> why do you think rates are running like this at this point? is it because people look at the economy and think it is stronger and the fed is going to push longer, because they look at the deficits in washington and think there is nothing that is going to get done there, a good chance the government is going to shut down now, is it a combination of all those factors. >> it is a combination. i think ultimately, there has been supply for a while. where is the demand. why are the buyers stepping away. i think it is the fed telling us we're not even close to cutting rates here. >> they're closer today than, don't you think, the cutting -- i would exchange my whole dot plot chart at this point. rates might make sense next year because they may have overdone things and this may get ugly. >> i think they may have overdone, they want to tighten in financial conditions, they get a very quick tightening in financial conditions. look at the data, the fed doesn't know, they don't know if the data is strong because

fundamentally we have become a lot more productive or a lot less interest rate sensitive. and which is why they're saying that maybe our start or this neutral rate is higher or is it the lags are longer? i would argue the fed argues that the lags are shorter because everyone looks at the market. i would argue the lags are longer. it takes time, maybe 18 months from the start of the hiking cycle. i think now is when interest rates start to bite. but i think the economic data is just slowing. it is not at recession levels yet. >> carol, none of this sounds great for equities. and we have been pointing out it just happens to be the beginning of october and those horrible teens where so many times in the past market -- the good things is markets sometimes bottom, but there is some pain that gets us to the bottom before it happens. is this history repeating

itself? >> well, it is interesting, i would argue we already had a lot of the pain. maybe not all of it. but you're seeing overshoot, emotional overshoot in both markets including the fixed income market. it is that compilation of events that are happening and psychologically driving that ten-year towards 5% or through 5%. it overshoots just like equity markets overshoot on both sides. september, october, tends to be a pretty scary period. hopefully what we have to pull us out somewhat will be a focus on earnings starting in a big way in next couple of weeks. people will be listening really closely to what those companies are saying about their margins, their balance sheets, their cash flow, they'll be looking at a lot of things. it is interesting because volatile markets like this do open up lots of long-term opportunities but have to have your seat belt on. >> yeah. priya, again and again, we had people in recent weeks almost

empathize with jay powell and the fed. all they have are backward indicators. they're no better, i don't think, than anyone necessarily at having a crystal ball. you just -- you mentioned some of the things that go into their thinking. trying to decide are we tight, are we not tight, what is restrictive, what is not, how long is a lag, they got all these things trying to see into the future. but they don't know. that's why they stayed too long in the first place at zero, they didn't know. and now maybe they don't know again. >> i sort of see your point. i think it is an extremely uncertain environment. we're coming out of a pandemic. i think what the fed -- >> still? still? >> we still are. remember all the covid savings? in our estimate, they're just running out now which is why the lags may be longer. interest rates didn't matter to me. as my savings run out, the job market becomes more important.

i think the fed has to be data dependent. i think some more humility, more time, i think, you know, they're continuing to do qt. they don't talk about quantitative tightening. >> that's a key, i think. >> exactly. i think the fed is ignoring that qt has an impact. qe had such a big impact. to argue qt is not tightening, they're tightening every single day. whether they hike rates or not, they're doing qt. they're not going to cut rates for a pretty long time. i think they're tightening through what they're seeing, they're tightening through qt. i wish they would give it some time. >> 2023 might end up being a year for the dow, now down. the nasdaq has done well. will 2024 be a positive year for stocks? >> we definitely do think you'll see some incremental gains in most stock markets and important to remember the s&p is still up 10% for the year.

the nasdaq is up 20% and granted off of low levels coming in from last year. hopefully, you know, hopefully the fed does fold in here and doesn't -- and takes that extra potential for rate hike off the table because basically the market is doing that hike for them, hiked once or twice, just in the last week or two when you start looking at the leveling of the yield conservative. hopefully they haven't gone too far and we can have a lot of stability. on the other hand, you do have some fiscal stimulus still headed into the market in the form of a lot of that acts that have been passed and the construction we're doing and the workers and one of the reasons why the market freaked out yet was the more solid labor market, which indicates there is still some base underneath the economy that we haven't fallen off the cliff yet and we do hope that -- our base case is that it will be a reasonable year. >> carol, thank you.

priya, thank you. what is your title again? no, okay, we had someone yesterday that was running a family. what is that? private individuals. we had a lot of -- >> pretty much. >> jpmorgan has that. your family is not there, is it? my family -- >> not there. >> don't qualify. >> does your family qualify? >> no. coming up, let's talk about news from the ftc suit against amazon. did the retailer use a secret algorithm to test its pricing power versus competitors called project nessie. we'll explain after the break. and as we head to a break, check out shares of intel. wl eaitprraabitiltrt s ogmmle solutions group as a stand alone business with the goal of spinning off as a public company in the next two to three years. "squawk box" returns after this.

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amazon used an algorithm to test how much it could raise prices in a way that its competitors with follow. that's according to redacted documents from the ftc's antitrust suit against amazon. it was called project nessie. it raised the prices on certain items and monitored competitors to see if they raised prices to amazon's level. if they didn't, it returned the item to its normal price point. a source telling "the wall street journal" that amazon made more than $1 billion in revenue through use of the algorithm. a spokesperson says the ftc's allegations grossly mischaracterize the tool. the company says the project ran

for a few years on a subset of products, but didn't work as intended and was scrapped several years ago. part of this whole debate is whether amazon basically is forcing third parties to match their prices and because they're forcing them to match their prices what that does to the prices at all the other retailers and therefore how they track all that. so, the good news is that if you're on amazon, you might be getting the lower price, but is it really the lower price if they're jacking the price on all of the other sites to create the lower price and lina khan would say, the idea that amazon has the lowest price and third parties are willing to have higher prices elsewhere suggests amazon has a unique market power because you want to be at amazon over all of the other places. it is actually -- >> a convoluted argument. >> it is one of the -- i think

it is a unique argument, but to me it is one of the few demonstrations of the power that amazon appears to have, which is that third parties are willing and happy or happier to have their stuff on amazon at a lower price than they are anywhere else and that is -- >> it is a market you don't want to miss. that's a clear argument. you would say the same for walmart or -- >> no, because that's the -- well, the point of this is that if you're willing to have a higher price on walmart.com or target.com so you can be on amazon, it means amazon does have the power. >> i mean in the stores. in a walmart store, they always talked about everyday low prices. pretty brutal on their suppliers to say you are going to have the lowest prices with us. we're going to make sure because they're so big, they can deal with the much thinner margin on other retailers. >> in store. >> in store. >> right. >> this is the equivalent of that. >> that's what i mean. i'm just pushing it back to

practices that the biggest competitors have always kind of -- we're able to offer lower prices because we have the mass. as a result, if you want to be a supplier with us, you have to agree to give it to us at these low prices and we're going to have super low margins. i get the online aspect of it. they're doing it online. but the idea that the project was scrapped years ago kind of weakens the argument too. they already have gotten rid of the project that wasn't working. >> we'll see. i think that -- the other piece of it, the idea that people actually are willing to have higher prices elsewhere, it is not just that you'll have the low price at walmart, it is that you're also willing to say, i'll have a higher price somewhere else. >> yeah. okay, when we come back, axios co-founder mike alan will be joining us. we'll get his read on the race for the next house speaker. "squawk" will be right back. as a first generation cuban-american, both my parents

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kevin mccarthy out as speaker of the house. our next guest says former president donald trump cast a long shadow over the former speaker's downfall. joining us is mike alan, the co-founder of axios. we had a little debate, let's call it, at the top of the hour, about this very issue, the connection between frankly matt gaetz and donald trump and the speaker. you think this is all a trump story ultimately underneath it?

>> well, certainly a trump story behind it, andrew, and that leeriness, queasiness in the markets that we saw at the top of the show is 100 x on capitol hill. republicans are afraid, but for the future of the party and the future of the majority. and how trump shadows this is how he does so many things. he helped make kevin mccarthy speaker. he would not be speaker without trump. but then once he got into the job and had to govern, had to do the job, a lot of the maga members, the most fervent trump supporters, were disappointed. and then in the end, surprise, being a friend of donald trump, he didn't save him, couldn't save him, wouldn't save him, and so that's when he -- >> what happens next, who do you think becomes the speaker and what does this all say about the possibility or not of a

government shutdown later this fall? >> yeah, we're going to be back the week before thanksgiving, see very little chance of this being solved ahead of time and i can tell you, the business community among others totally taken by surprise by what happened yesterday. the lobbyists were very invested, over many years, in kevin mccarthy. even though we can see this coming, even though this seemed like the way the play would end, nobody really -- no one in the business community that i talked to reallythought it would happen this fast. and so, there is not a plan b. you killed the king, but who comes next? the way the one top member of the business community put it to me is there is no plan b, it is more like plans b through q, that is no plan, a buffet. i can tell you based on my conversations with capitol hill, two most likely leaders as we head into that leadership

election expected next week, the two who are the front now, first steve scalise of louisiana, who is the number two member of the house, and andrew if he really makes a push for this, it will be very hard for house republicans to deny him. he sacrificed a lot for the country in the conference, of course, as your viewers know he was batly wounded in that shooting years ago with the republican baseball practice and this summer diagnosed with blood cancer. but, members say to me, what is he really right for the rigors of this job, the job is traveling the country? the second most likely, jim jordan of ohio, again, someone your viewers know, chairman of the judiciary committee. why jim jordan? why did i hear so many people last night saying to me, i can see him. and that's as far as we're going to go in these crazy times. one, he was the first chairman of the hard-line freedom caucus.

so his brand is the hard right conservatism. but, he has ties to the establishment, he was a mccarthy team player, very important, because most republicans were still with kevin mccarthy. it was the minority that booted him. but, question about jim jordan, he is fire brand, could he adapt to the rigors of governing? you have to make tough decisions, that's not his brand. >> would you concede that i remember tip o'neill and reagan, the two parties are a continuum about that. the cramera can't go wide enoug to show where we are. you have the squad and people who pull fire alarms and know exactly what they're doing way out here and then sort of center democrat, and then you've got mccarthy who hakeem jeffries said really was extreme maga,

but not extreme maga enough to keep his job because the actual extreme maga are another -- probably exponentially, like a earthquake, like between a 5 and a 6, 10 times more powerful. the extreme maga faction and i didn't know where did nancy mace, what happened to her? where did that come from? it was a strange group of eight, those eight, was it not? everybody spends. but how can you stop it when you don't control the presidency or the senate? >> you're pointing to something very important and we'll talk about both the megatrend and the particular. the megatrend you're talking about, that spectrum that extends beyond the tv screen this is something that is really changed in the time that i have been covering capitol hill, covering politics. and that is that, joe, when we

started, people liked to argue, they liked to engage. they liked government on the other side. now they don't want to hear it. they don't want to talk to the other side. that's the megatrend. you see it on capitol hill, you see it everywhere you travel in the country including charlotte, north carolina, where i'm this morning. the particular, you're exactly right, that this episode shows you can't get anything done. a week ago, even less than that, i would have bet democrats would have saved kevin mccarthy, house minority leader hakeem jeffries -- >> we understand that, though. the republicans would never save nancy pelosi. that's when i say fish got to swim. >> people often act in their own interests. they assume that whoever came next would be worse from their perspective. after what happened this weekend, the increased distrust, no movement to do that, no

report of that whatsoever. >> he kept the government open. >> did not increase trust between the democratic -- >> ukraine or something. and biden impeached -- the inquiry. >> so, joe, something interesting about the impeachment inquiry, i think that democrats wanted to get something from speaker mccarthy, if they were going to save him. one thing they floated was shutting down the impeachment inquiry and he was, like, a, no, i'm not going to do that, my brand is i'm a fighter, but, b, he would never have been able to keep his job if he did that. he would not be speaker for long. >> and that's what we talked to him about yesterday. he said it right here and reiterated it. >> great interview. >> and it was no deal. that he kept his promise on. mike allen, appreciate it very,

very much. coming up, the adp private payroll report is on the docket later this morning. increasingly important, probably. we'll tell you what to expect.

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on today's squawk planner, we'll be getting weekly mortgage applications data at 7:00 a.m. eastern. then we have the adp private payroll report that's due at 8:15 a.m. eastern time. full forecasters expect an increase of 160,000 private sector jobs in september. that would be down from 177,000 that we got in august. and opec is holding a virtual meeting today to decide the future path of oil production. crude prices are up more than 20% since the june meeting. we'll get a live update from brian sullivan, that's coming later this morning. also, jury selection continues today in the trial of sam bankman-fried. we'll talk to a former s.e.c. official about that case coming up in the 7:00 hour. but, guys, heads up, adp means on friday we'll be getting that

jobs report too. >> what? >> that's right. >> unemployment number, employment number, wages. >> that's friday? >> yes. jolts number yesterday was indicated a stronger than expected jobs market. big implications. yeah. >> jolts. >> jolts was yesterday. >> unemployment claims tomorrow, the weekly unemployment claims. all of this putting pressure on the fed and that's potentially a big part of the reason that these treasury yields are up. 4.829% now for the ten-year, that continues to climb. that's been putting pressure on equities and the dow turned negative atht is point, indicated off by 20 points. >> could be inverted. 5.5? >> well, you're already at 5%.

the ten-year yield hitting a 16-year high, topping the 4.8% level this morning. joining us to talk about the impact of those higher yields on the banking sector is scott

seavers, senior bank analyst at piper sandler. we had huge concerns back in march when things really started picking up, when rates went higher. we calmed down a bit. we thought things were better, but the rate picture continues to climb. yields continue going up. what does that mean for the banks? >> yeah, good question, becky. thank you for having me. so, you know, if you can believe it, we're only about 15% up from those spring lows. so i think investors just have the sense that we're just rolling from one concern to another. the latest concern is the impact of high rates and how long they might stay here. we tend to think about rate ramifications in four major buckets. they exacerbate funding pressures. someone can get 5.5% on three-month treasury, tough to keep that money in bank account earning less. so banks will be forced to continue to raise their own cost of funds to keep and attract customers. and second, banks hold a lot of

bonds. when rates go up, the rawvalue declines. for most part, those should be transitory losses and not really matter. but the bank, the bonds that banks own is good. so we need to give them time to pull, it hurts the liquid and capital, but it is an unfortunate thing investors have to deal with. higher rates exacerbate loan growth issues. banks are pulling the reins on loan supply as they look to build their capital. with higher rates, fewer incentives to borrow because the cost do so is higher. we have both supply and demand issues on the lending side and then finally the higher rates go and the longer they stay there, the greater the risk we have to our credit cycle. you can't raise rates by several hundred basis points this quickly and avoid causing some pain along the way. so, we're already seeing what i would call discreet or one off

credit issues. there is just the fear that those persist a little more broadly than we have seen so far. >> would you steer people away from the financials at this point? is there a section, like the regionals you're more concerned about? >> yeah, you bet. that's a good question. i would say for right now the safer play has been to be in what i would call the larger names and that looks like it will continue work. and in particular when i say the universals, what i'm largely referring to is jpmorgan. just an excellent name, excellent credit profile, very, very conservative outlook, strongest in capital liquidity in the space and the best profitability with which to continue to build capital throughout all this sort of turmoil. it has been an excellent place to hide and i think as long as there is all this uncertainty, we're going to stick with jpmorgan as sort of our go to in the largest area. >> do you have a price target on jpmorgan? >> yeah, i can't recall it off the top of my head. kind of higher than we are now.

i don't have it at my fingertips. in the regional space, there is going to be more issues, of course, because you're seeing more transformation there with all the new regulatory stuff. but we like cincinnati-based fifth. i consider that a straight down the middle play. really conservative assumptions. they'll meet new regulatory requirements quickly and great risk profile as well. there are places you can pick your spots and we think investors will do very well over time. >> back in march, things broke because rates rose so quickly. happened at a fast pace. we got the vix back up. you got interest rates ticking higher. the yields ticking higher. pretty consistently here. is there a point you worry things get broken again. have we fixed any of the problems that were there underlying before? >> yeah, you bet. so another great question. while those were abrupt and sort of chaotic problems, i think we're in the process of fixing them. we have gotten a lot of new

regulatory proposals on capital, on long-term debt, still waiting some on liquidity. thankful thing in my mind is that the regulators are giving banks a long runway to meet these new requirements. you won't see broad-based forced capital raises that would spook investors. i think that's a good thing. but the thing we watch most is really the macro backdrop. if we end up breaking the employment market, that's going to be a problem because to date consumers have saved really healthy and much more so than you would have figured given the abrupt change in rates. to the extent we have a potential credit cycle on the horizon, that's the thing that really spooks investors most now. that's what we're watching most closely. >> scott, thank you. scott seavers. >> thank you, becky. coming up on the other side of the break, we'll talk fallout from the ouster of kevin mccarthy. we'll talk about the candidates that would be willing and potentially capable of winning the gavel. you're looking at a live shot now of the capitol this morning,

leaderless. we'lta authel lkbo t future of the republican party with former new jersey governor and presidential hopeful chris christie. "squawk box" returns after this. >> squawk picks sponsored by wisdom tree, the modern alpha pioneer. (birds chirping) go. and go and go and go. ( ♪ ♪ ) but what if you... stop? you work hard, it's time for a bank that'll work hard for you. everbank brings security and a guarantee that you'll earn a yield in the top 5% of competitive accounts. going, that's what got you where you want to be. we're the partners for your next move. everbank. advantage, you.

good morning. rates staying higher for longer. that idea weighing on investors and the stock market this morning. we'll have a breakdown of the move in yields and the economic impact. washington dysfunction. the ousting of kevin mccarthy as speaker, putting into question the state of the republican party. presidential hopeful chris christie will join us with reaction. and the sam bankman-fried trial under way, we'll be hearing from a former s.e.c. official about the possible outcome and what it means for regulation and the crypto market. the second hour of "squawk box" begins right now. good morning and welcome back to "squawk box" right here on cnbc. we're live at the nasdaq market site in times square. i'm andrew ross sorkin with becky quick and joe kernen.

a lot going on in new york. a lot going on in washington. we're going to talk all about it. look at u.s. equity futures at this hour. don't know if this is all moving around more as it relates to the ten-year and the fed and what we're seeing with employment later today and later this week adp coming up in an hour and a half. the dow off 11 points, nasdaq off 14 points, s&p 500 off about 3. treasuries right now, let's show you where the ten-year stands, looking at 4.821%. two-year at 5.146%. >> we have no speaker of the house. >> i'm not sure it is that. >> we got something happening in a couple weeks we need to take care of. he's not there. and you got donald trump and joe biden as the two presumptive candidates for 2024. >> i think it is the stronger -- >> what is going well in washington right now? you don't think there is an overall -- >> i think all of a sudden t

tht ththe ides have skyrocketed. >> just in general, does it seem like washington is, like, is this the way you want to run a country? >> that's moody's point and the rest of the rating agencies which is why moody's put us on watch for a downgrade. >> overall, how -- are you excited about 2024? go ahead. >> let's get to senior economics reporter steve liesman. he joins us now with more on rates. steve? >> good morning, andrew. yesterday's big rise in rates in the wake of that stronger than expected jolts or job openings report was a reminder that along with more debt, strong economic growth is a big part of the reason for the higher rates. and the message it is sending to the fed and the market rate is that the neutral rate is higher. and that's a long-term conclusion. one that may not go away very quickly. let's look at what the fed's policy has been with the economic results.

the fed raised rates by 500 basis points, around 5.3%. the balance sheet is declining from its peak by a trillion dollars, just under $8 trillion right now. what are the results? just one tick down in the unemployment rate. you still have -- the economy is 2.3%, and the cpi has fallen sharply to down 4.5%. the message to the fed, the economy is a lot more resilient than i thought and rates can be at this level with inflation coming down and growth and employment still healthy. i talked to former pimco economist paul mcculloch yesterday and he said the bond market is mispriced for the strength of the economy. that the economy is so strong, rates are so high, the neutral rate is higher. powell suggested that could be the case if the press conference last month. the idea of higher rates, long-term, which means fewer near term cuts in a market that

baked in substantial rate cuts next year. the only way for the rate cuts to adjust, price rate cuts out of the short end and drive the long run higher. we had the atlanta fed yesterday saying, hey, we're sufficiently restricted, which means we don't have to raise rates more, but then went on to say he doesn't see -- he sees the next fed move as only a single rate cut next year at the end of the year. >> what about you? where are you, steve liesman? >> well, i'm starting -- trying to process this idea of a higher long-term rate. i think ultimately that leads to at least one good development. if and when we can get inflation under control, the fed can start to ease back on the short end. i think bostic may be a little pessimistic about the ability of the fed to cut rates next year. if we do get inflation under control, a lot depends on what

happens with oil and how that works through the economy right now. but you can imagine a situation where the funds rate comes down, maybe somewhere below 5% and you get a flat or a slightly inuninverted or disinverted or up wi upward sloping yield curve. i think the fed is talking tougher than they feel. yesterday one of the things ways trying to report, andrew, is if you look at the dot plot, there is a bunch of folks down at 4.25, 4.5 for next year, none of those folks have been talking or if they have been talking, they might have each changed their mind for september there are a few doves out there. just hard to find right now. >> i'm putting -- cuts are back on the table. i'm convinced. i'll convinced, next year, the steak is totally well done. you put it under the tin foil, it was pink, when we did it, and

we definitely -- it was heated up way too much and now it is like an old shoe. already overcooked. already too tight. that's what i'm starting to think. this could get out of hand, steve. if these rates are unmoored, which is what some people are saying right now. not moored to what the fed is doing. >> joe, the discussions i've had with fed officials suggest that they're not overly worried about the financial system right now. of course, famous last words. >> right. i mean -- >> i'm talking about mortgage rates. i'm thinking just about we could get -- it could be much -- the economy could roll over much more quickly and worse than they had thought previously. and we haven't seen it yet. one of these days we'll get a data point that starts indicating that. >> so what do you to with that, joe? it sounds like one thing in the bond market you would do, you would go very long the short end because you would be playing those cuts that are now being --

>> what does the investor do or a fed do? >> as an investor. you would go long the short end on that call, right? and maybe even a little bit of the long -- the long end. you might have more return there. >> i just think we're ripe for a policy mistake on the other side of this. we had one going in and we might be ripe for one now. we're going back from the soft landing, steve, that suddenly is what we were 80% consensus on that. where are we now, do you think ? >> i think what you're saying is funny because i kind of remember that, it seemed like we were only reporting the idea that a soft landing had become the conventional wisdom until all of a sudden, like, in a week or two it wasn't the conventional wisdom. people started worrying about the effects of the higher rates.

>> what changed? >> what did you say, beck? >> what changed? i couldn't pinpoint it. >> i -- what happened -- these higher rates are creating a lot of concern right now in how they're affecting both consumers and businesses. one thing we have seen for a while there the spreads between corporate bonds and treasuries were actually narrow. they seemed to be widening out again. stories about delinquencies out there. the thing joe was talking about is the effects of the higher rates on the economy. what i just reported this idea that the neutral rate is higher is sort of saying that the economy can withstand this, the difficult adjustments notwithstanding. >> steve liesman, we're going to be talking to you a lot more later today. we'll get the adp numbers and later, friday, the jobs numbers. so a lot going on. thank you, sir. >> see you then. and moderna is planning to

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we're back. kevin mccarthy became first speaker to be voted out of his job yesterday when eight republicans -- shouldn't we have a reality show -- >> see the commercial break. >> if you could only see. >> mccarthy had the backing of much of his conference, yeah, 96%, he said last night he would not run for the speakership again. so the -- it is on. this race for speaker. not anything that can happen until tuesday or wednesday of next week. let's bring in 2024 presidential candidate chris christie. he's a two-term governor of new jersey and a former u.s. attorney. good to see you, governor. >> good to be here, guys. >> always good to see you. how is the wife? >> she's great. she's watching. her favorite show. she watches every morning. every morning. >> can you -- can you give me anything positive, any silver lining of that excrement show? >> no. >> from yesterday? >> no, i can't.

look, it shows -- it gives people more of a concern about our party being a governing party. and that's bad for all -- >> well founded. >> right. and, look, kevin's mistake in the beginning was taking the job under those circumstances. >> only way to get it. >> well, i said to him at the time, should tell him, go find somebody else. there would have been no one else that could have gotten to 218. >> always one person. but usually you had a margin of 30 or 40 in your party. >> we can thank donald trump for that. >> so trace it back to that. wasn't a one person thing. the margin was -- there was no red wave because all the maga candidates, extreme maga. >> you heard from matt rosendale. >> another one. >> who said he was praying for them not to get a big majority so that he could be more influential. so you have these guys who yesterday were literally just trying to raise money for themselves, get on tv, that's

all they care about, and, by the way, the creator of all this is trump. >> right. >> this is -- he set this type of politics in motion. >> governor purdue in georgia and said to mcconnell, i hope you lose. republicans. i should just start saying -- republicans lost the senate. >> and trump did that because he didn't care because he only cares about himself. >> and then the 2022 midterms, that didn't happen. >> well, look, when you put candidates up, like they did in new hampshire from the senate, like they did in pennsylvania or dr. oz, who is a guy known for a long time, both of my finance committees when i ran for governor. you know why? he's from new jersey. and he -- so you run for senate in pennsylvania, you now, i spoke to my mother-in-law who at the time was 94 years old, now 96, si asked her who are you voting for in the primary? she said i'm voting for

mccormick. i said, why mccormick? she said, oh, christopher, dr. oz is from new jersey. sometimes people get too cute and too smart for their own good. people understand basics. and she understood that she lived in pennsylvania her whole life, she wanted a republican senator from pennsylvania, not somebody from new jersey. >> what does this all mean to the business community? we have been trying to mull that around, just the potential for a government shutdown, the inability to find compromise, the inability to govern and get things done, no matter which party you're looking at. >> i don't think there will be a shutdown because mccarthy showed that you can prevent that from happening by, you know, the folks, the 210 in the house on the republican side who were ready to vote with democrats to have a continuing resolution for 45 days. i'm not worried as much about a shutdown, but what i am worried about is you look at our long-term economic issues that

we have to deal with. we have to deal with the debt. and in that, you know, i don't agree with gaetz, i don't think he has any core on that, but my point is you need -- you need to have a stable majority to be able to do that. what happens in ukraine? what is zelenskyy saying when he wakes up this morning? what are our allies in europe saying? the last time we turned our back on a shooting war in europe, it cost us half a million american lives ultimately. and i don't understand these people who are making ukraine this kind of dividing line on this stuff. and it is going to hurt our relationships around the world. it is going to wind up costing american lives ultimately either in europe or in asia. >> i got a question for you. in the 6:00 hour we were talking about trump. and joe says to me, we were talking about tds and this idea of -- he says deplorables and all of this. what is this whole situation mean for you, for your election,

and the idea that there are a strong base of support still for president trump? why is that -- what is that and how do you rationalize the situation? >> i think there is three elements to the trump support, right? there is an element of folks who are -- they just -- they never really have been sfloflinvolved politics much had before. he spoke to their anger and it is something they can relate to and they're rock solid for him and probably wouldn't support anybody else, right? there is an element of folks who it is just purely tribal. they feel like they have to keep the jersey on all the time and if they -- if they say they even have some concerns with trump, that means they're for biden and can't be for biden. they just put that away. then the third element is the people who are just scared because they look at it and say, i guess i have to be for trump because he's ahead in all the polls and there is no

alternative to that. i think that last element of people will break away from him. >> and that's where you think your opportunity is? >> correct. >> clearly matt gaetz thinks politically for him that there is an audience for what he's doing. he thinks he can become a governor of florida up there eventually on the back of this kind of thing. >> it is a fiscal -- he -- eight of those people were hiding behind the $33 trillion. that's what they said. >> florida is a red state now. and so could gaetz -- will gaetz win a gubernatorial primary? who knows. look at matt gaetz is not a whole heck of a lot different than ron desantis. if you look at the things that desantis did and said when he was in the house, he was not a whole lot more liked than matt gaetz in the caucus. >> matt gaetz has some serious ethical investigations that -- potential illegal activities.

>> i think you're right. and gaetz looks at this as the best defense is a good offense .and he's setting this up when they do come back, if they do, with serious ethics charges against him, oh, well, it is all rigged. we heard this before. it is all rigged. because i went against mccarthy, now they're going after me. i think that the -- if you continue to look at the early states, in the polls that have a decent amount of sample, trump is below 40% both in iowa and in new hampshire. that's a bad sign for -- imagine, andrew in the democratic primary, if there was a poll that showed biden under 40%. >> why isn't there? if you want to do what aboutism, you talk about not staring a problem right in the face, which is republicans with donald trump, democrats have nothing but joe biden and with kamala harris waiting in the wings. tell me how they're rationalizing that without trying to figure out --

>> the people who have to answer those questions are gavin newsom and j.b. pritzker and cory booker and others who -- they don't want to run. >> they don't want to run. they're too fearful they're going to split a party at a time when they are looking at the gop and looking at trump. if trump was not the leader, i think you would have a completely different situation on the democratic side. i think people would be very willing to split that whole situation up and run against him. >> the premise is flawed, though. >> i'm not saying it is right. that's the conceit. >> i think the premise is flawed because, you know, you and i were at a similar meeting recently. and i heard there were a number of democrats there, and they're all scared to death that biden is not going to make it, that he's not going to physically get there. and then the only thing standing between donald trump from their perspective and the white house is an 82-year-old joe biden who

on most days doesn't seem to be able to put, you know, eight coherent sentences together in a row. >> words, right? >> it is -- it is incredible. one of the reasons i'm running is because you can't have these two people be the choice. and you -- and everybody says, well, i don't know how you'll do it, how you thread the needle, how you win this thing, well, you know, the alternative to me is unacceptable. so, if the alternative is unacceptable and you feel like you have something to offer, it is not acceptable for you to stand on the sidelines and just carp and complain like a lot of people that we all know who come here and whether it is from this business or whether it is from wall street or whether it is from other parts of business in this country, who all say the same things to me, but then they're all waiting on the sidelines. i want to see how this plays out. >> it is part of the problem, too many people are running. the problem being if there was one alternative, maybe there would be more of a -- >> we got to pick the

alternative. >> the only way you get one alternative is for someone to actually prove they can get votes. and, look, everybody says there is too many people. remember something, on october 4th of 2015, there were 16 republican candidates in the race. today, for practical purposes, there are six or seven. >> there wasn't a former incumbent. >> but, you know what, he was, if you remember back to this time now, october 15th, he was clearly ahead and significantly ahead. when he first got in june he was not. when we got through the debate we had, the first one and the second one at the reagan library, trump was the clear front-runner, center stage and he was double digits ahead of jeb bush or scott walker. and by the way, remember by this time, eight years ago, walker dropped out. he was the front-runner in iowa six months earlier. so, my point to people is there aren't too many candidates yet.

and then you talk to all the other folks, they want the field to thin. well, then do something. i've said to any number of people, even if you don't pick me, pick somebody. buil but these folks are all afraid of being wrong. guess what, if you look at -- let's take the wall street industry. if you take a look at their ability to predict who is going to win, they stink. they never can pick who is going to win. it was president jeb bush. it was president scott walker. it was president rick perry. come on. so, if i say to them, decide who you want to be president, who you think is the best most confident most responsible person to be president and there are some of the few people who have the resources to give that person a chance. but everybody wants to be careful. i'm careful of everybody being careful. i'm out here not being careful. i'm the only one that on the stage that didn't raise my hand and say i would support a convicted felon and i got booed by 5,000 people from milwaukee. i don't care because it is

right. really want a convicted felon to be president of the united states? and you had jokers on the hill yesterday saying make him speaker. who are these people? >> who should be speaker? >> i like scalise. i've always liked steve scalise. i don't know whether he's up to it from a health perspective. i spoke to him when he first was diagnosed, he's a friend, and he was focused on making sure he gets well, which is what he should. only he knows what his prognosis is. >> jim jordan, total pro trump. >> who? >> jordan. >> well, look, yes and -- >> i like him. >> jordan also stood with mccarthy. >> he did. >> and voted for mccarthy. >> he's a -- >> look, i think the most likely two candidates are scalise or emmer. they're in leadership already. they put a lot of -- >> pretty low key. i saw him talk -- >> emmer? >> yes. >> it may not be bad to have a speaker from minnesota, from a blue state, with somebody who

actually understands how to get things done as a republican rather than someone who is only red state focused. we need to put together a coalition and recruit candidates. >> mccarthy from california. >> that's almost ridiculous because then you really have to be tribal when you're from that state. like being from new jersey. >> bakersfield. >> it is bad. >> you've got to get over it, okay? next case. >> i had you for a silver lining. you said, no. >> there is no silver lining on this. there is no silver lining on the speaker stuff. but, look, we got a race going on, let's get to it, let's go and try to win the damn thing. >> okay. >> the only way -- everyone is going to say if i go ahead and beat him in new hampshire, you know they're going to be people going, i knew it, i could feel it, i knew it. well, let's make it happen. >> you're going to be among the

smartest people in america. >> you'll have us to thank. governor christie, thank you. >> always good to be here. even though joe is just a bummer. >> i'm not a bummer. >> you are. >> really? this happened yesterday and we have 2024 with those two candidates to look forward to, that's what i said earlier, does that put you in a good mood? >> that's why i'm running. >> thank you. >> when we come back on the other side of this, mortgage rates s closing in on 8%. we'll break down the latest mortgage application numbers, talk housing and so much more. the trial of ftx founder sam bankman-fried, it begins -- it began yesterday. former s.e.c. attorney john stock will join us with the latest headlines and implications for the crypto industry. trying to pick a jury now. you're watching "squawk" and this is cnbc. >> time now for today's aflac trivia question. how many branches are there in the federal reserve system? the answer when cnbc's "squawk box" continues. tal bill?! for a thousand bucks?!

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and welcome back to "squawk box." i'm frank holland with this morning's premarket movers. we begin with apple. shares are down almost 1% after a downgrade from key bank as analysts cite high valuation and slowing growth in their note. they say apple gets 37% of revenue from the u.s. and analysts are forecasting a fourth consecutive quarter of sales declines with specifically iphone revenue falling 2% in their estimates. shares of apple down almost 1% in the premarket. moving on to chips, intel shares moving higher after plans to spin off the programmable chip unit into an ipo in the next two or three years. you can see shares are up almost 2%. they said theunit would operate as a stand alone business as of january and its financials will be reported separately during earnings. intel up more than 35% year to date, but still under performing the broader chip sector. we want to lockok at bond

yields. we'll start with the benchmark ten-year, 4.78%, easing a bit, at highs we haven't seen since 2007. forecasts from bill gross and jeffrey gundlach we could be headed to a 5% yield on the benchmark ten-year. right now at 4.78%. also the 30-year long bond, right now at 4.9%. inching closer to 5%. up a percent during the year. this is important because the long bond, the 30-year is seen as investor confidence and expectations. that's a look at the stocks to watch and premarket movers. "squawk box" will be right back.

all right, everybody, the latest data on mortgage applications are out. what does it look like? >> i'm going to sound like a broken record, but mortgage rates keep rising, so mortgage demand just keeps falling. total mortgage application volume fell an unusually large 6% last week compared with the previous week. this as the average rate on the 30-year fixed for conforming loans with 20% down payments rose to 7.53% from 7.41%. that was the average for last

week. but another daily survey had the 30-year at 7.72% as of yesterday. applications to refinance a home loan dropped 7% for the week and were 11% lower than the same week one year ago. refis made up less than one-third of mortgage demand two years ago when rates were setting multiple record lows. refis made up roughly three-quarters of demand. applications for mortgage to purchase a home fell 6% for the week and were 22% lower than the same week one year ago. the adjustable rate loan or arm share of purchase applications rose now at 8%. it had been less than 3% two years ago. rates moved higher this week. seeing the highest rates since the year 2000. >> diana, how much of this, we had the conversation a couple of conversations on the m&a activity out there, we're seeing in the ipo market too and so much of it, every person we talk to says you're not going to get more confidence until rates

stabilize, people are waiting and watching. same probably holds true for the mortgage market. >> absolutely for the mortgage market, for the housing market. and the thing we're watching is how long will it take for these mortgage rates to have an effect on home prices because usually when mortgage rates go up, home prices go down. housing is less affordable. we haven't seen that during this rise, which is a really strange dynamic. and it is because of that supply and demand situation. but there has to be a limit right somehow for affordability. does it -- is it 8%, is that where the line is where home prices start to fall? we'll see. >> all of this plays into not only home purchase prices, but also into the rental market as a result and all of that adds to inflation, which the long-term implications, what that means for the fed's actions, crazy spiral. diana, thank you. we'll talk to you soon. want to stay in the housing sector now. two months ago the national association of realtors sounded the laralarm if yields kept ris

rates could go to 8%. joining us is lawrence eun. i was looking at stuff with a friend over the last week or two, mortgage rates are at 8% even if you got pretty good credit rating and money in the bank. >> good morning, becky. right now the situation for the housing market is very tough. the mortgage rate going up to 8% again, highest in two decades level. that is pulling back demand naturally. but what is interesting is that now we are seeing some of the supply issues like the home builders construction loans, building apartments, those loans are becoming 10%, 11%, 12% on construction. so we may have restriction on supply, which would fuel rent increases and add to the inflation. so i think the federal reserve is clearly overdoing the rate hike and could backfire given that housing is a big weight to the overall consumer price inflation.

>> what is to be done about it if the problem is a supply issue? >> well, supply is to assure that the home builders are not burdened in terms of trying to build homes, remove the excessive regulation or even some of the zoning implications. we should consider some tax credit incentive to bring some of the disused commercial properties, whether office buildings or empty shopping mall, convert is it into residential units or vacant houses, maybe some tax credit to make itabl ahabitable. it is all about supply at the moment. right now this high interest rate, well, now people cannot buy, so now they're extending their leases, renting longer, adding to the rental demand and making rent increases to possibly strengthen. >> some of the things you talked about, the idea of offering loans or tax incentives to get people to convert some of the commercial retail space or

commercial office buildings into housing, those are ideas that you hear a lot of real estate people talking about. is there -- are they getting any traction with the elected officials who would have to buy into that? >> it is a small movement. it is moving in the right direction. but in an incremental way. one thing that will quickly boost inventory is to possibly consider a capital gains tax reduction for real estate investors. mom and pop investors. not black stone or black rock but who are owning five properties or less, if one was to put that on to the market, then one would have reduction and capital gains tax from a sale so we can add immediate increase in supply, so that's one of the things that our organization is speaking with members of congress. >> diana was pointing out adjustable rate mortgages are much more popular as people are trying to find some way to get relief out of the issues.

8% of mortgages now versus 3% historically. is that a good bet? adjustable rate mortgage means you think rates are coming down in the not too distant future. would you tell people to do that or is there a chance the rates will go higher and stay higher for longer? >> the adjustable rate mortgage are almost same as the 30-year fixed rate interest rate. so in terms of interest rate comparison today is equal, so i would ay, you know, lock none the long-term rates, one can always refinance downward. but the overall -- the interest rate will be downward, clearly the economy is slowing. we see some of the leasing activity in office space, warehouse, all are becoming much softer conditions, so economy is slowing. >> you think that. if you talk to larry fink or jamie dimon or many big ceos on wall street, they say you better be prepared for higher rates for longer. if you're making choices on the assumption, not only do you think the economy is coming

down, but you think the fed has tamed inflation and they will go along with that. it is a risky proposition to have an adjustable rate mortgage if you're doing this to make sure you have enough money to make your monthly mortgage payment. >> my advice right now is go into the fixed rate 30-year fixed. even with that, one can always refinance once the interest rate goes down. i think the mortgage rates are topping out now hopefully they raise some downward trend in the upcoming months. >> lawrence, thank you. >> thank you. coming up, former s.e.c. attorney john stark joins us for the latest headlines, implications for crypto and that industry. plus, much more on ousting of kevin mccarthy. the state of the -- it says gop party. grand old party -- for the grand old party party and who may be waiting, is there a party? and waiting in the wings to take the speaker's position. "squawk box" will be right back. .

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more than 75,000 employees

of health system kaiser permanente are striking today. that strike in virginia, california and three other states began this morning and is expected to last three days. among the workers that are walking out, x-ray and lab technicians, sanitation workers, and pharmacy workers. the union's demands include better working conditions and staffing levels and higher wages. but, again, the types of jobs that you haven't seen strikes in the past now happening and in healthcare and we'll see what this leads to. >> all over the country. coming up, sam bankman-fried's criminal trial is under way, a breakdown of ato expect. john stark, we'll talk to him next. stocks? (fisher investments) nope. we use diversified strategies to position our clients' portfolios for their long-term goals. (other money manager) but you still sell investments that generate

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♪ ♪ every single day, businesses everywhere are asking the exact same question: is it possible? well, with comcast business... it is. is it possible to help keep our online platform safe from cyberthreats? so we can better protect our customer data? aww-yeah. absolutely. what else you got? can we use predictive monitoring to address operations issues? before they even exist? we can help with that. can we provide health care virtually anywhere? we can help with that, too. even out here. you, sir. something on your mind? is it possible to survey foot traffic across all of our locations? with wifi analytics? easy. order for nina! can i teleport our guests to their rooms?

technically, no. or power thousands of mobile check-ins while thousands of other guests check out? now that we can do. with the advanced connectivity and intelligence of global secure networking from comcast business. it's not just possible. it's happening. welcome back. the high profile fraud trial of sam bankman-fried did begin yesterday with jury selection kicking off several weeks of proceedings to determine if he's guilty of misusing billions of dollars of customer funds or not. joining us right now is john stark, former chief of the s.e.c. office of internet enforcement, senior lecturing fellow at duke. okay. i'm going to make you, for the day, the defense attorney, john, for sam bankman-fried. what would you tell the jury? >> that's a real problem,

andrew. i would have pled the case a long time ago. this is an -- first of all, he wants to claim some kind of reliance on counsel defense, which is a very top affirmative defense to do because if you want to say your lawyers told you all this was okay, you need to have evidence that showed you it is all of them are former executives at the company. they've spent the last 11 months walking the prosecution through every single document, every e-mail, every text. why did they do that? because they signed plea agreements. they have a stake in this trial.

they have to perform or they're not going to get the deal. >> if i was the defense attorney, what you just said actually would be probably my best defense, which is i'd say you can't believe these people. how can you believe the credibility of these individuals if in fact they've all taken plea deals and they all have a stake in the outcome of the case because their stake is my stake? >> that's the truth. that happens in every single trial. i was with the sec enforcement division for almost 20 years. every witness has a bias. you walk them through that and explain how they're here to tell the truth and they explain document by document. remember, you have a legion of accountants, of forensic accountants, lawyers, technology, all hired by john ray. ray has paid them over $200. the -- 200 million.

their primary job is to give law enforcement what they're asking for. they're charging somewhere on the average of $1,800 an hour. they're running over to that office giving them every single document, every single text, every single e-mail, everything they find and it's free of charge for the prosecutors. this is unpress decedented to ho many prosecution witnesses that have access to every piece of data. what's his defense? he's his own worst enemy. he's got diarrhea of the mouth. he talks about the dumb games we dumb westerners play. he admitted that the ethics stuff was mostly a front. he spent his time talking to you giving you all sorts of inkulpatory evidence. his his own worst enemy.

>> just running through the defense when he was asking questions like do you know anyone with adhd? if adhd is an excuse, half the population has adhd. and his parents are lawyers. >> don't get me started on the parents. his father gets a $10 million salary. they great 16.5 million house and they're saying we didn't know when we signed the papers to that house -- my father used to use this statement when my brother and i would get into trouble, the i don't know syndrome. i don't know how the car got all messed up. yeah, i was using it last night. all of a sudden you're the biggest idiot in the world and you were paid $10 million for

what? my closing argument -- i'm sorry i didn't answer your question directly. i'd rather be the prosecutor obviously. remember hamilton, becky, you want to be in the room where it happened. say it a "a room where it happens." and this whole snl skit, the caveman lawyer. remember that skit in. >> no. >> he's going to say i'm just a caveman, i don't understand, i don't know what's going on. i'm not familiar with these corporate ways and using that money to buy as much political influence as i can and getting my mom to help me conceal. >> you have made a number of accusations on the air, not just against sam bankman-fried but

you've made a number of allegations against his parents, his father and mother. you seem to be implicating them criminally. do you want to speak to that? >> it's my opinion but absolutely. absolutely. how do you say you're getting $10 million and you're a senior advisor to the company and you say, gee, i had no idea at all. they should at least be relief defendants for the sext action. >> so why is it they're not? if you're -- you've quite explicitly just accused them of a crime. why do you think they're not being accused of a crime by the government in. >> well, a couple reasons. this is the first trial. there will be another rile for they weren't pear extradition -- >> i'm going to sop you because the other piece of this is you don't think that if he's convicted they will stop?

>> who will stop? >> no, no. if sam bankman-fried is convicted in this particular trial, my view -- you may disagree with me -- it's your understanding there are going to be separate trial on all these or charges. what i'm saying to you and you may did i agree with me, i believe that the courts are not going to spend your tax dollars to do this five more times. >> it's up to the prosecutor. i don't know the if answer to your question. it depends how many counts he gets convicted on. if allows the jury leeway if tuse this i don't know anything

defense. it's been staged so it not blooe blo but to your question, why haven't they named the parents? >> they're obviously they've wist listst and they're probably just thinking let's keep this case simple, we'll see about mom and dad later on. i'm with you in the sense of who knows what will happen if he gets 150 years like bernie madoff did. and he could. it's going to be up to the judge and counsel. >> we got to run. we appreciate all of your perspective. i see that you're not taking the defense role. i'll let them know if they're looking for attorneys, not can

tall and "squawk box" will be right back.

good morning. wall street laser focused on interest rates. they're sitting near 60 year

highs while the dow is coming off its worst day in months we ha. coming up we have a cl-- closel watched numbers. and investors watching the clock till it ticks down to the next government shutdown. all that and more as the final hour of "squawk box" begins right now. good morning and welcome to "squawk box" here on cnbc, live from the nasdaq market site in times square. i'm joe kernen along with becky quick and andrew ross sorkin. we're okay, sort of. i mean, so far we get.

when i said we're okay, what is that? that's from "broadcast news." who cares what you think? >> i don't know. >> arthur brooke. >> who is very happy. >> he like the anti-albert brooks in terms of neuroses. >> matter or anti-matter. >> exactly. they'll explode into the same room, or dissolve into the same room. >> where's it going in? i don't know. we do have an adp number coming in 15 minutes. >> very, very sorhortly. we want to get right over to mike santelli. >> a moment of stability here.

the stock market is kind of serving at the pleasure of the bond market as you guys have been discussing lately. we did get a little bit of a retrieve. 30-year treasury could set the down just about to its 200-day average, right around the 4,200 mark right now. bow low 42 is the level people think could serve as a little bit of support. yesterday a thousand stocks and the nasdaq made new 52-week lows. also go back in time and we went back to june 1st, the next day was a really hot jobs number. june second, market cap tire. that whole scenario is what's being tested also in the context of supply-driven i have a

semiconductor. add a year-to-year basis, built of huge leads during that summertime period and now definitely have come down. but still staying above these levels that we got to in the first half or by mid year. this consumer discretionary sector, that's where it's going on. the economy is holding together well for now. a lot of concern being discussed as to whether consumers can kind of handle it or if we're setting ourselves up for fast growth now, kind of hawkish fed now been p but then it gufs way to bank of merrick, over three

years, it straightened like one of the regional banks. but m also i would say bank of america as well the entire k.r.e. trading at 80% of book value. we can talks talk about all the concerns, a lot of that is probably be discounted in these valuations. >> thank you. we have ten minutes before that number comes. >> in the meantime, kevin mack carty ousted from his job as speaker of the house. it the first time in u.s. history that this has happened. a small group of decisives. >> he said he would no run again

for speaker be living theory up in the air mull painy. he also served as acting director of the consumer program. mick, we've already discussed in what does this due say what you want to about the bill. that is a fact. brings up the bipartisan bill on saturday, loses his job on tuesday. if you were speaker of the house -- >> who would want to be? >> yeah, who would want to be? >> we left out ambassador to ireland. which thank you for saying it

was not a freedom ruse. >> but it caught you by surprise to see this happen or was this kind of a. >> yes and no. >> after the vote on saturday, then i saw it. i didn't see the vote. i thought kevin with shut down for a brief period of time. when he brought that bill to the floor on saturday, the motion was not a surprise. the surprise to me was all these folks in a democrat party who say they want bipartisan didn't vote for it. >> let ask congressman crowley about that. what happened there, joe? when it really was and to

demonstrate the level of unfunctionality in they have very little say whatsoever to now saying they're responsible for the demise of -- >> a couple of presses, saying i'm here, i'm not going to vote. you knew that on saturday he was rejecting the maga,'s, if you will, the extreme of the magas and the rb jeffrey said we're not going to do it because he never reswekd and what's done if. >> you yourself have been, i

don't know, cast aside for aoc. so you understand the extremes of both sides of the party and you had to be stung by that. but, you know, physician heal thigh self. both parties got song serious inview. >> i never want to admit that you're right but sometimes you are. it's a republican problem for sure but what surprised me was the democrats didn't -- the first boat to kill the mogs is an institutional especially if i had made my name for myself in washington promoting bipartisanship.

which a lot of folks half. orall in this mfrgs to dptd about what happens it. and it also raises the question about whether the democrats would be in a similar position just in terms of keeping their caucus together. nancy pelosi had the same situation where she only had a five-vote majority. she also had a rule that you couldn't bring a motion to vacate with one representative. that changed at this point. would the democrats be in a better position in they were in the majority? would they be able to control their caucus and did any of the vote yesterday have to do with concerns about their own far left not allowing them to keep grp. >> the rules change happened because kevin gave in to the far

right. it wasn't always that one person could do this. so when nancy pelosi was the speaker with a very slim margin, they were able to accomplish many, many things. so that's why i fail to see the comparison between the two. you know, kevin is a victim of his own making. and it's unfortunate. i don't know where this is all going to go. as being in i do think there is an opportunity, though, if they krpt. >> be or the democrats with who they're trying to work with? >> it's never easy to be the minority in the house. i don't know if mick was ever in the minority. i can't recall. but i was there for most of my

terms in congress, 20 yoors. it's never good to be in the unt. and when kevin mccarthy needed at the to pass the extension of the democrats, but, look, it's not in fact, i was talking to if i hear jim jordan's name and steve sclasy. he is ill and we don't know what his condition will be. i don't know who can get the votes to be the republican speaker but for kevin mccarthy. so we're all the way back to scratch. i don't even know if they can

function with a prp operation from it if it's a tough place to be a republican right now. >> so what would you tell the business community, people watching this today? your odd of a government shutdown have gone up dramatically? is that a short shutdown? is iti hate to be obtuse but ordinarily when i come on the show, i feel like i got some access. >> i got nothing. i don't even know if they can pass a law tomorrow. i don't know if they can elect a speaker. >> i don't think they can. >> i don't think they can ooe but they're acting like they can, joe. it freaks me out.

>> does it get a. >> i've heard some discussion about a coalition government, that somehow the center is going to come together. after yesterday would any of the republicans in the have you blamed this one go but you were there for a long time. >> yeah. >> this is in direct response to that's why we're in this mess and the republicans lost the senate in georgia. that's why 2022, that's why there was such a slim majority. >> i think i just said exactly that. i quit on january 6th, by the way. since trump has been in charge,

we and it's a tough applause to fab. and until we get somebody who is -- >> guys, we've got to run because we've got data. i want to thank both nick and joe crowley. >> and three seconds for the adp job reports from liesman, liesmaniac. >> they're saying the jobs are a miss, the good sector up by 6,000, the service sector up by 8,000, which includes government and the private sector of 170,000. looking at the job growth by business size, small businesses doing their part, medium bases

that's a bug change flpg the leisure hospitality business also stronger. kind of curious what's happening in the mortgage market. construction also doing well. but trade transportation and utilities down 13,000 and professional business services down by 32,000 right there. wage gains also showing quite a bit of moderation. those staying in their jobs got year-over-your. >> still high by the historical series here but down quite a bit from, pay, 14, 15%. some good numbers when it comes from the potentially as wage. >> 1 a hundred thousand rofrp.

>> steve, will you keep waiting. 89. maybe that's the beginning of something. stay with us to talk more about the new ditia. let's bring in neela richardson. are we seeing some cracks developing? >> good morning. we've seen a weak month sandwiched between two stronger months for sure. the last time for the ner was in june of this year. it's not unusual to see that in the market, at least a couple more months. >> is really a will if and this particular month of september large fronts pretty much wide up

relative to what we you a saul our leisure and hospitality sector is growing as long. >> we've had people who said we're already in a recession. maybe in the first -- in the very beginning of a recession that turns into a couple of down quarters or flat quarters of gdp. is there any way that's possible given what you look at? >> people have been saying things about, i will point out that hiring but there as reason

proof. from i think there's reasons to think that the plashting is loosening quite a bit. steve, what -- if you could ask kneel la anything, what what nm as well as the stock market getting a little bit of a bump from this number. in 7:00 we had been talking about these rising yields being very much inc.ed to issuance and it is linked as well to outlooks of the economy. >> and yesterday there was a big jump after the jolt report. to your point yesterday there was a big jump in big yields

after the jolt report. >> and it sets up a jobs report on friday as being very significant. there are some errors in this thing but that's not what i want to ask kneela fj and do we then think that maybe this number is a little bit stronger than the headline appears. glu might see some differences there's a lot of differences between sthem we count striking work twrrk and they are. and so they don't show up in this number in the same way they might show up in the bls report. i will point out that where investors might really cheer this number is when you look at pay growths.

we're seeing job changers that that's most sensitive to the labor park commission and after moving side ways. >> let me rudely interrupt you to give you a chance to praise your own number here, which is whatever people think of the top line number, your wage data has way more actual data points of people's -- of employee's actually inl bijs is go. >> we have 22 million markers at our disposal. i'll give you another number, steve. we looked at new hires, so thee are people who were not matched,

22 million workers,the our until this is a way too accelerating. if you're concern were. >> in why time in the sext 18 months, in your view? >> i think we're going to see a slowdown in the labor market. but i you this it still too recall to call it a recession, though the likelihood of one coming as a temperature the longer before we get into this new interest rate economy.

it been flm and so even beyond the fed, active interest rate hikes. so i think there's still more to come on that, joe. i think to hedge you. sfwlob knows when hear about small companies with a 2% outstanding loan rolling into a 9% business loan, it just seems like these are real concerns and real numbers. still to come this morning, we will talk technical and the the yields have come down a little bit after adp was weaker

than expected. the 10-year at 4.752%. we've been looking at reeled at the highest level pretty much acro tsshe board. the two you watching balk balk, and we'll be right back.

. >> coming up, the latest word from opec and patience with the cartel beginning to wear thin in some corners. we're going to talk out aball of it. stay tuned, you're watching "squawk box" and this is the one and only cnbc.

treasury yields surging this week. that's been associated with a

lot of equity market pain. our next guest say the economy is taking the scenic route, not gliding to a soft landing. joining us is chief investment officer of newberg and -- how do you sleep? >> not well. >> joe, it's been interesting times and you're not sleeping. >> it has been interesting. while there's a lot going on in washington you guys were talking about recently, i think the real story is what's going on in the bond market. we've seen an enormous move. yields are up almost a hundred basis points from just the summer. it's interesting to see how equity markets start to react to that, we saw that yesterday and the head winds over the last few days. i think until we see stabilization in fixed income par markets, i think it's continued volatility. >> if the market's getting ahead of the fed, what's driving the

market. >> it's interesting, you haven't really seen a change in expectation on growth, and you haven't seen a change in inflation expectations. so there's got to be technical reasons and good old fashioned supply and demand and the realization that there's going to be huge amounts of supply and we haven't seen as much buying outside the u.s. when the bond market moves, it usually moves fast and violently. so right now it's like trying to catch a falling knife. >> we talked about this, the idea that the fed is not only trying to keep rates higher but also do quantitative balancing. can they continue ton that path with all of thieves things setting up? and i'm not talking about this year, i'm not even talking necessarily about next year but is there a point where they have to either stop letting these treasuries roll off or actually become a more active buyer? >> i think they're determined to

roll off and reduce the balance sheet. they're going to increase dramatically to levels you never thought about 20 years ago. i issue is the rate curve. my view is we've seen the last of fed hikes. i know the market is pricing in hikes later this year but the headwinds that we see and the recent increase in the long end tightens financial conditions that much more. i think the feds got to realize that and be more careful in their policy decisions over the course of the next six months. and i mean, you're really tight. >> the next move will be a cut, not a hike? >> that's my view. we debate that on the fixed rate income team. >> this year? >> you're looking in our view

mid '24 but see a cut. if things get much weaker and see what a really bad number, i don't know what the number is on employment, if you see strong or weak employment numbers, that may change the outlook for the market on fed hikes. >> what do you do with equities if you're worried about margins tightening. >> i think our view was not the right position. first half the year you saw high beta rally and an ability to protect margins, a bit more defensive in business mod els. we're not saying don't own equities. the at. >> stocks have come down, but you're still talking about the s&p up 10% for the year, of

nasdaq being north of 20% for the year. are stocks cheap here are they are they -- >> you have a group of stocks, the super seven that are at 16 times earnings. the rest of the market doesn't look screamingly expensive. the third quarter of the expectation is for essential live flattish earnings. but if you carve out the earnings, they'll be down right know. >> but it does look cheap to you right now? >> i think there are sectors that look cheap. if you look at health care, utility, consumer staples, they've not done well this year, they're down. i think moving into those sectors as we move into continued headwinds makes as

soon as. >> thank you. thanks for coming in. now that kevin mccarthy has been ousted as and we'll speak with one of the lead negotiators on the recent continuing resolution which kept the government open but closed the door on the speaker. stay tuned, you're watching "squawk box" and cnbc. in the u.s. we see millions of cyber threats each year. that rate is increasing as more and more businesses move to the cloud. - so, the question is... - cyber attack! as cyber criminals expand their toolkit, we must expand as well. we need to rethink... next level moments, need the next level network. [speaker continues in the background] the network with 24/7 built-in security.

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the gop will have to pick a

new leader in the house following the ouster of california's kevin mccarthy. in the meantime the clock is ticking towards another potential government shutdown next month. joining us now republican congressman kelly armstrong of north dakota. he helped negotiate the issue last week. after yesterday how would you characterize what you're feeling right now? i don't know if you thought it was going to be a touchy, fehely interviewed. >> what word comes to mind? >> i'm sad. i'm sad more anyway republican conference, to and now it's almost like the people who voted to create chaos didn't have a real good idea of on we go to

mccarthy to fulfill the promises from and allow him and you not to negotiate what caused his ouster last weekend. so they said it was almost a trap. it was almost a setup to fail. >> yeah, they voted against the rules. we talked about negotiating last saturday to keep the government open. three weeks earlier i negotiated with some of the most conservative members of our conference to pass the most fiscally conservative bill in my life time with the most robust security. 21 republicans against it. that's how you get to the table with the senate, we had eight members join with the entire democrat it wasn't lost on a lot of us where they were standing

and where they are talking from. >> well, they're not going anywhere so why would anyone else say yes to the job? they're always going to be able to hide behind the $33 trillion. and each to be dealt with probably so just talking tough with no solutions isn't going to get you anywhere. why would anyone become speaker? >> well, the cost for my vote is a rule change. we're grown up, we need to take it away. and the 3312 of our entire one quarter of ourin and we had it the most conservative c.r. you could possibly put forward.

it's about time to get to the table and put on solutions or wise we've seen how this game plays out. instead we just gave chuck -- >> how soon before we get through the election? >> we need to get through this. we need to get a speaker elected and we need to come forward and we have to do all of this in 44 days and negotiate with the senate. otherwise we'll be in n-- >> one thing that former president trump did say yesterday and even though i think he probably had a lot to do with some of the divisions in the republican party, but he did say you're arguing with each other instead of with democrats and the biden administration. the republicans need a united

front and it's more disunited than maybe any time in -- i don't know. i'm not hold this is not a united freight to try to tackle conservative issues. >> i think sometimes because there's a division, we act like the division is equal and it's not. we had eight people vote with the democrats yesterday. the huge majority of our con frengs supported mcthey want to govern with conservative policies. listen, when you have a group of people that's more interested in raising money off of or prepares, you have a repro lp.

>> favor? whose hat would you like to throw in the ring? >> yeah, kevin mccarthy. he's opened the house up. he's drop more in the last eight months. my biggest concern is i don't know why anybody else would keep it. we broke 25, 30 years of washington, d.c. inertia and we've ahng range and so whoever is going to be our next speaker better find out how he's going to deal with and negotiate with our it 2 just going to be in the same position again and i'll notlele to specific that. >> eccentric.

>> what does that look luke congressman? >> well, i think the easiest answer is there needs to be a rule change. it's one rule change, it's a simple rule change. you can't bring a moog to negotiate. then at least you can continue down a path and do what needs to happen. it took us democratic votes to get the most conservative cr from and we did that because we could not get people to understand that we can to get to the negotiating table and not put us in a shut double play. the alternative was getting rolled by chuck schumer's c.r. >> congressman, good to have you on this morning. hang in there. still got to get up every morning, go into that place.

pry. >> i used to be an american legion baseball coach. if you can deal with these folks, you can deal with congress. >> thanks. see you later. >> that is not a commentary on the maturity of congress. that is commentary on the inmature of parents bier is what this so. coming up, the impact of high rates on the market. plus this morning as all when "squawk box" returns. with comcast business... it is. is it possible to help keep our online platform safe from cyberthreats? absolutely. can we provide health care virtually anywhere? we can help with that. is it possible to use predictive monitoring to address operations issues? we can help with that, too. with the advanced connectivity and intelligence of global secure networking from comcast business.

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ahead with the price change. >> that would have been the news. this was a virtual meeting. this kind of sets the plate for what happens on november 26th. as the next meeting, as you knowsed, because you always want to use sort of pre-co individual levels and we are 62% higher now than we were a couple years ago. plus in a virtual meeting, in fact most members were in due eye. >> okay, plus, as a group. all opec nations plus rush and others. i'm doing orfrom anyway, it's

kind of hard to know exactly where they stand. bigger than that is saudi arabia's single, solry andle have russia adding on nor, literate lal and that should equal 3.3 million barrels a day coming off the market. in opec mack either way they're keeping their foot on the cut/gad gal and working hard behind the seas to negotiate the normalization of relationships between saudi arabia and israel. if that occur, it is a massive

three i don't there and there's a lot of drama out there. here's the drama. gasoline in california, $5.97 per gallon, and you wonder why americans are not convinced inflation is over. talk a lot more about it tonight, by the way, utilities, gas, everything, on "last call." we've got the ceo of a major power company. we'll also ask him about nuclear. they're a big nuclear producer, and mark fisher, that's just a last call promo, but we've got mark fisher as well. oil and gas all day. >> so, the head of opec made comments, i think, yesterday, that he doesn't think there's enough that's being spent, investments on trying to get more oil protection. he says that demand is going to increase. we could be looking at, he thinks, $100 oil.

how soon? >> harold hamm at that conference that i was at a couple weeks ago, said oil could go to $150. it's an oil guy, so take wit a grain of salt. here's the reality. oil wells don't maintain themselves. they take hundreds of billions of dollars all over the world to make them operational so they don't explode, things like that, and if you're being told by one part of the world that fossil fuels are going to be phased out or we'll need them for a couple more years or whatever it is, a lot of people are going to take that to heart and say, well, we need to stop investing in oil and gas, and if you do that, you reduce supplies. you don't need production cuts, becky. your dad was, i think, in the oil business or around it. the wells just go away. they go away. things need to be taken care of. >> brian, thank you. we'll be watching "last call" tonight and hopefully we'll see you again soon. >> thank you. >> thanks. when we come back, we're going to do i have into this week's market selloff, rising

rates in the treasury market. stay tuned. you're watching "squawk box." (vo) while you may not be a pediatric surgeon volunteering your topiary talents at a children's hospital — your life is just as unique. your raymond james financial advisor gets to know you, your passions, and the way you give back. so you can live your life. that's life well planned.

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oochl the reality of higher for longer interest rates putting a big, big dent in technology. that sector has been squeezed by rise in treasury yields with some of the megacaps losing significant ground. joining us now is doug clinton. you shaved the beard.

>> i did. >> you had the beard. but let's -- we'll put that aside. the question is, what do you do about the magnificent seven? are they magnificent anymore? will they be magnificent again? what's an investor supposed to do? >> they're still magnificent. i think that the best i think you can do is probably just hold and stay the course right now. the reality is if you think about rates rising -- >> meaning because you've already lost? meaning if you were going to get out, you should have done it beforehand? >> and in our view, these are great companies you want to own over the long-term. they're not stocks that we try to trade in and out of. we want to own stocks for the long run. and these are still great companies, despite is this pullback. when you look at interest rates, 1% increase in our models for the discount rate, it's about a 10% headwind to valuations, and if you look at where these stocks have come from -- >> say that again. >> 1% change in rates, 10% -- >> is a 10% change in the equity value? >> that's correct. in our models. give or take a little bit. >> so, what is your fed model at

the moment? where things go for the next year? that would have a huge impact on this 10% impact on the equities. >> it would, and i would say, we're not bond experts. what we try to do is focus on being tech experts and instead of predicting interest rates, we're trying to look for stocks within the mag 7 that have catalysts that could buck the interest rate trend if they keep going higher, or if rates go lower, you get an even better push on that catalyst. google, for us, is the mag 7 stock that has the best catalyst. they have a new a.i. model coming, gemini, their most powerful a.i. model they will have released to at a time. it could be better than chatgpt. if that's the case, i think it changes the narrative on google. where they have been a laggard in a.i. >> it may change the narrative on google. the thing that i can't figure out, between microsoft, amazon, aws, google and the like is whether we fundamentally think

that the a.i. technology, which is spectacular, i mean, just beyond spectacular, creates demonstrable value for these companies or ultimately is something that become the commoditized product that everybody has to have, that's part of the business, and ultimately becomes almost a defensive piece of it in terms of owning market share. yes, copilot will cost you 30 more, and yes, there will be incremental dollars, but that does it actually change the ecosystem fundamentally? >> we think it will. the reality is if you rewind the clock 20 years ago, i think we had the same questions about the internet. does the internet create actual real, incremental value? and for us, a.i. is the same thing. every company will be an a.i. company in the next ten years, just like every company has become an internet company, and i think the providers of the infrastructure, the providers of the tools that do that, including the mag 7 stocks, will benefit. >> and your gamble is google is the winner? >> we think google is one of the winners. that's our top holding across

deep waters' funds. we think they have this catalyst that's incredible. it could result in a higher multiple if investors start to apply more duration. >> who on the magnificent seven do you not keep on your list? is there one or two? >> we sold amazon earlier this year. it's a stock we owned for a while. that's one where, again, it's a great business. all these are great businesses. there's no bone to pick with them. for us, it's a matter of selection, and we want to own the ones that we think have the best opportunities over the next one to three years relative to the others. google and meta are those two for us. >> you could replace it with comcast. i mean, just -- >> i don't know if they have enough a.i. >> what's the piece for -- when you think about meta, it's the a.i. piece for you? >> it is. they have optionality with a.i., so increasing the amount of time that users spend on the platform by showing them more -- >> lost your mic, doug. >> right. keep going. >> by showing more relevant content to users through a.i. just like tiktok has done.

they've been the innovators with a.i. i think meta is implementing that across their platforms, and that's good for ad dollars. >> okay. thank you for coming in this morning. we will see where this all heads. there's a lot of people holding those magnificent seven. some, i think, are a little worried about it, but maybe hold steady is the answer. let's take a final check on markets before we hand it over to our friends on "squawk on the street" this morning. right now, you're taking a look at futures in the green. we started in the red this morning. dow up now about 50 points, higher 51 points. nasdaq looking to open about 70 points higher. s&p 500 looking to open about 10.5 points higher. we did have that adp number. we'll get the jobs number on friday. let's show you the ten-year, at 4.735%. >> the jobs picture has been the driver of yields, which has been the driver in turn of equities. it's what we've been watching all week long, and over the last several weeks, so the numbers we get tomorrow with the thursday jobless claims and then friday for the unemployment figure, the

big number from the government, those will be pretty important. >> let's take a quick look at the dollar. should we show the dollar? >> bitcoin. looks good. >> dollar is good right now. >> dollar is strongest levels -- closed yesterday since its highest level since november. >> dollar's good, which is bad. >> join us tomorrow. we got to roll. "squawk on the street" begins right now. ♪ good wednesday morning, welcome to "squawk on the street," i'm carl quintanilla with jim cramer here at post nine of the new york stock exchange. david faber is at cnbc hq this morning. premarket is pinning its hopes to some relief in bond yields after adp comes in line, 89,000, the lowest in three years. ten-year yield back below 4.75%. oil near a three-week low. our road map begins with treasury yields. stocks look to regain some of yesterday's big losses. plus one long-time apple