Transcripts For CNBC Squawk On The Street 20240713

Europe is a big week personal income and spending is roughly in line. Our road map begins with apple, nearing an all time high, expanding ipad and air pod demand, Services Growth offsetting that demand social media twitter banning political ads, facebook defending its decision not to, saying, quote, its not all about money, facebook shares by the way rallying on those earnings head winds, markets are set for a mixed open, a report about chinas longterm doubts about a trade deal with this white house. Well begin with apple, though, higher than better expected revenue, despite iphone sales, results got a boost from stronger demand for ipads and air pods as well as growth in services they are issuing upbeat quarter guidance jim and josh lipton talked to tim cook about better sentiment in china as well. I was surprised with that, when talking with tim and with josh and on the street the whole tone of the discussion was that things are pretty much on track, more than we realize optimism by tim cook countered, of course, by blind stories involving chinese officials who we do not know, who are saying, listen, there is no real longterm plan that i totally discounted that what i care about is boots on the ground thats tim tim cook is selling a lot of phones everywhere. Now, its china is not as great as youd like, but does it really matter . This is not a phone story. When they decided that they were no longer going to release the granularity of the phones, most of the people i talked to said, ha ha, thats because phones are bad. What the reality was exactly what tim cook said, which is that phones are only a piece to the puzzle now i listen to service revenue. Its no longer just as big as a toaster kind of thing. Thats what they used to do, say its as big as a bread box no this is a company that has a multiple thats way too low given the fact that its consistent and that china does not seem to be the be all and end all of whats going to happen. The bears argue its exactly that the multiples had an incredible run just this quarter. So where should the multiple end up if were 20 now 21 geeze, i dont know, this is a weak quarter a transitioned quarter this is a quarter thats supposed to be bad weve got 5g ahead of us they had a camera three triple camera that people felt didnt really mean anything those of us who like to take pictures at night. Some can take pictures at night. Some said a battery light. Big deal it turns out, geeze, i cant run the battery down, what i said to tim was, hey, how about the air pod . Whats the deal with the buzz . Can we get them . The pods no, the answer is they will get very hard to get the Noise Cancellation one of the things he said to me was we are running foul out for watches, number out for watches . Watches are a big part of the business now so i say, if were just going to be bound by the four walls of the number of phones that are sold, were going to miss the fact that this thing might get a 22, 23 rollover. 22, 23. What about the fact that operating expenses growth are now exceeding sales growth look. I will keep hitting these things to you you will bat it away. I say own it, dont trade it. So far i have been right since i was 5, whenpy daughter told me she wanted a second ipod, one was pink she needed a blue one because they were jewelry. When you talk to tim cook, i say listen entertainment i dont know i mean dont have you as to buy the nfl or whatever i threw out stupid things because i like to hear myself talk he said, listen, were not going to buy a catalogue buy a content company. Were going to develop, like that unbelievable interview you had that fullday interview on hbo. Full day. Anyway, he said we wont buy a catalogue. We said how about the longterm value of a customer . Lucas said, jim, i like the longterm value. I used to ask the service question every single time now on long term but the credit card, i mean, i dont even have room to talk about the credit card. They have a credit card that people take in this is not the magnesium card this is being taken out of the pockets by millennials. Did you, david, did you pay your bill this month . My fico score went to 480. Who knows maybe we did who knows. I like to look every morning how how much i made. People say how did you get rich . Its because of look at my score every day. I am fought really rich. I think its morpt to recognize this is a quarter its important to recognize this is a quarter, he said hes coming down with a cold well, as far as targets go jpm goes to 280. Right webb bush and davidson 300. We have handles on targets now. That makes sense. How people are completely right. She is talking about the serviceing a seg racing. I remember the last quarter we started to hear about service deceleration every time you want to count this company out or say there is something wrong, look, we saw a bad review of a tv show. One tv show, apple plus, stock went down 5 on a bad review are you kidding me thats odd. This shouldnt have any impact whatsoever, you would think. None. In their efforts so far in streaming. We said, well see, you got to give it time like a lot of other things they have done and five years from now, we may be sitting here with a very different narrative about apple tv and its success in streaming. Right now, its not much of anything. This is a Delivery System its a fantastic Delivery System we used to talk about racer razor blade. Im tired of that we talk about Cell Phone Service david, i dont know whether you paid your bill yesterday for cotton, apple cares. It comes with its something that comes through, 299 here, 299 there its netflix. Then they do Something Else it was like 3 20 a. M. Benefit yack called me benniac called me the second time he likes the disney light sabres. Theyre very heavy. He does hows the book going for him . Do you turn the phone off at night . I keep the phone on, hey, man, how are you doing . 3 00 a. M the phone is in the different room its not in the bedroom. Thats a different strategy you get up to go to the bathroom in the middle of the night, you have it begging you to pick it up you do. You got to get the phone away from yourself. Why i need to be on every single second of my life. Thats whats really important work, david, is everything yeah. Of course it is, when you die will be happy you spent as much time you wont have any regrets. You worked too hard the only thing you will have is three hours of sleep you get every night. I cant get face id id to work you can help me get that tony saginagi who you leak, youve taken some shots. He is so nice he says q1 revenue guidance is somewhat reassuring, we think apple material 8 plus head winds for the phone. Meaning weakness and aphone weak ness remains a key wild card. He will face the research honestly, this was one of those stories that it, look, its clean across the board as katie said in my discussion with tim. You know you sit there you say, i have like 20 questions i want to add, josh asked 13 questions, 20s hard hitting questions i get down, hey, you know, you know, that was a credit card i mane, there is nothing like most of the time, you have a background call and there is like wow, one, two, boom, booming boom, no, whered you buy the stock . What price did you buy a lot of stock . This company is bulletproof. Now, i know as soon as you say that, thats the end, but people have been saying that. I mean there are still risks there are risks. There are always risks. Thermo nuclear war, always a factor you have a president that hasnt ruled it out right . Honestly, the number is in apac. The number, do you know that they had a billion dollar, billion dollar foreign currency issue . Billion dollars billion dollars but yeah, i know, but its a very large company. Im saying, the dollar got weak, what kind of number would they print anyway, i thought it was very special. I went to sleep with it last night. We are actually watching the dollar here, see if it breaks 97 we would have wide ranging implications well watch apple. Facebook is the other big story getting a lift social network betterthanexpected results on the top and bottom line, beating forecasts for average revenue per user the company says the facebook app had a particularly strong quarter. Mau is up 8 to 2. 45 billion. Jim. A lot of this over shadowed by twitters announcement minutes before the call they be ban political ads. Something they disagreed the day before 140 businesses in power. Mark zuckerberg starts with that i really like that heres a stock that if you gave it a 20 multiple, it would sell at 220 i mean, its trading under 20 times gap earnings, right . Its crazy, david done you think its crazy . Their guidance was higher than had been anticipated. Their op ex, a lot of investors were focused on operating guidance would be. They gooded top x growth of 32 to learn the . That 37 maybe you could hit better toplus or 45 growth thats not going to be their capex guidance lower than expectations yeah. Theyre for, everybodys cash flow numbers are moving up at some point the engagement metrix, there has been no slow down, no slow down in engagement whatever its on the old the facebook platform or instagram, of course, we talk so often about. So as you just indicated, saying stock trades below 20 games i tim 20 times gap. Gap earnings when youread through the beginning of this call, its really zuckerberg existential talking about the need for free speech i liked it i liked the empowerment theory i like the fact that you understand his view on political advertiseing yes, i do you do . Yes, i do yes, i do. He is talking on writing an editorial about it its the most powerful platform for distribution you could argue, period. Right right. Why shouldnt it be held to the same standards of all the other platforms are in terms of at least making sure the claims that are made in political advertising are not outright lies okay. Why . Why is that a free speech thing . Look, i know the most powerful platform there is for delivering information. Targeted information. Thank you to, okay, the world the electorate. Look, okay, let me give you an answer to thattheyre debating that right now. Thats why i like this call. Theyre debating this, no, they r. Theyre debating you think peter teel and Mark Andreson liberals on the board will change their mind for the values since the company was founded . They did take down 50ple hours. Free speech i get that but i dont understand where this argument goes you mean are they a Greyhound Bus . Should they be regulated why dont we just go to the Supreme Court . Eventually, thats where the multiple thats where its going its going to the Supreme Court. Eventually these things will be regulated how can you not regulate it . They devote a huge amount of time to why things are going to go bad because of regulation it was an incredible discussion. Incredible about all the things that can go wrong. Zuck basically says they are at the heart of it, at least the antitrust part. Instagram, hes focused more about all of the businesses built around instagram and a little mess about free speech. Free expression. Listen, i dont dismiss the difficulty of parsing sort of how you do both. But, well. Allowing outright lies on your platform to be propagated by all in all ways in terms of influencing, we know how influential this platform can be. Why dont we go to back to what Mark Elliot Zuckerberg says free speech you cant yell fire in a crowded theater . What are you Oliver Wendell holmes i will be if you like many zple how about putting the troop transport time tavenlts right now content is about political ads him should we block them with political ads google and platforms run the same ad. Most Cable Networks run the same ads, thats required by law to run the same ad. Is that not relevant is that not relevant thats exhibit a yeah, thats exhibit a. But we dont run ads that say, you know david, thats it what are you like foment dont foment he crushes it. This is why people are asking why twitters move forces zuckerbergs hand. They cant get metrics out of twitter. It was an ad that literally had lie after lie after lie complete total to be brickss nobody said you cant post it or write it for free you just cant pay to have it targeted to the people you think will believe it. Hire another 50,000 people which, theyll do it i mean, look, im not debating that theyre not debating. They are trying to wrestle with it his free speech position in georgetown it was as good as the Marshall Plan announced in the commencement speech. I kind of disagree with you. Its overstating the situation. But it was a good speech he is talking about free speech in their role. Hes debating it now, if mark benioff were here said instead of calling me at 3 00 am allege, theyd say there is no truth. I am saying this is a different facebook they are debating these issues why doesnt nobody believe me . If you say, believe me, if you say theyre thinking about this i trust you i do theyre thinking about i. Theyre not the evil empire. Theyre not the evil empire. Its not the soviet union. When we come back, well get cramers mad dash, count down to the opening bell so much to get to on this thursday morning take a look at futures here. Awonhetrts ckba after a break. Ah come on lets hide in the attic. No. In the basement. Why cant we just get in the running car . Are you crazy . Lets hide behind the chainsaws. Smart. Yeah. Ok. If youre in a horror movie, you make poor decisions. Its what you do. This was a good idea. Shhhh. Im being quiet. Youre breathing on me if you want to save fifteen percent or more on car insurance, you switch to geico. Its what you do. Lets go to the cemetery by the way, shes the it wasnext mozart. G day. As usual we were behind schedule. But sophies enthusiasm cannot be dampened. Not even by a runaway donut. We powered through it in our toyota prius. Because a stars got to shine, no matter what. Its unbelievable what you can do in the prius. Toyota lets go places. Annoepidemic fueled by juul use with their kidfriendly flavors. San francisco voters stopped the sale of flavored ecigarettes. But then juul, backed by big tobacco, wrote prop c to weaken ecigarette protections. The San Francisco chronicle reports prop c is an audacious overreach, threatening to overturn the ban on flavored products approved by voters. Prop c means more kids vaping. Thats a dangerous idea. Vote no on juul. No on big tobacco. No on prop c. [ music playing welcome back to squawk in the street. Time for a mad dash. We get you ready for the opening bell about 11 minutes from now so many different earnings on apple and facebook lets get to dupont. I think there the another worldly moment going on, almost everyone i heard who chattered after the fed said, well why does he really have to cut why dont you look at a company like dew pont . Almost every line except for the lines that are not cyclical are troubled its certainly not dew ponts fauld, transportation is not that good. Have you construction not that good what is good nutrition, you know the line i really like . What . I like the skrcellulose line why because when you eat a beyond meat burger, that taste is cellular, emuscle fire, dupont emulsifyer, dupont. That is a secular story, cow versus wood product. I like wood product with ketchup. No lets be honestly, organic sales minus 2 offsetting macro price. The fed has to cut because Industrial America is not doing well yes, its true walmart is doing well look at this, this is why a Federal Reserve cuts, david, look at that, look at that line i am drawing, how fabulous and powerful, clear that one. I dont nderstand they are doing a great job. What has to happen they have to split up the nutrition split, we have been talking for years the value resulted as a split of dupont. That has happened, they got together, split up so far dow created a lot of value you want to point that out, you got me on that one. How much time did we spend on that the banks, lawyers, everybody was advised on this thing, activists, all of them you are negative, man, i was just talking about the fun the right to fed cut, a negative, man. All right a a downer beyond meat, david. Cellulose. Thats why it has that great taste. You learn something new here every day, you got to admit that, right, folks we have opening bell next. Heading into retirement you want to follow your passions rather than worry about how to pay for longterm care. Brighthouse smartcare℠ is a hybrid Life Insurance and longterm care product. It protects your family while providing longterm care coverage, should you need it. So you can explore all the Amazing Things ahead. Talk to your advisor about brighthouse smartcare. Brighthouse financial. Build for whats ahead℠ brighthouse financial. 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Com grow most people think of verizon as a reliable phone company. woman but to businesses, were a reliable partner. We Keep Companies ready for whats next. man we weave security into their business. Virtualize their operations. woman and build ai customer experiences. We also keep them ready for the next big opportunity. Like 5g. Almost all the fortune 500 partner with us. woman when it comes to digital transformation. Verizon keeps business ready. [ music playing you are watching cnbc squawkon the street, the opening bell in a few minutes. A new tweet from the president just now, china and the usa are working on selecting a new site of signing of phase i of the trade agreement. About 60 of the total deal he says after apec and chile was cancelled. A new deal will be soon. President trump and president xi will do the signing. Its a mind story which says that we all believe from a couple chinese officials and we have no idea what they were saying they did say pompeos speech was ar gant, a smear, a vicious attack. Listen they have been using cold war language the whole time since the october 4 speech of last year by pence, they have been saying listen you guy versus started a cold war and so well play cold war ii. Im saying its not all blind sources say today. Right look, you go back to the talks initially with the Old Soviet Union and when you talked about nuclear disarmament. There was a lot of talk about hey we hate you, you hate us remember, reagan when he got the great deal was trust and then verify i look at i do think the chinese better do some sort of pmi came in 49. 3. That was the weakest since february given their numbers are phony, youd think they can phony it up better i think the chinese is not necessarily, i dont regard them as a council of nations. We let them into the wto we thought they would be demock ra adverti democratised. We can all agree, carolina is not a democracy. Wasnt that the point i dont want to belabor this. You sound like pompeo, in response they took advantage of our good will. To be fair along the way there were moments when that appeared to be more likely than not. But it hasnt ended up there look it has developed their economy to become number 2, conceivably number 1 in the world. Can we look at elizabeth warren, her platform, she dislikes the chinese as much as trump does on when it comes to stealing workers jobs, but she also talks about how they destroyed the air. She gives you a 2fer. We are doing that here now, too. What, in california in general. If theyd cut the darn trees. We are rolling back a lot of regulation and pollution it has no finer particles thats the opening bell, s p 500 staying the same nonprofit giving Homes Mortgage free to veterans and their families pharma focused on therapys to treat ocular surface diseases. All right. So well see how the president s tweet moves to open seconds before he says read the transcript im getting my macout. I carry it at all times. I do know that. Who the heck knows . You want to weed out the fine particles. Because of that pest problem with 3m. The mask wont help. The president , i think he, look, he watches tv. He watches the futures, it matters. Saying things are all bad. I think the Peter Navarro camp is resigned to the idea there will be a deal resigned to the idea there will be a deal a phase 1 even the hardliner catch resigned they accept it might have to happen they would like to obviously ease executions for people that sell fentanyl here they execute for white collar crimes why cant they execute for drug deals . You this i the december 15 tariff itself come off or get delayed . I think it keeps going on i think the president has to have one more listen were going to 35. He has to look like hes won you know the idea that the chinese cant lose face, i mean this guy, hes never losing face do you think this phase i sounds like more than half of the whole thing as he just said . No, 66 i think thats questionable math, dont you i dont know enough i think phase i is smaller. It seems high. Remember the chinese first we heard from Anonymous Sources they didnt even believe in phase i. Right they didnt believe in phases. They wouldnt say the word phase i. They didnt loo tech word phase. Theyre incredible plenty of earnings to get to i dont know where kraft heinz is up 6 raising prices for lunchables, oscar mayer and filmily cream cheese even with organic sales down onesix zblth sales down 4. 8 . They had a negative currency impact well, mack rhone and cheese macaroni and cheese mac and cheese is up what was lower, natural cheese, so what kind of cheese do they have they have velveeta. You know that franky down the block in that fullout was stacked with chef boyardee and velveeta this stock has a nice little pop. I was surprised ebitda decreased, thats a inwith i mean the fact that this company isnt falling apart, people like. And i cant believe they put a price increase for philly cream cheese falling apart listen, they were pay lotted for their zerobased bucketing, of course, for their focus on comforts and there were morning, there were those that warned you cant just cut cut cut you need to spend some money on things to sustain your brands or even find ways to reinvigorate those brands i agree and thats what happens i told you to get the unilever deal done. That was a great moment to sort the stock if you had the guts to do that. Today a better day for us. How about a couple losers etcy talking about Free Shipping costing them money i think this is shortterm but its been bad. How about my travel trust . Lets go right to twilio, they had accounting issues. They were minor, they had slowdown i believe in twilio, but this was a terrible call and jeff has a lot of customers there i have to put it in suboptimal line wayfair as well the loss was not a expected, bu [ audio technical difficulty ] you dont have as Many Division divisions. They are relentless except for this one competitor strong and silent. Satya nadella. Microsoft ceo. Tough as nails, black teeshirt. So when you aggregate wayfair, etcy, twilio, grub, shop, beyond, i mean these firsthalf growth ideas, when do they come back sheesh, i dont know, theyre all in the penalty box look, i thought he did a good job on beyond meat the ones you just talked about, i think that one can actually bounce as millennial Stock Traders who do love it twilio as soon as you hear they had growing pains, weve reve reverted to fang fang was really never a way, it was kind of being mistreated and treated as a piniata sort of like zuckerberg were treated piniata i didnt get a chance to watch much of the mullenberg hearings i listened to your analysis. I listened to phil lebeau. You got to listen to phil. It was tough. He was treated pretty tough by phil. In the hallway. Phil is coming after ou i dont think mullenberg planned on answering any questions. That was good reporting that was mike wallace, line 1, see you later. That was interesting. Guys, i want to update a story a couple weeks ago activism president ish from elliot and deshouldnt in there as well. They do announce earnings this morning and an update on their strategic review, which has some news involved. You can see the stock is selling off rather sizably it was a few weeks ago i said likely to immediately initiate a spinup speedway. Continue to review potential divestiture in some fashion of the midstream assets and mr. Fenninger, longtime ceo expected to step down. Thats what happened this morning. He says they will retire in 2020, for hemminger and the speedoff speedway. People know speedway its the largest, pop live doppler radar, it will be potentially the largest publicly traded independent gas Station Company and stores right now, its embedded in the company. Right now it will take year or so before its an independent company. But theyre saying the value right now within manthon the multiple that company gets is 10 billion. It does a billionandahalf on ebitda they think it is amongst the best run with the highest margins and, therefore, can garner perhaps a valuation in the public marks some 15to 18 billion. Hence the creation of said value not being seen that way in the markets today, though. Unlofting the value of the midstream business. David, i dont want a midstream business its a terrible business right now. My understanding is thats a lot harder to do in terms of, its intertwined with the other business i agree with that. At marathon and very tough to separate that is at least people looking at this tell me. Its a tougher separation. Not that they arent thinking about it its harder to get down. Speedway was easier. The hess deal. Look at it i dont want it through deals ebitda for the most part. In the end, david, it has something to do with oil and gas. If it has something to deal with oil and gas, i dont want to touch it by the way, how is aramco doing with that deal, thats what ive want like a home in the head, like a bolt to the head. Which is why you need beyond meat you spare the cows acrramco, will we learn moren sunday peleton, smile direct, aram core in other words aramco, in other words, stave away you didnt get that at all 68 billion in profits so far this year. Bp has a 6. 5 yield they didnt increase the dividend, so the stock got hammered would you like a 6. 5 yield with a company that is an honest, Terrific Company or would you like a black box like aramco who the heck know what is they are doing . Well, they are taking a lot of oil out of the ground and selling it its oil. No one wants oil how is shell doing today by the way . They have decent number, right decent numbers, who the heck cares. W. H. O. Cares . Who cares yes, who cares, who cares david its like watching houston versus washington and thinking its the rockets versus look, basketball theres shell 158 versus 157. Decent numbers, down x bp i was on that, it was a really good quarter. Cat calls, they started immediately. By the way, mcdonalds has bottomed mcdonalds bottom how many times can you factor in wendys breakfast there is a big existential question with grub hub promiscous the other right but what matters here is that they are up against this door dash. Its the last great Venture Capital give away. Its got a we work feel. Its better. Wework means adam newman, it has a lot of connotation doordash, i dont want that stock either i dont want it. That gives us a chance, you mentioned mcdonalds, duncan did beat, they raised their guide. Comp is up 1. 5 its a long time since theyve raised that. Theyre doing good on meat. Starbucks, we will talk to kevin tomorrow kj is in japan, he couldnt speak to us. Its ul about cold brew, nitro, fantastic. Stores in china. If you listen to him, its like china, were like best friends, between tim cook and kevin johnson, hey, a big exchange program. There is so many it was fun . Thank you. Its so many Chinese Stores opening and theyre doing trickally there. Kevin johnson is just doing so much by the way, can i say business is the best force for change hes wearing a green apron right now. In the month in mexico they wear org aprons to give money theyre the orange aprons in starbucks, everybody, the stores are devoted to carity. A huge amount goes to charity. Kevin johnson is sa big hire and they give money away they dont get enough credit they put a lot of people through school all we do is bash businesses in this country capitalism. Now, speaking of something you dont like, did you see altria reported numbers and wrote down their jewel investment theyre talking about the other david, theyre not talking about them anymore icos. They are also marketing here. Hallard willard. He, of course the changes thats juul putting the Management Changes yes a couple weeks ago we reported on trade that had taken place. How much is fidelity . 90 cents a share. Which is significantly down. Altria took the position last year. I think juul should be a prescription product like that ad we see for that turkey it shoulgd be a prescription product. I point out none of the vaping illnesses are traced back to juul. Thank you for that. Also, its been six weeks since the white house floated this idea of banning flavors so far, nothing has happened squawk talked to a congressman this morning still pushing for limits or a ban on mint and menthol. You cannot. Then juul is always quick to say, if we dont, if you pull us, then the chinese will flood us with ones you know, its the usual wrachlt maybe this thing wrap, maybe this thing shouldnt have been born maybe it should never have been born well, a smoking replacement is not a bad product you are hooked on tobacco. Your complaint is with the fda. They watch your dog, they would be mortified how they allow what a 15yearold michigan girl . We went there we talked to them. Thats amazing part of the story is that it was the best second to david, of course. We should go to rick. We are going to get the chicago pmi having gotten personal income and spending and claims, lets get to ricks. All right buckle up. We will go fast. Lets look at four oneweek charts, ten minus twos at 20 is now at 15. Yes you see the yields are dropping faster. Look at one week of 2s, everything is giving up the pop, pop took us to 166 we are now 10 basis points belowist ten year we popped up to 186 now we are back down to 172. If you look aten bunds, they need to hold this currents level, they were at minus 32 we have been following them, they for sure followed us and all global rates stood after the feds decision rate yesterday. Finally the dollar index you can see a oneweek chart what you can see we are hovering just above a level if you take it out which will be at the lowest level jins july 1 the october pmi expecting the number in the zip code of 48 and we are nowhere near it it is 43. 2 and this isnt going to be pretty, folks you have to go way back in the way back machine to get a number this low. 43. 2 actually comes to the same thing that 47. 1 last month did, comeps back to december 2015 at 42. 1 there really isnt much in the middle there so, sequentially, a big drop from 47. 1 unrevised at 43. 2. We end up comping back to the same place in both instances c jim, david, back to you. Thank you four that the dow down 70s on that, it sort of brings us a chance to recap what powell said yesterday about the way forward on rates look, this is not the number you want to see. I do think that powell made a good case for raising rates for most of his testimony. It really bugged me. He did not spend a lot of time why doesnt he talk to some of the industrials . Because what they would say is give us some relief. We are doing poorly. And here we are. Thats a poor number markets can go down. Still, i mean, still survey data, right . It is survey data look, employment, we had good employment, good claims. Im not that worried i do think, remember the two economies are very real and when you look at auticity, electricity use was down versus earlier in the year and year over year, that shows you thats the real economy, electricity use. Banks get hurt on this number, bafrgs get straight up, people will be saying halcyon days are over again partly because of the strength of the consumers. You pointed it out, j. P. Morgan, its an institutional business but bank of america i worry thats a scary, i shouldnt say scary. Thats a disconcerting number, disconcerting. By the way, dupont talked about housing not being great. Thats all the stuff that tied back in. I see tie backs the layer there. Well, starts and permits in september were down. Yeah, i know. How do you like that you got to get this economy. The president must be beside himself, an election coming up next year. About a year from now yeah, one year. You keep saying it so far, david, that will be like tomorrow i think your appointment as fed chair will be soon after i told you take the job in a nano second. I think if trump wins, he will feel empowered to get rid of him im go to polo, concern with cramer lets go to bob see what else is moving. Good morning good morning, a lot of trade talk ed line confusion out there. That pmi number is not good, the market is not moving to the down side. Lets look at sectors that move on trade talk, metals and mining, semis weaker, industrials. There is all trade talk. Energy disappointment. Oil is down four days in a row here of course, defensive reit stocks move up. Very predictable reaction when you get news on the markets. We are ending october. No big blowups everybody is afraid of october bad things happening we are entering november the second biggest gainer of the year for a month in the last since 1950 december is number 1 so seasonally strong period. The back stops in place in the Federal Reserve. Maybe theyre neutral. The market believe that is right now. Thats important we see some small rotations in the sick lick also not a lot. Let me show you what is going on for the month here two sectors in the S P Technology and financial so there you go, the fed hasnt engineered a modest steepening of the yield curve there is your banks showing that moving up. Technology, two biggest sectors move up. Its no wonder the s p moves up 2 on the month. Semi conductors, hope springs eternal with that sector you notice the former leadership groups, all defensive names. All are down this month. Staples utilities, energy, of course, a perennial disappointment thats not defensive thats cyclical. Thats an exception to the rule. So lets see, why are we getting new highs, not a lot of breakouts . Its a new high rally with big cap stocks, the five biggest stocks all are really out performing s p is up 2 for the month apple is up 10 . Amazon 2, alphabet is up 4 . Facebook is up 11 put these five stockstogether, theyre about 22 of the market cap of the s p 500 roughly. You get the point. Five stocks are more than 20s points of the s p. When those stocks go up double digits the s p will go up you can have other stocks under performing and get the market the new high thats why you are not seeing tons of new stock, individual stock breakouts. About the marko whats out there, well, there is a few i think so this. Ive been complaining about the trading volumes for the last few weeks, they are lackluster, new highs, there is not a lot of buying enthusiasm. There is just lack of selling pressure different kind of mentality. Still new highs but nobody is buying the market hand over fist very low volatility, vix at 13 and not a lot of people interested in positions, very confusing trading news flow. December lets call it posttraumatic stress disorder, 20 drop in december last year but its a very different market the fed was in tightening mode last year, now they are not and its a very different attitude why a lot of people think december 2020 i should say 2018 not going to happen. Guys, back to you. Thanks very much. Be sure to check out our podcast by the way you can hear the opening bell hour of squawk on the street with jim, david and me at cnbc. Com podcasts or wherever you hear them dow down 72, back to 3040 on the ngop. Dot away. You should be mad that this is your daily commute. You should be mad at people who forget theyre in public. And you should be mad at simple things that are unnecessarily complicated. But youre not mad, because youre trading with e trade, which isnt complicated. Their app makes trading quick and simple so you can strike when the time is right. Dont get mad, get e trade and start trading today. I cowe can do theyour screening at her house. Hi. This is the man thats going to check your eyes grandma. Cognizant ai solutions are helping Healthcare Companies advance diagnostics and prevent blindness in patients with diabetes. Everything looks good. You have beautiful eyes. 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Oh, and if you happen to be somewhere that doesnt accept apple pay yet, theres this. Nice. Or trips to mars. No commission. Delivery drones, or the latest phones. No commission. No matter what you trade, at fidelity youll pay no commission for online u. S. Equity trades. Happy halloween. We have people who own smarties. Thats awesome. We will see you at 6 00 for cnad money right here on bc when we come back more reaction to apple and facebook. Dont go away. But were also a company that controls hiv, fights cancer, repairs shattered bones, relieves depression, restores heart rhythms, helps you back from strokes, and keeps you healthy your whole life. From the day youre born we never stop taking care of you. For farmers here, this is our lifes work. But when a recall happens, perfectly good food goes to waste. Now, weve got away around that. Looks good. Were on target. Blockchain on the ibm cloud helps pinpoint a problem anywhere from farm to shelf. Its used by some of the biggest retailers everywhere. A nice wedge. So more food ends up on your table, is that daddys lettuce . Yeah. And less food goes to waste. Is that pgim, we see alpha emerging in the trendsete . Driving specific sectors of outperformance. 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. Every day, our 1,100 investment professionals around the world search out opportunities for alpha. Partner with pgim, the Global Investment management businesses of prudential. Good thursday morning, welcome back to squawk on the street, im carl quintanilla. Market was hanging in there, but the chicago pmi number worse in about four years has us down 100 points, s p down 10. Earnings, fed, trade. Apples growth drivers, the tech giant nearing all time highs, ipad and air pod demand and services offsetting a job in iphone sales. How should investors play the rest of the year. And its dorsey versus zuckerberg, the two social media giants clark over political ads. We will give you the latest. Start things off with apple getting a boost from devices and services, stronger demand for ipads and air pods, our next guests say its 5 g that will boost the stock higher in 2020 joining to us amil dionadi and chris caso is this about 5 g . Well, i think the move in the stock right now is perhaps a combination of both and we had upgraded the stock in july under the premise, you know, under that 5g premise. It is interesting at the time the push back was the call was probably too early because people were cautious on that cycle. Frankly, the reports now were better than we would have thought three months ago and so i think thats whats created the squeeze here i think people do want to own it for the 5g cycle, they werent expecting this cycle to be as strong as it was and here we are. Ahmid, do you agree and what can you tell consumers, not so much investors, aboabout 5 g tht would make them want to upgrade. 5 g is more the sideshow of the apple narrative not the main part you can get down loads in 8 seconds. I think thats the pitch to me apple is not about how you can grow iphone units its about how you can monetize the 900 million plus install base. What you saw last quarter is something you will see Going Forward which is iphone units can go down 8, 9, 10 but apple can grow revenue on the heels of services and variables narrative. Thats the real story for this year, for the next year, for the next five years in apple. Chris, how are you thinking about that balance between iphone given the fact that like it or not its still lions share of revenue versus the services story. Personally we were not part of the services for the last year and its just a simple function of math, how big iphone is i agree that services could be a driver in the context of a stable or improving iphone, again, thats the difference between last year and this year is that youve seen some stability in iphone which has allowed services to come through, but, you know, its not going to happen without iphone showing some growth, which, you know, again, we think happens into the 5 g cycle. Amit, was there anything that disappointed you in the numbers or in the commentary yesterday i would say two things and they could be debated as potential levers for upside, one is the december quarter guide which while good is up about 36 sequentially, that number is only 200 basis points better than what they did in december of 18 when they negatively pre announced. The guide i would argue could be much better over time. The second part is despite the leverage youre having in the model, Gross Margins are guided to be flat on a sequential basis. Thats a bit of a disappointment or source of upside eventually, that will be debated chris, 250 for new air pods, these air pod pros coming into the Holiday Season given the fact that we do see such strong growth in wearables overall in the last quarter how important is that to the story moving forward . Its small and i would kind of put that into the category of sort of Everything Else that apple is doing well. And, again, you know, getting back to the original point, theres a bit of a law of large numbers problem with iphone being as big as it is, they need multiple hits in order for anything new they bring to the table, be it air pods or watch or, you know, other services they bring to be impactful so, you know, i think, you know, all of these things are helpful Going Forward. I would also add as they go into the next cycle one of the biggest elements in services is actually apple care and thats side units as well thats perhaps why we saw some flattening of services over the last year as units started to decline. I think as units start to improve again and perhaps as asps get a little lift as people buy higher end phones that adds to apple care which helps the services as well. Amit, youve got to feel good about what they said regarding china and trade uncertainties and i guess consumer uncertainties there. How much of that surprised you the stability in china is a surprise because if you think about who is it is getting into this the risk was huawei, especially in schoochina and wht that to mean to the model. I think that stability was a good sign. Chris, we got apple tv plus launching tomorrow so far its been mixed reviews on some of these shows that will be debuting with the service how are you forecasting that into your forecast moving forward if at all. We talked to the company about that last night. Thats more of a longterm investment and, you know, one of the actually things that did prize us with the report yesterday was the op ex that increased as you go into the december quarter part of that was because of the launch of some of these services and apple tv, tv plus, for one example, it requires a big investment you know, theyre doing new content, some of the big name stars arent working for cheap so, you know, i actually think over the next year or two, you know, some of these new services will take some time to kind of come to profitable in the other sense some of the things they invested in years ago like i cloud, however, is starting to get some leverage, that requires two years ago a very large investment in data center and now you get leverage on that as more people come to the service. I think its a good story, i just have to think you have to put it in context and make sure you have the proper time horizon when youre going to get a return on that. Op ex versus sales is definitely on the bear checklist today, amit. At what point does that become a concern given the huge cash balance relative to some of their competitors . Yeah, you know, this i think will be an issue for them if Revenue Growth does not show up in a big way or stops growing, period or when the buyback momentum seizes which its going to be a threeyear run i think once they are done with the buyback refer for epps growth and Revenue Growth is not there i think the op ex investments will be an issue and potential pain point i mean, chris, one last thing on buybacks because we know whats happened to the overall trajectory of buybacks for the s p this year. Do you think come april or may the springtime when they talk about capital returns and Balance Sheet that buybacks could be a liability well, i think in apples case the issue that theyve had is, you know, theyve been trying they have so much to buy pack, they have been constrained about how big they can be in the market so im not particularly worried in april coming that we would see some decline because, you know, they still have some catch up to do in order to get to what their ultimate goal is as a neutral cash balance and, you know, the cash per share is still quite high for them. I think they have some time before it becomes a problem. Were watching 2 48 this morning. Guys, appreciate it, good way to start the hour thanks. Thank you. Meantime, its dorsey versus zuckerberg, clark over political ads on the day of facebooks big beat Julia Boorstin joins us with more. At the moment facebook released its earnings jack dorsey said hes planning all political ads from twitter saying a political message earns reach when people decide to follow an account or retweet pinning removes that dee sis forcing political massages on this people. Now, political ads do comprise a tiny perspective of twitters revenue, it generated 3 million from political ads during the midterm elections and the company says this change does not impact its guidance for the Fourth Quarter now, fresh on the heels of dorseys announcement Mark Zuckerberg defended his decision to run political ads on facebooks platforms and to not fact check them, saying in facebooks Earnings Call that political ads are key for free speech we estimate that these ads from politicians will be less than 0. 5 of our revenue next year thats not why were doing this. To put this in perspective, the ftc find that these same critics said wouldnt be enough to change our incentive was more than 10 x bigger than this so the reality is that we believe deeply that political speech is important and thats whats driving us. This overshadowing the headlines about facebooks far better than expected results across every financial metric, it grew users and engagement faster than expected an gave stronger guidance than analysts had anticipated. Facebook shares are up about 3 right now. David, back over to you. Julia, thank you. When we return, a massive auto maker merger, fiat, chrysler and pew joe looking to make a billion dollar deal details on that next. And later its one of the worst performing stocks of the year but shares are rallying sharply toy. Wfi you in when squawk on the street returns reports that china has thrown cold water on hopes for a longterm trade deal with the u. S. , we have some softer than expected data thats putting pressure on stocks, too. Joining us with more is jeff presenik, also omar agholor, Charles Schwab chief investment strategist good morning jeff, i will start with you. What is driving the market narrative in general right now you have earnings, the fed situation yesterday which was seen as a bit more dovish than i think expected and now you have trade headlines. Over the short term we have a few headwinds because of this but i think the real underlying narrative of the market is growth is going to continue, no recession around the corner and the markets growth expectations are too low that gives an upside bias to stocks. Do you think the softening, slowing in the economy is bot m bottoming at least in the u. S. I do think we are coming to a bottom, the gm strike is over, manufacturing is starting to stabilize, thats what were hearing at fifth third from our middle market customers. Thats all good news what isnt going to change is we are not going back to robust growth we dont have the workforce to do that. Omar, the s p closed at a record high yesterday, where does it go from here through the end of the year. I think its going to be more volatile it has to be after you hit a record normally you actually see investors taking a little bit of a pause as we go through the end of the year you have the fiscal years ending, you have a lot of things going on through the end of the year. I think after the fed decision yesterday a lot of people will be looking at what is the hard data that tells us about the state of manufacturing, what about the wage growth and the potential reads on inflation because we will lead into future fed decision in terms of Investment Strategy right now, what would you be telling clients or investors out there right now to be focusing on or buying for us its a rare period for us when we during this bull market its one of the very few times we have not been overweight our benchmarks in stocks, they are neutral, thats not a bearish call, just a recognition of a Slower Growth environment. What we did do the third time in the last ten years weve added gold to portfolios. Interesting. We think given the constraints, the labor force, given the fact that we dont see a rebound in capx that means we have a narrow window of acceptable growth. Its too easy for something to go wrong, gold in this case is an insurance policy. Whats a good percent allocation we stepped our toes in the water with 2 , we en havision i that going higher later in the cycle but we wanted to get started. If you think industrial activity is bottoming can the fed pause reasonably i think that is a good strategy we fear that theyve used up some ammunition, the fed likes to talk like its 1995 and they can add five years to the cycle, we think its more like the mini easing cycle of 1966, three rate cuts that started when the Unemployment Rate was 3. 6 , you only got three more years out of the cycle, i think thats baked in already here at most and you took the Unemployment Rate only from 3. 6 to 3. 4, you didnt do a heck of a lot of good. Omar, what was your take away from the fed and chair powells comments yesterday well, i think the fed is finally realizing that the data is not there to support further cuts i think a lot of what we have done in the previous three cuts has been more related to what is happening internationally, less about what the u. S. Economy. I think we all agree that the u. S. Committee seems to be decelerating, a normal part of the cycle, but actually they trend level that you would expect which should expect that trend to continue as we go into this global deceleration and i think the fed realizes that, you know, the drivers of the u. S. Economy are in better good shape when you think about unemployment, you think about housing, when you think about consumer, and particularly consumer, everything points out to something that is just about in the range of trend that you would expect for this part of the cycle. So the fed is just coming to the reality stage and with this they feel comfortable that the International Markets are not going to bring the dee fla igs that they all fear so the mandates for them seem to be in good shape, the stability of financial markets, the unemployment and inflation, all of them seem to be in the right place for the moment, so pausing seems to be the most natural decision they could come up with and the market seems to agree, too. So, omar, in light of that what do you like in the markets right now . We are at an interesting Inflection Point while we continue to see deceleration i think expectation of growth are way too low. We also see on the other hand that earnings expectations are also way too low and that the potential for an acceleration of Earnings Growth next year seems to be in a much better place some of the things we are starting to look at is the potential for a rotation away from the expensive defensive sectors and into more of the cyclicals and the Higher Quality and value starts to seem to be looking taking a little more traction after a couple of years of being severe underperforming the attractive valuations seems to be something that people should be paying attention. Jeff, just to wrap up here, in answer to why you have this new allegation of gold, i think you said its too easy for something to go wrong. Correct. What in your mind is sort of something that might go wrong . Well, it could go either way. Some kind of spiral in trade problems around the world, you know, we have all these populous movements that are essentially antiglobalism which can translate into antitrade. If you send our base growth rate is sub 2 already, you send it down to sub 1 , you start to get credit concerns and credit breakdowns and you spiral into recession. On the flip side perhaps this is a replay again of that 1966 where you put a little too much money into the system and you went to the 60s from a period of sub 2 inflation, the whole decade sound familiar, and suddenly you went above 2. 5 and they ever turned back until the mid 1980s. You are not calling for a repeat of the 70s. No, absolutely not, but that doesnt mean you cant get to 3 inflation. We do have rising wages, albeit slowly in the United States, there is a continued Workforce Shortage in the United States and were going to lose the productivity gains because were losing capx that have been offsetting those. Gentlemen, thanks for joining us today jeff and omar. Meantime, weve got fairly big auto news that we want to fit this morning, fiat, chrysler and peugeot announcing they will merge. The auto makers say the deal would involve a 50 50 symptom swap, peugeots chief executive would be the ceo thats if the deal clears the regulatory hurdles it would create what would be the worlds fourth largest auto maker by sales the combined worth of both companies when you put them together equals about 48 billion. Both shares adjusting to that economic split with peugeot down sharply. As we go to break, take a look at some of the Top Performing stocks on the dow for the month, unh will lead that way, along with apple, caterpillar, intel and pfizer. Down 151, worst day for the s p in a couple here more squawk on the street after a break. Obvious. Sometimes, they just drop in. Cme group can help you navigate risks and capture opportunities. We enable you to reach Global Markets and drive forward with broader possibilities. Cme group how the world advances. Servicenow put our this changes everything. Youre right sir. Everything. No not everything, i mean youre still blatantly sucking up to me gary. Brilliantly observed, sir. Always three steps ahead. Six steps ahead. Sixteen. So many steps. You done . A million steps ahead. Servicenow. Works for you. Fidelity has zero commissions for online u. S. Equity trades and etfs, e arto invest anywhere else. Fidelity. Welcome back to squawk on the street. Take a look at shares of crakra heinz. They beat earnings and revenue can a im in a bit shy of estimates. If you look at the stock year to date it is still down about 25 or so. Remember earlier the Company Announced it would cut its full year forecast that was back in august theres been a Management Change no shortage of difficulties of course over the last couple of years, really ever since the company failed in its approach to union lever, its been straight down here this is the first time i can remember in some time where we have seen a sharp uptick in shares of kraft heinz as it has fallen dramatically and so have its expectations or the expectations of investors. One of the top gainers today, obviously, big story, despite as we said with jim organic down 1. 6 in the us, 1. 1 around the world, but he seemed to like the idea that they would raise some prices. Raising some prices but to your point its not as if their Product Portfolio is seeing any organic growth, at least not yet. At least ten California Wildfires are now burning, more than 100,000 acres statewide over there hot, dry weather, overgrown forests all contributing to the fire dangers, but there is a new prevention strategy that has investors piling in. Diana who wiolick explains in h series the rising risks to real estate reporter as wildfires now rip through thousands of acres of california real estate on the heels of record setting destruction last year, a unique Financial Strategy to prevent such fires is under way in nearby Tahoe National forest a bond that provides immediate much needed funding for fast restoration of the now overly dense, dry and dangerous forest. I see a beautiful forest in front of me. What do you see out there . It is strikingly beautiful, but what we really have right now is an overstocked forest. Reporter zach knight is managing partner of blue Forest Conservation and the brains behind a first of its kind bond. Its a Public Private partnership, we have engaged investors like Pension Plans and Insurance Companies to up front the cost reporter here is how it works. Investors buy into the bond n this case a 4 million loan held by blue forest it gives the money to contractors who do the forest thinning investors are paid back over five years with 4 interest by those who benefit from the work and have contracted with blue forest like the Forest Service, state agencies, and yuba water whose reservoirs receive water from the forest. There is about 300,000 acres upstream of our reservoir that the water comes from we care about the quality and quantity of that water from the forest. Reporter they say its worth it for yuba to pay investors back a little more over time because of the invaluable benefit of getting the work done now. The need for funds is immediate. We have a longer Summer Season or a shorter wet season and we have significant north winds that are in effect of Climate Change we need to do something now. Reporter yuba cant rely on funds from the Forest Service anymore because the service is spending more than half its budget fighting fires and Climate Change could push that higher it creates this vicious cycle where were spending all this money to fight fires and that takes money away from the preventive work that could stop the fires in the first place. Reporter the driving force behind this is an increasingly type of investing, environmental, social and Corporate Governance its investing for the greater good, in this casebuying into the health of the forest but still making money our investors are looking for an impact and a financial return and this is off the charts when you look at what its giving back. Jennifer pryce says her investors want to align their capital with their values and fighting the effects of Climate Change is number one on their agenda. Its a little bit harder i do find for people to buy into at times preventing rather than mitigating and taking it away or stopping, but were preventing it from even happening reporter the greatest risk, she says, is if they dont do more bonds like this one. Because if this transaction isnt replicated or there isnt other funds allocated to do the forest clearing, the forest fires can still rage blue forest is expecting to launch the next fire bond an even larger one in the Second Quarter of next year demand has been very strong. In fact, an article about this bond was just published as part of research at the Federal Reserve bank of San Francisco leading up to the feds first ever Climate Change conference which is scheduled for next week huge news, guys. We are talking about a fire bond and talking about forestry right now. I wonder if a bond offering like this is something that could be applied to some of the other resiliency or Infrastructure Projects when it comes to natural disasters like flooding. Absolutely. You look at cities like miami, new york city, pouring tons of money into flood resistance, Flood Resilience you can use a bond like this for all kinds of projects and that is what the folks at blue Forest Conservation are planning to do. They want to get this well known, this he want to get it out there and apply it to all types of resilience. When it comes to risks are real estate people talking more about fires or floods . As long term damaging risks, trends. Well, right now they are talking about fires. Obviously. When you talk about floods, floods actually cause much, much real estate damage, they are much more widespread so thats where a lot of the money has to go in. But for californians, of course, thats what they think about. I still remember your piece about the home that would not ignite. Right yes you wish you had more of those out there. That was from the Insurance Industry the insurance paying a lot into california fires and, in fact, for this bond they are looking to get Insurance Companies to be some of the payers on this bond as well. Given the fact that you watch real estate as closely as you do, have we seen an impact, for example, in california with the fires, have we seen an impact on home prices an insurance rates absolutely. Youre seeing insurance rates go up, people whose policies are canceled and people who want to move out of the state because of this in those fire areas of course youre seeing Property Values go down just as in flood prone areas on the east coast here. Diana, great work for our viewers out there, rising risks, find out more about the work and the stories that diana has been collecting on cnbc. Com. Its really worth a look. Lets head over to sue herera. Good morning. Here is whats happening at this hour president trumps former adviser for russia and European Affairs arriving on capitol hill to testify in the impeachment inquiry. Tim morrison the First White House political appointee to testify stepped down from his post at the National Security council on wednesday a massive fire caused by a cooking gas stove erupted on a train traveling in pakistan killing at least 65 people it is the latest tragedy to hit pakistans dilapidated, poorly maintained and mismanaged rail system several passengers jumped off the train, many to their deaths as the fire broke out. A magnitude 6. 5 earthquake rocked the southern philippines this morning, the third this month, killing at least five people 20 people have died since the first quake which was on october 16th. And on a much lighter note, the Washington Nationals are the world series champs, beating the Houston Astros 62 its the first baseball championship washington since 1924 and the nationals are the first team to win all four games on the road as well. So congratulations to them that is the news update this hour guys, i will send it back downtown to you. Carl. Suh, thank you. Keeping our eyes on this tape here, we have lost 3030 on the s p, this is the biggest drop now for the index since october 8. When we meac wwico bk,e ll watch the selloff. Dont go anywhere. Mini is a different kind of car. Ladies and gentlemen for a different kind of drive. Ladies and gentlemen for the drive to create a new kind of family car, that became a new kind of race car. For the drive to rebel, zag. For the drive thats inside you. And inside us. Thats the drive under the hood of every mini. Because every mini is. For the drive. Welcome back to squawk on the street. The selloffs picking um steam with the dow down 238 points it is time for our etf spotlight and banks are among the sectors under pressure as weaker chicago pmi and worries surrounding u. S. china strayed lead to segment. The etf ticker kbe near the lows of the session but up more than 1 so far for the month. Its been one of the better performing sectors for october stocks are extending their losses as with you see at session lows following a weaker than expected chicago pmi number we have the s p down three quarters of a percent lets call it right now, dow a bit more extended than that joining us now with his perspective on the market ron kichevski. Give me your thoughts on the market, sort what have we saw in that pmi, whether you are worried in terms of the industrial economy and that bleeding in as we hear into other parts of the committee as well. Well, lets start with the fact that industrials are 11 of the economy, i actually think that they will be fine look, the markets the fed has sort of gotten into line, i think the fed is in a good place, even though china is coming out talking about maybe no trade deal, i think that the trade talks are in the right direction. Brexit is moving in the right direction. Look, at steeple we see a mofl to psych clickless away from defensive, that includes financial. We are actually positive on this market now, you had earnings of your own which we will get to in a moment but give me your take on earnings season so far as well well, you know, theres been earnings have been mixed for sure theres probably a number of factors that will drive that, but, again, the market is always forwardlooking and we, again, see the things that the market was worried about you know, it wasnt but a month ago we were talking about the high likelihood of recession and 0 Interest Rates those certainly weighed on financials as we move further away from those two scenarios, again, i see the cyclical stops improving here, especially the financials. Ron, i wonder how much you think d. C. Drama is factored into this market if at all we have the house voting on an impeachment inquiry resolution today, obviously the election next year. Do you think investors are paying close enough attention to that and i guess how do you think that continues to shape the narrative into 2020 . You know, its interesting. You know, you talk about the geoPolitical Risk or maybe specifically the Political Risk in washington. Its almost becoming a daily event and i think that investors do sort of just smooth that over and dont really look at whats going on in washington if there is an issue this washington, its the fact that weve got to make sure we dont shut down the government, that we get spending going. The impeachment inquiry is a lot of noise, but im not sure the market is paying a lot of attention right now. They will pay more attention when we get to february and we get a sense of what the you know, what the who may come out of the Democratic Convention and how that might look, you know, for 2021 and beyond. I wonder, though, if you think businesses and ceos are paying attention, whether its Capital Raising pipelines, whether its investment plans, looking to the future. I mean, with he talk so much about uncertainty and the fact weve seen a softening of those numbers. I wonder whether thats weighing on it and wonder whether thats going to continue to weigh into next year. Well, certainly what i see is i do think Business Investment has certainly lagged the consumer in terms of whats driving this economy, but i feel that that was more reflective of the uncertainty coming around trade, around brexit and around Monetary Policy. As ive said, all three of those have improved over the last month. So from my perspective and my confidence, my confidence is higher today than it was a month ago. You sometimes you have a decent feel sometimes for the Retail Investor out there. And the investor in general. You know, what are you guys hearing from in terms of your platforms or Global Wealth management as well in terms of how people are thinking about this market right now, ron you know, i think that the average Retail Investor sort of reflects whats going on in the economy and that is the consumer is very strong, i think theres confidence on the consumer side and i think thats reflected in our investors who are engaged in this market. So as usual, you know, sometimes the consumer is just moving ahead and its all about the professionals that are that are, you know, woe is me ron, while we are talking the president here with a new tweet, people are very disappointed in jay powell and the Federal Reserve. The fed has called it wrong from the beginning, too fast, too slow, each tightened in the beginning, others are running circles around them and laughing all the way to the bank. We should have lower Interest Rates than germany, japan and all the others we are the biggest and strongest country but the fed puts us as a competitive disadvantage china is not our problem, the Federal Reserve is we will win anyway theyve used up three of their potential nine cuts, should they just use the other six no, look, i think that chairman powell has got the fed where it is, i think rates are somewhat accommodative, a little bit below the neutral rate i do think the fed got ahead of itself, especially last december, but these three cuts have put the market in a good place and Monetary Policy in a good place so, no, i do not think we need to be using the other six cuts absolutely not i think the president seems to be indicating he wouldnt mind negative rates, i guess im reading that into that by saying japan and germany. Ron, what are your thoughts about negative rates look, negative rates certainly in the u. S. Would be, a, unprecedented, but would not be reflective of the kind of economy that we want as a country and, frankly, i do not think would be positive for any reelection results when you take negative rates to what it would mean throughout the entire economy. I think we are in a good spot. I think the fed has done a great job of reversal. I mean, they actually were raising a year ago and now weve had three rate cuts and so the fed is doing its job in my opinion. Net revenues at stifel have entered 21. 6 million, were up 11. 3 . An all time record. Yeah. All right. The stock is down over 3. 5 . Are you surprised at the reaction what are people focused on this morning that has them selling rather than buying more of your shares look, all financials are weak today, im a little i dont know that im surprised at any daily movements in any sector of this market. Ive come to be used to that, but i think stifel is an example of we have had record revenue, second best earnings in our history. Everything is really good and were trading at less than nine times earnings versus a historical multiple of 14. So i think that we may i dont want to talk my own stock, but i think that financials and we are reflective of financials, are undervalues relative to the market yeah and i will tell you Something Else, the other thing that i want to talk about is that i do believe that this is a stock tickers market now and, you know, you need to rotate into growth and you need to rotate away from defenses and into the cyclical stocks and thats where money is going to be made. Yeah, ron, i mean, just to that point, record net revenue, record Wealth Management revenue, record client assets. When you go down the list, how much of this is Company Specific and how much of this really speaks to Investor Sentiment more broadly right now well, you know, dont ask i mean, obviously i think stifel has done great and our Business Strategy is working, but certainly we ride also with the sentiment of the investor. So its a combination of both. Ron, always appreciate you joining us thank you. Absolutely. Keep the faith here. I think this market is going to do well in the Fourth Quarter and into 2020. All right well make sure to get the word out. Thank you. As we go to break, take a look at shares of starbucks, moving higher on its earnings beat strong u. S. And china sales growth, the companys cafes drew traffic through all times of the day. Stocks up about a percent in what is obviously a tough tape we will talk with Ceo Kevin Johnson in a first on cnbc interview come morning at 9 30 a. Ete te. M. Asrnim most people think of verizon as a reliable phone company. woman but to businesses, were a reliable partner. We Keep Companies ready for whats next. man we weave security into their business. Virtualize their operations. woman and build ai customer experiences. We also keep them ready for the next big opportunity. Like 5g. Almost all the fortune 500 partner with us. woman when it comes to digital transformation. Verizon keeps business ready. Tobacco giant altria lower despite a beat while riding down their juul investment. Frank holland joins us with more shoo thanks taking a turn for altria, shares falling now about a percent and a half after the company explained its decision to write down its juul investment by 4. 5 billion more than a third of the 13 billion investment it made less than a year ago for 35 stake of the ecigarette maker. On the altria Earnings Call that wrapped up the ceo saying the Company Still believes in juuls long term potential but there are clear near term regulatory headwinds. Certainly the possibility that the e vapor category could see its growth rate significantly slowed down or even see the category contract, weve also revised our estimates of juuls International Business due to recent market developments. Altria maintained its eps guidance for this year but lowered the top and bottom range of the eps guidance through 2022 juul certainly a factor but so are cigarette sales. Marlboro and other brands say sales fell by 7 this quarter, greater than the industry average of decline altria has raised prices three times this year to offset some of those declines. Altria is continuing its rollout of icos, sales in Richmond Virginia will begin next month the first store opened in atlanta in september analysts estimate that altria will have at least a year before another company can get approval for the fda to put a competing heated tobacco product on the market. Frank, thank you. Thank you. Frank holland. Now lets send it o every to john so we can get a look at squawk alley. After earnings facebook is up, apple is up, do you know who he is is up. Zinga the Gaming Company doing better than manyxpte eecd. We have the ceo coming up on squawk alley. But were also a company that controls hiv, fights cancer, repairs shattered bones, relieves depression, restores heart rhythms, helps you back from strokes, and keeps you healthy your whole life. From the day youre born we never stop taking care of you. By the way, shes the it wasnext mozart. G day. As usual we were behind schedule. But sophies enthusiasm cannot be dampened. Not even by a runaway donut. We powered through it in our toyota prius. Because a stars got to shine, no matter what. Its unbelievable what you can do in the prius. Toyota lets go places. Welcome back to squawk on the street. Stocks are hitting fresh session lows with the s p 500 on track for the biggest one day drop in two weeks. Weakness in industrials and financials one of the groups fairing better is Health Care Stocks. Also been one of the better performers for the month, thanks due to strength in biotech stocks ibb on pace for the best month since january. Among leaders this month, large cap names like a. M. General, celgene. Also, boosting sentiment, ver techs pharmaceuticals got approval of a cyst particular fibrosis drug. Back to you. A big month for biotech and for Health Care Stocks me meg terrell. Thank you. Lets get to Rick Santelli for the santelli exchange. Good morning, morgan. Like to welcome harvard professor ken rogoff thank you for joining me lets get right into it. Okay. Savings was really solid, 8. 3 on Household Spending side, up twotenths, not bad, but much softer claims, 218,000, yesterday, 1. 9 gdp, third quarter, and then the piece of resistance, another week read in chicago, pmi in front of the nationwide number what do you think of the data points i dont think theres any question the economy is softening. 1. 9, 2 growth is above the fed estimate of trend. That said, i think the trade war is taking its toll the imf estimates that global growth, global, is down almost a percent because of the trade war. The fed economists have similar kmim estimates. Thats the main thing. Business investment has been weak until that stabilizes i think wed be lucky to sort of stay on this moderate growth path. Now, yesterday the fed of course raised for the third time, Steve Liesman i thought nailed it several times yesterday. It is not a one way bet. Had three cuts and a pause, now theres no talk of any type of up side in rates first, do you believe that and second, it is historically not feasible you see a pause and pivot in the same meeting. What are your thoughts yeah. I completely agree with that its hard to see how the data could be so terrific that theyre starting to hike rates in december so they emphasize it would take much worse data to get them to cut again, but i think it is not symmetric, it is still one way. Over six months or a year, a completely different story near term, yeah. It may take more, but no question it is still tilted down on rates. My favorite topic, and this goes against many issues we discussed with our fed, Christine Lagarde comes in, many finance ministers in europe are vocal antidraghi strategy with regard to moving forward how do you fit that in a slowing economy. How is Christine Lagarde going to avoid negative rates when the economy as the imf pointed out globally is slowing . The short answer is shes not, and i think the ecb has been studying negative rates more stead eeg negative rates more we are seeing through pass through to deposits, people with 100,000 a year or more, something they thought wasnt happening, thought was hurting banking profits. Now i suspect we see more in the way of negative rates. The big debate in europe is actually about quantitative easing, which is very different than the United States, it is a transfer from the rich countries to the south theres a lot of push back, theres some prominent former ecb bankers protesting that this is going on, weve never seen that so draghi is leaving under a lot of controversy about the quantitative easing in europe. Professor, thank you for your thoughts we would like to have you back as we get closer and closer to Fourth Quarter which they just updated on the growth side, down to 1. 5 on gdp thank you for joining me carl quintanilla, back to you. Rick, thank you Rick Santelli. When we come back, more on the selloff thats finally catching a bit of a bid. Reaction to apple and facebook big reports from last night. Dont go away. When i lost my sight, my biggest fear was losing my independence. Mmm. Good. So ive spent my life developing technology to help the visually impaired. We are so good. We built a guide that uses ibm watson. To help the blind. It is already working in cities like tokyo. My dream is to help millions more people like me. As your life grows, so do your needs. And with bank of america and merrill, the benefits you get can grow, too. As a preferred rewards member, you can enjoy Priority Service and exclusive discounts. So your growing life can be more rewarding, too. What would you like the power to do . What would you like the power to do . Im happy to give you the tour, i lohey jay. It. Jay . Charlotte oh hi. He helped me set up my watch lists. Oh, hes terrific. Excellent tennis player. Byebye. I recognize that voice. Annie . 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I am Carly Fiorina with Morgan Brennan and jon fortt at post nine of the New York Stock Exchange stocks losing some steam, off session lows, down now about 175 points on soft data this morning. Well be over the Broader Market action but we start with apple, rallying thi