Crude that was the story yesterday. Look at that. You were just at 50. We were just pushing 50. You saw the latest caseshiller home prices, they were just released at the bottom of the screen. San francisco, denver, portland have the biggest home price gains. Lets get to our road map this morning. Earnings, earnings, earnings. Alibaba higher in premarket after profits and revenue beat expectations. Yahoo goes up when alibaba goes up. Mixed results in from dupont, ford and u. P. S. The cfos of u. P. S. Will be up later in the show to give us more insight. Pfizer, merck, bristolmyers all beating consensus and boosting fullyear guidance. Take a closer look at pfizer. Those were particularly good numbers. Lets start off with alibaba, up sharply in premarket. Posting better than Third Quarter results. Revenue up 32 . Strong growth across the board, particularly in mobile. Yahoo owns stake in alibaba, it will be putting that in a separate company, hence it goes up, almost as much as alibaba because its core business is worth virtually nothing. It will be interesting, when the stake is sold or put into the new company and you see what yahoo is worth. I know. Including even yahoo japan. It may be worth more to someone else than them if they fail to monetize what they got. Whether its tumblr, what they did this sunday, which people are mixed about. The nfl. Right. What they may have in terms of search. Theyre not a totally lame company. Its just that when you back it out not much going on. Not much going on. The last quarter from yahoo did not do a great deal to engender confidence. Not a lot to write home about with yahoo so much to write home about with alibaba. Tell me. The merchandise value on mobile, 62 , the adoption mobile accounted for 62 of their gross merchandise value. Thats been moving up every quarter. It accelerated. 28 year over year just for revenue. I think its hard to read through anything other than the Chinese Consumer is back. I really think so. This is an amazingly strong number. David, they cut theyre a good referendum on how the Chinese Consumer is doing. They are certainly as good a referendum as we will get. They also increased their presence in 4,000 additional rural villages where they provide purchasing and delivery service. Y yes, they are. Covering that massive country. Imagine how many drones they would need . A fleet of drones. Like star wars. Yes, it conceivably would. Monthly average users, 386 million, jim. Unbelievable. The take rate goes down as you switch from desktop to mobile, fewer people, as we know, think of advertising and all that the form function is harder. But its stabilizing. Yes. How about cloud . Cloud revenue 128 growth. I know its not a big number, but we know when you look at these companies, we just think about amazon cloud revenue, its darn good. It is. It is. What a great quarter. They also bought back a lot of stock. 2. 74 billion. They just put that repurchase in place, 4 billion over two years. In the September Quarter they both bought 60 of that. Jack ma, i have to say, its rare that you see a guy issue a mea culpa letter and you had to buy it that day. Im sorry, ill do better. He did. Man of his word. They bought back a lot of stock. Since the im sorry, my computer keep going dim here. Thats okay. This is what i have to spend the time doing. Since the barrons article, the stock is up dramatically. Look, i got to tell you this is a company that is a very competitive company, and it is not waiting for the Chinese Consumer to turn around. Yet the consumer is turning around, which is double whammy to the positive. The international is not bad. Tomorrow when apple reports, positive commentary on china from them . Yes. I would say we i say own apple, dont trade it. Dialogue yesterday, the Small Semiconductor Company that rippled through avago, therefore apple, people are saying, look, theres going to be a dramatic slowdown in the apple build for phones because of dialogue. I think you want to counter that by saying, wait a second. If alibaba is right, the Chinese Consumer is strong. So therefore you may not want to read through that apple sales are that bad. I think tim tooks interview this morning in the journal about the things in the apple pipe is saying can we stop doing this as a one trick pony . Do we have to look at this as only the 19 growth in china . I dont know. Theyre trying to build a stronger case for recurring revenues away from phone. Thats one of the reasons why with the multiple so slow you shouldnt sell it here. We will talk more about apple later. Lets get to some industrials reporting this morning. Duponts Third Quarter operating profit came in better than expected. Revenues missed. It was hurt by a stronger dollar, weakness in its agriculture business. Fords Third Quarter earnings were shy of the consensus. Revenues ahead of consensus. The revenuemaker says it had its best quarter ever. U. P. S. Beat expectations on the bottom line, earnings. Quarterly r lly revenue missed,s because of fuel surcharge revenues. Only up 1. 9 , operating profit declined domestically . Not what i was looking for. You can read through fuel, but still these are numbers that are just that shows you the u. S. Slowed. The durable we lump in the durable goods numbers, we could make a case that Industrial America is in a recession. Did you just use the r word . Look at the cummings statement. Look at oil and gas. What accounts for that . Strong dollar. Strong dollar in energy. Boeing, if you smooth the orders out, you wont feel that. I look at the dupont numbers. The dupont number is quite bad. It doesnt matter because dupont is in flux, breen theres stuff for breen to work with. I dont think im picking up on something Steve Liesman talked about, the industrial recession that he hears chatter about. Housing was not so good. New housing numbers yesterday were not so good. Autos still good. Domestic number ford, a lot of people attributing the decline in ford to asia. Youre getting the down side of lower oil, youre not getting the upside of Consumer Spending because back to School Season turned out to be terrible. The post back to School Season for department stores, abysmal. Where is the consumer . Where is the Industrial Orders . Cummin cummings commentary is so down. Theyre very good, very read through company. I have to quote it, its so bad. Please. We are take ilking difficult actions to lower costs. Firing people. Markets have been weak for some time and are worsening, industry orders, key end markets brazil and china multiyear lows. I mean, theres some real negative news out there. Some cross currents. Yes. I like to use that word. If youre at merck, pfizer, bristolmyers, youre saying where is my bonus. We have to get to those. We will. Theres a lot more to talk about. Oil at 48. 23. What is . Oil. Were importing a lot of oil right now. The natural gas, people are talking about 1. 50 natural gas. I know lets get to those pharmaceuticals. Pfizer, merck, bristolmyers out with earnings and posting better than expected Quarterly Earnings. Pfizer getting a lift from oncology drugs, merck helped by lower costs. Bristolmyers driven by results of its cancer and blood clot medications. All looking up. Pfizer up quite strong. Lets start there. I got some commentary on that. Basically it looks like sales of prevnar were good. They beat because of better revenue. And they beat on gross margin. Stroke drug, terrific. There was a great basketball player who played for the 76ers who recently passed away, moses malone. He talked about when they were on that great team, 83, 84, he kept talking about four, four, four. This is four, four, four. You know what theyre doing it with . Cancer franchise for bristolmyers on fire. Pfizer, unbelievable pain. This lyrica drug is unremarkable. The stroke drug is remarkable. All we ever do is talk about biotech, quietly these guys have built up their franchises. The coe, mr. Reid likes to talk about the tax rate a lot. The fact that hes unfairly penalized by being a u. S. Corporation, as opposed to some of his competitors. Then we talk about mma what they can do to invert. Its a very small window. Its either glaxo or agn. Floss peter parker emails at pfizer. A reference to valeant. Listen to mr. , mr. Reid. Start being proud. Stop talking about inversion. That lyrica drug sun believable. Everybody who knows that drug knows its a miracle drug. Bristolmyers miracle. Mirror caacle. The drugs are unbelievable, but the companies are so huge you dont get to see how great theyre doing. Mr. Davis at merck, this is the quarter i was looking for. Always remember the calls. Pfizer at 10 00 a. M. Youre right. But look at where j j is going. Well get more detail then. J j im sorry, kent frazier at merck. Dont know why i said davis. Lilly, you have to circle back to lilly. You have to look at what these guys are doing. Theyre quietly Building Back their franchises. When frazier came out last time, he wasnt happy with the quarter. This diabetes franchise, very strong. So much here. Youre making some big statements. David, the stocks the old Pharma Companies are suddenly getting it right. Reid and frazier, they are not chest pounding enough. Someone has to speak up for them. They were both very good parts of a basketball team. I dont know how bradley awas. Remember when he walked on in the end. Of course i do. Im talking about new york sports teams. Well count down to the republican president ial debate. That airs tomorrow night on cnbc. Well have a live report from the site of the debate. Also ahead, tmobile Ceo John Legere on earnings. He will talk to jim, thats later in squawk alley. A rare squawk alley appearance for cramer. St. The republican president ial debate airs on cnbc tomorrow night when it comes to the race for the white house numbers indicate an electorate unhappy with all of the president ial candidates. Lets get more from aman javers. Good morning. Good morning, david. A bunch of grumpy cat voters. A lot of dissatisfaction out there. That seems to be propelling the rise of donald trump and ben carson. This is some footage we shot last night. This is the actual debate stage where the debate will take place. You can see the ten podiums up there. Still a lot of candidates in the race that are not named donald trump or ben carson. A new poll out from the new york sometime the and cbs lays out the challenge for the rest of the candidates who will be standing on that stage on the flanks of carson and trump. Ben carson in the lead, 26 , donald trump 22 . This is the first time in months weve seen donald trump fall out of the number one slot. It will be a big blow to his company if that trend line continues. This is just one data point just now. Watch for that to continue. That will be the story line of this week. Why is this happening . Its all of this dissatisfaction in terms of voters and frustration with candidates this time around. Look at this graphic. It shows you a couple of candidates and how upset voters are with their choices. Feelings here, optimistic, Bernie Sanders, 43. Uncertain, pessimistic, 50 . Ben carson, similar picture. 42 optimistic, uncertain and pessimistic, 50 . Hillary clinton also a similar picture. Uncertain and pessimistic for hillary clinton, 56 . She is 13 underwater there. Its a similar picture with the rest of the candidates. Voters not happy. Not settled on a candidate. You look at this poll, which shows ben carson up within the margin of error over donald trump. You get a sense that the voters here have a shallow feeling about all of these candidates. They can move a lot. We will see in this debate whether they move again by the end of the week. Eamon, while we got you, in terms of news, there it is, your money your vote tomorrow night. Give me a quick take on the budget deal that is apparently very close to being done, if not done. Absolutely. Its amazing what can happen in washington when theres a deadline thats real that the political leaders feel. In this case the deadline was the exit of speaker of the house john boehner leaving by the end of this week. Theyll elect a new speaker of the house. Boehner said he wanted to clean the barn and get rid of all the issues that have been dogging the republican majority, such as the debt ceiling, the spending and budget bills. Boehner was focused on getting this thing done before he left. Lo and behold it looks like we have a deal now. Well see the details come out and who is opposed to it. Thats a big one. Doesnt seem to be having much market impact. Thank you, eamon javers. The marketses may have thought this was a done deal already, right . They might have baked into the cake that they would get to something in the last minute. Yeah. We talked about that yesterday, david. We were trying to figure out whether it was baked in. I felt that the market should have been more excited about this. We have a durable goods number that is weaker. I thought it was positive. This could have been the socalled black swan out of nowhere it isnt. People people are caught up in earnings. Earnings are mixed. I agree. If we were dealing with a debt ceiling problem a week from today, it would be a big deal. The conversation would be difficult and dire. Yeah. Its a bullet its missed. Its a bullet that misses. Meantime i think the debate will be interesting in terms of just t the eamon talking about how down everyone is. Were down yet employment down yet theres a lot of good things happening in the domestic economy, in housing, autos. Its trucks, oil and gas, manufacturing where the weakness is. If youre in those industries youre down. In the other industries, not bad. We have so much more to get to, including cramers mad dash. We count you down to the opening bell. Look at futures. Were back on squawk on the street after this. The possibility of a breach can quickly become the only thing you think about. Thats where at t can help. At at t we monitor our Network Traffic so we can see things others cant. Mitigating risks across your business. Leaving you free to focus on what matters most. About six minutes to the opening bell. Marvel wont be marvelous at all today. No. Theyre talking about how western digital, sandisk tie up is not good. The Accounting Firm, pricewaterhouwaterhousecoopers. Im calling out a red flag. I dont blame you. Its typically not a great sign. No. Do we have more information than that . No. Whats interesting is that there was very little short position. No one saw this coming and a lot of people felt this was a takeover target even though it was down a lot because of so much consolidation in the industry. Red flag, my feeling has been accounting regularities equals sell, even here. Even here. Thats the thing, why not a big short position. Theyre already down 35 for the year. We talked about the dichoto y dichotomy, strong colldollar hurting. People say how can this one stay independent . How are they able to be standalone . The answer is because nobody wants them. All right. Thats always good for about 20 in a stock when your Accounting Firm says over and out. Its we havent had this in a long time. No. We have the opening bell about 4 1 2 minutes away on squawk on the street and a lot more to get to. Stay with us. Hello, ken jennings. I havent seen you since that tv quiz show. Hello, watson. You can see now . I can recognize people, analyze images and watch movies. Well i wrote a few books, did a speaking tour, i. Ive been helping people plan for retirement. And i help doctors identify cancer treatments. Is that all . I recently learned japanese. Yeah, i was being sarcastic. I havent learned sarcasm yet. I can help with that. Awe believe active management can protect capital long term. Active management can tap global insights. Active management can take calculated risks. Active management can seek to outperform. Because active Investment Management isnt reactive. Its active. Thats the power of active management. Youre watching cnbcs squawk on the streets is, live from the Financial Capital of the world. The opening bell will ring in about a minute and a half from now. Whenever its the two of us its not that often i get to turn to you and relive my youth and relive some of your youth and ask you, what is the key to this market . You wont want it . Give it to me. Its still valeant. Why . Because you cant have the drug stocks go up until this thing is off the agenda. Because people want drug consolidation. They want it so badly that forget about earnings. Im getting out the old valeant file here. Quickly looking. I have so many different notes on this thing. Well see if it stabilizes. Theyll have an awfully long road back. I think its fair to say you have a board that signed off on a 10q the other day. I said the other day i dont think its fraud. Just a lot of questions about the business model, the earnings power and their ability to get back to following that model that enabled them to do acquisition after acquisition in part because of a stock price. They did do acquisitions for cash as we. Yes, they did. The Health Care Segment wanted to get to hca, that segment has been down. Thats a huge part of this market. We need to see them. I guess i would talk about cummins, if we were a great manufacturing country again. Valeant is important. Amgen just had good news about a phase two heart failure. It has to do will valeant buy this guy or that guy. Not buying anything for a long time. Look at that celebration there. You heard the opening bell. You saw the s p 500 realtime exchange at hq. At the big board, it was gold corp doing the honors. Our friend, john legere there, all those is it purple or pink . Pink. Pink. Magenta. I think he will have to answer some questions about churn. Lets look at tmus. The stock first time in a while i can remember them reporting a quarter where you didnt go whew. They have a 3. 6 churn, i got a 1. 33 churn. This is moving from one guy to another guy. We have a 1. 46. At t and verizon are probably thinking how do we tell the story, because people dont know how to tell the story. John, hes still got the ads. Hes adding people left and right that does matter. Ebita margin, up 600 basis i think people are look at earnings per share. 15 cent people are looking for 30 cents. A lot of asterics at t doing better than people think. At t is not about going out and buying a dish, its about fanduel, draftkings, directv. A holy owned subsidiary of at t. Im talking about a preponderance of this country wanting to watch frooootball ga out of markets. Talking about holy owned subsidiaries, were one of the comcast market. This morning, comcast reports what im listen, its the hometown team. Take it for what its worth. A couple Hedge Fund Managers said results are good. Video losses slowed, declined to 48,000. Everybody is losing video subs. Thats the story of slimmer bundles, cord cutting. 41 improvement from the Third Quarter of 2014 in terms of losses. They added 320,000 high Speed Internet customers. Lets stop right there. Thats huge. Buyback was higher. Revenues higher. Cash flow. The call is on going. Stock not doing anything. Cash flow. Brian roberts talking about the huge upflow of cash flow from nbc. I come back to the idea you want high Speed Internet because of netflix, whatever. Its extraordinary. People want high Speed Internet. They love it. Its something people dont think about enough when they think about a cable company. Its like water. You have to have it. You do have to have it. If your cable goes down, youre not you might not know it. If your broadband connection goes down in the house its a panic. You need it restored immediately. I have backup. You have backup . I have backup. Do you have some guy who cranks a generator . One of those things i have backup. Ive got backup verizon. You got backup. I have to. Its too dangerous for me not to have it my life would not be the same. Theres the wife, theres internet. Theres the wife which comes first . You dont have backup for her. Shes turning 50 this weekend. My god, you got to share that publicly. I mean 40. 40. 40. She doesnt watch. She never has seen the show. Doesnt know about this. She knows i have money. Doesnt know. Amazing. Four years, when she catches on to this ill have to change my attitude. Dont you tell her. Dont you worry. Secret safe with me. Promise me . Yes. Carl so close to mentioning the show. I always pull him back. Good. Lets keep her in the dark on the fact that you have a Television Show in the morning as opposed to as well at night. Hca up a bit. The hospitals, we know, crushed last week. Hca preannounced community was a disaster. Tenet hasnt reported yet. It got crushed. 3 billion buyback for a company that over the last few years has already bought back 24 of its market cap. Private public buyback, theyre doing it again. They are. They are. They do generate a lot of cash. Thats a big number. 3 billion. Another 11 of the company. What is the stock doing . Stock is up. Stock is up. A little bit. Little bit. Yep. A lot of people own that, big Fund Managers get hurt. What are you doing . I dont know. Airplanes going to land here. I dont know. What do those guys do . Bosses weighing in on that wife stuff. I better be careful. Lets get to some other stocks. Grub hub, thats not pretty. Geez. David, everyone is in that business, delivery business. Everybody and his brother in that business. 50 guys 50 guys delivers and you have the regular guys there it is. Grub, not good today. This was a period there was a window when companies came public. They have not made you money. How about that. Thats a good point. Right . They have not. Talking about companies that came public and didnt make you money and then did, didnt. Alibaba up almost 8 . Back to 82. How is yahoo . Look at that. Yahoo up on alibaba. Is that better programming at yahoo . Must be. It does show you the importance of president 384 million shares that yahoo owns that it will be distributing into a separate company. With or without an irs ruling. Not worried about it. Taking the opinion that chinese stock market stopped going down. Why it stopped going down, i dont know. You remember how we were worried that was hurting the consumer . We. Were. The chinese stock market has been okay. From china to apple. Reporting after the bell tonight, but well be sitting here analyzing it tomorrow, at least i will. What are we going to hear from apple . You know what is your expectation here . I think the issue is apple is they have to get off the treadmill of cell phone sales. They have to say, listen, you take a larger perspective, 12, 13 times earnings. If you analyze every single week of china data or get a number from us by looking at suppliers or sticking your fingers in the wind and saying i think people are using samsung, get away from that. You own the stock. Could it go down . Look, if i were tim cook i would say, guys, no guidance. Berkshire hathaway. Really . Really . The Largest Market Cap Company in the planet . I would say, listen, were doing well. We have a multiyear game plan. If you just look at us from daytoday, you will miss the big picture, as so many people have. That may be true. There are those who would simply say the law of large numbers and were living in a world where youre simply going to have slower e. P. S. Growth for this company. Its deserving of this multiple. Im not denying if you look at it as a cell phone company, that youre going to max out. It doesnt have that beautiful subscription revenue that people like so much. Does it have cloud . Does it have mobile . Yes. Social . Needs more social. What are you writing down . Symbols, things i have to get to. Coach. Im talking to you. Im listening. By the way, like hillary clinton, i can do two things at once. I can listen to you. What do you got there . Coach had a better than expected quarter, they actually reaffirmed. They reaffirmed which is unbelievable. Coach they reaffirmed is this the first glimmer of hope for coach . Yes. Thats the right way to look at it a glimmer of hope a glimmer. The rest of the group that been horrendous. Have you noticed the weakness in accessness or focussed on it . No. You ought to. Coach is making a comeback. Its more than a glimmer, its a comeback. They didnt cut numbers. Its been a serial cutter of numbers. Are they getting merchandising right . No inventory problem. A lot of these accessory companies have had bad inventories. Theres inventories throughout the system. Thats why the money wants to flow back to the drugs but they cant get conviction because of vrx. Its so interesting that you think thats the key to the market. Valeant is up ever so slightly. 1. 5 . Ackman is having a call now. Im sure thats ackman is having a call im sure mike pearson rues the day he got involved with ackman. At one point algen is like yahoo . Hes doing something for you. He is. You think he would want to take that pfizer stock if they offered it to him . Its a research play, not a tax play. Pfizer is doing better than the pfizer coe wants to say. Hes a complainer. Hes a complainer. He do not like the u. S. Tax code. I dont like that. Never explain, never complain. Who said that . I dont know. Henry ford. Bristolmyers up nicely. It is. Something was down 18 . But i didnt get to write it down. There is . Something down 18 . Is that a mystery chart of the day . Cummins down 10 . What was it . I cant hear them. Lets look at cummins. Console energy. See, david no wonder i couldnt hear. David, if its coal, if its coal, turn it off. Natural gas do you know they had the biggest fine in the history of the United States in utica do you know what happened . Yes. We are lower than coin lower than coin. Cheaper than coin. Im looking where we are right now. Bigger than u. S. Steel. Bigger than u. S. Steel. We have crude down 2. 5 . 42. 90. Natural gas do you think it will go below two . Will absolutely go below two. Absolutely. Eqt has dollar natural gas. You could we are burning more natural gas as we just flair. And they cant build natural gas plants enough. Im trying to do a switching analysis how many of these utilities can switch from coal to natural gas. Coal is finished. Finished read my lips. You said it before. You will say it again. Finished in this country. Is coal finished . Yeah, coal is actually finished. Natural gas is so cheap, these railroads, i dont know if i want to own them. They all had radical revisions for coal, but they havent taken it low enough. Thats why that duke purchase was so important yesterday. By piedmont. It was overlooked. Utilities are so important. I had American Electric power on last week. They have a huge coal portfolio, a fleet they like to call it. A coal fleet. The fleet. Like the combined fleet that went against trafalgar. You know, nelson, trafalgar. Yes, admiral nelson. Once more to the breach no, that was another guy. Dont confuse things. The fleet is sinking. Like the combined fleet of france and spain. Im trying to access the history part of my brain. You try it. You try it. You try what i do here with him. The Energy Stocks and industrial stocks are lagging. Thank you. Bob pisani, we didnt get to everything this morning. Ill try to fill in the gaps a bit. Good morning. A little bit of weakness overall. Its obvious why. Look at the sectors. We have oil trading near the low end of its recent range. Thats weighing on energy. The industrials are having problems because the industrial numbers have not been good today. Thats really whats going on here. Heres the problem. Lets look at a few of them. I wanted to concentrate on the revenue numbers here. Dupont came out, beat on the top line, revenues on the light side. Cummins, beat on the top line, revenues notably light. Paccar, revenues light. Te textron, beat on the top line, revenues low. Corning, top line good, revenues light. Bottom line, okay. This is what i call a revenue recession. Im sticking to my point here, you can look at some of the other ones coming out with issues here. So, look at where were at now. Were at roughly 19 times forward earnings on the s p 500 with revenues declining and margins near a record this is a problem. Margins near a record high. You have to defend the record high margins what do you do . You start announcing a lot of cost cuts, thats what were seeing. Dupont, they beat on the top line, light on affirmed earnings, but taking a fresh look at cost structure and Capital Allocation that means layoffs again. By the way, currency impact this year they said is 72 cents. They will make roughly 2. 75, 8 2. 80. Theyre saying revenues would have been 25 higher if they had not had a flat currency. Look at cummins, you cant blame everything on the dollar. Couple minutes was light on the top and bottom line, they lowered guidance and talked about brazil and china orders orders, not currency, at multiyear lows. And they said it was showing no signs of improvement. They also were looking at restructuring and cost cutting actions. Another company, paccar, revenues light on expectations. Their guidance indicates u. S. And canada, retail sales, not currency, retail sales below 2015. Thats why its down 4 . Some companies are mixed. Te textron, big in commercial aviation, they beat on the top line but revenues light. Bell was very weak. Some parts were okay, like the commercial aviation, the beechcraft, the cessna business. Thats doing well. Textron systems is doing well. So a mixed report. Other companies had weak revenues. Masco should be killing it. They had earnings on the weak side. They continue to say theyre optimistic because theyre in a great industry. But masco had revenues that were on the light side. Heres the score card for revenues. I know everybody wants to talk about earnings. The q4 numbers since i put this up one week ago, the estimates have gotten worse. Now at 2 . They were at 1 more than a week ago. Four consecutive quarters of negative revenue growth, now we have companies coming out startinging to talk about additional cost cutting measures. The dow right now, down 45 points. David, back to you. Thank you very much. Lets look at oil prices, for that we are joined by jackie deangelis. Good morning. Oil prices trading under 43. Not surprising were seeing a slide here. The close yesterday under 44 was critical. Now there are not many catalysts influencing the market now. The focus is going back to supply and demand. What do we know about the supply story . We have a bit of a glut on our hands. Traders are looking to the api data this afternoon and the d. O. E. Inventory number tomorrow. Last weeks data, not very encouraging at all. A huge build. We had flat u. S. Production and only one rig came offline. The demand side, not very encouraging either. I do want to highlight bp earnings. They did beat, more spending cuts, cap x for 2015. Probably 19 billion. This is the third time the company has cut cap x, about 6 billion down from the original forecast. The question now is if this will be that second leg lower that people have been calling for. Do we touch the 30s . Its difficult to say now the momentum is to the down side, but remember, fed on wednesday could keep the dollar low. Back to you, david. Thank you very much, jackie deangelis. Coming up, coceo safra catz on how theyre looking to get a leg up on the cloud competition. Proud of you, son. Ge a manufacturer. Well thats why i dug this out for you. Its your grandpappys hammer and he would have wanted you to have it. It meant a lot to him. Yes, ge makes powerful machines. But ill be writing the code that will allow those machines to share information with each other. Ill be changing the way the world works. interrupting you cant pick it up, can you . Go ahead. He cant lift the hammer. Its okay though youre going to change the world. Welcome back. Lets look at shares of jetblue this morning. That stock down almost 7 . Again, after earnings were disappointing. And ben baldanza of Spirit Airlines on tonight. Spirit talking about things as not robust. The airlines had low multiples because they deserved it. Delta and southwest are doing well. We still need to look back and whenever it was, two, three years ago after a couple mergers, we say that was it. That was the line. Value guys have to look at this group. American air. Way too cheap on a multiple basis. Understand that if you add a lot of capacity, you take a lot of the quick upside out. Have they really added that much . Jetblue. Not everybody. Right. Be careful. We have stop trading coming up with jim. The only way to get better is to challenge yourself, and thats what were doing at xfinity. We are challenging ourselves to improve every aspect of your experience. And this includes our commitment to being on time. Every time. Thats why if were ever late for an appointment, well credit your account 20. Its our promise to you. Were doing everything we can to give you the best experience possible. Because we should fit into your life. Not the other way around. Time for jim. Where are we headed . We talk about apple, the bar has been set high. Gm set the bar high for ford. Asia wasnt that good. U. S. Terrific. F150 good. Just be careful in selling it. If china turns around, you will regret it. At the same time i understand gm was so much better than expected, people figured it had to be good. When the bar gets set high, i will mix metaphor here, then you get trouble. Idti up today because the bar was set so low on after yesterdays dialogue number. Idti is wireless. When you have everyone coming in with a full head of steam thinking that gm is so great, ford will be better because the f150, Big International companies. Asia, latin america still a problem. Lets wait for the cfo before we bail. Okay. Okay. Hell be coming up with phil lebeau later. Hell have john legere later also. That stock also getting hit. These are not easy to understand companies. Do you want that growth . Do you want churn . Do you want how much money is being spent . Do you want magenta . Do you want excitement . Do you want periscope . Do you want a guy on a spin bike saying good things . Do you want fabulous pictures . Do we just want good tasting tuna . All right. Well see you tonight on mad. Thank you. Thats right. Hell be with john legere. Coming up, breaking news on Consumer Confidence. Good morning, welcome to squawk on the street, im david faber, along with sara eisen and simon hobbs. We are live from post nine. Carl is on assignment in colorado for tomorrows president ial debate. Well see him on the show, of course, tomorrow. Lets give you a look at some of the markets, including the stock market, which we tend to follow here at cnbc relatively closely. A look at the broader market. S p down about 0. 25 . Wti, a bit of a story yesterday and today. Not long ago it was close to the 50 mark. Now 42. 89. Some concerns about the industrial economy. Breaking news on Consumer Confidence. Jim iuorio. Our second disaappointment in the form of consumer confident. We were expecting 103, it came out 98. 6. This is disappointing the one thing we were hoping for is the consumer felt good when you consider stock prices are buoyant now, home prices are buoyant, gas prices are low. The last Consumer Confidence number was the Michigan Sentiment a couple weeks ago, it was good. This is disappointing. The stock market started out down on the s p, now its down three handles. Tenyear yields went from 2. 031 to 2. 029. Yields going a bit lower here. The richmond fed came out also. We were expecting down three, came in at down one. Thats better than expected. Consumer confidence numbers are a bigger deal. Thats a disappointment. Thank you very much. Second one of the morning. Shares of alibaba surging after sales rose 32 . Helped by mobile sales. Here with us to talk about this stock and what it means for china from las vegas is gi gill lorea from webb bush securities. Everybody was concerned about the slowdown, the Chinese Consumer and the chinese economy. Then alibaba had pretty good numbers. Should we stop worrying about china . Not quite yet. Alibaba had good numbers. This is a quarter where they started caring about the shareholder. Margins held up. They bought back stock. They communicated during the quarter to assure investors that everything is okay. Volume growth went down to 28 from 34 the previous quarter, and 50 a year ago. The Chinese Consumer is slowing down, so is alibabas volumes. However they did deliver a good quarter. What are they doing right on mobile . Theyre really able to convert their entire business to mobile. More than 60 of their volume is coming through mobile. Theyve been able to rebalance the marketing spent from the retailers more to mobile than desktop. Desktop modernization has gone down, but mobile modernization has almost caught up to desktop modernization, which a year ago almost seemed impossible to do. They did a great job of getting sellers to spend money on mobile marketing. Lets talk about the stock, gil. This has been a crazy one to follow. One of the most hyped ipos ever, over a year ago in september, ran up, oneyear anniversary came back down below the ipo price. Barrons said the stock would fall 50 , and israelied back strongly since then. Where are you now on your valuation . It looks like youre lowering target here and staying neutral. Id say the stock is where it needs to be now. There was too much hype at beginning. They were growing at unsustainable rates. Then everybody got too discouraged as the growth slowed down. As they stabilize at these 25 , 30 revenue growths, slightly less on earnings growth, theyre trading at the mid 20s on earnings. Thats about a fair multiple. Theyve become more of a clean play, a very good fastgrowing company tied to the Chinese Consumer. Theyre priced right right now for the growth rates they have. You mentioned mobile modernization. It appears the take rate has stabilized. Do you expect them to continue on that, so that will no longer be a concern for people as they transition from being on desktop to mobile . It shouldnt be a concern any longer, but theres not that much headroom. Theres only so much they can raise the modernization rates. They have good competitors. First and foremost, jd. Com, it takes a lot of marketplace sellers from them. If they raise prices too much, theyll be at risk of losing sellers. They can raise them a bit. They stabilized them. But its not a lot of source of upside Going Forward. Gil what about the acquisitions, 15 billion to date and counting. Do you regard jack ma that longer term he will be in the right place or is this a different kettle of fish . I think that Mark Zuckerberg and sergei are great analogies for jack ma. Hes a big thinker. He thinks well ahead into the future. Hes actively through each 5 zigs tra5 acquisition transforming his business where he wants it to be in 10, 15 years. What about singles day . Last year, 9 billion in sales for alibaba what can we expect this year. Theyre trying to take it global. I doubt they can grow in china more than last year, they grew 60 last year. Expect more countries where singles day becomes a thing. People start shopping on that day. Alibaba for now at least owns that concept, should benefit from it. Gil, thanks for joining us from vegas. 75 price target on alibaba stock. Appears were moving towards agreement on congressional leaders on a two youre budget plan. But representative paul ryan, presumably to be voted as speaker of the house, was talking about his frustrations with the budget process. Im reserving judgment on this agreement because i havent seen it yet. I want to see what it looks like on paper. The process, i can say this, i think this process stinks. This is not the way do the peoples business. Under new management we will not do the peoples business this way. Okay. The budget vote is expected as early as tomorrow, then the vote for speaker of the house presumably, paul ryan will take it, thats on thursday. Sticking with politics, of course, we are just one day away from the cnbc republican president ial debate in boulder, colorado. Our own eamon javers is live at the debate site. The first time many of us have had a chance to look at it. Thats right. What you said there with paul ryan and whats going on in the basement of the Capital Building is so similar to whats going on here at the debate site. This is the year of the political outsider. Paul ryan now running sort of as an outsider but going to takt u take the ultimate insider job. The Republican Debate tomorrow night, and candidates running for the president of the United States. Look at the stage we have set for tomorrow night. The podiums are up. There ive been calling them podiums all morning. Im told these are technically lecterns, not podiums. Theres about ten of them up there. Well see ben carson and donald trump at pole position in the middle of the stage. All candidates by poll numbers fanning out through the rest of the wings. We have a big change in the story line. Just this morning a new poll out from cbs and the New York Times, this one is fascinating. Look at these numbers. You have ben carson now at the top of the republican field nationally with 26 of the vote in this cbs New York Times poll. Donald trump number two at 22 . Thats the first time weve seen donald trump fall to number two in some months. It upends the story line there. Look down the list, marco rubio, carly fiorina, jeb bush all mired in the Single Digits there. Their big challenge tomorrow night will be to do something to break out of this battle that has become a battle between number one and number two. Im wondering how trump and carson will ultimately square off . Clearly trump has been more aggressive over recent days. Yeah. Absolutely. We saw trump over the weekend with this interesting move, raising a question about ben carsons religion. Hes a seventh day adventist. Trump saying he is a presbyterian, doesnt know about a seventh day adventist. A lot saw that as a megaphone to evangelical voters saying that carson may not be one of us. Carson urged trump to back off of that line of attack, trump said he went going apologize for it. In fact, he didnt say anything negative about the religion, he just raised a question about it. Perfectly innocent according to donald trump. These two guys have been at each other. I think you can expect that will continue on the stage. Carsons big claim to fame is he is the mild mannered softspoken one. Hes not triumph the insult comic dog up there. You can see him take that more deliberative posture tomorrow night. Donald trump is good at raising questions as he might say. Well leave it there. Thank you. Remember, of course, cnbcs republican president ial debate is it tomorrow night, moderated by our own carl quintanilla, becky quick and john harwood. Coverage begins at 5 00 eastern on cnbc. When we come back on squawk on the street, cheap fuel proving to be a double edged sword for u. P. S. The cfo joins us for a cnbc exclusive. Shares of u. P. S. This morning. Beating earnings by two Cents Per Share thanks to international, but domestic ground delivery dropping for the first time in over four years. Joining us now is the new cfo at u. P. S. , richard peretz, also incoming member of cnbcs incoming cfo council. Nice to see you on air. Thanks, simon. Lets concentrate on the part of the business that is shining. You could hear that on the Conference Call, thats international with double digit Profit Growth despite whats happening in canada and germany. Give us a little victory lap there. The International Segment for the Third Quarter in a row has had double digit Profit Growth. You know, a large part of that is our european model. And our continued growth in europe on transborder product and its driven by the same Business Trends that were seeing across the continent, that is the trade between countries. So much of our europe business stays in europe. The other part is were creating Network Efficiency throughout the network and making the adjustments we talked about where growth was in europe and u. S. Imports. Were also seeing a softening out of asia. As a result, we adjust our network and reduce the number of planes were flying so we can have good bottom line growth. Richard, a lot of people are focusing inevitably on whats happening in this country and the read through for the transport industry in particular. The btob side of the business, not b to c which is doing well with retail, ground volume down for the first time in 4 1 2 years. On the Conference Call it was projected negative Industrial Production for the Fourth Quarter. Whats going on. Exactly. Right now we have this balance between b to c or ecommerce. Industrial production is down. It was down for the Third Quarter. Theres an expectation it will stay down this quarter. Its really being driven because of the strength of the dollar and the weak Global Demand from a manufacturing side out of the u. S. So that has an impact. Today over half of the volume is btob volume. We have a direct correlation between whats happening with Industrial Production. That being said, we have good growth, our best growth in b to c this year. When you think of thisyear and last year, last year had tremendous growth. Our Third Quarter was the largest quarter of growth in the last four years in 2014. When you stack the two years together, were seeing almost 4 growth. We know it was softer this year. We know we had some tough comps, but we also know that the b to c market is continuing to grow. Were participating in a big way. The defining challenge for you and fedex is what happens in the holiday period when all these consumers are ordering stuff online. You are now saying its the fact that you double your normal daily volume. Lets get that out there. Youre projecting that this year youll have 10 more packages. The crucial question, in two years you struggled with this badly. The question is, a, having gone to the consumers, trying to calibrate what theyll send you, and what days theyll send it on, and where theyll deliver it within the network, are you prepared to turn around to them and say im sorry, this is above our forecast. Were not taking those deliveries. Simon, weve actually spent the last year getting ready for peak season and making sure were balancing the Network Efficiencies that weve added by adding New Buildings. We will have ten New Buildings that are automated. They will handle more volume quicker. Weve been collaborating with customers since the spring to manage demand and capacity. Make sure that were think being which days of the week the volume comes in. Sure. I think when you put those two together, we actually have a good plan that is in coordination and in alignment with customers so that we can deliver almost 630 million packages to the end consumer for christmas. Do you think there will be a pilots strike this christmas . Despite the news articles that you read, we are continuing to negotiate. We are under the Railroad Labor act along with the National Mediation board. Negotiations are continuing. We believe the best place to do the negotiations is at the table and we actually have two more meetings scheduled this year, both in november and december. We expect to get a solution thats a win for customers, the pilots and u. P. S. Okay. Let me talk finally about drones. You guys dont like talking about drones. Amazon and walmart are able to get a lot of press coverage from their plans for drones. You guys test every innovation. We have a picture of a drone that you actually used. I think you used it in your warehouses in atlanta to check the upper reaches, the top shelves to see what room there is and what is there, to double check the bar codes. Where are you on drones and putting them in service . Either for emergency situations or as walmart or amazon would have it for curbside delivery. Its a good question. Probably not a week that doesnt go by that we hear about where do we sit on drones. Its a promising future but for humanitarian and warehouse we see a great value to it. At the end of the day, the judgment that our Service Providers make as to whether to leave a package, to enter a building with multi tenants is important for customers. While theres a use for drones in our network, we dont see the sky full with thousands of drones delivers packages, how will you get up the elevator and to the front door of that apartment. And our driver is an important Service Providers of the Value Proposition we offer customers. The end user is expecting that driver to bring the package and have it there when he is at home. Richard that wasnt so bad, was it . Tv interview done, after the Conference Call, straight on to cnbc, its all over for another quarter. Nice to see you. Richard peretz, thank you. When we come back, the tobacco sector outperforming the s p and fellow Consumer Staples in a big way. Tobacco is up 20 in 2015. One of the best performers, Reynolds American. We have an exclusive interview with the ceo. Another earnings exclusive coming up on squawk on the street. In one day, the republican president ial debate, tomorrow on cnbc. The market is losing more steam. The dow down 56. Day one of a twoday Federal Reserve data. Steve liesman has more results on the new cnbc fed survey. Were factoring out a rate hike this year. I want to show you the outlook for the s p 500 from our cnbc fed survey respondents. It stopped dropping in terms of the outlook, but its the outlook for this year is only 8 points higher by the end of this year. 2071 is the current level. Come over here and look at where we started. The outlook for this year in december was 2194. We have 100 points out of the outlook for this year. A similar story for next year. A bit more robust. 2166 that is about a 4. 5 rise if that comes true next year. Nothing to write home about. Look how much has been baked out. 2311. Quite a bit of optimism, but thats come steady down. The stock market is discounting or taking out the idea that a rate hike is coming. We asked our panel, 41 economists, Fund Managers and analysts, 33 say the stock market is discounting a rate hike. Thats down from 56 in the september survey. Look right here, 60 say the market is not discounting a rate hike. Look at the outlook for treasury, the outlook for the yield on the tenyear has come down, along with the outlook for stocks and the economy. 2. 2 is the expected level for the end of the year. 2. 04 is where recloswe closed y. 2016, 2. 7 . Look at how much has been baked out. 3. 5 was the forecasted yield for the tenyear in 2016. Thats all the way down below 3 for next year. One thing i want to show you is this idea. Some think the fed is paying too much attention to the market swings. We asked this question last month, 43 said that. Now 60 say the fed is paying too much attention to market swings. Sara and folks over there, you can read all about this, simon, on cnbc. Com where we have the full results of the cnbc fed survey. Where you also will find they pushed ahead the forecast for when the fed will do that first rate hike from november to december. Its interesting, i wanted to bring up the point, when you talk about the relationship between the stock market and the Federal Reserve, we were in that weird period where it seemed like Equity Investors wanted the fed to raise Interest Rates, now theyre not expecting the fed to raise Interest Rates, and, boom, we have a rally. There was a period there for two days where it seemed like the market changed its mind over what it wanted from the Federal Reserve that gets to the last question we talked about. This one behind me. Is the fed paying too much attention to market swings . Nobody in their right mind can figure out what market wants. Does it want a better economy and slowly rising Interest Rates, or a worst economy and no rising Interest Rates. The argument is nobody knows what the fed wants. The greatest danger in what youve just laid out for us is that tomorrow they signal that unless theres a rapid deterioration in the economy they will hike in december. Nobody expects that to happen. Very few expect it to happen. Thats where verbally they still are. Thats not quite right. Simon, just to push back a bit. Our survey shows that 49 of respondents, to the extent this represents wall street, we have talked a bit about the difference between the economists and the analysts and the traders and where they are. There is a big divide on wall street with 49 expecting a rate hike this year in december, the other half expecting it next year. As you point out, fed fund futures with a much lower problemibility th probability. Straight ahead, apple stairs taking a dip ahead of its Fourth Quarter report tonight. Was do you do with the stock now . What do you do with the stock tomorrow . More on that after the break. Ne. Ne. Huh. The good news is my hypertension is gone. So why would you invest without checking brokercheck . Check your broker with brokercheck. We heard you got a job as a developer its official, i work for ge what . Wow. Yeah okay. Guys, ill be writing a new language for machines so planes, trains, even hospitals can work better. Oh sorry, i was trying to put it away. Got it on the cake. So youre going to work on a train . Not on a train. On trains youre not gonna develop stuff anymore . No i am. Do you know what ge is . Good morning, everyone. Im sue herera, here is your cnbc news update. House Speaker Boehner says congress has a deal for a budget. He said theres no reason why any republican should vote against the agreement. Chinese warships have given warnings to a u. S. Navy ship as it patrols closely to chinas man made islands. The Chinese Defense ministry saying they would take all necessary steps to protect that countrys interests. Afghans are assessing the damage to their homes and towns in the aftermath of yesterdays earthquake. The 7. 5 magnitude quake killed more than 300 people in the region. It was centered deep beneath the hi hindu kush mountains. And six pairs of giant panda twins making that public debut in southwest china on monday. Photos and videos of the twins posted online and the public has been invited to choose their names. Twin pandas have accounted for 90 of all panda births in china this year. Thats the cnbc news update. Simon, together with me, awe. You cant beat panda pictures. You cant. Why are they always born twins. Interesting. Thank you, sue. Youre welcome. Yes. Apple is reporting its latest Quarterly Earnings after the bell tonight. The stock is up slightly today, had a rough day yesterday in anticipation. A lot of focus is going to be on iphone, growth in china and indeed software updates. Lets meet the hardware analyst at rbc capital markets. Hes optimistic on apple. Welcome. Thanks. The main thrust of what everybody seems to be focusing on here is the idea to whether or not iphone sales which is the bulk of the profitability and the bulk of the business, whether well see a sequential downturn in sales. Do you think thats possible . Do you think well see that on the Fourth Quarter projection tonight . Yeah. Youre right. All that matters is what iphone units do. Were more optimistic, we think youll see flat to low single digit growth out of the iphones in the december quarter. If you look at the data points, sales have been strong. Tim cooks comments on china until september have been positive on the pun side. The third element i would point out is you actually have more selling days for the new forms in the december quarter this year versus last year, which should be a win for the company. I think flat to up a little in iphone units is an expectation. For investors that are watching now at home, they may have a longer time horizon of 18 months, two years, three years. Do they separate from the fast money, the hedge funds and analysts in that they may say, okay, were down for the moment. Thats simply because we had such a great iphone 6 launch last year. I believe this is what analysts cant say, i believe theyll do it again with the iphone 7 next year. Im buying in now on the basis that there will be great ideas and great innovations ahead. Absolutely right. If you take a longer term perspective, things like moving up the memory configuration on your phones is massive for apple. The iphone leasing program, which i think will get more and more momentum Going Forward will reduce the replacement cycle, help iphone sales, i think if you look over the next one to three years, i get iphone 6 is a tough compare, but there could be mid single revenue growth. Since iphone is everything, can you explain how investors are supposed to interpret these results from suppliers and chipmakers . Dialogue yesterday, weak results. Apple stock got hit 3 . How often are they correct in terms of being a barometer for the iphone demand . If you look at dialogue, 80 of revenues come from apple a good indicator of whats happening with apple. Revenues in december quarter would be up 2. 5 , 3 . Now, the caveats with this as you would imagine. Inventory rebalancing, how much that is a reflection of not just demand but what apple is doing with inventory. Theres some caveats to it. With 80 concentration investors clearly took interest yesterday. Your 150 price target, trading at 115, what time period is that over . Thats not to the end of the year, is it . No our targets are typically as is the case with apple, over the next 12 months, we expect apple to get to about 150 number, which would be about 15 times a 15 times a potential. Good to see you, sir. Busy evening for all concerned. Thank you. Thank you. We are keeping tabs on the housing market. New home sales took a dive last month and builders are still well below normal production levels. Thats why some are pulling out all the stops when it comes to exciting potential buyers. For some its the kitchen. Diana olick has that story. We may be in a suburban warehouse, but according to poulte, we are in the hub, the kitchen. According to them, your kitchen speaks to who you are that is your personality. So, this is the first time the home builder has done this, kitchen throwdown, that is inviting suppliers like whirlpool, moen, electrolux and kohler to design kitchens and run focus groups through them. Are you a young, married millennial . A downsizing baby boomer . A parent . Do you entertain or not the life of the party . You are a foodie or do you cook to survive . It is marketing to the buyers personality, a strategy particularly ur jept ngent now the builders numbers are disappointing. Heres what the ceo of pulte thinks is driving demand. You dont have a lot of urgency. Buyers are saying if i dont buy today, maybe in a couple months from now it will be just as good a time. He actually believes that slightly higher Interest Rates might get some potential buyers off the fence. What they want to do now is create that urgency, create that excitement and do that in the kitchen. Simon, im thinking that this kitchen really represents squawk on the street. Its got the gray for the markets and wall street and the bar with the ice sunken right into the island. Back to you. Im never sure they used to say it was bathrooms and kitchens that sold apartments. I know people who never go into the kitchen. For me, its the closet. Theyre in the wrong place. Next year. Up next on the program, Reynolds American getting a boost in the Third Quarter thanks to pricing of its newport brand. The ceo of Reynolds American will join us for an exclusive interview next on cnbc. Today, were seeing new technologies make healthcare more personal with patientcentric, digital innovations; from selfmonitoring devices that can interpret personal data and enable targeted care, to Cloud Platforms that invite providers to collaborate with the patients they serve. Thats why over 90 of the top 25 Global Pharmaceutical Companies are turning to cognizant. Our domain experts, technologists, digital and data specialists, clinicians and scientists are transforming the way Clinical Research sites collaborate with pharmaceutical companies, and enhancing Patient Engagement with innovative platforms and solutions. Our populations growing healthcare needs present growing opportunities for our clients to advance the future of medicine with digital, and improve the quality of lives. And casuper food . Is that recommend sya real thing . Cedar . Its a great school, but is it the right one for her . Is this really any better than the one you got last year . If we consolidate suppliers, whats the savings there . So should we go with the 467 horsepower . Or is a 423 enough . Good question. You ask a lot of good questions. I think we should move you into our new fund. Sure. Ok. But are you asking enough about how your wealth is managed . Wealth management at charles schwab. Good. Very good. You see something moving off the shelves and your first thought is to investigate the company. You are type e. Shorten the distance between intuition and action. E trade. Apple is the big mover tonight. Markets in negative territory. Look at the Health Care Sector trending higher today. Dom chu has more. The only seblctor in the s p 500 that is positive is the Health Care Sector. Among the leaders, Edwards Life Sciences and pfizer, merck and bristolmyers. Those stocks are up between 1 and 3 . Year to date the sector is in the green up by 2. 5 making it the fourth best performing sector in the s p 500. So, despite the recent weakness in headlines around biotechnology, health care trying to hold up as we approach the end of the year. Back over to you. Thanks, dom. Reynolds american out with Third Quarter results, earnings in line, beat on sales, and the company narrowing its forecast raising the bottom end of the range. The stock is off this morning but still one of the best performers in the s p this year, its in the top ten. The stock up 54 in 2015. Joining us now for an exclusive interview as always, susan cameron, ceo of Reynolds American from winstonsalem. Good to see you. Good to see you, sara. Can you talk about what drove this quarter . It looks like newport was the crown jewel. Tell us about how the integration is going and why that is the bright spot right now. Yes, thanks a lot. The integration of newport, the last time i spoke to you was in the summer when we closed the transaction. So this is our first full quarter with newport. Our adjusted earnings are up 17 , up 18 for the year. This was the first full quarter of newport volume. We have seen newports market shares up half a share point, thats accelerated momentum since it has come into our stable. All the brands in our portfolio, the growth brands, have had a strong quarter. Good net pricing, good margin improvement were delighted with the new portfolio. Overall, i mentioned the outperformance of the sector in general. You confirmed that in todays release, better sales, better volumes, better pricing. Some might be surprised to hear in this age where were all sort of more obsessed with health and wellness that it is such a good time for the cigarette industry right now. Why is that . I think what youre really seeing in the industry is not more people using necessarily, youre really seeing a trade up in premium mix. So, the economic tailwinds and lower gas prices, people are trading up. Trading up from roll your own, trading up from little cigars. Thats been strong for traditional combustible industry. And i guess the concern with investors, your stock is down 3 , but i mentioned very strong performer so far this year. Is this as good as it gets . Can you tell us anything about the outlook on pricing . On volumes . What youre expecting to see . As you mentioned, we did lower the bottom end of our guidance. Were projecting for the year an increase between 13 and 17 on eps growth. So, we announced this quarter as well a 5 billion cash transaction. We are selling the brand natural american spirit in the overseas markets. We are keeping it here in the u. S. Our investors are pleased with that result because the use of that cash, we have continually demonstrated that we will return value to shareholders, so they see very strong prospects on the horizon. What about ecigarettes . The growth was so strong, people were really optimistic, but that rate has slowed down. Vus is your brand. One of the leaders. When does it become profitable . Were actually very close. We put in some efficiencies into the operations process. Really this whole ecigarette vapor space, vues is the number one brand by a long margin. Consumers are trying vapor, interested in vapor, and vapor needs to satisfy the smoker. We continue to believe that vapor and ecigarettes offer the potential to reduce harm for people who have used traditional combustible. We launched four new flavors for adult consumers. And we continue to see momentum on vuse. But the space got very saturated very quickly, so inventories have pared back. The consumer still wants an alternative to a combustible product. Theres some talk that people who were using the ecigarettes are actually going back to traditional cigarettes. Is that happening . What we do see is people using multiple product categories, experiential, depending on the situation. But really people are substituting and consumers continue to state that they desire an alternative that satisfies them. We continue to invest in invasion, to enhance that vapor experience. That would be good for Public Health and good for smokers. I mentioned pricing which has been quite strong for you and your competitors. Three big players virtually control this industry. Thats been good. How long are you going to be able to continue to raise prices . Well, the industry, of course, has been in secular decline for decades. And, of course, pricing and volume form an equation. Our margins are also very strong. So, you see we have seen combustible cigarette price increases year on year, slightly ahead of inflation. And we would expect that to continue. A lot of this net pricing realization is about how much discounting and promotion is being done at the retail and at the consumer level. And we have seen relative stability in that environment for the past 18 months. Were pleased with that, our brands are growing in that environment, and were seeing trading to premium volume. Natural american spirit grew 20 year over year. That continues to be popular and in line with macro trends. So we feel we have a strong differentiated portfolio, options across the price space. And we have a very positive outlook for the business. Susan, thanks for joining us as always. Susan cameron, the ceo of Reynolds American. Up next on the program, 75 million millennials will clearly be pivotal to the president ial election. One tech ceo has some advice for the candidates on how to Better Connect with the young, bright things. Z zillos spencer razkoff will join us live. Sure, tv has evolved over the years. Its gotten squarer. Brighter. Bigger. Thinner. Even curvier. But whats next . For all binge watchers. Movie geeks. Sports freaks. X1 from xfinity will change the way you experience tv. Just many time for the candidates to hit the stage in colorado tomorrow. One tech ceo out for words of advice on how they can Better Connect with millenials. He penned his tips is zillow Group Spencer from seattle. Spencer, you got a lot of them at your company, of course. You are wellversed in the language of millenials, if you will. What do they like to hear . They mukt through text, social media, short captions. They value brevity, consignificance, authenticity. The political rhetoric that appeals to baby boomers and genx and geny, they want a politician to address them like somebody talking to a friend. Thats the Communication Style that resonates with millenials. I always wonder about the effectiveness of those ads that can typically tear down an opponent and build up the person who the ad is for. How do they respond to those given they can often not be how you just described, they like to hear their candidates . Well, increasingly mill enwrals arent watching as much tv as prior generations. The ability to reach the millenial audience through a 30second tv spot, thats rapidly eroding. Increasingly, theyre focused on social media and other short form video content throughout the web. Politicians are changing not just their political Communication Style, but also their advertising tactics to try to address this largest generation. There are now more millenials than any other cohort. Past elections have been influenced by retirees or by boomers or other cohorts. This is ages 18 to 34. Authenticity, spencer, isnt just about brevity, is it . Its about a feeling. Its about an angle. Its about a desire for change. Its about maybe a view that half of capitol hill is rigged. Even baby boomers might feel that. Think about ross perot connected by just being a straight shooter. That is tried and true, but millenials in particular know no other way. Thats the only way they want to be xhublgtd with. Who is the millenial pick . Donald trump or Bernie Sanders . The people that talk sort of the most bluntly . Well, its a little too early to say. I mean, trump and sanders are certainly appealing to millenials by being blunt ask direct, but the history of candidates like this, whether its ross perot or howard dean or even john mccain to some extent is that typically their direct Communication Style gets coopted by the political mainstream, and kind of the mavericks end up fading as the mainstream coopts not just the Communication Style, but also the political positions of the extreme. Its a little early. Well learn a lot more tomorrow at your debate, of course. Something occurs to me. They dont vote very much. When you look at the actual numbers in terms of 18 to 34, they are not showing up to the polls. They care about different issues than politicians are talking about so they care about rent affordability. They care that 30 of their income of average americans income is going towards rent and historically its been 24 . Because of their increased rent payments, they cant afford to pay off their student loans. I mean, they care about gun control. They care about slightly different issues than your typical, you know your typical voter. If you want them to vote, if you want to activate this cohort, you have to talk about stem education, student debt, rent affordability, domestic issues that affect them. Thats how to actually catalyze this generation. I want to talk about something you know a lot about. The housing market. We got higher prices in the form of s p kay shiler this morning, but disappointing new home sales last month. Where are we in this recovery . Is there a reason to be concerned . The housing recovery is on solid foot, but its pretty boring now. Home values are appreciating sort of 3 , 4 yearoveryear, can and thats normal. Huge upturn during the bubble, and huge downturn, and now were plodding along 3 , 4 . Thats okay. Rent affordable, in many parts of the country people are paying 40 of her monthly income for rent versus the historical average of 24 . Where does that 16 come from . It comes out of discretionary purchases. Thats what impacts the economy in a recession overall. We need to be talking about rent affordability. We had millions of americans no loer owning a home that moved into renting, but we didnt build millions of more rental units so rents went up. Very substantially. These are the types of issues that affect not just the economy, but also the election and i hope that we talk more about these issues at the debate tomorrow. Yeah. Well, well we will be watching and hope the seam. Spencer, thank you for your insights. Whether you are a millenial, a generation x, or baby boomer, youll hear from donald trump and the other gop candidates tomorrow night during our own cnbc Republican Debate coverage. It begin at 5 00 eastern. Wonder what the baby boomers want to hear . David. David. Im going to beat the hell out of both of you. Thats what im going to do. That is just so low. Im leaving. Im leaving. Im just leaving. 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