Hour futures are solid, earnings phase one signing, lots of eco data our road map begins with trade optimism reigniting the record rally. The chinese delegation heads to d. C. Today for an expected phase one signing on wednesday plus new ceo, same crisis. What to expect from boeings new chief executive, David Calhoun, who takes over today and the future of the 737 max. Then there were four, alphabet nearing the trilliondollar market cap club, behind apple, microsoft and amazon stocks are looking to recoup some losses from dow, the dow surpassed 29k for the first time before finishing in the red. All three major indices are in the green since the beginning of the year led by the nasdaqs 2 gain as we were saying on squawk a few moments ago, jim, if lulu yes, maam of lemon is a clue to the earnings season, maybe this rally has been justified we have two conference this is ek wweek, icr in orlando andi conference in san francisco, health care. Theyre used to be able to say better than expected, better than expected and a lot of companies saying the old estimates we have to throw them away things are really, really cooking. Sop it does happen to the upward momentum im seeing a lot of it here. All right, were going to watch health care, of course, a big part of it, but banks are the other big part and already the street continues to give goldman some props, jp upping goldman to outperform. What is important tomorrow goldman, we forget the fact theres a china deal on wednesday. What an idea, listen to this how about apple and goldman, which have a credit card thats only in the United States, how about if they got permission to float that in china, just an individual goldman to chinese, using an apple card embedded base, you know what . Thats worth about 30, 40 per share. Hmm i dont know if thats happening any time soon. David hi, jim david you think i flirted that idly, you think jimmy chill floated that idly . No, i know you were very focused for a very long time, really youre turning the other way on me . On the amex. Yes, because its a podcast, you dont have to two ary. Im not insulting you. Which they got. I know you were focused on that for quite some time being sort of a key sign that tensions were starting to abate. You got it, partner okay, thats how were going to play it today speaking of apple, jim, d. A. Davidson goes to a street high 375 now. Apple is having its best 12month return since the end of the crisis the title of the report is five good reasons why theres still gas in the tank and the five good is a play on 5g, where well pay more attention in the months to come this is the year 5g tim cook was at the introduction of the 11 in new york, and a lot of people figured the 11 was a big yawner the 10 which people didnt catch fire with. This is very different it turned out to be a step function it turns out to be much hotter than everybody else has. It turned out to be to me death nail of samsung. 99 customer satisfaction. You cant beat it and this surprised people, what i have in my hand is why people have to raise numbers. It is extraordinary and nobody thought there could be another lets just say new product but the airpod, you get the ears, people listen in, noise cancellation, the watch, and all turned out to be different, carl it all turned out to be bigger than expected and no one saw it coming except for maybe tim cook carl, the move up as we pointed out, not just shares of apple, of course, but we mentioned alphabet at the top of the broadcast, approaching 1 trillion and facebook is already up over 6 as well, those at least that part of faang netflix itself more in line with the market in terms of its gains so far this year but the accretion of market cap to these three of the largest market Cap Companies in the world has been extraordinary over the first week or so of trading, jim yes, look, another thing that surprised people is that facebook levitated here. Theres no doubt, this morning, im raising price facebook, raising target why . Because people are saying the instagram ad business is better than expected. Weve got we havent seen amazon amazons been the laggard, and i do think that alphabet is surprising thats thomas curryian the believe the cloud will be a Major Movement the division is changing the way we think of alphabet so there is a lot of momentum and if you to faang, apple is obviously the lead per to jims point, alphabet to 1600 today they were at 1350, and then on facebook, evercorp. Goes from 280 to 235 it is David Calhouns first day on the job as boeings ceo hes facing a lot of challenges regarding the 737 max. In an email to employees this is a crucial time for boeing we have to do to uphold our values and to build on our strengths. I see greatness in this company but i also see opportunities to be better, much better than includes engaging one another and holding ourselves to the highest standards of safety and quality and providing outside perspective on what we do and how we do it follows the page one store why i in the times saturday which they describe the culture there as being sick, engineers were torn between wanting to recommend sim training for their customers pilots and financial pressures not to do so look, i think theres this interlude where greg smith, who is the cfo, was the ceo and during that interlude, we saw what greg wanted greg wanted simulation why did he want simulation because the max turned out to be at least for people overseas, who may not be 3,000hour people like u. S. , the max was different, and i think that dennis uniquely dennis mu muilenberg was hoping theyd not have to sayen will, you got to be on a simulator. Guys in america who fly 3,000 hours wanted no part of a simulator. Thats all changed pi that interlude they took a lot of hits. I think calhoun is blessed by just kind of a kitchen sink period, where boeing got it together, trying to have no more leaks. I think if we can stop the leaks about something that, you know, everything bad, and that during that interlude, i think a lot of hits were taken. Now calhoun has to start brooming people and saying this is the new boeing. Brooming people is of the essence here so we have news of muilenbergs severance or lack of it on friday. Hes still entitled to 62 million and a little m a in the wake of this regarding suppliers, david its not connected specifically to the troubles at boeing, the idea youd force consolidation amongst suppliers but we have a fairly large merger of equals this morning. Well see how the stocks perform when the open comes roughly 20 minutes from now woodward and hexall getting together own 55 of the company theres not a lot of synergy because they dont do the same thing. One is about composite materials, advanced materials and components, so one will make the rotor, one the rotor blades, one the accuator, the other composites that would g into the wing itself but it is, jim, a part of the efforts by boeing and airbus to continue to pursue efficiency in terms of lighter weight planes, planes that can move faster with less fuel and therefore sort of they have the same teams that will approach these companies in terms of efficiencies, and now theyre going to be able to present these together as a Product Portfolio and perhaps you could imagine in the future they start to work on things that are like the smart wing of the future, so to speak the financials though look pretty good for the combination. Well keep an eye on shares of both hexall and woodward one interesting note, woodwards ceo was on the board of hexcel thats how they started talking he was a board member of the company, sort of surprising. Jim, overall in the numbers themselves, youre talking about a company thats going to have 5. 3 billion of revenue, 1. 1 billion of ebitda, and theyre going to only be levered at 1. 4 times so they also are instituting 1. 5 billion Share Buyback taking place over the first 18 months after close. Well keep an eye on two companies you dont hear a lot about but one fairly soon. Makes a lot of sense to me. Remember, honeywell acquired rockwell with united technologies, these are smaller companies. The composite was a big problem for the dreamliner, thats been solved i think companies are natural in terms of being able to have some power in that partner position that boeing, that mcinerney put together these guys are squeezed over time when you have a little bit more power, bargaining, a little more bargaining, the margins go up. Its a brilliant move even though they are complimentary and not in the same area composite some of this stuff in cockpit, i dont know. Does it Work Together . I think it works together, when boeing comes calling and listen you guys have to charge less they can say guys, were a little bit bigger than you expected were not just going to take your pricing that may be true or when boeing comes calling, airbus says we need to keep it lighter, take weight out to decrease our Carbon Footprint one quick m a note here. This is a merger of equals, 55 owned by woodward shareholders, 45 by hexcel, split boards, but this is something we may see more of. Its hard to pay big premiums when the stocks are at alltime highs, jim, and so this is also in some ways a reflection of that you keep a Balance Sheet intact, you can buy in a lot of stock as a result. I cannot wait for boeing to do something with that precision cast parts business. Its been great for them but i got to tell you, i thought the precision cast parts at hexcel would have been a better merger obviously the board situation is telling. You said boeing you mean berkshire hathaway. Sorry, berkshire owns precision cast parts david, what have they done with that other than just say listen youre a Good Division precision cast parts is supposed to be able to do something its been kept very much apart id like to see them do some m a thats interesting, yeah. I remember the deal. It was a typical berkshire deal, recall of course they keep management in place essentially, they pay the price and then they move on, but people love working for berkshire in part, jim, because they are not they are able to just follow their own plan and dont really have to worry too much about, about dealing with the home base, so to speak but your points a good one. I dont know whats going on with precision cast parts in terms of potential consolidation at least david, remember when arconic had something good going with parts and planes and then i dont know, you chad that curios period where Klaus Kleinfeld overpaid id love to see something happen there, but arconics become a mystery. Mnuchin was on the sunday shows yesterday and said the max could potentially take 50 basis off 2020 gdp, which is, jim, toward the higher end of estimates, once economists fold in boeing into the models late last year. This is the issue, when is the max going to be in air i think everybodys been way too optimistic remember, there were people who felt this would be flying last april. I think this is a big issue calhoun will address, look, we have done everything you want but i think the pushback from the overseas faas, going to be a lot tougher than boeing expects. I think we have to stay on it. I do not see the max flying until maybe six months i know that thats maybe even auto optimistic, what i think secretary mnuchin is talking about. Definitely got to Pay Attention to recertification, resumption and production and of course actual return to service in commercial flights, so thats a huge story for 2020. Well get jims mad dash and count down to the opening bell, hear more what hes got planned at the Jpmorgan Health conference well watch some retail. We mentioned lululemon donohoe starts at nike five below holiday disappointment but futures look good were back in a minute i can. The two words whispered at the start of every race. Every new job. And attempt to parallel park. electrical current buzzing each new draft of every novel. typing clicks the finishing touch on every masterpiece. newborn cries it is humanitys official twoword war cry. Words that move us all forward. The same two words that Capital Group believes have the power to improve lives. And that, for over 85 years, have inspired us to help people achieve their financial goals. Talk to your advisor or consultant for investment risks and information. Were going to get started with trading here at the New York Stock Exchange around 12 minutes or so from now first trading day of the week, of course. What a year, though, its been for shares of tesla so far, jim. I know thats a focus for you on our crosscountry mad dash this morning. Look, everybody is behind now, starting to catch up to the stock. Opco was behind and opco comes out this morning and says listen, david, 612 price target. What do they know . Actually, their estimate for 2020 is 4 and change, actually below the street, that gives them a chance to raise their estimate, raise the estimates for the year when tesla reports. David, this is an extraordinary move because a lot of people felt at one point they had to lose money in 2020 this thing is trading on earnings i dont think anyone understands its trading on earnings, maybe 10 next year, so 600 price plus target by opco, a bump of price target i believe, david, i believe someones going to come up with a 700 price target soon you do. Wait, what were the numbers then give me some of the earnings estimates for this year and next year, jim, haveif you have them can understand the mull tipple opco is using around 440 for this year and youre going to Start Talking about 10 for next year, david, 10, because china is coming online, operating efficiencies david, the bears 27 of the float, the bears dont know what to do. David, its an earnings story, for heavens sake. Its earnings are going to more than double from 20 to 21 conceivably with china coming online you got it, partner despite what we think is increased competition in the market for ev vehicles we are seeing a lack of serious offerings, including, including bmw. Caved, bmw does not have the car that is like tesla tesla is literally breaking out when it comes to assisted driving. They are so far ahead, this china factory built in ten months, the best news out of china is going to be tesla they actually have a little period here, where youre going to get subsidized, but david, when you Start Talking about big earnings power, you Start Talking about Balance Sheet, no longer an issue, david, no longer an issue. Its amazing to watch the run that that stock has had really since the last Earnings Report and the opening of china we should point out ford numbers in china not good, but it is the Worlds Largest market for autos by far and the push of course is towards ev yes, david, when ford and gm combined are worth less than twice tesla, wake me up. Im sick and tired of hearing stories that the market cap is, you know, almost as big as gm and ford well, of course what kind of year are those companies having look at ford you want to own ford sold to you. All right jim, stay right there. All right all right, thats it dont go anywhere you get an all right. All right yeah it is almost two months by the way after he completed its acquisition of celgene what is next for bristolmyers we have an exclusive interview with the companys ceo watch us live on the go on the cnbc app stick around, opening bell nine minutes from now our Retirement Plan with voya gives us confidence. So we can spend a bit today, knowing were prepared for tomorrow. Wow, do you think you overdid it maybe . Overdid what . Well planned, well invested, well protected. Voya. Be confident to and through retirement. Through the at t network, edgetoedge intelligence gives you the power to see every corner of your growing business. From managing inventory. To detecting and preventing threats. To scaling up your production. Giving you a nice big edge over your competition. Thats the power of edgetoedge intelligence. Danafarber Cancer Institute discovered the pdl1 pathway. Pdl1. They changed how the world fights cancer. 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Jim, mnuchin did say the commitments to buy u. S. Goods both ag and otherwise did not change in the translation and looking for 40 billion to 50 billion a year well find out wednesday what granularity we get on this fact sheet. Yes, look, china needs our pork actually maybe need our chicken. Zowetis will tell a story, kristen peck is the new ceo, shell tell a story i think about the fever african swine fever and how it decimated pork in china a pork buy of tremendous proportion should be in the offering you know, it is definitely progress when we get this sign, but jim, when you step back in terms of the relationship between china and the u. S. , and the competition between these two great powers, first and second largest economies in the world, of course, its only going to continue, isnt it . There is this belief now that were going to have almost two separate systems as opposed to one in a sense, two separate economic systems, two ways to look at the world. Thats not necessarily going to lead to greater efficiency over time, is it . No, and thats why, remember, theres still a lot of tariffs on the chinese, more than 300 billion, so some people feel we have the cake and eat it, too, we kept the tariffs high which the president thinks, puts money in the pocket of the treasury, and at the same time weve got some movement by the United States, which just says listen, were showing you good faith next phase two we have to see intellectual property being held up in our country. We have to be able to see, david, no more stealing and so far, that has not been part of the deal the people in the administration say okay, enough already we gave them this goodwill, now we need to see a change. I dont think the chinese want to change. I think president xi is walking a fine line. I think hed like to see some change i think the people who are really in charge of china, pack in ch back in china arent happy and dont want to do any more until our tariffs go low [ applause ] its going to be a big piece of the discussion, obviously [ cheers and applause just how quickly phase two moves along. Lets get to the opening bell here and the s p 500 at the cnbc real time exchange, the big board its the commodity futures trading commission, the cftc [ bell ringing ] the nasdaq biotech ringing the bell remotely from the Nasdaq Entrepreneurial Center in san francisco. Jim, where you are obviously, not a coincidence given the events there this week, maybe remind viewers why the Jpmorgan Health care conference is not just another conference. Yes, this is the biggest conference this is the conference the beginning of the year, of course, it occurs before quarters are reported. If youre telling a story, sometimes you just cant hide it you have to see how good things are. This has been a place where a lot of big mergers have been announced, a lot of new drugs have been announced. Every analyst is here. This is the con fab of the year, and i got to tell you, the orlando icrs occurring at the same time i think thats a mistake. You see consumer and Retail Stocks reporting things over there like 21 below. People arent focused on 21 below. They used to call it five below but 21 is how much that stock is down on preannouncement. The consumer stocks not doing well exlulu and the drug stocks doing incredibly well. I think for instance dr. Giovanni carforio could say look, the numbers are better im going to try to press him on that jim, theres always a theme at these conferences, as you say, everybody comes there, m a certainly always can be something that is discussed as well, given how many members of the Overall Community are at that conference, but what would you say the theme is is it around immunotherapy the journal had a story about the differing ways the companies are coming up in terms of allowing customers and health plans who cover their customers to pay for their drugs where are they focused the theme is the consumerization. The consumer is rapidly being put in charge. Why is that . You got to figure out your Medicare Part d, what are you going to do . 70 million baby boomers, some people say only 50 million but not looking at how many people have to start think being this, that is the most important thing is that the Customer Matters immunotherapy was last years part t last year this year is okay, its the consumer because so many people are in medicare. Its the consumer because its confusing and the consumer has to take charge of what they want thats why i have cvs, the Charlie Victor kind, at the touch point of the consumer. They can tell us how much the consumer really is in charge of their own health care. Its a new theme and its working. Five below on track for its worst day since 2015, looking for Fourth Quarter 193 to 198, street was at 202. They are blaming the six fewer shopping days between thanksgiving and christmas, overall sales they say did not meet expectations. Kind of flies in the face of lulu, though sees 222 to 225, streets at 215. Yes, look, it turns out high end is doing well. Im waiting for nordstrom. They could tell you that that kind of range of 5, 6, 7, 4 bucks, not doing that well i think five is trying to expand all over the place but for the six days it turned out it wasnt good enough for the customer for other Companies Six days turned out to be better. Go back to bed, bath beyond, a huge amount of flow to short bed, bath beyond had good numbers during that period its the power of merchandising. Im sur fprised five below is nt doing better they told you repeatedly theyd navigate this period i question whether bed bath is doing nearly as badly as people say. Mark tritton who came from target is doing a far better job. People have to cover their shorts there, theyre being ridiculous this thing is going to work. Not to mention kohls, which is trying to find some stability here around 46 1 2 yes michelle made some comments on the fireside chat regarding amazon traffic take a quick listen to that. I get this question, is amazon working amazon is working, this returns program is working were seeing the traffic were getting new customers, we are gating a younger customer, you know, and to what we expected, some of them are buying youre never going to get 100 but some of them are buying. Jim, does that answer some of the questions youve had for her . No, no. Theyre not getting the darned traffic. Theyre not. These guys are living in a frdra world. I know this because my travel trust owns some and its killing me the customer is going to amazon, back to the store e not looking at what kohls has i think those guys have to wake up and smell the coffee. They really have their head in the sand the plan is not bringing new people in. It was the traffic was the problem. They have to start owning up to how badly theyre doing. The press releases are ridiculous they are doing i think much more poorly than people realize i put kohls, theyre not jcpenney, nobodys jcpenney, but they are well, maybe sears but theyre not doing as well. I dont want to be mean. Im not a meanie my name is jimmy chill, for heavens sakes but auto ill it happy. There are overall price levels that are interesting. Beyond meat back above 100, david, for the First Time Since i think october. Of course we all remember last week when it was up some 27 for the week alone, and then youve got tesla above 500 for the first time we spent a lot of time just now jim talking on the mad dash about tesla and about that increase in price target at oppenheimer. The stocks gone almost p parabolic, up 5 , backing off the highs of this trading session so far in the first five minutes. Its market cap is over 90 billion, but jim, that 10 number that you mentioned for 2021, which i guess is out there in print, some analysts, it got my attention it should if you have 10 per share, who cares about the Balance Sheet . Thats never talked about. Elon musk, i know he danced a jig but hes not dancing a jig in twitter the guy is a statesman, and i know from someone who is not a statesman, this guy really is the real deal. He is the new phase of face of executive. Your car becomes an exciting place to be. Howard schultz used to call starbucks which by the way suck in the airports, used to say starbucks is the third place your car is your third place i love sitting in a tesla. My daughter loves the flatulent seat, kept pressing the button, i know its a little odd tesla is the place to be people love to be in it and autonomous driving, oh, my, so exciting beyond meat is an ecosystem. People talked about beyond meat theyre talking about india. India there is an untapped market for them, thats right, because theyre vegetarian yes, they dont eat cows. Sacred. Theyre sacred well they hate cows theyre sacred i dont mean they hate them. They love them cows produce the most methane. I know theyre natural but boy, they are methane producers hard to justify. Theres a lot of methane coming out from all sorts of ways the flaring you talked about so often is increasing and not even being monitored anymore by the epa . Im not sure well, look, flaring is obscene how much flaring they are trying to get to 5 flare. They told me theres 30 some guys are doing 30 and a lot of people on twitter told me youre allowed to do whatever you want but it is heavily regulated. Heavily regulated by who im regulating it more than they are. David, i think the president may be proflare for all i know. I believe he may very well be any environmental regulations who were perceived to stand in the way of Economic Growth in some fashion have been or are planned to be eliminated, carl even as the latest or rolled back is a better way to put it. As recently as last week, word the president said in some cases it takes a decade to build a road before that infrastruk tour a the law in place in the epa started under nixons the rollbacks are significant you nexted flaring and certainly thats going on a lot but also speaks to the plethora of natural gas in this country which we talked so often about right one would expect you to find some places that could use incredibly cheap energy, maybe start the server farms near where theyre flaring all this gas and run them all on natural gas . The server farms dont want natural gas. David, the server farms they want solar, and the guys who do solar are winners, guys who also like hydro here is one david, ill throw one at you how about when the president goes to davos, which you and i dont go, not because youre an old hack, david, everyone remembers that the reason why, one of the things throw a bomb and the bomb would be germany, you use our lng instead of supporting the russians with gas. I think theyll be bombs thrown by the president , and one of them is going to be use our lng and we have enough of it that we can undercut anything that gas prom does plus shouldnt we be prou. S. Er is success prorussia i think the next big stumbling block is the idea the president says were sick of europe. Think of that. Yeah, thats been an issue. Certainly anybody who wants to drink french wine is aware of it indeed. If its not that, its sanders running number one in iowa, as we found out from the Des Moines Register poll on friday. Lets check in with Rick Santelli at the cme. Good morning reporter good morning, carl. It is going to be a big week we get some big data points and of course the signing of phase one and the more details we get on it, it actually looks like there may be some good surprises in there regarding intellectual property and how to protect it look at an extra day of tens, long end is firm are firming up a bit, curve resteepening just a bit, short and like a twoyear note unchanged if you look at a chart from july on tenyear, this is fascinating. Were basically in the middle. You look at that big move we had, so were around, what, 214 last time we were over 2 , about 147 on the bottom, the average, the middle of that is right around the low 180s, which has really been home base. However, home base is definitely on the move. Goal posts are moving in europe. Look at intraday of bund yields minus 16 a close here would be the best since may as you see on this chart and finally lets get back to the dollar versus yuan. It continues to trade firm in favor of the yuan. Jim, weather is much better where youre at than in chicago. Yes, this is the place you have to be and one of the reasons why you have to be here is we have dr. Giovanni carforio, the ceo of what i call the new bristolmyers. J giovanni, thanks for being on the though thanks for having me here people come on tv and announce new things. The combination of bristolmyers and celgene. You and i met in november after the close, i feel better about where we are today than even in november we are a new Bristolmyers Squibb and a Great Company we are a Growth Company and better optioned for today and the future we have Strong Performance in our business is it the change from six big drugs in the pipeline to eight big drugs in the pipeline or earnings per share and the estimates are too low right now . First of all we have great performance commercially with our franchises in 19. Were entering 2020 with great momentum we have eight launches were preparing for, thats unprecedented. Theyre all first in class medicines, best in class medicines, areas of highend medical need we have great commercial capabilities, eight launches in 24 months. I am pretty confident well do a good job there and in the longterm, the broadest, the deepest pipeline in the industry we have tremendous financial flexibility, well continue to do Business Development as you know we can do there are great people at Bristolmyers Squibb i know you were a strong believer in the deal from the beginning. There are more opportunities to be optimistic today than there were last year when we were here you announced it last year, stock around 45. I said you got to be a believer. This is bristolmyers next generation and speaking of that, the one thing no one talks about. You have a drug called eloquis people, eh, its some drug we can focus on loss of exclusivity with revlon and some of the problems brisston myers has in terms of competition. Eloquis, talk about the lack of competition on what may be one of your biggest drugs. It is one of our biggest drugs, a leading medicine in a growing market so weve done a great job because of the profile of eloquis to establish as a leading agent globally there are further opportunities for growth were continuing to replace warfarr warfarin, the old standard of care there are many patients not diagnosed, not treated there is tremendous opportunities for growth with eloquis and we have an Early Program in our pipeline, the asset has great promise and can take our cardiovascular enterprise into the future great prospects there. You have an amazing incredible franchise, but the pricing, i keep hearing at the hospital level, there is a major level of price increase in socalled the last ten days of life is there any way to get that under control, and does that have in anything to do with how much you charge . When you look at the facts, jim, in 2018, pharmaceutical spend increased 2. 5 the issue really is that over the last few years, patients now spend 50 more on medicines because of the way benefits are designed, and so whats important is to make sure that we develop policies that help the affordability of medicines for patients thats important for us. We are the number one Cancer Company in the world we are developing some really exciting medicines, i think its important they reach patients, so those are the types of things, and the types of reforms that were discussing. I think its really important for an Innovation Company like br Bristolmyers Squibb i think a lot of people feel merck leaped you with keytruda is there really a gap between you and merck or are you very close race between each other . Well, i think the two studies that we had in 2019 in first line cancer, what we are hearing from physicians, theyre very excited about it obviously lung cancer is very competitive, but the depth and durability of response of immune oncology, that offers the possibility of longterm survival it will have an Important Role to play and beyond that, we have a really broad program. You and i have discussed this before, the next wave of growth for immune oncology is adjuvent setting, treating early. We have three studies will read out this year, so i look at opdivo as a growing franchise. Dr. Carforio, one of the things i loved about the deal but a lot of institutional shareholders were skeptical about is accretion you talked about 40 accretion 2. 5 billion in synergies everyone is so worried, again, about the franchise that you pay too much the next couple of years could be a dramatic debt paydown because things are working so good together. Well, i agree, and in fact, the company has tremendous financial power and flexibility. Because of the Strong Performance of the business, we just executed a 7 billion Share Repurchase program, weve increased our dividend by 10 . We are going to have an opportunity to pay down the debt and go back to less than 1. 50 debt to ebitda ratio by 2023 these are all things we discussed a year ago, and were on track with the 2. 5 billion in synergies at the same time were executing really well on the value drivers of the deal, which is the biplane that is progressing well i know youre going to tell me listen, my jobs drugs, not stock, but are you surprised how inexpensive your stock s given the fact that youve changed your profile and havelogical, especially because of tesla, your Balance Sheet is far better than people realize. There is great momentum in the company and when we look at the conversations were having with investors, since we closed the deal, the value of the new Bristolmyers Squibb is becoming really clear my focus is on creating value for shareholders in the longterm. Theyve made great progress in 2019, but i think 2020 will be an even more important year. I think were really well positioned, it will be an exciting year. Dr. Giovanni kaforio, i totally agree with you thanks, imwill have more from the Jpmorgan Health care summit all week long. Keep your eye on the market, the dow is up 54 points. Jim will have glaxo on mad money back in a minute. When you look at the world, what do you see . We see patterns. Relationships. When you use location technology, you can see where things happen, before they happen. With esri location technology, you can see what others cant. High protein. Low sugar. Tastes great high protein. Low sugar. So good high protein. Low sugar. 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Get customized security with 24 7 monitoring from xfinity home. Awarded the best professionally installed system by cnet. Simple. Easy. Awesome. Call, click or visit a store today. What a weekend of football the past couple days as the packers end the seahawks season Marshawn Lynch gave a press conference last night when the conversation turned to money this is a vulnerable time for a lot of the young dudes i tell you all right now while youre in it take care of your bread so when youre done you go ahead and take care of yourself. Jim, i know helping nfl players manage their resources long term is one of your strengths. Yeah, coach reed late of philadelphia, congratulations coach and tammy, asked me, listen, what can you do . He actually i gave him my cell phone number. I said anybody who wants help from the eagles cramer is there. He doesnt want your money, doesnt want anything. Only two players took me up on it i think it is a sign they think my agent will take care of me. Geez one of the agents put a lot of money, these players, made a player be in a scam, real estate scam these players need to be educated and cant let the agents do it because the agents are not responsible when it comes to money amazing one of my favorite weekends though is the divisional there is so much great ball as we saw in some of those games. It was. I have to say last weekends games in many ways may have been a little more exciting though that comeback was incredible by kansas city down 240. Im looking forward to next weekend. Matchups that you couldnt have asked for more jim, what is on mad tonight . By the way, the hexal deal was announced, get this, literally announced while you had the texans up by 24. And i said, guys i got to talk to you later i think this is a comeback of a lifetime that was happening we have so much on tonight we have glaxo smith kine we have zoetis a lot of people i think will say wait a second. Numbers are too low. And of course it will be extraordinary. Larry can tell us the numbers are too low. I dont even think 7. I think they can do more than that please. By the way, that hexal is up 10 . Good response. Of course incredible. There is a lot more on the Jpmorgan Healthcare summit coming including lillys david ricks. Dow is up 56 good monday morning welcome back to squawk on the street. Nice bounce at the open here dow is up 58 as a big setup week whether earnings, china trade, or eco data on the way it certainly is our road map starts with stocks getting a boost from positive trade headlines as the chinese delegation heads to d. C. For the signing of that phase one deal we will hear more from the ceo of pharma giant eli lilly live at the jpm Healthcare Conference and what to expect as David Calhoun takes the helm of boeing markets showing some gains this morning as the u. S. And china prepare for the signing of a phase one trade deal on wednesday. Where should investors be positioned as we get into the eighth trading session of the year joining us today our guests. Good to see you both good morning good morning. Keith, you still like the setup here, ample global liquidity and stocks still attractive on a relative basis can you talk about that . Sure. I mean, the next 12 months we still think stocks look attractive as i mentioned. Global liquidity is ample. Weve had a lot of central bank easing on a shortterm perspective i think sentiment is running a bit hot so i expect more consolidation in the weeks maybe even the next few months but ultimately the path of least resistance is higher we think and we still think Recession Risk is relatively low yields are slow. 1. 8 that means about 48 of stocks in the s p have dividend yields above that of the 10year treasury and, again, we think the policies will remain accommodate if f accommodative for the first half of the year. It is that policy that has made life so difficult for the bears. How do you explain the bear stance right now well, the bear stance will mostly come from either earnings disappointments because we do have a lot priced in i mean, the bottom up intense is looking for 10 growth in eps which is going to require quite a bit of Margin Expansion this year and, you know, to come and say that Recession Risks are low, i mean, that might have sounded good a year ago but were nowhere close to being priced for a session anyway were really priced for growth reacceleration if we dont get the growth reacceleration which is now more of a hope and forecast than necessarily a reality or once the fed stops goosing the system with liquidity to fight their problems in the repo market, it is a lot like what happened when the fed started to pull back on the liquidity post y2k in early 2000 just keep in mind really what changed since early october beyond say phase one which is really just about soybeans, that is when the fed posted its memorandum it was going to start to hoover up the Treasury Bill market, resteepen the yield curve and the process to cover up the problems in the repo market i mean, the fed has actually expanded its Balance Sheet at a faster rate the past four months than it did during q3 and the feds Balance Sheet has now a 95 correlation with the direction of the stock market and, in fact, in early october just before the fed made the announcement the total return in the s p 500 was barely more than 1 next thing you know three months later its up 30 and the only thing that really changed materially was the liquidity spigot by the central bank keith, the market conversation was very different this time last week really around geopolitics and the risk associated with iran is it on hold . Could it come back and shock investors . It can certainly come down. One thing we mentioned is because of the run weve had in sentiment we are all vulnerable to the bad news but i also want to comment i think to put things in perspective, its been a big run since september but the last two years the market is up a little more than 20 and earnings up about over 20 but you had a tale of two different years. 2018 we had 20 Earnings Growth in a market that was down as the fed was tightening and then last year you basically had flat earnings and a fed that was easing and a market that was up strongly if you look and average those things together the market has actually moved in line with earnings its just done it more with a lag and a lead david, i wonder, we talk about where the fed how they see this going we had discussion of the Balance Sheet and creating imbalances last week and now low rates may drive risk taking like that ahead of the Great Recession do you have faith the eyes are wide open over at the fed . Well, its not the first time theyve been talking about financial imbalances for quite a while i think a lot of it was more geared toward Corporate Credit and the fact that the corporate sector bond spreads dont compensate investors one iota for the prospect of what the default situation is going to be in the next 12 months even without a recessionary scenario. You know, so, yeah i think that financial imbalances are clearly a concern among we saw and then you have the contingent more concerned about the fact that underlying inflation remains so far below target at least as far as how the fed measures that. So you have the two balancing off each other its interesting that, you know, the situation propelling the fed to ease policy and remain so accommodative, which is their measure of low core inflation, is what is precipitating the massive financial inflation in the asset sector broadly speaking in terms of the comment about the equity market ill just say this look at the forward multiple, which is now pressing against 19 times earnings i guess you can always say, well, that looks much better than what youre going to be getting in the bond market on an earnings yield comparison. We are still pressing against the high end of the range. When you look at price to book, you look at ebitda, price to sales ratios, were now pressing against the peaks or certainly the highest levels weve had since the dot com bubble in 2000 so theres a lot priced into this market right now growth wise for the coming year keith is that what you mean when you say you do expect the market to take two steps forward one step back in 2020 . Thats correct. Weve been using kind of 19p as where we might see fundamental resistance i think the other thing is you have to look beyond just the headline index we know that technology was the only sector to meaningfully out perform last year, up over 50 , up over 60 since december i think theres going to be more opportunities in these sectors that have kind of lagged behind over recent years like financials, industrials. Especially if we start to see stablization in the global economy, which is our best Case Scenario all right, guys it is going to be interesting. Well know a lot more in the next couple days as earnings and trade really take the spotlight. Keith and david, well talk to you soon thanks thank you thank you following todays Market Action which of course follows last weeks jobs report capping a decade of robust wage growth and solid job creation but a closer look shows some pockets of weakness in the labor market, which could mean slower Economic Growth ahead good morning, steve. Good morning. The tight labor market continues to offer a mystery to economists why arent wages rising faster why is the work week actually falling . You would expect with a low 3. 5 rate workers could bargain for higher wages and employers would give the work force more hours neither is happening the work week has declined by 0. 3 hours as the Unemployment Rate has declined from 4. 9 to 3. 5 after increasing for nearly three years wage gains have declined for most of 2019. You can see that fall off there at the end jpmorgan writes the generally soft pace of wage growth in this expansion isnt too much of a puzzle, given extremely weak Labor Productivity growth. But the deceleration of wage growth over the course of 2019 is more mysterious Morgan Stanley says even with a 3. 5 Unemployment Rate the labor market is not so tight that its creating sharp wage or price pressures. There are three reasons economists are talking about these are not all of the reasons. The first is substitution. You have a lot of Young Workers replacing Older Workers who make higher wages you have changes in the mix all the time in this case, you may have low wage retail and leisure jobs replacing higher wage manufacturing jobs lost because of trade finally the idea of monopsony that the employers are the only ones in town in a lot of rural areas so workers actually do not have bargaining power. Modest wage growth with low unemployment gifls the fves them to keep it low but also suggests modest overall growth underpinned by modest Consumer Spending steve, thanks meantime, it is a new era at boeing with chairman dave calhoun taking over as ceo of the dow component inheriting the many challenges surrounding the 737 max. Our phil lebeau has more from chicago on what to expect on day one. Phil well hell be busy not only today but over the next several weeks as he not only hits the ground running but really tries to focus boeing, which has been wildly distracted over the last year, year and a half as everything has unfolded with the 737 max. His agenda get boeing back on track its not just with the max you got the triple 7x, the new middle of the market airplane, a number of other areas. He will be making quicker decisions. Not reckless but quicker there is a sense there is a bit of paralysis at boeing and he is going to streamline the 737 max process. Now, hell be visiting the seattle area plants next week. That includes the 737 max plant in renton. Thats part of the beginning where he says, look. We need to get an assessment of where we are he will also be calling on regulators, suppliers, and airlines in his email to employees this morning dave calhoun said, this is a crucial time for boeing we have work to do to uphold our values and to build on our strengths. Keep in mind, dave calhoun could cash in to the tune of 28 million in his first year provided he gets the max back in service and hits a number of other incentives that were laid out by the board of directors. But the big focus right now, guys, its all about the max and theyve got their work cut out for them theyll be working with the faa, other regulators, as well as trying to get the max to that final point where we can do certification flight and then from there potentially they could get this plane back in service. I imagine those conversations with the faa will be very important in the coming days what about, phil, boeings relationship with suppliers, the layoffs at spirit, and, plus, General Electric being of course the manufacturer of the engine right well, the spirit one is sort of expected spirit has a backlog of about 100 737 max fuselages because it never cut its production rate even when boeing did they simply have way too many of those fuselages and needed to cut employment theyll cut about 2800 jobs starting january 22nd. The supply chain is a concern for boeing thats why theyre going to be working with their suppliers especially those tier 2 and tier 3 suppliers in order to say, look we do not want you to layoff workers. What can we do to assist you, work with you . Thats going to be a big focus for boeing phil, thank you you bet phil lebeau reporting for us of course on mr. Calhouns first day of work. Still to come right here, dont miss a first on cnbc interview with the ceo of pharma giant eli lilly. That is going to be live from the Jpmorgan Healthcare conference and later, a trio of big banks will kick off the earnings season well break down what to expect. A lot ahead. Sfx [phone ringing] you still have service . Call the Insurance Company its them, calling us. Its going to be a week before they can get through on these roads shhh, sorry, i didnt catch that. I said ask how soon they can be here right now . Whats now . He says theyre surveying our property now theyre probably at the wrong house i dont see any hovering his name is hovering . Look up . By automating claims with Machine Learning and analytics, cognizant is helping Insurance Companies advance how they serve even hard to reach customers. Cool some things are too important to do yourself. Get customized security with 24 7 monitoring from xfinity home. Awarded the best professionally installed system by cnet. Simple. Easy. Awesome. Call, click or visit a store today. It is the biggest healthcare investing event certainly around kicking off today in san francisco. There are thousands gathered for the 38th annual Jpmorgan Healthcare conference. Reporter good morning, david. That special guest is eli lilly chairman and Ceo David Ricks thanks for being here. Great to be with you. Reporter some of the news weve already seen at the conference a new Company Founded to undercut the cost of your drugs and other companys drugs. They are saying theyll be the amazon of pharma what do you make of this it is interesting i read the press release i dont know much about their Business Model of course this is an idea thats been tried before. There are lower list price launched drugs in many categories unfortunately, they havent found as much success as one might think. And i think that exposes the complexity of the supply chain and how medicines get to patients and the role is much stronger than the consumer demand there is so much innovation right now in our industry. Thats exciting. We need moreoninvestigation on the payment and reimbursement side i would welcome any ideas. If this is a good one lets see what it does i think Big Companies like lilly need to play a role, too, innovate and find new ways to make sure our medicines are affordable to patients does a Company Coming out saying were going to offer a drug at a price of onethird to onefifth of perhaps one of eli lillys biggest medicines does that make you nervous or do you feel the supply is so complex they wont be able to break through it that has happened before. And as i was saying it didnt find much success. Ultimately, we have significant price competition when we lose our patent and go generic. I think the idea here is to create sort of me too medicines that would be a lower priced alternative. That can work but usually the primary reason doctors choose a medicine for a patient is the evidence behind it so its a difficult to both pursue a robust r d agenda, to have a full list of great data and to afford to charge less some have tried it it hasnt found much success we ourselves have launched a half price insulin and so far mixed results. About 1 out of 10 prescriptions for the half price version and 1 out of 5 formularies cover it. There is more than just the supply side but the demand side problem that needs to get resolved you got some flack from Senators Elizabeth Warren and Richard Blumenthal saying that you hadnt made it available enough in pharmacies and people couldnt get it. Has that been addressed . Is it more available do more people know about it can they get the half priced insulin . They could get it before the report came out and can get it now. They stated three things that just werent true. One it wasnt available. Two we didnt try to make it available. And, three, it was sort of a gimmick and doesnt actually affect market pricing. All of those things werent true certainly we tried to make it available and it is broadly available through the wholesalers. We sell to wholesalers and pharmacies have to buy from them it is true for any medicine if you walk into a pharmacy they might not have it on the shelf but to the point on insulin, usually within a day they can get the insulin you want and that includes the half price ins din. So coast to coast it is available and if Consumers Want it they should ask for it from their pharmacies if they dont have it at the moment they can get it the bigger issue is formulary coverage why arent more . Wed like to see more cover it even though net pricing is the same it is not a given. We have a competitor that is a real biosimilar, the day we launched our half price insulin they cut theirs to half as well. So it did create price competition. Consumers are benefiting this is an Election Year of course and drug pricing is always a huge topic during an election how consequential is the president ial election for eli lillys business does who the next president is matter for you guys . Of course policy matters our industry is reliant on a lot of federal policies for how reimbursement works and of course the fda regulates us. Its not the most important thing but its a very important thing. The most important thing is can we invent new and better medicines for patients with unmet need and i think theres never been a better time for that than right now in our industry im so excited by whats happening in our early stage pipeline for really tough conditions that can affect in a very significant way the health of americans and around the world. At the same time the policies by which they get to the market as weve been talking about need change and were for change. There are a number of bills on the hill now that lilly and the pharmaceutical industry are for to reform part d, to make the system more transparent. Wed like to see those move under this president or a different one. We think change is necessary i want to ask you also about your pipe line and specifically alzheimers disease lilly has been committed to alzheimers for a long time but of course youve been through so many failures, spent so much money. Last year we saw biogen have a drug in phase 3 that looked like it failed and then came back from the dead and now theyre saying they will apply for approval early this year did that affect the way lilly looks at its alzheimers pipe line and the race to get to market well, not really. We had, in late 2016, just missed in a big late stage study, we decided to pursue a very clear path to prove whether amaloid could make a difference for alzheimers patients meaning we arrest that aberrant form or in the plaque form we have a drug that does that as well as biogen but to do it in a very clean way so we wouldnt have questions about efficacy the studies are still going on one reads out soon on patients with this dominantly inherited form of the disease. If that is successful i think it will be another positive sign on top of what could be a positive sign from the biogen drug and we have another as well and that data will come out at the end of 2020 or beginning of 2021. We need that answer, too we have a symptomatic medicine because symptoms of alzheimers are still a major problem even if we had disease modifying drugs and a specific antibody that seeks to arrest the other driver of alzheimers. So all of that is about to read out in the next 12 to 15 months and it will be an exciting period for alzheimers disease a treatment. Potentially competing with dupexin, which was recently forecast to be a 10 billion drug how do you plan to compete . This is a slightly different mechanism. It works against the key not the lock that is thought to cause this atopic cycle which causes itching and eventually bleeding, some infections. It is a condition that tens of millions of americans suffer from and even more globally and they are still high unmet needs. We hope this medicine can resolve itch a little better, maybe a little faster, and perhaps have a better dosing schedule for patients. Were excited. Dermira is the company and as soon as it closes well go to work to bring that to patients around the world dave, thank you so much for being here this morning. A lot more coming up from the jpmorgan conference including jsk in the next hour with jim. Back over to you meg, thanks looking forward to your coverage from the Jpmorgan Healthcare conference when we return, teches roll in retail for 2020. We will take you live to the annual nrf big show on how major retailers are adapting in the age of disruption. Squawk on the street will be right back i can. The two words whispered at the start of every race. Every new job. And attempt to parallel park. electrical current buzzing each new draft of every novel. typing clicks the finishing touch on every masterpiece. newborn cries it is humanitys official twoword war cry. Words that move us all forward. The same two words that Capital Group believes have the power to improve lives. And that, for over 85 years, have inspired us to help people achieve their financial goals. Talk to your advisor or consultant for investment risks and information. Talk t your advisor or consultant dont get mad. Get e trade, dawg. Time for our etf spotlight we are taking a look at the spdr ticker xrt it is off to a rough start in 2020 down more than 2 so far this month and extending its losses today by around 0. 4 of 1 lets go live to the National Retail federations big show in new york with all the highlights reporter hi there. This is kind of like the Consumer Electronics show for retail here. And many retailers are now looking to the future. The holidays are behind them we know the future will involve an awful lot of technology infused in the in store experience and frankly the way that retailers are run this morning we heard from starbucks ceo kevin johnson. Later today well hear from lowes ceo as well as mastercard you cant really move forward to the future until you fix the fundamentals of whats wrong now. I spoke with kohls ceo Michelle Goss here is what she said about holiday sales. Im very confident around where were going. You know, we did not meet expectations for the holiday time period. Certainly didnt meet my expectations womens is 30 of our business its 70 private brands. If we hit some speed bumps there it has a major impact on the company. We have our arms around it reporter theres a lot going on in retail ahead of the icr presentations were getting a number of specialty retailers that are preannouncing results lululemon is one of the names that had been called out by analysts as an early winner and it does appear that was the case for holiday. The company basically now upping their forecast for earnings, for revenue, as well as comparable sales, now expecting them to be in the mid to high teens that was above the original low double digit forecast. Abercrombie, american eagle, both of those names reaffirming their forecasts. Abercrombie saying it had a record revenue week for that black friday week and then jeffries is reiterating its buy on american eagle. Not the same case, though, for five below shares down around 20 after the retailer just warns investors, look were not going to make the analysts forecasts for earnings, for revenue. Comparable sales, now possibly down as much as 2. 5 when the street had been hoping those would be up by 3 . Back over to you so many stories swirling around ub today. Thank you so much, Courtney Reagan the big week for bank stocks starts tomorrow. The ceo of kbw will join us to talk about jpm, wells, citi, rng. ll all be on deck in the squawk on the street is back in two minutes welcome back, everybody. Im sue herera with your cnbc update at this hour. Prices at the pump edging higher gas prices rose by 4 cents over the past three weeks to an average of 2. 64 a gallon, 33 cents higher than just a year ago. Queen elizabeth and her heirs will meet today to work on a plan for prince harry and his wife Meghan Markle to step back from their duties and spend more time in north america. Harry and meghan shocked the world last week, announcing they will step away from royal duties and work to become, quote, financially independent. Bolts of volcanic lightning were seen crashing across an ash column during the eruption of a volcano in the philippines last night. More than 16,000 people have been evacuated Dunkin Donuts is teaming up with snoop dogg for a limited time menu item called the beyond dogg sandwich. It features a beyond breakfast patty with egg and cheese and is served on a sliced, glazed donut. Thats the part im not sure about. But it will be available today through sunday maybe its a sweet and salty sort of thing. Ism not sure. Youre up to date. Thats the news update i bet it sells, david. You never know you know, you never know what people will eat, sue exactly thank you sue herera banks are gearing up to report earnings this week. Tomorrow well hear from jpmorgan, citi, and wells fargo. Thats a lot of market cap right there. Joining us now is ubs bank analyst Saul Martinez. He down graded jpm and bank of america ahead of this big week we all know anybody who paid attention watched that big move up in the bank stocks over the last quarter in particular of the year out performing the s p as we are in this year, how important are these earnings to justify the valuations that banks ascended to only over the last few months . Well, thanks for having me on look, i think the quarter, itself, is important its really about the outlook and whether the outlook can really justify what have been pretty material moves for the largest banks. Our downgrades last week of jpmorgan and bank of america to neutral werent necessarily reflective of a more negative view, fundamental view of each of the stocks. Its really that we just feel like they are pricing in a heck of a lot and that the bar has been raised quite a bit. For us you really would need to see material profitability expansion for both banks to be able to justify the kind of upside you would need to justify a buy rating so for the quarter, itself, look i actually think the quarter will be pretty good. I think itll be pretty good for jpmorgan we are actually above consensus for the Fourth Quarter i think the question for jpmorgan and for the rest of the group is what are they going to say about the outlook from here . And is the outlook going to be sufficient to really justify the kind of move that you would need to or the kind of profitability expansion you would need to justify the material upside here yes, to your point, jpm, you point out trades at what almost 12 times 21 earnings, right, trading above two times tangible book value at this point obviously very different from the likes of a Goldman Sachs so you dont see much upside in the stock even if they do report a decent quarter thats absolutely right i think it will be a pretty good quarter. You know, when we down graded them last week, we estimated that to see material upside from here, their rotce which is in the 18 to 19 range wouldnt need to get well above 20 you would need to see material profitability expansion from here from an already elevated profitability level, already elevated rotce level so the quarter could be good but is it going to give us enough visibility to suggest that they can continue to improve profitability in a low rate environment, you know, from what is already a pretty high level of profitability i think that is a hard bar to jump over for them yeah. All right, we talked jpm bank america to a certain extent anything in terms of wells fargo, which has had a bit of a different track over the last couple years, just trying to rebound from a significant crisis yeah. Look, i think for wells fargo the quarter probably matters less than even for jpmorgan for the other bank really to get excited about wells fargo you need to have a line of sight that they can, you get past the regulatory hurdles that they face and start to grow and improve their profitability which has really suffered for the last couple years. One of the biggest things for wells fargo is can they right size their cost base, improve their efficiency level their current efficiency ratio is the mid 60 range to the point of comparison most banks we cover are in the high 50 range and some are even better so the bull case is, look. They are not going to be at that level of efficiency forever and once they right size that their profitability level is going to expand materially. The problem though is the timing and when you actually get line of sight to get there. Im not sure youre going to get that this quarter. You have a new ceo in charlie sharp. It is hard for me to believe well get a Financial Outlook or guidance that suggests that theyre at the point where theyll start to right size the cost structure and be able to grow a little bit more again yeah. Saul, well be paying close attention as i know you will thanks for joining us this morning. Sure. Thanks for having me Saul Martinez from ubs. Lets get more on the banks now and bring in the ceo of kbw. Nice to see you, tom good morning. We were just talking. The bank stocks in particular, some of the big cap ones moved up appreciably certainly in the latter part of the year. How important is this earnings season again in terms of justifying those valuations and or to the point saul was making pointing toward future growth in the stock price . So i think the first thing is, yes, theyve moved up and out performed really by about 10 since mid august but i dont necessarily think its because they rallied so much i think its because they recaptured a lot of under performance. So if you took a snapshot today of the bank stocks what you would see is on average theyre a little cheaper than they are historically whether on a p. E. Basis, relative dividend basis or an absolute relative p. E. Ratio so we do think they still are modestly attractive relative to the market and, also, the smaller Cap Bank Stocks have under performed the bigger ones. Those are very much so under valued relative to the market. But i do agree with the point that really the First Quarter is sort of a stopping point for the broader story, which is that theres been a negative operating leverage story here in the banks for the last six months or so as Interest Rates have been continuing to march down now that Interest Rates appear nearing the end of their lowering cycle, youre probably going to see a pick up in operating leverage and that is going to be a positive so its going to reveal itself not in the print itself but the commentary that follows . Absolutely. And i think thecommentary is going to be around where do you think your Net Interest Margin is going because Net Interest Income is still the majority of revenues for this group what due see about loan growth loan growth has been slowing over the last six to nine months the margin is expected to be down again it is going to be down by a smaller and smaller degree as the year unfolds and then another thing is, do not forget capital management. We think over a hundred percent of earnings for many of these banks will go back into Share Repurchase and dividends, which is very favorable to share holders. That trend should likely continue the top five banks collectively spent about 16 billion on buybacks last year, thomas do you expect that to continue with the fed keeping rates on hold absolutely. The snapshot of the quarter is going to be record profitability in terms of net income dollars Balance Sheet is as sound as its been since the Global Financial crisis benign credit quality. So the snapshot of the industry is it is in great shape. The question is what is happening to earnings momentum whats interesting, even though we talk about this, the banks will probably still grow earnings in 2019, 4 or 5 , probably still better than the market theyll have probably flat earnings for the first half of the year in a year over year basis and then theyll get better in the second half as the margin stabilizes. As long as we dont get a credit cycle that shows up or a recession, thats probably whats going to happen you mentioned loan growth were getting some cni numbers, got to go back to march now to see cni this low why . The economy slowed. I think with the economy slowing you saw and fears of recession you saw folks pull back some. So that is really what we think has happened so yes loan growth is probably now a 2 to 5 type opportunity for the bigger banks whereas it used to be above 5 . Were starting to see a return on tangible common equity i mean in the high teens for some of these institutions a number we didnt think wed see certainly it is remarkable. Also, david, whats interesting is whos doing it . We were just talking earlier jpmorgan and bank america are 16 , 17 return on tangible common equity companies. Thats above a lot of the regional bafrmgs now, there are some outliers, great performers there, but the bigger banks are becoming more profitable, which is going to give a lot of credibility to the scale argument which i think is going to drive more consolidation what is an appropriate multiple to book, though with jpmorgan now trading above two times tangible well, we downgraded jpmorgan the end of last year as well, the market perform we think it is a very High Performing Company our favorite of the large cap banks right now is citigroup, mainly for valuation and we think it is a similar story weve heard which is theyre going to get positive operating leverage, going to grind to better profitability and buy back a heck of a lot of stock. So for that reason we would prefer citigroup right now over jpmorgan but i agree with the point that jpmorgans results could be very solid. What is the bull case on the small to mid cap banks that were really left behind last year yeah. The bull case is that it is going to be less challenging in the future, so the Smaller Banks have less noninterest income, so this margin trend of stablization is actually more beneficial the other thing is the bigger banks have more Global Operations another story, we just double downgraded the european banks of kbw. We went from out perform to under perform about a week ago that doesnt happen usually. And thats predicated on negative Interest Rates. And a continued slow economy so to the extent youre a big global bank and youre in that market, thats going to be somewhat of a head wind. Weve had negative rates for quite sometime, though yeah. But the call had been that they were going to turn and that we were going to see some return and now theyre doing a big ecb review, which wont play out to the end of the year, which our analysts believe means youll see no change in what it is now. So there is a sense that you would see some change but that has been pushed further out in the horizon. And while thats happening, youre seeing roe for some of these big european banks go to high Single Digits while were talking about bank america and jpmorgan at 17 . Thats the difference. Tom, always appreciate it thank you. Great thank you. As we go to break take a look at some of the Top Performing names on the dow today led by dow, coke, boeing, axp, and Goldman Sachs of course the names well be paying attention to in the coming days. You can always watch us live on the go on the cnbc app you can download it today. Aomt. Trts ck see iba in men and etfs are commissionfree. S and when you open a new brokerage account, your cash is automatically invested at a great rate. Thats why fidelity leads the industry in value while our competition continues to talk. Talk, talk high protein. Low sugar. Tastes great high protein. Low sugar. So good high protein. Low sugar. Mmmm, birthday cake pure protein. The best combination for every fitness routine. Financials kick off the earnings season this week and charts suggest one bank is the best bet to break out. Find out which on trading nation cnbc. Com more squawk on the street coming up. [narrator] at Southern New Hampshire university, were committed to making college more affordable. Thats why were keeping our tuition the same through the year 2021. [woman] i knew snhu was the place for me when i saw how affordable it was. [narrator] find your degree at snhu. Edu. But in my mind im still 25. Thats why i take osteo biflex, to keep me moving the way i was made to. It nourishes and strengthens my joints for the long term. Osteo biflex now in triple strength plus magnesium. Welcome back to squawk on the street. Stocks are in positive territory for now to start the week with technology and real estate you can see here helping to lead the way higher one sector though moving to the down side today is healthcare as you can see here one of only two red sectors on the early trade today. Take a look at the underperformers there. We see a smattering of big insurers, also pharmaceutical companies. Youve got them in there as well one of the big drags on healthcare today is a biomed the manufacturer of implant devices provided preliminary guidance for the Third Quarter that fell short of analysts expectations and the stock is on pace for its worst day since november keep it on healthcare especially in light of all that Jpmorgan Healthcare conference headlining coming out today david, back downtown to you guys at the New York Stock Exchange thank you, dom. When we come back trumps tariff tactics well speak to one of the largest spirit and wine wholesalers live from the texas warehouse on the proposed 100 tariffs on french wine we made usaa insurance for members like martin. An air force veteran made of doing whats right, not whats easy. So when a hailstorm hit, usaa reached out before he could even inspect the damage. Thats how you do it right. Usaa insurance is made just the way martins family needs it with hasslefree claims, he got paid before his neighbor even got started. Because doing right by our members, thats whats right. Usaa. What youre made of, were made for. Usaa and when you open a new brokerage account, your cash is automatically invested at a great rate. Thats why fidelity leads the industry in value while our competition continues to talk. Talk, talk while our competition continues to talk. Dealing with our finances really haunted me. Ttle cranky. Thankfully, i got quickbooks, and a live bookkeepers helping customize it for our business. live bookkeeper youre all set up janine great vo get set up right with a live bookkeeper with intuit quickbooks. Beyond the routine checkups. Beyond the notsoroutine cases. Comcast business is helping doctors provide care in whole new ways. All working with a new generation of technologies powered by our gigspeed network. Because beyond technology. There is human ingenuity. Every day, comcast business is helping businesses go beyond the expected. To do the extraordinary. Take your business beyond. The trump administrations fight against a new French Digital Services tax, the white house proposing up to 100 tariffings on millions of goods leaving the Wine Industry to warn that such tariffs could lead to an armageddon of costs among those who testified, barkley stewart, executive from wine and spirits he joins us from a Company Warehouse outside dallas thanks for joining us today. Set the thanks for having me. What does this 25 tariff mean for your industry how has your industry been responding how many jobs are at stake so thank you for having me, number one the tariffs could be as much as 100 on french sparkling wine and champagne. And the number one point that we keep trying to explain is that we think that the largest impact from these tariffs would be on u. S. Workers and on u. S. Jobs and on the u. S. Economy. In large part, france is able to sell as much champagne as they produce, whether its to the United States or other parts of the world. So we think that the damage to u. S. Jobs could be as many as 17,000 employees in the wine and spirits industry and leave lasting damage on the u. S. Economy. Some pretty big numbers whats your message to robert lite heusser who in the last week has said that 25 tariff koul imcrease to 100 . Who would that mean for your industry like i said, i think the damage would be severe theres two different sets of tariffs and i think its important to understand there are some tariffs that went into place on october on french still wines, and those are 25 right now and theyre being discussed as being raised to 100 . And then on the digital tax, there are new tariffs on french sparkling and champagne that could also be as much as 100 and that sort of doubledown is whats particularly alarming to us as an industry. Frankly, you know, our industry has worked for years to try to eliminate tariffs and allow for the free flow of goods in both directions we really hope that ambassador lighthizer can negotiate a settlement and not have to go to using tariffs. We see that as being a back and forth that only escalates and is counterproductive. Although in classic episode of uncertainty, then, i guess i wonder what the industry does in the meantime in terms of ordering inventory do they try to minimize what theyre bringing in from europe and try to highlight whatever is an equal substitute made in north america or somewhere else . Well, i think, you know, theres a couple really good points you just made in there. The uncertainty around when the tariffs would win and if the tariffs would be applied is a huge issue there are a number of importers that dont want to ship goods right now because they dont know when the tariffs would be applied and they have to set their price before the goods hit the water. Our supply chain can be as long as 120 days for product coming from europe to the u. S you mentioned the 25 tariff. What has already been the impact in the marketplace since those tariffs went into place in october . And given what youve learned, what would your expectations be if question we go get the 100 n sparkling wine well, you know, the 25 tariffs have certainly had an impact and weve seen that the issue with the 100 is that, you know, i was having breakfast with an importer that we do business with the other day, and he said, barkley, if these tariffs go into place, its not going to hurt my business. Its going to put me out of business you heard that over and over again in the testimony last week in front of the ustr so we fear that there are pretty drastic consequences to this finally, on pricing, kwhashd consumers expect one said a bottle could go up from 70 to 140 is that what youre seeing in the marketplace, barkley well, you know, the tariff percentage hasnt been set yet, so its hard to say what the impact on the shelf would be but with 100 per tariff, you c see a doubling in prices well leave the conversation there. Barkley, thank you for join us and walking us through what these tariffs could mean for your industry. Barkley stuart thank you very much when we come back, do not miss an exclusive with googles cloud chief. Sometimes, the pressures of todays world can make it tough to take care of yourself. But natures bounty has innovative ways to help you maintain balance and help keep you active and wellrested. Because hey, tomorrows coming up fast. Natures bounty. Because youre better off healthy. Good morning its 8 00 a. M. At google headquarters in mountain view, california, 11 00 a. M. On wall street and squawk alley is live begin the day with a friendly voice good monday morning im Carl Quintanilla with Morgan Brennan and jon fortt live at post 9 of the New York Stock Exchange on the cusp of a big weekend ahead. We begin with a tech stock rally, tesla, microsoft, apple, nvidia