it is 5:00 a.m. here at cnbc global headquarters. here is your "five@5." we begin with wall street continuing to price in the new war risk premium as the fighting in israel and gaza heads into the fourth day. and glrowing conflict with saudi arabia and china and what it means for the market. and flight for safety under way as investors around the world push into u.s. treasuries sending yields to the lowest levels in weeks. we will speak with a major israeli employer about what they are telling the staff about the

conflict and future of doing business in israel. and later, in the show, the rate shock remains real for many in housing. it is tuesday, october 10th, 2023. you are watching "worldwide exchange" here on cnbc. good morning. well mcccome to "worldwide exch" i'm frank holland. we check on the u.s. futures after the positive move from wall street. we are seeing green across the board. dow would open up 75 points higher and nasdaq and s&p would open up .25%. among the drivers is energy on the heels of the move higher in oil and the best day since april. you see here the energy sector moving 3.5% higher.

halliburton and marathon ending the day up more than 6%. this morning, you can see the pre-market with marathon" uu is up .50%. we will continue to watch these stocks. defensives off a banner day with the etf with the best session since november of 2020. leaders include northrop up 3.25% higher. looking at defense stocks in the pre-market, kratos defense is up 1%. the rest of the basket is moving higher. l3 harris up 1%. now turning to treasuries. they were closed for trading yesterday. this morning, a sharp move across the curve as investors around the world are piling into the perceived safety of u.s.

debt. the benchmark at 4.65. well off the highs we saw earlier in the month and just last week. you are seeing a steep drop here when it comes to treasury yields. you see the steep drop as more investors pile into u.s. treasuries for safety. we are watching the energy market as well. oil is coming off the very huge day yesterday on geopolitical concerns. the market is flat in the pre-market. wti at $86.38. you saw it was lower a second ago. now higher. brent crude at an $88.16. similar story for natural gas. that is the set up for the u.s. markets. let's turn attention to the war in israel. now in the fourth day. israel remains in control with the border with gaza and all southern areas remain secure.

officials say parliament and ministries are secure despite any strike on targets without warning will result in the death of one of the 150 plus hostages. we are hearing from the iran supreme leader saying it was not involved in the saturday attacks. we have global angles with kelly cobiella who is live in tel aviv and jp ong in singapore and dan murphy is in dubai. kelly? >> reporter: frank, good morning. israel pushing forward with counteroffensive with 200 strikes on the hamas positions in the gaza strip. identif israeli fighter jets hit a number of positions including a mosque used to store weapons. hamas is saying through a

spokesperson in beirut and telling the ap they will use the hostages as bargaining chips to get prisoners released. they are digging in for a long war and they have the ammunition and supplies to carry out a long war from the gaza strip. concerns are escalating for the more than 150 captive inside gaza. unclear where they are being held. after yesterday's statement by hamas that they would be prepared to execute one hostage for every civilian home hit without warning. saying if you are going to kill our civilians, we are going to kill yours as well. no word on the status of any hostages overnight or into the morning. we are hearing among those

killed, captured or missing in all of this are a number of foreign nationals. thailand confirming 12 of its nationals were killed. among the killed, captured or missing are, ukrainians and american and nepalese. the conditions are getting worse this morning. nearly 700 killed and 200 women and children according to gaza health officials. there is a disturbing video coming from workers pulling children from collapsed buildings there and into hospitals and ambulances. united nations is saying hospitals are barely functioning there and running out of medicine and fuel to supply the generators. a tough situation for civilians inside gaza as well, frank. >> kelly, thank you very much. kelly cobiella in tel aviv,

thank you. we are hearing from another major player in the region as comments from the kingdom is a metric with the ongoing conversations with the white house. we have dan murphy with the latest on that. >> reporter: they have called to halt escalation in gaza. they have expressed concerns of the plight of the palestinians and potential for the conflict to spill over into the region to cause oil prices to spike and risk asset volatility. crown prince held calls with the leaders in the last few hours saying his country stands by the palestinians, not with hamas territories, but with the palestinians. that is critical as president biden seeks to feind a way forward on the normalization

agreement which is the holy grail of middle east peace deals. saudi arabia wants concessions, but israel's war with hamas makes that look less likely. prime minister benjamin netanyahu has ordered a full siege of gaza and vowed revenge for this hamas attack. frank, that retaliation effort is just getting started. >> dan murphy, thank you. around amending the latest comments on the situation. jp ong has this part of the story. jp, over to you. >> reporter: frank, good morning. the events that happened in israel threatened to complicate a wedge with efforts with the

united states and china over improved relations with the countries. as we know, the conflict and attacks on israel and declaration of war on hamas happened over the weekend and leading up to chuck schumer with the delegation of senators to meet with xi jinping. the chinese foreign ministry issued a statement where they did call for more peace and cooler heads, but they were seen pushing forward with the only solution which was establishing the two-state solution or establishment of the independent state of palestine. this was seen as innocsensitived not aware of the attacks and casualties which were a result and hundreds of people who died as the attack on israel. this as echoed by schumer who was disappointed aftermeeting with the foreign minister of china leading up to the meeting

with the chinese president. >> i told him how deeply disappointed i was. you heard me. i think some of you were in the room when i said it. how deeply disappointed i was in the initial statement. they rectified that. a bunch of us made the request that china use the influence on iran to not allow the c conflagration to spread. >> reporter: the chinese issued a statement saying they were deadly saddened by the civilian casualties. in response to that, senator schumer said he is satisfied that the new statement included the loss of life. this is a major test not just of whether the u.s. and china can improve relations, but a test to

see if these countries can put this aside and look and act in concert to a helping resolve. frank, back to you. >> jp, thank you. despite the tension and rhetoric from leaders around the world, u.s. investors remain largely uns unscathed with the s&p. the conflicts causing investors to assess the impact on the fed and its next policy decision. with the cme fed watch tool showing an 86% chance the fed takes no action at the next meeting. let's bring in mark avallone of

pa potomac wealth. we see the fed deciding not to hike at the next meeting come up in the next meeting. that is the latest opinion. do you agree? >> there is a lot of truth to that. you have terrible headlines across the world. we have the ukraine-russia war and the tragedy in gaza. the stock market now rallies and that comes down to the fact that interest rates drop due to the flight to safety. there was pillow talk coming from the fed heads yesterday. they where underscoring they wee near or end of the hiking cycle the. jay powell is the number one factor that could tilt stocks to the positive if the fed continues this pillow talk and

sweet rhetoric and whispering what the market investors want to hear and then we see the stock market rally. short of that, i think there is caution. >> to your point, four speakers spe from the fed speaking later today. we have earnings growth for q3. earnings growth still. does the rise for oil prices change your mind about the q3 earnings? >> it will help earnings in the energy sector. across the board, the input that oil has impacts earnings. so do wages. i know in some sectors we have wage compression and it is helping the overall inflation number. in other industries, we are seeing significant wage hikes. mack truck workers being this close to signing on the deal and they walked away.

you have pilot -- pilots and you have auto workers and healthcare workers striking. the higher wage component will lower earnings or they will raise inflation. earnings are inversely related to stock prices. that is another caution sign that i think the market might be slightly undertaking right now sdplchnow. >> mark, thank you very much. coming up on "worldwide exchange," we have the one word investors needs to know and latest on the conflict and future of doing business in the middle east. and wall street earnings getting under way. we get set for pepsi results in one hour from now.

we feltell you what you need to know. and diana olick lays out the state of play for potential buyers and sellers in the higher for longer market. a very busy hour when "worldwide exchange" returns. stay with us. at morgan stanley, old school hard work meets bold, new thinking,

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welcome back to "worldwide exchange." the conflict in israel entering the fourth day today as countries are racing to evacuate

citizens. a number of companies are asking employees to work from home. delta airlines and chevron and many others. joining me now is the ceo of a company with ties in israel. dan, thank you for being here. >> thank you for having me. >> i want to ask how you are doing and employees are doing and how has the hamas attack impacted your operations? >> sure. personally, it is just hard. it is hard seeing those images and videos and i don't think a normal human being can process it. obviously, the attack was a surprise attack. the casualties are going up. it is the understanding of the

magnitude. we are 7 million population and the attack was over 1,000 people right now. understand almost every walkme employee knows someone who was hurt, kidnapped or murdered. it is the most difficult time that i experienced. i've been in the lebanon war and it is just hard. >> dan, i can only imagine. thank you for making the time to talk to us during what has to be a difficult time as you mentioned with your employees impacted by all this. you are a multinational company. you have offices in the u.s. and israel. are operations impacted negatively by everything going on? >> i would tell you that actually the opposite. we have 1,000 employees worldwide and over 500 in the

u.s. and 400 in tel aviv. hamas wants to hit us and hit our economy as well. our team is doing a phenomenal job. they are all recruited together and working to win that mission. obviously, we are hosting the cloud with the servers in the u.s. we are just working in shifts. people are working from home. some people were drafted into the army and some people can't work emotionally. i wrote to the company yesterday that i saw the worst in humanity and the most amazing in humanity in the past 24 hours. to see how everybody is working together and collaborating means we will prevail. it is amazing to see. it is just sad sdpl. >> emotion al linkedin post.

i want to talk about the business impact of what is going on in israel and the attacks. your stocks did close lower yesterday. i'm looking at a list of other israeli-based companies. all falling lower on investor concerns what have is going on there. what would you say to investors about the conflict and long-term impact on your business? >> obviously every time there is a crisis people are taking a measure of checks and balances. you see the drop in the tech with the israeli companies got a greater decline than the rest. on the longer term, we will be stronger. we are innovative and obviously most of the customers are not in israel or in the u.s. or europe. the real impact is not existing,

obviously, but the perception is there. israel is a strong country and strong nation. i don't think it will affect us whatsoever. having said that, i do think there is an a lot of work to explain to investors about the situation and we have a strong business plan and a strong team in the u.s. and strong team in europe and japan and australia. most of the israeli companies operate the same way. we are using cloud. nothing is hosted here in israel. i don't foresee any real impact. just big moral ie issues right w with the employees to keep

picking their heads up and continue to work. that is a mission for every ceo in israeli tech to lead by example. it is a challenging time. we with wil wil we with willl overcome it. >> dan adika, thank you. we appreciate your time. more "worldwide exchange" coming up after this.

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welcome back to "worldwide exchange." pepsi shares are on the rise ahead of earnings. the stock is down 10% year to date. under performing the consumer sector this year. for the quarter, revenue is forecast to increase 6.5% and profits expected t ed to grow . the report coming after pepsi raised prices by double digits last year and delivered strong growth for the first half this year. analysts are questioning how a stretched consumer and trading down trends i am pangtmpacts pr power and weight loss drugs to impact sales. joining me with the expectations of the quarter is jeremy

goldberg. jeremy, good morning. >> frank, thank you for having me. >> looking at the numbers right now. analysts have a buy rating on pepsi. average price target of $194. a 20% upside. are you bullish? >> i hate to create short-term predictions on pepsi. we have been holders since 1984. we are familiar with the pepsi performance through economic cycles and interest rate environments. taking a step back, demand is resilient. that was on full display in the recent quarter when pepsi was able to do a beat and raise quarter. they beat on the top line with revenue and organic growth up 14%. they beat on the bottom line. they increased on the top and bottom line on fiscal. that is not happening often.

that is proof of the purchasing power. we expect the purchasing power to remain in tact. we are interested to see what will change. are they able to continue increasing prices? how is the consumer feeling? our expectation is they will keep doing okay. >> let's ask how you are feeling. let's talk about valuation in the higher for longer environment. price neyields eased with what happening in israel. are you comfortable with the valuation as a long-term share shareholder? >> you bet. there are times where pepsi has traded above 25 times above earnings. there have been times where it is a 15 pe stock. if we look at the trajectory of earnings through 2027, we have the expected growth on earnings.

we have the 8% earnings growth and 3.2% dividend yield gives us a low double digit return. from the valuation perspective, 21 times forward earnings. there is a bit of valuation expansion. >> we are looking at the portfolio of products. i'm a big fan of doritos. there is concern of ozempic and other weight loss drugs. a walmart executive flagged the weight loss drug risk to their business. are you concerned about the long-term exposure to the pepsi stock? >> i'm not concerned. i think at the center of pepsi's portfolio product innovation is zero sugar products. they have light water and

aquafina. they have philatropicana as wel. they have healthy snacks. they can capture or maintain the healthy eaters. >> jeremy, we have to leave it there. we appreciate you being here. we appreciate your insight. >> thank you. straight ahead on "worldwide exchange," what c-suites are saying about the war in israel. what my next gst iues telling them. we are back with more "worldwide exc exchange" after this. 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. it's not just possible. it's happening.

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it is 5:30 a.m. in new york. there is more ahead on "worldwide exchange." stocks pulling momentum after a week in the green. investors are watching the developments in israel as global corporations try to navigate the violence. tina fordham is standing by with what clients are telling her. and managing your money in the world of rising rates continues as we dive into what higher for longer means for the hea head hot housing market. it is tuesday, october 10th, 2023. you are watching "worldwide exchange" here on cnbc. welcome back to "worldwide

exchange." i'm frank holland. let's start your day with the half hour check on the u.s. stock futures. you see we are in the green across the board. dow would open up 60 points higher right now. a bit off the highs of early this morning. despite the gains yesterday, the airline stocks got hit hard. a number of airlines calling off flights in israel due to the conflict and prospect of rising oil prices. you see the global plane etf taking a hard move to the down side. down .30% for the week. taking a look at airline stocks this morning. sp delta doing the best of all of them up 1%. pressure on jetblue and southwest right now. turning to treasuries now which were closed yesterday. investors all around the world are piling into the perceived

safety of u.s. debt. we will look at the ten-year yield which is 4.66%. you see the sharp move to the downside here as investors go to the bond market for safety. yields move inversely to prices. we want to look at energy, specifically oil. you see in the red across the board with oil. wti crude is down right now. brent crude is $88.10. natural gas with the same move. we are checking out the early trade in europe right now. the german dax up over 1.5%. similar for the italian ftse. all up 1.5%. that is the board for this tuesday. we turn to a breaking news

story. israeli military is preparing for an extended ground assault in the gaza strip. amassing troops at the border. israel retaking control of the southern region and as of this morning, 900 israelis confirmed dead with 700 palestinians. hamas warning of future air strikes threatening to kill hostages if israel attacks without warning. all of this with the thawing of tensions before saturday's surprise attacks. joining me now is tina fordham. a former citi chief global analyst. thank you for being here. >> good morning, frank. >> we saw the markets end in the green despite the geopolitical concerns. i know you are talking to clients and executives. what are you telling them about the risk to their business?

>> thank you. i mean i had a lot of calling over the weekend and busy week ahead because a lot of boards have been looking carefully at the russia-ukraine war and china and taiwan risks. most see the situation in the middle east on a positive trend. of course, we had optimism about normalization between saudi arabia and israel which would have been a huge boon to commercial integration in the region. the hamas attack has not only put the possibility of normalization of relations on the shelf, it opened up where we are now which is a full-scale war. i think that has caught executives off guard and judging by what i see coming out --

>> tina, wearing having issues with your signal right now. this caught executives off guard, but it did not catch you off guard. you put out a letter saying this was a catalyst for the super cycle. as you talk about the geopolitical risk, how do you characterize that and what should executives be mindful of going forward? >> there are a couple of points. one is the strategic context that we have today is very different from 2006. that was the last time we had an uptick in tension. we don't have qe. markets are concerned about higher for longer. geopolitical risk feeds straight into that. i think we're at a time when people are out of practice at pricing geopolitical risk. it is a much more complex outlook for all of the factors. we don't have a speaker in the

u.s. house of representatives. we can't get aid passed. we don't have an ambassador in israel. these are the small things taken individually, but taken together, a unified response with a dual response for supporting israel and ukraine remains complicated. what investors need to understand and business leaders see we are not in a world of tail risks and a base-case scenario. we need to look at plausible scenarios and there is a plausible scenario forr escalation of russia-ukraine and the war in israel. >> i want to talk about energy prices and specifically oil. flat right now. we have seen a rise in oil plpl prices with inflation and supply. what are you telling clients about the inflation risk and supply risk if this does

escalate? >> most investment strategists are pointing out that israel is not a producer of energy and the two gulf wars, for example, really didn't do much to impede supply. i put it differently in a macro context. we have the ongoing war between russia and ukraine impacting food security and one of the risks of escalation in israel is attack on the iran nuclear facilities which could lead to more issues with supply chains. we're always looking for transmission mechanism. both ukraine and israel have the potential to become systemic against the monetary back drop. >> tina, thank you. coming up on "worldwide exchange," our series diving into the sectors impacted by

rising rates rolls on. we will tell you what it means for the housing market resilience. ckre "worldwide exchange" coming ba in just one moment. stay with us. we got this. we got this. we got this. life is for living. we got this. let's partner for all of it. edward jones ( ♪♪ ) we're in the security business... our job is to help people feel safe. not only our customers but those who matter most to them. just like our company does for us. we have great benefits from principal. so i know i'm taken care of. and (pause) not just me. but the ones who matter most to me. ( ♪♪ )

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financial crisis. that's pushed mortgage rates higher at 8% for the housing ma market. diana olick is joining me now. could this keep more potential buyers on the sidelines? >> reporter: they could, frank. the housing market is in a different place. the average rate on the 30-year fixed started at 7% in september and now heading toward 8%. to get a picture of how much the affordability has been crushed, you know i'll do math. buying a $400,000 home with 20% down on a 30-year fixed, you are paying $965 more than two years ago when rates were around 3%. that was before the fed started hiking rates. that doesn't factor in the same home is now 40% more expensive than it was at the start of the

pandemic. we went to a sunday open house in d.c. to see the impacts. a lot of buyers were out looking. that is all they were doing. just looking. >> in the first two weeks of october as anticipated, inventory has taken a jump. interest rates have taken a jump and we are seeing more houses, but it is anecdotally on the streets with less buyers. >> reporter: some buyers who qualified over summer no longer do at the current rate. they are waiting to see what the effect this rate will have on demand and home prices. >> you have a low mortgage rate on the current mortgage, yes? >> yes. >> everybody has 3%. >> yes. it makes it difficult to, you know, purchase a home at a higher rate. it is easier to hunker down

until the market normalizes. >> reporter: do you bite the bullet and buy now or wait? that may end up in a bidding war. >> 8% mortgage. i know that is not high historically, but i cannot imagine a rate like that. stay with us. we have the deputy chief economist at moody analytics. chris, thank you for joining us. >> thank you. >> chris, you put out research saying interest rates are headed up to 8%. obviously, we have seen a disruption with the israel incident. are we on path for the 8% mortgage? >> rates are coming in and as you pointed earlier and there are lots of reasons for rates to climb up. this may be a temporary re

reprieve, but presidthe path fo is upward. it is a strain for potential home buyers with the mortgage payments. >> let's talk about the strain. an 8% mortgage means the payment is higher. people are paying $965 more a month on the $400,000 house than two years ago. what does that mean in real terms with the incomes and other inflation impacts on the economy and consumer? what does that mean when it comes to affordability or people with a willingness to buy a home? >> it is a stretch. increase in mortgage payments is out pacing incomes. we have some relatively strong growth for lower income households. it is not enough to offset the mortgage payments. you have a lot of renters

sitting out and not able to afford a property. if they could, the volume of inventory is so low that you cannot find a house easily in the price range. it is pretty much a frozen market with buyers and sellers waiting it out to see what happens next. >> renters are waiting it out. diana, we are concerned about mortgage rates hitting 8%. is there a rate to bring buyers back into the market? >> actually, research has been done on this and you see buyers at the 6% range. john burns, who does a lot of work with builders, says 5% is the magic number to bring people more into feeling better about the market and closer to the 3% that we had two years ago. again, from the people i spoke with over the weekend, they want

it to come back to the 6% range so they felt they were not buying at the top of the mortgage market. home buying is an emotional process. they didn't want to buy at the top. >> chris, i want to circle back to you. you are saying according to research that 8% is a psychological level. obviously, rates have been higher. this is for all of the millennials out there. have the economics changed from 20 years ago to the last time we saw the 8% rates? >> because of the run up in home prices as well means if prices didn't have the 40% jump that you mentioned, that mortgage payment would not be as large as it is today. the combination of the higher prices and the speed of the run up in interest rates is the psychological barrier that many are facing here.

we have to remember that buyers usually don't look at the total price. they are trying to understand the monthly payment impact would be in terms of the affordability with that $200 mortgage payment and higher taxes and insurance is a barrier to buying a home. >> it seems higher for longer is not just interest rates in the treasury market. cris, thank you. coming up on "worldwide exchange," the one word every investor needs to know today and more on the impact of higher yields and headwinds that stocks face from them. stay with us. ♪ the biggest ideas inspire new ones. 30 years ago, state street created an etf

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welcome back to "worldwide exchange." time for the wex wrap-up. kevin mccarthy leaving the door open to become house speaker again. he is not ruling out a run if steve scalise or jim jordan can secure the speakership. and the canadian auto workers begins to strike this week. and country garden failing to make a $60 million repayment today. unity ceo is stepping down and will no longer be on the board. this comes after unity announced the pricing change that upset developers. samsung says the third quarter profit is expected to drop 80% from a year ago. the effects from the global chip

oversupply is likely the key driver for the losses when it reports results tomorrow. we are setting up the trading day with the stock futures at this hour. still in the green. the dow would open 70 points higher at the bell. let's bring in jeff kleintop with charles schwab. >> thank you for having me on. >> we saw the issues with the middle east. what do you expect today? >> we are hearing from a number of fed speakers today. it is interesting that the move up in stocks yesterday was tied to chairman jefferson's statements which lowered the market perception of further rate hikes. this focus on interest rates is mattering more than geopolitical

issues. >> oil markets are flat at this hour. we saw a jump yesterday. are you expecting the oil market to move higher today? does that put pressure on certain areas of the market? >> oil prices have moved up. i expect them to remain firm. i don't know they need to necessarily move higher. we watch the developments in the middle east. the supply situation is tight. they have the ability to deliver more supply with the global oil supply in saudi arabia. higher for longer doesn't just apply for yields, but oil. >> i want to talk about free cash flow. one way to look at it is free cash flow yield. you sent us research that companies perform better in recent months. if you are putting money to work, what areas of the market are you looking at here?

>> you will find the financials which are a great hedge of interest rates. it is focused on 20% of free cash flow yield which out p performed since august of 2020. you can find etfs that focus on free cash flow yield. >> just a second ago we showed the chart. in the last couple months, those have out performed. i want to focus on the day ahead. what do you expect? there are so many questions here. volatile day or does the market calm down? >> the market will calm down a little bit. we have the fed speakers on the tape. the fed is close to being finished with the work along with other central banks. we have the fed minutes coming

up and the earnings season coming up. >> we have to leave the conversation there. thank you very much. "squawk box" is mi ucongp next. thank you for watching. rsonaliz, based on your goals, whatever they may be. all that planning has paid off. looks like you can make this work. we can make this work. and the feeling of confidence that comes from our advice? i can make this work. that seems to be universal. i can make this work. i can make this work. no wonder more than 9 out of 10 clients are likely to recommend us. because advice worth listening to is advice worth talking about. ameriprise financial. ♪ ♪ 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.

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good morning. israel says its border is now secure as it conducts a siege and blockade after the surprise by hamas. president biden is set to address the american people this afternoon. the race for house speaker is heating up. a candidate forum will be held today. the bond market reopening after yesterday's holiday. that's good.

treasury yields retreat from the 16-year high. it is tuesday, october 10th, 2023. "squawk box" begins right now. good morning. welcome to "squawk box" here on cnbc. we are live from the nasdaq market site in times square. i'm becky quick along with joe kernen and andrew ross sorkin. l let's see where things stand at this hour. equity futures and dow futures are higher up 70 points right now. s&p futures up 9. nasdaq indicated up 45. joe mentioned treasury yields open after yesterday's holiday. you will see the yields are down this morning across the sp spectrum. ten-year i