Transcripts For CNBC Squawk On The Street 20171025

Our tenyear is at a seven month high as durables crash estimates. Earnings from dow components dragging us lower in the premarket. Chipotle sinking double digits a big miss on results last night. Amazon unveils delivery inside your door with a new Smart Security camera. We will fill you in. One day after another record high for the dow coke and boeing beating with earnings this morning. Jim, theres a lot to get to several companies with a socalled triple play meaning they beat on the top and bottom line and raised guides aance. I think that visa doesnt get enough chatter by anyone its been maybe one of the most consistent if not the most consistent company in the Financial Service and tech business once again, it blows things away i was afraid that this would be one of those where it blew it away and people would yawn but it was too good because its double digit we are seeing some quarters i went over 3m ynesterday it was a clinic, it was so good. Some remarkable numbers. We could let everything be characterized by Advanced Micro Devices and chipotle which were the two big downers last night, or you can just say you know what, there are companies out here, please come down stocks, please come down so we can tell people to buy them. You mentioned 3m which had its best day in more than 8 years. Goldman takes it to neutral. Rbc takes the target to 209. There has been talk, jim, when you have some of these single digit growers and the guidance theyre giving you, giving you multiples of 20, 25, right look, the goldman guy was a capitulation but this is very interesting. If you go back over and parse y what one of my favorite ceos said, we are a definition not a commoditized company the Global Leader in automotive and Traffic Safety that cracked the code in china, people dont understand electricity and energy grew 13 . They are the electric car company. They are a safe way 3m . Yes. Post it notes, scotch tape. My father used to sell postit notes. He sold the scotch tape for 3m the package that they sent me dad before he passed was all the new products and of course not the electronic stuff but i think theyve invented products five years ago that didnt exist that are selling so well. One of the things that england talked about was that china is deeply committed to clean air and clean water. Theyve decided thats what 3m is going to give them. He was saying that 3m is synonymous with air quality in china. Youve got electric cars, air quality, you have a company thats shooting lights out in asia 7 growth. The Goldman Sachs guy who was i dont want to say he was pantsed because that would be too much like when i was in 5th grade, but i have to say that the goldman guy asked questions that were basically, it cant be this good, please, please. No, it really was that good. Thats a tough name to have a sell on which they did until today. This guy, thulin, he could play goalie for the pittsburgh penguins. Theres a lot of defense, gym. He loves ice hockey. Boeing beats revenues ahead cash flow beats. Cash flows ahead. Okay, theyre going to send it down. How is that backlog . Its like a half a trillion dollars, 5700 aircraft people want to send it down because its up the most of any dow stock. It has been a huge winner. What do they really want nor northrum grum on i say the air Space Business for United Technologies and ge were fabulous air space is in major bull market mode. Every time a Company Comes down, whether it be honeywell, certainly when i look at what United Technologies did, china was weak but whitney was fabulous air space is a fabulous business. They raised their full year guide for the third time this year. Still expensive. Theyre going 1290 to 1310. They make the fuselage for the air 35 lockheed this week said that jets going to grow 13 , 15 . I felt lockheed has been a good stock if you buy it every time it goes down defense is very important, whether it be our country saying to other countries you have to start spending, whether it be the new budget is going to be very good for defense. The Defense Companies themselves are having a house yon period. They tend to leap frog each other. Theyve been a consistent winner because the Patriot Missile is in peoples mind and in part because of north korea i think that Group Remains very strong. The other big blue chip is coke, beats by a penny organic revenue up four. Thats ahead sprite is a big winner this quarter. Also the new zero coke. Speaking with quincy, james quincy, hes a remarkable guy in that hes really trying to energize it. Hes also talking tea. Hes talking new mineral water theyre trying to be more than carbonat carbonated the u. S. Did have issues in part because of a hurricane and theyre still refranchising. As much as i think james is good, when you look at what they put together on the good, good for you and pizzazz, including, yes, the super bowl halftime show, you recognize that growth is superior and consistent and the best in the industry cocacola does have great turns in a Grocery Store which matters but nothing like frito lay theyre an engine of fantastic growth i know that people dont like those companies now. They want honeywell. They want freeport for all i can tell, but they always circle back and find the best one of those consumer products. Ive looked at all of them and its still pepsi. By the way, in beverages just had their first drop in north america in a couple of years but your argument is that snacks snacks are just i mean, people love to snack worldwide they love to snack and thats not stopping. But again, this is far and away not what people want right now there are people who are going over once again, theyre like ripping apart some of these industrial numbers and saying how could you have 6, 7, 8 growth yesterday what shocked me was stanley works. Stanley black and decker craftsman isnt even in the numbers yet. We could do a whole segment on Thermo Fisher, tinken and leer, these names that we never mention. Life sciences is a fantastic business dana her is a really great number again, trying to speak positive about ge because im a kind man and a good man, not unlike in apocalypse now i feel ges Life Sciences is going to be very good. Well get to a lot of that. A couple of down stories today, one is chipotle taking a hit Quarterly Results miss estimates. Steve l. Says the Company Plans to slow down now their new restaurant openings for the next 12 to 18 months so they can, quote, get the fundamentals right. Theres a company with 4 growth, rapidly going natural and organic. The stores are clean everybody thinks that its got the best technology, and that company is mcdonalds. And then theres chipotle with half the Revenue Growth that is doing 2 , had major problems this quarter the only bright spot was that avocado prices have come down but i didnt need them to tell me that. Queso, were not sure. I want to say its a work in progress but an overpriced stock. Nowhere near the impact that guacamole has for example. Some analysts were looking at buying intentions an beginning to see a bit of an uptick after a long trend down. You need like a Hubble Telescope to see that frankly. Maybe yesterday afternoon was good. So youre nowhere near you said were on a reset. Look, you had these problems. They were very look, heres the problem, carl. In the end they have a decent rate of return at the stores but people havent come back and you cant have a stock with that high price earnings multiple thats growing at 2 not when mcdonalds is giving you 4. I was very discouraged by the Conference Call because i really kind of feel like theyre saying, hey you know what, well get it together, give us time. Well there is no time. This is america. Its business. Chipotle is not going to get the time the stocks going to go lower. Well do the reset, take a look at it. In the end, mcdonalds deserves to go higher and chipotle should go lower theyre not a great Conference Call and ive been a big devote tay of their Conference Calls. I thought, lets keep that one in the penalty box and maybe well come back and look at it another quarter if they can get it together but the instances that we heard about social media is a bear. Its there by the grace of god, is anybody cleaner, no, but theyre the ones we think about and i dont want to go there id rather by boeing up than chipotle downin terms of the ethos of this market one last point. You mentioned visa earlier today and it does sort of raise some market cap comparisons everyones talked about paypal, am ex, market caps pretty much in line with one another squares market cap now is almost as big as twitters. Sarah fry kind of runs that day to day jack dorsey is the ceo i said last night that i think its overvalued at this point versus the others. I think paypal has tremendous runway ahead visa is this Great International company. Master card is going to shoot the numbers out. I think that square has tripped. They deserve that. Its a small to medium size business and small to meade assu medium businesses are doing well congratulations to sarah fryer who has done a remarkable job in convincing a lot of people, listen, we may be a bank, were not taking on a lot of risk. Its been one of the great unsungs. Paypal, no, because i talk about every single day. You called it the millennials worldwide credit card. Yes. Not the c. F. Frost am ex. When they fronted that Holiday Party and said i want venmon venmo. I just had it for dinner its my middle name. So you did pay her back kaylas fabulous. Were square well, you know a lot to get to today we havent even touched at t yet or were on the surface. Were getting there when we come back, would you allow amazon into your home to deliver a package . Well fill you in on the companys new service. Also ahead this morning well look at some other names including apple, amd again and the decision that the senate made on banks and forced arbitration last night theres a look at the premarket. Well get into the durables as well which come in at 22, way above expectations of one. Were back in a moment amazon announcing a new Delivery Service that would let its occcurriers open your front door to leave a package. You would have to purchase a cloud cam and a compatible smart lock take a look. Cloud cam also powers the newest feature for prime members. With amazon key, get free delivery of packages inside your front door plus grant the people you trust inside your home and watch it in real time. Between this and home assistance, jim, theyre trying to get into the house. Done, done. I mean, one of the things that we had, ordered amazon phone, stolen nothing you can do its not their fault i want it inside the house i think that many people are in a similar boat because you see the box. Its too attemptitempting for td guys and i think this is terrific they come up with things that i didnt think they could come up with and i say how come i dont have that. I have an amazon box pretty much at my doorstep every day. Sitting outside. Sitting outside i always say, oh good, they didnt take it so i like this i like this a lot. And i think that when amazon reports, i was thinking do i really want to be on walgreens which had a fabulous quarter, really great quarter, when amazon starts squawking. I just find that amazon, maybe they mentioned, we like the banking Business Amazon maybe we want to do more delivery of this or that and i just find that you have to own and then sell you have to trade everything before amazon reports because you dont know what bomb theyre going to drop. It is coming thursday night along with alphabet and intel and microsoft. Busy night great night. It does bring us to this letter thats been reported from einhorn in which he says are earnings relevant to share price anymore . Is it about being disruptive and changing markets is that why value has underperformed growth for so long is he some sort of existential crises im going to send him some sart. Very good wine the reality is what youre seeing are companies that are finally so lean, they fired so many people, let people go, and then were getting this great leverage its the opposite. I have been in quarters where all i felt was that we were shadow boxing against data center or what its going to be all about crypto currency which is part of the problem with advanced micro this was the quarter and has been the quarter where we see these Great American Companies Buying back stock, theres a stock shortage einhorn is a very thoughtful man but this quarter is the opposite of that. This is the quarter where Great American industrialists who have worked really hard and waited for asia to come back, for latin am to come back and its going their way. So hes got to stay focused. Even though he doesnt explain well see what amazon prints but it doesnt explain the tesla dynamic in other words. So few teslas hes been around for a long time theres so few teslas out there. Remember, if you regard tesla as a technology play, then you can justify it but theres so many more visas and 3ms out there American Express jpmorgan sells at 14 times earnings citi sells at 12 times earnings. Is that not great value . In a lot of ways people get frustrated because of fang im not frustrated im looking at some companies and saying you mentioned Thermo Fisher i say these companies are so well run mark casper, does anyone know him . Ive had him on mad money and you finish the interview and you say, wow, youre really smart. Remember when you were in college and you see some guy whos really smart yes. Wow, that guy, i dont want to be in that class. I walked out of a philosophy class. It was all numbers everyone in that class was smarter than i am. A lot of these ceos are like that. Youre like im out. Please. I really appreciate the schooling. I am getting schooled by ceos who know their businesses so well and are delivering such unbelievable numbers and again i just want to applaud i really felt that caterpillar, that was a remarkable quarter. So i dont get the existential criseswhen this is the quarter where im seeing people deliver numbers that are extraordinary in areas that are so good around the world. Asia is very strong. Europe is off the charts. Thats a great rebuttal to einhorns note we havent mentioned yet taxes and probably for good reason because earnings are such a big part of the story but well get to that. Washingtons really hard to sort out theres a big monument there youre not allowed to build higher than that. Well get cramers mad dash, count down to the opening bell, what the calendar may look like and what the president today tweeted about jeff flake in a bit. Like agriculture to feed the world. And energy to fuel its growth. Real estate such as ecommerce warehouses. And private debt to finance transportation and infrastructure. Building blocks of strategies to pursue consistent returns over time from over 120 billion dollars in real assets. Partner with pgim. The Global Investment management businesses of prudential. We cut the price of trades to give investors even more value. And at 4. 95, you can trade with a clear advantage. Fidelity, where smarter investors will always be. We mentioned at t earlier and amd. Yes at t i like the cash flow. I think people want a 5. 7 income, thats not bad it was a disappointing quarter not because of all the changes theyve made but because theyve basically threw cold water let me read one line theres some leveling off the of the crypto currency demand obviously you need these cars to mine that was not good. There was a sense that they havent been able to get the average selling prices up. Its going to reflect poorly on inindividual ya which it shouldnt because inindividual ya is crushing them. It might reflect poorly on intel which it shouldnt because intel is doing better than they are. Theyre in sony games play station, also xbox thats interesting theyre in the data center theyre doing a lot of things that are right but the problem is this. Theyre up against two of the Great American companies, well, inindividual ya and intel, and its really hard to do that well they said something that i think really chilled a lot of people which they said that block chains leveling off. Block chain, when i was on the ibm Conference Call, block chains on fire. I started thinking is it leveling off for advanced micro. I think a lot of people came away with the same thing which is like, okay, its been a hot stock. Dr. S maybe we find other things to buy. They are finding. They did guide to a down revenue quarter which would be the first break a sixquarter streak. It was a bummer and the average selling prices arent up and the analysts were all kind of, tell me something good, tell me that you love me. There wasnt anything there. Ill be singing that all day, in addition to apocalypse now. Well get to the opening bell in just a couple of minutes dont go anywhere. Well, its earnings season once again. Yeah. Lot of Tech Companies are reporting today. And, hows it looking . I dont know. Theres so many opinions out there, its hard to make sense of it all. Well, victor, do you have something for him . Check this out. Td ameritrade aggregates thousands of earnings estimates into a single data point. That way you can keep your eyes on the big picture. Huh. Feel better . Much better. Yeah, me too. Wow, you really did a number on this thing. Sorry about that. Thats alright. I got a box of em. Thousands of opinions. One estimate. The earnings tool from td ameritrade. Something we all think about as we head into retirement. Its why Brighthouse Financial is committed to help protect what youve earned and ensure it lasts. Introducing shield annuities, a line of products that allow you to take advantage of growth opportunities. While maintaining a level of protection in down markets. So you can head into retirement with confidence. Talk with your advisor about shield annuities from Brighthouse Financial established by metlife. Youre watching squawk on the street live from the Financial Capital of the world the opening bell in 90 seconds were watching the tenyear at 245, the highest since march durables destroyed the estimates on every level jeff dunn this morning, jim, says the moment of truth has arrived for a secular bond bull market, need to start rallying Effective Immediately or obits need to be written. I like him. Hes feisty. Business is better i wish europe would raise rates. Businesses better in europe than here were looking at 3. 5 , 4 if we do things right. The hurricanes, sadly, terrible thing but they have increased growth in this country the unsung hero of this bull of this leg is jpmorgan. Just take a look at their thing. It goes up, starting at a 15 multiple jamie diamond doesnt come out and knows im going to be a house man for him and say that numbers are going to be good it doesnt matter whether you were a good bank or a bad bank, its gone higher you had called for jpmorgan to 100 two months ago . Yeah. I thought by thanksgiving. It was a low ball. They are kershaw theyre shut down. Congratulations by the way to the dodgers winning game one 31. Theres the opening bell and the s p at the bottom of your screen the big board, it is build a bear workshop celebrating a 20th anniversary. Its up. Speaking of health care, jim anthem guides ahead and theyre not assuming any end in csr payments as part of that guide. Im saying to myself, how Many Companies are as big as this with 40 million subscrib s subscribers. Thats the kind of number that even john legend on twitter would say, okay, theyre as good as i am. Theyre remarkable United Health had a fantastic quarter. Repeal and replace failure has been, as the president has said, these are the biggest winners. The president s absolutely right. Hes got the right sector. You ought to create an etf of companies that have won because hes lost. Right anthem is your second best gainer this morning followed by wba, walgreens. I looked at wba and said to myself, i sold at 80 because of worries about amazon theyre putting up plus 6 numbers. Theyre using a 570 possible as high for earnings so its not expensive. But then i think amazon and i just think what happens if amazon decides i get my Vitamin Supplements from amazon. Its really easy it comes nobody i assume no one will steal my Vitamin Supplements maybe amazon could run my life id be a heck of a lot happier amazon, would you please take over the part of my life thats not going well. G. M. Today gets a downgrade over morgan stanley. They go to equal weight. I thought that was basically one of those thats had a big run and i get that its become a little more expensive but its still an inexpensive stock in general it was a valuation downgrade when i ran it i said, i dont know, i still like g. M. But i totally get that. The journal hops on with their own take and that is, as you say, a big run, but have they really proven to you that they have what it takes to compete with the alphabets in the world in autonomous at least taxes . I think one of the things that bothers me endlessly about alphabet is that they dont like to talk about what they do so you find mary barra likes to talk. Alphabet doesnt alphabet has a very constrained Conference Call and youll finish it and youll say, okay meanwhile its one of the greatest companies on earth. I sometimes want to orchestrate a Conference Call and i want to say to these guys, listen, you just delivered a great quarter dont give me one of those andy reid press conferences, yeah, i put the best guys out there. No, theyre winning. But when youre on a g. M. Call, g. M. Call is a team, they want to be in the playoffs badly and talk themselves up alphabet talks themselves down, and it always bothers me but i happen to love ruth boreat shes the greatest. From g. M. To g. E. Where there is no relief, jim. 21. 60 is a new multiyear low, down more than a percent we talked earlier about i think its six firms have downgraded or cut the target since friday yeartodate down 30 or so s p up 15. Suboptimal situation. Yeah. And then ever corps yesterday or the day before with a note about what these longterm care obligations may look like. Ive talked with them longterm care, i remember when aig was trying let me explain longterm care because my father had it in your 60s you take the policy and my father took it in his 60s. The longevity, my father lived to be 92 and the actual tables, all these are wrong, didnt give it to gen worth, my insurer. If you look at the obligation you say these people are living forever and you have to do this inhome care which is so expensive. They turned out to be the greatest bargain in the world for those who took them, but theyre really terrible for those who wrote them g. E. Is not alone in that front. Oh, no. Manual life did it unum did it. Having been my father had a livein person and i couldnt believe that the policy was so good now, they fight you. Some of these really fight you to get it because my father had a stroke and he was in bed and they said he had to go there in person to claim it that was a nasty series of phone calls. Im sure. It was like, eh, no, thats not going to happen. But i do think that in the end you cant wring fences easily. Aig spent a long time trying to wring fences, get it so it didnt hurt the rest of business in the Conference Call, flannery, the new ceo, point blank said listen, this is why were not going to be able to divvy enough money until we get this. From the capital to the parent yes this is the number one thing im worried about. At play today or this week, this dynamic i think yeah because flannery is transparent saying, listen, this is a big issue. Hes not shying away from saying whats big issues. They got to get their arms around it. Now, i remember peter hancock, the former ceo of aig, telling me he was going to get his arms around it. They ended up with a big deal i believe with warren buffett, but the obligations are out of control because of the fabulous demographic that we have in this country and because the expensive of living longer is really extraordinary when you have livein help and these companies are paying for it, they never knew how much it was going to cost to have livein help for years you can have livein help theyre fabulous people, the nurses in this country, dont talk enough about how fantastic you get these people and they come to your house and it would be like, wow, theyre taking care of pop. I would pay them nothing yep theres lots of estimates of just how much the deficiency may be at g. E. Well find out a lot more next month perhaps. I know that it is sometimes its just you cant get your arms around a cost, and when thats the case you got to pay someone to get your arms around it. Im confident that flannery will do it and its weighing on him as its weighing on all the executives who wrote these policies some people call them ticking time bombs, theyre ticking time bombs. Apple is not moving a whole lot although there is this bloomberg report, jim, that they have told their suppliers to reduce the accuracy of the facial recognition in an attempt to get these things made and ready to buy on the 3rd. Im so excited about it but i also know that, look, this complex technology, i think it will still be good enough. Tim cooks not going to put out something unless he thinks its going to be much better than what everybody else does we have to accord him that gift. But the stocks doing nothing in part because i think its a 2018 story at this point. Its 2018. The 10 you mean yeah. Some reactions theyre getting that are odd cocacola reports a quarter and i liked it i liked it, its okay. But theyre doing the restructuring and when theyre finished restructuring its going to be better than expected but people like yield and thats why i want to circle back to at t i really think that those who are throwing away at t must have thought it was a momentum stock based on cable numbers its a cash flow stock and the cash flow is better now that at t is going to close with time warner so if you want to throw it away, understand youre throwing it away because youre a momentum investor youre certainly not throwing if you think that that yield is less safe after the merger, you havent done the homework. So im not a big believer in throwing away at t i know a lot of people are doing that i think randall stevensons done a lot of things right but i recognize, look, a lot of this, carl, is hey, how do you get your information. Right they lost some tv subs. Yes, they did. They mentioned hurricane. And the suppressed upgrade cycle because of apple. I think hbo is going to be good for them. Monday was the oneyear anniversary of the at t time warner announcement and since that time at t is essentially flat and time warner is up 20 . Well look, jeff buick cuss did a fabulous job im not saying the combination is going to be this great accelerator. Now, there is talk that things could accelerate im not asking for that. I just want that yield covered and the cash flow for the yield is well covered and thats what matters to me. John ledger is saying some things in my twitter field thats not all that complimentary about at t. Really . Yeah. Its kind of interesting. Tell me more. He can trash talk better than anyone ive ever seen. Yes, yes. I think josh norman whos a great player for the redskins, josh norman, please read john ledgers twitter file because you will be able to know how to trash talk better than anybody. Its an analog to politics in that others try and just arent as good at it. Yes. Its innate. You know, i take pleasure with a box of morton salt because while hes talking billin big the stocks not doing anything it has been a big winner and ive been recommending t mobile since john got there because in many ways john is the modern day ceo. Hes in there fighting for you hes loved and hes colorful and hes not lawyered up one last point on your restaurants, jim yeartodate mcdonalds now up 35 chipotle yeartodate down 26. Remarkable. It says it all. Chipotle Conference Call was kind of a sad call it was a sad call. It was like, hey, maybe well get the growth back, you know, were going to try were doing a lot of things. Que queso. The mcdonalds call was we are using all the Great Technology from around the world. The franchisees are very energized. Were going to do mobile pay the best is yet to come. Eeshbrook led a Conference Call that made me feel like i got to get a cheeseburger, fries and a diet coke. I think mcdonalds is easier to order than its ever been, faster that coffee is so hot, its a weapon the coffees a weapon. Chipotle is your biggest loser on the s p by the way, my favorite stat of the day, the dow has posted roughly 160point gains on alternate days for three consecutive cycles 160 last wednesday, 165 friday, 167 yesterday. It could be fbignashy there is a dow stock every day that takes your breath away and thats the ceos. This l. Kelly at visa, it goes to 100 countries visa is competitive against master card. Azure bierbaija azerbaijan, everybody in that space is unbelievable. In the meantime, lets give credit where credit is due the lending for these banks is fantastic. So theres a lot that i like, going back to einhorns problem about momentum, im thinking what is the momentum of citi im looking at k bank which a lot of people felt that bath mooney did not do a solid job. It wasnt perfect but its had a big move since then. I like this group. I like first data. I know people think thats an indebted awful situation i think that thats going to be terrific and i dont like if you want to know if i want to see moment momentum, look at advanced micro. Crypto currency. Dow is down four. Lets get to bob on the floor. Good morning. Happy wednesday, carl and everybody else two to one declining to advancing stocks at the open and yet were basically flat on the s p. Its amazing lets look at the sectors here, got a move up in the banks the yields are moving up now theyre flat Consumer Staples down. Semiconductors have a tough day on amd industrials weak Ingersoll Rand is down ge down. The semis here 8 million shares traded preopen. That was really something here the earnings looked okay but people were talking about flat quarter over quarter margin guidance momentums look like theyre getting out. Enormous volume for them a little pressure but not a lot. Banks hit a lot of new highs this week. Keep an eye on the tenyear. The durable goods numbers were excellent this morning we moved up four or five basis points on that on the tenyear as well. Got an eye on that the earnings, you heard the guys talk about visa, freeport okay as well. He is, ve hess, very interesting numbers its down right here i think the production in the bachen was a bit lower than expected by the way, speaking of oil, weve got a big ipo tomorrow, Master Limited partnership Bridge Petroleum has a 900 million deal these are all about yields and how much of the business is going to be turning around ill keep an eye on that tomorrow morning finally, we are at the 20th anniversary of an event that really changed the world the Asian Financial crises of 20 years ago culminated this week here money had been flooding into asian emerging markets like thailand and indonesia for years. It all culminated on this day, october 27, 1997, thats friday. The dow dropped 557 points and triggered the one and only time we saw Circuit Breakers triggered and the markets closed early that day it was very traumatic. I was on the Floor Covering that event. The mood started turning ugly right after we reopened about 3 05 and thats when traders started getting very nervous down here. Remarkable how orderly it was when i came down on the floor to see even the specialists standing around doing really nothing. The consequences of that crises are still with us it had profound implications take a look here millions of people were forced back into poverty but antiwestern sentiment rose and really this was the seeds of the antiglobalization movement that we see today it accelerated japans decline as a global power. They were a huge exporter to Southeast Asia and asia in general and it dramatically weakened the imf and they remain still weak, global trade deals still being stymied. Could this happen again . Theyve made a lot of improvements but we do have very high debt levels the Chinese Government has been warning about this in the last week, sounding the alarm and theres very much Interest Rate risk still out there if we suddenly get a spike in Interest Rates in the United States, you can bet money will come out of those countries again back into the United States and back into europe as well so i would say definitely more stable but risks still very real for those countries. Down seven points in the dow guys, back to you. Great video, bob. Fun to see. Its fun to watch yourself. You know, i dye my hair gray now. Its a little different. Bob, thanks what a morning its been in the bond pits. Lets get to Rick Santelli at the cme. Good morning, carl. Look at a twoyear note. Well open the chart up to just about nine years ago, october of 2008 thats the last time we were closing at these levels, right around 23rd of 08 to be exact as a matter of fact now everything on the curve up until tens has a higher yield, lower price than the last training day of 2016. Its been slowly working its way down the curve five years, well, if you recall they sell at 193 theyve been above their closing yield for a couple of weeks now. If you look at the fiveyear the last time we were at these particular levels was march right around the 14th. Tenyear, last time we were here was around the 20th. This chart goes back to 15 244 and change is where we close. We still havent closed so this is entry day levels. It will be very important to see if we do hold that close above 244. Yeartodate of ten shows you what im speaking of finally, a very interesting chart, especially considering tomorrow is Mario Draghis big day. This is our tenyear note yields minus bund yields. Their recent high is around 60 basis points if you blinked you missed it but that spread has continued to widen. Its now 196 its the widest since may. Even though we are pulling wider, we are dragging it a little bit it will be integral to this spread and maybe other spreads if we see what mario draghi has to say about the stimulus, the Balance Sheet. These are all going to be big issues tomorrow. The dollar index, wish i could show you 31 days of entry day but our systems dont do that. Weve been knocking at the door at 94. You can see it on this august chart. 94s a biggie. If we close above there, probably going to be a few traders offsides carl and jim, back to you. Rick santelli still to come this morning, well talk all things tech with former Ceo Dick Costolo. Were down six back in a minute im vern, the orange money retirement rabbit, from voya. Im the money you save for retirement. Whos he . Hes green money, for spending today. Makes it easy to tell you apart. 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Call now to request your free decision guide. Senate republicans yesterday and asked for a show of hands on whom each supported for fed chair candidate, yellen, taylor, or power the decision is unlikely this week, and other reports suggest that yellen in her meeting with the president , said shes very interested in a second term. Open to new ideas about vice chair. Thats what im hearing look, i think janet yellen would be remarkable. I have been a huge bull on her shes done a fantastic job i know a lot of people felt it was a new broom sweeps clean, but look what shes done shes presiding over a very good period of calm and growth in the economy. No inflation very thoughtful person very great role model for a lot of peep in the country it would be a fantastic thing if President Trump just said, you know what. I think that this woman has done a remarkable job shes got your endorsement. I didnt think she would be in the running this would be a gift shes so good. So thoughtful. We expect to get it before he heads for his asia trip. Again, politico saying maybe not this week. Stop trading with jim in a moment later on closing bell, an exclusive with mark parker sara eisen as they he eiavthr investor day in organ gone she thought it was a fire. It was worse. A sinkhole opened up under our museum. Eight priceless corvettes had plunged into it. Chubb was there within hours. They helped make sure it was safe. We had everyone we needed to get our museum back up and running, and we opened the next day. Hi, im the internet you knoarmless bowling. Lt . Ahhhhhhhh you know whats easy . Building your website with godaddy. Get your domain today and get a free trial of gocentral. Build a better website in under an hour. Is now a good time to refinance . Yes Mortgage Rates are historically low. The time to refinance your home is right now. Get started at lendingtree. Com. The only place you can compare up to five real offers, side by side, for free. Our average customer can significantly lower their monthly bills. Quick. Beat the feds next rate hike. Do not miss this window. Are you sure you have the best rate . It only takes 3 minutes to find out. Go to lendingtree. Com right now. Lets get to jim and stop trading. What we dont want to have happen if youre bullish is have Something Like norfolk southern. They report a remarkable quarter. Jim squires is do a fantastic job, yet the stock goes down you dont want people to say this has run so much, enough is enough i think the rails are so important for commerce and so important as a judge of how strong the economy is. Obviously, they had a decent coal component but lets just watch the idea. We dont want to get into this period where people say, well, thats why it ran. Of course. What you want is people to say, its been running and it makes sense and it can continue to run. Thats a bearish i pointed out its bearish, but theres light volume what about tonight . We have logitech. One of the things i think is going to be nca nationwide change is eastports gaming. And Bracken Darrell has been leading this i have become a believer, and hes really inspired a lot of people you want to back a team, i have friends who own teams. I have friends who own teams they own eastport teams, and theyre very smart people. They may be on to something. Definitely keeps you young, keeping track of that stuff. Well see you tonight, mad money. When we come back, a lot more on chipotles action today stock having a very difficult morning, on pace for the worst day since in about five ars. A little more than five years. Back in a minute alerts wouldnt you like one from the market when it might be time to buy or sell . With fidelitys realtime analytics, youll get clear, actionable alerts about potential Investment Opportunities in real time. Fidelity. Open an account today. Fidelity. Of emerging markets obsolete . At pgim, we see alpa in the trends, driving specific sectors of out performance. Where a rising middle class powers a booming auto industry. A leap into the digital era draws youthful populations to mobile banking and ecommerce. Trade and travel surge between emerging markets. Everyday our 1,100 investment professionals around the world search out opportunities for alpha. Partner with pgim, the Global Investment management businesses of prudential. The street. Breaking news. September new home sales make sure youre sitting down. Were expecting a number around 554,000. Way more, 667,000. Thats huge. Thats up almost 19 from a slightly revised 561,000 im going to have to take the way back machine to tell you how long its been since weve had a 667 number we had 638 in march. That was the highest since november 07 im going back quite a ways. It looks to me like the last time we had a number that high was october of 07 the month before, and that was 727,000. These, of course, are seasonally adjusted and annualized, but its one whopper of a number carl, back to you. Wow, on the heels of durab durables thank you very much, Rick Santelli welcome back to squawk on the street. Im Carl Quintanilla and sara eisen. David faber has the morning off. Dow is down 16 being dragged lower by ge and some others, but big morning for blue chip earnings coke, boeing, visa, and as rick said, durables and new homes beating expectations our road map begins with the earnings bonanza cocacola, chipotle, at t, boeing all reporting results and more on tax reform. Democrats drawing some lines in the sands as republicans race to finish their plan. And finally, nike holding its First Investor day in overtwo years. What to expect ahead of saras interview with mark parker later today. But first up, earnings front and center three dow components, boeing, cocacola, visa, all beating estimates. Some names reported after the bell last night on the move and getting hit, especially chipotle we havent seen a move like this for chipotle in years. The stock now down double digits, mike, we were on closing bell yesterday we knew this was going to be a doozy. They missed on comps, on margins. I counted nine analysts who took down their targets this morning. Questions over visibility into a recovery the Conference Call did number to help i think people felt like there was not a secure line of sight as to how they get the comp sales back a lot of fixation on the small stuff like the queso rollout and things like that at some point, youre looking for a give up trade in the stock. People thought maybe it was struggling to bottom above 300 thats given away and now its got to find a new level. At t, you watching that as well again, its a rough spot i think in this market the media strategy is completely a little bit still being formed and i do think, look, you have the tenyear yield today pushing above 2. 4, pushing toward 2. 5 youre taking away one excuse to stick into dividend stocks and thats hitting at t, and coke, the Consumer Staples names heres my takeaways from cocacola. We saw sales growth for this quarter. It is coming back for cocacola. 4 organic revenue not too bad. Better than expectations coke has been gaining market share, especially after pepsi reported a drop in carbonated beverage sales the new ceo saying hes slowly Building Momentum on the top line the Company Still in the process of selling off its bottlers. Refranchising weighing on overall results, but quincey says that will wrap up in a couple weeks the big takeaway was the developed picture. The Global Markets like the u. S. Were softer than emerging markets. A reversal from the last quarter. He said it was temporary due to the hurricanes we saw that in dr. Pepper this morning. Some Convenience Store weakness. On the plus side, he said china improved and india returned to growth brazil, though, still a big problem. Finally, guys, a lot of talk about the drinks and where the portfolio is going zoec coke zero sugar did launch in the United States. It was sort of an experiment because it was new packaging, but turns out consumers loved it it doubled the growth rate for coke zero. He said fans were not confused by the different packaging and they actually liked it diet still in decline. Sprite is doing well overall, beverage volumes are flat if you look at the stock price, it is lower to muted this is still a company that is in transition. There we go. Its basically flat. Theres a lot of focus on investor day coming up in a few weeks. T first time investors and analysts will meet the new ceo and see where hes taking the company once they wrap up the transformation and what sort of innovations they have in the pipeline interesting so the stock is right around flat so outperforming dr. Pepper, snapple, which had a bit of a rough print. And i think the conclusion is kind of navigating a tough business, reasonably well. I think that the street in general is unexcited about the stock at these levels. Its not terribly cheap. Trading at a premium. Absolutely. Analysts are kind of lukewarm and wait and see right now, the aggregate target price among analysts is right around where the stock is trading. In theory, theres room for upside surprise, but its a wait and see. Whats up with sprite did well. We never talk about sprite. It was a story this quarter. Sprite has been doing relatively well, actually, for the last few quarters. The pressure is on diet, and the pressure is on brand coke, the main carbonated beverages. But the smaller package strategy is really helping sales because theyre able to get more pricing off of lower volumes thats the story with all carbonated beverages sprite was a nice bright spot. Also, its the noncarbonated, the juices, the coffees, the highend brands. Innocent, fairlife, which is their joint venture on milk, doing well thats what people want to hear from quincey how is high going to transition theportfolio coke having a negative effect on the dow, nowhere near what ge is having. Were joined by barry, chief equity strategist. Morning, guys. I wonder, just your take overall on earnings and how they compare as the dynamic versus tax reform right now. So, i think earnings are coming in quite good, and they are one of the primary reasons why the market has been doing as well the tax reform is clearly something that can help the market, but i think the likelihood that things get passed the way we have envisioned it is still pretty much up in air the markets are discounting some of it, but not a great deal. Because theres still substantial amount of substantial amount of risk but the bottom line is Global Economy. U. S. Economy, european economy, emerging markets every place we see continued strength as long as that is the case, the markets should do reasonably well barry, you go along with that and did strategists come into the quarter with earnings expectations too low this time well, we were looking for 125 this year against 106 last year and 138 next year. We have been positive on whats called the reflation trade thats financials, materials, the side of technology which are coming out of an earnings recession, and those industries have been doing fairly well. Barry, as you look at, we were talking earlier about the tenyear yield making another move higher. Multimonth highs. Are we in a zone where thats still going to be friendly for the overall stock market and your trade and what level of yield do you think it starts to potentially work the other way well, early reflation, if you can get it, feels like growth. Its a long way from being a problem in terms of yields not just the treasury but midgrade corporates as a discount rate for earnings whats really going on today and whats really important is the two Central Banks. The European Central bank and the fed and the transitions and changes going on there i can elaborate on that if youre interested. I think the key with the tenyear rate, at least today, it is extraordinarily dependent on the fed choice. So if we have a yellen reappointment, i wouldnt be surprised if the markets rally or the yields go down some, as a result because the uncertainty of having a taylor goes away i wouldnt read too much into what the tenyear note is telling us clearly, economic streth tells us the tenyear note should be higher than where it was earlier in the year. But the likelihood that it is going to 3 , which some of us are calling for, i think is too early for that you raise an interesting point. This morning, guys, jeff gunlack says its a moment of truth for the secular bond bull market, saying it needs to start rallying or else we have to start writing obituaries, and scott minor of guggenheim says the yield needs to go to three to violate the longterm trend whats the most interesting level to you right now actually, three would be well beyond just the trend. We have been in a down trend and the trump bump would have been part of a continuation of the down trend i do think yields get to about 3 im expecting a bear, but the fed choice, as the other guest said, is very important. Dr. Yellen would represent continuity that would be the happy meal for the market in terms of continuity, and remember, obama did that with bernanke, reappointing in late 2009 for continuity the other choice is the Taylor Powell combo meal thats going to shake it up. I think after the republican disarray this week, i think President Trump wants a little bit of continuity. Im leaning in that direction. I dont know. Theres more than one vacacy open on the Federal Reserve. He still has to appoint a vice chairman and others. No matter who he appoints, if he listens to any of the republicans, the center of gravity in the fed is going to move to a more hawkish position, is it not . I think the chair has enough clout, even today, to persuade the sway votes enough to kind of get their vote in place. Clearly, if a walsh or taylor are on the board, theyre going to have a bit of a problem, but i think if yellen is reappointed at the chair, i feel pretty good that it will continue. A lot of people, to carls point, where Central Bank Policy, which has been so front and center and priority for investors over the last few years, takes a back seat look at the earnings were getting, the fundamental economic numbers were getting not just here but all around the world. Doesnt that count more . And also, fiscal policy is back in play. Again, no doubt the Global Economy is at the best place it has been since the financial crisis i think we all agree on that having said that, thinking that were totally out of the postfinancial crisis era and Central Bank Policy is really insignificant doesnt really matter i think thats a bit of a stretch as well. Barry, you know, its pretty much by acclimation, everyone has decided we have this nice global recovery. Earnings are coming in pretty well, do the point i wonder how comfortable sentiment has become in february or march, the market was stalled out. Is that something on your screen its a late stage bull market i dont think we have quite yet complacency and optimism i have associated with past market peaks. But i did have aa look at the ce months experience of the board of governors if dr. Yellen were to leave in february 2018, you would be down to 121 months of cumulative experience compare that to the three decades average of 320 months. Last thing i want to go into 2018 with is a relatively inexperienced, understaffed board. So that also argues for continuity i think if youre looking for a market barometer, focusing on the tenyear note is probably not the thing to do. I would say focus on the dollar. If the dollar is moving in a meaningful way, upside, and it would if the things start heating up, i think that will tell us a lot more than a tenyear note. Its interesting that its barely moving right now. Well, as we said last hour, politico this morning reports unlikely this week, but dont take that to the bank. Who knows. Lets hope we get it before the president goes to asia thanks guys. Good discussion. Thanks. Well, boeing beating on earnings and revenue this morning, while also raising its full year guidance phil has more on boeings quarter and joins us from chicago. Hey, phil. Mike, its all about execution and bringing down that backlog as they increase production of the 737. We were out in the boeing facilities in the puget sound area a couple months ago and talked about how theyre increasing the production. Thats at sort of the heart of whats going on at boeing. If you look add the thirdquatorer earnings, it did beat on the top and bottom line. Earning 2. 76 a share. Revenue coming in better than expected at 24. 3 billion. The operating margin, 9. 8 , but its the operating cash flow and Free Cash Flow that will get a fair amount of attention when the Conference Call starts in about 15 minutes both were better than expected with operating cash flow at 3. 4 billion, and Free Cash Flow coming in at 3 billion. A billion better than expected as you look at shares of boeing, keep in mind the company is raising its fullyear guidance for how much it expects to earn, but this is primarily because of a lower than anticipated tax rate none the less, they are increasing their earnings expectation for full year earnings by 10 cents to a range of between 9. 90 and 10 a share. The expectation was for 10. 06 a share. That call begins in 15 minutes well hop on it and let you know if theres news coming out of the questions from wall street back to you. Well be anxious to get some color on that quarter. Thank you, phil. As we go to break, take a look at shares of chipotle the company sinking as earnings fall shy by about 30 cents revenue and comps miss steve says the company will slow down restaurant openings over the next year as they focus on, quote, getting the fundamentals right. Stocks having its worst day in about five years the biggest bull on the street will join us next with more on the quarter when we return dynamic performance, so you can own the road. Aggressive styling, so you can break away from everyone else. The bold lexus is. Experience amazing. Stay with me, mr. Parker. When a critical patient is far from the hospital, the hospital must come to the patient. Stay with me, mr. Parker. The at t network is helping First Responders connect with medical teams in near real time. Stay with me, mr. Parker. Saving time when it matters most. Stay with me, mrs. Parker. Thats the power of and. Chipotle sinking this morning on pace for its worst single day drop in about five years, after missing on both the top and bottom line, the stock down more than 25 over the last year it is down about 14 this morning. This is one of the companys largest share holders, bill ackman took an initial statement of 1. 2 billion a year ago. Thats worth about 360 million less for more, lets bring in sarah senior restaurant analyst at bernstein, who also holds the highest price target on the street last we checked 564 are you still, after this quarter, recommending investors buy it you know, this quarter actually was pretty close to where the consensus estimate was, if you adjust for some of the nonrecurring events that happened, whether its the hurricane or the clearly the onetime charges related to the credit card breach you know, store impairment, so stripping those out, it was actually pretty close to where the market was expecting and frankly, the source of the miss was higher avocado prices i think what were seeing is some shareholders or the market just really losing patience with this team because its two steps forward, one step back, as each quarter you end up with periodically sort of a onetime event that throws things off and stalls the momentum. That being said, you know, if you look at the underlying fundamentals, you did see a boost from queso you did see some pretty nice expense control on the g a line and frankly, you know, theyre talking about some things that should help drive top line a little bit more, you know, in an accelerated way in the coming quarters yeah, but i think the other factor here is that chipotle has always received this premium valuation. Still trading almost double where mcdonalds is trading versus next years earnings. Why does it deserve that val valuation with 1 comps. Very little meaningful margin recovery and sort of this hard to see recovery down the road . Well, i mean, on pe, at least on my estimates next year, its not trading at twice mcdonalds. Its trading at roughly 28 times, which for a Restaurant Company depending on what you think about the growth prospects, is fairly reasonable or at least in line with what a lot of other restaurants trade at and the answer to your question is, they are still adding units. Theyre adding 150 units on a base of 2200 its a midsingle digit pace of unit growth. And that is, i believe, a temporary sort of reduction in the pace of unit growth. Our analysis on how many units they could have certainly calls for Something Like, you know, 3500 so a lot more units versus where they are now and to your point, the 1 comp is not, certainly not what you look for in a growth company, but the fact of the matter is, with the norovirus incident in virginia, you know, they went from what was a 4 to 5 comp as they talked about in early july to a negative comp and so, again, you know, theres a little bit of an issue with the fact that just as they were getting momentum, it retrenched. I think that the underlying momentum was clearly coming back sara, do you not think theres some impairment of the brand itself if you say it can ultimately get to that full store footprint that you were anticipating even before all this, doesnt that presume that they basically still have a similar kind of customer affinity and all the rest of that that they can count on the new units performing well im wondering if this is a Company Problem or just a stock problem at this point. I think clearly there has been a Company Problem but my view would be that even if you take all that into consideration, theres still Growth Opportunity here. And the reason for that is new Unit Economics are still quite good so when you look at the profitability or the returns on their new units and certainly once they reach sort of a mature level, this kind of 2 million auv, which is where they are now, not presuming any kind of improvement from here, again, the returns are very respectable. Sales to invest of capital almost three times you have, we think, 20 , the margin is very reasonable for the margins. It certainly supports more growth from here, even though it clearly is less than where it was a couple years ago sara, some of the more bearish calls in the past week or two have pivoted around labor costs. How much of a liability is that . How do you rank it you know, everybody in this industry is seeing 3 , 4 , 5 labor inflation, and chipotle is not going to be different. That being said, if you look at their labor costs relative to their volumes, for a very long time, you really did nlts see them getting any benefit from the big increases in volume. You would typically expect a lot more leverage than what they saw. That tells me that there wasnt a lot of efficiency in their labor scheduling you know, in their labor matrix. Yes, they have the same headwind as everybody else, but they also have in my view some latent pricing power, and well see if that takes hold as they roll out more price and they also have, i think, more opportunities for Company Specific efficiency initiatives than a lot of other companies dont. I would take the other side of that in the sense of every Restaurant Company, especially every Company Operated restaurant, is going to see some pressure from labor, you know, chipotle is one of the few that may actually have some appreciable offsets. Making the bull case, sara. Thank you for coming on on a day where chipotle shares are down 14 . When we return, it has been two years since nike last held an investor day. In that period of time, the Worlds Largest Athletic Apparel company has seen its stock price fall, its north American Market share decline. What does nike have to do to convince investors of a turnaround also, dont miss an interview with Ceo Mark Parker coming up later today on closing bell. 4 15 eastern stay with us investor day in over two years as the company navigates through a much different landscape with increasing competition, especially here in north america, and decreasing market share. We were there back in 2015 the stock was near a record high at that time nike said it would get to 50 billion in total revenues by 2020 well, today, were expecting an update on that number, perhaps even a moderation based on what has been happening since that investor day, the stock has fallen 15 the market rallied 30. Its happening off Slower Growth in the home market a major transformation in the company pivoting to focus on big cities and direct to consumer business and guys, heres one chart to keep in mind as we look for answers from mark parker today this is the adidas sales outpacing nike, just in the last few quarters or so you can really see what been going on adidas is touting its lifestyle sports wear, the whole athleisure trend moving to a more stylish phase nike says you cant separate that from sports, but well wait to hear what nike says, mike, not just about the new targets, where the business is in north america, and how much Faster International growth will power the overall business china and europe have certainly been a bright spot, and then of course, whats in the innovation pipeline what are they excited about, whats coming next thats always been a driver for nike stock you wonder how much the street is waiting for the pendulum to swing back from fashion to more of a pure sports athletic innovation focus. The stock, really, the street is neutral on it. Not as many kind of buys on it as you normally see for this stock. Also, relative to the market, the valuation probably hasnt been this low since about 2010 a lot of that premium has been drained. I think that the street kind of expects a moderation of longterm targets. The 2020 targets on the books are not really in reach at this point, so theyre going to have to revise down speaking of down valuations, it comes on a day where under armour shares are at an all time low, having been issued in 2016. And an amazing chart to look at if you go back to the last nike investor day. I said nike shares were down 15. Over that time period, i think we have it, all three of them. Under armour shares are down 67 . And adidas shares are up 150 . I mean, that is a crazy divergence in the various Apparel Brands nike would say that adidas is coming from a much lower base, and it still is completely dominant in north america. But that adidas turnaround, i dont think was expected no, and i mean, i also think that under armour, which was considered so unbeatable and they were going to take on category after category back when it was at its peak, and its completely washed away that story. Quick programming note before we head to break dont miss our exclusive interview on closing bell with mark parker. Hell be speaking to investors and talking to us exclusively on a lot of these themes. So much to get to. Nba uniforms, hot topic. But mostly the stock price and where the business is headed yeah. As we go to break, take a look at shares of at t the Company Reports a miss on earnings revenue with losses in the video subdivision. Fewer wireless upgrades. Stock down almost 3. 5 first, what the democrats tax proposal bill means for the republican plan. If the dow is down 53 today, its not much but the worst point loss since september 5th back in a minute it can detect a threat using ai, and respond 60 times faster. It lets you know where your data lives, down to the very server. It keeps your insights from prying eyes, so theyre used by no one else but you. It. Is. The cloud. The ibm cloud. The cloud thats designed for your data. Ai ready. Secure to the core. The ibm cloud is the cloud for business. Yours. What is an answer and how can you measure the value of one . Today trusted answers from trusted sources are rare and precious commodities. And when industries are undergoing massive transformation, opportunities are only opportunities if you can find an answer that separates fact from near fact. Thomson reuters provides you the intelligence, technology, and Human Expertise you need to find those trusted answers. The answer company. Thomson reuters. Good morning, everyone im sue herera heres your cnbc news update at this hour. Former white house chief of staff Reince Priebus is back at work at his old law firm priebus, who had a rocky six months in the trump administration, also tweeted this morning he will be giving paid speeches. Airlines are getting ready for new security rules, which go into Effect Tomorrow u. S. Bound passengers using overseas airports could face short interviews at checkin as part of the new procedures the rules are expected to impact more than 300,000 travelers every day. Feeling a bit tired at work today . Well, according to glass door, only 26 of fulltime employees say they get the recommended eight hours of sleep a night two thirds of workers say they would be better at their jobs if they did get more rest despite pressure to curb costs, college is getting more expensive. Prices for tuition, fees, room and board at a fouryear public and private college hit a new high this year, rising by 3 for instate students and 3. 6 for private universities on that cheery note, thats the news update at this hour ill send it back to you you and i have to collaborate. Were going to have multiples in college at the same time true enough thank you, sue sue herera were getting Oil Inventories breaking lets get to jackie deangelis. The department of Energy Reporting that crude Oil Inventories roiz last week, just under a Million Barrels. This is not what the market was expecting. It was looking for a draw of 2 1 2. You did have a draw down in gasoline, about 5. 5 Million Barrels. You can see prices are a little lower, but staying over the 52 mark youre still seeing the support baked in there what was important was u. S. Protection we saw a Million Barrels come offline last week as a result of the hurricane effect those barrels now back online. Were back to 9. 5 Million Barrels a day. Close to peak levels final points i would mention in terms of why the price is staying over 52. You have the comments yesterday from the Saudi Oil Minister extending the prospects for an extension of the output cut raising the prospects, and of course, the tensions in iraq are on traders minds. Thank you for that. Jackie deangelis democrats releasing their own tax bill proposal this morning as republicans try to finish their own plan our ylan has been following the story and joins us with more from washington. Morning, ylan. Good morning, karlg democrats want to lay down their own markers in this process and not just because republicans are crafting a bill now, but also as they look forward to their platform for 2018 and beyond they are focused on four areas midclass tax credits, education, child and elder care, and retirement representative richie neal, who is the ranking democrat on the ways and Means Committee called this a tax code founded on fairness, not based on who you know or how wealthy you are. So taking a swipe there at the republican plan with those comments his proposals include expanding the earned income tax credit, letting you exclude your student loan payments from your taxable income, also a bigger tax credit for child and dependent care but this tax train may have already left the station speaker ryan spoke to reuters this morning and said he would have to gut the Growth Drivers in his plan in order to win over most democrats, but he did hold out the potential for a few getting onboard. I do believe some democrats will end up voting for this thing. Its hard for me to imagine somebody representing a state like my own, like in indiana or north dakota or missouri, would vote against this kind of tax relief for their citizens, for their plfrers, for their Small Businesses the house is only the first hurdle getting this passed in the senate is going to be a lot trickier, particularly now that republican senator jeff flake is retiring, and proving he has no qualms about bucking this president. Guys, the senate is expecting to unveil its own version of the tax bill in the coming weeks the house is rolling theirs out on november 1st, so well get a better sense then of how close these two chambers really are. Thank you for that setup. For more on the tax debate in d. C. , were joined by lonny chen, stanford director of policy studies, and alexander thornton, senior director for tax policy add the center for american progress. Good morning to you both lonny, take the flake angle this morning. Flake, mccain, corker. How much of a swing is there right now . I dont know that there is very much, carl. I think the reality is while these guys have issues with President Trump and they have expressed those very vocally in the last week, from a policy perspective, i think that they are pretty much in the same camp as Mitch Mcconnell and paul ryan i dont see a lot of deviation there on policy. So while there might be a personal issue with the president , i have a very difficult time seeing them voting against tax relief, voting against the tax reform package because of a personal grudge match now, one can never tell. Its washington. But fundamentally on the policy, theyre still there. Now we have the journal with a piece up about a breakfast that kevin brady spoke at this morning. He was asked about the president s tweet about 401 k s, alexandra. Arguing there would be no change and brady appears to suggest that, you know what, its still on the table how much do we really know nothing seems to be really firm at this point. Well, i think thats right, because the math really isnt adding up for them and theyre trying to look for ways to pay for these huge tax cuts for the wealthy and for kopgzs i should also point out those actually are not cuts that will create Economic Growth or jobs because effectively, for example, the Corporate Tax cut would be a tax cut for existing investments. Its hard to see how that would contribute to Economic Growth. Yeah, and its also hard to see how this wouldnt add to the deficit. Independent analysts at this point are saying, alexandra, 2 trillion to 5 trillion. How are the republicans going to be able to vote for that well, i think thats exactly right. Now, they seem to have proposed some things to offset it, but theyre having trouble, as you point out, with the 401 k proposal theyre having trouble covering that cost. The budget that they passed would allow 1. 5 trillion in deficit finance tax cuts, but their plan is much more than that, and its hard to see how theyre going to cover that. Lonie, is 1. 5 trillion over ten years truly the budget, so to speak, for the tax cuts in other words, if you make these other growth assumptions, is there that stuff in play in terms of perhaps getting a bigger tax cut on paper at the outset and saying youll make it up on growth just exact hoe how many payfors are we looking for, do you think . I think there have to be enough to be in the ballpark i dont think they can be dramatically off some of the estimates we have seen, you know, if youre off by a trillion dollars, thats a problem, right so theyre going to have to be able to get in the ballpark here but this highlights, this fight were seeing over 401 k s and retirement savings, this illustrates just how hard tax reform is, and the reasons why its difficult because once you start digging in to individual provisions that affect actual people, actual taxpayers, you end up with political interests. You end up with challenges to looking at specific things are you going to get rid of this, get rid of that . Youre affecting some constituency, and i think were seeing the impact of that with the furor and uproar over just this provision alone alexandra, given that were expecting some legislative text on november 1st, essentially next wednesday, do you think we get it and if we dont, how much of this is off the rails, if any . Hard to say i mean, presumably, theyre working behind closed doors. Theyre not including democrats in that, and the budget they passed doing it under budget reconciliation means they wont really have to work with republicans to come up with something. They also are in control of the house and senate they can affect what assumptions are made, what budget gimmicks are used, what baseline they use. So i suppose there are a lot of things they can do to help themselves out, but the bottom line is it will blow a hole in the deficit and were going to end up paying for that down the road, most americans will in the form of cuts to medicare, medicaid, housing, education, which you were just reporting is so important because of the costs are going up, and many others seniors will lose out. There are many ways this could harm Many Americans who voted for President Trump. So lonie, on that point, both parties have threatened that the midterm elections are at stake and the republicans grip on power could disappear if they dont pass tax reform. First, is that the case . If it is, why do democrats, to ylans take, have any insentive to work with republicans to get the tax deal done . If it fails, theyll just recapture the house if you believe that i do tend to agree with the school of thought that republicans have to get something done, and tax reform is a priority going into 2018. And so i think it is imperative that they do i think the only incentive for any democrats to work with republicans, and i think youre right, by and large, the incentives arent there. If there are particular democrats in states that donald trump won, so were talking about democrats representing states like west virginia, north dakota, in the senate, both of which are represented by democrats, those democrats are going to have some incentive to get on board because of how popular President Trump is in those states if they get onboard, its strictly because of politics, and i do think that theres a possibility, as speaker ryan said, that some democrats do vote for tax relief. Well, through that lens, alexandra, to put a coat on it, its no surprise that the president went to pennsylvania to announce that or at least to argue that Corporate Tax cuts would result in an average median household hike of thousands of dollars i think as voters become more familiar, theyre going to be paying attention now that the tax bill is theoretically actually moving. I think when they find out that Corporate Tax cuts are going to benefit shareholders and that 35 of those shareholders are foreigners, as we learned the other day from a report that came out, i think theyre going to start having second thoughts about whether they think this should be done, and its hard to see how democrats in those states are going to be able to support whatever tax bill comes out. We have an eventful couple weeks ahead of us on this front. Well see what happens thank you so much for your time. Thank you thank you coming up, former twitter Ceo Dick Costolo joins squawk alley as the Company Announced new transparency measures and its appearance on capitol hill in november. But first, checking in on stocks pulling back, the dow is, from its record high where it closed yesterday. Ge is the biggest percentage loser again. Tech is actually the only bright spot in the s p right now which is down about a half a percent its the only sector thats higher 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. All right. Just how much juice is really left in this stock bull market one technician reveals the answer in just three charts. Go to trading nation. Cnbc. Com to see it more squawk on the street coming up. Building a website in under an hour is easy with gocentral. From godaddy in fact, 68 of people who have built their. Website using gocentral, did it in under an hour, and you can too. Build a better website in under an hour. With gocentral from godaddy. Lets get you out to the cme in chicago where rick has the santelli exchange. Good morning, rick good morning, and thank you, mike i would like to welcome my guest, ben, thanks for taking the time thank you nice to be here. All right you know, you like to talk in global terms and you started your career out at the Federal Reserve board and spent some time at the Federal Reserve bank of new york are we at a crossroads with Central Banks . And will it be by necessity synchronized or is there no way to tell . I think the facts on the ground is that this has been a somewhat synchronized tightening in Monetary Policy theres the fed to begin with. Where we have had this conjecture that they would resume hikes in december thats mostly priced at the moment and will likely continue into next year, but its not just the fed its the ecbu, which is in the process of communicating a pivot in policy. Its the bank of england its the bank of canada. Its the Royal Reserve bank of australia. I see this as somewhat of not to coordinate it, but a synchronized tightening of rhetoric and actions its interesting you said that because i dont disagree. I just think its going to be very tough for many. I notice one name you lefted off, bank of japan lets put that aside for a minute tomorrow is the ecb meeting. Do you think indeed that mario draghi is going to get detail specific on reducing the Balance Sheet . Its out there that its going to go from 60 billion to 40 billion, but rates lower for longer are those pretty much whats built in in your opinion yeah, i think i have a view that most other Central Banks are going to follow the protocol laid out by the fed more generally, so i think that as the fed communicated on exit from unconventional policy, it was a very very hedged manner of communication. On the one hand you tighten by pivoting down policy on the other you think about affecting Forward Guidance to move in the other direction. The idea is exactly to tighten financial conditions but not to overtighten them and not to do it in a sudden manner. I think that would ab reasonable expectation thinking about ecb tomorrow. One thing i think weve all learned, that if there isnt some kind of synchronicity, if thats a word, with respect to Central Banks, the market takes care of it if weve cut back, for example, on quantitative easing but other Central Banks are doing it, it still all comes out in the global wash. My comment now, lets include the bank of japan. Their meeting on the 31st. I dont think they are anywhere near reversing with abe in power for another turn, i think mr. Kr kuroda is going to be in power your final thoughts on japan. Maybe its time looking at bond yields, tenyear treasuries, to revel in the idea economists might be right for a fleeting moment. Every year we come into the year saying bond yields look low to where fundamentals are this year its been an about face weve had a Global Growth story thats taken take step up and maintained that momentum if anything, theres upside risk to that. Monetary policy tightening in a synchronized manner. Upside risks there as well so i think the bank of japan in some sense is along for this ride but they are going to hold back as much as possible so far as maintaining that peg at the tenyear point to zero in order to affect as much stimulus as possible before they are forced to move peru thank you very much, ben interesting. A couple of days well know more about both those topics ecb and bank of japan thanks for being my guest today. Mike, Rick Santelli, back to you. Ceo going to join us. Strong earnings, stock up more than 5 in the early trade the question is how much of this is due to outperformance in security that was the best performing unit Cloud Security were going to dig on that and more coming up on squawk alley. James murdoch ceo of 21st century fox speaking on stage with our own Julia Boorstin who joins us with more julia. I just got off stage. He made headlines on recent controversy over former fox anchor bill oreilly playing 32 million in a settlement over Sexual Harassment allegations. James murdoch said the settlement was news to him and defended the companys firing of oreilly he said it was easy to say that the company did not know what was going on, but he said it was news to him that 32 million number he thinks the real issue is how fox handles these type of things with the firings of bill oreilly, roger ailes, he and the rest of fox hopes to send a message to the company that the behavior isnt tolerated he does expect the sky deal to be cleared in the next year. He dodged a question i asked about the latest concern about 32 million could affect approval of the sky deal as for the broader challenges facing the media landscape, he says hes not concerned about cord cutting he thinks were in the process of rebundling, although a la carte out there, people will want new digital of sorts. As for competition from netflix for original content hes not concerned. He asked about declining nfl with Credit Suisse warning it could hurt foxs bottom line he thinks oversaturation of football but hell wait to see how the season checks out. Back to you. Thats a lot of good information. Thanks, julia. Dow is down. Worst day in about seven weeks well be back in a minute. Today, smart planning is helping the new new york rise higher than ever. As the world leader in unmanned aerial systems, were attracting the worlds best talent to central new york. And turning the airport into a firstclass transportation hub. All while growing urban areas into vibrant places to live and work. Across new york state, were building the new new york. To grow your business with us in new york state, visit esd. Ny. Gov. To grow your business with us in new york state, yeah, i got some financialbody guidance a while ago. Howd that go . He kept spelling my name with an i but its bryan with a y. yeah, since birth. That drives me crazy. Yes. Its on all your email. Yes. They should know this . Yeah. The guy was my brotherinlaw. Thats ridiculous. Well, i happen to know some people. Do they listen . What . Theyre amazing listeners. Nice. Guidance from professionals who take their time to get to know you. You know win control . Be this guy. Check it out selfappendectomy oh, thats really attached. Thats why i rent from national. Where i get the control to choose any car in the aisle i want, not some car they choose for me. Which makes me one smooth operator. Ah still a little tender. vo go national. Go like a pro. Welcome back to squawk on the street. Tech down the least. Leaders include total systems servi services that does it for squawk alley, back over to you. Good morning. 8 00 a. M. Amazon headquarters in sanlgts, 11 00 a. M. Wall street. Squawk alley is live , 11 00 at squawk alley is live , 11 00 at squawk alley is live e, 11 00. Squawk alley is live a, 11 00. Squawk alley is live t, 11 00. Squawk alley is live t, 11 00. 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