good morning. welcome to "squawk box" here on cnbc. we are live from the nasdaq market site in times square. i'm becky quick with steve liesman and an mike santoli. >> i think the market will listen closely. i'm not sure it will get the guidance it krcraves. if you look at the fed probability and short-term rates, you will take it. there is lot of uncertainty with the strong economic data.

that comes up against the weak anecdotes we keep hearing about. the beige book did not sound like the robust economy. i don't know what you are hearing from the companies and everything. it is not robust news. the question becomes not so much the strong third quarter. the question is in the fourth quarter and if the fed wants and needs a slowdown to feel comfortable about inflation. i don't know if we have the problabilities available. the first is the ten-year note which is darn close to 5%. 4.98% was the top overnight. it is now down a bit. the second is limited or almost no chance. quickly, i'll give you the probability. 5.7% for november.

it jumps up to 39% for december. then it is 47% for january. >> if you hear from the companies, mike, i say most of the ceos are concerned about what is coming. >> generally, that is true. if you get a slowdown, it doesn't usually happen precipitously. i think the market wants the ability to try to start to focus fully on companies and on exactly how the business is going. you know, steve, we are sitting here and it is 25 basis points in december. is it january? is it not? the ten-year yield since august is up a full percentage point. it shows where the focus is. there is a way to tell the story of 5% on the ten-year yield is recession or psychology of the supply. it is a belated acknowledgment

of the fed message which is higher for longer. can the economy handle it? are investors comfortable with higher valuations for the stocks? >> let's look at where things stand for the equities. there are red arrows at the dow and s&p. dow is indicated off 45 points. s&p futures down 4. nasdaq is indicated up 15. we are talking about all three of the major averages facing the worst losses yesterday since october 3rd. the dow down 300 points. s&p and nasdaq off more. s&p down 1.3%. the nasdaq off 1.6%. higher treasury yields is the catalyst behind the move in equities. the biggest part of the story. the yield in the ten-year yield topping 4.9%. 4.96% right now. two-year yield is 5.24%. >> when the whole thing started,

i want to say three months ago, i called a guy who manages billions. he told me 5% was his trigger to come in and buy. >> leon cooperman told us last week that he would not buy the ten-year yield at 5%. >> at some point, mike, i think there is some desire to take duration. >> a lot of things can be true. value can be building on the long end of the curve. you are getting higher rates and compensated for the risk. it still could go higher. it has momentum. it can create the doubts as to whether we can withstand it. that is the main thing going on. can the economy deal with 8% mortgage rates? >> the transports tell you no. with the russell 2000 yesterday. >> exactly.

monday, tuesday? russell 2000 up 3%. you have to figure it out. >> we have to figure out what kind of decline in yields do you need to make the risk worthy of coming in at 5%? would you come in at 5%? you could get that in the 2 or the 1 or the 6. >> you can get that in a money market. >> you would come into the 5 because you think it is going to 4.5. you would make -- >> it will go 4.5 to 5.5. that is the idea. 9 s the stock market closed yesterday as it was september 22nd. i looked at this. the ten-year yield is 4.5%. it is not an inn trenintricate level. >> one discussion out there and i credit bob pisani with this idea with stocks holding up well

with the rise in yields. you think what has happened and the competition from the bond market means stocks could be and should be down a lot more. they're not. he credits the earnings with that. underneath the surface, although there is no big marquee blowout earnings numbers, they have been good enough. >> people have more cash on hand. morgan stanley said that is part of the problem. 23% of assets management is cash. >> the part of the problem for morgan stanley said it is potentially buying down the road. people are not over their skis at this point. >> we talked through your read and made it my read, becky. >> go ahead. president biden will differ t deliver the foreign policy

speech addressing the attacks against israel. the president returned home from israel last night. let's get the latest with nbc's jay gray from tel aviv. >> reporter: good morning. the response here in tel aviv with the front page of the newspaper here "biden dictates rules of the game." they are taking seriously the president's short visit here. let's talk about what he feels like he accomplished and what we will hear partially this evening. israel and egypt after the president left and pushed adamantly for this, decided they would allow humanitarian aid into the 2 million people caught in the middle of the fight in gaza. that will likely begin tomorrow. what is happening along the rafah border crossing at egypt is the roadways have been damaged during bombing runs by israeli troops. they are repairing those.

they expect the first convoy of 20 trucks with food, water and medicine to move in. the first time in two weeks that they have done that. we don't have any indication of the duration of how long this may last. we know that the u.s. president says will commit $100 million of aid for those in that reegion. there is another issue boiling on the other end of the fight. it is the possibility of expansion of the military action. there is a growing concern about the border with lebanon and what has been and i'm quoting the idf here. significant escalations in skirmishes with hezbollah along the border. we know this morning anti-tank missiles were launched near a kibbutz near a security against and the idf has responded with artillery fire. there have been stepped up troops and equipment moved into that region. the fighting has been growing

significantly each and every day. that is something that people are concerned about, especially with the atmosphere on the ground. there's a lot of frustration over the explosion with the hospital in gaza that killed hundreds. we expect more protests over the weekend. this is a hot box that a lot of people are paying close attention to. >> jay, thank you very much. that is nbc's jay gray on the escalating concerns in the middle east. we will make sure we will keep track with him along the way. when we come back, we are awaiting quarterly results from at&t and blackstone and american airlines. next, another vote and no house speaker. representative jim jordan losing another round. what are the options for house republicans? we will discuss that next.

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welcome back. let's get the latest from washington where the house is still without a speaker after representative jim jordan failed to win enough votes for a second time. joining us with more on the impasse and the possible options for house republicans is michael even. the co-founder of axios.

mike, i find myself running thin when i figure out what happens next. we saw the vote yesterday. jordan didn't make up some ground. he lost ground. he lost 22 votes after 20 the first time. kevin mccarthy said yesterday that we should look to see if there is improvement. he didn't improve. now what? >> becky, it is not just you. people in the capitol don't see the end game. so often in a fight, you think you know where it is going. we're day 16 without a house speaker. i think that number will go up. there will be another vote probably this afternoon on jim jordan. you are exactly right. losing votes and our capitol hill team doesn't see a path for the ohioan. where do we go? there may be a few other turns of the screw where it is most likely to wind up if you are

going to vegas, you would look at patrick mchenry of north carolina. currently in the shachair as th speaker pro tem. it is possible they will wind up extending his duties to the end of the year. another wild card out there? you see some people wondering if there is a way to gets kevin mccarthy winds up getting it back. one of those two people think it will fwind up with. patrick mchenry is chairman of the house financial services committee. he came into the house as a bomb throw er or fire brand in the tm dely years. he moved up after learning financial services. >> when you say one likelihood would be for them to extend

patrick mchenry's powers to get to the end of the year. who is "they"? is that the republicans? the biggest issue is the republicans don't have enough within their caucus for anybody. >> you are right. this is deciding not to choose and status quo that we had in the sneak peek newsletter. the person who has the most votes for speaker in this round is the house democratic leader hakeem jeffries. it is a vote of the house. they wouldn't need democratic votes. becky, a lot of republicans are concerned that this increases the chance that democrats will flip and the democrats will get the house in 2024 because republicans are showing and saying we can't lead. we can't govern. >> mike, what are we learning from the 22 or 20 voting against

jordan about what is and mimati the opposition? what the will it take to bring them on board? >> fascinating question. this is a show of weakness for maga. you don't see a show of weakness for trump weighing on the republican party. t trump has been quiet on this. he is endorsing jordan. the endorsement by sean hannity back fired jim jordan. that's one of the factors in the 22 votes. some of those were people who were lobbied hard and getting the phone calls from people in the maga world. they rejected it.

>> who is the leader of the republican party right now? is it donald trump? >> if you look at who has the -- >> i would have said kevin mccarthy two weeks ago. >> right. yeah. who has the most juice? donald trump. you have senator mitch mcconnell and patrick mchenry. the fact we cannot give an answer shows the party's problem. >> your betting line in terms of when you think we will actually see a house speaker? is this something that has to happen by the end of the week? >> it should. at the top of the show, we have been talking about the massive issues facing country. the president's oval office address at 8:00 p.m. he will reveal a new request for aid for israel and ukraine. this is where the no-end game

happens. i talked to people in the cap the capitol. jim jordan is not giving up. there may be a few other people. the twist this week is names of members of congress and the people who cover congress did not know were there. people we don't know being floated for speaker. this may be going on. that's why it's the most likely end which is deciding not to decide and leaving patrick mchenry with the temporary gavel. >> michaelchke allen, thank you. >> thank you. coming up, tesla tapping the brake s. elon musk wants everyone to slow their roll with expect tation wh the cyber truck.

should investors buy the dip? and as we head to break, check out the price of crude. it is hovering in the high 80s. "squawk box" is coming right back. the first time you made a sale online with godaddy was also the first time you heard of a town named dinosaur, colorado. we just got an order from dinosaur, colorado.

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to stop the spread of wildfires. now's the time to see what america's largest 5g network can do for your business. tesla shares moving lower after the ev maker missed on revenue and earnings for the first time since 2019. the stock took a turn during the earnings call. elon musk said he is moving through the issues with a degree of caution. we have gene with us now to discuss.

gene, the third quarter estimate was whittle down to 63. it comes in at 66. where does that leave us here in terms of the earnings power and how much more they have to deal with over price cuts and margin pressure. how does this feed into the story? >> margins are the critical point, mike. they need to improve the margins. musk was clear. don't expect margins to move higher in the next year as they ramp vcyber truck. this is the center vortex of the tesla story. margins go up. that means this is a tech company. margins go down, it is a typical car company. so that's why there's so much weight on that all-important auto gross margin. frame in one detail there. it was 16.3% in the september quarter and it was 29% a year

and a half ago. these margins are approaching traditional automakers. granted, traditional automakers lose a ton of money with the evs. mike, what does this mean? it means pay stience is a virtu. elon musk talked about a challenging period. he used that phrase twice. he did not talk about that in the june quarter. the setup is the investors who believe this is a tech company, i'm one of those, has to wait a extra year plus before we start to see some of the margins improve. there was another layer of disappointment on the call, too. tesla has been steadfast with the 50% compound growth expectation. elon is starting to back off with that language saying it is impossible to grow at those rates. when we think about tesla and

the story for the next five or ten years, 20 million vehicle number in 2030 just got a lot harder after his comments last night. that's the near term. it is disappointing. i'm optimistic for longer-term reasons, but it was not a pretty quarter. >> right. you mentioned the margin profile has been trending toward traditional auto companies. it is not there. it is getting in that direction. as well as elon musk complains about high interest rates. they have to cut price to create demand. in other words, the story that got tesla to an $800 billion market cap is not really there any more. at least not in front of us. it trades at 70 times earnings. it has the advantages with the vir vertical integration. what do you pay for it? >> ultimately, you probably pay

five or six times revenue. the question he is is what is t flew going to be in the three or four years? this is the thing where people need to look in the mirror and ask the question which is ultimately where is the world going when it comes to transportation? if the answer is maybe it isan electric world in the next 10 to 20 years, then tesla will not get there to keep the stock going. if the answer is the world is going in that direction, i think the company is in a great position. the reason why is this addressable market gets back to your question about what do you pay for this. the addressable market is massive. if you take the low end, it is $2 trillion a year. the high end is $2.5 trillion a year. the smartphone market is $6 billion a year. tesla has a pole position. general motors announced they are backing off plans for the

light truck production facility. they postponed that by a year. the other automakers are backing off on evs. i think this is the period of great companies have difficulties. i think they will come out. you the will pay five or six times revenue. that gets you to $125 billion in revenue next year. that probably goes to $500 t billion in the next several years. fill in the multiple there. >> a long way to $2.5 trillion market cap. we will see if we can manage that. it was half that at the peak. gene, thank you. >> thank you. let's take a look at at&t. just out with quarterly results. company came in with earnings in adjusted basis of 64 cents a share. that was 2 cents better than the street had been expecting. revenue at $30.4 billion.

that beat expectations. the stock right now up 1.8% now. the company is raising the full-year free cash flow of $16.5 billion. that compares to the prior guidance of $16 billion or better. they are raising adjusted ebita growth. they are looking for better than 4%. they had given guidance of 3%. i spoke with the cfo and talked about why that is happening. he said they see wireless revenue growth up 3.7% for the quarter and on track for 4% for the full year. also fiber revenue up 27% in the quarter. those are the reasons for the free cash flow guidance. he went on to say important things about the consumer. the consumer, in his words, has been more resilient than expected. he went on to say this is the widely anticipated recession

that's ever been. am i cautious on the macro? yeah, it is hard to see all these things happening out there and that eventually taking a toll. for now, the consumer is hanging in there. they are looking for signs of this and haven't seen any to this point. they are looking at two things. fiber and wireless revenue growth is strong. they are looking at cutting costs. that is why they have the expansion year over year. the interesting part is they talked about a.i. and what they are doing with a.i. they are using it for customer service agents to be more efficient and also in dispatch to send people out to fix things. that is partly why they have been able to cut as much head count as they have. they are getting more efficient with a.i. >> let the record show becky is talking about a.i. and stuff like that with handwritten notes. >> very old school. >> i am old school. this is the way i do it.

they talked about a.i. >> productivity boost. >> the stock is up 1.9%. we'll continue to track it. comi coming up, we're waiting on results from american airlines and we will have an exclusive interview with robert isom in the next hour. and netflix with more subscriber growth and at what levels are expected? as we head to break, we are looking at yesterday's s&p 500 winners and losers. dad, we got this. we got this. we got this. we got this. we got this. yay! we got this. we got this! life is for living. we got this!

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good morning. welcome back to "squawk box" live from the nasdaq market site in times square. the nasdaq is the upside leader with netflix following with the contributor to the early gains. the ten-year bond seemed to brush up against 5% earlier.

it is $44.96%. when we come back, president biden returning home after pledging full support to israel in the war against hamas. he will address the nation tonight and we will get into foreign policy and what the markets should watch coming up next. "squawk box" is coming right back. >> announcer: currency check is sponsored by interactive brokers. the best informed brokers choose interactive brokers.

welcome back to "squawk box." anti-israel protests have spread across the middle east following the deadly hospital explosion in gaza and israel prepares for ground operations in the middle east. joining us with more on the volatile situation is the senior

fellow michael o'hanlon. mike, i thought it was disappointing to see the president was not able to meet with everyone he wanted to in the middle east and now we have rockets coming from hezbollah. >> hi, becky. the possibility of the second front is there and i'm not sure what we would do with the aircraft carriers with the implied threat. the concern i have about that is sometimes implied threats, if your bluff is called, you may not want to follow through. we will see what happens on that front. i agree it is disappointing the broader canonseranonversation c happen. what is the real end game in gaza? should it be a u.n. trustee shift for a certain period of time? should we do something unimaginable like move to a palestinian state in gaza and put off the west bank idea until

later? i don't know what the right idea is and no american or no american president can solve that on his own. it begins with a broader regional dialogue. now with king of jordan and others. it is overdue to explain how all of these foreign policy crises fits together and the strategy addresses it and the aid from the united states with a bill in congress is essential at this point. >> what is the grand strategy which explains how all of these events tie together? it is a tall order. >> it is a tall order. on ukraine, the president needs to explain why resolute american support is needed now and why we need to give our ukrainian friends another year or two to win back as much of their land

as possible. these things take time historically because modern military equipment is complex and they he have not received all they need yet. they need a time horizon to acknowledge when a newly elected president in 2025 takes office and at that point if the war is still stale pointed, we may have to think about a second strategy if ukraine can maintain itself and be anchored to the west with security, but not necessarily keep building up offensive forces on the battlefield. it is too soon for that debate. it is too soon to cut off possibilities. the president should explain these things and take time and it would be a real travesty if we concede to putin. >> mike, we also have the turmoil in washington, d.c. you have there. you see what is happening. how much does this cause a

problem in terms of what the united states could or should be doing? >> well, the good news, if there is any, becky, in the short-term, the united states can provide assistance to israel and certainly can provide the moral support and political support we have been providing. the israelis in the short wars don't need our help on the battlefield. we can provide support with existing budgets. i don't think our response to the current israel-palestinian crisis would be fundamentally different if we had a big pocket of money to disperse to the israelis if he wished. that will change in the next few weeks. if there is not additional support from the border crisis to ukraine and taiwan and

israel, then that could be tied to iran and that could be tragic. i like linking these four problems together and i hope tha that addresses different constituencies as well. >> mike, i have a comment and a question. everybody is talking about israel. the number of arm-chair military analysts who have come out of the woodwork is remarkable. it is striking israel has twoim. the first is to stop the rockets from raining down on gaza. the second is what it has to do with the two objectives is something i don't know. those are the things it has to accomplish. adding in other things about a gaza state or palestinian state are complicating the immediate and important objectives. if this were the united states and something was happening on a

bordering country, we would not think twice about what was going on. i'll leave that there and ask this. what do we learn from the reaction around the world about the hospital bombing and about how thin or thick is the support for israel? is it one bomb away from losing global support? >> it is one bobmb away from losing arab support. we may have already done so. you need to add a third goal to dramatically weaken hamas. you can debate just what that means. that's, i think, part of the problem for israel to figure out what it means. we had prime minister netanyahu say if you are hamas, you are a dead man walking. you are going to obliterate and he eliminate hamas command structure and underground

networks. that indicates it is not really realistic. they want to and will topple hamas as the government of gaza which is why i bring up the question of what comes next politically until you have a concept for that, then it is hard to know what the goal should be for the ground incursion. >> mike, i want to go back to what you said at the beginning of bringing in aircraft carriers as a bluff and hoping the bluff doesn't get called. is that what you think was happening there? a show of support we didn't think we would need to use, but every day looks more likely that it might come into play? >> i'm worried about it, becky. i'm not necessarily against the carriers. when you move them into the position, you imply you will use force under certain circumstances. the first could be a hostage rescue platform as a possible usage. you get the second and aircraft

carriers are not required for hostage rescues. i think this is directed at hezbollah and iran. that's fine, except that at some point we may have a slippery slope toward using american military force against hezbollah in the way we haven't previously. i'm not sure we would be better than the israelis. they struggled with hezbollah in the past. i worry about a slippery slope to the use of force. i hope people are aware if there is a decision, it is a big deal and not the natural next step coming from having made this deployment. >> michael oo'hanlon, thank you d annext, we have the netflix cracking down on pas passwords and increased subscriptions.

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disney giving investors an inside look at espn's financials. investors an inside look at espn's financials. the entertainment giant revealing a 20% profit decline over the past several quarters. this coming as disney seeks a potential strategic partner for what has long been considered one of the crown jewels in the magic kingdom. sports network facing numerous challenges including cord cutting and increasing sports rights fees. stock right now, you see it there, not far from levels it first reached i think maybe eight years ago. up two-thirds of a percent right now. netflix beat earnings expectations as the streaming giant added nearly 9 million paid subscribers helped by its password sharing crackdown and cheaper ad supported tier.

the company is also flexing its pricing power, hiking fees on some plans as early as this week. joining us now is michael nathanson, partner and senior research analyst. michael, i was saying here on set during the break there is four things that are important when you're the parent of a 20-year-old. when they come off your health insurance, when you stop paying their cell phone, when you stop paying the car insurance and when you stop sharing your netflix password with them. what is going on here? am i going to not be able to do this anymore? >> well, you're going to be able to do it, you have to pay more to do it, right? what netflix has done is they said, there are 100 million homes around the world, where people share passwords. we have done research with pch, it says the vast majority of sharing are parents and children. and at some point, your kids are going to be outside of the home and have to pay for their own password or you will pay for it. so we're halfway through that

process right now. we think there is another two or three quarters and then a lot of that password sharing will either be paid for or people will just not use netflix at that point. >> if i showed you the family text group that i have, half of the conversation is, what's the so and so password. that's all we ever talk about here. it would be nice if they asked how i'm doing once and a while, but they really just want the password. we're halfway through the process. the 9 million subscribers they added in the last quarter, how many of that do you think came from the password sharing efforts there? >> they have not said, but, again, the research we have done with pch just about 20%, 30% conversion of 100 million. i would say we're probably about 10 million of that way through, right? so basically you think 5 million last quarter, 5 million this quarter, 5 and 5. that's how we think about it. the company is not saying. and i think the dquestion peopl

have is 12 months from now that is going to happen to the crackdown, will it start not mattering at that point to subscriber growth? >> at some point, right, you do lose some viewers. does netflix not care about that at all? it really cares about paid subscribers? >> yes. what they're counting on is that new ad tier, the price is so low that at some point people say, okay, what else is on right now, for $6.99, i'll take this product, it is cheaper to the other options. opening up that price point has given them more confidence to raise prices and start pushing people toward password sharers. they'll catch people who are price sensitive or just angry about price hikes. >> one more quick one, are you ultimately upbeat here on this? is this something you think there is room to grow? and they're going to surprise us again and how surprised were you with the earnings? >> that's a good question.

we're most surprised about the price increase, right? they raised prices in the u.s., uk and france pretty aggressively right now. there is a strike going on. we didn't think they would do that until the strikes were over. that was the big a-ha for us, they're flexing their pricing muscle. on the stock, the stock really got brushed after a conference with the cfo speaking a month ago. it is back to the level where it was before. we're neutral on it. we think disney, because it has been on eight year lows, that's to us the name people should be looking at right now. it really just has been hammered. there is no investor attention alone there. that to us is really interesting idea for the next 12 months. >> let's get into that, because there is a lot of ways to frame the espn financials they came out with on a nine-month basis. it wasn't a big precipitous drop in revenue at espn. kind of broadly defined. but how do you think about disney in terms of being able to

be agnostic about how people consume their content and also the overall spend? one thing i've been wondering about during the strikes is are all the companies coming around and saying maybe we don't need as much. maybe in aggregate we don't have to give as much new stuff all the time and therefore we can kind of get by on -- in a more profitable way on streaming? >> i think it is a great point. to steve's question about the a-ha in the quarter, netflix only is going to spend $13 billion, only $13 billion. we thought they would spend 15 when the year started. i think what people are missing about disney, they overspent the way netflix did to build their business. and now they're realizing perhaps we could spend less, we could stretch out some of the content, make less regional content. and i just think what you're seeing is the strike may have been the silver lining in the sense that people now realized they could slow down their content spending, right? and start to drive margin. also, they can drive pricing because there is ad tiers. i think for disney, the

opportunity is really about their streaming profitability, netflix is the 23% margin range. disney is negative. just get me somewhere closer to netflix or halfway there, and disney has a lot of upside in terms of earnings power. >> and in terms of the espn financials, is that just kind of a signal to say, look, this business is still viable. it is not a fire sale. or do you think they are really prepping some kind of strategic investment into that business? >> well, i know on the strategic investment side they're talking to leagues and distributors. they have been clear about that. talked to some of the leagues you know and the major digital distributors. that's the plan. what surprised us in last night's release was the non-espn net works were much worse than we thought there is an opportunity, we're not bullish on other networks, but they need to drive profitability. they need to reduce their spend, you know, cut expenses, and to

me, you know, we're, like, wow, the espn business is not as bad as we thought. the top line was more stable. so we think there is an opportunity also in the linear margins to be better. so, you know, espn, you know, when this whole thing emerges, probably will be seen as better than people would have thought, you know, with all the noise and all the furor, it is not as bad as you probably would have thought. >> all right, michael, thanks very much. what a fascinating space. >> thanks. when we come back, american airlines is set to report results. we'll have those numbers right after the break. ahead of that, the stock off by about 4 cents. and the yield on the ten-year hitting another 16ea-yr high. mohamed el-erian says it is pointing to deeper issues in the markets. he'll join us next right here on "squawk box." squawk picks is sponsored by

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to five-hundred bucks. he just didn't wanna do that. he was proud of the price he was charging. ♪♪ my dad instilled in me, always put the people before the money. be proud of offering a good product at a fair price. i think he'd be extremely proud of me, yeah. ♪♪ good morning. wall street wading through a sea of earnings and preparing for a speech from the fed's jay powell. american airlines reporting quarterly results. we will speak to the company's

ceo about demand and the upcoming holiday travel season. and tesla's elon musk sounding the alarm on the state of the global economy as he looks to make evs more affordable. that story and other stocks to watch ahead of the open, all coming straight ahead. the second hour of "squawk box" begins right now. good morning. and welcome back to "squawk box" right here on cnbc. we are live from the nasdaq market site in times square. i'm becky quick with steve liesman and mike santoli. we have been watching what has been happening with the markets this morning and after a relatively rough day for the markets yesterday, where you had the dow off by 1% and the s&p and the nasdaq down by more on a percentage basis, it was the weakest performance for stocks since october 3rd, you're now looking at futures relatively

flat. dow futures off by about 4. s&p futures up fractionally. nasdaq indicated up by 31 points, partially because of some strength with some of the earnings last night. you have to be looking at netflix to see the shares there and the reflection of what is happening. treasuries have been the real story. treasury yields this morning look like the ten-year is actually just below 5%, at 4.95%. the two-year sitting just above 5.2%. and that 30-year still situated above 5%. american airlines reporting quarterly results. let's get right to phil, planes, trains and automobiles, lebeau with the numbers. >> this is a beat on the bottom line for american airlines in the third quarter, earning 38 cents a share. street was expecting 25 cents. record quarterly revenue coming in at $13.48 billion. roughly in line with expectations of $13.52 billion. total revenue per available seat mile and passenger revenue per available seat mile, both of

those down 6.3% in the third quarter. costs per available seat mile excluding fuel, that's important here, up 3.3% in the quarter with a margin of 5.4%. the guidance, which is what so many people are going to be focused on in the fourth quarter, american airlines expects to be break even. the street is expecting a slight profit of 7 cents a share, with capacity increasing 4.5 to 6.5% and for the full year, american airlines expects to earn between 225 and 250 a share. right now the consensus is at 232. lots to discuss with american airlines ceo robert isem. that is one ugly chart. we have seen this for all of the airlines. pessimism from investors about the state of the airline industry, the cost of fuel, cost overall rising and what is the outlook for the fourth quarter. we'll discuss it all next half hour with american airlines ceo robert isom. back to you. >> i want to tighten up on this

guidance thing. it sounded like they were break even versus 7 cents, but the full year sounded like it was right in the middle of the guidance. is this terrible guidance or okay guidance? how do you judge it? >> it is okay guidance. it is okay guidance. it is not a surprise. there is nothing in here that will make you say, oh, my goodness, the sky is falling, where is this coming from, it is out of left field. the street was expecting, look, they had a huge third quarter last year. so these numbers are, you know, it is tough comps, basically. and then when you look at the fourth quarter, a large -- a big fourth quarter for them last year, the break even is not a huge surprise there. the 232 consensus versus -- their expecting to come in 225 to 250, it is just roughly speaking it is in line with what wall street is expecting. but by far there is possess nix when it comes to the airlines now as far as investors are concerned. >> you know what i care about. is this the consumer is gone or is this an internal sort of

profitability issue relative to fuel costs? is -- are they getting the traffic? is it it tell us anything about the consumer and travel there? >> they got the traffic there. they got the traffic there. the question becomes what are you seeing at the lower end of the market. we talked about this over yesterday, with united, and we talked about it last week with delta. you're seeing a split within the airline industry. the premium providers and those who have international exposure, american, delta, united, they have got pricing power there. and they have people who are paying up for premium seats. lower end of the market, you don't have that. and that's where we're expecting to see losses in the third quarter. at least that's the expectation from analysts that you will see losses with the low cost carriers in the third quarter. so definitely seeing a split in terms of investor expectations when it comes to the airlines. >> phil, thanks so much. yesterday, the beige book said declines in the consumer end of things, but increase in business travel, which is exactly what phil just reported. >> united talking about that as well this week. stocks selling off sharply

yesterday as treasury yields surged to multiyear highs. rates will be in focus again today as traders await a key speech from jay powell at noon. joining us now is mohammed el-erian and president of queens college of cambridge university, co-author of a new book, "perma crisis: a plan to fix a fractured world." good morning. >> good morning, mike. >> we have been talking about the treasury market. it is using up a lot of the market's oxygen here, clicking toward 5% on the ten-year treasury. there is a world in which you can say, we're just pricing out imminent recession risk and investors at the long end are getting properly compensated for the risk of holding longer term fixed income securities. and there is a way you can find there is an equilibrium that stocks can reach on this. on the other hand, we're not prerhep repricing the fed path very much. the moves have been violent. how do you read the why of what is happening with bond markets

and the implications of it? >> so, you can provide very focused answers, but that's not the point. the point is twofold. one, this market has lost its anchors, it has lost its policy anchor, it has lost its technical anchor and it has lost its economic anchor. policy-wise, if the fed is excessively data dependent, it doesn't provide enough of a forward look as to where it is going. add to that there is debate about the lag effects of the rate hikes, the debate about the monetary framework, debate about as well what do you do with qt. so policy is not an anchor. technicals are not an anchor because we have lost the reliable buyers. we have lost the fed. we're losing china, the latest data saw china is reducing. institutional investors were underwater. we lost them. and we may also lose japan.

and then the economic anchors, and then short-term, and that's what's of concern is the enhanced stabilizers are weakening. so people who would come in every time yield went up in order to lock in that interest rates have been catching a falling knife. so they're less keen to come in right now. so it is the way in which treasury yields have moved that raises both economic and financial concerns. >> the way i usually try to explain when markets get volatile and they seem to swing around and price a lot is that the market is always hunting for buyers or sellers with conviction. and when there is less conviction on the buy side, it means prices have to go down more to find the buyers who are willing to step in. so i guess it always is a matter of, you know, at a clearing price, we're going to find some kind of stability here. is there any way you might guess where that is when it comes to yields? >> you have to guess because you

have an inherent symmetry. we know supply is going to go up. supply is going to go up in a serious manner because of what is happening to the government deficit. we don't know what the buyers are going to be and at what level. so, we will probably overshoot, like you say, in order to find the buyers. the trouble with overshooting is that it causes distressed sales and that's why the more we move violently like this, the more you risk an even larger overshoot. now, that's a dynamic, a technical dynamic that we typically see in emerging markets, in a high yield. we are seeing it, mike, in the most important segment of the financial markets, which is u.s. treasuries. they are benchmarks for so many other things. that's why it is really important to keep an eye on it. we need this market to stabilize. >> mohamed, all of this is great and very important, but we have to get through today. and powell's talking today and what we did is took a look at

powell's dashboard and when you look at that, how the economy has changed since he last spoke at the meeting, generally the real economy stuff has been to the upside. when you look at what happened to retail sales, when you look at what happened to gdp, when you look at what happened to jobs, stuff has come in to the upside. inflation a little bit more mixed when you look at the inflation numbers, some of the headline numbers were a little bit higher, some of the core numbers lower, or unchanged. tell me what you think the message is from powell today, does he steer us either way towards additional rate hikesor does he give us higher for longer? >> thanks. it is a really tough situation to be in. he's got to strike such a delicate balance. and the risk of not striking it are high. and it is not just him, we have six other fed speakers today. and people are going to also be looking at them. >> but his job is to basically say nothing, mohamed?

>> well, i would hope that his job is finally to pivot, to pivot away from the excessive data dependence because if he retains his excessive data dependence, he's going to have to give a hawkish signal because of the -- how strong the economic data has been in the third quarter. >> i got to -- i'm sorry to cut you off, but to pivot away from data dependence is to provide guidance. so if he pivots from the data dependence, what is the guidance he pivots to? >> so, steve, you know how absurd it is to havethe excessive data dependence? you are dealing with an institution whose tools operate with lags. so the notion that you are targeting a forward-looking economy in six to 18 months, using data that is backward looking, that is inherently inconsistent and yet the fed has ended up in that trap. that's why -- >> what else would you look at if you're not looking at data.

>> for me, we are seeing major inflection points, technically and economically, and the message to give right now is the fed is done. we're done. that's what the message should be. whether he gives it or not, i don't know. >> it begs the question of what do you do if you're saying i'm not data dependent anymore, i've figured it out, i am the great car knack and i'm going to go forward with this -- >> the metaphor of what mohamed just said is to be looking in the rear view mirror to determine where -- how you turn the vehicle three miles down the road. >> that's always been the problem. >> i know, i know. but it is interesting -- >> becky, it hasn't been. this fed has been excessively data dependent. if you look at prior feds, they took a forward-looking view. it was controversial at the time, remember greenspan, remember bernanke, remember yellen, it was controversial at the time, but it was critical in anchoring the markets. this fed has only been data

dependent and now we have issues because we had inflection points. steve is right. who would want to be in a car that is being driven with lots of curves ahead looking at the rear view mirror? >> were they right? you said it was controversial when greenspan did it. was he right? >> he was right for a while, but he took his eyes off financial stability. >> i don't want to be in any of their cars. >> you are though, becky. >> it was excessive loosening of regulation. >> we got to go. this is grate conversation. >> mohamed, appreciate it. talk to you again soon. when we come back, tesla earnings disappoint after deliveries slow. we kind of knew about that. there is questions about what happened to margins too. and what they're anticipating the future. we're going to break down the evmaker's latest quarter. "squawk box" will be right back. >> this cnbc program is sponsored by baird. visit bairddifference.com.

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blackstone group reporting results, earnings at 94 cents a share. analysts were looking for a $1.01. revenue of $2.3 billion, short of estimates. total assets under management grew 6% in the quarter, now topping a trillion dollars. don't miss our interview with blackstone president and ceo jon gray, coming up at 8:00 a.m. as

the shares trade off just slightly. tesla reported weaker than expected results in the third quarter. the evmaker had lower profit margins, but it is holding to the full year forecast and said they expect to deliver 1.8 million vehicles for the year. that stock, though, down by 7.2%. joining us right now with more is colin langone, wells fargo senior equity analyst. thank you for coming in today. we knew the deliveries might be a little bit on the weak side. but i think it was probably the surprise of the profit margins, and how elon musk himself described some of this. he said in a difficult time, the rough seas, even a big ship takes on some concerning issues, and you got to be careful about it. we're not sinking, but it is a difficult time in the market he acknowledged. >> i think that's fair. i will say, though, this does seem to be right now at least tesla specific. we have seen pricing hold up for other companies. this is just an impact of, you know, cutting price to, you know -- >> to try to win margin. >> to win volume, actually.

i think that's the fundamental thing out of the quarter. you had a miss in the quarter, but i think investors wanted to get a sense of two things, where is demand going and there is negative commentary on cybertruck, negative commentary on the plant in mexico. that is the future volume growth drivers. if those are getting delayed, we might have a demand gap and that means more pricing to keep volume going which means margins will continue to be under pressure from an investor standpoint, this is going to be not much positive coming out of the quarter. >> look, some long-term investor s would say we're fine with cutting prices because this is a longer term game. if you look at companies like amazon who didn't care about making profits at certain times, does tesla have the same flexibility of the company like amazon, same support or not? >> well, sure, year to date, i mean, earnings estimates are down 40% for the start of the year and the stock is up 100%. they have some flexibility. i think the concern i have is on

that point is, like, the mexico plant. that's the next volume driver and that sounds like that could get delayed to some degree. that means if i'm a long-term investor, why am i delaying it? why am i delaying it if interest rates is such a concern? that's good for the lower income customer. >> and what about the -- the china market, it seems like all the -- tesla is doing everything it can to meet its volume target for this year, which hasn't really changed, right? next year is coming into question. and then, you know, the clear leader in evs here, tesla is, but overseas not so much. so, how much is that part of the story? >> i think it is a huge concern. china evs are a global concern among broader industry. we did actually a teardown of byd last year and it is a pretty phenomenally engineered vehicle and byd is competing extremely well against tesla. so, you know, i think long-term the china evs is a concern not

only for tesla, but talk to the traditional automakers, it is a big concern. >> you sound flummoxed the stock is up 100% for the year, defying logic if you look at the fundamentals. what would you tell an investor to do right now? >> i mean, i'm equal weight. i do think the near term is quite challenging. i think margins, i think numbers are going to come down after this. i think volumes, not only become a question into '24, they have a 50% long term -- consensus is more like 20 to next year. i think that probably would be shy of that. and then what about even 25 in that mexico plant is delayed, where is the growth coming from, especially if that next gen vehicle is delayed. >> can i do a little channeling of ron baron here, who i think would say i don't care. get somebody into the car today because that means another car down the road. current automakers -- >> the services they talk about -- >> i want to get to that too. current carmakers bend over backwards to keep you in their

car. they're going to give you incentives. should i be satisfied as a tesla investor, i'm giving up some margin now but getting people into the car and down the road that means more profits for me? >> i think, one, you have to believe in full self-driving and the capabilities. i have skepticism. some believe it is ten years away for genuine self-driving, not level two plus. i'm not sure how long-term most investors are. ten years is a long way away. other technologies, they could clearly beat them if they're successful. and then i think cutting price, you know, has impacts on your current customer, right? the cost of ownership, your biggest cost to ownership is the depreciation of the vehicle. if you bought a model 3 or y in november of last year before all the price cuts, your residual got slashed. that's actually your biggest cost of ownership and those customers may not come back. there is damage risk long-term

for what they're doing in some ways. >> you mentioned the chinese manufacturers are a concern for all automakers. we're dealing with the strike. are they really radically rethinking their commitment to this transition to evs do you think? >> i think they should have been thinking it before this, right? i don't think china is a big risk to the u.s. because of tariffs now. i'm assuming that stays in place. the ev economics are terrible, right? lithium prisseprices are high, raw material prices are high, $7,000 cost premium for electric vehicles. i think, you know, and so with regulations pushing us down this road to evs, it is a big challenge. i think they would like to back off as much as they can, but the regulations are kind of having them to have to hedge their bets. we're talking about plants that cost billions of dollars in batteries for vehicles that don't have clear line of sight to profitability. i would be pulling back if i could as well. >> colin, thank you for coming in today. coming up, american airlines

ceo robert isom on the company's latest quarter and the stock to watch as we head to break. las vegas sands, shares popping on a third quarter revenue beat. overall sales more than doubling and revenue from the macau properties rising seven times as recovery in the region continues. the casino company also authorizing a share buyback program. the stock is up more than 5%. las vegas sands ceo will have more on this in a cnbc exclusive at 1:30 p.m. eastern time. more stocks to watch coming up after the break. >> announcer: time now for today's aflac trivia question. according to a study by engineering students at purdue university, how many licks does it take to reach the tootsie roll center of a tootsie pop? the answer when cnbc's "squawk box" continues. gaaaaap! did you just say gap?! he's talking about expenses health insurance doesn't cover. good thing coach prime knows about...say it one time! aflac! because aflac gets you money to help close that gap!

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[ heavy breathing ] d[ lights buzzing ]. [ music builds ] [ screaming ] now the answer to today's aflac trivia question. according to a study by engineering students at purdue university, how many licks does it take to reach the tootsie roll center of a tootsie pop? the answer, 364. the group created a licking machine modeled after a human tongue to perform the study.

>> i'm sorry. where is the fun in that? if you're going to do it, do it yourself. don't create a machine. that's one job you don't need a.i. for. >> that's what their spending their tuition on, there you go. >> love purdue. to dom chu, he has a list of stocks to watch ahead of the opening bell. dom, you want to comment on that aflac trivia question or go on to the stocks? up to you. >> i was much more of a blow pop guy. i didn't go the tootsie pop route. i went with the bubble gum side of things. steve, becky, mike, to your point, let's kick off the stocks to watch, breaking this morning, that's at&t, right now those shares up nearly 5% on just about a quarter million shares of trading volume so far. that's after it topped estimates for quarterly profits and revenues and driven in part by more robust growth in its wireless phone subscribers. those stronger results are leading at&t to raise its full

year profit guidance as well as its full year free cash flow guidance. so that's some of the positivity around at&t up 4.75%. netflix, shares are surging. up over 13%, just around over 150,000 shares of volume. the streaming video tv move studio giant topping profit estimates. revenues roughly in line with expectations. but has been the case in many quarters in the past the focus here has been on subscriber growth numbers and netflix easily beat expectations. it added over 8.7 million new subs during the quarter versus consensus estimates for just under 5.5 million. those shares up 13%. and we'll end with an analyst call getting some attention on wall street this morning. analysts at goldman sachs upgraded consumer electronics retailer best buy to a buy rating from a hold. the target price goes up to 85 bucks. it was $79. they think that better demand trends for certain electronics products because of upgrade cycles and what not will start to play out over the next year and that valuations right now

don't take those trends into account. right now those shares up around 2.5%, around 6,000 shares premarket. those are your stocks to watch. i'm going to see if i can buy a tootsie pop or blow pop. back over to you. >> you do that, dom. we'll see you later. still dto come, american airlines ceo is going to join us after results were reported earlier in the hour. and a letter to sequoia about chinese tech investments. we're going to hear from the committee's air chand ranking member in a little bit. "squawk box" will be right back. there are some things that go better... together. burger and fries... soup and salad. >> announcer: stocks to watch sponsored by voya, well planned, well invested, well protected. with voya, considering all your financial choices together... can help you make smarter decisions. for a more confident financial future.

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american airlines reporting earlier in the hour. let's get to phil lebeau with the details. phil? >> mike, robert isom from american airlines, ceo joining

us here at their headquarters in fort worth. let's talk about not only third quarter, but also when you look into the fourth quarter here, and what you're seeing right now, despite this concern about airline demand, you don't see it in terms of the travel and demand and the portfolio out there, right? >> well, phil, the world has got a very short-term focus right now and we're in a business we have to plan and work for the long run. and when i step back and take a look at the things we said we were going to do, return the airline to reliability, profitability, and then pay dunn the strength in our balance sheet, we have done all those things. in terms of profitability, six consecutive quarters, and now in terms of debt, we actually paid down almost $11 billion on our way to even more. so as i take a look at the future, i see american positioned very strongly, i want to give a shoutout to our team for really putting together these fantastic results. and as we look into the future,

look, it is a rocky time. but that said, i see demand, especially as we approach the holidays, very strong. >> the booking trends for the holidays. what are you seeing? >> we're booked stronger than we were at the same time last year. now, we have to deal with yields as well. overall, i feel really good about where demand is, not just now, people want to connect, people want to travel and so as i take a look out into 2024, i see robust demand. >> you just stated to the investor out there this is why american is performing. >> right. >> when we show people your chart, you're at an all time low. i don't expect you to answer for the investor, but how do you convince the investor this is not the time to be negative on american? >> i don't like where our stock price is. it is not acceptable. but it is because we actually have to get out there and tell our story, and have people understand what is going on. this is a business that really needs to be looked at over a longer period of time. when you take a look at the last 12 months, or go back to

comparisons versus 2019, i'm very pleased with how we have recovered, how we have performed from a relative margin perspective, and as we go forward, we're entering a period where, look, american airlines, we bought almost $30 billion worth of assets. aircraft prior to the pandemic, right, we're getting to use those, those are assets used for the next 20 plus years. others at the same time are taking a look at going the opposite direction. american is very well positioned for the foo up. >> -- for the future. >> is that a headwind in a high interest rate environment like this? >> well, right now when i look at our overall portfolio of debt, about 75% of that is fixed, 25% is floating, that's 75% was all put in place during a period of time when interest rates were actually fairly favorable for financing. the 25% on the floating side right now, our high cash

balances really offset that because they're earning interest too. >> the yields that you mentioned, a big factor of that is the capacity in the market. and what is happening out there. how concerned are you about the capacity that has been brought on, especially on the lower end of the market? you have the premium and the international, so you've got a different portfolio of customers than the lower cost carriers. but there is concern in this industry that there is too much capacity that is out there right now, especially on the lower end. are you worried? >> it is a supply and demand business. and over time, look, we react to it, from an american airlines perspective, we're going to do the things we know work and that is making sure we're running a reliable airline, focused on profitability, serving our customers in a way that they want to be served, offering them products that they're willing to pay for, restoring service to places that quite frankly we haven't been able to because we have actually been somewhat constrained in terms of putting back assets that aircraft have been on the ground. so as i take a look forward, i

do think that the industry overall and especially american, we are going to react in a way that ensures that we're profitable over the long run. >> and i know they got a question for you back in the mothership. go ahead. >> robert, and thanks to phil for asking all the financial questions because i want to ask about the trip. robert, i'm on the road two, three, four times a month and i think things are gotten a little better. tell me what you guys are going to do. what can i look forward to that is going to make air travel less of a drudgery that it has been? >> well, first off, thanks for the question. but i'll go back to the best thing that we can do is make sure people get to where they want to go on time. and that is where we have been focused. there is a lot of difficulty in the supply chain, in terms of making sure that we're in the right place. that's where we focus first. we do a good job of that. best summer we had in our history. and as we go forward, the real key is to make sure we can recover when irregular

operations happen. and in that case, we want to make sure that you have the ability to really address service issues as quickly as we can. so we're going to be really pushing, you know, more amenities, and capabilities through our app and our website. and over time, i think that life is going to be a lot easier, especially when you think about flying on a carrier like american, where we have a full tier of products and also services to take care of you. >> real quick, we have to wrap here, business travel. about 80% back compared to prepandemic. do you still see it growing over the next year or two? >> as i take a look back, we're inching back to, you know, we're making good progress. but at about 80% now. i think that comes back, especially as people return to the office even more and as we look into 2024. on top of that, the industry still hasn't recovered its fair share of gdp as it has been in the past. so as i take a look out into the future, i think demand is going to be there.

american is going to be very efficient. and we're a story that, you know, i can't wait to talk more about. >> robert isom, ceo of american airlines on a day where they do beat on the bottom line, but, you know those concerns are out there in the market about the state of the consumer. robert says the consumer is still flying. back to you guys. >> phil, thanks so much. coming up, will weight loss drugs shrink the market for diabetes treatments? jon fortt weighs both sides of that story after the break. and check out the futures. the s&p 500 is now indicated to be down just about ten points, down 1.3% or so. the nasdaq still so far in the green. "squawk box" will be right back.

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welcome back, everybody. shares of medical technology companies have taken a beating over the last three months as investors focus on the potential of weight loss drugs to improve people's health without the help of devices. it raises the question, will weight loss drugs shrink the market for diabetes treatments. john jon fortt is here to weigh in on this. >> the drugs aren't even

technically authorized for mainstream weight loss yet, but we're already seeing their impact in small waves. it started in july when executives said on the earnings call that that it had slowed. patients were asking about weight loss drugs instead of minimally invasive surgery. they took note and the stock began shedding $25 billion of market cap as a price began to slide from near 350 a share to 275 today. medtronic is down since then and abbott as well. the impact isn't just on health stocks. the ceo of walmart u.s. said earlier this month, preliminary data shows customers who take weight loss drugs are spending less on food. and access to the drugs is likely to expand quickly. personalized healthcare provider accolade said while 25% of employers it surveyed now offer access to weight loss drugs, 43% plan to offer them in 2024. bottom line, the drugs work, access is growing and they'll

shrink the need for diabetes treatment. >> that makes sense, just in terms of the surgery option. who would not rather take a pill than go to surgery, but the drugs are pretty expensive and unless they get a lot cheaper is this something that redefines all the treatments? >> well, yeah, on the other hand, becky, investors are once again getting a little too excited about a headline before thinking it through. are weight loss drugs exciting? yes. will they quickly grow into a big pharmaceutical category? absolutely. morning star estimates it could be $60 billion mark neet in ten years. that's not the whole story. high prices mean that probably only 10 million to 15 million people get access to weight loss drugs the next five years, which is less than one out of every 30 people with diabetes globally. abbott stock was up nearly 4% after earnings yesterday, by the way. what if usage spreads? do the drugs fix everything? no, they have side effects like nausea and loss of muscle mass that patients need more

treatment to fix. it is too soon to conclude that weight loss drugs will upend the market. they'll solve one set of problem for wealthier patients. the sell-off in med tech stock is probably overdone. >> i was thinking that. people keep pointing back to what this u.s. ceo of walmart had to say about things, how they have seen a smaller basket size i can't imagine that a huge portion of the walmart shoppers are getting access to these drugs just yet and they're not the ones who are using this to lose five pounds like you see on the upper east side to fit into a dress. we may be getting a little ahead in some of the ultimate playouts, not from what good this could do for people who need it, but maybe the exponential plays from there. >> yeah, the side effects are something too and you can already see multiple -- nestle, i think, yesterday, was saying, hey, we see some possibilities here in offering nutritional supplements to help people maintain muscle mass.

everybody is pivoting already. you can bet the companies in med tech as well. >> how much of the s&p 500 market cap is based on people being fat? >> i mean, when you count lazy boy and all kinds of -- >> tens of billions of dollars, trillions, right? who didn't go down because -- >> i think jon's point is the companies are going to pivot. you pivot to what your customer wants and what they need, and a lot of them are already doing that, offering healthier snack options and doing things along those lines to bring them in. >> and market cap, count on people being thin but flabby. there is a lot of delta between flabby and healthy. >> there is always going to be a little bit of an over estimation in the short-term, but then, you know -- >> we are hoping people get healthy, just to be clear. that would be nice. >> yes, we are. >> all right. got to mention, on the other hand newsletter, get the qr code on the screen or if you don't want to take out your phone and

scan that, type in cnbc.com/otoh. easy access to the weekly poll on linkedin. weigh in there. let me know which side you agree with more. results from the most recent topic, lopsided, birkenstock or nike, which shoe stock is the better bet. 75% say nike. >> that seems look a slam dunk. >> yeah. >> by the way -- >> you used bottom line in your report. >> inside joke. >> thanks, jon. >> all right, thanks, jon. the china select committee sent a letter to sequoia about the chinese tech investments. we'll hear from the committee's chair and ranking member next at the top of the hour. blackstone president and coo jon gray joins up. "squawk box" is coming right back.

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guests have sent a letter to sequoia, part of a broader effort to curb u.s. in thes in the country. let's bring in congressman mike gallagher of washington. and congressman, thank you both for joining us. let me start with the chairman here. what has been the response from sequoia at this point? >> we have yet to get a formal response but we're hoping that they will participate in good faith and that we can have an open and honest conversation. what we're trying to do is gather information that will inform the legislative process.

r raja and i agree american firms should not be capitalizing on chinese communist parties human righ ri rights abuses. sequoia has a history of investing in companies that do that. we want to understand how the new split between sequoia u.s. and sequoia capital china. whether it will prevent from flowing to chinese military companies or intentionally or unintentionally sequoia capital china to avoid scrutiny from the new executive order from the biden administration. >> congressman, would you follow up on that. is this split enough for you or do you need to hear more and what kind of, i guess, rails are you looking for or walls between the two companies? >> i think the underlying issue is this, which is i think mike and i and our members on the

committee are concerned about not just capital but technology and know how and expertise flowing from the funds to these prc companies, and these problematic sectors, ai, quantum, and semiconductors, subject of the outbound restriction executive orders. i think what we're concerned about is although it might be a step in the right direction, the spinoff, this sequoia china entity are the underlying investors the same? are the relationships going to be maintained such that expertise and know how continues to flow from americans to these chinese entities? those are some of the questions that we'll be asked. >> congressman gallagher, i just wonder if you can talk about how much bipartisanship, i mean, if i'm not mistaken, there's a democrat and republican standing right next to each other, shoulder to shoulder, about 6 inches separating you right there. how much bipartisanship is there

on this china issue regarding u.s. investment overseas? >> we are uncomfortably close here. i'll try to get through the interview. i think there's a lot of bipartisanship. our committee has operated in a profoundly bipartisan manner for the last year. i think our members are very serious so they want to work across the aisle, and the nan date we have been given from former speaker mccarthy and the minority leader hakeem jeffries was to work in a bipartisan ma matter, not just to throw bombs at each other. that's not to say we agree on everything. we have principle disagreements, u but we're trying to identify what is the center of gravity that we can build a lasting china policy that will endure regardless of who's in the white house and be successful in the short-term in preventing a war with china, and successful in the long-term in winning the technological with china. >> what is the danger here that we go overboard? we want obviously to protect

national security. at the same time, america is about being open for business, and if we restrict our companies overseas too much, we lose the competition? >> i think that's exactly right. some people talking about decoupling from china. i don't think that's going to happen. i think we're going to be diversifying our supply chains, derisking whatever the word of the moment is that signals that signals we don't want to have sole dependency on china. we learned this the hard way during the pandemic, personal protective equipment or as we have now come to realize, critical minerals that are essential for ev supply chains. we can't be dependent solely on the prc because we know that the chinese communist party uses these dependencies as leverage, as sources of coercion. and we can't have that. >> can we talk this bipartisanship a step further and get a speaker between you two guys?

congressman gallagher, do you want to comment on what's going to happen today and with the speaker? >> i don't know what's going to happen. i'm not going to lie. it is a mess right now. i sort of have this image in my mind of us as a local fire department, and we're getting all of these alarms that fires are going off in various neighborhoods and rather than getting in the truck and putting out the fires, the fire in the middle east, the fire in eastern europe, the heating up at the taiwan strait, we're arguing over who should drive the truck or who should sit shotgun. we need to get our act together, select a speaker. we have a lot of work that needs to get done in a short period of time. hopefully we can make progress on the front today. >> who are you supporting as the driver of the truck? >> i voted for jim jordan in the last two rounds, i believe we need to avbide by the rule in te caucus. you have to support whoever the majority of the caucus votes

for, otherwise it's total chaos. >> did you support steve scalise as well? >> i supported scalise, and kevin mccarthy, it's unleashed pandora's box, nobody wants to abide by the rule. >> your name was floated, con congressman gallagher, you said you're not running, why not? >> i have the job i want, which is chairing the committee, working with my good friend, and we have plenty of good candidates. i think the important thing is whoever the speaker is going to be, they got to treat it like a 14 month deployment, step up, do and almost go away after that. >> we got to go. raj, are democrats ready to back somebody from the other side? >> potentially. i think at this point we're waiting to see whether, you know, we can have kind of a bipartisan coalition, a unity coalition that sidelines the extremists and makes sure that the people's interests are first. yesterday i spoke to the peace

for hong kong foundation in the morn mor morning, and i said we love kn democracy so much that i'm voting for a speaker for the 17th time today. in all seriousness, i hope we can take care of business. as the china global times, cc propaganda organ said this speakership mess, unfortunately, is being used against us as a sign of weakness in our democracy. so we got to take care of business. >> we have to go. thank you both. thank you for your bipartisanship. >> thank you. >> thank you. coming up, black stone out with earnings this morning. we'll dig through the numbers with the president and ceo jon gray. that is next. and netflix shares surging overnight after reporting a big subscrer bt,ibea what the company told investors and what it means for the streaming landscape. "squawk box" will be right back.

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opposite ways in the premarket. we'll tell you what drove their latest quarter for the company 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 steve liesman along with becky quick and mike santoli. u.s. equity futures off this hour. i don't know where we are. we've been up, been down. where are we. down on the s&p, down on the dow, a little bit up on the nasdaq. interesting treasury yields, though, that's what i have been follow following, 4.98. 30-year, .509, and the five-year

note. i can't see that guys, 4.99. i guess i got to go visit the eye doctor again. >> we've got third quarter results out from at&t earlier this morning. the company beating the street's expectations both in terms of profit and revenue. it's also raising its full-year free cash flow guidance, and its adjusted ebita growth guidance. previously, they were talking about above 3% for that adjusted growth guidance, and now they're saying above 4%, running through some of the comments from the company on this. on a macro level, things are looking good from at&t's perspective. i had a conversation with the cfo, pascal, he said this is the most widely anticipated recession that's ever been. he says he's still cautious about everything, keeping an eye on it, but it's hard to see things happening, not eventually taking a toll. right now, they are not seeing any signs. the consumer looks steady. in terms of why they're able to raise their adjusted ebita for

the year, talking about free cash flow as well, talking about wireless and fiber revenue growth, coming in strong and seeing they're making good work when it comes to making progress on cost cutting. they did see 120 basis points of margin expansion year over year for the quarter, and talked about how they are kusing ai, guys, we talked about this before. using ai in customer service and dispatch to fix service outages, that in turn is helping them reign in the head count, and that's helping on the bottom line too. >> somebody yesterday said we had a pre-session, there's all of this time businesses have been gearing up for a recession. they have already pared, back, there's not the excesses from which you would have a recession. tom barkin said this in a speech, one of the three reasons he thought if there was a recession, it would be less

severe. remember in minority report, the pre-cog thing, this is a pre-session. >> that's true. it's been over a year that a lot of companies have been preparing. >> we have been talking about the consumer giving it up for how long now. back to the broader markets, mike santoli has made his way to the telestrator. >> obviously the biggest driver of markets, three months since yields started to take flight globally. take a look at the s&p 500 year to date, relative to the ecowave version of it. this is a relationship we have looked at quite a bit. you can say, look, s&p 500 has been pretty resilient, up 12%, year to date. that's not too bad. obviously we're more than three quarters of a way through the year. the average stock as represented by the ecoweight version. that started in march. that was when silicon valley bank went down. there was a risk aversion. there was a migration towards

those very strong balance sheets at the end of the market cap spectrum, and big growth stocks in the nasdaq, that's what's been keeping us going. arguably, the rest of the market has taken medicine, looks less expensive. let's take a long-term look at long-term bond yields, the tlt, eft, the treasury etf that holdings 20 years and longer dated securities. here we go, 84, draw that line all the way back, and you're basically, that's a bad line because we're basically going back to the mid 2000s which basically tells you when longer term yields were back at this level. i'm not enough of a chart believer to say there's some kind of magical support at these levels just because we did bottom around there almost 15, 20 yeerars ago. it is a big marker for value being created at the long end of the treasury yield for those willing to buy and hold them. the semiconductors in the

overall market, those have been two leadership sectors. that's been good news for the market. you like when semis are out performing, housing a big part of the economy, home builders. they're out performing. you see this emotion. they're at an advantage, they can buy down mortgage rates, and benefit from housing scarcity. 8%, 30-year fixed mortgages are biting to some degree. kind of cutting into that cushion they built up, guys. >> mike, thanks very much. >> it's probably not any sort of a coincidence that that line that you were looking at on the treasuries that goes back to the great financial crisis. the fed has been involved for that entire time, kind of without any let up on things! absolutely. so fed pulls things down to zero, stay there for a long time. and related to that, the pig pic --

big picture was inflation. >> i've seen a chart, they call it alligator jaws or something like that. you know what i'm talking about? >> sure. >> bond yields, yields going up or actually it's the stock market staying up and bond yields or bond prices going down. and the implication is something has got to give. >> well, my point on that is that relationship is not always in sync over long periods of time. bank of america has a piece, it's a more recently phenomenon, since covid, they have been in lock step that stock prices are down, bond prices down very much at the same rate. i think part of it is the big nasdaq stocks that are impervious, and part of it is there's no magic skeleton key for figuring out where stocks and bonds trade together. >> thanks, mike. blackstone reporting third quarter results earlier this morning. revenue and profit both missed the street's expectations, though blackstone's ceo said in

the earnings release that the company is in his words, well positioned with a record amount of dry bpowder. blackstone's assets grew 6%. for more, we want to bring in jon gray, the president and chief operating officer of the black j blackstone group. down 12% year over year, steve schwarzman said this is what's happening, the results are coming in and he described a pretty challenging market out there. how would you describe the market that we're living in right now? >> well, good morning, becky, and i think steve had it right, the environment was tough in the third quarter. that's continued now with rates moving higher. that impacts markets and valuations. i think the key thing for our shareholders is our fee-related earnings are very resilient. they're pretty much flat year on year. our management fees were up year

on year for the 55th straight quarter and the most important thing is we delivered for our customers. so across our flagship strategies, we delivered performance in excess of what we're seeing in liquid markets. we had real strength in infrastructure, in life sciences, in private credit and to your point, with more than 200 billion of dry powder, that gives us a lot of flexibility to deploy in what looks to be a dislocated market. >> where do you see those dislocations, where would you be deploying the dry pattern. >> i think what's challenging is we're going to see here rates elevated because the fed is going to stay tight for a while. i think growth will slow to the point mike was making. you've got, you know, 8% mortgages, 8% car loans, and so what do you think about doing it? i'd point to two areas, and one of them would be being a solutions provider. so our private credit business, which has grown to be quite

large, we can help companies. we can help consumers in that area. we've got businesses like tactical opportunities, where we can provide liquidity to companies who need to deleverage, and the second area would be not rely on multiple expansion or adjust gdp growth. you have to invest in areas where there's some real long-term tail winds. if you think about energy transition, an area we have been quite active, digital infrastructure, what's happening in data centers driven by ai is extraordinary, it was the biggest contributor to our value increases in real estate and infrastructure in the quarter, and then i would say globally, india is a place with a lot of growth. we made a large investment in a hospital chain there. we committed in the quarter. so we look at the world and say, yes, it's a challenging place, but there are certainly opportunities. >> what does the situation with commercial real estate that's been a huge issue that's been

something you guys have been concerned about, and lot of others too, but commercial real estate, are we nearing an end to the woes there or with rates still so high, is that going to continue to be a problem for quite a while unless and until the fed brings down rates? >> well, i'd say there are two notable head winds. obviously office buildings, which you've talked a lot about on your program face some secular challenges, given remote work and some obsolescence issues. that's a very small piece of what we do in the u.s. the second challenge, of course, is the rising cost in capital, which does have an implication in the near term for all commercial real estate. i think two things to keep this mind, though. one is if you invest in sectors with higher growth, we have a majority of our capital and logistics and student housing and data centers, you're better

positioned to absorb the higher cost of capital, and the second thing is we're seeing a sharp decline in new construction. now 30 to 70% in this last quarter in most areas of commercial real estate and that lays the framework, the ground work for future recovery and value. so, yes, the near term picture, more challenging, we like to be long-term investors. >> hey, jon, i have always been curious about this, if i go out and buy a home right now, i have to get a mortgage for 8%. you guys buy homes, what is your cost of funds in that space? >> well, the cost of borrowing is not much different, steve, for commercial investors in real estate and residential investors. you don't have the flexibility to prepay those 30-year mortgages which fannie mae and freddie mac allow individual homeowners to have. so there's an advantage, but the cost of capital has moved up and so that does make the economics

in sectors tougher. we do have a structural shortage in housing, and it's one of the areas that's going to get exacerbated by this high cost of capital, which we think will persist for some time. >> so does it make sense for you guys to still hold on to that housing inventory or should you be selling some of that housing inventory? >> well, i think it depends, but i think if you take an intermediate longer term view, we have been under building housing by about 4, 5 million homes since the financial crisis. we're now going to see housing starts, i believe, across multifamily and single family, probably come down, exacerbating that shortage. and so if you think about an asset class over time, i think it should have pretty good performance, even if there's some near term challenges. >> jon, we have been talking about higher yields from the cost of capital perspective, but, you know, somebody owns the assets, you among them, and so therefore you're earning more off of plain vanilla public

fixed income assets, treasuries and corporate bonds. does that raise the hurdle rate for somebody considering, you know, investing in alterna you have been able to gather the assets at a time when returns are scarce. >> when the risk free ralt te g up, you do have to generate higher returns. the good news is we have done that for a longer period of time in lower rate environments and higher rate environments. if you can buy a business of an asset, improve management, invest capital wisely. drive returns higher that, works in any environment. the other thing i would say is we've got a very large credit business between corporate and real estate credit, nearly $400 billion. most of that is floating rate, and it's benefitting from this higher rate environment. you are seeing clinents lean in. more than hatchlf the capital w

raised in the quarter was in the private or credit space overall. >> jon, i want to thank you for being with us this morning. >> thank you. >> jon gray again from blackstone where he is the president and chief operating officer. coming up, the earnings metrics, juicing shares of netflix in the premarket, and later, north island'gls enn hutchins joins us on the fed, and the israel-hamas war. stay with us.

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netflix shares surging in the premarket, the company reporting 8.8 million subscriber additions. it's best performance since early in the pandemic and well above expectations it announced price hikes for some subscription plans in the u.s., britain and france. our next guest moderated the netflix earnings call, joining us is b of a senior entertainment analyst. jessica, it's great to have you on this after the call, and i guess the questions going into the report, i think, on the street were, you know, how sustainable is the sub growth related to crackdown on password sharing, how much pricing power we have, and also the fate of the advertising tier and the advertising opportunity in general. how would you sum up what we learned based on the quarter? i would add to the concerns, operating at good margins. they kind of adjust everything last night on the call. their commentary on margins was

actually very positive, bill, and this year, 23 at the top end of guidance, roughly 20%, next year, 2 to 300 basis points of growth. the trajectory for margins is very positive as they scale up. on subscribers, as you mentioned, we're starting to see the beginning of the password sharing crackdown. they added nearly 9 million subscribers, well above expectations, and said fourth quarter will be similar. so that was another surprise positive. another surprise was the buy back. their buy back was $2.5 billion, they increased the authorization, they doubled the authorization to $10 billion. free cash flow is strong. so i think while the metrics were strong, i guess on the price increases, no one expected that, they increased the prices basic for new subscribers and the premium tier, normally when

there's a price change or increase, you see an increase in churn. in this case, there's an option for these basic subscribers to go to a lower-priced advertising tier and the good news is for investors is they will actually -- if subscribers go down to a lower priced tier, netflix will generate more revenue because of advertising. whereas the company says arm. premium will be less susceptible to churn. >> that's such a key point, though, on the tiering of pricing and essentially funneling a certain percentage of subscribers to the advertising tiers. my sense out there is that people under appreciate how much there's a vacuum in terms of the advertising market from the advertiser ear perspective to reach people through streaming. how fast do you think that can scale and become more significant for netflix's business? >> that is such a great question.

i think, you know, they just launched this in november. it's a new business. the advertising market is tepid at best. so it's actually, in our view, a pretty good time to start a business. they have nothing to lose. there's no legacy business here to lose. they have what most advertisers want. they have demographics that are valuable, younger viewers, older viewers, it's just across the board. with a less cluttered environment. our view is this is a three to five-year growth driver. and it will take some time to build, but they have the tools they need to scale, and they're building the scale. to the extent that consumers move into that advertising tier, that is a real positive for them. and you do see it in the revenue. the revenue from advertising actually exceeds the revenue from -- >> we have to be quick about this.

talk about content. is there enough content? is the pipeline strong if you have nfor them and what about te cutback that seems to be all over the place for this business, the cut back in content. >> they had no choice because of the strikes. this year, spend is $13 billion, they plan to go to $17 billion, this is not a strong content quarter, q3, and q4, it ramps up and they announced a deal with sky dance with animation, and look atwhat studio is doing or "band of brothers," certainly not for netflix. >> we appreciate your time. thank you. >> thank you. coming up, the latest on the gop fight to elect a new house speaker in washington. stay tuned, "squawk box" is coming right back.

the u.s. house remaining without a speaker after jim jordan failed to get enough support in the second ballot yesterday. emily wilkins joins us right now. she has a look at what could come next. good luck with that. >> it does not look like the third time is going to be a charm for jim jordan. there will be a set of votes expected around noon to see if ma jordan can be speaker of the house. 22 republicans opposed him yesterday during the second ballot, two more than opposed him on the first day. jordan is planning at this point to keep going. this is what he told nbc yesterday after that second vote. >> we have 200 colleagues who are for us, that's right where speaker mccarthy was in the process. we're going to keep talking to members. >> now, there are some republicans, and a couple of democrats who are discussing the path to get speaker pro tem,

patrick mchenry the ability to pass legislation for a short period of time so the house can address things like funding skpiand the federal government. congressman mike gallagher said the solution would be kicking the can down the road and could set a dangerous precedent. >> mchenry is speaker pro tem because mccarthy wrote his name on a secret piece of paper. like he wasn't chosen to be speaker, and i think he interprets his position that way, and why he has been resisting this option. he doesn't feel like he has the constitutional authority to start bringing legislation to the floor. i think it wouldbe far preferable if we can just like unit behind someone to get to 217. >> the house will return at noon today for that vote, and we will be keeping you guys updated on what happens, and whether jordan continues the fight or whether republicans are going to have to go to plan d, becky.

>> emily, thank you very much. emily wilkins. when we come back, new jobless claim numbers out after this break. we'll see you on the other side.

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welcome back to "squawk box" on cnbc. we're just seconds away from new initial jobless claims and manufacturing data from the philly fed. futures this morning, we are down just ever so much on the s&p, a few points on the dow and up a little bit on the nasdaq, but the action has been in the bond market here. we're taking look here, 30-year, 504. ten-year, 492. let's go to rick santelli at the cme, the data dude. >> yes, the data dude. initial jobless claims for the week of october 14th, steve, expected to be 204,000, not meant to be. we broke under 200. 198,000. 198,000. you have to go back to early january of this year to find a lower number in the form of 194,000. last week was revised from 209 to 211,000. continuing claims a different

direction, expecting slightly over 1 million, 700,000, well a little bit more than we bargained for, 1,734,000, to a 1,705,000. you have to go back to second week in june to find a higher number that 1,734,000. we now have ten of the last 11 months, the ten reads we have, because this is obviously in october have been negative. the one month this year that was positive was august, and august was positive 12. so we went from minus 13 1/2 last month to minus 9 this month, and there's a couple of things to point out, steve. i know that mike was showing the tlt chart. i like that chart, too. the problem there is that if you look at the highs, and then the

lows that you're at now, there's a wave count. and it doesn't look like the fifth wave is complete. even though we're resting on area that's consolidation, need to be a bit careful. look at intraday, the dollar yen, ever closer to 150. how rare is 150? i'll tell you, on the 3rd of october this year, we had an interday violation, up to 150, we've had one close above 150 since 1990. and that was october 20th of last year, and the close was 150,115. one day, you have to go back to 1990 to find a continued effort of trade above that level. it's very significant, and the world is watching that weakened currency, of course, and the controlled interest rate complex do give them an export edge. >> that's an important point. i have to ask you, how important

is 5%, is it psychologically significant 5% or psychologically insignificant 5% on the ten-year? >> you know, all of the big round numbers are significant, whether it's 4 1/2, 4 3/4, but 5%, especially, remember how tough it was to get through 4%, but having said that, even though there is a psychological technical resistance there, i don't see it as long lasting. i continue to say we're guns hot on the long end and what we're doing, we can debate about all the reasons, but hey, i think the "wall street journal" picked up my main reason, premiums, term premiums, how much extra do you require from uncle sam to go from a five-year to a ten-year on lending the money, from a 10 to a 20 or a 10 to a 30. those distances are widening and if you look at historical spread, steve, especially things, 10 versus 30, is hovering around 24 basis points,

historically, we could get that out to 140 or 150. these things can continue to biden and it's that widening, i think, that's one of the big driving forces along with supply, which translates in my world to debt. that's moving those rates high sg. >> good stuff, rick. a closer look at the economy and job picture, my good friend, lindsay, thank you for joining us this morning. >> thanks for having me. >> what's going on with claims? shouldn't we be weakening here? >> when we look at the labor market down, claims, earnings, hiring, the unemployment rate, what we're seeing is a tight labor market, you couple that with an extremely resilient consumer, and i think we're painting a solid picture of the u.s. economy. this is going to make it difficult for the fed to continue remaining on the sideline, with the international conflict with the timing of the policy move more uncertain. >> guys in the back, i don't know if you have my unofficial powell data dashboard. if you look at what happened in the gdp, retail sales and jobs the last meeting, they were all

stronger, how does the federal reserve react to this. powell has said repeatedly, i need slower growth to get inflation down. >> slow tend growth, and you couple with the fact that inflation is not just holding steady but many metrics pushing higher then we have an up side potential risk for a further rally in energy prices, the fed is being backed into a corner. they don't want to be. they're being backed into a corner, they have to take a firmer position in policy, if, and this is the big component, maintain their resolve for reinstating price stability. >> how does it respond? >> how does inflation respond? >> how the fed respond? >> the right now, a lot of it is communication, if they want to maintain the pause on the sideline, they have to be clear they're doing that as a further temporary move in order to better assess the impact of the international events, better assess financial conditions. they remain committed to price

stability, and they will continue to move forward with further policy firming. that's going to be a difficult message to send to the market, and if the market starts to lose confidence in the fed, we could see longer term rates lose momentum, the reason the fed said they may not need to lose rates. >> meaning the fed could potentially raise again? >> lose confidence in the fed that they're going to stay the course until inflation is back to 2%. >> okay. >> right now there's a lot of question marks on whether or not a 3% inflation rate is good enough, and the fed needs to be very clear, no, 3% is not the new 2. and we heard this directly from chair powell in some of the more recently commentary. the market, investors have to be convinced that the fed will stay the course and get inflation back to 2%. >> that being said, the current projections by the fed officials is they don't get to 2 until 2025. their theory is the leeway, we

believe the lag effect is real, the long end of the curve is doing work to restrain the which i. we can have an estimate of what neutral rates are, and we're very restrictive right now. doesn't mean they have to do anything, but they have to essentially send that persistent message, i guess. >> we have the luxury of remaining on the sideline, with just communication as we continue to see the downward trajectory. as of late, we haven't seen that. the headline has reversed course and the longer we see the upward tick, that will force the fed's handmen hand. we need to see more improvement in inflation data to adjust the position. >> we don't have inflation coming down. a quarter doesn't get you anywhere, does it? what i have been saying is if the fed has to do that other quarter, it's going to have to be more than a quarter. >> the median forecast is one additional rate increase. >> one? >> but that doesn't mean to your point we're going to get where

we need to go. latest step suggests that the fed at the very late. >> summary of economic projections. >> correct. >> thank you, lindsay. >> you don't have that laminated on your refrigerator? >> i have it on my forehead. >> got it. but i think at the base case, they're saying they're willing to take nor action. but to your point, 25 may not be enough. we may need to get to 6%. now, the caveat there is even if we see supply side pressures remain elevated, i don't think that's enough to justify the fed indefinitely raising rates. it does support them holding rates higher for longer. so separate those two thoughts. >> what do you think about the committee, another screen that breaks them up into three categories, we have the category of those who say we're done, and by the way, we have somebody coming up tomorrow on our air who says we're done. we've got those who are kind of in the middle, the patient noncommittal. >> that's such a tease, who's comi

coming up who's going to say. >> you wait, becky quick, i'll tell you in a minute. we have bostic tomorrow. where do you think the committee is, and assuming you agree with the three categories wrhere doe powell come in today? >> powell is additional rate hikes, he's one of the more hawkish members. the fed has a job to do, and they're going to do whatever it takes to reinstate price stability. i think that powell's comments we're waiting for later today will be on the more hawkish side and he'll be in the camp of further rate hikes. >> i don't think the market is there yet. if he surprises with a hawkish commentary that puts that quarter point back on the table. >> he has maintained that. i don't think that's a surprise. >> i don't think the market is thinking that way, given the speech we have had. >> the market has been consistently optimistic that the fed won't need to raise as high as we have seen of late. >> thank you very much for your help on this. >> thanks for having me. >> and follow up to that amazing tease, rafael boston, atlanta

fed president coming tomorrow. he said we are at the sufficiently restrictive level. he's the one guy that said we're definitely done here. maybe not definitely. >> we'll see. coming up, north island chairman, glenn hutchins joins us live on the israel-hamas war, the impact on the global economy, the next set of decisions facing the fed and much more, and a reminder as we head to break, you can always watch or listen to us veli using the cnbc app. stay tunes, "squawk box" will be right back. 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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macroeconomic conditions are stormy, you know, the best job is still going to have tough times, the weaker ships will sink. we're not going to sink. even a great ship in a storm has challenges. >> that was tesla ceo elon musk on the company's third quarter earnings call last night, sounding a note of caution on potential macroeconomic conditions ahead. still, he said, tesla is quote, an incredible capable ship. shares down slightly in the premarket. the company missed revenue expectations in the third quarter, the first top and bottom miss in four years,

supporting deliveries and aggressive price cuts with automotive gross margins falling short of forecasts. it is day 13 of the israel-hamas war. president biden returning to the u.s. after a short visit to israel. he will be addressing the nation at 8:00 p.m. eastern time tonight. joining us on the conflict and geopolitical implication is north island chairman glenn hutchins. the world has changed drastically over the last couple of weeks. it has not been really reflected in financial markets to this point, but what do you think as a business leader this is going to mean? >> great to see you guys. especially you two. i guess andrew and joe are doing a work from home today. there's a lot here in the middle east that's personal for me, and i usually don't talk about personal stuff on tv. one of my first memories is being woken up before dawn and put on a plane to be evacuated from cairo with my mother in

1967 when the war broke out. my father stayed through the war, basically held hostage at the american embassy. that was one of my first memories. you grow up quickly when you have that experience. we have three family members in the idf, they are at arms derchld defending their country today, and thirdly, care of international relief foundation, where i have been on the board for many years has been in the gaza strip and palestine for 79 years, working feverishly over the weekend to try to provide relief supplies. big victory, was able to deliver 6,000 crates, 30 some thousand liters of bottled water to women and children in the gaza strip, their only source of water. i see so many different parts of this perspective. it's hard just to focus on markets and the economy, but let

me tell you about that for a minute, if i can. so far this war has had little impact on the markets. i have vice presidents in israel, a venture fund, i have insights into their company too. after 9/11 for us, they will be able to rebuild and continue to go forward. i feel confident about them, but that's based on the assumption locally and broader markets, it will be short and contained, and that's not the goal of iran. which wants to disrupt the architecture of peace in the middle east being forged between saudi arabia, israel and the united states, and thrives on chaos and conflict. it's not the goal of russia, iran's ally that wants to diverse resources and resolve on the part of the united states from ukraine to the middle east, and it's also not particularly the objective of china, which is smarting under u.s. tech

sanctions and eyeing taiwan. this is a very very global chess board. and thwarting and containing this, which is vital to market performance is the purpose of biden's trip. that's exactly why i'm going to be watching very carefully what he has to say tonight. only the united states has the resources to keep this thing contained. this is the time period when america's leadership is vital to the world but also vital to the things your viewers care about, which is market performance and company performance. >> the president's meeting that was supposed to take place in jordan with the jordanians, with the palestinians, with the egyptian leaders didn't take place because of what happened. does that make you concerned that the risk of really expanding this crisis is real in the forefront? >> that would be a key concern, right. on the other hand, as i think you've talked on this show the last couple of days, a bunch of people are taking off for riad

for the future investment, i think it's important to lean into that relationship. >> are you going? >> no. long ago planned not to go, but i think that the message, regardless of the other issues out there, the big issue today is can we forge this alliance that reorders the middle east in a way that can create peace and prosperity for everybody involved, including the palestinians. the iranians want to disrupt that. the saworking with the united states to create this framework, and i think that's really important to reinforce. i hope american business leaders do that. >> this hasn't played out in the economy to date, are there things that businesses and companies are doing to prepare accordingly or what happens? where do you see this going? >> right now it's narrowly confined to israel and the israeli companies are figuring out, and they're kind of, i think, doing a pretty good job of it. the canary in the coal mine would usually be the oil markets

and they have been trading at a range within normal volatility. there's not a sense at this point that this thing can be contain, and it's relatively brief. and cooler heads prevail in terms of what the response here is that this doesn't have a major economic impact. i think jay powell's speech is going to have a chance to have a bigger economic impact. >> what's he going to say? >> i don't know what he's going to say. i know what i would ask him. are you going? i'm going to be there. >> i cover it more effectively from not being there. >> the headline of my question would be 3.5 is greater than 2. >> inflation. >> yes. >> steve is smiling. we've gotten inflation down from 5% to 3.5%, but that's a long way from 2. >> as mike pointed out, the fed itself doesn't think it's going to get there until 2025.

>> that would be my view too. >> so what's the question. >> not the question, i think the thing on people's minds is going to be is he going to give any indication of a path to easing before he gets to something that looks like 2, and i think answer to that is no. as i said in the past, i think that the i think the next round of inflation is structural and much harder to get out. it's demographics, deglobalization, decarbonization, debt monetization, and now the incredible overperformance of the u.s. economy, we've all talked about here, plus this huge flow issue that you folks have been talking about, which is all the treasury -- >> stimulus too. there's a lot of stimulus that's still pouring in. >> but the flow issue would be -- what i'm referring to is the massive issuance of treasury securities that are flooding the markets and also causing rates to stay up. so, i think it's highly unlikely that -- i don't -- by the way, i'm not worried about a fed increase in next meeting or two. it might or might not happen.

i don't think it's consequential. i think the markets in the age of forward guidance, the markets have done the fed's work for it already. >> talk about the -- what it means for you as an investor. does 5% create a hurdle? i think i know you a little bit. i don't think you go to bed at night thinking, i'm going to buy ten-years tomorrow morning. you're in it for returns that are -- make 5% look silly. >> i was on the show probably a year or so ago, and i talked about how during the bubble, two years ago now, how there was this reach for yield, where natural buyers of treasurys were buying corporates and corporate buyers were buying high-yield, and high-yield buyers were buying index equities, the stock buyers were buying tech, and tech buyers were buying venture capital growth and they all went up -- they all had to reach up to chain for yield. and i think now, it's cascading downward. as natural buyers come out of that. and the -- these higher rates as

part of that are putting pressure on companies and economic arrangements that, as the higher rates persist for longer periods of time -- and i think the base case of not a cut until 2025 makes most sense to me. so, if you imagine a year to 15 months from now on grinding your way through, the implications of these higher rates for a long period of time increasingly weakens economic arrangements that are based upon lower cost of debt. highly leveraged private equity companies. >> yeah. >> venture capital. we've talked about the real estate, so i'm not going to go into that. venture capital companies burning cash. the -- i think the emerging markets will continue to be under enormous amount of pressure. by the way, go back to the venture and pe. there are securities that are based around cdo -- clos that are based around buying those assets. all those things, i don't think,

are going to create any systemic risk, but they're going to bring back, in my view, distressed investing over the course of the -- i think new opportunity is going to be something we haven't seen in many, many years, which is rescue financing for companies with -- >> in other words, a company cannot roll over the debt, and the better course for the company is to be bought out either through bankruptcy or before bankruptcy. >> but you think there's plenty of private money that will do that and it's not going to require the government to step in. >> for instance -- >> if you talk to the owners of some of those assets now, they're calling for relief from the government. >> i think the government relief we need is joe biden's trip to israel. so, i don't think that's the case. the banking industry is very sound, silver lining, right? but some of these small regional banks might well need to raise capital. as an example. that would be the difference between having a bank failure and having the banks need to go to the markets. >> imagine if glenn came on and

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little more than a half hour until the opening bell on wall street. dominic chu joins us with a look at some of the morning's top premarket movers. >> it's been a big earnings mover today as we head toward the opening bell for cash equities trading. at&t this morning, those shares are gaining steam, up north of 5%. over 1.7 million shares of trading volume after the telecom giant beat profit and revenue estimates due in part to better than expected growth in wireless phone subscribers. those results are also leading at&t to boost its full-year forecast for operating profit growth as well as free cash flow growth so those shares getting a nice bid premarket. we're watching shares of american airlines, flying high by roughly 1.5%, just around 800,000 shares of volume. mixed report here. profits beat expectations. slight miss on revenues. it also cut its full-year profit forecast amid higher labor costs

and fuel costs, but ceo robert thinks that things are looking better this holiday travel season. he joined "squawk box" earlier this morning. >> we're booked stronger than we were at the same time last year. now, we have to tdeal with yiels as well, but overall, i feel really good about where demand is, not just now. people want to connect. people want to travel. as i look out into 2024, i see robust demand. >> for the big story in tech, it's especially the nasdaq, about netflix up 15.5%, nearly 700,000 shares of volume. profits at the video streamer, movie studio, better than expected. revenues were in line. now, net subscriber editions blew by expectations which is, for now, outweighing a weaker than expected current revenue forecast. let's end with the drop in tesla. shares of the electric vehicle maker losing right now over 6% of their value on over 6 million shares of volume.

it dropped 5% nearly in yesterday's session. tesla's quarterly profits and revenues both came in below forecasts. now, ceo elon musk says he is concerned a bit about the effects of higher interest rates on consumer demand. the result and commentary are leading a slate of wall street analysts to reduce their expectations for the stock in the coming months, becky, so tesla shares on that nasdaq side of things down 6%, maybe counterbalancing the 15% gain for netflix. back to you. >> dom, you get that tootsie pop? >> i did not. i got the blow pop. we do want to look at the markets and see where things stand. the dow is indicated up by about 16 points. s&p futures up by about 6. the nasdaq now up by 64, so we bounced around a lot. nasdaq has stayed in positive territory all morning, and it has added to its gains, but now you've got the dow and the s&p joining it as all. also been watching what's been happening in the yield complex.

in the treasury complex with yiel yields. the ten-year yields 4.39%. you have the two-year at 5.218%. gentlemen, it's been a fun and interesting morning. >> as always. >> bostic tomorrow and the second part of the all american economics. >> and we're going to watch what powell has to say at noon. that does it for us today. join us tomorrow. right now, it's time for "squawk on the street." good thursday morning, welcome to "squawk on the street," i'm carl quintanilla with david faber, sara eisen at post nine of the new york stock exchange. cramer has the morning off. premarket has erased some early morning losses, even as the ten-year got awfully close to five. big day for fed speak. seven speakers, including powell, at noon eastern and tons of earnings movers. our road map begins with powell, of course, u.s. government bonds gaining for a fourth day. the ten-year nearing 5% as investors await tea leaves from