Transcripts For CNBC Squawk Box 20161014

And spain and france. Strong gains across europe. And look at crude, which is set for weekly gains, up by 1. 25 on the week. Showing just about that gain today. We got surprising inventory builds yesterday. Traders seem to be taking in stride. The u. S. Treasury department issuing final rules to crack down on those tax inversions. Thats when a company is acquired by a smaller foreign business in a low tax country to avoid paying the higher u. S. Corporate tax rate. The new rules crack down on earnings stripping when the u. S. Subsidiary avoids taxes on domestic operations by sending them overseas as tax deductible payments. Got that . Sara eisen does. This is clearly becoming a signature issue for the treasury secretary, for this administration. And what he issued yesterday were new rules to crack down on tax avoiding companies. This earnings stripping strategy, its a common practice by inverted companies, they use the u. S. Subsidiary to issue loans from the Foreign Company that are tax deductible and avoids paying the u. S. 35 Corporate Tax rate. I sat down with jack lew, his main message is we listened to the opposition, the Business Community, were watering them down a bit but still going hard after tax avoidance. I think theres a lot of frustration into the United States and around the world in tax systems that just dont seem fair. Weve been saying it for a long time. Weve taken action. In taking this action today weve shown were taking tough action to stop the egregious behavior but also listening and responding to reasonable concerns. Well be back with more of the interview. We talked about why he cant go after just Corporate Taxes which is the real problem. And many other issues. Okay. Sara, stick with us or come back in a bit. We do have breaking news now concerning senator Elizabeth Warren and the s. E. C. Eamon javers has that story. Reporter good morning. Senator Elizabeth Warren just released a tough letter to president obama calling for the removal of s. E. C. Chair Mary Jo White. Senator warren saying shes frustrated with whites agenda and upsay tet with the failure pass a spending disclosure rule which would say what the companies are doing with their money politically. She writes this brazen conduct is merely the most recent and prominent example of chair white undermining your administrations priorities and ignoring the s. E. C. s core mission of investor protection. What she wants in the letter is for the president to exercise unilateral authority to remove Mary Jo White as s. E. C. Chair and elevate another commissioner to commissioner in order to move forward on this agenda. Its extremely unlikely that president obama would make such a dramatic move just before a Major National election. Also extremely unlikely he would do it before the end of his term. You can look at this as sort of working the refs here by Elizabeth Warren ahead of a possible Clinton Administration. The idea that there are only three commissioners of the s. E. C. Now there are supposed to be five. There are two vacancies. Mary jo whites term is up in 2019. You can imagine Elizabeth Warren wants somebody else on the s. E. C. , maybe two other people on the s. E. C. Who align with her views about how this ought to be handled. And she would like the Clinton Administration to start paying attention to that if they do get into office. This is a slot across the bow potentially from Elizabeth Warren signaling what kind of role she intends to play if Hillary Clinton gets elected in november. I dont understand these publicity stunts. Either shes in with Hillary Clinton and she can call her on the phone and say whoever is the next person, do this. Why does she do it this way . Theres no chance in the world were talking about get your watch out. Three months. I dont understand this. I get what she wants to do. Who is she playing to . Two things. Theres no base to play to in this particular instance, right . Theres always a base to play to you have to right. Theres two reasons to do this. One, yes, Elizabeth Warren, assuming Hillary Clinton is elected, Elizabeth Warren could call president clinton and ask her to do this or that. But you also have to rally the base. Sending this letter in public shows the base that you are doing what you told them you were going to do, so that benefits Elizabeth Warren. Its not just the two women here involved, its all of their staffs, the vaes infrastructure of the government. And shes riding high after the wells fargo thing. We had john stumpf resigning after Elizabeth Warren dressed him down in the senate. Thats viewed among the base of democrats as credit to Elizabeth Warren. Shes using that momentum. She called on Mary Jo White and the s. E. C. To investigate mr. Str stumpf and wells fargo. We had her on yesterday, she was circumspect on whether she would or would not look at whats going on there. She played a lawyerly role there. Clearly ms. Warren wants the okay to go aggressively after wells fargo. She does not think the s. E. C. Has been aggressive enough across the board, particularly on this political spending issue. Thats one that will resonate with democratic voters right now who are frustrated with all the secret money out there in politics. They would like to force corporations to have to say what theyre doing with their money in terms of politics. They think thats only fair. Thats an issue that Elizabeth Warren thinks she has traction on. Thats why she is sending this letter. You said her term ends technically there 2019. I imagine if donald trump were to win, she would go much sooner than that you think in a Clinton Administration she goes much sooner than that, too . Basically when the president turns over, it turns over. Elizabeth warren saying what we would like is those two vacancies on the s. E. C. Right now, theres only three out of the five commissioners now saying that we would like two commissioners that side with us on these issues to be nominated. Possibly one of those to be elevated to chair you can see a couple scenarios. One where Mary Jo White says im retiring and moving on. One where she says i will stick out my term but the new president clinton elevates somebody else to be s. E. C. Chair who would be much tougher on wall street. Democrats are skeptical that Hillary Clinton is tough enough on wall street. They think she gave those secret speeches to wall street, shes in cahoots with them on some level. This is a shot from the left reminding the incoming potentially clinton people what they need to do to appease the left. Eamon javers, thanks. A busy day for Economic Data. The september Producer Price index and retail sales around 8 30 eastern time. At 10 00, be on the lookout for business inventories and Consumer Sentiment data. We will hear from lots of Federal Reserve officials. Two key ones, boston fed president , Eric Rosengren and janet yellen. Both will be at the boston feds 60th annual economic conference. Rosengren a voting fomc member. Before the speech, Steve Liesman interviews him on 7 30 a. M. Eastern. Rosengren dissented at the december fed meeting in favor of a hike. It will be interesting to hear from him, hear him elaborate. Fed chair janet yellen speaks at 1 30 eastern. Her comments will be live on cnbc. Its the official start of earnings season. We expect results from Jpmorgan Chase in about a half hours time, 6 45 eastern. Then at 8 00, citigroup and wells fargo are expected to hit the tape. Keep watching squak for full coverage of those results and the Market Reaction. A bit of other corporate news, verizon indicating it may try to renegotiate its 4. 8 billion proposed merger with yahoo in light of the data breach. It was reasonable to believe that the breach is a material event that would allow the terms of the takeover to be reviewed, thats according to their couns counsel. Two weeks ago we asked the same question, and he demured, tap danced a bit. A little buyers remorse . I dont know about buyers remorse, just maybe a lower price. Just a lower price. Want a lower price. If you can get a lower price. Why pay 5 when you can pay 3. 5 or 4. A buck saved is a buck made. Opportunistic for them. As we mentioned earlier, treasury releasing final rules in its crackdown on Corporate Tax inversions. Sara eisen spoke with treasury secretary jack lew and joins us again at the table. You guys had a wideranging conversation. The inversion rules are what the Business Community had been expecting for a few months now. And theyve gotten used to it jack lew and this administration cracking down on corporate inversions. The rules announced back in april led to the collapse of what would have been a record pharmaceutical deal between allergan and pfizer, now the Treasury Department is piling on restricting one taxsaving tactic known as earnings stripping. The upshot is the Treasury Department listened for months to businesses and law americas, their concerns about this rule and now its softening its stance. I sat down with jack lew last night to discuss what this new rule means. Liste listen. Theres an important final rule that were putting out today. It takes the earnings strippings rules part of the announcement we made in the third round of administrative actions on inversions, and it makes them final. You know, it is an important statement that the tax avoidance used to support inversions will be stopped. And, you know, tax avoidance thats egregious will be stopped. How much corporate backlash was there to the original rules . The original rule was put out in a form that was quite broad. We knew there would be concerns about unintended consequences. Happily a lot of concerns came with proposed solutions. We had hundreds of comments, but mostly concentrated on six issues. You could look at those six issues in depth and come up with solutions between some exemptions and some fine tuning to take care of the unintended consequences. I think the purpose of this rule is to really demonstrate that while we need tax reform legislation to really fix our tax code and stop the push that is driving inversions and to make it by law impossible to invert or strip earnings, we need to also in the meantime use the administrative tools we have to stop the erosion of our tax base, Corporate Tax base. I know you encountered concerns from republican lawmakers, members of the house weighs and Means Committee warned that the rules would have a significant adverse impact on the American Economy discouraging investment and hurting american jobs and workers, and urged you not to pass this prematurely. I think when people study what the final rule does, theyll see we addressed a lot of the concerns raised about normal Business Practices that are not designed around tax planning strategies, which weve tried to address. To the extent that, you know, companies are using the tax code to avoid paying taxes unfairly, earnings stripping is used to that. Donald trump proposed cutting the Corporate Income tax to 15 10 for those repatriating overseas profits. That would discourage inversions. Our proposal for Business Tax Reform would reduce the business tax rate, Corporate Tax rate to 28 . We did that by eliminating loopholes and deductions. I dont think we ought to be losing revenue when we lower the business tax rate. If there are more loopholes and deductions that could be eliminated you could perhaps bring the rate down more. It becomes a tradeoff as to when are you taking away provisions that do real good. The challenge on International Earnings is to get to a political space where he can can work on a bipartisan basis to legislate. I talked to a lot of republicans and democrats who want to do something about it. And if we could have a men mum tax on foreign earnings and decide what that rate should be in a negotiation, it would be a good thing. It would stop this problem, stop things like the action in europe reaching into our tax base to address something. It cant get done. Not with this congress and this administration. I think it can get done. I think that European Commissions action put a bright light on the fact that if congress doesnt act, others will start doing things that we think are unfair. We agree with the europeans that its wrong for companies to be able to avoid taxes almost completely. What we dont agree with is the u. S. Tax base should be, you know, used by another taxing authority, another government authority. I think the political situation in the new year is going to be an opportunity to deal with this. One thing we said in Business Tax Reform is you should do two things at once, tax the incomes overseas but you cant use that to cut tax rates, its a onetime tax, use the money to pay for infrastructure. A lot of people want to invest in infrastructure, and a lot of people think we should do something about the fact we have income going untaxed. I hope theres a moment when that conversation with come together at the beginning of the next year. Some optimism there about Corporate Tax reform, an important issue for business. Expect business and gop lawmakers to push back on these new rules, even though the treasury is saying we listened and we actually limited the scope of them and watered them down a bit as to not impact businesses that are not trying to avoid taxes, which was the original complaint about this rule. So, if we were to look at any deals currently pending on deck, do any of them get pushed off as a function of this . Not clear that they do. Certainly nothing like we saw in april with pfizer and allergan getting pushed off. That is the point, to discourage deals. I asked whether that breakup of that pharma deal was one of his biggest achievements, he said were not trying to break up deals but trying to claim whats ours, u. S. Profits. I thought that was an important point he made, that the European Commission going after apple 14 billion is a symbol if we dont get Corporate Tax reform done, other foreign governments will come after u. S. Profits. Lobbyists criticized this as a rush review, to try to put some rules on paper before the administration ends so they cant be accused of having fallen asleep at the switch on this issue. Do you think it was rushed . Did you ask him how thorough he felt the job was . They first put out the rules in april. They took the last several months to meet with the house weighs and Means Committee, other business groups, organization for International Investment was involved and critical of the rules. They say they took their time. Why theyre putting it out three weeks before an election, they have to. The treasury and the administration is using their own authority to interpret the tax code to do things where congress is not. Its a huge frustration of treasury secretary lew. Was he pointing to the possibility of some move in the new year, new administration, which ever, to bring back foreignheld profits and use and tax them at some rate . Yes. And the other part of the bargain would be that money raised from those taxes would be used on infrastructure . Thats his model. That feels like the kernel of a deal to me. It does. Except for president obama did with the help of treasury secretary lew, put such an idea in his last budget and it went nowhere because of the environment in congress right now. Paul ryan was quick to come out and call it envy economics. Its a question of whether they can do a deal that doesnt include other tax deals, its always so complicated. Yes, theres bipartisan support to build infrastructure now with the republican president ial nominee, donald trump, calling for infrastructure building and to bring that money back from overseas. You would think there could be some deal. Even s p weighed in on the issue and said tie the portions of overseas cash that 2. 5 trill yoctrillion overseas, tie it to where 15 would have to go into infrastructure building. You asked him about wells fargo. Wells fargo, Deutsche Bank, the british pound. We covered a lot. It will all come out later in squawk box. Sara eisen, thanks. See you in a bit. When we return, markets in focus. U. S. Equity futures, the dow would open up about 73 points higher about now. S p looking to open up about 8poi8 points higher and the nasdaq about 15 points. Back in a moment. Welcome back to squawk box. Markets will need a bounce to turn positive for the week. If not, thats two down weeks in a row. Investors will watch key Economic Data including september retail sales at k 30 plus 8 30, plus lots of earnings news. Joining us is Stephen Friedman from ubs wealth management. And james sweeney, chief economist of fixed income at Credit Suisse. I was thinking about you guys last night only because i was reading your reports. Thats why i was thinking about you last night. Likely story. Didnt come out right. Both of you seem to think that the world is Getting Better, which makes me nervous. Mmhmm. You Credit Suisse has a report that says the tide gently turns. You think things are getting a lot better. Ubs thinks markets will be better than 7 next year. When both of you agree that could be a problem. And when the swiss are positive, that bothers us. Explain yourself. Was a big shock to the world with oil prices down, Commodity Prices down, led to weak trade, weak industrial production, weak investment, especially in commodity related stuff around the world and basically since february thats been normalizing. Trade has started to grow. We avoided a big blowup in china. In the tradable sector globally youre picking back up. Thats important. But hold on let me ask you this. This is on brexit. You seem to think the heightened Political Uncertainty related to the uk referendum is now over. All that is finished. No, we dont think that. What do you think . On brexit . I think its something which creates some uncertainty around the eurozone prospect, we have not direct effects so far. Its something which from an investment perspective leads us to be less optimistic on the outlook for the markets. The reason im nervous, both of you were negative three months ago. Um sort of . At the very least youre more positive now. What are you seeing thats changed . From an investment perspective, weve been overweight equities all year. We have not turned positive right now. Weve been expecting to see the turn in earnings, this is happening now. Coming from a market perspective thats not evaluations driving things. Those are slightly above average but in neutral range. Were coming out of an earnings recession. The same factors that james mentions, energy, recession ending from an earnings perspective, strength of the dollar, which was a big problem. All that is abating, you can see the underlying growth. So steven thinks the break outis caubreakout is caused by earnings, you think its because of growth . I think its the commodity global shock. We passed out of it now. Right now Global Growth has picked up a bit. Thats good news. Is 2017 going to be better than globally . Yes. How much better . Industrial production globally growing at 3 . Global gdp perhaps above 3 . That may be high. Before you go play politics. Does it matter who the president is . Seven key predictions if Hillary Clinton wins, one main prediction if donald trump is president. Yes. It matters. The market does what on wednesday in november . Depending on who wins . Right now the polls suggest clinton will win. I think its very much priced in. If clinton wins, not much. If trump wins, i think the Immediate Reaction is negative. Then you start potentially seeing fiscal stimulus with the tax cuts and that might please the market in the short run. I think the risk scenario of a Trump Victory is negative for the market, but a democratic sweep is also negative for the markets. The markets are expecting a status quo election, if you dont get that, you have risks. Thank you. Coming up, Martin Shkreli back in court today charged with looting his former Biotech Company to pay back defrauded investors. Meg terrell tells us what to expect next. And a look at yesterdays s p 500 winners and losers. Wonderful. Bravo. I love that. Great. Pretty good. Wasnt bad. Parts of it wasnt good. Could have been better. I didnt like it. It was terrible. Bad. Awful. Boo have to do that from my phone. We use tons of data. I really dont have to worry about it cause everything is unlimited. I need data and i need it no itshe end of data limits for your business. Get unlimited 4g lte data as low as 30 bucks per line. Switch your business to tbile work. Whats Critical Thinking like . A basketball costs 14. Whats team spirit worth . cheers whats it worth to talk to your mom whats the value of a walk in the woods . The value of capital is to create, not just wealth, but things that matter. Morgan stanley and its got the spring and bounce of a traditional mattress. You sink into it, but you can still move around. And now that i have a tempurflex, i can finally get a good nights sle. Buy the most highly recommended bed in america for as low as 25 per month and a 90 night free trial. Welcome back to squawk box. U. S. Equity futures, we are in the green, dow scheduled to open up by 91 points, s p 500 up by 10 points. Look at crude, were looking at 51. 03. Keeps nudging up. Up. Up. Time for the executive edge. A new survey suggests 25 of americans completely distrust the Economic Data reported by the federal government. That includes statistics like the Unemployment Rate, job growth and consumer spending. The latest data finds this is most prevalent among donald trump supporters. 48 of trump backers distrust the data. 5 of Hillary Clinton supporters do. Martin shkreli back in court today charged with looting his former biotech firm to pay back defrauded investors. Meg tirrel has more. Martin shkreli was arrested back in 2015. At his most recent court appearance, a court date was set for june 26, 2017. This is a status update. He has been charged with miss appropriating 11 mill wion fro his old company, retrophin, charges of wire fraud, conspiracy to commit wire fraud and securities fraud, saying he lied about how much money his funds had, lied about performance and looted, calling it a ponzi scheme, looting retrophin to pay back investors. This has nothing to do with this old drug price he raised by 5,000 . I was looking to see what happened with the price of that drug. They said they would lower it after this blew up. I talked with the cleveland clinic, they say though the Company Started giving big discounts to hospitals, 50 , 60 , 50 off of 5,000 price increase is not solving the problem. Maybe off a 2,000 price increase. Today we will hear from ben brafman, a lot of what the prosecution will be seeking, arguments over evidence and inside baseball going on. This has been tried in a court of Public Opinion before it gets to court. Im wondering if you think now with the mylan situation, if some of the pressure on shkreli is off. I dont think so. I dont think hes taking it off himself either. He takes every opportunity to comment on drug pricing. Even at one point coming out and saying mylan are the good guys, theyre a generic drug company, theyre not making a lot of money. Not taking himself out of the public eye. The smirk. He needs to work on the smirk. He needs to lose the smirk. Some have suggested that. I think Congress Might have suggested that. I there he is with the smirk. Did you see him in the crazy video with Hillary Clinton . Ondemand. Was that him with Hillary Clinton . Remember that . Standing outside of that building downtown near chelseas place . After she had that Little Health scare. Yes. She went to her daughters house. Home. She walked out. He was standing on the street or something, there was video. So strange. He periscoped the whole thing. Wow. He periscopes a lot. Yeah. Always in the right or wrong places. Its very, very were. Thank you. Lets tell you, cnbcs half time report with scott wapner hitting the fiveyear mark next week. They have an incredibility lineup. It is filled with some ochf the biggest names in investor, david depositioner, jeffrey gun domingugunlach, pelted, dinan, lasry. A huge lineup, you dont want to miss it. Jpmorgan expected to report earnings in the next few minutes. Well bring you those numbers and a reaction from wall street. Plus crude oil in focus after a positive week. Albeit somewhat of a topsyturvy one. Well talk about the output cut planned by major producers. As we go to break, a quick check of whats happening over in europe. This car is traveling over 200 miles per hour. To win, every millisecond tters. Both on the track and thousands of miles away. With the help of at t, Red Bull Racing can share critical information about every inch of the car from virtually anywhere. Brakes areetting warm. Confmed, daniel you need to cool your brakes. Understood, brake bias back 2 clicks. Giving them the agility to have speed precision. Because no one knows like at t. U. S. Equity futures at this hour looking in the green. Were getting some reports the Earnings Report from jpmorgan just crossing. Dow looks like it will open up 95 points. S p 500 up about 10 points, the nasdaq up about 20 points. Jpmorgan has beat on earnings it looks like. 1. 58, beating the estimate of 1. 39. Were looking at the rest of it two revenue numbers were looking at. One is a reported revenue, one is a net revenue. Both of them are very solid beats above the just shy of 24 billion in revenue. That was expected. Core loans up 15 year over year. Up 2 from last quarter. Mobile customers up 17 . Credit card sales up 10 . So a lot of strong Growth Numbers for the company that generally kicks off earnings season for this sector. Well hear from citigroup and wells fargo in a bit. Well break down some of these jpmorgan numbers as we get them. Floridas identifying a new zika zone in a miami neighborhood meaning mosquitos have transmitted the virus to people. This a month after the state declared a nearby area safe after mosquito pressure. This will put more pressure on the u. S. To do something, which they have done very little. I thought we were over zika, or at least things were settling down. Oil futures rallying despite rising inventories in the u. S. Investors cheered the weeks drop in fuel stockpiles. John kilduf is a cnbc cribber. Its not typical to see u. S. Stockpiles rise and oil goes up, is that because total output globally fell because theres an expectation of a Production Cut . The market right now is rewarding the rhetoric around these various meetings that have occurred now among opec members. The sidelines of various energy conferences. In particular theres an important rule in the bond market, dont fight the fed. I think the market is saying dont fight saudi arabia, theyre out there doing road shows to give a massive bond sale to get money into their coffers. They got hurt, much more than they anticipated, from the low oil price. Theyre reacting aggressively to right the ship, in terms of their economy and get money on the table. What will have to happen for this price to stay up, theyll have to shoulder the majority of the talked about Production Cut. This Million Barrels or so. Im not sure they will be able to do it. Im not sure theyll want to do it. Theyre fighting a slew of new production coming to the market from russia, libya coming back. The iraqis are having no part of a Production Cut or freeze. Also in istanbul, officials said opec needs to be manageable, reasonable, not go too far to crimp production. Even while it may be willing to make a change t seems like the appetite to do something that would have largescale effect doesnt seem to be there. Exactly right. Its a dangerous game theyre playing, a game of chicken with the u. S. Shale industry. We saw in the market a ton of hedging in the past couple of weeks as the forward curve got over 50 a barrel. That should ensure a u. S. Rise in Oil Production. Theres a lot of moving pieces here. A lot of other headwinds in terms of the rise of the u. S. Dollar which keeps a lid on prices. Again, lots of talk. A real rush to reward the opec rhetoric in saudi arabias moves, but i dont see it lasting. Spin the tape forward. Lets say they glee in noevembe to Production Cuts or caps. Will they actually follow through and do those and meet those caps . History says the balance of opec wont. But the saudis will . May likely will. They have the most to gain. They, too, theres a great story in the times about the problems with their economy. And the wrenching period theyll have to go through here to fix it. The air conditioned barns for the cows will have to go, for example. But the iranians, having just gone through the sanctions period, they almost girted themselves for this, and are faring much better under this low Oil Price Environment than any of us would have expected. With Oil Production going up, theyre selling more oil. Albeit at a lesser price but bringing in money to cover needs. How much faith do you put in russias involvement . Not at all. They are all talking this good game. The russians are ramping up production massively. Theyre probably up upwards of 500,000, 600,000 barrels a day, still more to come. The question is where are they . When they say theyre going to freeze, what month are they picking . January, when production was about 500,000 russia will freeze in january. I mean previous january 2015. Will they pick november today . Where theyre at a much higher level. Whats the trajectory of the price over the next 6, 10 months . I think were near the top end of the market. We could potentially get up towards 60 a barrel for a brief time here. When we get into the winter period. But i think once we turn the corner on the peak winter demand, and we see the Petroleum Balance sheet globally has not righted itself, its going to be tube city again. Meaning . Down towards the 40s and potentially lower than that. If youre a producer or a Company Lending to a client in this space, youre not out of the woods . Oh, not by a long shot. Though we certainly had a a solid number of bankruptcies already. But theres more to come. And the other problem youll have is the reset of the asset values of the various fields, not just in the u. S. But around the world. The socalled borro borrowing b. So that hasnt happened en masse yet . Not yet, and they gave a pass the last goaround, and the upcoming one is where you will see damage done to the borrowing bases and lions even though some of these junk rated companies can still borrow easily . Again, once they get benchmarked to the new forward curve, the numbers wont add up. Theyll get pressure from regulators and others to own up to this problem hovering out there. Well see how it plays out. Appreciate it. Thank you. Jpmorgan out with its first of the three big banks reporting earnings. The bank posting profit of 1. 58 per share, above estimates of 1. 39. Revenues beating forecasts, records net income in commercial banking is the highlights of the quarter. Jamie dimon saying both loans and deposits grew by double digits in the quarter. Jamie said last year to us, dont worry about whether youre beating the estimates or not. Thats not the business. You want to keep beating every quarter where you were before. Worth noting in this instance, profit did slide. Compared with where they were a year ago. It is what it is. I put it out there. You look at the estimates, you go how good are the estimates if theyre that far off . 20 cents a share off. Thats the question, is it the company that beat the estimates or or the estimators. Who were off. This goes back to the whisper number and what people were saying before. They did have a provision credit provision of 1. 3 bill yo billion. Markets revenue which is a number we watch closely for these companies, markets revenue up 33 . Fixed income particulmarkets re 48 . Two quarters ago we were saying they couldnt make money. Now theyre back. These were businesses they would have to exit because it wasnt making them money. On the revenue side, strong growth. Much more on the jpmorgan report still to come. Well dig through the numbers with an analyst at the top of the hour. We heard from jpmorgan, next up, citigroup and wells fargo. Theyre due to report at 8 00 a. M. Eastern. 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New report in the wall street journal this morning says donald trump plans to claim that mexican billionaire carlos slim is part of a cabal drudging up that trump touched women inappropriately. The claim centers around lincth support for clintons, the Trump Campaign said. Said slim had never sought to influence the newspapers cover. Some stocks to watch today, intosys cutting its full year revenue guidance. Thats putting pressure on the stock. Amazons Cloud Computing unit partnering with vmware. The ability to run operations on vm data centers and on amazons webbased services. Amazon unchanged vmw up slightly. Honeywell trying to make a case for a resurgent 2017. Remember shares of honeywell dropped last week when wall street had a negative reaction to guidance. Jim cramer talked last night on mad money. He said he was quote, shocked, about last weeks reaction suggesting he was wrong to focus on restructuring and not a longer term outlook in that last announcement. It worked for hon key well at least for today. Heres what cody had to say. Yes, i wish i included a lot more of this stuff. I gave credit for people understanding what our longterm profile was. I was wrong. This is one where i could have done a significantly better job of communicating the story. And we tried to do it in the context of 2017 is going to be good. But it seemed to get totally lost. Cody says honeywell still predicts 8 to 9 growth in earnings. Its not often you get such a strong mea culpa from an executive but hes clearly trying to shore up confidence. And zumiez upgraded. Taking stocks to get a feel for teen trend. This is why i dont know. This is not our demographic, andrew. Yes. Kayla, help us. Im not a teenager. I might like to be, but im not. I think it is zumiez. Did you see that they just did a rebrand of Abercrombie Fitch . Did they . By the way it looks like the old look pretty much without naked people. That was an easy fix to make. I would like them to tone down the cologne smell. When you walk into the store. Or when you walk by the store. And finally hp inc. Expects to cut up to 4,000 jobs over the next three years. Also hiked its Quarterly Dividend by 7 and said its upping its Share Buyback program by 3 billion. Im starting to think i do like the smell, its just a little too much. Chris rock inking a record payday from netflix. The streaming service is paying rock 40 million for two two standup specials. Thats it. The first one will tape in 2017. The deal is a loss for hbo which aired rocks previous five standup specials through 2008. I wish i understood the economics of those. Do we know how much hbo paid him . I dont know. Netflix boasts about being cash negative. But two pay 40 million for two maybe this jump starts into comedy. Theyre already in with chelsea handler. So they could build up the stable. Zblmplt in the meantime when we return, jpmorgan out with Quarterly Results. Were going to have analysis. And then dont miss this mornings interview with boston fed president Eric Rosengren. Back in a moment. Were drowning in information. Where, in all of this, is the stuff that matters . The stakes are so high, your finances, your future. How do you solve this . You dont. You partner with a firm that advises governments and the fortune 500, and, can deliver insight person to person, on what matters to you. Morgan stanley. Financials in focus. Jpmorgan results are out. Were going to break down the numbers, talk about the state of the big banks, and get Quarterly Results from citi and wells fargo. A squawk box exclusive. Eric rosengren joins us for a special interview for fr when rates will rise to the state of the economy. And we hit the road with n winnebago. Honey, honey. Tree. Its all right. Find out whats driving sales from the companys ceo. The second hour of squawk box begins right now. Live from the beating heart of business, new york city, this is squawk box. Welcome back to squawk box right here on cnbc. Im Andrew Ross Sorkin along with Kayla Tausche and mathisen. Thank you for being here. Take a look at the markets. The dow up about 100 points and the nasdaq up about 20 points. Futures Getting Better after getting jpmorgan. Heres what also is making headlines this hour. Busy morning for economic numbers. Were about 90 minutes away from the release of september retail sales and Producer Prices. Retail sales expected to be up 0. 6 . Ppi seen rising 0. 2 . After the markets open, investors will get a look at the latest readings on Consumer Sentiment as well as business inventories. Sentiment expected to post just a slight increase. And a computer glitch delayed thousands of United Airlines passengers for hours late thursday. The issue was with uniteds wait reporting system. United says the problem was resolved as of about four hours ago. And jpmorgan reporting just a short time ago. Wilfred frost is with us with the numbers. Good morning. Thanks, andrew. As you guys mentioned earlier, the revenue number came in at 25. 5 billion. Eps expected at 1. 39 per share. A decent beat. Lets look at why. The big surprise was really in loan growth. The extent of loan growth. Strong q1 and q2. People thought it might slip in q3. It hasnt. It came in at 15 year on year. 2 quarter on quarter. Coming into the quarter people were concerned about commercial loans. That was less for jpmorgan. Smaller part of thart book. Either way it came in at 10 commercial loan growth. That was the surprise there. This does lead to a bigger provision 1. 3 billion, though, they say due to the volume of loans theyre making. Not lower quality loans. Either way this will be something to focus on. Where is this loan growth coming from . Is it something that concerns them . The other area of the beat was Investment Banking. It was strong Investment Banking that was expected a bit better though. Particularly came for them in fixed interest. Up 48 . And also rates they say was, quote, particularly strong. They cited anticipated Central Bank Action and the brexit fallout as reasons for that Strong Performance in rates. Worth noting that could also be good for citi who have a big skew towards rates. Well look out for that. Mr. Dimon said, quote, they remain focused on our regulatory and control agenda. Of course perhaps a little bit of a nod towards the wells fargo scandal. That will come up on all of the calls today. He did cite their fortress Balance Sheet. Shares up on that beat. Guys . Okay. Thank you, wilf. Joining us on the squawk newsline is david george Senior Research analyst at robert w. Baird. Whats your headline, sir . It was a really Strong Quarter across the board. As wilf said, they beat. And the upside was really broad based. But the big headline is just blowout Capital Markets quarter. Up 48 . Markets revenue up 33 year over year. A good quarter from jpmorgan. Whats a fair price for the stock now . Our target on the stock is 72. We review that based on our valuation work and pro forma so youre going revise that upwards . I cant really tell you. Were going to take a look at that and evaluate it later today but we continue to have an outperform and positive buys to the stock here. Tyler asked a good question the last hour when the news came out and we asked about them beating earnings by so much, is that a function of jpmorgan doing a terrific job or a function of the analyst just missing it . I think its a function of good execution on the part of jpmorgan and frankly the significant strength in Capital Markets revenue. I think the street was expecting a very strong markets quarter from jpmorgan, but they did total markets revenue of 5. 7 billion. Its probably 2 billion better than what we were forecasting. That revenue markets number as you know is significantly volatile to the more traditional banks. So the upside and volatility, this quarter was a benefit really stem from markets. Is there a knit to pick in this report as you can see . Not really on first glance. Were still taking an initial look. Obviously i think theres nothing to nitpick about this particular quarter. The sustainability, obviously, of the strength in markets is probably something thats not going to continue in q4, in q1. Would expect a positive reaction out of the stock but not to the extent of the upside in the quarter. But thats really all we can point to at this point. Thats what i was going to ask you about. Wilfred just mentioned much was on the back of the brexit vote which happened at the very end of the second quarter. Much of that activity was taking place in the Third Quarter. Do you think that was a onetime gain . For the most part, yes. Jpmorgan is executing very well. Theyre number one global Investment Banking and lead tables. Clearly the brexit despite all the fear that the market had about it, it was really a boom for those that are big in fx and fixed income given the volatility we saw in both the currency and the fixed income markets of the last three months. So clearly thats probably stronger than it should be through the cycle, but nonetheless, they did benefit nicely because of it. What is your Favorite Bank and why . We actually recently upgraded wells fargo a couple weeks ago. We think the 15 decline or so in the stock because of the well reported issues facing wells fargo has faced a great opportunity in that stock at just over ten times next years earnings. We think wells is starting to look really attractive here. Whats the one thing you want to look for at 8 00 when wells reports this morning . Really are there any other shoes to drop from an account this account opening situation . And then has it really had any kind of daytoday impacts on the operations of the company which we frankly dont expect . Primarily due to the fact that the issues impacting wells had really no material benefit to the company. I think it helped by roughly 2 million of revenue. Keep in mind wells does 90 billion a year of revenue. Fair fair fairly negligible. The Treasury Department taking steps to keep its companies in Corporate Taxes in the u. S. Spoke with jack lew about the new rules to make inversions less profitable. I think that the purpose of this rule is to really demonstrate that while we need tax reform legislation, the push that is driving inversions and to make it by law impossible to invert or strip earnings, we in the mean time need to use the administrative tools we have to stop the erosion of our tax base, our Corporate Tax base. I think theres a lot of frustration in the United States and around the world in tax systems that dont seem fair. In taking this action today, i think weve shown were taking tough action to stop the egregious behavior but were also listening and responding to reasonable concerns. More of saras exclusive interview coming up later in the program. Now for a look at the markets. Our guest host for the hour, Gabriella Santis from Jpmorgan Funds who joins us now. We have to talk about jpmorgan the bank. I know you were looking for loan growth as a sign of growth overall in the economy. 19 is the average core loan growth for the consumer bank. Do you think thats one company out performing . Or do you think that gives us a little more confidence in consumer demand and the health of the consumer Balance Sheet . Unfortunately we cant comment specifically on individual companies. But i think its something this loan growth is something were looking for in the Financial Sector as a whole. And its one of the three main reasons were feeling very positive on financials in the medium term. So in the beginning, loan growth was really all about commercial and industrial loans. That was really driving the move there. And now its become much more about consumer related loans. Whether its mortgages, whether its credit cards. And if we look at the economy, we still see a healthy consumer. Thats a big trend we expect to continue over the next few quarters and a big reason were positive on financials. Do you think the activity will switch places as soon as the consumer starts borrowing more heavily . Maybe that Means Companies will sit it out a little more or a boom in overall borrowing . I think were looking for a bit of a step down on cni loans and were expecting the consumer related part of loans to pick up the tab here from now on. And thats a positive sign for what we can expect for financials and the consumer and hence the economy as a whole. About 6 billion in profits for jpmorgan. You were personally responsible for 4 billion of those. Personally, yes. Around 4 billion. Lets talk about profits more broadly in the economy. People saying well, maybe the turn in the cycle is here. Do you agree with that and do you think that the Fourth Quarter is going to be the quarter when overall profits begin once again to rise rather than fall or just be flat . It is looking like this current Third Quarter might be another negative quarter. But to a much lesser extent than wed been seeing in the beginning of the year. Why . Well, finally were seeing the fading of a lot of the headwinds from the stronger dollar and low oil prices. As these fade, you would expect u. S. Earnings to turn positive. Now we look at 2017. Now what . Now that these headwinds have faded. Its all about growing that top line and that will depend on how strong the economy is in 2017 which we expect to continue at a 2 pace. Do you think the Third Quarter weakness has been telegraphed well enough to the market that its being priced in at this point . I think so. I think weve seen the normal decrease in expectations in the Third Quarter. Especially pertaining to the Energy Sector which was expected to contribute more before oil prices fell. So i do think so. And maybe we can even get a positive surprise in the Third Quarter. Stick around. I know were going to talk to you a lot more about fed expectations, about what we heard from the treasury. And politics. Oh, boy. Got to talk politics. Coming up when we return, politics with her and the rv industry getting a boost in the past few months thanks to lower gas prices and other factors. Were going to hit the road with the ceo of winnebago and find out whats driving the rv market. Still to come, fed for thought. Boston fed president Eric Rosengren joins us for an improve interview. Where the fed dissenter believes the rate should be. That interview is straight ahead right here on squawk box. Mobility is very important to me. Thas why i use e trade mobile. Its on all my mobile devices, so it suits my mobile lifestyle. And it keeps my investments fully mobile. Even when im on the move. Sign up at etrade. Com and get up to six hundred dollars. The rv business is revving up. Shipments of mobile homes and towables posting the best month since 1977 in august. That according to the most recent data from the recreational vehicle industry association. Joining us now is mike happy. Thats the reason for the song choice there. Hes the ceo of winnebago. Welcome. Glad to have you with us. Shares up more than 40 . That would make even a guy named sad feel happy. Mike, what is driving the growth here . Why are people doing it . Ive got to say i took a vacation with my family out to yellowstone. I was astounded at the number of rvs i saw on the road. Been a great year for the industry. Certainly the low fuel prices and low Interest Rates have helped. Consumer confidence is in good shape. Access to financing is Pretty Healthy right now for the potential rv customer. But more than anything, i think rv manufacturers are packing more and more value into rv products these days making them more attractive tools for people to use as a leisure activity. A lot more technology in them, im sure. A lot more wifi and all of the tricks you would find in a technologically advanced home are now on homes on wheels. With things that drive the Purchase Decision, we focus maybe too much on fuel price. Tell me which is more important to you. A rising fuel price . Or a rising Interest Rate on loans . Is credit really the thing that matters most . Yeah, i would say credit is probably a more important factor to acquisition of a new rv than the fuel price. We generally look at fuel price and think about usage first within the industry. And where fuel prices are today, we think theres some significant runway that would have to happen with an increase in order to affect purchases. But really financing and the access to financing is probably the biggest metric to look at. I would think that a rising fuel price might not influence the Purchase Decision but might influence your marginal propensity to use the vehicle. Thats exactly right. We do see the rise of fuel prices have some impact on usage by those consumers that already own an rv. But nonetheless, 2016 has been a great year for the industry. Almost 400,000 rvs will have been purchased in this calendar year. So the gross number of sales is up very strongly. What about the average selling price . What is it in your company if you disclose that, and is it rising as well as the volumes are rising . Well, we really break our business down at winnebago into two legacies. Around motor homes. Those are those you drive. And then towables which were just now gaining traction. These days you can get a motor home rv from anywhere from 70,000 all the way up to a half a million dollars. Whereas on the towable size, it could be 15,000 all the way up to 90,000 or 100,000. Really we have a product for any price range customers are looking at. It depends how theyre going to use the product. Whos the average buyer . What is their demographic . What is their income . Im sure its different in terms of your different segments that the towable buyer would be a different demographic than the 300,000 or 400,000 diesel motor home buyer. Yeah. A lot of people think the average buyer in the industry is the baby boomer. When in fact the average age of an rv buyer is in their late 40s. And that age is actually coming down. Theres no doubt that the baby boomer segment is still very important to the rv industry especially on the motorized side, but we are seeing younger customers come into the rv lifestyle and use the products differently. Theyll use them for tailgating, maybe having the kids around them at a soccer tournament, or going hiking on the weekend. And the rv industry is really evolving to try to attract younger consumers to the lifestyle. How do you find those younger consumers . Where are they and how do you market to them when its a big Ticket Purchase . It might not be something that a lot of millennials consider themselves willing to buy. Yeah. At winnebago, were trying to do some largely nontraditional Marketing Activities at least for our past. Were going to, you know, biking events and were going to races around the country where people are engaged in fitness events. And were showing them what are called class b touring vans which are smaller, more compact rvs that allow them to get closer to the outdoor locations that theyre spending time in. So were finding that, you know, through social media engagement but also just being at the events that these consumers sort of gather at, that we can show them our brand but more importantly the types of products they might be interested in. Mike, thanks very much. Thanks, guys. We appreciate it. Mike happe of winnebago. Coming up next, snoop dogg cooking up a new show and you wont believe with whom. Thats next. Plus look at the markets. Dow would be set to open up 100 points. Squawk will be right back. D a. Aflac isnt Major Medical enough . No whos gonna help cover the holes in their plans . Aflac like rising copays and deductibles. Aflac or help pay the mortgage . Or child care . Aflaaac and everyday expenses . Aflac learn about one day pay at aflac. Com boat blurlbrlblrlbr sprint . Im hearing good things about the network. All the networks are great now. Were talking within a 1 difference in reliability of each other. And, sprint saves you 50 on most Current National carrier rates. Save money on your phone bill, invest it in your small business. Wouldnt you love more customers . I would definitely love some new customers. Sprint will help you add customers and cut your costs. 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I like that. I think thats really good. I assume theyre doing a special version of brownies for dessert. Yeah. Snoop is such a preppy kind of a you can have that. Snoop is a preppy guy. Back to how many musicians are getting into cooking . Quest love, coolio. When is kayla doing it . I dont think im a hip hop star. Not yet. Not yet. Just give you time. Coming up, were going to head up to boston. Steve leisman will bring us an interview with the boston fed president Eric Rosengren. As we head to break, look at u. S. Equity future suggesting higher opens. Well be right back. Its been over 100 years since the first stock index was created, as a benchmark for average. Yet a lot of people still build portfolios with strategs that just track the benchmarks. But investing isnt about achieving average. Its about achieving goals. And invesco believes doing that today requires the art and experte of highconviction investing. Translation . Why invest in average . Welcome back to squawk box this morning. Among the stories that are front and center at this hour, jpmorgan is in the books. The numbers are out but we still have two more big banks set to report quarterly profit this morning. Citigroup will be out at the top of the hour. Also playstations unit is to release phone games. The games will be made both for app apples ios system and googles android. And people flocking to pinterest. It has 150 million users. Thats a 50 increase over a year ago. The not yet Public Company was valued last year at 11 billion. Kayla, youre our tech expert. When is pinterest going public . I dont think it is. I think itll get sold before it goes public. Who would buy it . Unclear. But it is one of the only platforms where you can actually follow the user to a purchase within the platform itself. Has a lot of powerful data. Well see. But they could also go public. But i think there are a lot of companies that would rather acquire them. Lets get a check on the markets this morning. Take a look at where futures are. After jpmorgan reported, we saw a sharp increase in the futures. Right now the s p would open by nine. Dow would open by 98 points. Nasdaq would open by 18. Of course this is following positive activity weve seen overseas for hours. Europe, look where we are there. Currently best performing market is italy and spain. Both up close to 2 . Asia closed well into the green after starting the week with japan and hong kong on holiday. Hong kong up by 1 . China is basically flat although slightly positive. We did see the biggest weekly drop for the yuan since january. One of the major points of focus this week. Crude pierced 52 bucks a barrel earlier this morning. Its currently up more than 1 . Take a look at where we were on Interest Rates. Were going to hear from Eric Rosengren of the boston fed. In a few minutes time were going to talk about whether the fed is going to be perfectly set for a rate hike in december. Currently the 10year yield sitting at 1. 77 . And well look at the dollar who is strengthened through the course of the week. Were getting interesting news about perhaps the fate of brexit. Whether its a hard or soft brexit. So the pound continues to be the way the traders play and certainly we have seen some Dollar Strength against the yen and the pound on macro news this week. Finally lets look at gold as well. Gold falling slightly. 1254 per ounce. Were awaiting Eric Rosengren as i mentioned. What do you want to hear from him . What do you think the fed has left to say . One of the things i would love to ask some fed members is around this debate theyre having within in the fed about r squared. And this is a conversation about what is the neutral real Interest Rate right now. Its striking when you hear yellen speak at press conferences for her to say were not actually very accommodative right now with Interest Rates near 0 . Thats not much accommodation. Theres this debate within the fed about how accommodative are they right now. I think that makes it very tricky for us to gauge their function. Do you think the big thing in 2017 is going to be incipient inflation . We do. Why . Where do you see it . Wages . We see inflationary pressures already. Right . Theyre being masked of course by the fallen Energy Prices and the strong dollar. But we see inflationary pressures and services already. Think about health care, education, rent. Those are already going up. So if we do get a little bit more wage growth with such a tight labor market, then inflation will definitely creep up next year. Gabriella, thank you. Janet yellen speaking at the annual fed conference later today. But now lets go live to the boston fed conference where Steve Leisman joins with us a special guest. Hi, steve. Good morning. Im here with Eric Rosengren, the president of the boston Federal Reserve bank and one of three dissenters at the last Federal Reserve meeting. Thanks for being with us. Great to you in boston. You dissented. You went away from the majority of the committee. What were you thinking . My views havent changed. Whats changed is the economic conditions. So when we have an Unemployment Rate around 10 , we should be very aggressive in our monetary stimulus. When we have conditions like we have right now which is were very close to full employment, Unemployment Rate currently is at 5 , and core inflation is 1. 7 . Its relatively close to 2 . Still below our 2 target. Those conditions are very different. At this point im as concerned about overshooting on what is a sustainable Unemployment Rate. And at that point i have to be concerned about whether if we did overshoot significantly on the Unemployment Rate, whether we would end up tightening much faster and possibly shortening the recovery. When you came in and you got the vote in january, the Unemployment Rate was 4. 9 . Whats different about the current 4. 9 that makes you more nervous about a tighter job market than the 4. 9 Unemployment Rate in january . Its partly tied to our forecast. So if you look at private sector forecasts and if you look at the boston feds forecast, were forecasting an Unemployment Rate thats going to go below what we think is a sustainable Unemployment Rate. So our personal the boston fed forecast is for 4. 7 . Thats a little bit on the low side for the fomc more generally, but our own forecast is that by the end of next year, well be around 4. 5 . By the end of 2017, were likely to be around full employment. The gdp growth looks like its going to be Strong Enough in the second half of the year to continue to provide the Unemployment Rate to be drifting down. And its very consistent, actually, with what most private sector forecasts have. Some of your colleagues including the fed chair janet yellen have used this concept of room to run. And one of the things they point out is over the course of the past year the Unemployment Rate has been stagnant. 4. 5 up or down in that range. And weve been growing jobs 100,000, 200,000 a month. And 3 Million People in the last year have come into the workforce. And that has surprised them. Why arent you on board with this concept of giving the labor market room to run to see if we can bring some of the millions of people who have dropped out of the workforce back into the workforce . So its obviously good news were bringing people into the workforce. The question is how much longer thats likely to happen. Actually, one of the papers at our conference is by alan krueger. And its actually talking about how people are coming into the labor force. And it highlights that for people out of the labor force, actually, we havent had over the course of the recovery as many people the transition into being in the labor force has not been that great. And he is arguing that its quite likely that its not going to be sustainable. And so that if we continue to get growth above potential, its going to show up in an unemployment race that goes down. And there are clearly benefits to having a low Unemployment Rate. If we get to the point where it becomes unsustainable, then we have to worry about raising rates much more quickly. Youre also concerned about some financial asset prices out there. You mentioned commercial real estate. Is that one of the areas youre still concerned about . In my remarks today, im going to talk a little bit about some of the financial implications of some of the anomalies weve seen in this current recovery. As you know, our conference is about the recovery, not just about the recession. I think there have been a number of anomalies that its important to take a look at. Im going to be looking on the financial side, commercial real estate is one area that im concerned about. A 10year rate thats roughly where we think inflation is right now is quite a low rate for the 10year treasury rate. So the fact that long rates are so low and that there are some sectors of the economy that were starting to see very rapid asset growth like commercial real estate is a source of concern as people start moving to try to get higher returns. Because weve had low rates for a long period of time. So it seems like theres two Different Things going on. One is that commercial real estate prices of existing real estate. But theres not a lot of construction of commercial real estate going on. I know youve talked about the cranes in boston. But nationally when i look at the investment in structures, its not been very strong. Maybe its not a policy maybe its an issue of investment. So part of it is looking at the composition of the investment. We have had an oil slowdown as a result of the Oil Prices Going down. Theyve now more recently come up. But as a result we had a lot of investment into infrastructure tied to the oil industry. That declined when we started to see oil prices decline. At the same time if you look at apartment buildings and other kinds of construction, its been relatively robust. So what kind of fed funds rate do you need to slow down the commercial real estate industry. So my hope is that we do it slowly and gradually. The longer we wait, the more likely it is were going to have to do it more quickly. Obviously you dont set Monetary Policy to one asset class, but i think its symptomatic of what happens when things become less sustainable. Whether it shows up in inflation or asset prices, its a little hard to determine. But thats why id like to have an economy that is at a sustainable Unemployment Rate for a longer period of time. I was looking at the difference between the 10year bund and the 10year treasury. 171 basis points gap. How much further can the u. S. Move away from whats happening in europe and in japan . They have negative rates. We have positive rates that you want to make more positive. We have to do what makes sense for the u. S. Economy. One thing that will slow down the u. S. Economy is if we raise rates faster than other countries which is what youre highlighting. That the exchange is going to move when it moves it slows down our economy. Thats incorporated in the forecast. Most forecasts are growing 2 or faster. Thats what weve had most of this recovery. And weve had the Unemployment Rate declining most of this recovery. So i think that poses one of the risks which is if we get unemployment to 2 , its no longer sustainable. How much do you have in a place that causes inflationary dangers. I do think that we are seeing both wages and prices gradually rising. Thats consistent with being very close to full employment right now. So i think its a positive trend that we are seeing the wage growth and im expecting to see more wage growth. But that also highlights that were not that far from full employment. Because when youre at full employment, that would be the time that youd expect some gradual increases in wages and prices. Can you give us your trajectory where you think Interest Rates will go from here is one enough this year for the Federal Reserve . And what happens in 2017 . So im not going to be specific about the exact path of Interest Rates. The summary of Economic Projections highlights that by the end of next year were expecting to be a little bit above 1 . Then the following year a little bit below 2 . My own view is that if the Unemployment Rate falls as much as im expecting that it is possible that well have to raise rates faster than as projected by the summary of Economic Projections. Thats also faster than what the market currently has priced into financial contracts. Talking about market pricing, the probability of a fed hike in november right now is below 9 . Is the market mispriced there . I do think that we have to consider where the economy is right now. We have tended to move around the times that the chair has a press conference. 60 to 70 over the last week or two. To me that seems appropriate. I dissented in september so i think the conditions were Strong Enough in september to make a move at that time. The market seems to think theres a high probability in december. Well see how the Economic Data actually comes in. We better leave it there. Thanks for joining us. Eric rosengren at the conference about what happened to the great recovery. Some terrific papers coming up here today tyler . All right, steve. Thank you very much. Guys, im not sure that he could be any more clear. I think he did set up december. They said relatively soon is probably appropriate. Unless the world changes. Unless something happens. Which it has every time. Somethings happened. Nothing. Nothing going on. Coming up when we return, iron man reaching out to help Mark Zuckerberg. Plus a steel cage match between a diver and a great white is creating quite a buzz this morning. Were going to show you some pictures. And later earnings from citi and wells fargo out at the top of the hour. The reaction straight ahead. And a programming note. Halftime report with scott wapner hitting a big mark. Monday david tepper, carl icahn, nelson peltz, jamie dimon, also bob kraft. It all starts on monday at halftime at noon. Squawk returns in a moment. Mary buys a little lamb. One of millions of orders on this companys servers. Accessible by thousands of suppliers and employees globally. But with Cyber Threats on the rise, marys data could be under attack. With the help of at t, and security that senses and mitigates Cyber Threats, their Critical Data is safer than ever. Giving them the agility to be open secure. Because no one knows like at t. Welcome back to squawk box. Mark zuckerberg is looking for a voice to an Artificial Intelligence system to control his home. He posted on the social media site its time to give my a. I. Jarvis a voice. Who should i ask to do it . It was only a matter of time before iron man himself came to save the day. Now, Robert Downey jr. Offered to be the voice of zuckerbergs a. I. System. Hes been talking about how hes been playing with a. I. In his house and trying to develop a whole system. I suggest a different iron man. Jeremy irons. That would be good. Little spooky. John lithgow would be good. Got to be Morgan Freeman for sure. Im sorry. If you want the voice of god, thats where you go, right . Thatd be a Good Business for him. Ive got this amazon earthquaecho. I talk to alexa all the time. She understands me. Siri doesnt. But alexa gets me sometimes. She gets you . She does. And i get her. No, its true. But its limited. You only ask it the reason why alexa understands you is you are limited in what you ask her. With siri, you think that you can ask siri anything. Anything. But, you know, is alexa listening to me all the time, you think . Thats what some people worry about. That shes listening. Shes not going to hear anything in my house. Supposedly it doesnt actually send back to headquarters, if you will, what youre saying until you say the word alexa. Okay. But it is listening. No, its listening for the word alexa. The second you say that, everything is because its not processing it internally. Its basically sending whatever you say is being sent to amazon, theyre figuring out what youre saying quickly and then sending it back and giving you the answer. Like i say whats the dodgers score and she gets back to me fast. And you cant figure that out . Well, i dont talk to siri about that. Ill ask her. I got it right here. All right. Lets move on. Just when you thought it was safe to go back in the water, a shark cage check out this video. A california man in this video terrifying moment. Great white shark breaks open and enters the shark cage. Look at this. Oh, my gosh. The shark leaped out the top. The diver emerges shaken but unharmed. There is the diver. I would be moving very fast there. And that is why people are scared of doing those cage dives even though people say its steel, they cant get through it. Oh, man. And i guess the shark got away, right . The shark got away. Good for the shark. Shark one, man zero. Coming up on squawk box, we wrap things up with our guest host for the hour. Find out what jpmorgans Gabriella Santos is expecting for the rest of earnings season. And on tap, wells fargo ready to report. The numbers and Market Reaction moments away. This is my retirement. Retiring retired tires. And i never get tired of it. Are you entirely prepared to retire . Plan your never tiring retiring retired tires retirement with e trade. Im in vests and as a vested investor in vests i invest with e trade, where investors can investigate and invest in vests. Or not in vests. Sign up at etrade. Com and ge up to six hundred dollars. Lets take a look at stocks to watch look at that guy. What . They were looking at you. But your pretty face is over there. A cash flow forecast. But the computer and printer maker did say it expects to hike its dividend by 7 . Also added 3 billion to its stock buyback program. Said its going to cut up to 4,000 jobs over the next three years. Honeywell shares are gaining this morning. The ceo told our jim cramer last night he did not properly convey the outlook during a recent management presentation. The stock fell immediately following that event earlier this month. And the rail Operator Union pacific was added to the focus list at citi group. Considering improved shipment volume numbers. Lets get back to our guest host this morning. Gabriela santos. Yesterdays story in the market began with china. And the decline in exports. Are you worried about china . I think chinas going to be many the headlines for years and years to come. Its a delicate balance. This big transition. Theyre trying to engineer in their economy. So far we think that they have been successful in stabilizing the big deceleration we had seen towards the beginning of the year last year as well. But its going to be a constant balancing act. Between reforms and stabilizing the economy. I think were likely to see these episodes. Ep soetisodes like we saw la august or this january . Perhaps not as extreme as last august because we feel more comfortable with the governments ability to stabilize the economy. But we are likely to seal in extra volatility on china. I promised were going to talk politics. Oh, i thought you forgot about that. We were so close. So whats going to happen . I want to know what happens if either candidate wins. Does it matter . It does not matter at all. Even though janet yellen would lose her job if donald trump wins. I would think that would matter to you. The way weve been thinking about the election, weve been talking about it as an election of extreme but a government of moderation no matter who wins. Doesnt matter. And so its not to say it doesnt matter at all. It matters for surgeon microsectors. But when we think about the economy and returns and how our clients should be invested, we dont think we should wait for the outcome. What do you think happens to global trade . Well, thats i think its not as much about who wins the election but around the general rhetoric around trade. Right . And thats not just in the United States but its also in europe. And were kind of concerned about that. As a driver of productivity. As a driver of growth. And so we are concerned to that extent about this recent rhetoric against trade. What president s can do on trade is one thing. But what they can do with tariffs is quite another. I dont think they have quite the limitless power to move on tariffs that they might have to move on trade agreements. Gabriela, thanks. Thank you so much. Coming up when we return, citigroup and wells fargo Quarterly Results. Check out shares here. We will see if numbers can help turn things around. Squawk returns in just a moment. Go after it the same way . Chasing after short term returns. Instead if getting caught up with the crowd, the Investment Managers at pgim take a long term view, with riskmanagement rigor, active investing to seek out global opportunities. We manage over a trillion dollars this way, attracting many of the worlds leading investors. Partner with pgim. The Global Investment management businesses of prudential weve been hearing so much about how youre a digital company, so you can see our confusion. Ge is an Industrial Company that actually builds worldchanging machines. Machines that can also communicate digitally. Did you build that robot . Thats not a robot, thats my coworker earl. He builds jet engines with his human hands. What about that robot . That is a vending machine, ricky. John, give him a dollar. Remember here at ally, nothing stops us from doing right by our customers. Whos with me . Im in. Im in. Im in. Im in. One, two, wait, wait. Wait wheres tina . Doing the hand thing . Yep we are all in for our customers. Ally. Do it right. Earnings alert. Jpmorgan beating the street. Up next citigroup and wells fargo rolling out Quarterly Results. Well bring you the numbers as soon as they hit the tape. New this morning, the u. S. Treasury lays out rules to curb tax inversions. Exclusive comments from treasury secretary jack lew straight ahead. Plus breaking economic news. Key numbers on inflation and the American Consumer as the final hour of squawk box begins right now. Live from the most powerful city in the world, new york, this is squawk box. Welcome back to squawk box right here on cnbc. Im Andrew Ross Sorkin along with Kayla Tausche and tyler mathis mathisen. Were waiting on two key economic reports. Retail sales and the Producer Price index. Take a look at the futures right now. Market looks it will open up higher. A little bit in part the jpmorgan numbers were good. Were going to be getting wells and citi soon. Would open eight points higher. Check out the 10year tnote yield right now. 1. 773. Kayla i believe is looking at those numbers. Beat on the top and bottom lines. Revenues 7. 76 billion is what came in. The estimate is slightly below that. We are seeing strength in markets at citigroup as well. Strength and fixed income. It looks like most banks might be seeing strength in the quarter because of all of the activity following the brexit vote. This is the quarter where the credit card portfolio was put into place with visa. We are seeing loans up 12 for citi and that compares to the same time last year cards purchased sales up 30 . So that growth is pretty much coming right away with the addition of that portfolio. I think that was fully put into effect the third week in june. So that activity would have been fully priced in in the Third Quarter. Its amazing that one retailer can make that much difference. Not just any retailer. Its not just any retailer, but made a big difference to American Express when they lost that. Obviously making a big difference to citi. Huge. Wilfred frost is covering the wells fargo story. Thanks very much. Just the headline numbers for you first of all. We were expecting 1. 01 for eps. We got 1. 03 per share. Thats a nice little beat. In terms of revenue, very close to consensus. 22. 2 billion was consensus. We got 22. 3 billion. So this is a small beat relative to quite a significant beat we saw earlier for jpmorgan. Were looking in terms of reserve build. It says no reserve build or release consistent with the Third Quarter. Thats in terms of credit quality. Loan growth came in at 0 0. 7 . Loan growth for the sector as a whole was 1. 6 . Some people forecast it to come down closer to 1 in this quarter. Jpmorgan blew it out. Wells fargo for the quarter on quarter growth 0. 7 . So a little bit softer in terms of loan growth. On the eps number, a small beat. Thank you very much. Jpmorgan as wilf mentioned beating the street and bigtime revenue also above forecasts. Profits did, however, fall from a year ago. Jpmorgan did see commercial banking income as well as double digit gains and deposits and loans. There you see the stock up president. Other stocks we are watching this morning, Pnc Financial beating the street on the top and bottom lines as well. The bank says its capital levels are strong and that loans and deposits increased compared to last year. Its also adding 3 billion to the stock buyback program. Hp also saying it will cut 3,000 to 4,000 jobs over the next three years. Stock down close to 2 . And hersheys announcing the ceo john bibrey will retire. The board has appointed a special committee to find a new ceo. Issuing final rules to crack down on those tax inversions. Thats when a company is in a low tax company. New rules crack down as well on socalled earnings stripping when the u. S. Subsidiary avoids on domestic operations by sending them overseas as tax deductible interest payments. Sara eisen spoke to jack lew in a cnbc exclusive interview. I think that theres a lot of frustration in the United States and around the world in tax systems that just dont seem fair. And weve been saying it for a long time. Weve taken action. And taking this action today, i think weve shown that were taking tough action to stop the egregious behavior. But were also listening and responding to reasonable concerns. Much more of that exclusive interview in just a few minutes including lews thoughts on the european banking sector. One of many factors keeping investors busy. Joining us is rebecca patterson, chief investment officer. Also a cnbc contributor and friend of squawk box. Thank you. Put all those things together. Yes. So i dont know if you remember this. You took me for a ride as it happens do you remember picking me yes. I needed a taxi. I saw andrew on a street and did a good deed for the day. You did. You dropped me off. In the car i said to you over the summer i remember. And you were exactly on the mark about what was going to happen to the market in terms of not just what was going to happen but the way the analysts forecasts were going to go. It was good. I should do that more often. I want you to do it again right now. Okay. So whats going to happen . You understand to a tee. I was telling many i wife after. And by the way, i didnt listen as much as i should have. I own some mutual funds. She told me remember that . Anyway. Sorry, this is like an inside conversation. But it was amazing. Well, do it again, will you . Do it again for everybody, please. Our clients portfolios have gone mutual equities. Because we think even though theres some upside for equities from here, our view, we think its more limited now. Valuations are higher. The economic expansion is longer in the tooth. Were seeing that with payroll growth slowing, Profit Margins rolling over. So we dont want to be over on risk. That said, we do want to own equities. We think that so many people today and you see them coming on your air all the time are so negative about everything. Geopolitical risks, political dysfunction, the economy, income inequality. And theyre all real. But a lot of that is priced in the market. What happens if next year after this election we do get some fiscal stimulus. Or the fed does move very slowly of or china which we saw their ppi Inflation Numbers this morning which are positive which is a really big deal. China can muddle along for another year. So if we have a decent Global Economic backdrop and stocks can still keep going, you want to say in the market. You just dont want to get over your sees. The more risk of just pockets of volatility. Like we saw on tuesday. What does neutral on equities mean . Thats a super important point. Because its different for everybody. I tend to think of myself still as a younger investor. I have a long time to invest. And so i dont need to have a lot of liktty today. I can take a longer time horizon. So my neutral for a portfolio might be 80 equities, 20 defensive assets. Whatever you want to describe that as. For someone else it might be 70 equities or 50 equities. When you say youre going neutral, thats its your own baseline. Where you are comfortable based on what youre trying to achieve as an investor which is going to depend on how you sleep at night. If january, february, this year kept you up all night, you shouldnt have a lot of risk. At the end of the day Everyone Needs sleep. During the commercial break you were calling this some of the parts of the market. Yeah. Are all the parts equal . No, of course not. The earnings season is right now. Right . Thats our news today. And so thats what the markets focused on. I think we are going to have a better earnings season. I find we always beat thats only because estimates came down. Exactly. That happens every time. Earnings matter, but i think thats more security by security. And you do get some macrodata out of that. But that one i put aside. I think the election matters a lot. And its interesting. I was at a meeting yesterday with a lot of other investors. And they basically want what america doesnt. You know, if we have status quo, if the government stays dysfunctional effectively, we cant get anything done, thats what a lot of investors want. Because policy continuity. If off democrat sweep or a republican sweep. You have a greater risk of a major policy shift which is disruptive. So if you think what is the equity market going to do november 9th, the best is if you have a president and you have a congress and theyre not all the same party and so you have some checks and balances. Thats probably your most optimistic. And thats to me probably the most important nearterm event to watch. I think china is hugely important, hugely important. And its so hard to follow because its opaque. Its such a different government system, economic system. But the ppi, a producer inflation number that came out last night, positive for the first time in years. To me thats a really important data point. Ppi in china has a very high correlation with nominal gdp growth with a nominal economy. So that number if we can see it persist for the next few months and i think we will, im not saying its rebounding. Well, the trade data was a little messy. The imports werent that bad. But there was a currency effect impacting that number. So i think the market overread it in the shortterm. Which again is the 10 was a big number. Its a big number. But people dont know china like they know america. And so sometimes i think they misinterpret it on a knee jerk basis. Its a different economy. You have to look at the data differently than you do here at the u. S. Or western economies. I think china muddles through and thats good news. I think theres barring some major shock with the election or something else, i think were going to have some positive equity returns going into next year. And i think we are poised hopefully, fingers crossed, to have some inflation. So cyclicals can do better. Given we were talking about banks all morning, would you own banks . Your former employer jpmorgan. I cant talk single funds. We do own a number of u. S. Banks. Some larger, some regional. And a lot of its going to depend on the yield curve. If the fed hikes in december, all else is good news for the banks. If we have a political outcome, you know, people are so scared about the regulatory reaction if we have a democratic sweep or a democratic president even. Sop more regulation on the banks. But we all know Campaign Rhetoric is rhetoric on both sides of the aisle. And what they do in office isnt necessarily reflected on the trail. So i think everybody just needs to take a deep breath and say, lets see what happens after we get through november 8th. Okay. Youre going to be sticking around . Am i . Maybe not. I thought she was. Sorry. Youre welcome to. We love her so much. Its always nice for her to comment. You can be late to your day job. Its okay. Riding in cabs with andrew. Theres a tv show there. Car karaoke, thats next. You can just pick people up. We can do some financial songs. Pick up random journalists. Good to have you with us. Good to see you guys. The Treasury Department finding new rules. Were going to hear more from jack lew and what he has to say about the european banks. Those exclusive comments are next. Stay tuned. Squawk box returns in just a couple minutes. Tell me, how do you like to learn . Songs are my favorite ooh elmo likes songs puzzles me love puzzles. Well. Puzzles are a great memorization too dinosaurs yess puppies ooh i love puppies so do, i. Actually. Pets can teach important lessons abou dancing elmo loves to dance. Okay then, lets dance. everybody cheers yeah baby oh hey john, im connecting our brains so we can share our amazing trading knowledge. Thats a great idea, but why dont you just go to thinkorswims chat roo where you cashare strategies, ideas, even actual trades with market professionals and thousands of other traders . I know. Your brain told my brain before you told my face. Mmm, blueberry . Tap into the knowledge of other traders on thinkorswim. Only at td ameritrade. Sprint . Im hearing good things about the network. All the networks are great now. Were talking within a 1 difference in reliability of each other. And, sprint saves you 50 on most Current National carrier rates. Save money on your phone bill, invest it in your small business. Wouldnt you love more customers . I would definitely love some new customers. Sprint will help you add customers and cut your costs. Switch your business to sprint and save 50 on most current verizon, at t and tmobile rates. Dont let a 1 difference cost you twice as much. Whoooo for people with hearing loss, visit sprintrelay. Com. The Treasury Department rolling out new rules to fight tax avoiding companies again. This time its going after whats known more specifically at earnings stripping. Its the strategy where Companies Use u. S. Subsidiaries to take loans from foreign parents in order to avoid high u. S. Taxes. Our sara eisen spoke exclusively with jack lew about that and other issues plaguing Financial Markets right now including the health of european banks. We continue to see some of these cross border regulations. You mentioned the eu and apple. Right now the dojs fine of Deutsche Bank is causing a lot of stress. A lot of people see that as retaliation for what the commission did with apple and the u. S. Im not going to comment on any specific Law Enforcement matter. I think that the situations are totally different. State aid is a different concept than we have in the United States. We think that it was applied to a tax matter in a way that was unfair. Weve said so. But that has nothing to do with Law Enforcement matters. As far as monitoring the stability of the Financial System, how risky do you see the european banks right now . Banks like Deutsche Bank dealing with negative Interest Rates and weaker capital positions than those in the u. S. I think that european banks are in a better place than they were before. They are better capitalized. Had much better results than would have been the case before. But ive said many times weve built up more capital, weve done more in terms of resolution. Were one country so its easier. But we have banks that are more resolvable. The more europe does to build up capital to have its Banking System have the kind of protections that we have, the better. But its much stronger than it was. I think, you know, you saw after the brexit vote that there was a lot of concern that thered be a loss of confidence in banks in the United States, in europe, in not just the uk. There was a volatile moment. But things kind of restabilized pretty quickly. That was actually a vote of confidence that the Financial Systems were better than they were. It doesnt mean theyre all the way there. We have pressed for europe to do more. And were glad that theyve improved from where they were before the financial crisis. I think weve proved in the United States that when you take massive a accident to fix your Financial System, it builds a Strong Financial system. Thats actually a good thing for the prospect for u. S. Growth. And yet we still have questions about the u. S. Financial system, bad behavior in banks. I know you spoke at delivering alpha last month about the wells fargo situation. Does stumpf resigning matter . You know, the decision about who should be ceo is for the board and the executives of the company. I think what the whole set of events around wells fargo shows is that anyone who thinks that its yesterdays problem to worry about whether there are abusive practices, whether there are predator practices, it is still an important issue for today and tomorrow. You know, we created a Consumer Financial Protection Bureau that is on the beat now. It has levied a large penalty in this case. There are some people who want to roll it back, take its power away. I think its a mistake. We saw in 2007, 2008 how bad practices, bad Consumer Practices could actually accumulate and contribute to a financial crisis. I dont think this has that characteristic. Its bad enough that it just takes away peoples confidence and trust and their own banking relationship. We need to protect consumers and we also need to protect the Financial System and we shouldnt be rolling back wall street reform. You can find more of saras interview with jack lew right now on cnbc. Com. And back to todays Big Bank Earnings stories. Wilfred frost just off the phone with jpmorgans management. Yes. Been listening to the cfo marianne lake. In response to questions about the recent wells fargo scandal, she firstly said she wanted to put front and center, we put Customer Experience front and center. Did admit they are doing quite a deep dive into the potential issues in their own bank sorry, potential issues following wells in their own bank. Theyre doing a deep dive investigation. She said, quote, i find no systemic issues. I said did that mean they found some issues at all . She said yes, they have identified some cross selling issues in their bank. She added, quote, its impossible to have zero defects. So just to really clarify this. No systemic issues. But they have found some cross selling issues of their own. But very much think its not a systemic problem and that they put Customer Experience front and center. Ill add a few more details in terms of the actual numbers. Decent beat for jpmorgan this morning both on strong loan growth and also strong trading revenues in the investment bank. On the trading revenues as kayla and i were discussing earlier, they did put part of that down to a bounce post brexit. That was one of the reasons particularly for rates doing so well in july. That carried through the quarter into the next two months of the quarter. Largely she attributed that down to central bank revenue. Its interesting to hear her say that that has continued into the Fourth Quarter so far. So theres quite a bullish factor that those factors have carried through to this quarter. Theyre of course saying with the election coming up and a potential Central Bank Action, its too early to say if itll continue through the whole of the Fourth Quarter. Guys . All right. Thanks so much, wilfred frost with that conversation. Joining us now, marty mosby of bank and equity strategies. Of the three banks that have reported this morning, which one do you like the best . Well, i think the reports have all been positive. What we are seeing is the money center and the Capital Markets revenues are really pushing citigroup and jpmorgan higher. I think what we came to citigroup is one of our Favorite Banks. We believe the leverage theyre getting showing improved probability here will have a little bit more momentum for their stock price. And what youll see is the growth and tangible book value as theyre buying their stock back at a significant discount. So the capital deployment will be something that builds more momentum through the day. And citigroup shares are up 2 . The whole sector is really on the rise this morning. But they did have much lower loan growth, marty, than we saw at jpmorgan. We also saw 34 decline in equity revenues. Is it as solid across the board for citigroup as it looks for jpmorgan . Well, what were seeing with jpmorgan is theyve stayed infor investing and growing where youre seeing some pullback like in citigroup and morgan stanley. So they have outperformed a little bit. But we are seeing the momentum of the overall just markets and the activity were seeing there should rise all tides for all these Money Center Banks today and then next week we seereleas. What questions do you have for management as the calls are about to get under way . What were going to be looking at is one, how much of this is sustainable. We just heard is talking about spilling over into the Fourth Quarter already. As much as there was in rates in brexit, there was also a big shift in Corporate Bond spreads. As Corporate Bond spreads started to come down, what you saw was two things happen. One, investors beginning to and the reason they were coming down shifting over to get risks and yield. As you saw those spreads collapse, you also saw Companies Start to come in and take advantage of those narrow spreads and low Interest Rates which is why you saw debt underwriting also do well this quarter. Marty, i know you have a busy morning ahead. Well let you get to it. Coming up, we have some breaking economic news. Were going to bring you the numbers and the Market Reaction right after the break. Squawk box returns in a minute. Whats going on here . Im val, the orange money retiment squirrel from voya. Were putting away acorns. You know, to show the importance of saving for the future. So youre sort of like a Spokes Person . More of a spokes metaphor. Get organized at voya. Com. Whats Critical Thinking like . A basketball costs 14. Whats team spirit worth . cheers whats it worth to talk to your mom . Whats the value of a walk in the woods . The value of capital is to create, not just wealth, but things that matter. Morgan stanley coming up, retail sales and ppi next. How exciting is that . Well be back. Tech companies. Snapchat ready for the public facility ier and a potential Storm Brewing in the twitterverse. Well talk about whats next for the social media sites. Squawk box will be right back. Om long island to buffalo, from rochester to the hudson valley, from albany to utica, Creative Business incentives, infrastructure investment, university partnerships, and the lowest taxes in decades are creating a stronger economy and the right environment in new york state for business to thrive. Let us help grow your companys tomorrow today at business. Ny. Gov for decades, investors have used a 60 40 stock and bond model, with little in alternatives. Yet alternatives can tap opportunities that traditional assets cant. And even though theyre called alternatives, theyre actually designed to help meet very traditional goals. Thats why invesco believes people should look past conventional models and make alternatives a core part of their portfolios. Translation . Goodbye 60 40, hello 50 30 20. Welcome back to squawk box. Breaking news litany of data. September read on retail sales. Up 0. 6 . Thats pretty much exactly as we expected. Strip out autos, up 0. 5 . Strip out autos and gas, up 0. 3 . The control group. Taking all these little pieces, smacking them into one unit and then plugging that in other calculations and we end up with the control group up 0. 3 . None of this is bad. All of it is pretty close to expectations. And there were some subtle revisions to last month but not huge. Down 0. 3 . Headline is now down 0. 2 . And now lets look at our inflation read at least on the far side of the spectrum. Lets look at Producer Prices. If we look at final demand month over month, that was up 0. 3 . Now, arguably thats a little hotter. We were looking for 0. 2 . Strip out food and energy, up 0. 1 was expected but we ended up with up 0. 2 . So another tenth hotter on that as well. Month over month ex food and energy, the core we want to keep a very close eye on this on the trade side. Thats up 0. 3 . Then maybe the final demand year over year up 0. 7 is also a bit hotter. So every metric here is hotter. If we look at those year over year numbers, up 0. 2 . Also a little bit hotter than last look. But we did expect it. Lets synthesize this together. Yields hovering a smidge higher than they were. But keep in mind heres the next story of the day. We can look at all of the issues and look at global macro. Its not going anywhere any faster than we anticipated. But yet considering all of that we see that yields started to move up even before the data was out. And that is important. Theres something going on on the long end with sovereigns. And its pushing back on central banking policy. And we need to be cognizant of this especially at times where the journal points out mario draghi is running out of things to buy. And look at some of those names. I wonder who makes the decision which companies to pick. Tyler, its cool to hear your voice on squawk box. Hey back to you. Thank you very much, rick. Appreciate it. All right. For more on the data, lets bring in Steve Leisman live from boston where hes been talking to fed governs and the like. Steve, what do you think . So this is a good number for the consumer. The retail sales number up 0. 6 . Motor vehicles and parts up 0. 1 . Its a reversal and then some from the august numbers which were revised to be slightly better. You had a surge in gasoline prices during the month. Sporting goods and hobbies up 1. 4 . We like to look at that to see how Discretionary Spending a going. I didnt like the number that is the control group. I think that number is just up 0. 1 . Thats the number that passes over into gdp. Well see how folks later today end up incorporating that into their gdp. My guess is thats a bit of a disappoint. And stuff translates from this report directly into the gdp calculations. Other stuffs like autos they get from elsewhere. We did get to talk to Eric Rosengren about rates earlier. Thats something the market is going to be thinking about. Heres one thing he said about hikes. My hope is that we do it slowly and gradually. The longer we wait, the more likely it is that were going to have to do it more quickly. Obviously you dont set one Monetary Policy to asset class. But its symptomatic. Whether it shows up in inflation or asset prices, its a little bit hard to determine. Thats why id like to have an economy that is at a sustainable Unemployment Rate over a long period of time. So. Just a quick word, guys. Rick is right that the Producer Prices were a touch hotter than expected. When you look at a year over year rate of 0. 7 . Its hard to get excited about inflation coming from the wholesale level. Price gains have been very muted. And its hard to think that theres a whole lot of push coming from the wholesale level. Maybe a touch of pressure on earnings and mortgages right there. You know, steve, one question about the Producer Price index. Is that really just goods . Or services in there at all . No. I think they did incorporate services recently. There is now a Services Index in there which is a great question. Because weve had two a tale of two different economies when it comes to inflation. On the good side is where the deflation has come from. The Services Side is where youve had inflation. And there are a wholesale Services Number that rejiggered the ppi a year or two ago to include services. And that, by the way, because i know youre to answer this. For services in the index. All right, thanks. Before steve goes, i dont know if you saw this poll we talked about some of the numbers earlier. This idea that the American Public doesnt trust any data specifically numbers. Yeah, very disconcerting to me. I know. I know. And some people work at cnbc are part of that group who dont trust the data. So thats an issue. Weve said as much as we possibly can. I dont know that there isnt 25 of the public out there on a consistent basis who believe that the sky isnt blue. You know . So maybe theres some kind of constant of conspiracy theorists out there in every population. Maybe i should hang my hat on the idea that 75 appear to have some belief in the Economic Data. Steve, we dont have any data whether those respondents believe the all america survey, but i would believe 100 of them do. If i gather it and do it, its 100 accurate. I can guarantee that. Its just like ivory soap. Steve leisman up in boston. Thank you. Coming up, a tale of two tech companies. Twitters troubles and snaps appeal. Well talk about the future of social media. Squawk will be ragt become. What are you doing . Getting your quarter back. Fountains dont earn interest, david. You know i work at ally. I was being romantic. You know what i find romantic . A robust annual percentage yield thats what i find romantic. This is literally throwing your money away. I think its over there. That way . Yeah, a little further up. What year was that quarter . What year is that one . 98 thats the one. You got it nothing stops us from doing right by our customers. Ally. Do it right. Lets get out of that water. Welcome back to squawk box on cnbc. Take a look at where the futures are right now. They have been climbing higher after the financials began reporting earnings throughout the morning. We are off the highs but the dow would open up 88 points. Financials are in focus. Shares of the big banks have been positive throughout the morning. Jpmorgan kicked it off with earnings just about two hours ago. That stock is up by 1. 5 . Citigroup 1. 5 as well. All banks that have reported all topping wall street estimates on the top and bottom lines. As those Conference Calls are under way, im sure well have a plethora of headlines. Chris rock in media news inking a record payday from netflix. Sit down for this one. The streaming service is going to pay rock 40 million for two standup specials. The first one will tape in 2017. The deal is a loss for hbo which had aired rocks previous five standup specials through 2008. We cant find info on how much he got on previous deals. But i cant imagine were even in league with whats going on here. Also he hasnt done a standup in eight years. Which makes this maybe more attractive. What about the oscars . I dont know if you get paid for that. He must get paid. Well look that up, too, for the audience. Viewers, help us out. Meantime, Martha Stewart and snoop dogg teaming up on a new show. The two are hosting a Weekly Dinner Party series on vh1 called martha snoops pot luck dinner party. Describing the show as half baked evening of cocktails conversation. Nothing is off limits. For anybody who needs a little levity going into election day. And theyll be filming that show probably in colorado. Maybe the state of washington. Yeah. Lots of edibles. Yes. Dessert. Marthas brownies, a new twist. A new twist. Other news to tell you about, Mark Zuckerberg is looking for a voice to an Artificial Intelligence system to control his home. He posted on the social media site its time to give my a. I. Jarvis a voice. Who should i ask to do it . It was only a matter of time before iron man himself came to save the day. That being Robert Downey jr. Offering to be the voice of zuckerbe zuckerbergs a. I. Assistant. Two big tech stories front and center. Twitter advanced to talk to a sales force to sell itself. Meanwhile snapchat ready for what could be the biggest ipo. Our next guest is at the helm of one of the valleys top venture firms. And to weigh in on more. Theyve had 43 Portfolio Companies acquired in 94 ipos. Joining us is the trinity ventures general partner. Good morning to you. Good morning. First of all, does salesforce and twitter make sense to you at all . Yeah. I think, you know, if you think about twitter as a data company, as an extension of what salesforce is doing with chatter internally, that data is pretty valuable for salesforce. Because its a way to measure customer sentiment. And also do Customer Relationship domain. Which is what salesforce has been interested in. So it does make sense. And i think it is something that they are look at very intently for quite some time. I think that twitters data has been undervalued in the market. And i think many of these companies as they look at it, theyre thinking of ways to extract value asset. Lets talk about that. Twitter thus far has struggled to figure out an economic model to monetize whatever you think the value of that data is. What has you convinced that salesforce could have it better . Because salesforce isnt the management business. And many businesses use twitter already. Companies such as bird eye which happens to be one of our companies actually provides a platform to allow small and Large Businesses to do analytics on customer sentiments and also do analytics on management and experiences. That is something that i think salesforce is interested in developing and providing to its customers. But twitter considers itself as of last week the peoples news network. It doesnt view itself as a data company. Do you think it will have to begrudgingly . Well, i think the two can coexist. You know, the data asset is built because of its value in the consumer domain as a pulpit for not generalists, not just celebrities but also politicians. Theres a lot of data there about sentiments on not just happenings in the social domain. But also happenings around products and services that are important to businesses. What would happen to twitter if donald trump stopped tweet, ajay . I cant imagine. Is we talk about salesforce and twitter. Is it the best fit for twitter . Or is there another company that could be better in your view . Well, you know, there were rumors that facebook and also disney were looking at twitter. And you can see why facebook would also be interested. Facebooks business is primarily built around connecting circles of friends and families. And this gives them an extension. Twitters domain is more about strangers connecting with each other, exchanging information and ideas. Sometimes not in a pleasant way. And i know that the twitter numbers have in terms of engagement have gone up since the elections for both parties. So i would imagine that some of these buyers are waiting to see what happens to twitters engagement numbers after the elections before they make their moves. What would be a fair price . Well, theyre roughly around 12. 5 billion or so last i looked. It would probably be a slight premium to that. I would imagine the 15 billion type of range. And can we talk about snapchat for a second in a meaningful way . Sure. Sure. Snapchat is go ahead. I dont even know what to say. Well, you know, snapchat is the app for the selfie generation, isnt it . Its sort of picking up from where facebook left off. Facebooks demographic as you know is aging. So of course the millennials have to sort of gravitate towards an application that is their own. It is all about videos and pictures. It has all face masks you can play around with. Theyve innovated a lot in the last year including with snap streak which helps improve engagement because it challenges users to come back on consecutive days to connect with their friends. And so its almost like a game of the network. But investors have been throwing money at the company. Why would it go public if it has limitless capital from private investors . Well, i think that if you look at snapchats numbers, its its daily active users are now over 150 million. Which is in excess of what twitter is doing. And revenue rumored only to be about 350 million. So theres a lot of room for it sort of growing into that user base and increasing its revenue. Twitters revenue as we know is 2. 5 billion. So theres a huge gap where snapchat and twitter is. So i think theyre looking at massive Revenue Growth and therefore want to invest in a big way in expanding their product and network. Fair enough. We appreciate your time this morning. Thank you. Sure. When we come back on squawk box, jim cramer will join us live from the new york stock exchange. Well get his take on the top stories of the day including the Bank Earnings parade. Futures right now still in the green. As we head to break, check out a highlight from Steve Leismans exclusive interview with boston fed president Eric Rosengren. My views havent changed. Whats changed is the economic conditions. So when we have an Unemployment Rate thats around 10 , we should be very aggressive in our monetary stimulus. When we have conditions like we have right now which is were very close to full employment, Unemployment Rate currently at 5 . And core inflation is 1. 7 . Its relatively close to 2 . Still below our 2 target. Those conditions are very different. At this point im as concerned about overshooting on what is a sustainable Unemployment Rate and that at that point i have to be concerned whether if we did overshoot on the Unemployment Rate, whether we would end up tightening much faster and possibly shortening the recovery. Ut the network. All the networks are great now. Were talking within a 1 difference in reliability of each other. And, sprint saves you 50 on most Current National carrier rates. Save money on your phone bill, invest it in your small business. Wouldnt you love more customers . I would definitely love some new customers. Sprint will help you add customers and cut your costs. Switch your business to sprint and save 50 on most current verizon, at t and tmobile rates. 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Ask your doctor about cialis and a 200 savings card. Yes, i wish i included a lot more of this stuff. I gave credit for people understanding what our longterm profile was. I was wrong. This is one where i could have done a significantly better job of communicating this story. And we tried to do it in the context of 2017 is going to be good, but it seemed to get totally lost. That was honeywell ceo david cote on mad money last night telling jim cramer he was shocked in last weeks drop in shares following companys guidance saying he was wrong to focus on shortterm impacts and longer term restructuring. Jim cramer joins us right now from the new york stock exchange. Great conversation last night, jim. Thank you. One of the things youre looking for when you have a ceo like that you figure you have to beat it out of hthem they screwed up but he came right out and said i screwed up. All we heard about were the things they changed in 2016 and aerospace wasnt that strong. Kind of a really not the narrative that cote should have traced out. He fixes the narrative and the stock goes back up. Can we talk banks . Sure. Okay. So we had jp, citi, wells . How do you trade . Jp, very strong, citi surprisingly strong because of the costco news, i think thats important. You saw some incredible growth in the credit card. Also bond trading. Theres still big disparity between the book value and where citis trading. Wells, nothing. Would you touch it . Wish we didnt you wish you didnt. Even at this point . Because you think it has further to fall because . Very little upside. If you dont have a clear plan, and i think that the papers are very clear also that you needed someone from the outside. Look, i think sloans good, up from wall street. But main street people say, listen, thats what they do, get another guy in there whos part of the whole problem. And wells isnt blowing away the numbers. They werent blowing away the numbers in the last two quarters. Its been the weakest of the big banks. One of the reasons i think its been the weakest is because they dont have all the excitement that off of a brexit. They dont have good bond trading. They dont have good international. These are the things that hurt banks before but now its helping banks. Wells is just a domestic socalled powerhouse that i now feel like was a cross selling machine and thats where the growth was. And thats no longer going to be incentivized. They better find something to do. Im with you, jim, on the idea choosing an insider was probably not the optimal move. No. To convey to the public that a new broom is coming in to sweep clean. What would you be looking at in the downstream quarters to give you an indication that the companys business is really been hurt by the scandals . What numbers would you focus on . They have a metric. They have a metric of accounts per person. And its plus ten. And what you want to see is the metrics more in line with some of the other banks, which would put it lower. A lot of people felt congress was naive in that there was just a lot of speeches. Thats not true. There were people asked legitimate questions about how other banks are doing. None of the other banks feel like they were in a position to do this much account opening. But, how did it happen . Id like to know, did someone open an account on friday, put 25 in it and take it out on monday . Is that what the is that what some of these lower level executives did at the branches . And which were the branches that were really, really, really violating the rules . All this stuff hasnt come out yet. Well see what the investigation says, but do you worry about j. P. Morgan which today said its identified its own cross selling issues. Not systemic but its impossible to have zero defects. Well, i think theres a big difference between zero defects and 5,000 people. Look, j. P. Morgan didnt run a scam. Lets just call it what it is. Theres no scam at j. P. Morgan. There was obviously a scam at wells fargo. It was. I mean, i think that you have a game plan, the game plan was to trick the system. Maybe you they batched accounts and on saturday they award people how many cross sells they did and on monday undo the cross sell, take the 25 back. Thats a good scam. Thats a way to be able to trick the system. I wonder if thats what they did. Jim, see you in a couple minutes. Thanks. Thank you. Coming up, todays biggest movers and a programming note. Halftime report turns five. Five is my favorite year, they are celebrating some of the biggest names in investing, temper, icahn, gundlach all starts monday. Squawk box wrap it up after this. Instead if getting caught up with the crowd, the Investment Managers at pgim take a long term view, teaming specialized active investing with riskmanagement rigor, to seek out global opportunities. 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Final check on the markets after ppi, Bank Earnings, rosengren, dow is back in triple digit territory for its implied open. So well see in just half an hours time how we actually do open. Tyler, youll be joined by janet yellen later this afternoon. Shes talking at about 1 30, and i think i know what ill be doing at 1 30, which is watching janet yellen. Thats what im going to be doing. Yeah, of course. And watching you. Ill be there. Waiting for analysis. Ill be there. Thank you both for hanging out with us. Great to be here. Make sure you join us next week on monday. Squawk on the street begins right now. Good friday morning. Welcome to squawk on the street. Im Carl Quintanilla with jim cramer, david faber at the new york stock exchange. We cap the week off today with the busiest agenda so far for big banks with earnings, macro week on data running hot, muster, rosengren, yellen all set to speak, chinas cpi comes in hotter than expected as well. Watch the tenyear, yellen speaks just after lunchtime east coast time