it is friday, december 20th, 2024 and "squawk box" begins right now. good morning, everybody. welcome to "squawk box" here on cnbc we are live from the nasdaq market site in times square. i'm becky quick along with joe andrew ross sorkin joe is off today let's check out what's happening with the markets because it has been quite a week. right now, you will see the futures are under pressure again. dow futures down by 267 points nasdaq futures off 300 points. the s&p is down 50 points. it snapped a ten-day losing streak the longest we have seen in over 50 years

however, we are still on track for the dow to be on the worst week in over a week and a half all the way back to march of last year. with these continued declines today, that could be an even bigger issue each fell .10% yesterday to the week, dow is close 3% the nasdaq down 3% as well if you are looking at the nasdaq 100. treasury yields are at the highest level since may. ten-year at 4.54 the two-year at 4.581. bitcoin tumbling below $100,000. all of this began with the fed's moves earlier this week. it was a hawkish cut it had been expected by the market, but chairman jay powell at the fmoc a little more

strident and the situation with the government that is not helping. let's talk about the situation with the government. the president-elect trump and elon musk backed bill billfailed we are now less than 18 hours away from an official government shutdown i want to bring in emily wilkins in washington, d.c she has the latest she has been working all night talking to everybody where are we >> reporter: andrew, there is no plan on how to keep the government open past midnight tonight. it is not clear what can appease house republicans and trump and elon musk and democrats. although everything is in the republicans' court right now, this bill, if it passes the house, needs to pass the senate. the most recent deal we saw included $110 billion in disaster relief and assistance for farmers, but cut other items in the bill. from a 1500 page package to a

100 page package the contention was something that was added it takes away some of the limited leverage next year also a number of fiscal hawks on the republican side did not like it because they want to use the debate over the debt limit to reduce spending. congress member chip roy, lawmaker who voted against the bill, criticized republicans on the floor last night take a listen. >> we're going to increase the debt by $5 trillion. that's what's going to happen. right here by republicans increasing the debt $5 trillion what are you doing in the same bill $110 billion unpaid for. you never have any ounce of self respect. >> reporter: a shutdown could have serious impact on holiday travel and the pentagon warned it would result in troops not

having pay over the holidays we will keep a close eye on capitol hill to see what, if any, agreement emerges and if they could pass it over the weekend and try to avoid the worst of the government shutdown >> emily, in terms of just anything new between last night and this morning, is there any sense if you took the debt ceiling piece of it off the table, meaning this two-year temporary reprieve, if you will, or any of the other measures that you could get something across the finish line >> reporter: i think right now all options are on the table, but that definitely does seem to be one of the biggest concerns of course, republicans will still say that some of the other parts of the bill aren't paid for. democrats could still be upset that republicans basically went back on what was a bipartisan and carefully negotiated agreement. i think it becomes a question from the leadership and how much they are willing to give and to

a certain extent, the politics are coming in had here last night, you saw republicans saying they are owning this. they are blamed for the shutdown you saw vice president-elect jd vance leaving the capitol and saying this is in the democrats' court. they didn't vote for it on the house floor and they are blamed for the shutdown he alluded that he thought a shutdown would be more likely than not at this point it has been a blame game here in washington, d.c. >> on a very practical level, you referenced this idea that maybe something could happen over the weekend could something happen over the weekend or all of these people headed home >> reporter: at this point, flights are booked i know a couple of members who have events today. i don't think they are going to make those events. the thing is they all need to stay in d.c. because the margins are so incredibly narrow we'll just have to see what happens today. we went into yesterday without a

plan they came up with a plan and it didn't work. technically, they could come up with a plan today and they could at least to move it or decide to let the government shutdown and head home for the holidays i think both options are on the table right now. certainly you have current house senate ma majority, sorry, top minority mitch mcconnell every time there is a shutdown, republicans get the blame. that would be a difficult thing for republicans have to start with when they come back in january with the trifecta instead of starting off with the new nominees and reconciliation bills and packages on energy and border they are dealing with the shutdown instead. >> i think this is an unforced error in a lot of ways it is before president-elect trump is even in office,s but unfortunately, it shows how tenuous his grip of power is

going to be. everyone has looked at it and said he won in an overwhelming landslide. he won the popular vote. he won the electoral vote. he won the house he won the senate. clean sweep on the issues. it shows they are not walking in lock-step. it shows all of the things he would like to get done would require the entire republican majority to stick together if you can't do it before you get in office, it shows there is not as much strength or ability to get things done insisting on these things now may have just been an unforced error. i can understand why he doesn't want to have that debt ceiling vote that every president who has come through, republican, democrat, has been dealing with this weaponized issue. if you are going to spend, you should be allowed to do it this is a weapon that some republicans have used effectively in recent years and they are not willing o put dow their weapon just yet.

>> reporter: becky, you are absolutely right the biggest question for the next congress is how much congressional republicans are going along with trump we saw trump was easily able to kill a bill. he clearly has a lot of way on capitol hill and his party as we saw with 38 republicans lawmakers turning their back on the bill chip roy did that and calling him out on truth social. it shows they are not just going to fall in lock-step you can take that from the election results if you look at the presidential shift to the right a huge shift in favor of conservative policies and way from the biden administration. if you look at what the house and senate did, the republicans lost seats in the house. they will have a smaller margin in january than they do now. in the senate, this was a really great senate map for republicans, but go talk to sam

brown in nevada or kari lake in arizona or mike rogers in michigan all of these were republican senate candidates who lost in states where trump won you are seeing a regulating impact on congress and could easily see that for the neck two years. >> threat of primaried if you voted against that, is that the case with 38 >> reporter: that's a great question, becky. certainly, we have seen trump come out against lawmakers that resulted in them losing. congress member bob goode is not returning for that reason next year two years from now is a long way away a lot will happen between then and now. i think it's going to remain a big question whether or not you actually see trump or see musk go against some of these lawmakers and what that could

actually result in and how successful that might be >> emily, thank you. i appreciate it. in the meantime, president-elect trump posting about tariffs in the early hours on truth social. in it, he said i told the piern european union they must make up the icit with the united states and purchase our oil and gas. the eu is expecting to purchase more u.s. energy in the coming years. european markets, by the way, are open right now you can see there's red arrows there just as there are in our futures this morning it looks like the dax in germany and cac in france is off 1%. the ftse and ftse mib are down as well. shares of novo nordisk are tumbling after appointing results in the weight loss drug.

the drug, not familiar with it, helps patients cut weight by 22.7% in late stage trials below the 25% it expected. you can check it out novo nordisk shares are down 22%. in the meantime, shares of eli lilly and other weight loss drug companies are jump ing on the news eli lilly shares up 10% this morning and viking up by a similar amount close to 10% as well we have more coming up on "squawk box" this morning. nike forecasting lower margins for the holiday quarter as it liquidates ventory as part of the turn around strategy we will ask have an exclusive with john williams about the fed's ability to cut back rates

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and tons of savings. bring on the good stuff. xfinity. welcome back to "squawk box. take a look at shares of tesla the company recalling 695,000 vehicles in the united states with the tire pressure monitoring system light.

tesla released an over-the-airsoft over-the- over-the-air software to correct the issue. driving with properly inflated tires prevents a crash it's funny we talk about a recall, becky. what is amazing about this world we're living in, you used to take your car to the dealer ship. >> serious pain. >> they are talking about a recall and beam an solution. >> an update to your phone. >> we talk about recall. >> i think that's accurate i have gotten recall notices some i have managed to get in the shop others i don't if you book a service appointment, it is a might nighe to get the parts >> hopefully it's digital. in the meantime, nike's turn around taking longer than expected should say will take longer

under the ceo elliott hill they will liquidate inventory to move away from promotions and return to full price models. nike expects margins to be down between 3% to 3.5% during the holiday quarter. joining us to talk about this is john kernen at cowan there is a lot of excitement about the new ceo and the potential direction of the company. how much of this is going to be the growing pains that you have to see through this? >> good morning, andrew. thanks for having me elliott is a 30--year veteran of nike he will bring the brand back to a competitive position he is setting a very low bar for his own expectations and the street's expectations as they reset the marketplace. a lot of pressure on the financial model. >> so, i mean, are you -- are you happy or upset that the bar

is this low? >> we have been cautious on nike for the better part of the year. we favored competitors with dekkers and hoka it is difficult to pin down where the bottom in the company's operating margin is going to be the next on two years given the pressure on gross margin you mentioned how much inventory is down over 300 to 400 basis points the back half of this year they have to promote heavily to clear goods and it's a long way back to full price as they reintroduce back into the marketplace. >> how much is it getting back to full price versus getting back to innovation when you talk about hoka and on and some of the other sneaker companies which have had great success, part of it is the view of more innovation there >> certainly they are premium level you look at the average prices of hoka and on, they continue to

rise year over year based on innovation their marketing has been very fresh. that is what exactly nike has lacked nike has been backed into the corner i think they are too focused on basketball right now they've lost lifestyle and running and key categories it is not just footwear. they are losing at the high end to smaller upstarts. >> what has to happen to fix that do you believe this new ceo can do that? >> yes, i think elliott will certainly refocus the company strategy on the wholesale challenge. he will go back to the playbook that worked for them in the 2000s and they also lacked innovation they have to get better design and better marketing and re-acquire consumers that they lost

if on and hoka and new balance all grow at the rate they're growing, it is difficult for nike to re-acquire consumers in the category where they lost share. >> where is the fair value of the company? we are looking at it right now and $74. >> 69 $69 for that's worth. we run a few valuations. if you run a basic business, you get back to the mid to high single digit top line in the next five to ten years you need to assume the operating margin gets back to 15%. it hovered around the last five years and we think the shares don't offer much upside. we continue to play the peers in the market share. >> that is after the stock is down more than 30% for the year?

>> it's been a shocking change in the economics to the business, becky. the margin profiled the business and lack of top line growth and need to reinvest has changed what we thought would be a high margin business and now sub-10% this year or closer to 8 it's going to be a long road back to the ebidta margin. elliott is probably setting a low bar. this is one of the most powerful brands in the world and recognized brands in the world when it comes to support if you stay true to numbers and financial model, shares don't look cheap. >> what is the fair price you say all of a sudden this does look good? >> i think you need to see more down side. you look at consensus estimates just for eps next year, you can make a argument 2 dollars eps is fair there is essure in early

fiscal '26 i don't think you are back to $3 before fiscal '27. i don't think why you need to pay 30 cents that far out of earnings that's what would get you meaningful upside. >> that translates into the stock. what price >> i would like to see it go down 15% to 20%ttractive to us >> john, thank you when we come back, starbucks bar baristas are going on strike today. we will show you comments from the union and tell you which cities in case you are on the way for your starbucks this morning. we'll tell you that when we come back also, later, senator markwayne mullin will join us about the looming government shutdown. "squawk box" will be right back.

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workers union representing more than 10,000 starbucks baristas says the workers will strike in los angeles, this morning they dubbed it the strike before christmas and walkouts would escalate daily and could reach nationwide by christmas eve. the union said it was striking because of unresolved issues with wages and staffing and schedules. starbucks is ready to continue negotiations and said the

delegates prematurely ended the bargaining session the timing is not great. the similar story from the unions dealing with amazon yesterday and the strike they are putting on just ahead of christmas time you see starbucks stock off off .80% year to date, down 8.3%. in the meantime, president-elect trump transferring his share the trump media to the revocable trust he made the move this week and did not receive any money of the gift of 115 million shares to the trust worth $4 billion of yesterday's close. he knew now indirectly owns the shares his son donald junior holds the power in the trust he made similar transfers to the same revocable trust the question is whether that gives you some kind of

separation from the assets themselves i think when your children are running them, it's hard to say that's actually separate that's where we are. >> you better stay on good terms with your kids if the kids are running it. true coming up, shares of fedex rising after the announced spinoff of the freight trucking business we'll show you what the ceo said about it last night on "mad money. as we head to break, a look at yesterday's s&p 500 winners and losers >> announcer: executive edge is sponsored by at&t business next level moments need the next level network. it all started with a small business idea. it's a pillow with a speaker in it! that's right craig. pulling in the perfect team to get the job done. i'm just here for the internets. at&t, it's super-fast!

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>> good morning, everybody welcome back to "squawk box. we are live from the nasdaq market site in times square. i'm becky quick along with

andrew ross sorkin joe is out today if you are hoping for a bounce back on a friday morning, you are not getting it yet dow is off 200 points. the nasdaq futures are down by almost 300 points this morning s&p futures off 50 points. this comes on a triple witching friday that's what jj kinahan told us to watch out for the katie stockton also announced this that you need to see a big uptick in the s&p 500 to break through levels of resistance there or levels of support that she was concerned about for the end of the week. we'll be watching this closely throughout the morning it is still the early hours. this is after we are watching the worst week for the dow, at least, since march of last year. it did break a ten-day losing streak yesterday the longest losing streak in 50 years. no question we have had turbulence in the markets this

week. new overnight, china kept the benchmark rates unchanged as china bolstered economic growth and backstopping a weak yen. meantime, shares of fedex on higher the company announced the spinoff of the less than truck freight division as they look to the core delivery business the spinoff to break value the ceo joined jim cramer last night on "mad money. >> fedex is the largest ltl company. the fastest transit time it is a gem. you know, we are increased focus. we play offense on revenue we ensure we explore our customer experience. i do want to point out that fedex freight benefits a lot by being part connected to fedex.

so, we are going to make surelil side and technical side as we go forward. >> it beat estimates of $3.90. revenue missed when the company cut full-year earnings on revenue guidance the stock at $300 right now. shares of u.s. steel falling after the company forecast a surprise 25 to 29 cents a share for the current quarter. that compares to the 16 cent profit it cited a slump in steel prices and the cost of the ramp up of the big river ii facility. the demand in europe has been weak the three-year picture for the stock down 50% you could see the prices for steel down by 50% over the three-year period. for the year to date for u.s.

steel, that stock is down 40%. it's down another 6.5% this morning. when we come back, president-elect trump threatening europe with tariffs overnight. up next, we're going to talk to the head of mickters facility as they face an automatic tariff of 50% in europe. also, you can get the best of squawk box in the daily podcast. follow squawk pod and listen any time we'll be right back.

welcome back, everybody. plblth president-elect trump delivered an ultimatum to the eu [ coughs ] >> sorry

i was drinking tea the possibility of tariffs if the u.s. doesn't get the sale of oil and gas. this raises the possibility of a 50% tariff on exports to the eu that is set to kick in automatically in march if officials don't reach a deal joining us is the president ofdy joe, we talk to you every year at this time >> thank you for having me on. >> it is great to have you in person this threat of tariffs does make us think very quickly what this means for your business because you have dealt with this in the past back in 2018 you all were targeted because you are the home in kentucky of senator mcconnell. when tariffs were put on the u.s., some countries came back and targeted looked at leaders you got hit front and center >> yeah. look, tariffs are complicated

things and i actually think it makes good business sense of the incoming administration is talking about ing tariffs on the eu. i believe in 2022 our trade deficit with the eu was $130 billion. >> okay. >> it is understandable tariffs are talked about if you look at it from the narrow perspective, singular perspective of whiskey, the industry would not rather have it as i said before from june of 2018 to january '22, the eu imposed a retaliatory tariff on whiskey. it wasn't 50% like the one looming for the end of march this coming year, but it was 25% tariff that had a big effect on american whiskey it fell 20% during that period. >> what did it mean for your business at that time? >> we were fortunate we actually wound up growing in

that period. we were an an omoly. what happened is we wrote with our partners and other countries to absorb part or all. >> they took a chunk of it >> yes so, what happens is a lot of the companies wind up having to reduced profitability during that period even if they maintain sales. >> it didn't happen to you because you had a product so in demand and partners. >> we reallocate our stuff plus, we have good local partners we export to over 80 countries we were not alone. really, a lot of the industry wound up working with their local representatives in different countries to absorb part or even all of the price increases. you also get in anticipation of the big tariffs coming in, you also get big load and transfers of ventory ahead of time. >> okay. what are you doing to prepare

for the idea of 50% tariff that will kick in if a deal doesn't get done you must have been planning for this some time >> crossing our fingers, pretty much we do plan, we are already speaking to our local partners, if that does, in fact, happen because the 25% tariff had a big impact and 50% is more we were looking the other day at pricing in france where we are doing well and growing nicely. you know, a bottle of michter's core entry is going from 67 euros to 88 euros. that's a big increase. unless we and our local partners do something, it has an effect on volume. >> we have already seen impact to volume because just because the spirits business in general took off during the pan democrat pandemic people were home and buying.

that dropped off describe the state of the industry tariffs aside. >> tariffs aside, the industry is going through an adjustment period you know, in 2023, u.s. spirits sales were down about 2% if you take a look at the first eight months of '24 calendar, spirit sales continued to be down american whiskey sales are down for example 2% a bright spot is super premium american whiskey, $30 and over is up 30%. we are dealing with factors and new things are people are adjusting to the glp weight loss drugs are a new thing. online gambling reduces spending in liquor store or restaurant or bar. >> people are spending more money gambling and that, as a result, eats in what they would

do going out >> i believe so. gambling on the nfl alone this year is expected to be $35 billion. >> that's got to come from somewhere. >> it's coming from somewhere. anecdotally, i hear 30 somethings friends talk about losses in gambling >> there is a move for younger people to not drink. >> i think part of that, too, is marijuana. you know, daily marijuana use is actually larger at this point than daily alcohol use >> i don't know what to root for in this situation. >> you are absolutely right. i saw a study that said people legal drinking age of 24 said they are drinking less than last year you have marijuana, weight loss drugs, online gambling also, another factor that especially in chain stores affected the industry is

shoplifting. you know, more and more goods are being put behind lock boxes and locked displays. some studies indicate when that happens, that volume can go down 20%. >> people say forget it. i'll not go ask somebody. >> they don't want to wait or whatever. >> what do you do to combat all of those things and i guess with the asterisk you point out the volume for premium brands was up last year. >> exactly as people drink less, you know, it sounds trite and people said it for years in the industry people are drinking better that actually is long-term good for the profitability of the industry >> where are your biggest sales? i was surprised to see that you -- i know i have known this in the past you are importing to china. how much is going to china and how much going overseas? >> it is substantial very substantial part of our

business our export business revenue is tremendous for exports canada is up 25% this year probably up similarly in china we just won the industry brand of the year award in china which is a pretty big deal in china. it's a great market for it we export to over 0 markets. it is an important part of the business. >> again, looking at tariffs and it's a good thing tariffs are discussed. >> if you look at it as an american and good for the united states, i can certain understand and i think it makes sense again, from the narrow perspective of trying to import and export, you know, spirits, it's challenging, but the industry adjusts this talk of 25% tariff on mexican goods. >> you are bringing in nes -- >> nescao up with the 25%

tariff that goes up from $25 to $40 on the shelf. >> you hope this is a negotiation and you hope the tariffs don't come to fruition >> yeah. putting pressure on the eu -- the eu at this point has a 50% tariff looming on american whiskey. you want to see a negotiation. hopefully that 50% tariff doesn't happen or happens less. >> joe, i want to thank you for coming in. we talk to you this time of year nice to have you in studio >> i really appreciate it. >> we're not drinking on the set. >> it's the same color, this is actually tea i promise. coming up after this, maybe we'll drink more we'll talk about this story because it continues to be a wild one in new jersey the faa now banning drones in parts of jersey due to security concerns we're going to bring you all of the details of what is actually happening and not happening and what we know and frankly what we

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we have breaking news this morning to tell you about. take a look at this right now because shares of novo nordisk tumbling after some disappointing results from obesity drug helping patients or the plan to help patients cut their weight by 22.7% in late stage trials that number is below the 25% it

had expected a spokesperson saying the company plans to optimize further exploration and the new plan in the first half of next year shares of eli lilly and other weight loss drug companies are jumping, by the way, on the back of this news. in the meantime, the faa has issued a month long ban on flying drones in parts of new jersey for security reasons after unexplained drone sightings. the faa is banning aircraft from flying over critical infrastructure over swaths of the state. the faa said it issued the temporary restrictions at the request of federal security officials. they are in effect until january 17th the department of homeland security said critical partners requested it over the facilities they say it poses no threat, but

we're weeks into it. saying we don't know what it is, but don't worry. when we come back on squawk, we are less than 18 hours from a government shutdown. mike allen from axios will join us on what is going on in the halls of congress this morning beautiful shot of the capitol this morning when we come back with all of the shutdown news.

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welcome back to "squawk box. a new bipartisan push in washington to extended deadline for the ban on tiktok. senators urging president biden to extend the january 19th deadline by 90 days given the law's uncertain future in the

supreme court. they cite the potential consequences for freedom of expression the court will hear oral arguments on the matter on january 10th we'll see where that all goes. >> it's complicated because this isn't something that president trump can come in and say never mind i'm overruling it. it's a law if the supreme court rules in it favor of the law, it has to be undone by congress they may have bipartisan support, but when you see all of the s oiling congress today. >> the fear of getting a better shot of getting this undone. >> it's an interesting prospect. i hadn't n't thought through t logistics of what it means if the supreme court rules in favor of this, but they did not stay the law in the meantime if they don't come up with some resolution or some, you know, decision on this by the 19th,

there's a lot at play and it is complicated. >> i think the president-elect would like to use this as a chess piece in the larger conversation to get 90 days or get anything, all of a sudden, it changes the negotiating >> it will be something to watch. it will get messy as we get down to the deadline. in the meantime, let's take another look at the futures this morning. the picture has gotten weaker throughout the morning we are looking at the dow futures down by more than 225 points the nasdaq down more than 300 points the s&p down 56 points below fair value a lot of red arrows continuing throughout this week let's get to frank holland with the look at what's happening in the pre-market and what stocks are on the move. >> good morning, becky and andrew shares of fedex are popping on the news the company will spin off the freight business into the publicly traded can be fedex's goal is to unlock value. fedex as a whole including the

trucking business trades at 14 times forward pe forward plays you can see here trade closer to 35 times forward pe again, it is about unlocking value there. i want to go back to the earnings fedex with strong earnings beat, but lowered the full-year guidance shares moving higher in the pre-market now to nike shares a different story there. take a look. lower down more than 4% after the initial pop on better than expected revenue and earnings, but then shares moved lower after ceo elliott hill got on the analyst call and made comments about inventory and discounting. we saw american shares fall 8% nike lost obsession with sports and a handful of sportswear silhouette shares are down more than 8% after the initial pop on earnings we look at shares of novo nordisk. they are plunging this morning on the reports that results for the late stage trial for the

experimental weight loss drug missed expectations. you can see shares are down just about 15%. well off the lows of earlier today. they were down more than 20% earlier. this new drug candidate helped patients reduce weight by 22.7%, but that was below joe is off today. among the top stories, the feds engaging inflation.

should be up 2.9% year-over- year. we will bring you those numbers and the market reaction when they had. meantime, luxury brands are loading up on lower-priced good to appeal to middle-class shoppers. gucci and prada have been struggling with weaker demand for expensive handbags and cashmere jackets. they are now expanding their product lines to emphasize scarves, belts, wallets, and home goods priced at $500 and unders. sales fell 6%, when a credit card data firm -- luigi mangione is in new york, facing federal charges in the death of unitedhealthcare ceo brian thompson and faces 11 counts and connected to the december 4th shooting. it includes murder and terrorism charges. he was perp walked in dramatic

fashion with the mayor behind him and you're looking at shots of that right now. you cannot tell, by the way, and i was curious. there is part of me that thought it was very important to have a perp walk because it hopefully demonstrates something to the public, that if you do something like this, you're going to be behind bars for a very, very, very long time, the rest of your life. the flipside is every time there is video of him, there is, unfortunately, an outpouring from some parts of this country that seem to be supportive of him and i just wonder whether there is a martyrdom thing going on? that is an interesting take on it. i had not thought about it. you want to make sure -- the reason prosecutors are going for such stringent charges on this, including the terrorism charge on this, is they want to send a message that this is something we will prosecute to the fullest extent of the law. the video on it, you are probably right. >> i do not know.

it was a wild video to watch yesterday. it was like watching a movie. meantime, the story of the morning. it is the looming government shutdown. we are now 17 hours, mark your watch, from that deadline after a government funding bill failed in the house and we are on the cusp of a full on shutdown if nothing happens between now and then. axios cofounder, the man in the middle, the one who knows it all, mike allen. good morning to you, sir. what do you know? what do you know? where are we? >> very likely that if there is a shutdown, it is fixed by the time markets open monday morning, however the very possibly could have a shutdown. what did we learn? this week, we saw a massive change in the information ecosystem and how washington governs, how voters influence government. a very telling tweak yesterday by don jr., the president's son, who said we are not just the media now. we are the government.

that is a flip of -- we would have thought in the past, but we see media and government coming together. we see elon musk with 150 plus tweets, moving congress, and then yesterday, congress rebelling against trump, voting down a bill that he wanted. coming up to 12:01 a.m. tomorrow, very possible there is a shutdown. i think they may find a solution that takes us past the new year, however high drama and no one, even the leaders, maybe especially the leaders, nowhere close. >> you think there will be a deal by the time the markets open on monday. there is also an expectation that a number of folks in washington plan to get on planes today. how is that supposed to happen?

>> yeah, uncharted waters, andrew. i can tell you that house republican leaders do not know how they will fix it and the real twist in this is the speaker, mike johnson of louisiana, who looks very safe to keep the gavel into the new congress starting january 3rd, and other republicans have the majority, because of the uncertainty you just pointed to, how do they fix this? it has a shaky hold on the gavel. your viewers very well know jim jordan of ohio, it is possible he turns of the speaker january 3rd. behind the scenes, ever since he lost the speaker vote before johnson slipped in, he has been reaching out to the hard noes against them, working them. that is a drama we are seeing behind the scenes. i can tell you from my reporting from the transition team, they think johnson's future depends on whether or

not trump expresses support from him. >> exactly. >> i would assume president- elect donald trump would support him because johnson has been a pretty big supporter of the incoming president. >> that is very smart. that is exactly right. i think people may convince trump there is no one better. the biggest hold that the speaker has on the gavel is that there is no one else waiting, but however we get through the next three, four days, like pulling back the camera, the musk online revolt. how that worked, the fact that constituents and members were responding to x and musk, even more so than republican leaders, and even before trump spoke. that is our new world and the big picture of that for your viewers is that it is going to be harder and harder to discern

reality. we have a call on axios. they say news consumers need to demand truth because we used to get the news and we used to get facts that we knew were facts. now, media, what we consume, can be totally divorced from rigorous truth based, fact based reporting. >> can i ask why you think this is nearest -- necessarily going to be done by monday morning? trump has lived through a government shutdown before. it was 35, 36 days that a government shutdown took place while he was in office last time. if you look, you will hear from certain places they would like some of this chaos. they would like this shutdown because that is how you will be

able to reset and really change parameters of things. they do not wanted to be business as usual. what is preventing them for saying we would like to see a little chaos so we really can't shake up the system. >> 100%, that is one of the scenarios. i agree with everything you said. in addition to that, they love the idea on january 20th, the legs come on and there is a change, a reset, as you said. i am just walking through the possibilities that you and i have seen covering this many times, in many years, shutdown showdowns, that they can be fixed if they want to. there is no certainty of it, but it is possible that there is a shutdown that lapses into the weekend, but before most critical government services will be affected, before the markets will open. >> mike, do you think it is different? the reason i ask -- and curious what you think of the role of elon musk and vivik ramaswamy and where we are right now.

to me, this was the first real demonstration of their true political power now that the president-elect has been elected the president. obviously, he is not the president yet, but for a very long time, they take to x and other things and express their opinion, but this is sort of a true demonstration that their opinion goes pretty far and here we are right now. so, the question is, we have seen this before it gets to the 11th hour and it all gets fixed in the end, but is this the way the movie is going to play out now? >> for sure, what has changed is what are the powers? what are the levers? the way that the transition source described it to me is if you think about the x fowlers -- followers and what vivik ramaswamy and musk will do with

fair d.o.g.e department, what they said to me is elon musk has a whole army of online people to go through every bill, every piece of legislation, go through databases of government spending and he can find what to highlight and that is a new part of the power, what does the online mag army find and what does elon musk the spotlight? is it true among those 150 suites posted on x, either that he said or that he amplified or not accurate? that is why it is very important, this takeaway about the difference between media and reporting. yes, all the followers on x are part of the media, but that does not make them reporters.

that is why news consumers have to be super intentional, super discerning, about what they are believing and what is going in their inflows do, what they are acting on, believing, trusting. >> mike allen, it is great to see you. we wish you happy holidays. i'm sure they have just been interrupted as we all try to follow these breaking news stories. >> fantastic holiday to you. thank you for a great show all year. >> thanks. when we come back, we will talk markets and today's inflation data with gabriella santos, a j.p. morgan management. then-president donald trump and elon musk. the capital founder ben narasimhan will be joining us to talk about this and much more. clock box will be right back.

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the head of the pce report, that is the fed's preferred engagement gates, we have been looking at the pressure. you're looking at the dow futures, now down by 270 points and the s&p futures down by 65 and the nasdaq down by 353 after some pretty big losses for the markets already this week. for more on this, we want to bring in gabriella santos, the chief market strategist for the americas at j.p. morgan asset management. help us understand what is happening. it has been a very interesting week. a lot of things happening since the fed meeting and the markets are really getting -- we looked at the futures down pretty

significantly. i know it is a triple witching day, but how much of it is what jake powell had to say at the fed meeting and how much of it is what is happening in washington and how much of this is triple witching and has the overall view of the market changed this past week? >> i think it is a combination of all those things. the first on the fed itself, it was not unexpected. the reason why there is a shift in economic forecast and it brought back inflation and signal to investors that it is -- perhaps for the wrong reason. >> by the way, you may not be getting any more cuts. >> and the market pricing and probability is thinking of maybe i need to reduce my expectation of gods or maybe at some point next year we could bring back the conversation

about hikes. to us, that was not really justified. we had actually been expecting a higher upgrade to the economic forecast that barely budged for next year and only moved up 10 basis points. we think it is about the economic resilience versus the inflation forecast, which moved up 20 basis points -- it does not seem justified by the data. it seems to be a different conversation about tariffs, which brings us to the second bin reason, which is the policy fog on the other part of d.c. i think the market had priced in a lot of the good stuff from the next administration and has swung the pendulum to the other side about focusing on some of the less favorable aspects from an equity perspective it keeps swinging back and forth until we get to a good understanding of the details. lastly, frankly, i think it is the end of the year. we had such a strong rally in the market. >> maybe people are selling?

>> it is a little bit of fatigue, especially up from mid- september to the beginning of december. we maybe had too much of an increase in certain deep, cyclical, small parts of the market that perhaps became a little overdone. >> has a review of the market changed? >> frankly, no. we called our 2025 outlook into the policy fog. out of the cyclical him storm, an acknowledge that overlying the economy is pretty good. it is normalizing their growth rate and patterns. however, especially in the first half of the year, we are coming into a policy fog in d.c. and where we need to kind of round out our decimal points in terms of growth and inflation and rates and expectations. overall, we are still feeling bullish about equities about corporate credit. it is that the market, in the short term, things about absolutes and there's a lot more nuance and uncertainty. >> we are not far from all-time

highs, really, but what you tell people to do? do you buy or wait for a bigger tip? >> it is really what you buy. if we look at investor portfolios. i do think there has been a very strong, of course, rally for a couple years. portfolios might have gotten tilted much more to the equity side. for some investors, they do not need to do anything. it is much more about looking at the stealth unbalancing beneath the surface. a lot of tilted growth. recently, investors dipping their toes in deep, cyclical value, small cap stocks. >> i know you do not like to go names, but help us. >> i think there was an expectation that all of the good stuff of policy would re- accelerate growth and re accelerate earnings and all of us could have the high beta stocks that do well when you're just coming out of a recession and re-accelerating, which is

not what we are describing. we are looking at an improvement in earnings, but -- we are looking after the fed's reaction. i guess wednesday, if you looked at the small cap stocks, they were off by 4.4%. it was off more than the expectation of which will not lower rates, those lower rates that small businesses really need are never going to make it. it is the big businesses that can continue to operate in this environment. is that still the case? >> i think large cap and small cap is a good example. rates are not going down as much, but also the policy will not be so supportive that you get a massive growth in earnings and re-acceleration. >> do you like bigger stocks over smaller stocks? >> i am in the middle with the mid-cap. that is the conversation. it can be very binary and

extreme. either it is large or small, but there is more nuance and there is a middle ground and that example of mid-caps is a good way to discuss that. >> if you have big gains and you want to sell a stock, you might want to do that at the beginning of the year because then you can wait another year to pay the taxes, the capital gains. you could see more chaos come january. do you agree? if i am seeing this and i am thinking that could happen in january, i might wait a couple of weeks. >> that is always the trick about rating. they could've waited for the first all-time high up until the 57th. take that with a grain of salt but, yes, we do see a lot of focus on the tax conversation from our clients and i, for some, it is that conversation about end of year and beginning of year but really, the bigger shift we have seen is much more active, frequent tax loss harvesting strategies that

might limit some of these moves earlier in the year, but, of course, taxes are an important consideration and a lot of portfolios had gotten very tilted and there is work to do. just bring things a little more in balance between the extremes. >> gabriella, thank you. >> thank you so much. >> happy holidays. a lot more on squawk on the relationship between elon musk and other executives and president-elect donald trump. tenacity venture capital is up. then there is and will join us in a minute. then markwayne mullin will be with us. you will be our guest and we will talk to him about everything that is going on, including this potential shutdown. we are coming right back. time now for today's trivia question. this classic holiday movie vis d red on this date to mixed reewanbroke even at the box office. the answer when squawk box the answer when squawk box returns.

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union workers at starbucks will start a five-day strike today to protest the lack of progress in the contract talks. they are scheduled in los angeles, chicago, seattle. they could spread to hundreds of stores across the country by christmas eve. the union, which represents 535 locations seeking higher pay, more benefits and additional staffing. starbucks says they offer $30 an hour for baristas who work at least 20 hours per week. the check that shows -- they hit a one-year high of $200 and change back in november, but has since fallen by 13% since then. when we come back, elon musk blaming house democrats for a spending bill. his role in president-elect donald trump's administration and the relationship between silicon valley and kim coming president.

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welcome back. u.s. government on the brink of a shutdown with no deal in place after elon musk demanded that the gop back out of a spending bill in a series of posts on x. the new york times, michael shear and -- they said, quote, this is the first time he has been will to use his website as a digital web, to drive lawmakers to support his desire to outcomes. they wanted to discuss the role of elon musk and silicon valley in the second trump administration. good morning, benjamin. what do you think? is this the moment? is this the first real example we have seen of how this might work? >> i'm sort of impressed with how much influence donald trump and elon musk have had before, before even taking office. the shutdown is likely right now and maybe this is elon

musk, where he shut something down and then see which pieces you have to turn back on. >> this is the question. that approach can work in some context in a business, like x. we saw how well that worked in terms of he cut a lot of employees and cut back on servers and all sorts of things and sort of waited to see what works and what does not and if it was broke, he tried to fix it. the question is whether that can work in the context of government and the context of, you know, the transportation security administration employees who will hopefully help folks through the airports over the next week and a half, but if they're not being paid, how well will it work? >> we have had government shutdowns before and i lived in california, where we have had it a lot more. things have seemed to carry on. most of the stuff is on the classic game theory. it gets worked out in the bitter end because -- as an

example, think there were things added onto the bill. i have not read all 1700 pages, but lawmakers decided to tack on a raise for themselves and get their pet projects put in and i think if anything, if you think historically about how trump operates, a lot of luster and then a deal gets done. i have to imagine that happens here. is there a delay? probably. you know, things will get worked out. it is just a force, he is a big fan of whacking the big stick as much as you possibly can until he gets the deal he wants. >> you think about the tail wagging the dog and the dog whacking the tail. how much of this do you say to yourself, this was really influence of elon musk's and x and that helped push trump over the top or how much do you think that trump is pushing

elon musk and that is pushing them over the top? >> it really does feel like elon has just fortunate influence. that is not necessarily a bad thing. you know, it is nice to have the evidence. again, that business and government are different creatures. however, when he cut staffing at x, twitter, by 70%, and nothing broke, everyone said, oh -- nothing will work. it will all be terrible. that was not the case. i think that was quite informative. i think when trump looks at what he will achieve, he says can we apply some of this to government? last time, we talked about trump versus kamala and how that could play out and when i said i was super excited about if this came to pass, watching what d.o.g.e is able to do, we have not seen massive regulatory overreach since

reaganomics. if you look back to reagan and many of the policies are exactly the same that are being proposed, that was a tremendous boost to gdp and obviously taxes came down and unemployment went down and inflation went down. we did grow the deficit tremendously, but he was fighting a cold war and we are not in that same situation. there will be some pain along the way, but i think we will have a better and stronger country with a more functional government that is thinner and more able to serve the purpose it was intended for. >> what is your expectation about the long-term relationship between elon musk and president-elect trump? >> a lot of people are pointing to -- someone was tweeting let's just see how he treats his friends and will anyone get fired again in six months? it has been interesting to watch, sort of, what i would call a maturing of trump.

even if we go back to a debate with biden, he showed, for trump, a person who has no reserve, tremendous reserve in that debate. it feels like he has learned from the past and i think that is a great hope. if you look at sort of the amazing shift of what people certainly and silicon valley have sort of taken as a prospective, a lot of that is self interest. they will support the administration that is in the seat because they do not want their businesses to be harmed, but it is a 180 degrees shift from last time. you know, i think we have got a really good shot, a lot of good stuff happening. the reserves, the opinions -- again, go back to the first point. he is not even in the seat and he is acting as if we have a lame-duck government. >> let me ask you a different question. you probably saw elizabeth warren sent a letter, i believe, to president-elect trump, talking about the need for transparency around elon

musk's holdings and the role he will play in all of this. he is the wealthiest person in the world. he has assets that have gone up in value some 200+ billion dollars, literally since president-elect donald trump was elected and for the credibility of the country and our democracy and everything else, what kind of transparency do you think should be put in place, if any? >> well, that is a tough one. i know elon and warren, looking at what they have had, have a very rough history together. one of my favorite clips you ever did, i'm not saying it is fear, was i keep fit -- forgetting you are alive. she was complaining about his role and he said i am a volunteer. so, some interesting back and forth. there is a lot of existing regulation. one of the reasons i do not worry that much about how this will evolve is simply the fact -- a lawn is a proud -- he has

asperger's. if you look at silicon valley has a lot of folks on the spectrum. i might be on there. if you look at folks that have that word of way of their brain working, it is a world of black and white and right and wrong. i think people assume he will act like sleazebag politicians have acted in the past and i do not think that will be the case. i think we -- he will intimately act in an effort to do the right thing and it may or may not benefit him. i do not think you will see the kind of underhanded history of actions that you see across politicians in the past because you have somebody who is fiercely logical and he will act that way. that does not mean he should not have to disclose -- everything he has is public.

there is no mystery about what he owns. it is not like you have to discern some magical tea leaves from a bunch of private holdings, right? there are some, but the vast majority of his wealth are held in public things. >> it is a longer conversation, benjamin. we always appreciate speaking to and i hope we have the opportunity to do it again. i want to wish you a very happy holiday. >> i always enjoy it. have a happy christmas. still to come, senator markwayne mullin -- as we go to break, let's look at the names that are dragging down the dow this morning. you have nike shares down by almost 7.5%. nvidia up by 2.8% and amazon down by 2.6%. salesforce off by 2.1%. it is all adding up to some significant losses. s&p is now indicated to open down by 67 points. you have the dow indicated off by more than 315 points. we will continue to watch this this morning, but this is

ppg f pretty turbulent week for markets. it is a triple witching friday and you can see the nasdaq is off by 350 points. we will continue with more coverage right after this quick break.

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joining us now with the latest in the government funding fight is republican senator markwayne mullin and, senator, thank you for being with us today. i think we are trying to figure out what is happening in washington hopefully have a better idea than we do from here. there is some market turmoil, not because of what it is -- a lot is the federal reserve, what we have seen, but the threat of a government shutdown, really, is roiling people. what can you tell us about what you know is happening at this point? >> becky, trying to find out where congress is going is difficult. we will wait till the last minute to get anything done. i think we will probably avoid a government shutdown, mainly because we are pushed up

against christmas. there is a chance today a clean cr, a short-term clean cr, might be for two or three weeks and that will get pushed out from one of the chambers. that is probably the closest path forward. that was something that was discussed, you know, late last night and even some discussions this morning. i will not say that will happen, but that is really the option that is on the table. other than that, there are a couple other options, like the one that i was working on weeks ago, that was proposed with some senate democrat colleagues. we were taking the tender brioche and bills -- they have not reported out of committee. the nda has been passed and we have other 10 appropriation bills that has been supported. schumer has literally refused to move them. we can take all that language and that has all the writers come all the extensions, and add disaster on top of it. the language is already

written. it was bipartisan. they put it on the floor to add the debt limit with a two-year extension and that would clean the deck for the outgoing biden administration and set up trump to just work on the fy 26 when he gets into office. i think that is a great plan, but schumer scrapped that and said no deal. >> it is just so confusing, what has happened. we thought you all had a bipartisan deal that was going to get worked out. it turned out that elon musk did not want that to happen because of the issues they are trying to deal with government efficiency and stopping spending and there were 38 republicans in the house who voted against what president elect donald trump has supported yesterday. i think we are trying to figure out what works and what does not. i understand you were talking with president-elect donald trump last week about a plan, but that does not sound like it would now pass muster because the democrats, we ill have trouble getting support from

democrats at this point. i do not know if the republicans in the house, if they can even find a way, finding something all republicans would vote for. >> becky, i disagree that trump disengaged. he has been engaged since you won -- >> i did not say he disengaged. he may be negotiating with you. >> he supported a plan but it did not get past by his own party. >> i agree with that, but president-elect donald trump had negotiated with the white house and had been negotiating with us. i have been negotiating with my colleagues on the senate side. we had a deal worked out and it was something that was agreeable. schumer is the one that backed out of it. to say that elon weighed in on it, and surprised everyone, that is not accurate. >> you had something working its way through the senate. >> yes. it had worked. and then some changes had to be made because schumer pulled away from it.

the deal that speaker johnson was trying to work out was a very difficult deal because our number one goal is to raise the debt limit now. how about we do something inventive? how about congress be proactive, rather than reactive. what can happen if we wait -- you know this. this will happen. you will see it on your show. if we have not had negotiations and they start doing what they do to keep the government open, what will happen is the stock market will get volatile again. you can see them talking about taking a devaluation and then you will start seeing a possibility of us defaulting and that would be horrible. >> it was chip roy, republican in the house, and 37 others who voted against raising the debt limit. >> we could go back, becky, to the original deal we had the reason why it is pulled is because schumer wants to use

that -- i'm not trying to be ugly, but basically as a weapon to hold to the president's had to negotiate. >> it is a weapon that either party has used. >> that is true, but we do not have to do that. >> i have not been a fan of that. >> i do not disagree. >> we have to pay the agrees -- bills we have agreed to pay. >> it should not be used to hold the economy hostage and that is what schumer is trying to do, hold the economy hostage. why would we disagree with this? it is what is best the recent president-elect donald trump wants this is because he ran on the fact he wants to get the economy started again. we are in the situation because the biden administration spent too much and they had a lagging economy and the gdp was not going to keep up their spending. the issue we are in is it is because of the bad policies that the biden administration put us here, so now that they have is here, how about we negotiated out and get this

behind us and we can actually start and get this economy going back again. it would be the perfect opportunity to clear the debt. i do not understand, other than the fact that schumer wants to hold this as a negotiating tool or as a weapon to the president's head in his next administration. that is not good. that is not good for our economy or the american people and that is putting party before politics. >> there will be a big blame game about whatever happens. >> that is true. >> what do you say to the government employees who may ultimately get furloughed if this does not get resolved and what kind of expectations do you have around what happens over the next two eeks, let's say, if the folks at the transportation security administration are not getting paid and, you know, so much of the country is traveling or, you know, there will be so many components to this. do you see a path that gets you there and what you tell all those employees? many of them, imagine, if d.o.g.e is successful, they might not have jobs anyway.

>> i have them for shutdowns before, unfortunately, they are never good. i have never seen a federal employee not get back pay. even the ones they got furloughed, they still got back late. some of them got backpay with overtime put in place, so everyone of them will get paid. i just take that there is a question -- especially over christmas, when they will have bills coming due or they have christmas gifts to pay. republicans and democrats can agree we all want to avoid the shutdown, however we have to get our house in order because this is going to catch us one way or the next, so this fight will happen now, andrew, or it will happen in july. i am one of these guys it up i will get in a fight, let's just get it over with so we can move on. why wait when you see it coming anyways? we see this happening.

we have colleagues wanting to go home. we have federal employees that probably want to go home that work on capitol hill. we all want to go home for christmas. i have six children. i want to go home to, but let's do this. >> let me tell you very quickly, senator. the hill is reporting that speaker mike johnson -- in the house, he is saying republicans have arrived at a plan c to avert a shutdown and the house will vote on friday morning on the legislation. are you aware of this? >> yeah, that is what i alluded to before, when i first started talking with you, when i came on. i believe there is a path forward. i do not want to release the details. that is this. office. we are in a conversation. i found myself in a very fortunate position to have good relationships in the house and senate and with the president- elect, president-elect donald trump. these conversations we have been privy to, i do think there's a path forward to avoid it for a set amount of weeks moving forward. >> you think that is something

that will require both republican and democratic votes? >> it will pick it will require both of us to work together. i believe you will have enough republicans and democrats to support it. if they do not support it, i do not know what to say. they will own the shutdown. >> i'm guessing this is something that basically kicks the can down the road? >> yes, of course. >> we will have the fight again in january. >> okay, senator mullin, thank you for your time. >> thank you, becky. >> we wish you a lot of work. >> happy holidays. merry christmas. >> we will have more on yesterday's vote and what is next with chris sununu in the 8:00 hour. right now, let's take a look at what has been happening with the markets because it has been a rather difficult morning. dow futures down by 270 points for the s&p futures off by 60. the nasdaq down by 328.

it is catching attention because this comes after a pretty volatile week for the market that began on wednesday with the federal reserve's decision to cut rates, but do so in a hawkish manager with fed chair jerome powell talking about what he is seeing with inflation and concerns around that and that is raising the question of whether there will be additional rate cuts that come next year. in any event, those rate cuts will be slower and more decisive and more dependent on the data we get between now and then. it will also have an impact on treasury yields. we were looking at them at the highest level since may and now, it is at 4.53. the two-year is added 4.27. bitcoin prices have been coming down as a result of it, down another 2.5%, down to 91,000 after getting up over 196. squawk box will be right back. ♪ ♪ ♪ ♪

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welcome to squawk box.

netflix gearing up for their nfl games . looking at the media giants ahead of that big stream on christmas day good morning to you, rich. lots to talk about in media land. let's start with the netflix of it all and maybe even the technology piece. obviously, they had extraordinary numbers going into the big boxing match with mike tyson, however there was a lot of buffering and challenges and other kinds of headlines. do you think they will have it all together come christmas day? >> look, it is probably not as big of an event and the stunt of mike tyson and jake paul and being an internet sensation and the historic side of watching mike tyson at his age come out and fight. i do not expect the nfl games to be as big of an event. maybe i am underestimating not the power of the kansas city

game on christmas day and beyonci■at halftime, but it does -- >> beyonce may get more viewership? >> look, if you look at the way the super bowl works, the peak time is during halftime. those are the big events. netflix is brilliant in terms of bringing in a musical act to really spike, pun intended, halftime performance, but i still think it is a smaller event. i think what is surprising to us, the thing that we never anticipated. when netflix started talking about their live event strategy, we thought it was all about driving advertising. advertisers love the event. you were over in paris for the olympics. advertisers warm up on live events. they want live programming. that is what we thought what is the parrot -- about that when you look at peacock and paramount+ and netflix during the fight, they have added more subscribers from these major sporting events than we ever

anticipated and i think that is what has been really surprising. even for netflix and their scale, adding 1 million plus subscribers from the tyson-paul fight is nothing short of shocking. >> you think this will be sticky? >> look, again, at the end of the day, every streaming service uses events or sports specifically to get subs. it is up to them then to have enough other content to keep you there. if there is any company that has enough other content to keep you there, it is netflix. >> you think they should be better. >> i want you to do a crystal ball, 2025. can we put up that board that we had of that show the number of subscribers and all the different surfaces that are there. we have netflix at $283 million come all the way down to 283 million subscribers, down to apple tv+ at 25 million. crystal ball, chess pieces, president-elect trump is in office and the federal communications commission nfts the and doj say, you know, game

on. how do the chess pieces look if we have this conversation? >> i will really disappoint you, andrew, because the problem is the one chesapeake everyone thought was going to remove off the board, and when i sat on cnbc a year ago, we really thought the chess piece that was gone was paramount+. he did not think they would exist by this point. now that you have one of the richest humans were families coming in and buying paramount, it should close in the first half, if not first quarter, giving the trump-ellison relationship. i am talking about larry ellison, one of the largest people. paramount+ is why larry got it. he is involved in getting -- there is a major push, right, to get top tech talent into paramount now as part of this sky dance transaction. >> why is it an disappointment? >> there is no major

consolidation. if you think about your parent company, common pass, nbcuniversal, the spin we are overtime but tiktok, will tiktok exist as we know it from now >> whether it is the warm spot in his heart or whether it is the supreme court, andrew, you

have watched the supreme court for a long time. i don't know if they have acted on a petition within 48 hours that was not election related. i don't know whether the supreme court save them or trump say to them. it feels like a pretty good shot that biden -- if the supreme court does not save them i would be urprised if biden does not shut it down, he will send it to trump to biden component by 90 days. i suspect a year from now we will be on tiktok and how and what the mechanics are? no one is focused enough on the trade, what can trump tree dysphoric?>> absolutely, agree >> why does china care so much? it raises more questions anyway. okay. it is 8:00 a.m. on the east coast and you are watching "squak box" on cnbc.

strike among today's top stories, fedex shares jumping in the premarket. that company announcing it will spin off its freight trucking division. analyst think that could unlock tens of billions of dollars in shareholder value. and help fedex management merge the express and ground units to increase profitability. fedex also reported mixed fiscal second-quarter results with earnings beating estimates but revenue missing. the stock up by 8.3%. there are shares of nike moving in the opposite direction. the company says that it expects sales to be down low double digits in the holiday quarter. that is worse than analysts were predicting. nike has been struggling to regain strength against his competition. the new ceo, elliott hill, vowing on a company ernie call to help get mikey back on track but said that that shift would take time and they will take a lot of discounting to move out existing product. the stock is down by 61%. there are shares of noven

notice getting hit hard this morning. the maker of ozempic and wegovy reporting worse than expected results for a late stage trial of an experimental weight-loss drug. the results show 22% weight- loss instead of the expected 25% , but that is still a miss that is not the wall street to take 20% off their shores -- shows this morning. eli lilly getting on the news, despite the stock no, notice says the new drug's performance was on par with best in class treatments. we will wait and see how this shakes out. we have a lot more on the markets, the battle in washington in the latest on a possible funding deal. that could be headed for a vote in just the next couple hours. speaker johnson was speaking about that plan. president-elect trump just posted this, if there is want to be a shutdown of government, letter begin now. under biden administration. not after january 20th.

under trump, this is a biden problem to solve, but if republicans and help solve it, they will. we will take you like to washington for the latest from the house speaker's plan c, that is next. a live shot of the capital right now when we are coming right back

we are hours away from the federal government shutdown and a we have some new development out of washington, d.c. emily joins us now with the latest details. this is fasting for your areas >> things are moving rapidly in washington. we had speaker mike johnson arrived at the capital and told reporters that there will be a vote this morning. the question is on what. johnson said to basically stay tuned for details. remember, he has got to come up with a plan that is not only going to get all republicans on board, but also have the approval of trump, and also now have the approval of elon musk. since it is clear he is holding a lot of sway over this new dynamic of congress. plus anything they have to come up with, it will have to pass the democratic-controlled senate, which just has a lot of questions about exactly what it will look like. johnson is now in a meeting

with members of the house freedom caucas. others include a lot of the 38 republicans who voted on the house for last night to basically what we were referring to as plan b, that slimmed-down spending bill that included the two-year extension of the debt limit. and we know that some of their concerns are, congressman chip roy was on the floor last night, where he basically called out his own party and republicans for not being more diligent when it came to spending. take a listen. >> we will increase the debt by $5 trillion. that is what will happen. right here, by republicans, increasing the debt, $5 trillion in what are you doing the same bill? $110 billion, unpaid for. because you never have any ounce of self-respect. >> hearing a lot of concern from chip roy and i have talked to other lawmakers who are concerned about this debt limit

increase. and get trump has said that is the thing you want in the bill because he does not want to deal with it during his presidency. he wants them to deal with it during biden's. you see another similar team from trump this morning posting on truth social just minutes ago, that if there is going to be shut down of the government, he is okay with it. as long as it happens under biden's term, of course, and what that means is that after january 20th, there is going to have to be away to figure out how to solve that with republican trifecta, if they cannot get a solution within the next couple weeks. that of course could interfere with a lot of things that republicans were hoping to do in the first 100 days including nominating all trump's cabinet, getting started on some of the border security and energy and tax packages. at this point, i think there is a lot of confusion in d.c. about exactly what is going to happen. speaker johnson has a plan that is able to get to the house and senate, we may see a small weekend shutdown. but there is also the potential

because there is a growing drumbeat that this could actually be a much longer shutdown that could go into next year. guys. >> we were just talking with senator mark wayne mullen, a senator from oklahoma, he said he has had talks with speaker johnson about this. he did not give us the details because he did not want to steal speaker johnson thunder but made it sound like this would be something that would just be a two or three we package that would basically kick the can down the road and say we will pick this up when we come back from the holidays, we will extends of the government does not shut down. so they can basically go home for the holidays. that was something he said that would probably require democratic votes as well. what do you think i like the wood is, emily, of something like that passing with any democratic votes, or with getting enough republican votes to just push this by a few weeks? >> it is a great question. remember, there will always be a group of republicans who do not like these stopgap spending

bills. they don't want to be continuing 2020 for funding, they want to do 2025 funding because they want to be able to fight for spending cuts. democrats feel completely by this whole process. they spent months putting together a bipartisan spending bill only to get it yanked out from under them at the last minute. they have been referring to elon musk as president mosque because of his campaign against this to there is a lot of frustration on the democratic side there is a sense that they are in a moment of leverage. at the same point, unfortunately this is falling to the political blame game if there is a shutdown, who is want to be left holding the bag? who are voters want to wind up blaming? you can already see it starting in the rhetoric on capitol hill and i think it might wind up playing a role as to whether we actually see a solution emerge today or whether lawmakers leave capitol hill with a short- term bill or even potentially a shutdown. >> president-elect trump, his

most recent comments that he just post and suggesting he would rather see it done now than on his official watch when he comes in on this. he has lived through government shutdowns before, so if he is not going to be putting any political pressure on anyone to vote for anything, maybe it is more likely does not get done. we shall see. emily, thank you i want to get down to the new york stock exchange. mike is at the new york stock exchange. what is on tap? >> under further pressure this morning, andrew. although we eased up on the selling a touch in the s&p 500 premarket, look at what it does look like over the last year to date. that is a 50 day average and request below that. yesterday was a pretty feeble morning rally trying to get a lift off of these oversold conditions, pretty much was halted by that 50 day moving average for we will open up basically of levels will be open on the day after the election or at least a little below. it shows we have unwound a lot of that. very few stocks are up on this

one month of basis. it shows you there has been damage below the surface. i wanted to look at how the market of use quality and defense, berkshire hathaway, apple against the s&p 500, funny how you had a real pullback early in the year at apple and that is when brookshire was also selling a lot of its stake in apple. bookshop of performing and insurance a strong, blue-chip public company holding, utilities have been strong. working in concert recently is a lot of housing exposure inside berkshire hathaway, home related and you have apple which really has emerged as the favorite bit of shelter in this market storm. finally, we will get an inflation number in a few minutes. take a look at the material sector as well as dbc is the broad commodity etm. that has been week for a while and you see globally, not a lot of push. the material stocks crunched. u.s. steel will open lower on week steel prices. the inflation we are working on

has nothing really to do with raw goods, at least that is a net positive. i see a scenario where if you get a benign pce inflation number, if you can get a rally and a dollar comes in, maybe the oversold stock conditions can force a little bit of a rebound.>> okay. mike, before you go, how do you think this d.c. government shutdown is going to ultimately play into this market pullback if at all? >>i think in a moment right now, andrew, it is just more dust in the eyes of investors who thought they had a clear view toward a really favorable policy mix. i put it in the category of, it does not help even though i think we have been through shutdowns and it is not about the shutdown, it is about what it tells us for whatever you thought was going to be coming in terms of growth supporting policies, next year. it shows you there is too much friction in the process and i don't think that beyond the deadline dynamics where you basically have everybody focused and hedging against a moment in time by today you

also have a big options expiration, i think we are crystallizing some concern that we could get some tension tnkoue with any deal. >>ha y. appreciate it. see you in a bit. still to come this morning, new hampshire governor chris a new know will join us on the government funding fight. government funding fight. "squak box" will be right back.? we're here. (♪♪) surprise!!! the future isn't scary. not investing in it is. car, were you in on this? nothing gets by you james. nasdaq-100 innovators. one etf. before investing, carefully read and consider fund investment objectives, risks, charges, expenses and more in prospectus at invesco.com

some news out of washington in the last half hour on a bill to fund the government, how speaker johnson is speaking to reporters. he said republicans have arrived at a deal and plan to vote this morning. joining us now is republican governor chris sununu of new hampshire and he recently wrote an op-ed for the hill titled, for models of efficiency, musk in doge should ignore d.c. and look to the states. governor, it is great to see you this morning. maybe not the greatest morning at least we will see, we will see where things land by the end of the day. how concerned are you by just how close we are to having a shutdown >> it is obviously very concerning. again, washington typically only moves in a crisis and i think that is what elon and even president trump have to remind themselves your. i think the biggest fundamental roadblock is communication and it is timing. right. it is not just saying the debt ceiling today, i think if musk and trump go back and say we will lay this out in six month and we will do this and in 2026 we will do these pieces, to get to some of those things

that the fiscal hawks -- they are not irrational people. we are not dealing with the irrationality of a mat gates or something to the congressman roy, they take the obligation of spending the american people's money seriously, as they should. and so they want, i think they want that long-term plan so they are not always saying, in three months we will do this for three months we will do that. it is a terrible way to go about business and i think you're trying to change that paradigm and we don't want to see a shutdown, if there is i can tell you is a state and i have talked to other governors, we will be ready to essential government operations is most people know will stay open and you can still travel and whatnot and the hospitals will be safe and available for folk . but you do have to make some kind of preparations because what happens in the next few weeks could be the difference in the next few months. look, i'm not saying it is a good thing, but is also not the end of the world. these guys have to be forced to do the right thing by the american people. we can handle it if there is a shutdown on the temporary side but it

comes down to better communication with in washington, d.c. >> governor, i think one of the big questions, and we were talking about it in the last hour, often times we have seen the movie play out and we know that we get to this 11th hour and then a deal gets done. the question is, weather this time is a different given that you have, you know -- i don't think we have ever had private sector folks like and elon musk in the middle of this. with a mandate in large part to some degree blow up the system. >> look, i don't mind elon musk is in the middle of this. i don't. trump and his a meditation got elected to be a disruptor. to blow up a system that very few -- >> to americans just -- >> i agree to the question is will he do it? >> 50-50. it is 50-50 and i think if there is a shutdown of allies maybe a week or two. but these guys don't mind saying

, if going to only react in a crisis, the let's react in a crisis. and really force things to the table. and relief was taking not just everything in one big clump of crs, but if we focus on a continuing resolution, just do that. and then we can deal with a border over here and ukraine over there and the political items over here. but you have to just focus on government. >> let me flip this around. there a lot of republicans and possibly even democrats who ultimately voted for trump who work for the government, who are unionized and other things like that. the question is whether they are voting for this idea that they will get the load. we were talking to the senator and the last hour, folks who still want to buy christmas gifts for the family, pay rent, all of these kinds of things, not to say they may not get paid in the future. but by the way, they may ultimately lose their job in the future and i wonder how much we have all focused on the, that elon made which i

think is accurate. at some point he said, to do all these things we might have some form of, "temporary hardship. the other side might look better when it is all done, if you can get to the other side. but the question is how politically palatable it will be for this nation to go through a temporary hardship, if it needs to do that. >> we can absolutely do it. all that matters is the long term and no one wants to see folks i get paid over christmas to as you noted, they will get paid ultimately. and furloughed mean it will be delayed. this is about the long-term game plan for america and not the three-month game plan and that is the disruption they need to bring to congress and if it takes elon musk and trump walking into the offices of these folks and having an open discussion and understand their needs and laying it out long term, that is ultimately what matters. it will take some hardship but it does not necessarily mean everyone loses their job so no one gets paid. that will get taken care of, they have to change the in for structure, the fundamentals of

what were doing with other people's money. >> a political question. do you agree with president- elect trump's suggestion that he posted on truth social again this morning, that he wants this done now, but is arguing effectively that this is on biden's watch. a quote you can see, if there's want to be a shutdown of the government let it begin now under the biden administration not have to generate 20th under trump. this is a bottom problem to solve but if republicans can help solve it they will. to think the public will take it that way? i'm not so sure. >> no. with all due respect to president trump that is the dumbest thing i ever. biden has not been in charge and is not been his administration the last six months to it is about trump, elon musk in the republicans, and that is a good thing. deal with a short time but also with the long term strategy, history is not going to say, the debt limit was raised in december and that was biden's issue.

that is silliness.>> governor, we wish you a happy holiday and hopefully we will not have a shutdown and everything will work properly either way. we love talking to you and hope to do it soon. >> it will all work out in the sun will come up tomorrow. i promise. >> that i both believe that hope is right. when we come back, breaking inflation data and we will have that for you at 8:30 a.m. . gonyertime dot awhe. we are just minutes away it's time. yes, the time has come for a fresh approach to dog food. everyday, more dog people are deciding it's time to quit the kibble and feed their dogs fresh food from the farmer's dog. made by vets and delivered right to your door

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up next, the number of the morning. we have november's pce inflation data and this is more important than ever. now that the fed has put us on alert that they are watching inflation ever so closely. this is the number, the estimate is fo2.r 9%, prior reports, 2.8%. reports, 2.8%. we will be right back. (♪♪) everyone has goals and dreams. and everyone deserves a way to get there. wherever you're going, getting there starts here. state street invest in your future with dia, the only etf that tracks the dow. (♪♪) need a last minute gift idea?

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welcome back to "squak box". we have important breaking news. a look at spending and all the fed's favorite, inflation gauges. on the income side, this is on november. we are expecting a number up around 4/10, comes in my. up 3/10, and that follows at least up to this point, and unrevised up, 6/10, if you recall. prior to 6/10 we had september up exactly the same amount to in the prior month was up to tenths, to give you

context. if you look at spending, expected to be up half of 1%, comes in light up, 4/10 of a percent. if we look at real spending adjusted for inflation, exactly as expected, up 3/10 of a percent and that would comp september where we are up half a percent and we're coming back a bit and if we look at month over month, personal consumption expenditure pricing index comes in cooler, up one tenth, following up to tenths, up one tenth, would equal where we were in august to find a lower number you have to go to may of this year. if we take a wider view, personal consumption expenditure year-over-year, expecting a number at 2.5. comes in a little light. 2.4. 2.4, keep in mind, is still hotter than the rear view mirror and this is important. came in lighter than expectations, but 2.4 follows 2.3, to find a higher number than 2.4, you are going back to july, 2.5.

if you look at the core pce which is probably one of the most import numbers on a month over month basis, up one tenth that is two tenths lighter than i last look, and it is cooler than expected. that is a good thing. up one tenth, we have to go all the way back to may of this year to find a smaller number. and finally what i consider the most important number of all, personal consumption expenditure price index, year over year. up 2.8. equals where we were, one tenth cooler than expectations, 2.8, if you go back in time to find a smaller number, that would be easy. that would be september because we round. last month was 2.79, rounded to 2.8. prior was 2.65. to find a bigger number you go all the way back to april. not bad, if we look at the marcus response, it is as expected because the numbers for the most part were cooler

than expected in even though they really have not made a huge amount of progress, especially on the year-over- year numbers. we are currently trading for 24 and that is any two-year, 424 would be down eight basis points on the day. and virtually unchanged on the week. if you look at a 10 year, currently trading at 450, that will be down one. i'm sorry, 450, an extra three, down seven on the day. but it is up 10 on the week. which once again, really underscores how longer majority yields have been much stickier to the upside. and if we look at the yield curve today, this is important. twos intends hovering above 26 basis points is the widest, the most steep that that yield curve has been internet years going back to mid 2022. "squak box" gang, back to you.

hope you have a nice weekend. >> happy holidays and merry christmas. for more on the data in the fed's decision this week we want to get to steve and he joins us now with a special guest. >> thank you, becky. i am pleased to be at the new york fed continuing a long running tradition of the interview that we do, john williams, the new york fed presidents is down with cnbc after the december meeting and it is not often but sometimes i guess this happens, the inflation number comes out when we are sitting down. john, it came in a 10th lower than expectations in your reaction. >> steve, welcome back. we are celebrating our centennial at her headquarter at 33 liberty street. a beautiful building. in terms of the data i think what we are seeing is encouraging news. it has been a bit of a bumpy kind of journey of seeing this process, especially over the past 12 months but we have seen sizable movement down in inflation in the last couple years and we are still not to our 2% goal, we will make sure

we get there. but seeing further progress toward that goal. >> i should probably say i misspoke when i was telling you the number. i said what is the target for the committee at the end of the year. and you said 2%. i met with the actual forecast was. but you're coming in more or less relative to the forecast was. it is pretty close >> i think the reason data are consistent with what we have been seeing and what we saw and the economic projections that were just published this week. again, this inflation process is continuing in a little bit of good news on inflation this last month. >> set us up for 2025 with your outlook for growth and unemployment and inflation. >> the economy is in a very good place and we had really solid growth looks like gdp growth this year is about 2 1/2%, unemployment rate a brown 4.2% and we talked about

inflation coming down closer to but not yet at 2%. for next year expect growth to slow somewhat. to around 2%, gdp growth. expect the unemployment rate to stay about where it is around 4.2% and i think the disinflation, very process, hopefully will continue and there is a lot of uncertainty for a number of reasons including the uncertainty around some of the policies that may happen next year. but right now i think we are in a good place and i think the economy is a good place and most importantly for me, monetary policy is well- positioned and i think we have monetary policy in a somewhat restrictive stance to make sure we can inflation all the way to 2%, that is the goal. but in a way that balances the risk to our goals and maximum employment and price stability. that is how i see it. there is a lot of uncertainty and we have to be data depended as we just policy going forward. >> john, there is some head scratching going on among people who watch the fed closely on wall street. you raised your inflation forecast, the committee did,

but also cut interest rates. how do you square that? >> again, we have seen a very good progress in terms of inflation already. the inflation data overall since our september projection has been a touch higher than we saw. the economy has been touch stronger than we expected, especially the gdp growth this year has been very good. i think it is really a matter of the data being good and were trying to focus on maximum goals and keep the balance of the risks well-balanced. and get monetary policy in a good position, this is the recalibration of policy from very tight policy or restrictive policy toward less restrictive policy, given where we are in the progress we have made on inflation. it is really about getting policy well-positioned for whatever may come next. >> did you raise your inflation forecast for next year? >> well, my view is there is a lot of uncertainty around inflation.

you know, again i think some of the inflation data relative to september has been a little higher. there is some reason to raise your inflation forecast to the some of the risks to inflation are also higher because we just don't know what will happen next year. that said, i do feel that we are on the right trajectory. just a lot of uncertainty about what will happen next year. >> one of the questions that the chairman fielded at the press conference was the extent to which members of the committee folded in their outlook for fiscal policy changes next year. where do you stand on that? >> first of all, i completely agree with the chairs remarks. there is a lot of uncertainty and we don't know. a lot of analysis is going on. a lot of studying scenarios and possible policy actions, that may or may not take place. i would start with, we don't know and we'll have to learn what policy actions congress or the administration will choose to do, and honestly study those, analyze those and folders in. right now i think somethings look, we have seen slowing

already in immigration into the u.s. and labor force growth. you may expect that to continue. and we will see about of the things such as fiscal policy or trade policy. right now i feel like we just don't know the answer. i think directionally, you might expect there to be some forms of tariffs or something, but it really matters exactly what happens and whether those policy actions are. >> have you begun the process of folding in some of that expectation into your forecast? >> my own personal forecast, i have incorporated some thinking about where fiscal policy maybe. immigration and other policies because those are important drivers to think about the economic outlook. but i would just emphasize that there is a lot of uncertainty about where there's offense will be. >> john, one of the interesting things as you have been cutting interest rates but longer-term yields like mortgage rates have

gone up. is that a cause of concern for you and you understand the dynamics that is happening? >> i think it is happening for reasons that are separate for monetary policy. short-term interest rates have come down. we have seen that 100 basis point guts this year but other things are happening that are pushing up longer-term yields. i think a big driver of that has been the strength of the u.s. economy. gdp growth has exceeded expectations for this year. i feel the labor market has done very well and our economy is doing well and that has pushed up longer-term yields. along with other factors. mortgage rates tend to be tied to longer-term interest rates like the 10 year treasury yield. i think that is what is driving it. i expect overtime as interest rates get back to normal eventually, the we will see mortgage rates come down but that is not a forecast of any particular time. >> is it a reason of concern for you, is it a cause of concern to you that rates are higher while you have been

reducing the short-term rate? >> we have to take into account all financial conditions will we dig about the transmission of monetary policy to the economy. i always think about how financial conditions of affecting employment in inflation. it is not just what is happening with long-term rates but it is important that is what is happening with equity prices and real estate prices and more generally and financial conditions. it is looking at the whole consolation of financial conditions of how they are affecting the economy. yes, longer-term rates have been one of the factors tightening financial conditions. >> john, you are one of the world's experts on the neutral rate. i would talk to you for 30 minutes about this if we could, and i would understand about three minutes of the conversation, but in any event. could you tell us where you think we are relative to the neutral rate? you have a model that you have created the becomes the basis for thinking about the neutral rate. it really hasn't changed much but people are saying, we may be at the neutral rate now.

what is your view and that? >> i don't take were at the neutral rate interest rate at all. we are initiative stance. we think about the neutral rate and we think of real interest rates adjusted for inflation, my model estimate around three quarters of a percentage point. >> real rate plus inflation. >> i should emphasize long run. this is where real rates would be expected to move toward over many years. a lot of people have brought up factors that could be influencing real rates or mutual rates higher or lower. my view is that a lot of the factors have pulled down the neutral rate before the pandemic to we saw neutral rate estimates go from 2.5 to a half percent before the pandemic and that is still there, it is around trends in global productivity growth and demographics. and other factors. those trends are still in place and i think the one thing that

my head is maybe moving up the neutral rate a bit is, we are seeing really good productivity growth in the u.s., productivity trends over the past five years have been significantly above what we saw during the pandemic. as you can see, maybe the neutral rate is a little higher and my estimate is around national model estimate is around three quarters of a percentage point, a little higher than before the be -- pandemic but nowhere near where we are today. >> you are good with your model and add inflation to that and that makes you think you are pretty strict about this point? >> i think we're pretty restrictive at this point but i don't look at the neutral rate and real interest rates. i look at labor what is going on in the labor market, you look at job vacancies, you look at the unemployment rate and a lot of measures that will going on in the labor market. over the past two and half years we have seen a steady cooling of the labor market from very hot labor market to now something that looks something like what we saw in 2017 or 2018. a good labor market but not an overheating labor market and

not one that is adding inflationary pressures. i think that is another indicator. monetary policy has been restrictive and i think actually continues to be restrictive because the cooling of the labor market is still i . >> all of that leads me to collude you think there is hope for rates to come down in the coming year. >> that is a forecast. that is what i think. i think we are still, the baseline trajectory is moving down toward neutral rates but we need to be data depended and we have time to really assess the data and assess what is happening and come to the best judgment based on the data, based on the outlook and the risk to achieving goals. i think we are in a great place and well-positioned but we need to do are doing. >> there is one more thing i have to ask you, as head of the operationsfor the federal

reserve system really, you have this responsibility for financial stability. we had a hiccup in the repo market is at the end of september, we are coming toward the end of the year which is a time of pressure. in the financial system. how much concern do you have for the turn of the year and whether or not there is ample liquidity to see the financial system through? >> i think there is ample liquidity to see the financial system through. i think we will see a little more pressures in the repo market says and you are referring to at the end of the third quarter and we will see that your end. what i am seeing right now is more of the pattern we saw before we had superabundant reserves, a little more short term volatility in the repo markets, one is not spilling into the fed funds rate and not in any way affecting the interest rate that we are targeting. and the second, these are short-lived. i feel that we will probably see some pressures, but probably the kind we saw at the end of the third quarter or maybe a little more. one sign that things kind of gives me reassurance is clearly, market participants in anticipating some pressures have been preparing for that

and we are seeing taking time repo and other things to make sure they are well-positioned for the year end and not caught off guard. we will watch and see but again i feel like we are well positioned in terms of the liquidity and the tools that we have. >> john williams, thank you for having us here. happy 100th anniversary and happy holidays to all you at the new york fed. >> thank you. while i have you i just want to ask you a little bit about the market's reaction to this. the 10 year yield dropped to 4.5%, that is several basis points dropped to we have seen improvement with futures, the implied open for the s&p now down 40 points and we were down more than that. the down as indicated off by 150. i want to ask you for your thoughts on this because when we got that pcu number that was a little less inflationary than had been anticipated, maybe the market is reading this as game on. is that the accurate way to think about things from the fed's perspective in your view

if the fed will be data dependent. >> i do. i do, becky. i was going to get five dollars for every time john williams said data dependent and i think i am up $10 or $15. and that is the way the market is looking at things right now. and essentially, the 0.1 has given some ammunition to people who are still believing the fed will cut interest rates and have not had a whole lot of ammunition for that in the past several months. i think it is fascinating and john, many years ago, gave out t-shirts saying the fed was data dependent. if he has been nothing but consistent on that score, but i also think it is very significant when he says about the long-term rate because there is no better expert in the country about long-term rates and if he is telling us we are still well above it, it is something you have to process in your thinking about where rates are going. >> definitely making an impact on the markets this morning.

steve, thank you. give us thanks to john williams as well. when we come back, henry mcvay will join us with his funds highly anticipated outlook for 2025. stay tuned, you are watching "squak box" and this is cnbc.

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♪ in case you missed it, there has been some movement on the government funding bill, after last night's failed vote and we will see how far gets. speaker johnson spoke with reporters as seen entered the capital and said republicans have a plan and they are calling a plan c and expect to vote on it this morning. he made the comments as he entered a meeting with vice president-elect jd vance and

members of the house freedom caucas. cnbc will bring you updates throughout the day and we will see how far we get. a year ago the outlook for 2024 was titled glass half full. the firm's newly released outlook is titled, glass still have for entering is now is henry mcvay, chief investment officer of balance sheet at kkr. and i want to talk about a lot of stuff. but with can we start before we get to your outlook with talk about what is happening this morning. you wake up in the morning like this and you think it is time for the holidays and things are winding down, not the case if you're watching what is happening in washington, if you're watching what is happening in the markets. >> it is definitely game on. a couple things i would say, one is, to be the signal of what is going on in d.c. is the red sweep is going to have some bumps along the way. right. they will have to work with the democrats to get things done. that is the first point. the second is on inflation. our view, we have almost 200

companies around the world, there is still inflation. wages are growing and you are seeing volatility around potential tariffs and i think inflation is down from red alert levels, but if you look at it we have at 45 months of inflation above the fed's target and the fed just told us that they are not going to get to their target until 2027. that means we have a six-year period, unless your viewers have never invested in a six year period where inflation was well above the fed's target, i think the interview with john williams was really important. why have we been glass half- full, why have we been deploying capital at a pretty rapid clip, has been productivity. we talk about this last year and the midyear, there is something going on in the u.s. right now that is not happening in other parts of the world. if you look at the 1960s, the 1990s and the last couple of quarters here, we see a surge in productivity and that is not

an a.i. surge. companies are doing digitalization, itemization, that typically happens when wages go up. it is not a natural but that is really the differentiator and that is why money wants to be in this country and that is why if you look at the sell side the past couple years they said gdp growth would be less than 1% and we have lots of calls through the recession and growth has been fine. that is what her companies are telling us. i try to spend a lot of time talking to our companies, talking to policymakers and then getting out and seeing what is going on in the economy and we are starting to seea period where inflation is come down, it is up, but real wages are turning positive. and that is why when you look at the gdp for the third quarter, consumption was 3.7%. that is pretty darn strong. >> you are continuing to invest. the one thing is i would say is markets need a knee-jerk reaction to additional inflation, is a means we may get fewer cuts from the fed. is that a problem or you think the economy will be strong enough to carry that through? >> i think the way you don't

have this workout, big deficits and heightened geopolitics, what is upset that has been productivity. if we end up in a time where i say the productivity story did not work, that we will have a form of modern-day stagflation. you will have china as competition on access goods, but you will also have big deficits and higher inflation and that is not a base case but i think that is the narrative you have to watch. we have two fed cuts next year, the market reacted to the fed raises gdp forecast, lowered its unimportant rating and said growth will be stronger in a cut. >> it cut and said an additional two cuts at all, will come in the later half of the year. don't look for it soon. that makes it feel like it is less that you can count on. >> part of what we outlined is the u.s. will be the above average area of growth. and if you look at where the

cutting is taking place it is in europe, bank of england, ecb, and in china, china has almost closed to deflation and the one other outlier is the bank of japan actually raising rates. we have been talking about this whole idea of a synchronous recovery which used to be the u.s. consumer would lever up and the fed would cut and they were by and banks would be lever and we have a problem. now we have just a lot of very different things going on by country and you really have to get out and see what is going on. one of the big things and you talk about this was fedex, there is a huge movement, one of our big investment ideas is this idea of copies going from capital heavy to capital light. what did fedex tell you? they said they will make the capital structure more efficient. we have been doing lots of deals were the equity or the debt, we did something with paypal, with discover, very active right now in corporate carveouts across our private equity business. it is a different playbook. this is a market where you make your own lock. why are we so active in japan right now?

because japan is cheap violations, reasonable funding costs and there is a corporate reform story going on. the other big thing our focus on is if president does not put tariffs on, which we think they will, the market, money will flow to economies that have big consumer economies because they have a wall of protection in that consumption. that would be india, that will be the united states to and that is why i think you have seen strength in the dollar because money is saying, in an uncertain world, i want to have larger part of the economic growth coming from domestic consumption, versus exports, where i to be exposed to tariffs. >> i love having you here to >> thank you >> "squak box" will be right back.

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if you don't for any reason, have a happy holiday "squawk on the street" begins right now. >> good friday morning welcome to "squawk on the street." i'm carl quintanilla with jim cramer and david faber futures are off the premarket ows as november pce comes in pretty tame. it is a noisy friday, as we watch the government shutdown clock, triple witching, nike, fedex, and the resumption of fed speak. right at 4.5 our road map begins with these jitters. pce a little cooler.