Transcripts For CNBC Squawk Box 20160218

October 2011 that the s p 500 has rallied at least 1 in three consecutive sessions. U. S. Equity futures at this hour, the dow opening higher. S p would open about five points higher. Among our other top stories this morning, were watching oil prices very closely. Brent has been above 35 a bar reversal. Wti above 31. That, of course, as we know can change depending on whatever these ministers that are participating in opec like to say. The late etc. Development, iran said it would support joint efforts by Top Oil Producers to stabilize prices. The market had been waiting to see where iran would come down on that. It did stop sort of committing to those output curbs. St. Louis fed president making headlines. Hes been a prominent advocate of higher Interest Rates. In a speech yesterday, he said it would be unwise to move any further, citing weak inflation and global volatility. Bullard said he wouldnt be comfortable with further hikes until the downward inflation trend reverses. Hes a Voting Member on the fomc this year. Wells fargo strategist yesterday also saying theyre predicting one hike in 2016, down from a previous estimate of multiple hikes. Joe, do i even go there with you . We talked earlier. Kayla gets here very for a millennial, shes very early. Normally thats not the case. They kind of come in right before. I dont know, do i have that wrong . It speaks for something. It does for you. Its expeern shl to be prompt. Its an experience millennials decide to choose. You have to clear the path in the hallway for andrew to breeze through at the last minute. Im not a millennial. I read it, as i do, with a little bit of a raised eyebrow because it said that this pause in the tightening cycle, the pause in the tightening cycle might be longer than people thought. What did you think of this tightening cycle that weve been in . It was a quarter point from zero. Its been nine years since anyone what would have happened . Nothing. Its a quarter point. Thats not what it is. But the rest of the world is, you know, not exactly on the same page. I understand that. I understand. We do look tighter by comparison. Thats true. I think we should have started this a while ago. I think this is part of the problem. Weve painted ourselves into this corner. We made this bed were sleeping in. But they are truly in a box now because even bullard, who was one of the most outspoken advocates of raising them, now hes folding. The market scared me. They came back 5 . But these markets, you cant say the shanghai or europe all these things scare these guys. Rubio had trouble explaining the dual mandate. Anyone would. Theres about 30 at this point. But the market itself with us out, and it had nothing to do with that, but i think nothing has changed. Terrible earnings in the Fourth Quarter. The worst in years. Oil prices, no real reason to go up. But everybody kind of looked around and said, do we really need to sell this much based on the fundamentals, given that were still going pretty well in this country . We got 5 . Although, when you have about a month before the next fed meeting, a lot can change. We have seen just based on the rhetoric out of opec, oil prices getting firmer. We have seen based on the moves of other countries the dollar getting weaker by comparison. Some of the deflationary pressures that the fed has been citing are actually getting better. Are you waiting for the next fed to see what they do . I dont know. I cant sleep. Thats why im here so early. You didnt go to bed after north carolina, right . Im glad i didnt stay up for that. Oh, you didnt. I did not. Onepoint win over duke. Yeah, it was brutal. I saw the headline, didnt see the game. What time did it end . Late. Nobody is everybody loses. The teams that i think are great, they all lose. Did you stay up . No, i didnt. You were on west coast time. I was on a plane. But i appreciate you wearing your light blue this morning. That is the color for the tarheels. All right. Is this me . The dalio letter. He told us all this, didnt he . Some of it. Why are we saying it again . Because its a letter . Tell it. The founder of bridgewater associates, the Worlds Largest hedge fund, dalio says the Central Banks ability to boost growth is weaker than it has ever been. Exactly what he told us in davos. In a note to clients, ray dalio said Monetary Policy three, or mp3, as hes calling it, will have to be directed at spenders more than investors and savers. Dalio said that meetings helicopter money, he also cautioned currency volatility will likely be greater than normal while countries fight for growth, which also seems like a look in the rearview mirror, as weve seen a lot of countries try to boost their economies by devaluing their currency in a race to the bottom. Lets check on the markets this morning. Not bad after three pretty good sessions. We never saw the blood on the street that people talked about, really. You didnt see that capitulation phase. You were right about that, joe. Maybe not. Might be a bear market rally. Cap bounce. Thats what people are saying. Im not convinced. If oil stays above 30 and weve gotten to the point where everybody says oil i read something about how much is in storage. Were 300 Million Barrels over in terms of how much we have. Thats not even including whats in storage. Iran has never been or iraq has never been producing more. Theyre hitting a record. 4. 5 Million Barrels is it a day . Probably not. Obviously its such a glut that opec doesnt even have to do anything. They can just say things and move the market. You see this internal report from russia this morning on their worstcase scenario . They say oil prices will remain at about 31 to 33 a barrel. Thats in the next year. With a rebound of 42 in 2020. Which is pretty bullish compared to some other forecasts. Huge amount of pressure on them if thats the case. Thats their worstcase scenario. And all these countries. They have a lot of big debt. Okay. We looked at the futures already. In europe, there wasnt a whole lot happening as far as i saw on the way in this morning. Although, europe has been part of the rebound that weve seen. Theres today. Germanys up. The ftse is trading lower. Oil, as weve seen, has been partly responsible for this threeday rally. Well look at that first. Shanghai back to about 2860. Heres the oil boards, which we were just talking about. All the way back to 31. 62 now. Up 3 today. Gold is turning back towards 1200 after it looked like it was finally getting ready to break. I was just going back to my notes from a couple weeks ago. The opec look ahead came out. They dont see 100 a barrel oil until 2040. About 40 bucks this year. How do they when youre looking at basketball games, how do you figure out a point spread . Theyre never right. I would hate to be a bookie to try and bet on these games. How did they know 2040 . How much confidence do you have theres anything to that, other than just making that up . I dont know. Maybe they do some analysis. The only level of confidence i have is theyre a bloc that can potentially control it. True. But its 2016. Is that 24 years . Thats 24 years. Thats how old i am. Thats my entire lifetime. I just think there could be some geopolitical events that maybe make that hard to predict. Well, as joe mentioned, u. S. Stocks are on a threeday winning streak for the first time this year. The s p 500 has climbed out of correction territory, although just by a few points. Dom chu joins us now with todays market checklist. Dom, its like you dont even want to acknowledge it because as soon as you Start Talking about it, then we start reversing. But it does look like we are out of correction territory. The dow is still a few points away. By like a quarter of a percent. Maybe a half a percent. Thats that level, that correction level that you were talking about. So as we kind of put the markets in focus here, threeday rally like you said. One of the strongest ones weve seen since the august turmoil lows and the bounce thereof after that. The s p 500, you can see here, up by about 2. 5 between january and now. In february, this part right here, you can see were just about flat. Maybe just a little negative for the month of february. Thats how volatile its been. Again, to put it in perspective, we are now barely, barely off of that correction mark. Were not in correction territory, but all we got to do is fall by another half a percent, and were back there again. Whatever you think about corrections and that 10 level, thats going to be key. The real interesting part here about the sectors that are driving a lot of the movements here that weve seen over the course of the past month to date period, materials gaining by about 6 . One of the most beaten up sectors out there. Also, industrials and telecommunication stocks. So some of these are at least painting a decent bullish picture, more cyclical on the materials and industrial side. Telecom higher. Maybe people are still seeking that yield and a little more of that defensive nature. And lets put those crude markets into focus. If you look at that sharp decline we saw since the beginning of february, weve bounced back quite a bit. Remember, 28 a barrel. We were there not too long ago on wti crude. The market checklist, joe, this morning has to do with whether or not this threeday rally can actually have legs. We did see higher than average volume yesterday. Thats whats giving bulls a little bit more of a good feeling about the rally that weve seen. Well see if it can hold for day four today. Back over to you guys. We still have these companies that are on different fiscal years reporting, but were out of earnings season, dom. It wasnt pretty, but its like the guy that, you know, you stop hitting your head against the wall, and it feels good. At least the bad numbers we had, it was the smallest amount of beats on estimates. It was also one of the worst quarters weve had. But thats over. Well see what happens. Walmart kind of unofficially caps the large cap earnings season. Again, weve already been in a sales recession, a revenue recession. This would put us now two consecutive quarters in terms of year over year earnings declines as well. Maybe were in an earnings recession. The question becomes whether or not because were over it we can see a little bit move higher because people are not as concerned about those corporate earnings and sales anymore. We get to retailers that are weird, their quarters end in january. Basically, everybody else is done. Anyway, dom. Thanks. For more on markets, were joined by jason pride, director of Investment Strategy at glenimmediatgle glenmead. Also, michael tyler. History doesnt repeat itself, i guess, guys, but it rhymes a lot. This doesnt look that different than a lot of corrections that weve seen in the past. Did this get oversold and its a bounce without anything to justify it . We think it did get oversold on a nearterm basis. You look at the ai, Investor Sentiment poll, the number of stocks or percentage of stocks below their 200day moving average. We hit levels that historically the markets recover from. When you think about corrections, weve done this study and looked at past corrections. Pretty much the determining factor is whether the fears get realized. Therefore, the correction ends up being not actually as much as you end up having. You ends up going down further. Or if those fears dont materialize and you come out of it, typically in that situation you rebound back to where you started within eight months on average. Thats based on historical nanl sis back to 1928. Theres a little bit different story as to whats happening today. I think it makes it a little bit more balanced of a picture. The fed i heard what you were saying, but we believe the fed with quantitative easing has been tightening for quite some time. Now we have this pick up of possible credit risk on the energy side of the equation seeping over into the rest of the market and kind of invading the Financial System a little bit. Also, the difficulties structurally with china and emerging markets gradually slowing down. You put those things together, and i think this is a more balanced picture than other corrections that weve had. One where you have to look at it and say, okay, wait a second, the actual chances of a more material downside have gone up. Its not a base case. Youre probably still expecting expansion. But the risks to the overall economy and the system are a little higher this time around on the correction than they were, say, back in july, august last year. I think thats what the markets are having to deal with. So markets sell off in anticipation of what could be something negative, but theyre not always correct. So sometimes they sell off because of the worstcase scenario and it doesnt actually happen. Markets are supposed to be smart. But theyre no smarter than the people behind them. Theyre no smarter than the information they have coming in. I looked at the same reasons why the market sold off. Nothing has really changed or improved since then, other than we got oversold. The same worries that took us down are still front and center, but its like everybody took a step back and said, wow, we really got panicked and maybe we shouldnt have. I think the key is the word panic there. People were getting very upset, concerned whether banks, for example, had really big exposure to highrisk loans in the Energy Sector. The answer is they basically dont. Its a very small piece of their portfolios. The banks have been clobbered. Theyre down 20 and 30 in many cases from their highs. Thats just not justified by their fundamentals. Theyve done much better in diversifying their businesses as well. So as were looking at it, i think oil is it going to go down by 50 for a third year in a row . Not very likely. Is the dollar going to soar again this year . Not very likely. For one thing, the fed is clearly backing off a little bit. To me, those were huge headwinds that caused the profit recession you were talking about a few minutes ago. I think that eases by Second Quarter of this year. Third quarter you start looking at positive earnings again. I think the market is going to reflect that. Were stuck in a trading range for the moment, perhaps, but longer term, looking to the back end of the year, we should be okay. So all this. Whos the latest guy to call it a circus . Oh, your buddy. Which one . Howard schultz. Oh, yeah. Political process turning into a circus in this country. He didnt just say republicans either. I figure hes a bernie guy, but he said even on that side of things. Im surprised you havent said knack for the obvious at this point. Right. I wonder how much of that played into what were seeing in the markets. Maybe not a lot. I dont think its a lot. But i have to admit, when we speak with our clients, its surprising how many times its coming up. More from a perspective of what happens if a nonestablishment candidate gets in place versus the establishment candidates. What does that do to just the overall system and whether that undermines the ability of the u. S. Economy to continue doing what its been doing. I dont know if i really buy that the president ial candidates have quite that much power in terms of the economy. I personally believe the Federal Reserve is really the economic dictator. Oh, god. And the president doesnt have quite as much power in influencing it. The rest of the world has a lot of nerve judging us and our political process. Theyre not exactly you know. But it is a little disconcerting. Maybe we should put in the confidence votes. Jason, is that a beaver i see . I think youve asked me that before. It is. Yes, it is. Im fascinated. You were undergrad . Right. I did not get one for graduate school, but you might actually be inclined to understand some of this stuff. Doesnt seem like i went to the dark side way too early, i guess. What happened . I dont know. Good old dr. Bose talked me into going into business. Chemical engineering from m. I. T. Youre going to come back. Sorry, michael. I dont know where you went. I didnt see you. Im still here. Wi know. I mean, i dont know where you went to school. Never mind. Thats a big tie knot youre wearing. See you later. Coming up when we return, were expecting Quarterly Results from walmart at 7 00 a. M. First, were going to talk to an analyst about what to expect when the dow component reports. Plus at some point, we have to talk about apple and all the security concerns and privacy sshs. Were back in a moment. Actions speak louder. Something well show you. Through small things. Big things. And spur of the moment things. Sheraton. Sometimes they just drop in. Always obvious. Cme group can help you navigate risks and capture opportunities. We enable you to reach Global Markets and drive forward with broader possibilities. Cme group how the world advances. No, youre not yogonna watch it tch it we cant let you download on the goooooo youll just have to miss it yeah, youll just have to miss it we cant let you download. Uh, no thanks. I have x1 from xfinity so. Dont fall for directv. Xfinity lets you download your shows from anywhere. I used to like that song. In less than an hour, walmart is expected to roll out Quarterly Results. The street will finally see how the retail giant finished its holiday season. Here with expectations for the dow component, managing director at raymond james. Bud, the company at this point has laid so much out for us about whats coming ahead in 2016, but im wondering what you think we will see so far as seeds being sewn this past quarter. Well, well see how traffic went. Traffic has been up for several quarters in a row, comps have been positive. Well see what the impact of the deflation on food has been, which weve heard a little more about lately. And well see how results will look in the quarter. Were estimating were a little ahead of consensus. I think were at 1. 50 with a u. S. Comp of 1. 2 . I think consensus is about 1. 43 on 131 billion. Sales were a little ahead of that at the sales line. The u. S. Comp stores trend has been pretty good, bud. Several years ago, investors never really expected Comp Store Sales in the u. S. To be positive. Do you think that its a given . Well, i dont know that its a given. Well see as we get closer to the actual time of the report. I get more nempbs. We have them expanding comps a little bit over the year, over the next year or two because thats where a lot of the effort has been laid. The company has been working to very much improve the experience in u. S. Stores since doug as taken over and greg came in as ceo. Thats one of the reasons why they put more investment in the stores. This year well see about a billion and a half dollars of investment. That gets you to about 2. 7 billion over two years. Thats a lot to spend to make sure the experience of the customers in the stores are better. If we dont make the experience in the Stores Better for customers, we dont have a business. But theyre also closing a couple hundred stores too, including all the walmart express concepts. Were those just ill conceived, poorly executed, a waste of time . What do you think of that strategy . Well, we always knew that the walmart express, which were the smallest format, was a test. That was to see whether or not they could tether those small stores to the larger super centers. I think the supply chain was impossible to get that to work. That was about 100 stores in that test. That should not have come as a big surprise. I think the media made a bigger deal of that. The stores in south america, latin america, those are stores that are basically being closed for profitability reasons. We think that probably some of the other International Stores may be on the bubble as time works on. So some of the store closures are being done for profit reasons and logistical reasons. But it was a test to see if that could work. Remember, walmart as a significant share of the weekly shop. Its the midweek shop that they were attempting to gain a better foothold in the marketplace. Well, youll be watching those results very closely, as we will at 7 00 a. M. Eastern time. We appreciate your time this morning. Thank you, kayla. Thank you very much. Joe . Andrew, we have niko on. Were going to talk apple. She going to wear her sunglasses . Shes never had her eyeballs exposed. This is difficult. I know youre on fbis side. 100 . 100 . Well talk about it. But if you told me that you could save somebodys life right this second, if i told you your child i understand. No, no. If i told you your child was kidnapped and the information is on the phone, youre telling me, tim cook, that you would not try to get that information off the phone . Craziness. If you knew there were 100,000 people who were going to be killed in a dirty bomb attack, would you use torture to extract the information where it was going to happen . Im not just saying. Did you see bridge of spies yet . I have not. I became much more aclu friendly. Wow. Oh, my goodness. You have to do the right thing at certain times. I dont know whats going on. Were going opposite. I know. Coming up, the battle between security how did i know . What a segue. The security bath l pltle pl out in california. Tim cook resisting a court order to help the fbi hack the iphone of one of the San Bernardino shooters. Were going to talk to a security expert. Thats next. We needed 30 new hires for our call center. Im spending too much time hiring and not enough time in my kitchen. announcer need to hire fast . Go to ziprecruiter. Com and post your job to over 100 of the webs leading job boards with a single click. Then simply select the best candidates from one easy to review list. You put up one post and the next day you have all these candidates. Makes my job a lot easier. announcer over 400,000 businesses have already used ziprecruiter. And now you can use ziprecruiter for free. Go to ziprecruiter. Com offer2 all across the state the economy is growing,arts today. With creative new business incentives, and the lowest taxes in decades, attracting the talent and companies of tomorrow. Like in the hudson valley, with world class biotech. And on long island, where great universities are creating next generation technologies. Let us help grow your companys tomorrow, today at business. Ny. Gov we built our factories here because of a huge natural resource. Not the land. The water. Or power sources. Its the people. American workers. They build worldclass products. And that builds communities. And a better future. For all of us. Because making something in america means so much, to so many. Weathertech. Proudly made in america. Welcome back to squawk box on cnbc, first in business worldwide. U. S. Equity futures at this hour at this point look like we could have four straight positive sessions, if that were to hold until the end of todays session at 4 00. Were out of correction territory if we were to main then they those gains. Up 85 on the dow jones. Up almost nine on the s p. And up 28 on the nasdaq. Whenever we see people, they say, you know, were listening. Tell us where it is. So sometimes weve got to do that for people. People on sirius. Yes. Ran into a couple people who listen us to in the morning. They say tell us. We dont hear enough when you say whats on the screen. Tell us. Exactly. Right now well tell you whats on the screen because its todays executive edge. The privacy versus security debate, its heating up following apples decision to oppose that federal court order to help the fbi unlock a phone used by a suspect in the San Bernardino attack. Joining us right now to talk about it, eric oneil, National Security strategist at carbon black. Also a former fbi operative, where he was the subject of the movie breech for his role helping to capture a u. S. Spy. Good morning to you. Eric, whos right . Tim cook or the government . Its not as cut and dry issue as whos right and whos wrong. Theyre both right. But let me explain why. The fbi has a mandate to investigate these things to protect us on our soil, to stop terrorism. What would you do . We know both of the arguments. Tell me what you would do. Right. Right now im on the side of security. Im on the side of the stance apple is taking. Let me explain why. In the past i conducted these investigations. The fbi wants that phone. Its a gold mine. It could have syed farooks contacts, emails, who he met, gps coordinates, where he was. It could be very important for the investigation. Now, on the other side, we have the interest of security. Were seeing enormous data breaches. These cell phones, its not just about privacy. Its about protecting security. Each one of these devices is a point that can get into massive data warehouses. What is the true danger in this particular instance of apple building a system so it can allow the government access to this phone . I mean, thats the fundamental question here. And the larger fundamental question that tim cook is worried about is if they do it once, theyre going to be asked to do it again. Right. So you have just got right to the heart of the matter. Theyre building a back door into some very strong encryption, probably some of the strongest weve seen to protect these devices. But lets acknowledge there is a back door. Theres always been a back door. Apple is proving it now by suggesting they could build this thing if they wanted to, which means there was this idea that there was no back door is crazy. Right. They could build it. They dont want to build it. They dont want to have it somewhere. We think if apple could build this back door which, when were sayi ining back door, the building a new operating system that allows the fbi to rapidly enter every pass code possible and break it. If there was a crime that happened in a hotel room and the h hotel room was locked, the government gets a subpoena, they go open the door. If for some reason they cant get a subpoena, they would go to the lock maker and say open the door. If the lock maker says we dont have a key, theyd say go build a key. Its not that were doing this to everyone on the planet. Were doing it for a specific purpose. We have a subpoena. The government has decided for better or worse, the judge has decided we need to see this stuff. I get it. And i understand. But its not just a lock for one door. Its a lock for all doors. What apple is afraid of is if they build it, even if they say were going to build it and then just destroy it, it could be somewhere and someone could steal it. They might say theyre going to put it in the most secure room in the world, but thats not going stop the robert hansons and Edward Snowdens who can steal it from the inside. Theyre worried its going to get out and be used to exploit apple products all over. I just cant believe youre agreeing with me. Hes beside himself over here. Let him finish his points. You keep interrupting. Just because hes right and im right on this, youre getting all, you know you know what people are writing in on twitter . Im missing scalia already. Because of privacy concerns. I cant believe im hearing this from you, of all people, that youre just throwing out eric, let me put it this way. Everything is an open book for everybody. If the government wants it. This was the example i gave yesterday. That hotel room. No, if your child is being kidnapped and the information is on the phone, youre telling me youre not going to get that information . Would you hook him up to electrodes and zap him . I dont know if i know you at all. You can do torture, whatever you want, because the ends justify the means. You cant do that, andrew. You cant. We all understand if youre going to save 100,000 people, maybe you do water boarding. Trump wants to do worse. I think most people agree that in this one particular situation, if there were a way to do it safely and thats what i want to ask eric. Is there any scenario in your imagination where apple could do this, whether the fbi ships the phone to them, they just do it for this one device, they securely ship it back to the fbi, where there could be any guarantee that it only happens in this one situation . Look, to respond to everything thats just been said, i think that there are situations which could be so pressing and important that this would be something that i think apple would say, okay, were going to do. Theyre resisting because we dont really know whats on the phone, how its going to help. Terrorism isnt big enough . Lets take a crazy scenario where we know if we can crack that phone, we can save lives from a bio or nuclear or radiological attack. Yeah, crack the phone quickly. Apple is going to have to find a way to do it. Theyre just afraid if they build this thing and i sympathize with them. If they build this back door but for them to be consistent too, they have to take the same position whether its saving 100,000 people or one person. Thats the fundamental problem. If you look at the case brought in brooklyn, again an instance where the government has a subpoena. Its not that the fbi or somebody is coming to them and theyre just saying, you know, were asking you nicely to do it. Its that a judge has actually issued a subpoena to do it. And theyre saying no. Well, youre bringing up someone mentioned scalia. Youve got an interesting case too because what happens when they resist the subpoena . It goes to the District Court and it gets appealed up to the circuit court. Eventually, this is a case that could get appealed to the Supreme Court. You have a 44 split and it goes nowhere. Apple can win this by just resisting. Its not who we are. But youre spientirely right. We have to protect lives. Its not who we are. In this case, torture, no privacy concerns. Its not who we are. Thank you. And i thought coming in this morning that you and i we never will be. I thought wed agree. I actually thought wed agree. We wont. And eric, hes a big right winger. He was in a movie. He still was on the other side of you. Youre so messed up. Although, next hour you might take a different side. We just dont know. Depends on andrew. Depend. Im about to flip. Coming up, we have your guide to the trading day ahead. Then donald trump falling to second place in the latest National Poll. John harwood will join us from South Carolina just days ahead of the next gop primary vote. Squawk box will be right back. So youre a Small Business expert from at t . Yeah, give me a problem and ive got the solution. Well, we have 30 years of customer records. Our cloud can keep them safe and accessible anywhere. My drivers dont have time to fill out forms. Tablets. Keep it all digital. Were looking to double our deliveries. Our fleet apps will find the fastest route. Oh, and your boysenberry apple scones smell about done. Ahh, youre good. I like to bake. Get expert advice for your Small Business at att. Com Small Business. No, youre not yogonna watch it tch it we cant let you download on the goooooo youll just have to miss it yeah, youll just have to miss it we cant let you download. Uh, no thanks. I have x1 from xfinity so. Dont fall for directv. Xfinity lets you download your shows from anywhere. I used to like that song. Welcome back. Time now for the squawk planner. Weekly jobless claims are out at 8 30 a. M. Eastern time with firsttime filings for unemployment expected to rise slightly from the previous week. More fed speak this afternoon. San francisco fed president John Williams will talk about his view of the kmiz. Thats at 3 30 p. M. Eastern in los angeles. And on the earnings front, in just about 15 minutes, dow component walmart will report Fourth Quarter results. Thats at 7 00 a. M. Eastern time along with Discovery Communications and starwood hotels, which was just out moments ago. After the close, well hear from nordstrom. Thats todays squawk planner. Joe . The battle for South Carolina hitting a fever pitch as donald trump leads in the polls there. But hes fallen to second place in the latest National Poll. John harwood joins us from charleston, South Carolina. This is an nbc poll, i think, john, but theres other polls where the margin of error just seems large. I dont know if we know anything. We need to take these votes state by state to figure out whats going on. Reporter agree with you, joe. This is a poll that was very encouraging to people who dont like donald trump, to the socalled republican establishment, but we got to wait to see if other polls affirm to see whether or not this is a trend or whether this is an outlier poll. What we showed was ted cruz in first place with 28 . Donald trump second at 26. This poll was taken after that debate last week, which he bitterly attacked george w. Bush on 9 11, the iraq war. Some people thought he went too far. Some republicans did. Here in South Carolina, some republicans have been arguing that he has suffered for that, although there are multiple polls showing hes in pretty strong shape. Our poll had marco rubio at 17 . The reason it was so encouraging is if donald trump falls into a head to head, withe tested that. We showed ted cruz and marco rubio ahead by double digits in a twoway race. As i agree with you, we need to wait and see. Donald trump was trying to dominate headlines heading into South Carolina by doing a town hall last night with our colleagues at msnbc. As usual, he was vague on policy issues. In this case, what to do about the debt and how his plans would affect that. But very emphatic. Take a listen. First of all, you talk about the 19 trillion national debt. If i listen to the people ive been listening to for years on these issues, they tell me your policies would add another 10 trillion, 11 trillion to the national debt. Theyre wrong. How are they wrong . Im going to reduce taxes. The taxes are going to bring jobs back. Were going to bring jobs back into the country big league and well have a dynamic economy again. Do you know last quarter but are you going to cut spending too . Joe, we have no growth. Are you going to cut spending . Were going to cut spending big league. Where . Department of education. Were going to cut department of education. We spend more money per pupil than any country in the world by far, and were ranked number 30 in the world. Reporter so you heard him. Hes going to cut spending big league. Although, the spending cut he cited, department of education, is kind of a Minor League Spending cut. Well see as the Campaign Goes on whether he offers more specifics on spending. Guys, i got to close by saying if you want to know the definition of big league, it was that duke, carolina game last night at the dean dome in chapel hill. You had to bring that up, john . Were talking topolitics. Reporter condolences to kayla. But you have the chance to get us in cameron shortly. Although, i wish it were the other way around. We get the win at home. But you cant always get what you want. We still have a higher ranking. Well take that. Reporter thats right. John, im totally confused about basketball and march madness now too. Im trying to watch to get a feel. On any given night, anybody can beat anyone. When the tournament starts, teams like louisville or, you never know, duke, connecticut a couple years ago. We know nothing. Theres probably 25 teams that could go all the way. Iowa got beat. Reporter absolutely correct. Oklahoma then got beat again. Xavier looks great sometimes. They beat providence, a great team, but they lost to creighton. Any given night, they start throwing up bricks. Reporter joe . Yeah . Reporter whats happened to xavier suince we talked a coupl weeks ago . 233. Theyve only lost to creighton, georgetown, and villanova. But everybody loses at one point or another. But duke is back in the top 25. Everything is right in the world. Reporter our problem is we have the shortest bench in ncaa history. We played pretty much all that game with five guys. Everybody loses. I start thinking of teams really good, then they lose to some average team. Thats why they play the game. Thats why we need to vote. Thats why the caucuses have to happen. Reporter thats why we need to vote. You got it. All right. See you, john. Thank you. Coming up when we return, the power of big data. Its changing the way americans work and the most Innovative Companies are taking advantage. Were going to talk to author alec ross, who tackled the evolving American Economy in his new book. Were back in a moment. Jake reese, day to feel alive jake reese, day to feel alive jake reese, day to feel alive losing your hair is no fun and no one wants to be bald but there is hope. Getting my hair back was the best thing that ever happened to me. Im happy with the way i look now. Im very excited about my hair. I feel beautiful. I love my hair. [ male announcer ] hair club offers all proven Hair Loss Solutions backed by our commitment to satisfaction guaranteed. If youre not 100 satisfied with the solution you choose, hair club will apply the Purchase Price to another proven hair loss solution or transplant more hair at no charge. 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On this book, if i was a parent, which i am, two little 5yearold men, what should i be doing and what industries will they be working in 20 years from now . Its interesting. The age of your kids by the time they enter the workforce, 65 of the job types that exist dont exist right now. So the best way to prepare them theres a couple of things. First make sure they are interdisciplinary leaders. Not just stem, stem, stomach but real leaders of tomorrow will have skills in science, technology, engineering and mathematics and combine things that are human like communication and human psychology. Big fields, the worlds last trillion industry was created out of a computer. The worlds next trillion industry you say its language. If you know languages. Computer languages, technical languages and foreign languages. Foreign languages in part because the world is growing more global and the extent that youre able to play on 196 youre well prepared. Should at least feel better that there will be any jobs that 65 that hes talking about that dont exist today you think is zero, there will be only robots and no one left look, Artificial Intelligence poses a huge threat. The robots of cartoons and movies of 1970s will be the reality of 2020. Ai will replace work thats not just manual and repetitive but cognitive. But question whether technology moves so quickly there are fields we have no idea about. People being put out of work will there be more people working 30i7b years, more Jobs Available or less or will everybody be replaced . In 30 years what we got to make sure were building skills. We dont know what computer languages people will build in ten years but if we build skills that is resilient thats what positions them best. Do you think learning the skills of computer programming, for example, are going to be akin to whatever skills you get in high school but would have given you a manufacturing job later . Thats the question. Is it just complete magnitude difference and therefore those that were in the manufacturing jobs they can never even get to this place. You know whats interesting the ceos who i spoke, to what they said the big reason to learn programming languages in part it teaches you a way of problem solve go to. Not so much about already a language becomes obsolete but teaches you how to work in these fields that are fast growing. The industries of the future is the name of the book. I need to talk to you about apple. You have insight from the white house. Right. Youre on apple side. I think that if you build what apple is being asked to do is build an alternative version of ois, within 48 hours the chinese will have it. This existed in a previous ois. What is this . The key. The way to access. The way to override the data eras eraser. Why cant you bring that back. What were bringing back is the ability of the russian, chinese and other hackers why do you say in 48 hours. I believe that if apple creates the opportunity to get in its not just the fbi but the chinese military. Well leave it there. This is a democrat there that worked for hillary. That was not my response. That was the other guy. All right. Thank you. Coming up walmart will report in the next few minutes. Well bring the numbers and reaction on wall street when we return. In new york state, we believe tomorrow starts today. All across the state the economy is growing, with creative new business incentives, the lowest taxes in decades, and university partnerships, attracting the talent and companies of tomorrow. Like in utica, where a new kind of workforce is being trained. And in albany, the nanotechnology capital of the world. Let us help grow your companys tomorrow, today at business. Ny. Gov advisor and team who understand where you come from. We didnt really have anything, you know. But, we made do. Vo know you can craft an Investment Plan as strong as your values. Al, how you doing. Hey, mr. Hamilton. Vo know that together you can establish a meaningful legacy. With the guidance and support of your dedicated pnc Wealth Management team. No, youre not yogonna watch it tch it we cant let you download on the goooooo youll just have to miss it yeah, youll just have to miss it we cant let you download. Uh, no thanks. I have x1 from xfinity so. Dont fall for directv. Xfinity lets you download your shows from anywhere. I used to like that song. Have lower prices at the pump paid off for walmart. The companys Quarterly Results due out in minutes. Well tell you what the Worlds Largest nation retailer is saying about the economy. Town halls turn to battlefield in South Carolina. Cruz, trump, rubio and bush bring the heat as voters get ready to put their stamp on the republican campaign. We talk politics and your money in just minutes. Apple bites back against the government. Two influential tech leaders are here to debate whether or not apple should unlock the phone of the San Bernardino shooter. They share their opinions on the issue as second hour of squawk box begins right now. Announcer live from the beating heart of business, new york city. This is squawk box. Welcome back to squawk box here on cnbc, first in business worldwide. Im joe kernen along with Andrew Ross Sorkin and Kayla Tausche. The futures are indicating another positive session, up 71 points for the dow, 7 on the s p, up 26 on the nasdaq this morning. Oil is part of the reason for the firmness in the equity markets over the past three or four sessions. Oil back to 31. 45 up 2. 5 or 78 cents for wti. Up above 35 now on brent. Lets tell you about some other headlines this morning. Were just looking for walmart earnings which were supposed to have just hit. Why dont you go ahead. Well look at that in just second. Lets tell you about some other thing taking place not those earnings from the nations biggest retailer. A couple of other headlines i want to talk about. We are getting walmart right now. The nations biggest retailer adjusted 149 per share that beats estimates of 1. 46. Shares are dropping in premarket trading. Store sales were up by. 6 . Still positive for the sixth quarter now running. Revenue was below analysts estimates, strong dollar continuing to impact revenue. Retailer says it expects sales growth to be relatively flat compared to the previous estimate of 3 to 4 growth. Thats certainly going to be taking some investors by surprise. Thats due to the continued strength as the Company Expects for the dollar as well as some recently announced store closures. Walmart announcing an increase in its annual dividend to 2 per share from 1. 96. Stock is now down a little more than 3 , andrew, the company is battling about 5 billion in added costs for wages, e commerce, new training, store closures, so certainly has a lot of head winds for the company in the revenue miss as well as guide down for the rest of the year looks not so great. Lets tell you about some other headlines. Big take over deal in the tech industry. Technology distributor Ingram Microwill be bought by chinas group. Two economic reports a little less than 90 minutes away. Well get the initial jobless claims report coming at 8 30. Also the fcc will vote on a proposed new rule today which will boost competition in the set top box customer and allow to buy the boxes. This could open up the market for people like apple and others who obviously have a box but right now has to be tethered to something else. Remember micro i kind of remember. 4 billion Company Acquired for 6. They do 44 billion in revenue a year. They are selling at 10 of sales. Remarkable. Their margins are like nothing. I dont even know if there are margins. Its like a supermarket where they make 30 basis points. I dont. 4 billion company. Lets bring in the markets. Dow and s p closing higher for three Straight Days. Are we at the beginning of a sustained rally or is this just another Short Covering rally from people sick of selling . A little bit of both. Its no accident that the fed starting to back off from their previous aggressiveness, if you will. We said that in quotes. I cant believe you said that with a straight face. Their pausing their tightening cycle. They went to a quarter point. If you think about the fact they were considering tightening with the rest of the world. And the fact were in a profi prof profits recession. You dont believe the employment number . I did. The fed is believing with 4. 9 savers might care. Okay. You know what i mean. Who cares . You were at zero and were at full employment. All im saying is if you can get the full employment and no inflation why should the fed tighten. Isnt that a food scenario . Whagts happening now were not in good scenario. We have employment but no profits. Were in a profit recession. Profits growth. Profits growth is negative for three quarters. The point im saying for the markets is the fed is tightening. It only happened once before and thas 8081 when volcker had no choice. Thats what youre seeing in the stock market. You cant just say in a vacuum, were tightening were at zero. When volcker was tightening it was tightening at 12 . Is market is not factoring in another hike. You want to ease and go negative then. We can go to minus five. Minus five is on the table. Thanks for coming in. Minus five . They didnt tell me there would be stones here. I think look, i think the issue is remember markets move on not the absolutes. The market doesnt care if rates are 5 or 1 . The market cares about the direction of rates. If the fed is indicating the direction of rates superwhen profits are down thats a terrible combination for the equity market. You seem comfortable with negative rates. No. Were at the very bottom of where anyone can go in term of rates. We cant go lower in rates unless we go negative. Were at zero. Im not arguing about the direction. All im saying is were virtually in an unprecedented period where the fed is considering hiking rates when profits growth is very negative. That is not the normal situation. Thats why youre seeing volatility in the markets right now. It is not once again i return you cant ignore. Youre talking about hiking were at zero. Were at the bottom end of the absolute, if you are not allowing rates to go negative then were all the way right here. Tightening here and not considering on an absolute basis where we are is did you not have breakfast this morning . Because im pushing back doesnt mean you get to whine. Hes actually relaxed. Tranquillity. You must acknowledge that we go negative rates because youre saying we shouldnt be tightening and things are still weak, or all im saying theres no inflation. I dont see why growth is still low. Why not go negative. If we cant raise why not go negative . Maybe we should. Im not arguing that. Tell us something good. All im saying if the fed the reason why were still pretty bullish we think the fed will be on hold longer than people think and we also think that the profits recession, the worst profits recession is right now. This reporting sperd about as bad as its going to get. If were right and the fed is on hold and profits do improve we live happily ever after. Weakness in the market is from energy and banks and there doesnt seem to be any light tend much those tunnels. Different story. For energy i think the long term story for energy is miserable. I think theres way too much money waiting on the sidelines. You wont get the consolidation you need. You could get a short term cyclical balance. Banks different story. Banks need to shrink their balance sheets. These companies refuse to believe, the big banks refuse to believe they should be smaller companies. They are getting smaller. Youre not you should see the return on equity and return on assets going up. Its not. Its paltry. They have to cut themselves by a third or half to get return on equities up. If that happens they are good investments. Do they have to break up like new fed president Neel Kashkari said . I dont think they have to break up but its worth considering. There may be parts of those banks return on equity, return on assets may be higher. Which bank would you break up first . I dont know. Im not an individual bank analyst. The industry overall has this problem. You look at any were only talking about three or four banks. We have this big debate but bank of america, which by the way which could split with merrill. That makes sense. You dont want to comment. Jpmorgan. Youre not going to touch wells. I dont see a lot of banks even in the big cap, small cap space making tremendous returns that are sustainable. You had some exposed to energy. Mid cap, they cant break up again to make more money. Maybe they go away. Also if you break up the big banks they have to hold more capital thats a drag too. This is the bad part. These are all hypotheticals. When theres a credit bubble you get excess capital. Its not doing anything. What is the next catalyst for the consumer . Is it tax refund season . For the consumer, joe will hate this, but the u. S. Consumer let me finish the thought, u. S. Consumer has been the healthiest and most stable part of the global economy. I mean one of the ways that weve done very well in the last year made me realize that. I think that despite the political rhetoric people dont appreciate how well the consumer is doing in the United States and that shows up in a lot of data. So, you know, although were worried about retail sales look at real rail sales. Theres so much deflationary space. I think the consumer is a fantastic story that people havent even been close to recognizing because of political rhetoric. If you listen to bernie or donald youre hearing how horrible everything is. The data doesnt support that at all. What you should concede is if growth is so slow how do you know what im going to say. I dont. If growth is so slow and inflation is so quietessence that should be with where your stance is you should at least acknowledge we should cut three, four, five were just right for goldilocks. Quarter point is just right. Dont go up but dont go down. I dont think the nominal economy where we are today, i dont know what the right rate is. Must be negative. Theres no inflation. Do you like this sweater with him . There we go. This is sorkin sweater of the month. Do you have one with a zipper . You dont have one . The hedge fund sweater. My office is moving today. Andrew, someone sent me a piece, apple unlock iphones for the feds 70 times before and yes. Yes, theyve done it before. Guess who that article is from. A soul mate, the daily beast. See how it lines up perfectly. You got the daily beast on the slate take on this whole you are very consistent. Richard youre a good sport. Thanks for coming in. Good luck with the move. When we return the republican race to the president ial nomination heating up just before South Carolina. New polls showing trumps lead on the national level, slipgt. Well talk politics and money next with the one and only politico ben white and take a look at shares of walmart the nations largest retailer just reported Quarterly Results. Well speak to an analyst about those numbers in just a bit. Walmart stock off 3 . Squawk box will be back in a moment. Youre not gonna watch it no, youre not gonna watch it we cant let you download on the goooooo youll just have to miss it yeah, youll just have to miss it we cant let you download. Uh, no thanks. I have x1 from xfinity so. Dont fall for directv. Xfinity lets you download your shows from anywhere. I used to like that song. Its two days now before voters head to the polls in South Carolina for the republican primary with donald trump maintaining a wide lead over the field in South Carolina. Different story nationally the latest nbc wall street journal poll out showing ted cruz inched ahead. Joining us ben white chief Political Correspondent for politico. And a cnbc contributor. I like the no glasses, jeb, much better. I wasnt talking about you. Youre not running for anything, are you no. Thank god for that. Nikki haley was a real i dont know how that happened because they were both governors and i think governor bush thought that he could count on nikki haley. Do you know any behindthescenes stuff there . I dont. Youre right. That was a big blow to jeb when he had momentum coming out of new hampshire. This would have bean huge endorsement. Maybe she wants to go generational. Maybe she thinks rubio is the future of the party. Thats a huge endorsements. Establishment republicans are adding up second and third. Thats the latest way of saying that trump is 35 or 40 isnt real. Its real. The question is how much can he go above that when other people start dropping out. Where does that support coalesce. They seem to be discounting even cruz when you hear that the media has handpicked rubio you kind of see that happening, dont you although hes doing pretty well. Hes doing pretty well. You mentioned nbc wall street journal poll which shows cruz with a narrow lead. Cbs has one that has trump way out ahead of cruz. If you look at headtohead matchups, nbc wall street Journal Journal cruz beats trump. Rubio beats trump. Its not just that. Those numbers and nbc wall street journal, evangelical voters for whom samesex marriage and abortion are key issues, trump dropped 10 , cruz is much stronger. Thats important in South Carolina. If people are not trusting donald trump on those issues that could be a problem for him going forward. So i mean his biggest problem is if you get bush out and you just got cruz, rub jobs trump can he beat rubio and cruz. Rubio said hes not wanting a victory in any of these races he wants the delegates. At some point you have to start winning. Thats the thing. The question now is expectations are higher for rubio in South Carolina now that hes got nikki haley. How much of a halo effect could that have . It will have a halo effect. Hell perform better than what people expect. Cruz campaign is saying marco has to win South Carolina. But you can rack up delegates over the long haul but at some point if you want to win the nomination you have to beat donald trump in states and if you dont do that you dont win the nomination. How is it possible that Bernie Sanders and Neel Kashkari are on the same side. Big surprise to a lot of people when he came out with this break up the banks thing. Hes a republican. He worked with paulson and bush opinion ran as a republican. There is in california, intellectual wing of the Republican Party that believes the only way to make america safe the economy safe is break up these banks or make them smaller. Its not out of mainstream republican thinking its outside of the wall street thinking. Theres another wing that says bust up the banks. Nobody heard this from Neel Kashkari before. A bit of a surprise. Nobody heard this specifically before. What does it say a regional fed president whose region has no too big to fail banks in it that they would choose to you could call wells fargo a too big to bank. You could. Its not the same. It was surprising to everybody. What do you make of this poll. Some suggest Bernie Sanders is ahead of hillary clinton. I still dont think Bernie Sanders gets the nomination. But in nevada they are tied. And oregon. Sanders is doing well. South carolina hillary will win big. She will start to rack up delegates on super tuesday. We say the National Numbers dont mean that much when its state by state contests. Hes giving her a much better race than anybody expected. You can say illinois if you want. We dont care. What do you think where is she in South Carolina . How ahead . 20 points, 25 points. Nevada its tied. Nevada polling is notoriously unreliable. We dont cho who is doing what in nevada. They had romney losing big. Super tuesday is whats the date . March 1st. No way. No way. Why . Thats like 13 days away. How many days in february . 29. We got the lead. How many months have 29 days in them . All of them. Well finally get people on the reside dropping out after super tuesday. The whole thing will look a lot different. Obama, does he nominate somebody . Yes. For scalias role. Into a moderate person or somebody on the other end. Hell go moderate and put pressure on republicans to hold hearings and do a vote. Its difficult for him to argue the case thinking that he filibustered he regrets that. Thats not who he is. Just like the debt limit. Regardless of that, its going to be difficult for republicans if he puts up a moderate. They dont want to hold hearings. If they do this person could equip themselves well. Its a tough spot if youre a republican. You know how sacrosanct he views the constitution. You think whether its moderate no matter they own the senate. Whats the argument for not having a hearing . They will have hearings. But its not going to happen. They dont have to confirm anybody. Youre going to block an obama nominee which is a legitimate thing to do in a lame duck presidency, you have to hold hearings. Youre not supposed to be a lame duck. Can you make a cogent intellectual argument. Time for todays aflac trivia question. What is the United States oldest retailer . The answer when cnbc squawk box continues. Ohh ah ah aflac aaaaflac tadaa hes not a very good magician. He paid my claim in just one day. One day . shh how does he do it . In just one day, we process, approve and pay. One day pay, only from aflac. All across the state the economy is growing,arts today. With creative new business incentives, the lowest taxes in decades, and university partnerships, attracting the talent and companies of tomorrow. Like in utica, where a new kind of workforce is being trained. And in albany, the nanotechnology capital of the world. Let us help grow your companys tomorrow, today at business. Ny. Gov. Announcer now the answer to todays aflac trivia question. What is the United States oldest retailer . The answer, brooks brothers, founded in 1818. Coming up, we got reaction to walmart earnings and then apple biting back at the government and old fight that put Civil Liberties advocates and Tech Companies at issue. U. S. Equity futures will open up higher. Were back in a moment. Liber. Among the stories that are front and center, toyota recalling 2. 9 million vehicles world wide due to possible problems in the seat belt design. Its affecting models produced between july of 2005 and august 2014. Stock winners is graphics chip maker beating estimates, gave some upbeat guidance. St. Louis fed president says it would now be unwise to raise Interest Rates any further given current conditions. Thats a change on his position. He argued earlier in favor of tightening policy in recent months. Well watch that one. Amazon relying on uber networklike drivers. Drivers use an app to sign up for shifts to pick up packages in nearby warehouse and deliver them to customers doors. Steps the program will go operational in 14 cities. Initially design to handle same day deliveries. The move is another example of amazon taking control of their delivery system. Walmart profits of 1. 49 Beat Estimates by three cents. Revenue was below. When you talk walmart it can be a billion dollars below but less than a percent off the, where analysts were. Retail giant cut its revenue forecast for the currents fiscal year citing strong dollar and store closures. Joining us now is joseph feldman. It was down 3 or so i think at one point. Now its actually down almost 5 . I dont see how they can, walmart can possibly surprise anyone and be worse than expected. What was worse than you were factoring into here . The sales trend definitely got worse than people were expecting. We were look fork a 1 same store sales number they came in at half a percent. Guidance for next year they talked about flat total sales versus the Prior Guidance of 3 to 4 . That in a nutshell plus the stock had responded so well since, you know, the start of the year as everybody was sort of making this defensive trade. Sort of forgetting the fact that there was a lot of investment spending that walmart is doing right now. Still, a far cry from the best levels in the last couple of years. Yeah. Dealing with wage issues, and pr and i look at sometimes i think of walmart like mcdonalds. Is it to turn it around. Mcdonalds seemed to be going to wrong way in terms of societys viewpoint about whats healthy and whats not but mcdonalds is back full force. Can walmart come back . They can. They are doing the right moves now to do the investment spending, and, you know, cleaning up the stores. More labor hours in the stores. Paying people better. Improving the website. Doing all the things you need to do to have that better infrastructure. As Doug Mcmillan the ceo said a couple of months ago we want to clean up the house first before we invite the guests over. I think this year is yet another year of that investment spending. They talked about that and made that clear. You got to have to look out to 2017. At some point later this year the stock might look more interesting in terms of, you know, when we get closer to 2017 and where the benefits play in, thats where the stock could start to work. He said when asked what he would grade himself on or what he would grade the company on for the investments in his store, in wages, and he just said point blank Comp Store Sales. That seems to be priority for the company but its only up about half of a percent. Still positive. Do you see the fruits of this labor paying off already . I do think the encouraging factor sue have a plus, positive traffic. Plus point 7 . So, yes, while half a percent is a little bit below the street was around 1 , disappointing. I get that. I know they took down sales and even for the First Quarter they are talking about half of a percent and people are talking maybe stronger than that. They are still getting people into the store. The traffic is there. I think the customer still needs to shop at walmart. As the future unfolds, internationally, strong dollar, what goes on in mexico, walmart, if it minds its ps and qs like mcdonalds if it cleans up its stores and does everything that made it a Great Institution to start with it can come back. It doesnt need to reinvent anything . With all the internet competition and amazon it doesnt need to respond . I think thats what walmart is trying to do is reinvent itself and become a bit of a younger, hipper company. Is mcmillan the guy to do it . I think he is. I think he gets it. Hes one of the youngest ceos they had a while. He understands this consumer. I think he gets this whole digital revolution thats gone on in retail and the combination of that with physical presence of stores. And how to leverage those stores. And they are working aggressively on it. Right before you came on the headline we read is what amazon is doing. This idea they are using car Service Almost uberlike taking control of the supply chain. A month ago we reported they were buying airplanes. Thats a asset heavy way to do that but do you need to do that to serve the customer . But amazon does recognize to get to the customer quicker and faster they need to do all these other things and what they recognize they dont have is stores. The ability to do that. I think thats where walmart could have an opportunity it does have the opportunity to be closer to the consumer and distribute quicker. Now will that play out . Well have to see. I think it can. But they have as good a shot as physical retailer to compete and do battle. Im not suggesting amazon is going away. One thing we learned he said this whole idea of getting your product within an hour, shipping within an hour doesnt make sense. That not Everybody Needs everything in two hours or even one day. Right. Is that right . I think thats fair. Thats fair. Think about like a lot of retailers right now on average, around 30 , 40 of all online orders are picked up at the store. People still want to involve the store in some way. I think that thats where walmart can have a real impact. 3 yield or no . 3 . 43rd year in a row theres bean Dividend Increase which is no small feat. Im asking, i think Doug Mcmillan, all he has to do is add an i. I suggested that to him. You know the one other person who told him he should do that . No. Donald trump. Maybe mclovin might be better. Mclovin. Thats what i think. I love that name. Anyway, joe, thank you. Coming up apple resisting a federal court order to open the phone of terrorist Syed Rizwan Farook along with his wife who killed 14 people in San Bernardino, california pits Law Enforcement against tech company and privacy reits. Andrew once again on the wrong side of this issue. Well speak with nico sell and bob davis former nico ceo saying apple should open the phone for the sake of the greater good. God bless. Squawk box will be right back. If they could ever catch you. Weyoung company around but if we want to keep the soda pop flowing we need fresh ideas got it. We slow, we die. What about cashing out . No im trying to build something here. How about using fedex ground for shipping . I dont need some kid telling me how to run a business ive been doing this for 4 long months. Fedex ground can help us save money and deliver fast to our customers. Not bad, kid. You remind me of a younger me. Aiden the dog is eating your retainer again. Lets take a short 5minute recess. Fedex ground is faster to more locations than ups ground. Wont keep you up at night. N know you have insights from professional investment strategists to help set your mind at ease. Know that planning for retirement suidance of a pnc investments financial advisor, know you can get help staying on track for the future youve always wanted. Think of it as a seven seat for an action packed thriller. Welcome back to squawk box. The debate is on. Tim cook finding support from a pair of rivals in the fight over fbi encryption. Googles ceo making similar warnings he has of the dangerous precedent that they say could be set if apple is forced to create software to help authorities crack a terrorist suspects iphone. Joining us to debate this, the issue of privacy versus Law Enforcement, nico sell cofounder and cochairman of wicker opinion shes turned down government requests to retrieve information from wicker data and i should say shes wearing her sun gases again not because shes so cool but thats because she doesnt want anybody to see her eyeballs on tv. Bob davis is here. He thinks apple in this case should open the phone. Nico, im going to you first. I dont get this. I think if you could save somebodys life if i told you right now that your child was kidnapped and the information is on the phone, the fact that tim cook doesnt want to open the phone seems crazy to me. I disagree. I think that tim cook is National Security hero here. And because really what the fbi is asking him to do is to create a weapon that would be absolutely devastating to my children, the United States and the world. And it set as precedent for Everything Else to come. I think its a really important fight and proud to see hes standing his crowd. Economic jobs one other question on this. If a crime was committed in a hotel room and the door is locked and theres a subpoena to the hotel to open up the door, do you think that the hotel should fight back . So its really different here because this is a talking about essentially code and technology. And this is something that once you create is replicated and cant be secure. So you cant really use a physical example like that. I dont think it applies at all. Technology companies are just immune from the law . I dont think were immune from the law at all. I think were upholding the law better than anyone else here really and i think George Washington would be proud. Bob . So im the privacy advocate at the deepest level. This is a little inconsistent. I dont like the idea of nsa snooping. The Fourth Amendment protects against unreasonable search and seizure. That says i need a court order. With an appropriate court order i can walk into a house down the street who is selling drugs or is a pedophile and i can search that house, i can tear it upside down, take his computer and all his digital files and take them away and learn something about him. We made a sacrifice in this country many years ago that trades off personal security with freedoms. So take a look at the airport scanner to come here today. Somebody is taking a picture of myself walk through that scanner and i say thats okay information safety. The idea to me of personal safety versus Digital Security which is this trade off were making, a big tradeoff, but its not an easy one. Theres a balance here somewhere. It doesnt say that the government needs to have access to the tools unilateral. I dont buy that for one second. I do buy that apple has access to a tool and under the appropriate court order and the appropriate oversight that apple can unlock that individual phone. It doesnt mean i have to unlock every phone out there and give government access and give government the path to do that. Theres technology that says i can unlock the phone with appropriate guidance. The question is whether its praept or possible to unlock one even if have that code not be accessible by other parties. So, yeah. I think its absolutely youre asking apple to create a unicorn. Its not a tool that they have. We dont live in a dictatorship. What the government is asking them to do is to write new tool and new code. Thats like compelling speech. This is an act of a totalitarian regime. Privacy and security are not on opposite sides. This is not a balancing act. Privacy and Security Work together and tim cook and i and all the technologists here are interested in National Security and keeping us safe. Thats what were fighting for every day. Dont pit them against each other. Nico, is there any situation in which you think theres a reason that apple or any company should open up the phone. If i told you i could save not one person but 100,000 people would you open up the phone . Nope. Because, again, its the most devastating weapon that would ever be created and it would ruin our economy and ruin the world. Why is that . Why are you so convinced that that is what would happen . Because essentially what youre asking them to do is to create code and code, this would be an exploit or cyber weapon that could be used on one phone but just cant be used on one phone it can be used again and again and again and compromises our entire security as a country and a world. It doesnt. Apple has the ability to unlock one phone. The apple engineers have the know how and capability. They can do a phone. They dont thoof have to releaso anyone. They know how to encrypt that phone. I dont believe they should give government access to that in any way, shape or form. They can unlock that phone and the idea of tradeoff is an unnecessary one and a line in the sand for form over function. Very important principle being argued here but it cross as line with what reality should be. I dont think youll find any other anyone in the security community. I spent all day yesterday at stamford with cryptographers and human rights activists and nobody in the rooms think its possible to create. So i dont know how you think apple says its doable. Youre saying its not doable. Its not doable for just one phone. If you create this code then this code can be used over and over again and this set as precedent. Lets play this out for a second. Say the u. S. Wins this one case and it happens. Then what happens again with the next case and the precedent. And then china comes to us and russia comes to us. Or they dont even come to us because they are not that polite. They just steal the code on the back end. And so this is something you dont want out there. It has a much bigger effect than one phone. I agree. The phone is the only bastion of that totally locked security. Our computers have universal access. We can hack thanks to people like you we can prevent that. We can hack data centers. Theres a lot of industry that we rely on to create great encryption and fire walls to stop that. Same with the phone. Back to the phone. Im not suggesting theres a product in mass market. Im suggesting theres a product that apple has that we dont have. The fact that apple owns and possesses that, if apple engineers leak that into the marketplace theres a risk others could follow suit. We had a guest on in the last hour that suggested that if they were to build it within 48 thundershowers chinese would have it already. Meaning they would be able to hack april told get at it. Apple is a great company. I respect the heck out of them. I think they are standing on principle. It cross as line. To your question earlier if 100,000 lives at stake, personally i can speak for others, im twoilg sacrifiwilli sacrifices personal privacy for safety. Were sitting here in new york today. Not suggesting that could happen but if theres a 9 11 about to take place in some way i have access to that because i suspect somebody has something on that phone you know what . Ill give up some freedom, some privacy for that. Ill take that tradeoff. To me this is what the fundamental circumstances. Personal safety more important than digital privacy. I understand there are strong emotions on both sides of that but i opt for personal safety. Economic could, well give the last word. I think thats really misleading. To pit privacy against security. Im a privacy advocate fighting for security every day. We need 2001 have the other. Okay. Well leave it there. A debate thats not ending. Economic could can visit me in davos. Nico, i spent yesterday at stamford too but i didnt see you. That was weird. I took a tour of the entire place. Pretty r impressiimpressive. We talked about this issue all day. So, you were indoors. Beautiful just to walk around. Yeah. Oh, yeah. Rub it in. Definitely should have worn them outside. It was 80 degrees. Have you been . I could never go because i can stay in the classroom. No work would get done. They do get a lot of work done. Nobody was screwing around. I between colorado. I was looking around, looking for somebody to be playing frisbee. Everybodying looked like they were going somewhere to study. Nico and bob, thank you. Good debate. Nico, by the way, gave me a bunch of little stickers that you can put on. Heres the thing, right now everything that you do, all the stuff all this valuable stuff, google has it for free. Thats your stuff. And they got it. Amazon has it. They all have it. You need privacy. Edward snowden. We have a quick programming note. Apples cofounder Steve Wozniak will be on power lunch at 2 00 p. M. As were all becoming arm chair cryptologyists. Be nice to hear from him. Spring is a month away and Companies Making bug repellents are thinking about mosquitos and bug repellent. Lets take a quick look at futures at this hour. Were off the highs of the morning, dow would open up 38 points. Squawk box will be right back. Every Auto Insurance policy has a number. But not every Insurance Company understands the life behind it. Those who have served our nation have earned the very best service in return. Usaa. We know what it means to serve. Get an Auto Insurance quote and see why 92 of our members plan to stay for life. I provide for my family. I will use my education to help my community. I will inspire our next generation of leaders. I am a college student, but i am only 1 . Only 1 of College Students are american indian. Donate now, and help our numbers grow. No, youre not yogonna watch it tch it we cant let you download on the goooooo youll just have to miss it yeah, youll just have to miss it we cant let you download. Uh, no thanks. I have x1 from xfinity so. Dont fall for directv. Xfinity lets you download your shows from anywhere. I used to like that song. More than 5,000 miles from the epinext of the zika outbreak we go to wisconsin to a plant. Reporter we are in wisconsin and this plant is 1. 7 million square feet about three quarters of a mile long. It makes household products including glade and scrubbing bubbles but its also one of three plants making bug spray. Mosquitos are behind a suspected link to babies born with mac microcephaly. What i can tell you is in brazil and argentina were running 900 of normal. So a huge increase there. Were just beginning to see an increase in demand here in the United States, increase of about 40 from what would be normal at this time of year. Reporter two months ago the family owned firm began increasing production of off and other bug repellents here and in plants in brazil and argentina. Production increases are planned for a plan in mexico as well. Daily meetings keep staff apprised and working with suppliers and governments to assure the surge in demand can be met. In argentina, sc johnson agreed to the governments request to cut price by 25 . Bug sprays and insecticide accounts for 25 of the firms 10 billion in annual sales. With the World Health Organization calling zika a Public Health emergency the company right now is clearly focused on meeting demand and making sure its supply chain is filled rather than on those increased sales and profits. Back to you. Running at 900 of normal. Incredible stuff. Reporter 900 in those areas. Coming up former mississippi Governor Haley barbour on the race for the white house. And iran puts production on hold. Well have the latest on crudes move. Squawk box coming right back. Earnings alert. New this morning walmart earnings beat the street but the stock is under pressure right now. Well tell use. A warning from dalio. Why bridgewater expects lower returns and higher risk. Race for the white house. New National Poll suggests a potentially seismic shake up in the republican race. The final hour of squawk box begins right now. Go big or go home go big or go home announcer live from the most powerful city in the world, new york. This is squawk box. Welcome back to box right here on cnbc first in business worldwide. Im Andrew Ross Sorkin along with joe kernen and Kayla Tausche sitting in for becky. Youre looking at the futures. Much higher. Dow about 51 point up. Nasdaq looks like it will open up 20 points higher and s p 500 looking to open a little over five points hire. Wti crude now up 31. 53. We should tell you breaking Economic News on the docket this hour. Well get weekly jobless claims coming up at 8 30 eastern time. First time unemployment filing expected to rise slightly. Here are the other stories. Walmart earnings beating the street by three cents on the bottom line but revenues fell short hit by the strong dollar. Retailer now says it expects sales growth for this fiscal year, remember this is ending the Third Quarter fiscal year to be relatively flat compared to the previous samuel alito of 3 to 4 growth on a Constant Currency basis. Well talk to a retail analyst in 15 minutes how this will play out. Shares premarket are down 5 . Ray dalio echoing what he first told us in davos last month. The bridgewater founder argues Global Trends and Central Bank Policy fueled an environment in which investors should expect quote lower than normal returns with greater than normal risk. Dalio suggesting Monetary Policy or what he calls mp3 will have to be directed at spenders than savers and the only thing to help the economy is money dropped out of a helicopter. And bullard suggests volatility. Hes been an advocate of higher Interest Rates. He said he wouldnt be comfortable with further hikes until the downward inflation trend reverses. Notable comments but well take with it a grain of salt. Few stocks on the move this morning. Ingram microbeing acquired by unit of chinas privately held company. As joe mentioned thats a company with a remarkable 44 billion in revenue but marginal margins. They sell a lot of, you know, stuff that is like commodity stuff. Like hundred of thousands of different thing. This was from years ago. Also in a video posting better than expected, graphic chips using game consoles in pcs. Shares of newmont falling. To politics, and president ial candidates slugging it out with super tuesday, i cant believe it, is it really march 1st. That a tuesday . Yes. The 29th. Super tuesday. 29st a monday. I kid andrew on that every day. How many months have 29 days. New this morning the latest nbc wall street journal poll puts ted cruz narrowly ahead of donald trump at the national level. February doesnt always have 29 days. No. Every four years. Haley barbour knows this former governor of mississippi joins us. Governor, its good to see you. Weve had your son on before. I see how people can get mixed up. I guess your son said something about donald trump and then donald trump got mad at you because he thought you said it. Explain what happened there. Actually, my nephew, joe. Your nephew. Im sorry. Thats okay. At any rate my nephew, his name is henry, said something about trump and trump attacked me for it. Thats fine. You know, this is politics. I have, in the last couple of elections, 08 and 12 have not endorsed anybody for president and i havent this time. As a former National Party chairman i think i should be cautious about that. And besides in this race there are a bunch of people that i served with as governor. But it is a race ive been doing this since 1968. I dropped out of college to work in the president ial campaign. Never seen anything like this. No. And it is, its ive heard it referred to as, howard schultz, starbucks ceo called it a circus, and i think watching the traction that Bernie Sanders is getting and traction that antiestablishment candidates like donald trump and ted cruz are having, theres a reason for it. I guess we shouldnt be that shocked and im not sure we should disparage so quickly candidates that may or may not be what the Mainstream Media thinks are typical candidates because obviously they have the support of a large part of the population and youre immediately dismissing these people as idiots if they are supporting somebody Huffington Post wouldnt cover donald trump as a real candidate. Put him in the entertainment section. Good have a News Organization deciding who is a real candidate or not. The News Organization has bean large part of this. Ive worked for ronald reagan. Ronald reagan could never have been on the sunday shows on the telephone like donald trump has been. To me thats just been amazing the way the news media has followed donald trump around like little puppies. The fact of the matter is at the beginning, the American People are mad. And they got good reason to be upset. They are mad at washington. They think that the government is not doing a good job. Its not just republicans. Republicans and democrats both. About 64 of americans, if you look at the polls think our country is going in the wrong direction. They got good reason. Very weak economy. The weakest recovery since world war ii. About 48. 5 adult americans have a full time job. The National Association of counties issued a report about three weeks ago that said 93 of counties in america and thats 3,000 counties, 93 havent entered into a full recovery. Can you imagine that . So no wonder a lot of people think things are bad. For them, the recovery is really not fully begun. The recession is not over. Thats use see a lot of polls, twothirds of americans say were still in a recession. Their incomes are down from when obama became president. And look at the world. Look at isis. Look at russia and ukraine and crimea and georgia. People got good reason to be mad and they are mad and it manifests with Bernie Sanders, with donald trump. The poll shows trump with a big decline but i would note that the poll has about a 5 margin of error. Its not a real big sample. But well see. Watching the debate last saturday night, you could see how a debate like that might move numbers around quite a bit. Because it was startling, really. It was. You wonder how, you know, when you eat your own you wonder if theres anything left. We saw a little bit with romney and Newt Gingrich gave the democrats all the talking points about private equity, all of them they need to, to impugn his Business Career by the time the general election came, the narrative already was that he was just a master of job cuts and Everything Else and you wonder how much of it sticks. If you were a betting man, what would you think the election finally looks like . After we go through the south. You are a good gauge of southern sentiment, where do you think when we get through the southern swing, hillary will do well, obviously. Who do you think its going to be on the republican side in your gut . Well, i think the real question is are we going to know by the mid. March . Middle of march. Typically on the republican side we have a frontrunner and usually one person who is challenging the frontrunner. The thing thats made this incredibly hard to judge is the field has been so large. Trump has been normally getting about likes hes got about a third of the vote and that gives him big leads normally or him and cruz, because the rest of the vote is split up with so many people. Thats got to narrow down pretty quickly. And then when theres three or maybe four candidates, its a whole different deal. You dont have six or seven candidates splitting up the rest of the vote. But the real issue will be when we get to the second half of march when normally we would see whose going to be the winner, is it still going to be two or three candidate, are we going to cleveland with the convention the nomination undecided when we get to the convention . Are we going to have a contested convention . I doubt it. But theres a better chance of this than any time in my lifetime. I was at the convention in 76, part of what was going on when we did go without knowing whether reagan or ford actually was going to win. Neither one of them had the delegates when we first got there. But that was a two man race. This, if we could possibly go to cleveland with more than two candidates still having a chance. So a guess is really guessing and im not that stupid. Governor, what kind of a person would you want the president to nominate to replace scalia. Is there somebody i would like him to nominate somebody like scalia but the chance of that happening is the same as me losing 50 pounds. Exactly. Its going to be is there anybody you think that the republicans, recontrolled senate would approve is this well i think the point is this. Justice scalia served on the Supreme Court for 30 years. This president is going to be president for less than a year. And the next president should appoint the person thats going take scalias place and maybe serve on the Supreme Court for 30 years. Not a lame duck president who son lie going to be president for less than a year. Thats real point. And if the democrats prevail i dont know why they seem seem so worried about to let hillary then you put whoever you want. This lame duck argument i dont understand. Ultimately i think theres a constitutional requirement that the president 25 of the president s term doesnt matter. Gop led senate. Congress doesnt have to confirm, but the idea of not confirming for political reasons because of the election thats not who we are. The great alito. You said it. Thats not who he. Maybe who he was. Haley barbour, thank you. We appreciate it. Ask the governor about the apple the we didnt ask him about that. When we come back wall street reacting to Quarterly Results from walmarts Fourth Quarter. Why shares are under pressure by 4 . Later fine dining at 10,000 feet. How this this celebrity chef plans to revolutionize deltas dining. Youre watching cnbc, first in business worldwide. Ata you need in one place and lets you visualize that information for any options series. Okay, cool. Hang on a second. You can even see the anticipated range of a stock expecting earnings. Impressive. Whats up, tim. Td ameritrade. [bassist] two late nights in blew an amp. But good nights. Sure,musics why we do this,but its still our business. We spend days booking gigs, then weve gotta put in the miles to get there. But its not without its perks. Like seeing our album sales go through the roof enough to finally start paying megs little brother i mean,our new tour managerwith real,actual money. We run on quickbooks. Thats how we own it. Advisor and team who understand where you come from. We didnt really have anything, you know. But, we made do. Vo know you can craft an Investment Plan as strong as your values. Al, how you doing. Hey, mr. Hamilton. Vo know that together you can establish a meaningful legacy. With the guidance and support of your dedicated pnc Wealth Management team. These are the hands that plow the data, dig up clues, create opportunity, and weave messages that lead to sales. These are the hands of pitney bowes, the craftsmen of commerce. These are the hands, the hands that drive commerce, that build business across borders. These are the hands of pitney bowes, the craftsmen of commerce. Welcome back to squawk box on cnbc. Some stocks to watch. Ibm upgraded to overweight from equal weight at morgan stanley. Price target increased to 140 from 135. Barrick gold lowering its production. Marriott earnings topping estimates by a penny. Revenue was essentially in line. Hotel chain did report improvements in occupancy and room rates. Stock down 2. 5 . Dont miss Arne Sorenson on squawk a squawk alley this morning. Joining us now is retail analyst at deutsch bank. You happy or unhappy . Honestly i think its par for the course. I know that the stock is down this morning given a lot of expectations and hope that walmart sales would have improved more than the. 6 of a percent given the low gas price and overall employment. Walmart has been a market share loser now for a number of years. And, you know, i think this is a very different backdrop than we had in 2008 when there was actual trade down and the economy was decelerating. . Whats your target on the stock . 62. I think the stock overshot a little bit just because of the volatility in marketplace. Walmart was a defensive holding. We think a lot of people felt that it was a safer name to own. But frankly we do not have a story here. The story about the customer or is the story about the economy . What is the story . Is it a currency story . I think that it certainly has a little bit of all of those pieces to it, but our focus really is the fundamentals. Is walmart accelerating top line . We went from a scenario where six months ago they outline a three year scenario in expectations of 3 to 4 sales growth and here we are in february and were already having that what do you think they need to do . I think that these guys need to really focus once again on price. I think that they need to become a more convenient retailer. We were disappointed they close ad lot of their Smaller Stores. That was spoifting. As they outlined in their release, thab neighborhood markets, Smaller Stores coughed up 7 . The consumer is telling walmart they do not enjoy shopping in a big box experience. They dont want to walk 150,000, 200,0 200,000squarefoot stores. They want to shop online. Walmart should have focused on small stores and dotcom. Should be sending to the e commerce side. Ceo on the Conference Call this morning said outside the u. S. There are some specific e commerce challenges that will be harder to tackle and im wonder if you think 2 billion or so they are spending on e commerce for 200 billion company is going to make a dent there. You know, Online Business contributed probably three basis points or so to the overall comp. Its helping. They are doing over 10 billion in sales in the u. S. Online. Certainly they have something to show for all of their investments they are making. But without question globally, they are having severe challenges in places like the uk, brazil and even mexico. International was below expectation. U. S. Below expectations. Sam Agencies Club was below skbektation. Only line item that beat expectations was member income. Correct. Thats the sams club line where theyve been doing a lot of offers and specials in order to gain membership income. When its all said and done this stock will work. When the top line is stable. And we can have a true defensive staple type of name where you can count on, you know, modest earnings growth. They are not giving you much to hope for in fiscal 17 which is what they are starting now. I agree. Doug mcmillan, is he your guy . Doug mcmillan is trying to reshape and redefine what walmart stands for and i give him a lot of credit for that. Hes made tough choices in terms of changing who is running sounds like you dont like his choices. I think the store decision was one that it personally did not agree with. But regarding some of the Management Changes that theyve announced, the commitment to their workers and the labor, and customer service, that certainly is something that past management hasnt done. Come underground up break being Commission News on the jobs front. First amazon taking a page out of ubers book today. Details on new delivery plans when we come right back. Announcer youre watching squawk box on cnbc. First in business worldwide. Welcome back to box. Futures right now, lets take a look. Up now 49. They were up 80 or so then 30 now 50. Oil prices have been solid for most of the session and at this point they are still up about 2. 6 at 31. 5 for wti, up 80 cents. Making headlines amazon is increasingly relying on an uberlike Network Drivers to deliver packages. Program is called amazon flex. Derives use an app to sign up for shifts to pick up packages april nearby warehouses and deliver the home customers. The program is operational in 14 cities. It was designed to handle same day deliveries now the company is using flex to deliver regular amazon orders. Its another example of amazon taking crow of its supply chain from thirdparty delivery service. The stock is up. But they are talking about planes, trains everything. Thats the interesting issue. They are approaching with it this sort of asset heavy approach to logistics. Alibaba does the exact opposite. Sorry, joe. But people have explained to me exact same single biggest. Single biggest i think you just need biggest. But with exact same, lets say its a penny. Pennies are the same. Funny part is the second i say it. I catch myself. Going forward at the end of the day maybe you can making an effort to get people to speak better. Alibaba on the on the other hand, if you will, doesnt own anything of their logistics and they dont want to. They want to be the opposite. We should also say a couple of mother headlines. Food in the first class cabin may be getting better. I wouldnt know this weekend, i was in the back of the plane. Delta airlines teaming up with danny myers Union Square Hospitality to gain an edge. Delta will serve new menus on flights from jfk. The aim is to make airplane food just as good as restaurants. To do that they have to path lot of salt find because apparently at different altitudes your taste buds are different. The food has to keep for hours at a time. I find it hard to believe you that have quality. You were in the back of the plane because there were babies in the front . Exactly. Sitting with my little guys. We hatched home alone and home alone 2 on our ipads. Fun. Those are fun movies. Coming up breaking Economic Data closely watched jobless claims numbers are minutes away. Back in a moment. Ive been called a control freak. I like to think of myself as more of a control. Enthusiast. Mmm, a perfect 177degrees. And thats why this road warrior rents from national. I can bypass the counter and go straight to my car. And i dont have to talk to any humans, unless i want to. And i dont. And national lets me choose any car in the aisle. Control. Its so, whats the word . Sexy. Go national. Go like a pro. All across the state the economy is growing,arts today. With creative new business incentives, the lowest taxes in decades, and university partnerships, attracting the talent and companies of tomorrow. Like in utica, where a new kind of workforce is being trained. And in albany, the nanotechnology capital of the world. Let us help grow your companys tomorrow, today at business. Ny. Gov its intelligent drive is msystems. Ng. Paradigmshifting. Its technologyfilled cabin. Jawdropping. Its performance. Breathtaking. Its selfparking. And selfbraking. Showstopping. The allnew glc. Mercedesbenz resets the bar for the luxury suv. Starting at 38,950. Welcome back to squawk box. We have some breaking news. Jobless claims, well they moved down 7,000 to 262,000 from 269,000. If we look at continuing claims slightly different timeline we see it move from 2. 24 to 2. 27 million and in terms of the philly fed number that is supposed to be out although i dont see that. It is out. Lets see what we see. Actual. Nope. Dont see it on any of the services yet. Well look at the markets real quickly and give them another second to brew. 182 on tens. Remember that a week ago, week ago we had an interday low of 152 and settlement of 166. Those are sessions you want to Pay Attention to. Here we go. Down 2. 8 on the february of philly fed. How does 2. 8 compare down . We lots of bigger numbers. Last month down 3. 5 prior to that down 10. 2. Theres a string. As a matter of fact i guess the appropriate thing to point out is one, two, three, four, five this is the sixth negative philly fed in a row and that does give us some meat on the bone with regard to this number. Joe, back to you. Watch out, people are watching to see how many hundred dollar bills youre carrying. Yeah. Ive seen them. Ive seen one. Ive seen one. Tried to figure that one out. Hey, joe, what do we do when banks dont have cash if they get rid of yeah, it is. Amazing. They worry about our hundred dollar bills but cant fix tax policy, regulation, its unbelievable to me on the more important things that they seem to find time doing in d. C. And all the strategies they do. I guess savings out of vogue. Is this the precursor of negative Interest Rates. Im dying to hear your thoughts. I was challenging a guest earlier who said the idea that the fed could even be thinking about ever raising rates again is absolutely insane given where inflation is and given where global growth. Then i say you must how many years ago when we talk you must top of the go negative. No i dont want to go negative. Quarter point is just right. Its the goldilocks not too hot not too cold. 4. 9 unemployment and a quarter point. We need to take a pause, rick, from the tightening cycle. The tightening cycle weve been in. Joe, how many times do we say when you recalibrate going back isnt like hitting the switch. Theyve changed our financial culture and it is going to be ever so difficult to bring it back. This is the box we were afraid we could never get out of. Its a bed we made for ourselves that were sleeping in right now and savers too big to fail. Now they are going to have every ounce of all of the bartering nature of our live. Apple case is another interesting one. If we dont have money where will our money be . In places that have toll keepers like our phones and our computers, but, of course, were not going to be able to hold the keys to that either. So should they let us . I think we should have the privacy. You want tim cook to do the encryption or not . Absolutely not you know what . You know better than i do, joe. When this couple was coming over all the deals on the board and the immigration, checking, facebook, all the simple things that maybe you do first. No, no. They want to start at the hardest things. You know what . Why do we gauge our society for the criminal element. Isnt it time to gauge our society for people doing things right whether its financially, people that did nothing wrong. Do you remember when you were young you used to always say its better to let 99 guilty people go than to put one innocent person in jail. Lets think about that when you think about apple. If you give up freedom, this is a great quote. Give up freedom for a little bit of security then you have neither freedom or security. Like them getting in phones are going thats the straw man argument that thats the lynch pin, to solving everything. Straw man arguments are going to take us into a society where we have zero rights. Funny. Strange bed fellows on all these arguments. Andrew, we thought we would be on the same side and we couldnt be more opposed again. Always happens. Were siamese twins. Lets bring in david freeman. Talk about the data. Is that okay . Please do. Its your interview. David, philly fed negative for the six month jobless claims. A little bit better. Does this change your thesis at all . Not really. Weve been seeing weakness in manufacturing for some time. Thats part of the effects of the Energy Sector collapsing, thats been part of the weakness in china. And, you know, we are expecting to see the first half of this year be more sluggish growth path than what weve been expecting before. But i think the important thing here is that we dont think this is the beginning of a rolling over of the economy we think its temporarily head winds which are significant, but which eventually will wane. Energy sector weakness will move out of this in the second half of the year. The cloud doesnt lift until the second half. Youre saying were in this for several more months . I think the uncertainty remains for some time because you need some proof points, you need to see the data start to pick up. But we do think were in the process of bottoming out and theres some moderately positive outlook for stocks at this point. Were essentially a bit on the sidelines in terms of our tactical guidance calling for a neutral stand on equities. Basically it means telling investors to rebalance back to their long term benchmarks. Its not a bearish view, its one where were looking for opportunities, trying to focus on . If you look at this past week we have four days of gain, the bottom is in or no . Hard to say. Well be in a bit of a range for the next few months but i think i would be looking for weakness as an opportunity to really look at areas that have long term Growth Potential. I think its a good time when you have this volatility to be focusing on long term growth stories because it helps investors move beyond the short term noise of thing. How long term is long term. Five years, ten years . You want to focus on the long term Growth Potential to be able to capture attractive valuation starting points from today. So things were looking at, for instance, include a number of areas in tech, around digital data growth, robotics. We think there are opportunities in health care around cancer therapeutics. These things are growing and looking at these areas now will rewarding if you take one or two year view. Do you buy april signal do you think they suffered some reputational damage through this fight . I dont comment on individual stocks. Were positively inclined on the tech sector in general. As far as apple i can tell you that. We appreciate your time anyway. The code Media Conference is underway in california where media moguls are talking about how digital distribution is changing their business. Reporter good morning to you andrew. Thats right with questions about the future of espn weighing on disney stock john skipper stressed that espn has seen a recent uptick in subscriber numbers and he says despite all head winds hes still confident in the future of the tv bundle. He also says that espn is in talks with the likes of amazon and apple to include espn in new bundles. I think for the foreseeable future that the imminent p predominance of content that people consume will be in a Pay Television bundle. We have authenticated television. All of our content is available on any device. The idea of going direct try to the consumer with that contend is not the way for to us drive the most value right now. Reporter but skipper says they are watching the cord cutting trend and working on some options outside the bundle. We are certainly interested in pursuing opportunities over the top and have already. We saw the world cup with cricket last year over the top. We generated hundred thousands of subscriptions at 1 haunt piece. We know how to do it. Well continue to look for other opportunities for content that doesnt currently exist to put over the top. Reporter skipper and i talked quite a bit about the dramatic rise in sports costs. He says hes not concerned. He believes espns investment in sports rights will pay off and hes glad that they have nailed down the rights to so many valuable assets. Back over to you, andrew. Thank you for that. Actually your turn. Thank you. Coming up oil shock. Well talk about the factors behind this mornings jump in crude prices. As we head to break check out the futures. Partly because oil is positive were seeing the dow would open by 48 points. S p would open by 4. Youre watching squawk box on cnbc, first in business worldwide. I just wish one of those people could have been mrs. Johnson. [dog bark] trust me, were dealing with a higher intelligence here. The allnew audi q7 is here. I know thats like my grandma the cooked, my mom cooked. I cook. Chocolate bread pudding, and souffles, and. Banana bread. I make a lot of banana bread because the baby likes bananas. So, we always have bananas in the house. laughs whatever home means to you, well help you find it. Zillow. Oh hey. Ive been using you hey mforever. Youre grimy. Grimy . Naw, thats personality who you talking to. . Hey, the wife jump in, lets all shave change that filthy razor change blades . Wooooh, rich folk alert fooled me with your linoleum tile. Stop hanging out with a dirtbag razor cause new ones are so expensive. Dollar shave club. Amazing razors delivered for a few bucks. Shave with a fresh blade anytime. Try dollar shave club. Com sometimes they just drop in. Always obvious. Cme group can help you navigate risks and capture opportunities. We enable you to reach Global Markets and drive forward with broader possibilities. Cme group how the world advances. Welcome back to squawk box. Crude prices rise after iran voices its support to put production on hold. Latest ap inventory report pumping up prices. Data showing a drop of more than 3 Million Barrels when analysts were expect ad build of nearly 4 million. The director of Global Energy and Natural Resources at the eurasia group. You dont buy it . You dont think were really going to freeze . No. Not yet. I think what we see going on here is exercising optionality. I think the most important player besides iran is saudi arabia. I think it just doesnt make a heck of a lot of scene right now for the sawed eyes to even agree to a formal freeze. Look they entered this period of low oil prices with a very, very pronounced agenda. That agenda was to chase out nonopec production, ie u. S. Producers. And in addition to that they have always been concerned how intense the volume metric ramp up in iran would be. At this point in the game i dont see them committing to anything until they see bankruptcies in the states and until they see the intensity of the iranian ramp up. So i think that the two milestones in terms of timing are bank redeterminations in the states which happen in earnest in april and month by month well see how the iranians progress with exports. Oil moves up and markets move up in the past couple of days. Do you think misplaced . No. Its not. We all know that lower Commodity Prices are stimulative. Normally, yes. Normally yes. The challenge that i think something abnormal has been happening . I think central bankers and justifiably so are concerned with prices as low as they are, there could be some contagen regard to petro dollar states. If you look at the numbers theres a lot of debt out there and these economies matter. Roush oussia out with a repo 30, dolla 32. 40 by 2020. That puts them in a tough place. Thats their worse case scenario. I think its almost a bit managing earnings expectations for a company. If youre a country youre issuing debt. You want to project to the Capital Markets that youre able to with stand a more realistic price deck. I think theres a little bit of that gamesmanship going on International Country level. Our forecast is calling for oil to average 24 in 2016 and a gradual move up to the low 50s in 2017. We really dont see enough u. S. Production coming off at this point in time. And we think that yearonyear production will only be down 300,000 barrels. We need more than that. The typing point is this redetermination period. Over the weekend i saw something that talked about iran, whats iran doing per day now, 3. 3 or something per day and iraq is doing more than its ever done before and everybody wants market share and theres no room offshore for any more oil at all. Thats a statement to say at collars 40 or above in 2016. Theres some people who think its worth 15 a barrel. How do you know its not 15 a barrel not 40. Just a projecting forward based upon the forward price curve and monitoring regs and cap x expectations. Did the price forward curve ever say 30. Whats good is the price forward curve. Its taking what we know today and adding costs or whatever, storage costs and insurance. Isnt it . It is. People get fixated on the front of the curve which is 80 volatility. The reality is all the planning that is done for production is at least 12 to 24 months out. Thats how Companies Look at the market. You bet your life we dont go below 20. I dont think were going below 20. You bet your life . Yeah. Moving higher is just headlines and talks. Discussions. Potential willingness possibly. Whats the likelihood they gettogether and decide not to freeze it and actually keep production exactly the same not increase it . Look, thats the prevalent question in the market today. Look, i think whats going on here is you have a positive trend of expectations that something is going to happen. At the end of the day, if youre a commodity specific investor or trader, theres not a lot of love shorting oil at 30 bucks. No one wants to be short oil at 30 bucks. Quite frankly people are worried about missing a rally. No one thinks its going to 70. But you dont want to miss the rally from 30 to 40. Thats 33 cents. And the commodities market you would be rich if you were right about 40. Thats right. You dont think thats the prevailing no brainer trade among Hedge Fund Guys is the 40 price. He wants that trade. So youre looking for things that will validate this cognitive bias. If youre a trader and sitting at your desk and seeing this trend of discussions, it add as little bit of fuel to the fire. So the one thing i will say is isnt it in their interest to say that they are discussing this. It is in their interest to say they are discussing this. Jaw boning will, obviously, have an effect on the market. But i think the reality is this. They are setting a predicate for a higher probability of success in june. Right now you have a lot of positioning. If youre sitting down at a table, starting to understand what production assumptions really are. Youre starting to understand who is on board and who is not. What sort of reticence one country has for another. Youre increasing the chances of a cut if you need it come june. I do not believe the saudis really want a cut. But if things get progressively worse, theyve started to build a foundation for that. Almost march. Thats a bold pulp fiction, a bold statement. Average 40 for 2016. Well see. Thanks for coming in. Thank you very much. When we return, jim cramer will join us from the New York Stock Exchange. Programming note, becky will sit down with Warren Buffett for three hours on leap day, that is monday, february 29th, following the release of berkshire, the annual report. We need your help. Send us your questions on twitter, facebook, instagram, use the hashtag askwarren. I would like to ask warren, you know what i mean, andrew . Yeah, all right, buffett. Any way, your question might make it on the show. Thank you for calling. Well be with you shortly. Yeah right. Xerox Predictive Analytics help companies provide a better and faster customer experience. Hello mr. Kent. Can i rebook your flight . Im here Customer Care can work better. With xerox. Wait im here mr. Kent . gasp shark diving xerox personalized employee portals help Companies Make benefits simple and accessible. From anywhere. Hula dancing . Cliff jumping Human Resources can work better. With xerox. Lets get down to the New York Stock Exchange. Jim cramer, cramer joins us now. Weve had andrews all excited about this apple thing. Jim, he wants to know where everybody comes down on it. He is surprised, i think tim is right. Who do you think is right . I think jack bauer was needed here. You needed someone with all due respect, mr. President , i can get the information and we can do it behind, and no one needs to know it. Thats what is kind of surprising. Look, in truth, i understand exactly what he has to do. He pledged confidentiality. What choice does he have. He has to let the justice department, because he cant just give it up. But i was surprised, actually a talked to a lot of lawyers yesterday. A lot of lawyers were surprised they didnt just go to the companies and say guys, listen, we want to get this one person. Not make a giant statement. The giant statement is one that obviously tim cook cant go with it. Jim, and i have a huge amount of respect for tim cook. I believe he genuinely on policy grounds believes this. Some people have made these arguments that he is doing it for business reasons, backed into the corpser because he said certain things publicly. I havent talked to tim about it personally, but my gamble is that he actually, this is genuinely what he thinks is right. I dont fault him for thinking that. Im not sure i agree with him. Ive sort of gone a little back and forth how to deal with it. Speaking yesterday to john ledger, and you know, john doesnt hold anything back. He is one of these guys, he shoots from 17 different hips. I dont know how he does it. He said i dont know what i would do either. This is a situation where weve fledged confidentiality, but we hate the bad guys. It has to be adjudicated because youve made a contract to not give out any information, good or bad guys, and how do you make a decision who is a bad guy. How do you make a decision to go against your philosophy. The answer is the court has to order it. Tim cook recognizes a contract. The contract he has made, whether its actual, defac tow is were not going to give up your stuff. Were going to give up everybodys stuff because weve rethought this. The government, is there any precedent for the government ordering a company to do something. Clear and present danger. To write code. Clear and present danger. They have made companies. Theyve made Companies Give it up. Off camera, andrew wants to expand guantanamo now. No, no. I never thought from th from you. I never thought i would hear this from you. Water boarding. Im not suggesting any of that. Im suggesting im really disappointed. I use the same example. If there a krienl in the hotel room everybody is holding that. Thats ridiculous. Clear and present danger. You have to open the door. Its not the same. Coming back in just a moment. We have a lot more squawk in a bit. Thats not who we are. And spur of the moment things. Sheraton. Can a a subconscious. Mind . A knack for predicting the future. Reflexes faster than the speed of thought. Can a business have a spirit . Can a business have a soul . Can a business be. Alive . All across the state the economy is growing,arts today. With creative new business incentives, and the lowest taxes in decades, attracting the talent and companies of tomorrow. Like in the hudson valley, with world class biotech. And on long island, where great universities are creating next generation technologies. Let us help grow your companys tomorrow, today at business. Ny. Gov couple of stocks to watch. Results from Discovery Communications falling a little short of estimates, discovery was impacted by the effects of a stronger dollar on its international operations. Jackinthebox lower than expected profit, fewer customers dined at its restaurant. 2016 Earnings Guidance was also disappointing. Oh, my god. That hurts. I thought when they changed the name, it used to be food maker, fm was the old symbol. It was all jackinthebox. I love jackinthebox. Once. I was in the land of in and out burgers. I love those two. Ill see you in the morning. Thank you for being here. Make sure you join us tomorrow, squawk on the street close is next. Good thursday morning, welcome. Were at the New York Stock Exchange coming off of three Straight Days of 1 gains, something that does not happen ven. Well talk with jim about what comes next. A pretty decent morning, asia as well, chinas cpi, just in line. Hanging into 18