Look across the pond its a mixed pictures over there. The tenyear note yield. We have some employment data, there is the 232 our road map starts with wall streets record run. U. S. Stock futures pointing to a higher open, the s p at its longe streak of records now in 20 years. Plus delivery wars u. P. S. And fedex shares are following on reports that amazon is testing its own Delivery Service. And bill ackman rumphing up his push for changes at adp, well hear why he thinking that company could be more productive making history after the three indices closed at record highs. Jobs fell by 12,000. Earlier President Trump treated stock market hits a record high, business and manufacturing enthusiasm at the highest level in decades a reason for him to be optimistic so too for the gulls industrials, transports, small caps, mid caps, almost everywhere you look. I think it will be interests to see what happens with the transcripts after this news for amazon thats been gravy. We are in an absence of news flow i have a theory with you, my theory is this, on downgrades head funds country in short, so on down days for the market, they have s p buy, and they have etf buy. If you look at a classic example. Lets use the example of a downgrade, like in gardenvariety downgrade 3m, a Terrific Company gets downgraded by jpmorgan, you go to the fabulous ceo, there is no reason why they do it. That downgrade is the failed downgrade, and thats been why weve been hits new highs. Sentiments sort of changed since the end of september people thiol we might have a meltdown now were poised for a meltup in historically the most volatile month of the year. Texas and florida are hue stages theres not enough of a discussion about them. The numbers phil lebeau reported are starkly different look, two weeks ago the narrative on gm, less ate use that, that they were cutting back on the sportsutility vehicle shift in tennessee. Then the narrative becomes they are the rival to tesla so you have shortterm considerations which may actually be blowing up, versus we decided to look at 2018, 19 and 20 when it comes to industrials. Europe is very strong, asia is strong we have this axis of negative. We focus a lot off president that doesnt get us anywhere what does the president have to do with the ratio of bristolmye bristolmyers . The answer is very little, but so you have earnings coming down. I am concerned about earnings. Are you really . We need to seea strong number on friday to be sure there isnt a ratio. We need a rate hike so badly one of the things harker told liesman that hes tess penciling in november, and hes a voting member. We definitely need that. Theres news that Randy Quarles replaced hes a green light to actual banking. Im taking jamie dimons rap for a monday if the government would let us lend more, we would. The government is going to look the other way. Immediately you get a backlash no, theres something between 207 and what weve been having, so the banks price to earnings multiple can expand if we get that fed rate hike. So 232 on the tenyear, the banks having their worst day in a monday yesterday, are back in an up trend, because banks the rate hike is going to happen economy is good. Look, im getting off the i hate wells bandwagon, as my friend wilf said yesterday, they have taken the premium of multiple out. So i mean out of the wells. Wells is i cant hate wells as much as i hated it. It hasnt moved. All the other bank stocks have moved. So the haters of wells have to deal with the fact that the price to earnings multiple has been shrunk, was the crosssale told outing to bogs onity to make up my own word. Theres still questions about these largegrowth technology stocks. In the absence of news we have analysts say occasionally an analyst lime jamie ruben , grubhub, i dont like, because i fear amazon. Legg mason its up to which. Coach, celgene, a hold to sell, of course you sell off the whole rally, why its up too much, up too much downgrade does not work that is not working. If the entire market is moving up, why do you pick on the stock in your group. Hello nvidia. People were negative just because it had run up so much. Now another push on nvidia. Nvidia has become a boring rally stock, crypt occurrence sit, we should talk about it every day, thats a small part of their business, but that was one of the reasons in the prompt, a company you follow, loop, loop capital. Thats right, its well reasoned to buy nvidia but mostly because of the artificial intelligence. When you see the google news, you have to the most damning downgrade is Deutsche Bank saying, be careful nan flash youre going to western dig, thats what youre talking about. Well get to that in a minute. We were talking about largecap growth tech, you mentioned it, jim, at the top of the program, the transports are in question, at least somewhat today. This is big. Amazon said to be testing its own Delivery Service to rival fedex and u. P. S. The new service intended to make more products available for fry twoday delivery it could also relieve overcrowding at amazons warehouses, so those stocks, fedex, u. P. S. Redhot. Lower on this news. I talked to a u. P. S. Guy the other day, can you believe it stock . Now, i guess it goes down, too heres the problem with this call we get someone from u. P. S. , fedex on, listen, theyve been trying this for well wait for a second day, see if anyone joins or downgrades these, and then your shot the rails are very overextended. See, anytime any news has come out that theres a thought that amazon will take over this particular thought of the universe, whether its the cvss of the world, they go down immediately, but only for a day or two. Wait a second, i disagree i sold for nigh Charitable Trust walgreens. Its not come back a bit the front of the store they put a lot of food in, thats whole foods really crushing them the back of the store, if amazon does prescriptions, walgreens, that stock has done nothing but go down, and the rite aid deal took too long, but costcos stock has run up the last two times, it sold off, but you had to buy it. Are you then saying that we need to be it concerned if youre an investor in fedex or u. P. S. , the decline youre seeing today could have staying pow power . Yes, because u. P. S. Is up in a Straight Line and not managed as well as fedex lets watch the transports classic dow theory says as long as they go up were fine watch jb hunt, but those having extraordinary. Xpo does a lot of the third party moving up large things. Transports crossed 10k for the first time ever. After sitting out for a while, they have definitely joined the party. After delta came out, okay, delta says things arent that good and the stock rallied what are you going to do what happens if its good . Well, things have been pretty good, and the Airline Stocks laid an egg. Warren buffett stopped talking about them, but continental is down substantially from even the incident, but watch the airlines, i think watch fedex. Let me askingthis, then, without the buff at the time stamp of approval in the ae airlines, would there be as great a story to talk . No, the halo of buffett just moved those stocks up big and a higher price to earnings multiple and there was price cutting which wasnt in sync with, and i think its okay. Its neither here nor there. They have moved up so much i cant get behind them. Thats what a lot of older people look at. They have confirmation of the rally. And the rails have been the big confirmation give me a break. You know, what are you going to think . The cold will have a up rev aeismt nce, and my wife saying maybe the transports, though, dont immediate what they used to to the rally. If i say, okay small caps great, mid caps great. They have been fabulous. The chip stocks have been great, so you need the transports to tell me the rally is good. Theres a guy who raised i havent look at anthenle in the rally is a noname money they steal that from mad money. I can in a name you ten stocks if andrew shop i fit wify if can you imagine 20 andrew leffs . Thats a lot of airtime when we come back, hear what bill ackman told jim last night on mad money about the approximate,fight with adp also ahead, jim grant of jim grants interesting rate observer with eyeopening comments, and taking another look at futures, will we extend these record gains on wall street sure looks like it off the open dow. More squawk on the street live from post 9 at the nyse, when we return throughout my career, ive been fortunate enough to travel to many interesting places. Ive always wanted to create those experiences for others. With my advisors help along the way, its finally my turn to be the host. When you have the right financial advisor, life can be brilliant. Ameriprise at ally, were doing Digital Financial services right. But if thats not enough, we have more than 8,000 allys looking out for one thing, you. Call in the next ten minutes to save on. And if thats not enough, well look after your every dollar. Put down the phone. And if thats not enough, well look after your every cent. Grab your wallet. Access denied. And if thats still not enough to help you save. Ooo i need these well just bring out the snowplow. You dont need those well do anything, seriously anything to help our customers. Thanks. Ally. Do it right. Were in a bye week, so im not allowed to talk about football. Theres a heavy overlap between what we do and people who watch football, including tired night football. Maybe better tonight. Pershing squares bill ackman pushing changes. Heres jim with ackman last night on mad money. I know what you try to do is make things be as substantive as possible youve been issues a question a week to adp. I would ask you to start the new one on mad money. Our new question is why is it that adp has lower revenue productivity than all of their competitors . So adp generates about 1640 for you very straightforward question when you think did adp, it has enormous scale, so if anything they should have more efficiency its all about the opportunity for improvement. We think its a great company, but it has massively underachieved its potential. So you couldnt get him to take the coat off . No, kinder, gentler, no ad hominum stuff he didnt want to talk about the august one, the tennis match, but he raised interesting questions about productivity versus paychecks marty mussey had been on mad money the night before. Bill was references that interview and why he has such he two the my Favorite Companies are service now and workday. They are chipping away at where i thought automatic data should be if it wasnt complacent they should have been automating a lot of the back office functions, hr, automating the onboarding, how to check in new people workday and service are remarkable cloudbased companies. Are you saying theyre too complacent i agree with him, but in a different way. I would have gone harder with bill hes looking a the some white tricks that are true theyre high touch and they need that. Thats why their margins are lower. But one point theres a difference between the tsr, they did a spinoff of automatic data, if you decide just to sell the spinoff, the rate of return isnt that good, ackman is talking about the rate of return the day before rodriguez, you know got need automatic data is a good stock. It makes the case harder to make. Thank you. If you look 5, 10, 20 years versus the s p, its beaten not only the s p and pay chex isself. There was the valuian problem, but the man is rigorous, i think he argues a good point you this that automatic data has been complacent. I think its lit a fire underneath them, but many of the points he makes in this new just totally devoid of any sort of fire ackman are right. I think he deserves a board seat, i think he could help the company. Interesting i like what he had to say. Shareholders are saying yes very heavily retailowned stock. What im saying is it should have been cloud based and never have let the Service Takes over the portion they should have neil came in and took a portion. If they decided they wanted to go payroll, automatic data is vulnerable thats not bills view thats my view. It is cramers mad dash, as we count down to the opening bell lets look at futures once more. It looks like a positive open on wall street yet again. There it is, all poised to open higher, more squawk on the street from the nyse is straight ahead what powers the digital world. Communication. Thats why a cutting Edge University counts on centurylink to keep their global campus connected. And why a Pro Football Team chose us to deliver fiberenabled broadband to more than 65,000 fans. And why a leading car brand counts on us to keep their Dealer Network streamlined and nimble. Businesses count on communication, and communication counts on centurylink. Seven minutes away from the opening bell we are talking about constellation brands, he did it again by a mag any nude we havent seen next quarter will be 247, modelo, corona and pacifico, i believe i like pacifico. Its the beer of choice of our san miguel, and the wine margins are going up his theory is all about the strategy, and hes got the three fastest grow ing its this goes amazing wines he didnt even go into it go into tequila and mezcal high west is one of my favorite. Double rye, yes. So he keeps the reason i put this out is the big issue, whether it by proctor, pepsico, making these additions and then pumping them hes taking this is brands and blowing them out. Someone should ask that conference call. They seem clue less they were come to bar san miguel, every category is owned. Hes an amazing manager, cannot wait to see him tonight. Ra fino. Thats another good one. Super tuscan they were at at one point petrified about nafta, and he said should i make mexican beer in america . Do people want mexico no, they want mexico beer from mexico. Bingo. Not that hard. But the analysts know they were thinking mexican beer should be made in the chesapeake bay. Like natty bough. Opening bell is just minutes away from right there on that podium what started as a passion. Has grown into an enterprise. Thats why i switched to the spark cash card from capital one. Now, im earning unlimited 2 cash back on every purchase i make. Everything. Whats in your wallet . Welcome back you are watching cnbc live from the Financial Capital of the world. The opening bell will ring in a little more than one minute. Jimmy well see how things open today. Well be watching u. P. S. Out with a staismt, they saw the stock decline, we support all of our customers with interesting leading Ecommerce Solutions u. F. S. Continues to experience topline growth driven, and Strong International expansion, end quote. I think what you can say there is i want to see how the analysts interpret it. It seems like why do i have to wait for them. This seems like not to be something new, yet everyone is taking action, but well see maybe theres some sort of initiative to cut them out of the third party because of the warehouse issue. That would be bad for their business pretty simple. Well have to see what it does to the transports trade today. But there you go, the bells are ringing, youre watching them at the s p 500, realtime exchange. Theyre celebrating the eighth installment of the saw series, and at the nasdaq, dressbarn. With the Breast CancerResearch Organization marking Breast Cancer awareness month. This is a day to watch fang, believe it or not. Netflix is going higher facebook not going to they really are, and might be about tv, but Sheryl Sandberg is not going but Google Alphabet has these new phones my probably with all these stocks is you need to see numbers go up i thought are we talking bitcoin now thats the probably with the 15th upgrade of nvidia you cant just come in and say you didnt buy yesterday, well, i have more opportunities for you to buy today that said, the technicals are ruling. Thats why i like the in a jairance i dont like the pick of the vikings defense, but thats a total homer call, but you know yeah, homer simpson. Sorry, pete. Just a lot of benign behavior its not like theres some regulator that comes out tomorrow and says i dont like how much modern the banks are making you could wake up instantly and find out, wait a second, he doesnt look stocks today. Im sorry, only under President Trump. He likes the stock market. Its his barometer its his nielsens, and he only cares about his nielsens when he was doing the apprentice and by the way, lets clarify once again its only third party. When they do the fulfill is the stocks overdone then yes remember what i said at the top of the show. Hedge funds takes action recently, and then overrun. Ups is down about is. 5 . Look at the run that u. P. S. Has had. Its magnificent run. I want to get back to facebook for a moment. Did you see what your guy benioff feeded because of all this noise, ive never seen anything quite like this, he says, and shows all these headlines in papers around the country, where facebook is the top of the fold story in many cases we dismiss the regulatory emphasis against mike roe soft ste balance mer started attacking janet reno they dont go to the headlines and blast washington you know, you cant they all learned the lesson, because behind the seen facebook has really good lawyers. Whats the lesson yes, pay up and shut up jason, with you know him as big yesterday on squawk alley, you cant trust zuckerberg or facebook, because you dont know what theyre doing with your data they know everything about you what happens if they have to do some sort of settlement around privacy . People talk about reg the First Amendment the penumbra of privacy . Look at the First Amendment its an inaccurate read of your constitutional rights. You dont have them. Thats an oldfashioned inaccurate read. The Supreme Court has not backed it at all. Its important off some knowledge of the way the law works. You go down and say, listen, what do you want i talk about Gross Margins maybe you need more people at the helm examining the news. Im trying to figure out what the Russian Initiative with puppies, how that swayed us. I post puppies, i dont sway anyone i mean maybe that has more persuasion honestly these are good headlines. Is your puppy managing any money yet . Hes outperformed almost every Hedge Fund Manager he doesnt taye 29 , and he doesnt take the 20. He says feed me. Throe him a bone now and then yeah. Hes on a fitness diet like im going to fit this whole piece in my month. The small caps and mid caps do we need fang if you have the retailers and theyre down, if they cant break through 50, theyre going to go down, and then you have a consolation brand let me give you exhibit a. United technologies goes from 115 down to 109. A bunch of us talk about how thats ridiculous, and the stock goes back up and it adds nine points Nothing Happened other than we said i didnt like that acquisition, but it turned out i liked that acquisition wait a second, i did like the 3m quarter. Look as pepsico in the first 19 minutes of trading, stock opens, trading down 1, down 2, and then he comes in appeared talks about brilliant disruption this was a clinic. They put on a clinic about what you have to do with small brands and big brands, how difficult it is to balance. You finish and say, what are we talking about . Fritolay is the greatest engine of alps time. I thought you were good yesterday. I was lucent. I came to play i wasnt going to roll officer and say i like the taste of your new water. A lot of water tastes like water. I dont know if youve noticed the variations of water. I have clorox on tonight, the britta, that also tastes like water, six drops of clorox into contaminated water, just six other than Nuclear Water t. Becomes clean . It may not taste as good, but thats what im saying innovation of old products, innovation of new products, its hard to, peltz is saying you and in a brilliant conference call, i even listen to these conference calls, it was a brilliant conference call, and the stock ended up making up all the gain by the time she was finished talking. Peltz is on quake seo squawk tomorrow. He is p g had a letter that letter, there is nothing in it that i didnt know this is just like, okay, lets just send letters. Now its gotten straightup nasty. Too many letters in this. I mean, i crave mail, because no one sends me anything, but the answer would be like, you know, youre getting as many things from them as you get from bed bath and beyond. You think the activist is you think the activist is right on this case i think frankly Procter Gamble has flat earnings forever, and maybe they too need this a push i am coming around the idea that they need a push this measurement of how trying is done, its done very subjectively, i think these firms need pushes you need outsiders. Im really coming an to that flu. It suggests other way toss do it its not so toxic. Youre not talking about some schmo either. We have to find out that the heinz at one point they said, you know, we talked to the heinz board, too, and theres two wom women. The hall of famer receiver . I love lynn, sad next to him at the super bowl new orleans, hes involved in housing, a very smart guy, but you know, i mean thats not going to sway me that i should vote for proctor that lynn swann didnt saying in good about nelson peltz then i started thinking why didnt i draftantonio brown instead of odell beckham, and then its like a fantasy letter. Throwing coolers around on the sidelines. And doing some sort of dog thing that was really ugly lets back up. Lets back up the rhetoric back up the rhetoric . The train has left the station so many stops ago. You know, i used a Dollar Shave Club the other day, and cut myself he came on the tell me why . Pisani is on the floor of the stokes he has a clean shave today. I dont know what brand hes using. Just worth pointing out every day weve got some problems over in transports but materials are holding up banks are okay, but down this week transports are lagging obviously with the problems with u. P. S. And fedex today. Risk to the market not clear if theyre going to materialize or not obviously north korea is a major concern, but theres issues the new fed chair could be on the more hawkish side, and that, of course, is tax reform might fall apart. The market has pushing investors into very strange areas of the market, but their etf rappers, and this is the russell microcap this is the bottom of the russell 2000, and the thousand or so stocks this is the reflation trade started. Big outperformance, thats a historic high for that etf, why . Why is this happening . Well, this reflation trade really matters for these small caps as well as the microcaps. Tax cuts are a big thing, and finally youve got more exposure to these on the etf platforms. These are the things that etfs allow you to do. So lets move on here. This is switch, this is a big data center, colocation, connectivity centers, the second biggest i want po you have the year and they have some big clients emay pixar, jpmorgan mgn, amazon could even be a competitor with amazon weapon services, but data centers have been a hot space this is one of the biggest performers out there, driven by the cloud computing, and the demand for wireless data and streaming. Theyre running it through the data centers here. All the stocks, four, five, six of them out there, with doubledigit increases this year heres a few of them most of these are reits. Switch is not a reit various reasons they would have chose not to have that platform, but you get the idea theres very difficult times trying to price the ipos, remember roku, we had a lot of talk, they priced at 14, the trading range has been about 15 to 30 thats tells you theyre having a hard time figuring out the valuation the angry birds game maker, they are trading on the nasdaq in helsinki, they priced at 1150, this is in euros, and theyve trailing between 10 euros and almost 13, thats a 30 range, but you get the idea. You can say, well, theres a problem, right now s p is up five, 25. 42. Back to you, scott. Lets head up to chicago on Rick Santelli at the cme group. Good morning, judge one week of 10s tells you a lot of information what i said to draw your attention to is the range. The range for these five trading days, 231 to 234 if you open it up towards 926, so september 26, basically seven trading days youll see that was the intraday before this would be the seventh session in a row. You know, it seems as though a lot of markets go into these long stretches of very trite trading, whether its treasuries or in many cases tens minus bund, there was a time three, four, fiveiers where the draw was lower yields it looks like its very slowly coming to an end now, lets look at something big. We know what the fed is going to do, we know what the economy has done we see how the equity markets have performed, so were all trying to draw conclusions heres Something Interesting lets overlay that on the top of the dollar yuan. Remember how it make the uturn . Look at how it turned at the same time, right around the 8. This is something to monitor of course theres a relationship between rates and the dollar, but this exemplifies how neck twisting it was. It trailly moved fast. Finally one week of the dollar index in an isolated fashion thats a whisker shy of 94 even. Its about 93. 75 eep the chart up to early july,en traders watching this 94 area, and calling it significant resistance right around 10 30 ill be talking too the most famous boughtie personality, jim grant. Dont moise it back to jim and judge. Look forward to that later this morning. Tomorrow, by the way, well be speaking with christine la garde, the future of bitcoin and so much more well have more back here on the new york stock exchange. At ally, we offer lowcost trades and highyield savings. But if thats not enough, we offer innovative investing tools to prepare you for the future. Looks like you hooked it. And if thats not enough, well help your kid prepare for the future. Dont hook it kid. And if thats still not enough, well help your kids kid prepare for the future. Looks like he hooked it. Well do anything. Takes after his grandad. Seriously anything, to help you invest for the future. Ally. Do it right. One of the reasons you could say for the continued gains microsoft. Upgraded to a buy. This is a really important upgrade. The reason i say that is because its called beyond the obvious the case for longterm growth theyve been waiting to make this upgrade i think did they wait too long . Why not we had hope for random correction in microsoft shares, or correction shun in the overall many analysts are throwing in the towel waiting for that decline and recommending stocks. Thats what this is. Theres nothing really new here. Thats a big theme i think azure is doing fantastic, i think the changes are good i begged aspi to come on the show he systematically refusing to do so, but thats okay he not that its affect youing you. No, i think about it constantly, that and whether cooks will go off tonight where is the beef here theenes is theres none, but they want to be recommending it when it reports. Its going to be you gave new words to the throw in the towel rally thats what we have now. Are you going to steal it at halftime if i use it it is half, ill credit you. Theres a person in my ear saying we have to go im tired of people thinking that its me itis just a marionette. We had take them out and continue to talk. You know what thats called mad money. They said wrap anyway. He power. When we return its stock trading with jim on the street well be right back. Duncan just protected his family with a 500,000 Life Insurance policy. How much do you think it cost him . 100 a month . 75 . 50 . Actually, duncan got his 500,000 for under 28 a month. Less than 1 a day his secret . Selectquote. In just minutes a selectquote agent will comparison shop nearly a dozen highly rated Life Insurance companies, and give you a choice of your five best rates. Duncans wife cassie got a 750,000 policy for under 21 per month. Give your family the security it needs, at a price you can afford. Since 1985, selectquote has saved over a million families millions of dollars on Life Insurance. Were back time for stock trading with jim cramer. Morgan stanley goes from hold to sell celgene, and they upgrade bioagain let me tell you what the problem with this is this is really important sat out on one of the great runs we have seen the teening to 140 celgene, missed it, so no choice now but to sell. The most important caveat here is we acknowledge we may be early with this thesis, because theyre talking about generic pricing, but not anytime soon. This is the kind of downgrade we see. Harrell lynch did the opposite towel throw, towel throw the only towel i want to throw is the terrible towel, because i did not get leveon bell when i drafted he was worth every penny. The thats an index of hope an index of hope is what is also behind in market hope and towel throw effort corr lace at the brands, and mark siegle, a guy who is making money in the oil patch. Youll have to watch the show tonight. Theres a compelling case to own the staples . Not really pepsico, yes walmart rising rates. Who do you have on were still figuring that out. I dont know that why dont you have josh how could i be paying attention to Halftime Report when im dialed in n. Ow coming up, more on a recordsetting day for stocks. Keep it right here welcome back, were expecting them around 1 we have an extra helping, up 1. 2. No revision. Lets trip out transportation and see how the number holds up. Pretty good. We lost a tenth. If you look at durable good orders, the headline number is more than expected, up 2 versus expectations, following a 1. 7. X transportation, thats three tenths better than the unrevised 0. 2, lets get to the moneyball. Capital goods number, and its starting to do better. Last look it was up its up more, were putting out decent numbers there. Do keep in mind this series is well watched by many, including the fed and the recent trends have been improving. Michelle, back to you. Well watch the effect on the markets. Thanks so much good morning welcome back to squawk box. Im Michelle Carusocabrera along with scott wapner and carl lets look at the markets today. The dow industrials trading, flat almost concerns the gains, the nasdaq at of 551 wti trading at 50. 46, if you want it delivered in november. Thats where our road maam begins this morning with those recordbreaking markets urges s p 500 going for the longest streak in more than four years well discuss ahead of tomorrows big jobs report. Amazon reportedly testing its own Delivery Service well discuss what it all means for the shipping war, straight ahead. And if weathero ricos governor has a message for bondholder, after the president says the islands debt should be completely wiped out the dow, s p 500 set report intraday highs, for more we are joined by bank of americas chief economist michelle meyer, as well as fidelity director of global macro, po michelle, first to you, yesterday services was good, claims good this morning, rick had pretty good data in its own right, and stocking seem to continue to like the story. Yeah, the growth has been reply rho business the ism surveys have been strong one of the challenges is to be able to isolate where theres distortions to the data related to the hurricanes versus an underlying trend were looking for a soft number because we do they that particularly Hurricane Irma will weigh on the figures theres a big range of estimates, if you look at the consensus expectations some people looking for anything testify numbers, some looking for strong figures, which means theres a lot of uncertainly going into the report. Look past it, focus on the broader data, which generally shows an improving underlying economy. Yeah, yurtian were looking at new record highs. Its very broke based it, call the it what you want, multiup, or throw in the town as jim and i were talking earlier. I apologize for my darth vader voice today, i have a bit of a cold. The economy has good momentum now. Europe has good momentum china has very good momentum, even though we are six quarters after their big credit impulse, so we remain in a globally synchronized expansion or reflation. At the same time, even though the fed is tightening and the ecb signals its going to be less accommodative in the future, financial conditions have been easing for the past six quarters, so when you add up strong Earnings Growth and its been growing at about 9 or 10 year over year, and add to that easing conditions, that drives valuations higher. When you have valuations higher, you get a significant bull market, which is what weve got over the past six quarters weve had about 30plus gains against the s p. So the question is, as the fed keeps removing accommodation, and now that its announced the Balance Sheet plan, to what extent is that going to tighten financial conditions assuming the fed goes slow, and we get a new fed chair that sort of stays the course on that front. What we have are strong fundamentals amid st. A very the stock market has seen outflow since 2009 thats a pretty significant thing. So, michelle, the fed chair was on with Steve Liesman this morning, and said you can still pencil in a fed hike does the market get worried ought all about where the fed is going from here . I think the market is expecting it thats my expectation as we. It does seem to have a bias to tighten. The data at least on the growth side is generally supportive financial conditions are certainly supportive the inflation data hasnt been, but the language is suggesting that theyre willing to look past some of the weak inflation data we just heard from fed president williams that talks about reasons for lower inflation, still reiterating, giving that backdrop it means the gradual normalization process should persist, at least in the near term, the market is okay with in a. The stock market is okay with that for now, but were looking at the tenyear year old, i think jurrien outlined what we heard from warren buffett. That when do longterm Interest Rates start to rise and offer competition to stocks and therefore hurt the stock market . Just because the fed raises rates doesnt mean longterm rates rise, right . Do you have any prediction about that which could actually undo peoples beliefs in what valuations are justified michelle yeah, from my point of view i would say the long end very much depends on what happens to inflation and estimates for longterm growth or trend growth right now what you see is exactly what i said. Is it hasnt been shown through throughout the curve so if we see some sort of concern or actual data that suggests inflation is spiking higher, or people are really starting to rethink productivity growth or trend growth in the u. S. More globally, then yes, maybe you see a takeoff in rates, but absent that, it seems like it will continue to be a slow process, which the fed is very much cognizant of as well when you this i about financial conditions and how the fed is influencing them, theyre looking at rates, corporate spreads, and all these things are coming together. If that stops, if you get a significant tightening in financial conditions, i think the fed also responds. Jurrien, you mentioned this is still an unsloughed market can you make the case in terms of the trading dynamics, a lot of talk of meltup . Were struggling to find reasons not to be in, and are those the moments when you have to sort of say maybe we have gotten enough in the price right now i think over the short term, that may very well be the case, and a lot of this has to do with how much of the fiscal agenda either is being priced in or priced out, and at the beginning of the year a lot was priced in, so then it got priced out, now its being priced in again when i look at the past eight years, according to epfr, which is one of the fund flow shops that measures that, both active and passive, u. S. Equity funds have seen redemptions of almost 300 billion. How can a market be up fourfold . Thats because companies have bought like 3. 6 trillion of their own shares over the past of the late eight years, the ample investor i dont think has participated so that may be changing now, but its not enough for me to say, okay, ring the bell, its over, by any means if i could just follow up on the previous question. When you look at Interest Rates and valuations, it all has to do with whether growth can support a rise in the discount rate or the Interest Rate. Its basically your standard dcf model. The reason they could not raise rates is because there was no growth now earnings are growing almost double digit, so the fed can raise rates, so the effect of the tenyear yield or Interest Rates in general is all relative to whats happening on the earnings or growth side. Right now that picture is pretty strong. Jurrien, thank you. Michelle, enjoy the day to you as well. Julia has a quick market flash. Netflix shares are trading over 2 highers on news its raising prices for two out of its three different subscription plans, the most popular plan will right to 10. 99, the price for the highertier plan, the ultrahighdefinite streaming that will go up from 11. 99 to 13. 99, starting for new members on october 5th and theyll begin notifying existing members as they roll out the price changes. The lowest tier plan will stay at that left net flex issues a statements that the plans are as we add more exclusive shows, and improve the overall netflix experience to help find members something great to watch even faster they note that since the last price increase they have add add downloading feature and interactive content as well as new films, the stock up 2. 6 as investors see this as a positive for the company. Back over to you. Thanks very much, julia people arent worried that means theyll lose subscriber growth, they have pricing pressure power here. Its been a key point for the bull case. It was underpriced, once you become indispensable, you get a little more pricing power. Steve liesman is in dallas and joins us after just speak to Patrick Harker he, steve. Yeah, philly fed president harker talking about hes looking for the third rate hike. He said he pencilled it in for november, and kind of puts him directly in the middle of the median fed fomc member we talked about this big issue that the fed is talking about. The inability to forecast inflation. He said, you know what right now its not that big of a deal heres what he said. If we step back from being a central banker or commentator on cnbc or banker, the rest of the economy thinking its pretty good low inflation, low unemployment. So while there are issues here, particularly with respect to low inflation, because it doesnt give us the legroom that we need, its not a horrible situation. Not too bad a deal. He said he looks at about a 2 economy not changing the forecast yet until he sees more detail, as michelle said im here at the conference investing in the work force, where theres four fed president s here, so this is obviously an important issue for the federal reserve. I asked harker why is the fed so involved in this sure of work force development. I would say the limiting factor in growth is the inable to get the skilled workers, this mismatch between what Companies Need and what workers know is real and growing so what the fed wants to know is are there people on the sidelines that they can put people back to work and does that mean they can let the economy run hotter, not be so concerned, because there are more people on the sidelines trying to get this worker mismatch harker may be emerging as my ne lockhart i mean that guy in the middle who is best to follow, doesnt real slit have an ideological dog in the fight here, and the way hes leaning is a pretty good way to look at it. A good tell thanks, steve. Which we get back, the house gop eyeing a plan thats key to the debate, well discuss with jim stewart. Hes next. Dont move welcome back meg tirrell has a market flash. A big patent battle on their big cholesterol drugs. It looks like a win today for regen ron and sanofi essentially a federal Appeals Court throwing out a ban on the drug and remanding the case for a new trial. Amgen is down there. We dont know when it will reopen weve reached out to both companies, and will bring you any extra news on this thank you, meg. Its budget day on capitol hill. The house is bringing forward the resolution to the floor and will begin debate. Ylan mui ask in washington with more. Reporter the vote is expected to begin about 11 00 am speaking ryan was on the floor making it clear this vote is all about getting to the special rules that republicans want to use to pass tax reform it paves the way for historic tax reform it unlox the reconciliation process. We need to pass this budget so to that we can deliver real relief for middleincome families across this country we need to pass this budget for the people who are living paycheck to paycheck in america, who are trying to juggle it all. Reporter the u. S. Chamber of commerce as well as conservative groups, theyre all flagging this as a key vote, meaning theyll be tracking which lawmakers support this budget resolution, and it is expected to sail through the house, but it still will have to go through the senate where the Budget Committee will begin debating on this bhugt resolution as well today. The wild card in the senate will be bob corker of tennessee he has called this whole process a meaningless waste of time, because he wants to get to the nittygritty of the tax reform debate he set out two new guidelines that he wants to see for his support to be found. One, he wants a tax bill to reduce the deficit he also juans to make sure that any tax reform is permanent. Remember, with his will not see any legislative text of a tax reform bill until a budget passes both of house and the senate and both chaim bers agree on a final version back over to you ylan, thank you very much. Youll be tracking every step of that process the growing budget deficit proving an obs tal to the tax plan our next guest says to create a new top bracket of 40 with adjusted incomes joining us now here jim stewart with that suggestion. Hi. You have a forth coming column in addition to that suggestion, unfortunate other difficult tradeoffs, so either youre providing a Real Public Service or really out of touch with how this process is going. Im trying to provide a Public Service i personally am not for creating a new top bracket. I have argued you can lower the top rates, but its clear the political will to get rid of deductions didnt there. President trump explicitly said we may have to create a new top bracket. So i said okay, let 091 , but 0. 1. There are only 140,000 of these people would that have swung the last election in im not sure, but nonetheless its not a huge group politically. They pay now 20 , one tenth of 1 paid 120 of all the individual federal tax, if you bump them up to 44 , bear in mind steve bannon said he wanted to see some with a 4 in front of it, you can raise about 300 billion over ten years now, again theres about a 2. 6 trillion hole in the current proposal the budget is building in an additional 1. 5 trillion. Whether growth can pick that up, or whether corker will sign off on that, that remains to be seen on take that down and theres a lot more of those, then you get eat 300 billion, so youre over halfway to the goal by the way, this is also assuming that the state and individual Tax Deduction bites the dust you dont have to be this drastic if you can keep that one in there, but i dont see how you do the math when you say bites the dust give it up, they decide to leave it. So people can keep deducketting their state taxes. I heard from people who said they are adamant they do not want to restore the state and but i dont know how you get the from places like upstate new york, and you need them to pass this. But that political calculus is really tricky i dont see how you get curb how you can do maybe some of it, there would be some tankering with it, but thats 1. 3 trillion right there they would lose. The other suggestion i make, trump also proposes in the campaign tax Capital Gains at death, with an exemption of 10 million, so 10 million in gains doesnt get taxed. Anything above that is a reduced Capital Gains rate that also could get you another 300, 600 billion that pretty much gets you there. Im not saying personally i favor these, but if you eliminate all the other options, theres not much left. Especially when corker is demanding what hes demanding, and hes not running for reelection, so his psychology as changed. The white house will say growth will make up this massive deficit. I think 1. 5 trillion, you can say that with kind of a straight face, its debatable, but if youre starting to talk about 3. 5 or 3 trillion then you need to cut spending, then theres the spending you know, again, where do you go with that . That seems to be a deadend every time they try to do it strict will you in the context the tax reform, they are running out of the options, i dont find raising rates very palatable, but it affects a relatively few people, and you request raise a lot of money with is it. When youre talking the higher end, the battle about the lower end is what seems to be the real issue in trying to sell this plan, even kevin brady and paul ryan recently have come out and setibility its oughts in individual story, so the narrative has changed a bit. Well, heres the basic problem, if you dont want to blow up the bucket, if youre going to get more money out of individuals, youre talking the quote unquote rich i know theyre selling this as a tax cut, but you cant cut their taxes much, because they dont play that much. Thats a great data point pew people makes less than 50,000, 62 of the filers paid 5. 7 of the tax bill theres not much more the effective tax rate was 4. 3 . Theres not that much to cut there. When youre talking tax reform and talking about raising revenue, youre talking about the quote unquote rich it does seem to be fair. The Corporate Tax will disproportionately affect the affluent theyre the owners of these assets lime Ronald Reagan said, of course the rich gets the tax cuts, theyre the ones that pay the most taxes. But the roerch every one of these elements is so hard down to 20 , is that in aggregate, this is not a very overtaxed country. If you look at the numbers, taxes for gdp, and therefore Everyone Wants germanys Corporate Tax rate, nobody wants the person income tax rate sanchts theres a political problem here, theres a big tax cut for people, who want more hiring and all of that, but thats kind of indirect. Corporations themselves dont vote but what we have learned if the just doesnt show repatriate that, the eu smells it and taxes it, right . Theres untaxed money in the world and somebody wants a piece of it. By our tax structure, we let the bureaucrats seize it instead of us. And look how europe is going after the tax giants. Thats my point. Ive gotten a barrage from people all over the country. Ive been trying to get totally objective, fairminded, whats best for the country, not whats best for me, not whats best for donald trump everybody i hear from is talking about whats best for them suddenly people all for broadening the base if they takes that deduction away, im never voting for them again. I guess thats how democracy works. And no wonder its been 30 years since we tried this. Jim, thank you very much, sir. When we come back, puerto rican femme shares plunging, and now the governor of puerto rico is sending his own message. A quick look at stocks, gains are mostly mode, nasdaq outpacing others at this point squawk on the street back right after this i cant wait for her to have that College Experience that i had. The classes, the friends, the independence. And since we planned for it, that student debt is the one experience, im glad shell miss when you have the right financial advisor, life can be brilliant. Ameriprise whuuuuuat . Rtgage offer from the bank today. You never just get one offer. Go to lendingtree. Com and shop multiple loan offers for free free . Yeah. Could save thousands. You should probably buy me dinner. No. Go to lendingtree. Com for a new home loan or refinance. Receive up to five free offers and choose the loan thats right for you. Our average customer could lower their monthly bills by over three hundred dollars. Go to lendingtree. Com right now. Not rebalancing your portfolio. Focused on what you love, not how your money will last through retirement. We make it easier to plan for retirement with day one target date funds from prudential. Look forward to your 401k plan. On. Im kate rogers. Heres your cnbc news update iraqs military says the forces have captured the town of hawija saudi Arabias King Salman meeting with russian president putin in moscow. Its the first visit of a saudi official to moss do you. Houston is reaches out to victims of hurricane maria, sending pallets of muchneeded supplies to puerto rico. While they are still in need in houston, it is rerewarding. And they may haves discovered the remains of st. Nick las thats your cnbc update for this hour over to Jackie Deangelis did department of Energy Reporting natural gas inventories built in those inventory of 42 billion cubic feet compared to the fiveyear average 93, its substantially less thats why Natural Gas Prices are trading higher, but trading higher most of the morning, really unchanged since we got this number out. Interesting to note in the last week were down just a little more than 1 , flat for about the month level, but still up 5 in the last three months. Remember, we were trading well over 3 not long ago, two weeks ago. People are expecting these prices to kind of flatline and bounce aroundhere, at least while were in that inbetween where theyre not necessarily using heat, either now back to you guys at squawk on the street. Puerto ricos governor is looking to reassure bondholder after President Trump set the debt should be wiped out of the following the devastation of hurricane maria. Marcus le mon marcus le mo neismt e gave him a chance dinchts our message is were all one, and what we need to go is go to congress, asked for a real aid package for puerto rico and make sure we have the initial conditions to get out of the emergency phase, but start rebuilding better than ever thats better for all of the stakeholder and all of the people in puerto rico. Why wouldnt the governor wholeheartedly endorse what President Trump said about wiping out all their debt. Wouldnt you want debt forgives in youll probably wasnt 100 billion to rebuild theyre going to need to borrow. Right now they cannot borrow if they really hose the bondholders in this negotiation, the chances to get the money they need to rebuild in the future means they would be locked out. So its a tough decision. The whole president s suggestion in the first place was almost instantaneously brushed aside by mulvaney of omb, it was like, no, i dont think so these are contracts, right . Its not as easy to say were wiping it out. The contracts are constitutionally protected the president just cant do that they did move ten cents, which would suggest his moral sways the record move he can draw a bigger haircut out of that by giving spine to the control board to say that the president backs us up, i think. The the puerto rico bond situation is so crazy. I spoke with a woman who runs the clearinghouse, can you send me the list of q slips, please, the numbers that equate for each and every bond she said, you dont want that list i said, what do you mean she said, its too long. There are thousands and thousands and thousands and thousands. Because puerto rico collateralize i had like every rock sitting there, they have borrowed so much money in so many different forms, thats why. The other thing that people dont realize, and i know you have made this point as well like more than half of muni investors have expos why are, they dont even realize it, if you buy muni,s which a lot of people do, you probably have exposure here. Theyre triple tax free. That number used to be 93 , then there was the barrons cover story and that slowly wound down. Reports of amazon may be getting into the shipping game what it could mean for the transports, and a quick programming note do not miss sarah cease exclusive interview with christine la dgarde roat0 a. Orw 100. M eastern time i was playing golf days ago. Love golf. I used to love golf. Wait, what, what happened . I was having a good round, and then my friend, sheila, right as i was stepping into the tee box mentioned a tip a pro gave her. No. Yep. Did it help . It completely ruined my game. Well, the truth is, that advice was never meant for you. I like you. You want to show me your swing . Its too soon. Get advice thats right for you. Investment Management Services from td ameritrade. Amazon is set to test its own Delivery Service next year, in a statement u. P. S. Sailing we support all our customers with Industry Leading Solutions and expect to expand these relationships in the future. Were joined by don bratton. Is it overdone or justified . Oh, its overdone amazon is doing what large retailers do they build out their own infrastructure look at walmart. Walmart has almost 8,000 trucks, 30,000 trailers, dozens and dozens of distribution centers, yet theyre still the largest customer for every major trucker out there. Well, heres the problem, the problem is they dont have density. Theres no way to gain the density of route that feddics, that u. P. S. , even the post office has theres a reason they use the post office. You know, if youre dropping a package everyfew feet or every quarter mile, the cost is much less to send that truck out than if youre driving ever two our four miles so the challenge theyre going to have is figuring out how to make that happen if you look at what they have done so far, they have gone to where they had problems with capacity in the surge, so the leasing is all about dealing with surge, and what happens as a result is they have come to grips with what the costs actually are, so actually in the end that would make them a more rational customer. For the xpos of the world who cater to these markets. Sort of the lastmile transportation is what youre talking about with xpo. Exactly u. P. S is falling a little more sharply even the ceo has said the majority of our business is business to business 85 has nothing to do with ecommerce. Absolutely. Given everything you said, is there more risk from the story on u. P. S. . Absolutely. Weve been big fans of fedex we favored feddics to be honest ive favored fedex over u. P. S. For my entire career. Its entrepreneurial, its not u. N. Ized except for the pilots, a much more dynamic flexible operating model, but more importantly, fred, one of the quint essentially entrepreneurs is exactly right if you look at what amazon has done extraordinary, theyve had exteriorly exceptional at disrupting b to c marketplaces, but not b to b thats what transportation is, its a b to b marketplace. You just havent studied the Business Model and what its about everybody said that about apple and the iphone [ laughter ] the iphone was just for consumers, but businesses like the security of the blackberry i could barely remember the name bottom line this youre telling some that u. P. S. And fedex will not see less revenue because of this move by amazon well, u. P. S. May, because they have a larger percentage of their revenue, still less than 3 committed to amazon, though their amazon revenue may be 3 , but its also a low margin of business, so they may not see a pinch to their operating income. Youre right, michelle, thats what everybody said about the iphone, but the buyers are sophisticated buyers, and you have sophisticated sellers, the opportunity is when theres an inefficiency in the marketplace thats not what you have theres a possibility that amazon becomes a more rational customer for these businesses. Why would it not getting fast delivery to their customers. Why are they not going to lean eyen mohr heavily and be more demanding of these Transportation Companies lets say you do it on your own and discover on your own it costs you four, five times cost. That may maybe you less demanding at the negotiation table about what your price is going to be, it may change your decision about exactly how much of that volume you funnel into your own system es. John, thank you very much well see you soon, donald broughton. My pleasure. Constellation jumping. The company also raising the fullyear guidance, good for another nearly 5 . A quick programming note mick mcgwire will be or guest coming up on power lunch. Coney island has been around for a long, long time. Reminds me of how geico has been saving people money for over 75 years. Hey, big guy come on in let me guess your weight win a prize sure, why not. 12 ounces sorry, mate. Four ounces. Ive been taking the stairs lately. You win, big guy. Sorry, scuse me oh, he looks so much more real on tv. Yeah. Over 75 years of savings and service. Get your rate quote today. Has grown into an enterprise. Thats why i switched to the spark cash card from capital one. Now, im earning unlimited 2 cash back on every purchase i make. Everything. Whats in your wallet . Welcome back Rick Santelli is there with the santelli exchange. Good morning, rick. Id like to welcome my special guest. All of you bond people recognize jim grant. Thanks for taking the time jim . All right lets get his mike fixed. Were going to go back to michelle and were going to correct this. Were going to get his mike fixed, well work on that ridung this commercial break. Dont move i know you all want to here what jim grant has to say throughout my career, ive been fortunate enough to travel to many interesting places. Ive always wanted to create those experiences for others. With my advisors help along the way, its finally my turn to be the host. When you have the right financial advisor, life can be brilliant. Ameriprise o. Welcome back. Jim grant, my special guest. Thanks for taking the time. Conventional wisdom is ecb, ast Program Going to expire. Is it going to cut back when mario draghi makes announcement . What is your thoughts in the area, jim . My basic thought is that the radical policy begets more radical policy and it will be less easy to remove it or to reverse it than people expect. Prices are information and Interest Rates are prices. Distorted Interest Rates deliver distorted information. So what we see in the ecb i think is kind of the center of mispricing world over. Ireland just raised 2 billion euros at interest cost of 0. These distortions are communicable just like disease. If you arb trag it is kind of the sneeze thatcommunicates misinformation. Since everybody has made this mistake, since all Central Banks have gone down this road even though we are starting to reverse it a bit, given your statement what do you think is in store for bond traders globally what humps in the future do you foresee because there is no normal to go back to at the moment Central Banks are creating or materializing from nothing 114 billion worth of credit a month. Thats the bank of japan, European Central bank and Swiss National bank together without the fed. What has this done it has created terrific distortions in pricing of assets. It seems to me that if, as and when Central Banks decide to reverse it we are in for something we cant foresee. We have never had the provocation and never had the degree of distortion we have now and i think its pretty glib to say it is going to be fine. Central banks were not reluctant to tell us how great it was going to be on the upside. Qe was going to lift asset markets. Another saying through the fed is saying that the absence of qe or withdrawal of it is not going to be noticeable. How is that possible i agree. I dont think it is possible. Lets look at Something Real time. The president made a comment yesterday that he wanted to wipe out the puerto ricoen debt. Whenever we have a crisis no matter where it is it seems the financial leaders always make the wrong decisions. Forgiving debt in bailouts dont work. And the impulse to speak within some of our leaders is unchecked. So i think leaders when they attempted to Say Something might reconsider. How about saying nothing i like that idea. Janet yellens term is going to run out. I guess my question to you is knowing the way you think and how cloudy the future may be with all the distortions does it matter who the chairman is if the answer is yes do you have a favorite that you think would do the jajob the best . I think it does matter. If the very dovish fed governor is appointed fed chairman that is outside the box call. I think it is a provocative one. I think donald trump is on record saying he is low Interest Rate guy. He wants the factory chimneys to smoke. He wants a great big booming economy. I think that what he therefore wants is a very easy fed. There was talk in the campaign that he was flirting with the gold standard. He wants the trump standard which would feature great amounts of cheap credit and low Interest Rates. Excellent. Always interesting to talk to you. Everybody loves to read what you have to say about the fixed income markets. Thank you for joining us today. Back to the crosswalk squawk ont gang. You guys were just having the conversation. We have mike mayo coming up on the Halftime Report. He has for a guy bullish on citi, he has a provocative some say controversial suggestion for what citi needs to do. He is always outspoken as both of you know. He has been long citi group for sometime. It has been a very good call. That stock is up 25 year to date whereas banking index is up nine percent. After being without question probably the most vocal critic for years of citi group. Most global and cheapest play. Well look forward to catching up in a bit. Lets have a look at what is coming up on squawk alley. The mayor of san jose in the middle of Silicon Valley is going to join us. He says he is not going to offer tax incentives to amazon for hq 2 and your city shouldnt either. And the white house securities czar marked a bisht tg ifinhe feds attitude towards encryption on new devices and whether they want a new back door. Because, when you really, really want to be there, but you cant. At cognizant, were helping todays leading Media Companies create more immersive ways to experience entertainment with new Digital Systems and technologies. Get ready, because were helping leading companies see it and see it throughwith digital. This s electricity. This is a power plant. This is tim barckholtz. Thats me this is something he is researching at exxonmobil using fuel cells to capture Carbon Emissions at power plants. This is the potential. Reducing co2 emissions by up to 90 . While also producing more power. This could be big. Energy lives here. Welcome back. Im dominic chu real estate and Consumer Staples leading so far. Other leaders include walgreens, all up by around a percent. Staples up five percent. That does it for this hour. Lets send it to the start of squawk alley. Back over to you. Good morning. It is 8 00 a. M. At Amazon Headquarters in seattle. 11 00 here on wall street and squawk alley is live