Fed funds rate the chairman talking about the action and admitting that the cut may not be a cure yall, so to speak we do recognize the rate cut will not reduce the rate of infection or fix a broken supply chain. We do believe our actions will boost our economy. Avoiding a tightening of the conditions that will help boost household and business confidence. Then stocks whip sawed with stocks ending down yesterday, the yield dropping below 1 for the First Time Ever take a look where we stand now at. 94 as we speak quite a bit lower quite a day. You want to get ahead of these things but can you we were up 1,300. I know. Im not listening actually i do want to know your predictions. He would shave to do it at some point i think there is no winner here exactly if they didnt cut, you are skpengting why didnt they cut and the markets go down . What do they know nobody else knows. At this point, it is pure insurance trying to loosen liquidity. You look at people looking at mortgages. I locked in a Mortgage Rate on saturday. Saying, look, things are going to get cheaper if you are locked in for a 10 or 30year mortgage up sharply today. Maybe biden or sanders we are not going to nationalize everything maybe enough people over 35. Did you see he won. I still think it has something to do with the gains today, by friday, lets see what the fed cut is i think yesterday, the knee jerk fell on the news. It will be helpful to stabilize. Do we have a jobs number on friday well have to look at global coordination if the rest of the world did and the fed didnt do anything, wed be looking at it the market had to move. We know the economy would impact we are seeing things from people eating out to driving. Conferences and it is happening now. These are frightening times i tell my self it is ridiculous to be thinking about all of these things during flu season, if we were rushing to talk about how many people died, we would be doing it all of the time even now in china, you are talking about less than 100,000 total cases. Weigh dont need to do the math. Every time someone dies, it is oh, no, another person died. If we did that with the flu Scott Gottlieb will be with us and said he suspects there are thousands of cases already here dont you think that in the next week, we are going to hear big numbers . We never got big numbers in china, you think 80,000 is a lot in china i dont think that is down, we are not going to be able to do that, that is true. There will be more cases here. Is it worse than a nasty flu i dont think we know until we see bigger numbers. Statistically, it should be we dont know because we dont know the denominator yet it is one or the other well get through this and it is probably like a really bad flu season of the 70,000 they studied from china so far, there is an article in the china cdc, they found a 2. 3 death rate. That is substantially higher than the normal flu. 10 times higher similar to the spanish flu what happened to my i had a read they got rid of it do you want me to tell you what it says we were going to do a sound bite okay ive been practicing how to toss to this sound bite voting fomc member said the emergency rate cut wasnt driven by the stock market but it was taken into account on cnbc earlier this morning, take a listen. The risk around that outlook have gone up significantly you dont respond to market volatility per se but if investors pull back as much as they were showing they did, that also influences business and Consumer Sentiment anchor school 101 the next central bank to watch is canada. The next banking decision is due at 10 00 a. M first we are going to check on Global Markets. When are we going to get to the experts . You can see the nikkei closed flat, the hang seng was down, shanghai composite was up. In europe, green arrows across the board. Okay, now it is your turn our guest host this morning. What nuggets do you have . You were. We dont know how many cases we are right now. In the urs, weve had 120 confirmed cases we hope that number will go away. Expect that to go up to the thousands and the death rate will go down weve seen not just in the u. S. , in europe and japan get so far negative. Extremely low reads. You get a snap back and right itself a little bit. 2 , 4 , whatever it is. If they start closing schools. If you do see a lot of things empty. I saw some Costco Stores empty if that gets more widespread in movies and et cetera, did the big selloff last week already discount that much dampening when you had sicka and sars, you had more we were down 11 if things get worse, you could see. The selloffs throw do you think that throws off literally what is happening. Every other hour, something canceled or conference happening. I would argue, if yes over the next two quarters we have a slow down, the markets are discounting not just that but a year from now things get back to normal future cash flows from one to two years out. All that will happen talking on friday but weather they consider that one time. In all of that, to your point the denominator. The active case has become inactive, in the short term, it is so easy to sell, just to get out and feel better. In the duration, it depends on how much of the gdp we recapture. Do we lose it, do we get. 3 back if you dont get the washer, you may get it in three months but do you skip the vacation are you shopping at macys . Were you already shopping at macys to sell the market, there is so much less friction to say sell the market than the individual company like in a casino you dont use cash, you use poker chips. There is less friction i think this knee jerk reaction is more trading. This is looking bad. The headlines are looking bad so people sell. If you look at cases like sars and ebola which may not be as bad as the coronavirus, within 80 trading days, the market had already recovered. Got any bonds do you do that we look at the bond market and focus on we can witnesses primarily. Treasuries are up 25 in the last year, when you look at that, it has only been the following seven times. Before the rate cut, there were yields above the 10year. That was before yesterday so just look at whats going on . 70 before yesterday . Yes chicken little bond traders need to grow a pair and get this 10year back above 1 . They are petrified this will pass what are we at 70 basis points does that make sense or is that an overreaction . I think it is an overreaction we have to get above one. Lets go its their fault they are so petrified. They are usually right thats what scares me. In the short term, thats where the fear is. The bond market reflects fear. The bond market is what do we not know was it. 7 . It was low it got even lower yesterday. Do you think he would be right this quickly i tell him this time you are definitely wrong could you not tell him that today . Maybe that will help. Maybe he could explain the bond traders. Has he lowered his guess again or does he think that this is it . All right the wait was completely worth it for you, paul. I only speak when im spoken to is that true . Youngest of seven kids. I bet you eat really quickly. My youngest brother eats fast. If you butt it in front of me, im going to get it. You can tell im an only child. I have 10 half siblings now, i found my birth parents 10 or 12 how many in your family . Only two you and your sister i thought you were talking my children super tuesday, what joe bidens big win means for the election and your money. First, check out the biggest dow winners premarket stay tuned you are watching squaurk on cnbc in who says our bank isnt tech enough . Everyone, look at your phones. G the design thinking, the digital engineering, security, blockchain, and we will be first to market yes. When we do we launch . Unfortunately, in 2 or 3, hours. Why the delay . Cognizant is helping banks use Digital Technologies at scale to advance speed to market. Welcome back to squawk box. The futures are solidly higher this morning up 483 now the s p indicated up just under 50, the nasdaq up after a volatile session yesterday if you saw the dow indicated up 500 points, can you imagine in the space of a week and a half we never say enough about that market. Yesterday, with he were down 200 points indicated a little lower. You gave back some but are still up quite a bit it is all relative lets talk super tuesday and what it means for your money Vice President joe biden winning nine states. Virginia, alabama, oklahoma, arkansas, massachusetts and texas. Bernie sanders won in his home state of vermont looking good. We are very much alive make no mistake about it this campaign will send donald trump packing. Tonight, i tell you with confidence, we are going to win the democratic nomination we are going to defeat the most dangerous president in the history of the country we havent mentioned Michael Bloomberg so far the idea that biden was going to win is fair to say, a surprise for many it is not just a biden w win. It is a complete collapse. Never have we seen so much money spent for so little outcome. It is prove message matters. Character matters. In our focus groups, we could see people switching from bloomberg tobiden. Frankly, i think it is a twoperson race right now. Do you want to handicap that twoperson race . I cant i talked about Bernie Sanders. Hes going to win the lion share of california the two will be in a dead heat. In last weeks debate, he will be a front runner. This will go all the way to the convention feeling like a rational way to pick a better chance to get to the white house. Competing on environmental, tax. Not just a reaction. Investors are looking at the possibilities now biden is more centrist less likely and puts forth the economic policy. They want biden, they dont want sanders. Some of this is good when enmass, the democratic population suddenly sees the real possibility of the predicted markets at 65 it will be Bernie Sanders and becomes a possibility it is a reality. I think thats what they saw sort of unthinkable. I dont know why you nominate someone who cant win. Why would you nominate a guy who would be mcgovernored from day one. They came back and were excited about all the other candidates. Democrats will not vote for billionaires i thought you said, dont estimate it, money will go a long way not in advertising. You have to go long in debates he aggravates people the focus groups weve been doing with democratic voters those groups were showing up people were leaving Mike Bloomberg in droves for joe biden. They found biden particularly over the last week just because of the debate performance . Debate and the speech he gave last week. We saw joe biden hitting his stride hes just as likely to have the same gaps hes had in terms of public speaking thats not going away, right thats why im telling viewers to watch the debate in arizona. At his best, he is a very strong candidate and delivers a strong, powerful speech. Looking at the polling data and response, biden is on his way up and sanders might well have hit his peek what does this say about spending a lot of money. Is there a walk away lesson this will happen again. Republicans dont hate millionaires, democrats do they just wont vote for you if they fell out of a boat, they couldnt hit water in terms of what was going to happen here. They go from what is going to happen. Im glad we have agreed none of it ever came true. I think you grew that beard, so people would remember you are the same guy tough guy thank you for waking up early. When we come back, the latest on the corona outbreak including a seattle employee at amazon testing positive for the virus anthem and cvs health gone up. More on cnbc at synchrony, were changing whats possible every single day. With technology that helps you offer shoppers a better experience. Take your companys app. We can add in all sorts of capabilities, which help your customers manage rewards, offers, and payments on the fly. And now, applying for credit can happen in a flash. That way, more people can start shopping with you on the spot, wherever they are. Hows that for changing whats possible . So it doesnt make a whole lot of Financial Sense for them to stay in this great big house. But, well, this is home. Its where they raised their three boys. Could they downsize . Sure. Will they . Not as long as thanksgiving is a holiday. Planning for the future is about more than just money. Let equitable be your guide. The who says the number of cases surpass the number globally the death toll is now 3,100. In the United States the total death toll here to nine. Amazon employee in seattle tested positive at the South Lake Union office in seattle the worker has been quarantined. Lawmakers are reportedly finalize a 7. 5 billion emergency bill with the hopes of pushing toward the end of this week ge announcing more detail ash carter going to be nominated to the board then the company is also updating its outlook, 2020 outlook, reaffirming the following for full year 2020 with additional commentary on the impact of the virus. Industrial revenues to grow in the low singledigit range adjusted to grow from 0 to 75 basis points adjusted earnings to 50 to 60 cents. The street is at 60 and ge cash flow from 2 billion to 4 billion. Went on to say compared to 2019, outlook assumes lower outlook due to its planned disposition as well as reduced cash. Offsetting these effects for the head wind. Less than four to one less equity just some headlines the First Quarter is anticipating the negative impact of 300 to 500 million. Net impact because of the virus. They say this is an evolving variable B Incorporated on the adjusted range to 60 for the First Quarter, they expect 10 cents adjusted per share negative 10 million of cash flow that incorporates the street now at 13 that tells you what they are anticipated with the virus it is all coming keeping the guidance to the rear end. Those numbers have not been updated. Everybody knows hearing what they b anticipate. This year will be like, hey, we got inflated multiples going on the companies that can access markets will be doing so the company will do that. Theyll see those pop up because of the discounty rate. More of an accounting issue. If you are anticipating 7 or al terms you have to bring back all of the future reliability looking at Interest Rates getting exercised even further your minimum payments will be higher want to talk about Global Markets continuing to focus on coronavirus outbreak Chinas Central Bank to take action eunice yoon with a look at any of those steps are actually working . Thats right. This morning, i ended up spending the day with a Small Manufacturer he said that easy money is good if you need a cheap loan but so much more needs to be done radio manufacturer was fretting about his companys future until the government came in to help with 125 stores in 180 cities but the jaw break impacts sales. On line sales dropped in half. The government stepped in offering him tax cuts, rent break and cheap credit the credit came on time. He no longer has to pay pensions or other incidences but so far a third of his workers are being kept away from the factory. Material costs are up 5 to 10 . Workers havent come back. That impacts our ability to deliver. He hopes the government can loosen restrictions on consumers. What worries me most is how tough measures can img pact. It takes time to influence the confidence Consumer Confidence is needed to rebuild this economy. Thank you, eunice trading app robinhood with another outage yesterday stocks fell after the surprise rate cut the trading app now faces regulator scrutiny joining us now to discuss the impact he is Business Editor at axios robinhood has been the darling you see this happen, what does this tell you . It is a disaster for them and for their highvolume users. They experienced an outage but werent necessarily trading. For regular users, it is a mess. It has a really clean interface and people love that a big piece of it, that 0 trade. You can go to another user and get the same benefits. What was the problem . Too much trading activity . We dont know they original said our systems were having problems communicating with each other. They took about 24 hours to come out with a statement that said their dns didnt work. They got overloaded by the activity there was a bunch of years that were questioning that. There will have to be a thirdpar thirdparty. All of this is caused with zero trading a year from now, do you think robinhood still exists i think it is the question is, is someone going to buy robinhood when Morgan Stanley announced the deal, they said, youll have to try robinhood it grew faster in kw4 than in q3 it was a wonderful acquisition for someone that wanted to rival what Morgan Stanley did. What do you think regulators will do . Theres a i law on the books and regulators will have to take a look at this what robinhood has so far doesnt cut it they are known as a focus company. Do you think they still would be an acquisition target well be talking longer term. I dont have anticipation for anybody going to the talks tomorrow i dont know how you are going to make trades if you didnt get to play on the biggest gain for the dow, you have to think there will be a class action lawsuit. Anyone who fried to log in that kay and couldnt has a clap you dont even know what they were going to do just to answer your question, it is a little over 10 million users right now. Substantial whats worse, not getting in that day or in 87, no one was picking up the phones. It came back on line after a couple of hours. If you couldnt get in on the upside, you couldnt get in on the down side. You missed the whole turn up and down dan, i like you are so corporate now. I like the new look. I dont have the tie or the hair is it the new employer has a code i asked for the kernan and this is what they gave me. You look so much younger but still so knowledgeable thanks. Means a lot. Coming up, dealing with the coronavirus. Well talk to former commerce second. First, take a look at the biggest dow losers premarket. Stay tuned announcer dont forget to subscribe to our podcast youll get interviews, orinagil content and subscribe to squawk pod today. Welcome back. Back above 500 points. 550 on the dow s p indicated up about 54. Nasdaq up sharply. After the session yesterday that ended on the loss. Come on. Almost over one, thats how im looking at it. Im looking at it half full. You are just saying Bond Investors get out of here . Yes stop being so afraid look into the abyss. Turn on the light. Youll see there is nothing fear but fear itself. Meantime, markets going on a wild ride with a rate cut. Joining us now, our guest, former commerce secretary and former ceo of you saw what the fed did yesterday. You saw what the president said about what the fed did yesterday. What do you think should have happened and what do you think needs to happen . If you take the coronavirus in isolation, i dont think an Interest Rate cut is going to do much to get people back and i think we have to realize that the virus hit on top of an already softening world economy. And every major economy is being revised downward now the odds of a recession now with the impact of the virus whether it be shortterm or not go up dramatically the policy that was chosen was Monetary Policy. Also at the same time were driving investors toward more and more risk. So we just have to keep our eye on what were creating not just getting through the next six months but it kind of bubbles. If you were in government right now, what would you be doing . Is there a physical stimulus policy that youd be putting in place . Do you think theres something realistic that could happen between now and the election fiscally perhaps an easing off on tax payments for some companies. Things of that nature. You say some companies, would you do would it be reasonable to have some kind of tax policy that helps people in the hospitality travel industry but not others. Lets just say you did it across the board and we dont have to get into picking winners and losers our deficit as a percent of gdp is over 4. 5 thats big so that is a big issue its not like we have a lot of options. We do have a trade poll sand ice have to remember that were back to our trade policy and thats also that is what has made many of the economies soft im not convinced at that point they were going to be downgraded by people watching in fact some of the easing of the trade tensions thought that maybe wed see a slow rebound from the head wind for 2019 and then Something Else that you said, that were driving people toward more and more risk, that and i dont know how you when you have Interest Rates out low where do you go for yields this just for safety. Youre not going to stay in fixed income i think thats a trend thats been happening just pushing and pushing people toward higher risk but this is why equities respond. Money goes into equity and higher yielding instruments and were going to see that. Phase one was not a big deal its almost going back to where we were. Theyre going to buy some soybeans and take some tariffs down its not taking place or being implemented. It was a truce. But now lets think about it this is a good conversation. And the u. S. And china, what can we do together to help out on the coronavirus situation. Should you take tariffs down and we will correspond with that so that you can get products at a better price that didnt happen what did happen is the private sector stepped up as always. And thats been the one area that has responded japan has done Everything Possible to help china i wish we would have used this opportunity to show that we can also collaborate in the meantime instincts are coming out its a pretext we want to put tariffs on the other country so after coronavirus and all the damage that its doing because lets not minutes words this is having a devastating impact on supply chains after that goes away and the damage is still around because this isnt a light switch. It doesnt go on and off it takes time. Were still going to have to deal with the trade war and an expanding trade war. We still havent gotten to germany. We still havent gotten to europe, france so that is the part that i worry about in the future and ill tell you Something Else, the next four years, maybe not six months, the other thing that worries me isimmigration polic because we, the more i talk to people, i realize that we are missing workers. We are missing talented people all the way from the top to the bottom and that could be an issue as well for the economy, for inflation, i think theres a lot of things out of balance. We have to run but i just have one final question which is your reaction to super tuesdays results and what you think it says about where the Democratic Party is at this moment. I tip my hat to the democrats. I dont know if this is a coordinated result but it was wonderful and it also helped the markets respond. I think that tempers the market so its been very good. Do you think that biden has a better chance of beating trump than Bernie Sanders . Yes than Bernie Sanders. I would have thought that Mike Bloomberg has the best chance but that didnt look like an option anymore. Dont tell us that carlos thats no longer an option. Biden versus sanders id put my money on biden. Thank you for joining us this morning. Thank you. Can the company avoid an iphone short fall . Well talk supply Chain Disruption with an apple bear. And why theres still time a the second hour of squawk box begins right now good morning, welcome back here on cnbc take a look theyre up and they are up nicely open up 57 points higher nasdaq up about 169 points higher we can debate and talk about whether thats the function of the Federal Reserve or whether its a function of biden and sanders. I dont know. Or just swungs in the market as the market tries to catch its equilibrium too massive moves to the down side but the Federal Reserve cutting rates by half a percentage point. This comes two weeks before the feds scheduled meeting. Only nine times since 1998 and the financial crisis has the fed had a rate cut like this the last time was 2008 and the Lehman Brothers collapse. In the wake of that emergency rate cut we went into the field with a cnbc fed survey got 41 responses from economists, Fund Managers and strategists and the ink is barely dry on the results. A strong 62 majority approved the feds rate cut 25 disapproved but only 32 think it will be even some what effective. He writes in the fed needed to do a confidence restoring move however were in the middle of a problem that starkly reminds even that Monetary Policy cannot be expected to be the sole solution to every problem. Even after the rate cut the probability of the recession has surged to 41 and thats the highest percentage we have had in probability in the nine year history that we have been asking this question. A recession is on the horizon. 6 off of gdp. They see a rebound of just a tenth which im surprised about for next year. Feds fund rates declining about 50 basis points down to 0. 7 by year end the average year end forecast 3. 098 and thats about 3 higher from yesterday rising slightly from where we are ow they had to do it or its a confidence measure a lot of comments about needing fiscal response the decline of Economic Activity can limit the spread of the virus itself not saying that you want a recession but you dont necessarily want people to do some of the things that they might do and spread the disease. If you Start Talking fiscal it doesnt have to in a month or two months it says were going to build bridges or do a tax cut. We are going to do something to restore confidence that theres a global coordinated effort. That would be a great way. When he talked to them all of them had great one. I still maintain the idea that thinking about it as a major Natural Disaster in the sense of is there a way to target stimulus and Fiscal Health to the good businesses that could go out of business if not for the coronavirus. I dont think you have a moral hazard situation here. This is not the way that you want to do it but theres a good argument here for in the travel industry, the Small Businesses that might go out of business. Lets bring in another voice. David wilcox is nonresident senior fellow at the institute for international economics. Lets get your first thought on this i think it was an important move i think confidence is what it was all about. Jay powell himself said that Central Banks dont have all the answers in this situation. Look, if this were a movie wed be talking about Central Banks as essentially the supporting actors the show cant go on without them but really the lead actors, the ones that were going to drive the plot line forward are the Public Health officials. Theyll determine the contour of how the disease spreads and what the social impact is fiscal policy makers are second in line they really need to step up and show that they can put in place a timely and well targeted action. I want to point out that the dow futures are now up by 620 points. We know that you guys look at the markets and some people criticize the fed for looking too much at the markets. Tell us how theyre going to internalize yesterdays Market Action and lets go back to friday at 2 30 the chairman comes out with a statement saying were going to use it signaling the rate cut monday and that by the way puts a little flooring right there because you ended upcoming off of the bottom. And this morning its up how are they going to view the effectiveness of the market. Theyre not too concerned about what happens their job is to promote a set of longer term objectives and point the economy back to a stable place while at the same time clearly communicating that theyre on the job and theyre actively monitoring the situation and what was important yesterday was the simple fact that actions speak louder than words. Do you think that it pays off longer term . I do. Definitely so i 100 agree with what david said this is not the primary this is not the primary response to the virus crisis thats Public Health thats fiscal but Monetary Policy helps so lets enumerate some of the ways it does help. It leans against the tightening of financial conditions. Secondly it validates the move down in longterm rates. Thats going to provoke mortgage refinancing. Putting cash in the hands of consumers and help the Home Building industry. Look at the dollar its really important that the fed keeps the dollar moderate. And enable more aggressive easing actions to boost growth around the world. You said keep the dollar moderate you cant let the dollar get too strong and basically make sure that theyre aligned with what other Central Banks are doing so it doesnt move too far one direction or the other ill tell you something even more than that which is youre worried about the exchange rate. More opportunity for you the emerging markets to cut rates. So youre not just getting a boost at home. The fed is also enabling others to act to support their economies too. Is this is the last word from the fed here theres been a lot of discussion about other administrative measures, supervisor regulatory things that the Federal Reserve could do i guess your former colleague that talked about lowering the discount rate and extending the firm and other things this could do to help grease the wheels in the Financial System. I dont think this is the last word steve. Theres a range of other actions that they can take but i really dont want to lose site. I want to come back and reemphasize, feds a supporting actor here it does have a role and has to continue to monitor carefully that the Financial System is functioning well i dont think we have an indication yet to the contrary on that front but really at this point, all eyes need to be on promoting the maximum extent the Public Health efforts and getting the fiscal package thats implemented, timely, well targeted and tailored to the unique characteristics of this really unusual situation. So a question to both of you, globally yes we have seen what Central Banks can do but fiscally what do you think governments could do that could provide what would be some confidence to the Global Markets . Because once you get that, then i think you could provide some type to these markets. First of all so i think theres really two dave, why dont you go ahead . I think speed is of the essence and theres something to be said here for pulling a play out of the play book that has been executed. There will be a tremendous temptation to get fancy and design something that is very narrowly targeted to this particular situation thats great i think we ought to move on two channels at once we can multichannel here we ought to think about providing support for example for workers asked to stay at home because of the infection. At the same time, putting broad based cash through some kind of payroll tax cut. Last word on that yeah. So look i think that makes some sense. Theres two areas that i would focus on that includes the need potentially for credit fwaurn te guarantees and then the question is the aggregate demand stimulus we think the fed is going to go more we think the fed will cut another 25 in marchand another 25 in april and then face a moment of truth around june where they have done enough or have to kitchen sink it down to zero but what is true is the fed needs all the help they can get so its time that fiscal stimulus also steps up here. Thank you very much and good to see you. This is good to be with you. Is it jobs friday. It is jobs friday with a wednesday adp coming up at 8 15. Adp is coming. I want to run to the refuge of your economic data. I do. The trouble is if becky is going to diss me. Im not. You are you have been doing it we need to know what the levels are above hand. Its important to know but youre also right in that all of this data has to have an asterik with it. This is why were great colleagues. We listen to each other. We get back to hours work instead of infection rates its not irrelevant this is significant. We talk about why the fed wants 2 inflation and why it wants to be at 2 growth. The reason is because you want positive growth and positive inflation. The further we are from zero in any metric the more we can say the economy is less likely to contract. Thats like they had in the last hour which is what was the trajectory of the economy before it came along. Not as excited as joe some countries that were coming down and some countries that were coming up the u. S. Was on the cusp. Carlos is a single issue voter. Carlos the republican and its about trump. I shouldnt have brought it up its my fault. Will adp or the jobs report show us any inkeling . Because these numbers are through last week . Or what are we talking about they would be on the week of the saturday that includes the 12th we just had a little bit of it in there but it was worth it. Were hearing from General Electric. I blame myself for tossing to you. Were hearing from General Electric the company is holding an investor call at 3 00 a. M. I think mark is here, yeah. Cash and profit targets but it expected to hit 300 to 500 million to its First Quarter cash flow from the coronavirus outbreak dont miss squawk on the street at 10 00 eastern. They also said for the adjusted numbers looking at 10 cents and the street was at 13 but that tells you how the street recognizes the moves we have seen over the last week and a half by burning things down. We know these numbers are going to have to be guided and adjusted based on the coronavirus so the numbers that youre looking at, those arent the real numbers. Its an interesting story too because so much needs restructuring anyway so youre really looking through the first year of whats happening. You add this to it so its kind of like the economy youre looking at now is saying if you have confidence in ge a year from now and confidence in our economy to invest in stocks. And i believe that you do. Thats what you have to do at times like this. One upside to all the market volatility Mortgage Rates dropping sharply and that showed up in the applications its a huge week for the Mortgage Market. Ending last friday according to the Mortgage Bankers association all thanks to Mortgage Rates that caused a big spike in refinancing. The average rate with confirming loan balances fell from 3. 73 . Thats for loans with 20 down now that drop caused a 26 surge in weekly refinance applications thats big compared to a year ago refinance volume is nearly 224 higher i read that right and a spokesman said they will be updating their annual forecast later this week calling for a big up tick in refinances this year now i spoke with the ceo of quicken loans late yesterday and he said they had a record day monday and likely tuesday of this week as well for application volume and one new tool is helping them handle the surge. The way that we Leverage Technology to communicate with our clients to make it easy for them to make a Mortgage Application for our underwriters, we can scale very quickly which helps us when we see increased volume like this they were 10 higher compared to one year ago theyre also up against a historically supply of homes for sale. Lets do regular consumer economics here whats the number . Is it half a point i know that becky is skipping down the sidewalks here. She is so excited. Its part of the numbers, right . You come in in the morning and she says 3. 1. 3. 125. 110 basis points from a year ago. Now any expert in the Mortgage Market will tell you that you need a reduction of 75 basis points to make it worth your while. Not if you dont plan on moving you dont. Well, but if youre looking at maybe going interesting debate. Your arm that could be lower or your 30 year fixed which is longer. 20 year fixed it does depend it depends on what your cup of tea is but rates are incredibly low right now and when we asked will we see them go much lower, there is going to be that Tipping Point where investors and Mortgage Backed bonds are going to say not worth my time and thats going to hold the rates where they are they have made it easy. Technology has really streamlined the process. So youre sticking with 75. Im not sticking with it. Thats what the experts tell mement they say 75 basis points makes it worth your while. Anything less than that youll be paying more im calling my guy. Call your guy. Its the upside for Retail Investors looking at the declines in their 401k the upside is you can check it out and save a lot of money on what is most peoples biggest investment in their home its a great thing make the call. Make the call avoiding an epidemic in america. There is time but full containment is likely impossible he joins us in a bit as we head to break, heres todays aflac trivia question. What was apples market cap on this day last year gotoe tht bwiin three decimal points the answer when squawk box returns. R questions. Aflac is auto insurance, right . No. Uh uh. Is it Homeowners Insurance . No. Uhuhuhuh is it duck insurance . Nope. Ahhh do they pay me money directly when i get sick or injured . Yeah. Aflac you got it. You know aflac boom get help with Expenses Health insurance doesnt cover. Get to know us at. Aflac dot com. Should they downsize . Nesters now. Probably. Will they . Not as long as thanksgiving is a holiday. Planning for the future is about more than just money. Let equitable be your guide. Heres the answer to todays aflac trivia question. The answer is 829 billion as of yesterdays close market cap was 1. 26 trillion lets take a look at whats been happening with the markets this morning. Been watching closely but this is something worth paying attention to dow futures right now indicated up by 667 points but this morning this morning is no exception overnight in asia, you did see a number of things the nikkei was closed flat and the shanghai up by abou about. 6 . In europe the major averages have all been in the green. Keep going. Wait for it. What were all really talking about. Pressure ri yields at this point. The ten year falling below 1 for the first time. Its above one. Theyre doing it. Rooting for it to go back up and its come back above 1 and we have seen the futures take off quite a bit more its the most important thing. When we come back, apple supply chain and what it means ua b bmpy. An sqwkoxack after a quick break. A thats incredibly valuable a . I. I dont know. Able when did we introduce siracha . Not soon enough. These are our sales. By product, by region. Set against evolving demographics. You can actually see taste trends. Since when can we do that . Since we started working with bdends. announcer people who know, know bdo. Welcome back to squawk box major iphone manufacturer saying its factories in china are set to rebound in the coming weeks as the country tries to recover from the coronavirus, joining us to talk more about how the virus is impacting apple, he is the managing director. Good morning to you. Good morning. So theres two issues that i think people are trying to grapple with one is when all the stuff comes back online what the supply Chain Disruption really means and the second is on the buying side which is to say Chinese Consumer, theyre going to be buying apple devices and what that means. Sure. Just the latter part because the first part is really noise. Its noise because . Its noise because you already have channel inventory and there was channel fill there and therefore you get it and the fact that its coming back i would say by the end of this month here, that is what i think some people had feared at the end of april okay. So it was there and provides that buffer in my opinion. The question on the demand there, if you look at it from a longterm oriented investor most investors are looking at whats the annuity of the user. You can think about that in terms of retention rates does a retention rate change because of an outbreak of the virus . Either for an android based phone or an iphone the answer is no and does that shift out demand in a material way. Now you have gone basically three months further away from the beginning of the product lifecycle and if youre looking to buy an iphone in the june quarter and you know that youre at the end of that, close to the end of that Product Life Cycle you might want to wait an extra three months to get the newest and brightest iphone thats why we shifted about 11 billion out demand out of fiscal year 20 and fiscal year 21 it doesnt change the retention rate and it doesnt change the value but the last thing that i would point out is at 25x earnings theres an expectation of a Significant Growth in the annuity of an apple user and that probably assumes close to 100 attachment of air pods and watch to every existing iphone user. Youre saying you think thats built into evaluations. You think thats aggressive. I think thats way too aggressive . Its not beyond the scope of believability but thats definitely very rich the new ipods the air pods. I have not acquired them yet. I have multiple the other one. I know. Should you build into any of your bottles the potential delay of purchases not just because of inventory but because of a lot of consumers saying i dont know whats going to happen the next couple of quarters im just going to push out the next phone that i am going to buy. Thats the Chinese Consumer yes what about the u. S. Consumer so as far as i can tell the supply hasnt been protected. Im talking about demand. Whether you think people will be walking into apple stores at the same velocity that they do today or that they did two weeks ago. Are you saming are consumers going to pull back on spending because of a potential hit yes. Understood. No, i have not taken that into consideration at this point in time. Because. Last time i updated was about a month ago when they did provide the update and whether or not we were going to see a true whether we would see a true slow down. Thats still to be determined though it does seem to be a more likely scenario at this point. The other question that i was going to ask you as relates to all of this is in terms of commentary around new products and new product launches do you think that everything that was on was going to get out the door the way it anticipated referring to the iphone se whether thats going to get out the door. Or a new ipad. Theres been talk about a new ipad that i desperately want theres going to be a track pad involved have you heard about this . Yes that would be a game changer. Why because if you want to use an ipad as your replacement laptop that will change the whole dynamic. That will make it much microphone limore like an ipad. I have been campaigning on this for five years. Its working. I dont want to claim credit. Its going to replace the pc. And thats a bit of a driver there. But look, they are guidance for the march quarter. Whatever they put up for the march quarter thats already going to be giving a pass and that all gets caught up either in the june quarter and especially with iphone that gets caught up in the december quarter. Thank you so much. Thank you. Good to see you. Coming up when we return, wall streets wild ride looking to continue for a tenth straight day. He delivered that fed first emergency rate cut since the financial crisis much more after the break. A reminder you can always watch us live. Right now you can do it. You can go on the bccn app were back just after this hat hf and in life. Im very fortunate i can lean on people, and that for me is what teamwork is all about. You cant do everything yourself. You need someone to guide you and help you make those tough decisions, thats Morgan Stanley. Theyre industry leaders, but the most important thing is they want to do it the right way. Im really excited to be part of the Morgan Stanley team. Im justin rose. We are Morgan Stanley. 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 its not necessarily. A little bit more calming. Yeah. Back above 1 . See the ten year below 1 for the First Time Ever. Lets get to mike that has more on yesterdays wild market moves and maybe a little bit of speculation about what we can expect today too. Just to put it in context this futures move were seeing would get us back almost but not quite to mondays close. You can go back to fridays low and we did hold it not even approaching it on the sell offs this week. Yesterday as dramatic as the melt was in the middle of the day it never really got below s p 3000 for long and were seeing if thats going to provide cushion now you were talking about the ten year yield right now the s p 500 yield is twice as high as the ten year yield. This is not a magical relationship its really much more another sentiment indicator. People are just rushing for the certainty of ten year treasuries and that is extraordinary. Its really happened in many decades. Maybe we saw it on the virus front. A lot of other elements besides just the disease were trying to handicap here. But you could make the case that theres a public saturation here now. For more on the markets big swing and what investors should expect lets bring in jack the equity Portfolio Manager at jp morgan private bank. Our guest host continues with us we have extended you santoli is here and he doesnt get any extra. Extra money. Here this is the new one have you seen that money . I thought that was wiping your hand with purell. Thats what the kids do they do this. I thought that was bloomberg buying some ad time. I dont have bills that big. Anyway, caffery. Joe. What do you say my man . Every time we go up 700 and down 700 do you change your story . Or what should we be doing here . I think ultimately we need to be humble about the difference between what we think and what we know. We should be less confident in what it is we think we know. With that said, looking at the overall economy and i do think that were going to struggle to make sense of what has happened from an earnings perspective and but if the irrational fear is going to cause people not to go out and do anything then its not an irrational fear its a situation that youre dealing with thats what makes this so different. To your point its selfcorrecting. It will panic is getting people to not interact and its going to diffuse the worst fears it gets to the missing element of this which is time. I can point to the charges and say it seems like we had a kind of climax of fear and panic and rushing and liquidation of equities in response to a lot of these things and by the way a huge mix of issues that we know now. But we havent had the time where you have people reassess the situation and reabsorb the evidence of what the economy is going to do and see if we properly accounted for it in the price. And maybe we should keep them in mind in terms of big rallies and all the rest but its not a script. Its just a guideline. Jack. We have heard that most years, whats the average correction that we have 10 . High or low. 10 every 18 months. So is 12 enough for a Global Pandemic is that enough . It depends on how bad. Youre back to what do i know what do i think . It would be nice to know whether we put in a bottom. Well then the alternative is what do you do whether you go to a 1 bond or cash. Its 1. 1 by the end. The yields are setting up the yields are setting up. Thats an option for a lot of people. But your real rate of interest is zero at that point so youre keeping upright now. Right but the market is built to give you your return xpectations. What do you like our favorite part of the market is technology that has been subject to a lot of pressure of late and ultimately that winds up being confidence reinforcing overtime. Thank you for being with us this morning is this really goodbye . You have gotten a little bit of what is it . A gift a gift. See if i do this its ones. Im giving you this here. When other people do it its whats the biggest denomination you can get . He says theres time but full containment is impossible. The measures taken by the government they had more on their visit coming up in just a bit. Squawk box will be right back. Music [ watch me walk by Spencer Ludwig ] cant take no class about this im on my way im on my way like this hey to start your investment plan, find an advisor at massmutual. Com sfx [ mnemonic ] theres one thing you can be sure of. Theyre changing by the nanosecond. Thats why cognizant created a unique engineering approach to design and build new digital products. Learn how cognizant softvision designs experiences and engineers outcomes. Cool. Thats the very first time now they have seen the largest outbreaks outside of china scrambling to find enough hospital beds for patients cancelling friday prayers with the death toll jumping to 92 amid 2,922 cases now making it the highest proportion of fatalities we have now seen outside of china and finally the World Health Organization saying the global death rate is 3. 4 this is making it deadlier than the seasonal flu that has a rate of just about 1 we have had that debate now several times. Fortunately the who saying the coronavirus does not transmit as easily as the flu does. Lets get right to our next guest. In a wall street journal oped this morning he says theres still a chance to delay the coronavirus epidemic in the United States. He joins us right now. Hes the former fda commissioner and cnbc commissioner and sits on the boards of pfizer and alumina. Its great to see you. Thank you you point out that people may have to start working from home because while we have only seen about 100 cases you say theres thousands of cases in the United States. Theres thousands behind that we have evidence that two different chains of spread in Washington State. What do you mean . Two different places. One was a new chain that probably came in from a traveller from europe. We have four cases now in santa clara that we dont know how they rose. We cant trace them back to sources in the community so it does appear that you have outbreaks underway in those regions. Perhaps large outbreaks given the number of cases presented and the people presenting with a serious illness. So were days away from steps in those regions and its probably the case that we will have an epidemic here in the u. S. But we can effect the contours of that. And maybe having certain people work from home closing schools needs to be considered. Closing schools everywhere or where the outbreaks are occurs. You want to target the places where you have uncontrolled spread to try to mitigate it theres epidemics floating around among officials both inside and outside of government and if you implemented the mitigation steps early you can dramatically alter the contours of the epidemic. How large it gets and how long it lasts we need to start thinking about these measures in the region where theres spread right now we could assume they would not have been this successful. In terms of mitigating flu . Something that doesnt transmit as easily as flu. China could not have been so successful in stopping what they did. Flu will be in millions of people. Im not so sure that you can draw conclusion based on the fact that they were successful at altering the evidence. Do you think they can stop the flu there . If you take the measures that they took you can alter the trajectory of lu and thats why its important to be very aggressive early on. But people can voluntarily take away a lot of the liberties. Sure. When you talk about cancelling large gatherings is that also only in the affected regions or for a lot of us in the Business World were seeing conferences cancelled routinely and gatherings cancelled dinners cancelled. Is that the right steps to be taking right now you want to target places where theres outbreaks and you have evidence of spread. Places like south by southwest where youre bringing in people. They havent cancelled that yet. The problem is we dont have good surveillance so we dont know where the pockets have spread out you saw new york state take much more aggressive actions than Washington State so far based on one case i have a very practical question it effects the sorkin family but families across the country. Schools in two or three weeks are going to start to have spring break and people are planning to travel some are should they be traveling i wouldnt alter travel plans. As long as youre not going into a hot zone the risk here is probably equal to the risk in other parts of the world right now. I wouldnt alter plans unless youre in an area that you know is affected. Why wouldnt you think the west coast because of the travelers coming from asia yeah. Because we dont have the testing yet. This would be sort of microcosm. Times square. The worst place. We need to get in place better screening and one of the things going on is theyre having their big conference and the management is going to be meeting at the department of health and Human Services and taking place at the white house. I do think they need to step up and have the capability and help in a moment of national challenge. Are they more alarmist than the cdc . They get a little bit more hyperbolic do you believe it . I dont. Do you no the number is real but its a skewed sample setting we have about 100 cases. Almost 100 cases and nine deaths its not going to be a 10 case fatality rate here in the United States if every person is tested theres how many more cases . Thousands of cases. Theres thousands of cases. But its a big country. Why wont that spread its going to spread unless we take mitigation steps. We dont know the thousand. We dont know where they are or who they are. We have to do very aggressive testing where theres outbreaks and identify the cases and start containing people. The hope is that we dont do it too late where the curve starts to change. What is a large gathering is that a concert or your kids basketball game . In italy they capped it at 5,000. They said 5,000 was a large gathering. Probably we would draw that line somewhere else anywhere theres hundreds of people is a large gathering where you have the chance to catch something. Do we do the show with the three of us from here on out or all remotes. You said theres a better number what is it probably less than that again i still think the risk, the actual risk to an individual in this country is low because its a big country theres probably thousands of cases. But if youre going into a region where the cases have been identified and theres a large outbreak going on the risk is higher. Yesterday the other thing that i saw that concerned me was just warnings about the ingredients to make lots of our drugs. Right. Were going to be getting less than we have for india in the past what will that mean in terms of medical shortages. Some of these were important drugs. India is holding on to the ingredient that goes into drugs because theyre worried about their local needs there. It shouldnt have been a surprise for anyone but these can create shortages here in the United States. What kind of drugs . Antibiotics, vitamins, hormones critical antibiotics were on that list. When you look at things, how concerned are you overall . Obviously this is changing probably not just day by day but hour by hour you see good news and bad news my concern is going to grow if we are complacent and dont implemented very stringent measures up front to try to affect the contours of the epidemic we had a window of opportunity with testing and we missed that window thanks a lot. We are approaching 8 00 a. M. On the east coast and you are watching squawk box on cnbc. Wall street prepping for another big day. Futures surging following a wild 24 hours an emergency fed rate cut and a big night for joe biden on the campaign trail. Bond yields plunging after the rate cut and we have the guy who called it early. I had expected it to go to 1 for quite awhile my next target is 75 basis points and we will speak with texas senator ted cruz the final hour of squawk box begins right now. Good morning and welcome to squawk box im joe with becky and andrew thats not a big move from one way or the other were seeing quick trading here. Nasdaq indicated up 175 and s p up 58. Look at the treasury yields. The ten year exactly 1. 00. Its about 1. 01 im sorry 1. 1. 1. 09 were actually talking in individual basis points and trying to take some gratification or satisfaction out of one basis point moves. Okay, were going to start this hour with the economic fall out from the coronavirus and the feds emergency Interest Rate cut it was the first such reduction since the financial crisis in 2008 the fed chair acknowledging though the limits of Monetary Policy when speaking with reporters right after the cut. We do recognize that rate cut will not reduce the rate of infection and wont fix the broken supply chain. We get that. We dont think that we have all the answers but our action will provide a meaningful boost to the economy. More specifically it will support acome day tif financial conditions and avoid a tightening of financial conditions that can weigh on activity and help boost household and business confidence. It was to ending the day down more than 700 points and continuing an ugly week for equities say for monday. Things look to be turning around this morning but steve joins us now with more on what the rate cut can do and nervous about the coronavirus. And the fed chairman just said a strong 62 majority approve of the rate cut and 25 disapprove and only 32 believe it will be even some what effective 43 say theyll be slightly effective. Still, another 50 basis points of rate cuts are expected from the fed this year and 35 of respondents think the fed could go to zero in the next 12 months it may seem like high stakes compared to the reduced Interest Rate environment on the horizon. 59 probability of not a recession in the next 12 months and that would be fair the survey was mixed in its assessment of the fed. It sends the message that were in an emergency. It does provide support to the economy. Forecasters estimate the coronavirus will save. 6 off of growth this year and theres a low number of just. 1 next year thats not what we meant. Save for monday if you want to do five trading sessions so were i love you looking at it. I heard you say continuing an ugly week and its like its wednesday number one so we only have two days. And when one is 700 and one is 1,300, lets get this right. Steve, thank you. Thanks, steve. Thats really kind of you. You didnt write that no, thats not me. The feds emergency rate cut was designed to save investors but ended up spooking them dropping sharply to 0. 906 its back below 1 at 0. 996 we were told right here on squawk box that sub 1 rates were coming. Who told us that the president of Global Strategies he joins us once again hes the chief investment strategist and joins us with a look at the stocks that have the greatest upside potential once the market bottoms with k to both of you. We have to start with you. When you called Interest Rates being between 7. 5 and 1 not only did we give you grief we had no idea we were going to be there so rapidly here you are the same week that you called that what do you think . I didnt expect it to go down so swiftly and i think in terms of the shot fall we owe it all to a bad move by the Federal Reserve and press conference by fed chairman powell. We can almost certainly bank on the misqueues and timings. Essentially the fed said they were cutting but didnt think it would effectively put an end to any of the problems for the market but they thought he had to do it anyway. And that kind of a press conference was a major factor. It happened so sharply in a few minutes that its all due to the fed as the chairman. I was going to say look at the Economic Impact in a place like china and italy that Just Announced its going to be closing all schools and universities all over the country because of the coronavirus outbreak until mid march. Were watching this happen real time all of that is happening and none of that is going to be corrected by the fed action. And on research and testing and not on cutting Interest Rates. This would offer a shock proof situation and all the other things had to happen too i thought that is what he said. Yeah but on the other hand he doesnt even remove the shot that comes from it the investors couldnt believe that the fed was doing an emergency cut even though mr. Powell thought it was not going to be effected so essentially he undercut the move and i dont think there was a boost to confidence that came from the move either in other words it was a total failure. Im confused is the move the problem or what he said about the move the problem both are problems theyre not mutually exclusive. So should have done the move and lied about its effectiveness or not done the move. Im sorry that it was not clear to you steve im saying that Monetary Policy is ineffective and it doesnt matter when it is done it is always ineffective so im not saying that it was a special day to be ineffective. Theres no move at all. Its okay to fall the way it fell even prior to the rate cut and for the fed not to validate that and keep its shortterm overnight lending rate what would it have been . 60 basis points higher than the ten year i have been saying this to joe over the last three years. The reason the ten year yield falls has nothing to do with the fed action it has to do with the inflation and the expectations and expectation of real growth and he said it best talking about the need for skilled individuals, you need to make structure and changes. You need to make training in order to boost the Economic Growth rate and that will increase the ten year yield. Lets talk about stocks poised to increase. We were down 12 at the worse and the question people ask is stocks could do fairly well. So i did a simple search looking for the stocks that are ranked buy or strong buy that then have very high differential between the target price differential. Interestingly enough a lot of the companies were relatively small but a majority of them came from the industrial sector followed by energy and materials not surprising this morning i added looking at stocks that have very high quality meaning consistency of raising earnings and dividends over an extended period. So you have Companies Like disney and like United Health care universal Health Services you also have financials like Jp Morgan Chase et cetera where these are High Quality Companies that have been beaten up by 20 or more that our analysts do believe are good investment opportunities. And a medium pe of 16 times. That means we should be coming down on the s p 500 which would represent a price decline. 7 from where we are today and 5 from where we were at our low. If, however, we find out that earnings end up being dramatically cut for 2020, and we end up with no growth whatsoever, and even lower pe of 15 would bring us into a bear market territory down about 26 to about 2,500 on the s p. We thank you. Well talk to you soon. Im not after last week, that was a very brutal week last week we lost 12 . This week if we were to open up 500 points this morning, wed be up 1,000 points for this week. Lets speak. S ming up, adps february look waout in just minutes. When squawk box returns. 1000 points. You should be mad at forced camaraderie. And you should be mad at tech that makes things worse. But youre not mad, because you have e trade, whos tech makes life easier by automatically adding technical patterns on charts and helping you understand what they mean. Dont get mad. Get e trades simplified technical analysis. These are our sales. By product, by region. You can actually see taste trends. Since when can we do that . Since we started working with bdo. announcer people who know, know bdo. The january payroll was revised to 209 but apparently its a new model so were going to come back to that the good sector, 11,000, thats good for the good Sector Services up a strong 172,000 the nonfarm payroll estimate 175 so the adp right in line with that. Lets take a look at job growth by business size up 24,000 for small and large doing the bulk of the work there. Up 133,000 these are the numbers before we probably see any impact of the coronavirus but take a look by sector here. This is a little bit of information here education and health 46,000 but break that down and its all Health Services with only a little bit of education. We might see some impact of the coronavirus in education hiring. Also Leisure Hospitality hiring is another place you might see some impact. Construction strong. We had good weather. Up 18,000. Trade transfer 31. Manufacturing down 4,000 i cant tell is that trade tension overhang or is that coronavirus early indications . Right steve, thank you stay right here. For more, lets bring in the chief economist at moodys analytics. What do you think of the question just posed . Is this overhang from the trade talks . Is this early concern about the coronavirus. Its based on a survey done that includes the 12th of february and the virus was out there but it wasnt a big deal it was on our radar screen thats trade war trade war damage is quite significant and continues to linger this number just to the point of interest is also by weather. We had a really strong number in january that was weather related. You can see in Leisure Hospitality construction underlying job growth is between 125 and 150k per month. Have you seen numbers already that would reflect coronavirus how recent numbers have you been able to get ahold of i havent seen anything to indicate that theres any impact on the labor market in this point in time. If were going to see initial claims but i have not well have to see but i havent seen it yet nothing has shown up youre hearing anecdotes in some of the surveys, people talking about what the impact might be but its just anecdotal. One report showed a big decline in imports and a smaller decline in exports. It may be because things werent getting shipped from china where it had a huge impact already there. I guess a question a little bit understating that in that the knock on effect of that is twofold. One is that consumers cant buy and retailers cant sell stuff they dont have and producers in the United States, many of whom rely upon products from chin cant sell stuff they cant make so its bad that its not coming in and actually ends up in a weird way increasing gdp where you take it away is on the back end on consumption perhaps and on manufacturing. Were going to get much weaker job numbers going forward. Theyre still important because you want to know how much cushion you have how would you assess the state of things before we try to pile coronavirus on top of it. Stable unemployment. Thats 2 gdp growth as we have been getting now for a year. If you see anything that goes south of that, particularly we go south 100k. Unemployment will rise that is recession. Thats why recession risks are as high as they are. Thats why economists are saying probability for recession is close to even because they understand once you go potential unemployment starts to rise thats the foundation for a recession. Mark, very quickly, our cnbc fed survey has an average impact of gdp of. 6 this year and only a small bounce back of. 1 next year from the coronavirus, could you quickly give us your numbers . Yeah, thats about right. That was a baseline kind of. Right were going to get a fair amount of growth. Stronger bounce back then. Ill be surprised if we dont get some bounce back but one thing that i will say is economists like everybody else have a really hard time saying over 50 probability of recession. I assure you that almost every economist out there is thinking over 50 probability. Mark, thank you steve, thank you. Coming up, a lot more on squawk this morning. Finding the Silver Lining in financials the sector got hammered yesterdays sell off down close to 4 as the fed slashed Interest Rates by half a point but that doesnt mean all the opportunities have vanished. Well also be talking to texas senator ted cruz Major Airlines response to the coronavirus as they get set to meet today Airline Stocks have been hit hard this morning you can see theyre trading up across the board. Looking at jet blue, its up over 3 right nowme stay tuned a lot more on squawk ahead now you can, with shipsticks. Com no more lugging your clubs through the airport or risk having your clubs lost or damaged by the airlines. Sending your own clubs ahead with shipsticks. Com makes it fast easy to get to your golf destination. With just a few clicks or a phone call, well pick up and deliver your clubs ontime, guaranteed, for as low as 39. 99. Shipsticks. Com saves you time and money. Make it simple. Make it ship sticks. S p 500 looking to open 54 points higher. That headline took a little bit of the air out were back up almost over 600 points. But, yeah, get used to it and then why does it come back after that i guess its the need and well see if it does. By 4 00, would you make any prediction. Would you make any prediction by 9 30 a. M. Not even 9 30 bank stocks get hit after the fed surprise rate cut yesterday. The s p bank etf fell close to 4 its now down more than 15 in the last 8 days. Joining us is the director of bank and equity strategy we look at how the financial does and we say yeah, credit quality must be good because were in such a good economy low rates and worries about a slow down, see how you can make a positive case for banks just based on the most recent events, or can you well, you have the Interest Rate impact and the credit soide. The Interest Rate impact is real so earnings are going to be unfortunately impacted by 3 to 5 more so we had earnings going down in this sector. The shortterm rates are moving lower. We just saw that employment was going period up. Our credit cycle monitor said that we had some cushion so theres some strength in the economy. So theres some shock absorber on the credit side so were not really seeing that the credit has to materialize and thats the bigger shoe to drop. So as long as we can keep credit in there, valuations are already starting to discount the fact that thet cycle is going to start to kick in and we have seen this a couple of times before when that did materialize. We just heard every single economist has a forecast for recession greater than 50 just heard someone deposit that factually. So if the credit cycle hasnt turned yet its guaranteed to do so so you have two strikes against the sector at this point you have the lower Interest Rates and the credit cycle. Thats exactly right. If we do see the credit cycle now begin to turn, then thats going to be an additional cost that will drive our earnings down even further which is why the banks react the way that they do. Theyre the canary in the coal mine when we start to have the fear of recession that we had in 2016 and 2018 and now were having in 2020 the banks get hurt the most because everybody is wanting to avoid 2008 so we start to see valuations which back in december we downgraded our stocks because we were looking at the sector and building in all the good things and all the bad kind of fears were kind of working out and now what we are seeing is its on the other side so a risk to return back in december was less than one we had more risk than we had return now given where the valuations are our risk to return metric is up to over two tops. So the valuation piece of this is pushed in between Interest Rates and credit and thats what we have to see is its a perception its not the reality of credit just yet. Okay. Good so then thats Interest Rates, credit cycle and valuation. Thats right. One we know, the other one were not sure and the third we know, so things are cheaper and this is not great for the yield curve for people that lend long and whatever it is the yield curve is bad for bank profits right now, right thats correct. But you have an offset that hasnt been played into yet. Deposit rates did not fall on the first 75 basis points that we went hrough we already see dividend yields start to creep back up again and what well have to watch for is this whole credit side. When will we it all depends doesnt it it all depends. Unfortunately it does it depends on the virus and the amount of fear and then the credit quality can be impacted in fairness, i think that were closer now to the recession than any time what was that . 8, 9, 10 years ago when they were ramping up based on nothing. Based on passage of time. Were inevitably closer than we were 8 or 9 months ago. But just in terms of i mean, i understand the. This is from real Economic Activity. This is based on what you are seeing globally so theres potential Economic Impact. Its not like its going to bounce back that quickly so we can watch it materialize and then we know if we then see the virus start to wayne as we get closer into the summer then we know the relative value built into these banks gives you the opportunity to rotate back to them but you have time and patience on your side here so theres no rush to have to do this. Thank you we appreciate it still watching the futures. Were just one headline away from if something is going to be that way for that long. Nothing to panic about. And then theres that. When we come back, Airline Executives heading to the white house as the coronavirus wreaks havoc with their business. Well also be speaking with texas senator ted cruise he is set to lead a hearing on capitol hill today on the Airlines Response to the virus well hear what he is thinking about. Right now though as we head to a break, lets take a look at the futures. Dow futures up by 550 points nasdaq up by 138 the s p indicated up by almost 50 points. This comes after yesterdays 785 point drop for the dow continuing a streak of extreme volatility for thend requawk box just ahead the barkins are empty nesters now. Should they downsize . Probably. Will they . Not as long as thanksgiving is a holiday. Planning for the future is about more than just money. Let equitable be your guide. A new kind of investor with an app thats changing the way we do money. Download robinhood now. These expect and way more. Internthats xfinity xfi. U get powerful wifi coverage that leaves no room behind with xfi pods. And now xfi advanced security is free with the xfi gateway, giving you an added layer of network protection, so every device thats connected is protected. Thats a 72 a year value. No one else offers this. Faster speed, coverage, and free advanced security at an unbeatable value with xfinity xfi. Can your internet do that . Welcome back to squawk box were live a couple of stories investors will be following today. General electric is holding a shareholder call ge is reaffirming its target for the full year but ge does say it expects a hit of 300 to 500 million to its q1 cash flow from the coronavirus outbreak you dont want to miss the first on cnbc interview. Thats going to happen at 10 00 a. M. Eastern time. We continue to watch the Global Response to the coronavirus. The country now plans to close schools and universities across italy until mid march as it tries to contain the outbreak. Thats going to have a bit of an impact and people are looking at that and saying is that going to come to other countries as well. A stock to watch today, Campbell Soup shares are rising the Company Raised its full year profit outlook and ill bet you lots of people, you go to the supermarket and soup, anything canned right now. They were trying to get away from soup and get into all sorts of fresh fruits and things. Designer soup. Soup is good. Chicken noodle. Theyre scheduled to huddle to talk about the Coronavirus Crisis theyre starting to see a bigger and bigger revenue hit phil is starting to join us on that story. This is the gut punch to the revenue screen for the airlines. How much will the airlines be hurting as the cancellations mount . Well it depends on how accurately we get this data and the most recent data from a couple of weeks ago from the International Air transport association. They said that global traffic would drop 4. 7 in 2020 and it would cost the airlines about 29. 3 billion in lost revenue. But as you take a look at the Airline Index keep in mind that that estimate that was from two weeks ago and we have seen the cancellations pick up since then this is why analysts are saying for the airlines its all about managing cash flow right now its looking to see how they can manage their cash. I suppose that you could say well at least theres a Silver Lining with the oil price coming down but if youre not getting the revenues in it doesnt matter how low the oil and fuel price goes its going to be a cash flow issue for many airlines. Take a look at the four largest carriers, delta, american, united and southwest the ceos of those companies will be here at the white house today. But at the end of the day, im not sure what the white house can say to the ceos short of well do something to help you out financially which i dont think is going to happen because if you help out the airlines do you help out the Hotel Industry and other industries that are suffering because people are cancelling their trips right now. And the seats are just not being filled on these plants to the degree they expected a few weeks ago. I guess what is unique about the Airline Industry is they collect the fees up front for the tickets that youre telling. So in a certain sense its like the float the Insurance Industry uses. Well pay the 200 to cancel the ticket but those are in certain areas whats interesting here is that their cost dont drop. Lets say it cost you 300,000 a month. You have to come up with 10,000 a day in revenue one way or another and if youre not flying it as often its going to be tougher to come up with the 10,000. Is liquidity an issue for the Large Airlines not right now. The issue is with low Cost Carriers particularly with Southeast Asia they dont have the liquidity that you see in the u. S. As well as in europe. Okay. Thanks, phil. In addition to todays airline meeting theyll be talking about the coronavirus this morning and containing the spread of the disease. Texas senator ted cruise joins us now hes the chairman of the aviation subcommittee. We were talking about deciding to go abroad. And their International Spring break programsand the president says that staff and students really shouldnt travel overseas who would go overseas now senator . And not only that but how do we help the airlines . What are you going to be looking for today as far as questions from the executives. Well, the risk profile varies depending on the Geographic Area that youre looking at whats important is that we do everything that we can to contain this outbreak and prevent it from becoming a full pledged pandemic the numbers are voutroubling an were right to be concerned. As we sit here this morning we have over 93,000 confirmed cases of the virus we have over 3,100, nearly 3,200 confirmed deaths of the cases of the virus were sitting at just 127 in the United States. So the bulk of that is overseas and the overwhelming majority of that is still in china thats good news to the extent that its been contained you look at where else its spread heavily its spread heavily to iran and south korea and italy so all three of those are dealing with significant challenges t to bring in the cdc and center for Disease Control and department of transportation and customs and Border Patrol to listen to the experts and understand whats going on a lot of people are concerned but its right not to panic and not to give in to hysteria but to be driven by the facts and hopefully get it behind us and once we take care of threats to human life the next stage will be the economic implications of what the slow down means and in particular right now the inability to travel back and forth to asia and to china in particular by definition, the migration to just about every country in the world now is it 100 mediated through someone on an airpla airplane we can assume that this moves globally from the Airline Industry thats the first place that we should look. They should be doing things to try to stop this from happening. What do we need them to do and thats something that the Trump Administration acted wisely when they stepped in early and halted commercial air travel back and forth to china and when they set up a quarentine regime for any americans that were abroad in the afthed region fected regione both extraordinary steps its been a long time sincewe have seen the federal government do either one of those listening to the Health Experts, i was listening to the head of cdc yesterday. The Health Experts are telling us that doing that significantly slowed down the spread of the virus. If we hadnt done that, if there had been unrestricted air travel back and forth from the time of the outbreak until now that we would be looking at a significantly larger number of cases in the United States it gives you time to develop vaccines and treatment protocols and the administration is meeting with and met with pharmaceutical ceos earlier this week and is meeting with the experts at the fda and the cdc and working to getting testing kits out thats one of the significant steps next week. A substantial number of testing kits are being sent out so that by the end of next week theyre expecting to have the capacity to conduct over 1 million tests. But a lot of people are wanting to get checked out and get the test and theyre stepping forward to get those tests out and available. People are still coming in from around the world though and if theyre asymptomatic or if we dont have tests, i dont see how we can expect to be screening people were not screening people, are we it is a challenge were certainly screening people if theyre coming from china in particular were not allowing commercial air flights so that limits some of the flow. Now we have italy how many places should we be screening people from Washington State going to other parts of the United States when we say screening were just talking about seeing if they have a temperature. Were not seeing if they actually have the coronavirus. Thats right and part of the challenge is that the incubation period we dont fully know we think it may be 14 days although theres conflicting evidence on that thats going to be one of the questions that well address at the hearing today so one of the questions that were trying to ask people that come in is have you travelled so any of the affected regions not just on the plane youre coming from right now but in the past two weeks have you travelled there . And getting those questions, you know, i met with the head of the Airline Association yesterday and they were talking about some of the challenges theyre finding implementing what the cdc is asking for in terms of getting the full travel history of every International Passenger and i think that theyre working hard to do that. One of the challenges is also that cdc is wanting Airline Employees to take temperatures of passengers before they board. Airline employees are naturally hesitant to do so. Theyre not Health Care Professionals and so some of the ticket agents are saying wait a second, why am i taking a temperature. That seems a reasonable question for an employee, an Airline Employee to be asking so how we get the necessary protections in place is going to be a challenge going forward. We spoke with the head of the Airline Pilots association. I guess it was just last week. Things were happening pretty quickly. They had some concerns about pilots being asked to travel some of these routes they may not feel comfortable with traveling and then what happens to them if they get sick is the Company Going to be responsible for that a lot of them in some particular carriers dont offer a whole lot in terms of security on that. So look i can give a personal example of that. My cousin is married to a captain for delta and he was just flying to japan and i was talking to her a couple of days ago and she was pretty worried about him and i said look based on the number japan has some incidences of the virus. He needs to be careful my advice to him was go straight to your hotel and just stay in your hotel dont go out on the town while youre there go straight to your hotel and come back. The odds are still pretty limited of exposure but theyre not zero so you have to take them seriously. Today is wednesday, right so super tuesday was yesterday. Right. Was it not . So we saw what happened in the great state of tex as you have spoken passionately about cuba and your feelings on the castro regime are you glad they gave him a big win or would you rather have him face sanders where are you on that . The enemy of my enemy i dont know how to view it. Im certainly grateful that texas didnt vote for we arebere i served with bernie hes a true believer but he is a socialist and you mentioned cuba he has for decades gone out of his way and fidel castro and whether the soviet union and one of the things that i did last month during the impeachment trial is i started a podcast its called verdict with ted cruz and i went from being nonexistent to it became the number one ranked podcast in the world. And the latest is i actually flew my aunt from dallas up to d. C. And i interviewed her because she was in prison and she was tortured and most downloaded podcast because of the chance and what bernie is saying with cuba is the socialist paradise is just utterly false as anyone has lived through. Some of those cars are pretty cool those old, you know, like a 56 ford or chevy. So what did you say . Did you say youd rather have the president face bernie or youd rather have to face Vice President biden . You know, bernie scares me and the reason bernie scares me i know a lot of republicans that are celebrating every time bernie wins let us run against bernie hes so extreme that trump gets reelected. The thing that scares me about bernie is were a divided country. There is a chance this country could elect a wild eyed socialist and you want to see something that would do devastation to our economy and to peoples lives, that worries me a great deal. Id rather not even roll the dice so personally id rather biden because hes at least slightly closer to rational hes still very liberal. What qualifies as moderate in todays democratic dramatically. Guns, thats telling right there. Thats exactly right. All right, senator, senator cruz, thank you. Always a pleasure i might listen to a tom cruise podcast, i dont know whats the name of yours again cruz on verdict. You have more listeners than the squawk pod i dont we have a podcast not only that, we passed joe rogan, rose to number one been when you pass squawk, ill see it no, you probably are good luck. Thank you under an hour to go to the opening bell on wall street. Dom chu has a look at the biggest stock movers for the record i am an avid smauk p squawk pod listener, i find it enjoyable. Shout out to that one as well. Look at the movers because of super tuesday and what we talked about, there is a lot of movement with regard to green on the screen, on Health Care Related stocks. First of all ill show you whats happening with some of the big insurers United Health one of the best performers in the s p premarket up 10 similar tight moves seeing play out for anthem, cigna, humana on some of the idea the handicapping of odds for medicare for all may be slipping just a little bit more, insurers a focus but not just the insurers, also names across the health care spectrum, from drug companies, to hospital operators, take a look at some of these names because youre talking about names like hca, youre talking about names like am amerisourcebergen and farmly benefits managers like cvs health up 4 , to 5 . Cvs health and mca up 5 and amerisourcebergen up 4 . Over the past Year Health Care as a sector has become an underperformer versus the s p 500. If you look at the chart, over the course of that span youve seen numerous times of gaps in performance. Some of the widest areas in temples of gaps in performance between the s p and the Health Care Sector overall have been 8 to 10 you can see right here so far that gap has narrowed considerably as we look at health care that might be the catchup trade and the political developments, andrew, could be the catalyst for health care versus the s p 500. Thank you want to talk about Technical Levels investors need to be watching this morning as they search the market for a little bit of yield here. Joining us is robert schlumr from Fund Strategic Global Advisers good morning. Tell us what we need to know. The s p you say its deeply oversold what are the levels . Joe asked me a question last thursday when i was on, do technical its matter at these levels i think they do. Couple of levels, this level 2855, right exactly at the october 2019 lows. We bounced off that, hovering around the 200 day moving data all the rsi data is oversold that needs to get worked off and i think the market is trying to establish a low around the levels its going to be a trading low lets move on to the longterm just to be clear you think weve hit a bottom a trading bottom. The point i was trying to make last week we think the market will take quite a few months to consolidate in base before it moves higher lets move and look at the longer term chart. Say the 2855 lows dont hold, right around the 15month moving average. A great proxy for the longterm trend. Say it breaks. People will panic. Next key level 2620, which is around that fouryear or 200week moving average, a key longterm support level. Saw it at the end of 18 and 2016 and 2012. 2620. The next major level. Looking at the nasdaq, speaking of technicals matters the nasdaq coming off the 200 day almost to the point. It was exactly to the point, and thats the relative leadership we still think a lot of the tech stocks have come back down to support levels so many names bouncing off the 200 day. We think thats holds where people will buy the names, a lot of tech names in the support the last point and really is a lot about the bond market, this is the tlt etf that tracks the long bond data, had an interesting longterm technical point. Rates starting to fall below 1 last week. This is key in the next couple of days in my opinion. Well keep our eyes on all of that appreciate it very much. Becky . Andrew, thank you down to the New York Stock Exchange check in with jim cramer how are you feeling today . Well look, i think that im the tenyear and if the tenyear is flat im okay i think that plus biden obviously very strong. Senator cruz had some interesting things to say, of course now i have to watch verdict and listen to verdict whatever, but as long as were in a situation where its status quo bonds and we dont have bernie leading, meaning that bernie could be poison for the stock market i think people feel a little better all were waiting for is the next coronavirus news. What do you make of what happened in italy . Do you think thats coming here . Italy lost control of the situation rather rapidly Italian Health care system by the way is very good so i dont know if its coming here they do z not cid not contain in didnt contain it. All you do contain is slow it down theyre overrun. Is it coming here . If you have a cluster, it will be, they will overrun things but we dont have any cluster thats anything like what they had. Milan, i go to milan a lot and Milan Fashion Week was just a week where the world descends upon milan and it seems like when the world came back they got a lot of people sick italy is extraordinary i think theyre trying to beat china. Given that weve done so little testing here, why would you notbe concerned this is th next place because i think that this thing is you know, look, i dont want to jinx this, this is not uniquely 155. We have to be much more serious who dies and doesnt its age related no one wants to talk about it but it is age related and not necessarily the right thing to initially go off to the schools. I think you have to do a lot of desocializing. I think thats better than the schools right now, but maybe im being too not cautious enough. Jim, see you in just a couple minutes. Thank you. Okay. Just no contact youre already there. Im there, except for dogs. I wont be shaking hands for a long time. You always give me a hard time im kidding, love people. First on cnbc interview with the managing director of the International Monetary fund coming up on squawk alley at 11 30 eastern time re 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. Schwab, a modern approach to wealth management. That does all youou expect and way more. Thats xfinity xfi. Get powerful wifi coverage that leaves no room behind with xfi pods. And now xfi advanced security is free with the xfi gateway, giving you an added layer of network protection, so every device thats connected is protected. Thats a 72 a year value. No one else offers this. Faster speed, coverage, and free advanced security at an unbeatable value. Get the xfi gateway and download the xfi app today. Watch the tenyear and heard jim talk about it as well and make sure you join us tomorrow squawk on the street is coming up right now good wednesday morning welcome to squawk on the street. Im Carl Quintanilla with jim cramer and david faber at the New York Stock Exchange. Trying to claw back the nearly 800 points we lost even with tuesdays emergency fed rate cut. Some observers are pointing iio bidens comeback in the super tuesday races. Can our tenyear yield hold 1 currently around 101 our road map begins with the market whip saw, global stocks rallies with u. S. Equities set to open sharply higher as investors continue to cope witho