Transcripts For CNBC Squawk On The Street 20160916

Lowest level since august. Road map begins with deutsche, shares plunging this morning on news that the department of justice is demanding 14 billion to settle some claims. Were going to take the pulse of the banking industry. The new iphone hit stores today. The lines arent what they used to be, but does it matter . Apple shares up 12 so far this week. And the nfl made its twitter debut last night to some mixed reviews. How it worked and what it means for the future of the company and live streaming. But first up, Deutsche Bank down sharply in the premarket. The doj demanding the bank pay 14 billion to settle Mortgage Securities probes related to the financial crisis. The banks head of communication spoke to cnbc europe this morning. Take a listen. We know that this is a number, its a very high number. This was the case with other banks, with our peers in the united states. And we all saw that these numbers go down significantly then. And so we are very confident that we are able that we will be able to negotiate this number significantly down. When we assure we will treat it fairly in this process. So quite optimistic that this number definitely wont be the final one. This is all related to some residential mbs in the words of the bank, jim, these negotiations are only the beginning. Yeah, theyve been dead wrong on this the whole way up. They felt the Justice Department would never really even target them. Theyre very unrealistic about the way the Justice Department under obama has worked. To tony west, negotiated the incredible fines, bank of america paid 16. 65 million, j. P. Morgan paid 13 billion, citi paid 7 billion. Those were negotiated by tony west. Now general counsel at peps kic. Pepsi Deutsche Bank has to be careful here in what they say because this is america. And thats not the way they play it anymore. This is a different Justice Department with a different view of companies that are not based here. So i think theyve been wrong the whole way, i dont think you go in and negotiate with the Justice Department by coming out and saying, hey, thats your first offer. Because that was the wrong thing. And everyone who negotiated all other deals, is probably laughing at them they started this way. My advice to Deutsche Bank, speak softly, carry big wallet. Eight years after the collapse of lehman yesterday eight years ago, its funny to go back to this time because Deutsche Bank was the leader in creating the abx index. Thank you. Which of course enabled people to short subprime and follow it very closely. You know, guys like greg lipman i remember at Deutsche Bank, they were all over this thing. Yes. Actually creating the other side of the trade. And focused with their clients. In fact, it was even in that movie. Big short. The big short. They actually had those guys in there. Thank you, thank you. Just funny to think about that now and theyre going to get it from the other side for creating the Mortgage Backed securities as well. Now, look, they are lucky west isnt there anymore. West is not there, west by the way is a sensational guy. Hes incredibly cool. But he was very tough negotiate with. What number can they pay . Because Deutsche Bank is had a rough go of it. How much did senator geary pay . I dont know. A lot of long term charts of deutsche floating around this morning. As were talking getting news of shares of intel youre going to want to watch raising q3 revenue outlook. Company says it sees signs of improving pc demand on what has been so far the best week for tech since may. This is amazing because you know that the last quarter was very weak. You know that they this is the First Quarter that literally bri brian said its not coming back, expectations incredibly low, stock well above where it was when it reported the quarter, Western Digital, buy seagate, this group is low on inventory. And its an inventory story. The inventorys burned off. Hp inc. Right. That is the key point here, jim. The increase in revenue that theyre citing which has them about 15. 6 billion plus or minus 300 million as compared to the previous range of 14. 9 is due, they say, to the replenishment of the pc supply chain inventory. Company also seeing some signs of improving pc demand. Now, they have said that before. We got to be careful. Okay. Brian is very conservative forward thinking guy. I would say intel is totally a function and has been for a while of gross margin and inventory. And i think this was the first time where they really did underestimate to me. Now, one of the things happening in tech is it seems like theres just buying of pretty much everything. What it really is is pcs they didnt flood the channel with pcs. They were wrong, wrong, wrong about microprocessors and how much demand there would be. And they finally cut back. And look what happens. Same thing with disk drives. They cut back, look what happens. Gains for the week, skyworks 14, were going to talk about apple in a minute, 12. Broadcom, core vo, list goes on. Nvidia internet of things, but all the other guys are in this. Remember skywork is 7 in the new phone. Yeah. And corp vo is the rf and broadcom is the communications chips. Theyre all in there, and they were all with the exception of broadcom going down ahead of this. Intel obviously has some exposu exposure. They took some exposure from kwa qualcomm. Im not sure id want to be in a Company Still primarily invested in the growth of the pc market. No, i agree. You know how inventories are. Look what happened with Western Digital when inventories, micron, seagate, theyre all commodities, theyre like oil. There was a supply and they cut back on supply and this is what happens. Weve been waiting for this to happen. Many people waiting for this to happen and kept denying, denying, denying. The fact hp is not at 15 right now is insane. Hp q. Thats them. Thats them. Thats the them. You cant buy dell. No, you cant. Well, you can. Boy did he get it right. I continue to think michael dell really got it right. Do you think he got it right . He might have. He might have. Well watch intel certainly up 4 in the premarket. Jim mentions apple, what a run its been this week. Stocks jumping about 12 for the week so far on this upbeat news surrounding demand for the new iphone 7 and 7 plus, they debut in stores today. Both phones are now available in more than two dozen countries. This is a live shot outside apples Flagship Store in new york city which opened about an hour ago. Canaccord today takes their target to 140. Discussion in the journal about how we judge the sales curve of these products as they come out. Also, how wireless carriers may not be poised to benefit in ways they have in the past. Yeah, i dont know. I read that story. Its certainly not what maurice whos here next week. Not what sprint would say. Marcelo. Marcelo. Marcelos very active tweeter right now. Yes, he is. Saying its not what john ledgers saying, its not what atts saying, its not what verizons saying. They could all be a bunch of serial liars and not know what theyre talking about, but i think theyre pretty honest guys. You can make a lot of money off this. Make a lot of money, especially when you didnt think you were going to have new contracts. Thats a pretty significant move in a stock in four days. No kidding. Best fourday run since 09. Mentioned that yesterday. 09. Well, look, when you have all these guys its very funny to watch this and im sure all the people who work at apple remember when all these guys cut their price targets. Now theyre raising price targets. Value added . There was a period a while ago where you were begging sell side to own their skepticism. I did before the fire phone, didnt know the fire phone would be released two weeks before the i7. Oh, samsung. Took me a second. The Consumer Product Safety Commission calling it a serious fire hazard, asking people to shut them down, do not use them. 92 reports now of cases with 26 burns. When do you charge your phone . I charge my phone when im asleep, okay . I know. I only sleep for three hours, but you cant risk that. All right. A million phones sold. Incidental when we come back, twitters first live stream of an nfl game is in the books. Well get reaction from the twittersphere, take another look at the premarket. Were back in a minute. Opportunities arent always obvious. Sometimes they just drop in. Cme group can help you navigate risks and capture opportunities. We enable you to reach Global Markets and drive forward with broader possibilities. Cme group how the world advances. Twitters up the morning after its first nfl live stream. Last night the new york jets beat the buffalo bills. The first time an nfl game has been broadcast on a social media platform. Some users complained about delayed feeds, but there was also positive reaction to the live streaming, particularly the quality of the video. Pittsburgh steelers running back deanglo williams tweeted took seconds watching thursday night football to know this is the way of the future. Business capitalist Mark Andreessen we were promised Interactive Television and instead we got nfl games on twitter. That was one element, youre seeing tweets from people you have no idea who they are, but the company theyd probably argue its a good first step. I thought it was a great first step and i tweeted that to adam bain and their c. O. O. And i thought it was a very big success. My friend fred wilson who i think is every bit as good as andreessen saying he thought it was a home run. But hes long. Wish could watch all sports like this. Yes. Now, can i say i didnt get to say this to anthony, but it did help that this was the best thursday night game i have ever seen. It was a good game. I mean, it was fabulous. Not all thursday night games like if this was a 147 game, you know, i think that we would all have gone to bed. But, no, they got very lucky, but it was a good presentation. Anybody who runs a block, i think thats a bad call. It was fun. It was a fun thing. Also that moment where you realize im sitting through a 30second spot on twitter for whatever bank, beverage company, right . And its interesting someone is tweeting adam bain how do you make money off this . He said commercials. This was a very big hit. And i know a lot of people who felt the stock follow twitter would be up 12 the world doesnt work like that. Congratulations to them. Sometimes ive been critical of twitter. Yeah, you have. But rightly so. Unclear they can get any significant top line growth at that company or meaningfully increase the Monthly Average users at the company, those have been the key considerations not to mention the fact weve brought up many times the ebitda equals more or less the stock base compensation. Right. But theyre a media company. That was interesting. Go back and forth, what are they . Remember yahoo anybody buys them you have to think about other media companies. Yahoo had the tampa bay game, no one really cared. This was different. This was fun. It was fun. Now, the game was fun. Fitzpatrick it was brandon look, you had bmarsh. Bmarsh . You making that one up. No, when i met him, we met him remember scott wapner introduced us at the correspondents dinner, scott wapner is unbelievable at these things. Youre on the field, youre in the huddle with scott wapner and hes friends with all players. Autographs everyone. Didnt know that. Scott wapner. Bmarsh. Is this how youre going to watch the games they have for the remainder of the season . I will watch it this way. It was just too much fun. And i like it. Its like a Nice Community and people were excited. Yeah, but obviously i play fantasy, and that matters. I dont have forte, obviously if you have forte it was the greatest night in history. But i do if the games a good game, yeah. And for those who never use twitter, do you think they look at this and say, oh, i get it . I think its still too hard. Its still too hard for them to onboard, i think. You have to have the right ios. They have to make it a little bit easier for people who are a little older. But if youre over the top, if you dont have a cable subscription but you got your broadband coming in which of course everybody has to have, you can just get it on your internet enabled tv and watch the game. You can watch it on apple tv. Thats how people watch it. Apple tv also got a boost from it last night. Yeah. But look, again, great game. Very exciting, but for the most part its the nfl. And the nfl is on is such a win. I had jerry jones on last night. He said if youre owner of the cowboys i know who he is. Thanks. If youre affiliated with the nfl, you have a win. I think jerry is right. He was very helpful. I talked how i lose on fantasy im disup he said, no, i actually own ezekiel, you play your fantasy, reality. Nice wakeup call from him. I did see you compare oracle to revis island. Yeah, that was that was rough. That may not have been fair to revis because revis is a really good guy. Ive seen profiles of him. Oracles down in the premarket on that miss. Revenue metrics got a lot of attention. Theres Service Revenue growth and overall revenue growth. But at the same time analysts are lap dogs. Safer cats said it was great, Larry Ellison said it was great, so analysts said it was great, revis is supposed to be great. But i think revis and oracle have lost a step, obviously because im looking at the legacy oracle, cloud oracle is doing fabulously and i think people think its going to do like adobe, so i give them credit. But at the same time they kept saying what a great quarter it was. And it was a miss. I was looking for 59, 60, but they are switching to cloud, when that happens there will be more cloud. But revis, you cant do single coverage anymore. That was embarrassing. Wasnt it . They call him toast now. Thats all right. Hes going to be okay. Just needs a little help back there. With Cloud Business the legacy business and legacy revis. So michael and who are they in this cornerback comparison now . Larry ellison of amazon, inferior product, boom, they say we bring up workday several times because were killing workday so we can ask bush ri whether theyre really being killed. They had some accounts. But anyway, it was a very loving call. It was like an amen corner analyst call. It was embarrassed how much they loved the quarter that was a miss. You do point out deutsche keeps their hold. Oh, yeah. Love, love, love, love, love. Suntrust still likes it. Canaccord says its expensive. Its love. The Conference Call was worshipful and it was, you know, it should have been on twitter. They should have broadcast on twitter so people could say isnt this going to take twitter up to 22, twitter can be 24. Maybe Conference Calls are next. But they did their own. They fixed the graph. I mean, obviously the game looked like the game. Yeah. Well talk more oracle, amazon as well, some of these new price targets. Well count down to the opening bell. Well get jims mad dash, take one more look at the premarket. By the way, today in 1929, the s p hit its thenhigh, a high it would not surpass for 25 years. Rca was up like 100, im not kidding. It was on fire. More squawk on the street in a minute. When whirlpool builds an appliance, they put everything they know into it. But once its sold, there usually isnt a way to keep improving that product. Today, whirlpool can analyze iot sensor data from connected appliances on the ibm cloud. So they can continuously learn how customers are using their products. And how the machines respond. Harnessing data to make great products better thats what the ibm cloud is built for. Tempurpedic mattresses is that they contour to your body. Harnessing data to make great products better it keeps us comfortable and asleep at night. vo soft, firm, or hybrid. Our three collections pair up to create the perfect bed for two. Theres more than one tempurpedic. Announcer are your children in the right car seat for their age and size . It may be too late to check when youre on the road. [blaring car horn and skidding] fortunately, youre on the couch. All right. We got seven minutes before we start trading on a friday. Always nice to say that word. You know, big fan of doug mcmillen. Yes, i know that. Of walmart. Heres an upgrade by credit suisse. I love this, not exciting but better than many others basically. Now, walmart has this was a good call, i feel, because walmarts been coming down but numbers are very beatable. Theyre doing a lot of good things in terms of training and keeping employees. Jet. Com obviously is a total wild card. I love this line, management is throwing a lot of money at the problem. Do we know what the problem is . Yes, amazon. Which by the way as again Larry Ellison says amazon vastly inferior to oracle. Yes, web services. Vastly. Incredibly. So anyway, the comp growth key driver stock growth i like the call. Remember, walmart and amazon are back. I mean, amazon never left, but walmarts taking share. If you go back to that incredible Dollar General Conference Call, which was quite disappointing. Yeah, you focused on that a lot. You think that was a seminole moment, huh . Watershed. Really . Watershed. What about this moment here . I guess that was a pretty seminole moment, wasnt it . That was squawk box and then mad money and remember that day . Upstairs right here at the nyse. Oh, we forgot to tell you about it was an illadvised decision he made there. It was. But look at the rest of it. Right. And thats because they took the numbers down, david, he took the numbers down to about here. Yeah. And so then we did the numbers here, the stock went here. Right. All right. Youve been onboard for a while now. I have been onboard, because i like him and i like the fact hes feeding the employees in a way that says im keeping you. Im not going to lose you to another chain after weve trained you anymore. And its working. And thats what jim senegal told me would have to happen in particular for walmart to come back. Because theyre losing a huge amount of money on training. And then the best people not to be confused with jim cramer from the church of whats working now. Costco. Got opening bell coming up after this on a friday, dont forget. Means its the last workday of the week for most of us. What if a company that didnt make cars made plastics that make them lighter . The lubricants that improved fuel economy. Even technology to make engines more efficient. What company does all this . Exxonmobil, thats who. Were workinon all these things to make cars better and use less fuel. Helping you save money and reduce emissions. And you thought we just made the gas. Energy lives here. 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. Youre watching cnbc squawk on the street live from the Financial Capital of the world. The opening bell in just under two minutes on this friday where iphone 7 launches. Donald Trump Holding a presser in about half an hour. Well be looking out for that. Cpi runs a little bit warm. Yeah. Ten months now that poor has run 2 or better. A lot of people saying, Steve Liesman saying the Conference Call this morning, where do they get these numbers. I like at the digitization of food continues to plummet, digitization i think keeps a real lid on wages. Im not as worried about cpi. Theres just a lot of price weakness where i see gasoline will be down. By the way, you know, oil futures for 2021, do you know where they are . Theyre like 51. Im not kidding. Oil is, really there is a real problem with oil. And that is the way the futures curve is indicating oil aint ever going up. And i think people have to recognize oil is very big important for all the numbers that we see. And i was just shocked to see how the futures market is saying oils not coming back. Interesting. Today it does hit the lowest since august. Yeah, thats something to watch. Traded as low as 41. 10. Well keep our eye on that. It is quadruple witching. Got a bunch of initiations which well work our way through. You hit at walmart a few moments ago. Right. Lets get the opening bell and s p at the bottom of your screen at the big board today, bank of nt butterfield and son based in bermuda celebrating its ipo along with the premiere of bermuda. A lot of bermuda shorts on the floor today. Reminds me of butterfield a classic and then elizabeth other than when she was national velvet. Over at the nasdaq celebrating its ipo Software Company everbridge, provider of safety applications. Curve, im looking at west texas, comes in about 54 in 2021. Again, oil is key. The markets turn down when oil around 4 00 a. M. When oil went down, you saw the futures go down. Its not stopping. Its still linked. Just want to point that out. Oil is heavier than intel, is what youre saying. Yes, i think intel is going to be regarded like micron, like seagate, like Western Digital, an inventory issue, not a demand issue. But intel will say spin it a little bit. Did you see that story in the wall street journal this morning . Coming off this continuing investigation from the new York Attorney general schneiderman of exxon mobil and questioning no write downs and whether thats appropriate in the journal story. Yeah, i dont know. Exxons a pretty honest company. When it comes to reserves, most conservati conservative. They are the most conservative. Some of these guys are real renegades. Exxon no one ever i would not. There are many issues i have with exxon, their long term plan, but not about the way they analyze things. Theyre the model. I saw anna darko with a very good call, a lot of people feel j. P. Morgan raised the price target 64 to 70, anadarko deal with freeport because freeport obviously needs the capital. Freeport needs the capital. Freeport does need the capital. They are still a wash in debt at freeport. Look at Western Digital, usual cast of characters from 1998 when pcs did better. Remember Western Digital when they preannounced that bad number at the end of 98 . I do kind of. The christmas shortfall. Thats what we called it. Youre really dealing with ancient companies that are making a comeback because of people cutting back the supply because they were losing so much money. Why keep building factories . What is the point of building factories . I dont know. They learned their lesson on that front. Yes. They stopped building they cut cap x and this is what happens. It was just happened a quarter later than i think a lot of people expected. Yeah. At the top of the list, as jim says, you name it. We mentioned these initiations. Lulu gets one at s. I like the quarter. I know they spent a lot of people feel theyre a one trick pony, they spent a lot of money. I think its much more mens and womens. Fella they got from nike is a brilliant guy. I think people should buy lulu. The other one we watched was gopro, rating with a buy 19 target. They say a heros welcome or a heros comeback. The hero 5 apparently is good. But this issue of inventories. Inventories are low for gopro, so theres no promotional discounting. A lot of companies learned their lesson not making a lot of extra stuff, but it might not be needed. Gilead, interestingly, tapping the bond market for 5 billion. This is a company ive pointed out many times with what is the largest Balance Sheet capacity already given its enormous cash flow and lack of debt. And yet they go out and get money they dont seem to need. Yesterday i mentioned cellgene competing so aggressively for medivation losing of course to pfizer, sanofi also losing there. Gilead was also in that. You know, many people think they will do a deal at some point. David, why do they need money . The pepsi, of course that deal they did one of the greatest of all time. They have the best war chest for them to raise money here to me is theyre going to do a deal. And were going to have to work on this. Were meaning you. I already did and i havent gotten an answer other than its really cheap and you can you know, why not take it when you can get it to have even more of a war chest. That was oracles rap. Raised a lot of money when they didnt need money, they have more cash than know what to do with, but they bought back a ton of stock this corner. Maybe gileads going to i dont know. They got a lot of fire power. They have fire power, yes. They could burn down a village and save it thats how much fire power they have. Could. One hopes they wouldnt do that. No. Theres somewhat of what appears to be a bidding war in amazon price targets. Rbcs mark mahaney goes to 1,000. Were going to talk to him later this morning, but ever core goes to 1,015 on what they call automated future. Bernstein already automated as well. Yeah, look, Amazon Web Services is doing so well. I had a fella that does nothing but game amazon. Last night i had a fella, fred dimien, has a company you hire them in order to be able to put your stuff on amazon. Uhhuh. And this is what people have to do because its such a huge part of their business now. And also to eliminate counterfeiters. When you want the box on amazon. Exactly right. Exactly right. What you need to do to optimize. So you need to hire consul substantiat tants be able to do it and make sure somebody isnt coming up cou counterfeiting. You brought that up with alibaba. Counterfeiting is a huge issue for them. Its always an issue on any number of these commerce platforms, but has been for them certainly. Amazon and alibaba going higher. Alibaba is, what, in boston today . Theyve just done a major blitz of the shorts i mean, their story. They have. They have. And that of course has helped to send yahoo shares up to almost 44 even though he did say, mr. Tsai, there will be a significant discount in his opinion between what will be left behind at yahoo, the Investment Company we talk about that will solely be that 15 stake in alibaba and what the market price of alibaba will be and describing why he doesnt feel they can successfully get at it sort of that glass box they cant get to the shares. And so didnt make it seem likely at this point that alibaba has interest in trying to buy that stake back in one way or another. But that was a very interesting delivering alpha conversation with joe tsai where hes basically saying in the end youre buying china. Thats something that tim cook has often talked about, youre buying this wave of middle classification of china. And i thought it was a very compelling story. I know there are issues of transparency that the shorts bring up. We know jim chanos in Previous Panel took him on. Its a horse americans love alibaba. Yeah. A longtime bull argues that 90 of the time when youre in september and stocks are up 5 to 20 for the year, theyre higher at year end. So he says the pullback has to be bought aggressively. You buy that . I never like to go against tom lee. Hes really smart and good. Does a lot of great impericle work. What about president ial elections . I wonder that too. Yeah. May have to change the parameters there. Extrump. He should have asterisked it. The part where all analysts say we could be long, its election based. I think thats probably a well advised analysis of it, i think. Finally, beverages. We mentioned credit suisse, pepsi, monster with an outperform. Coke, constellation neutral. I think constellation the other day it got a recommendation, i think pepsico is totally spot on, stock is down. But remember in july 7 to 10 almost all these stocks beat clorox peak, Campbell Soup peak, a lot of those are bond market equivalence, constellation is plain old growth. Monster plain old growth helped buy european conversion with the cocacola infrastructure thats really helped them. And Convenience Stores doing better, obviously where you stop when you have extra money from the gas pump, you buy monster. I dont buy monster, i think rock star is much better, i dont know what do you think . Jim said it a moment ago, intel leads the dow. Lets get to bob pisani, bob. Yeah, i think theres a little blowback here from the whole Deutsche Bank thing. Our banks still not looking very good. Lets start with Deutsche Bank down about 8 over in europe here. And the rest oflt banks not looking very good as well. Remember, theyre seeking u. S. Authorities 14 billion. That would be a record right now. Just to give you an idea how much this is for Deutsche Bank, Deutsche Banks market cap is about 18 billion right now. So the seeking of 14 billion fine on a company that has a market cap of 18 billion. Okay, its true, they set aside 5. 5 billion euros to deal with this, but do you get the idea the size of this relative to the size of the company. One reason were seeing weakness in the u. S. Banks even. Now, remember, there was a downgrade of citi group over at Goldman Sachs maintaining bank of america. So citis a little bit weak if you look here, but bank of america, zions, key, theyre all on the weak side. Wells fargo a terrible week overall down 1 today as you can see. S p up fractionally for the week, but just barely here. Remember, its been a week of tech stocks by and large. So of course microsofts had a very good week. Intels had a good week. But really apples the one that matters. You can see its up fractionally today, but thats not the real story. What you want to look is the sector leaders for the week and why the s p is up fractionally, its largely due to the performance the outperformance in technology. So 3. 5 gain in the tech group, which tech and financials are too biggest sectors in the s p 500. Apples 11 gain. Remember, apple is north of 600 billion market cap, far and away the biggest stock in the s p 500. Intel a fraction of that. Microsoft 450 billion, big but significantly smaller than apple. So apple yesterday was almost 20 points in the s p 500. The s p was up 20 points. You get the idea how these big cap stocks can move the Market Indices around. My point being, the reason were doing well on the s p this week is largely because the outperformance of big cap techs particularly apple right now. So lets move on here. We got a couple ipos that are trading today here. We got the biggest bank of bermuda down here on the floor. Im waiting for some indications. We just got them 231 to 23 for butterfield, biggest bank in bermuda, right now 21 to 23 is the price there. So well see how that opens here. We also have a Tennessee Bank thats opening here, fb financial. Theyre one of the biggest banks in tennessee. They price at the high end of the range 19. Price talk 16 to 18. Dont have indication on that. Well get to that in a moment here. And tech stock over at nasdaq, everbridge, a communication and enterprise safety applications, they priced right in the middle of the range 12. Price talk was 11 to 13. They do Subscription Services for emergency mass monitoring. So they have contracts, eight of the top ten biggest cities, 24 of the top 25 airports. If theres an emergency, they do all of the emergency communications. Very specified specific area of handling Technical Communications but one thats obviously very important. Interesting niche, but still a niche there. Ipos, well, im waiting for it to heat up. Were on the verge of it. Ive been saying it for a while, but so far september might be the biggest ipo month of the year. May has been so far. It depends on what happens in the final month. Next week when we get a few big names, valvoline should be trading here, e. L. F. Makeup, depends on what happens in the final week on the 26th, we get a couple more. This will be the biggest month of the year. Still markets still out. Finally, real estate is finally getting its own home. I was the real estate reporter 25 years ago here at cnbc we were talking about it back then. Today is the day reits will separate from the financials. They have been part of financials for ever. Theyre going to become the 11th sector. Theres ten sectors in the s p. There will now be 11. Reits are 20 of the Financial Sector when theyre separated out you might say 3 . Might say thats not much, but materials is 3 of the s p, telecom is 3 of the s p, we talk about that all the time. The point is its time to do that. Reits performed well, outperformed the overall market up 6. 5 , s p is up 5 . We obviously have long term Interest Rates being low. And that dividend 4 is the average dividend that reits pay right now. And thats been the Main Attraction for them. So give you an indication here right now 21 to 23 on butterfield. Go over there and talk to the ceo in just a moment here. Right now the dow down 99 points. David, back to you. Thank you very much, mr. Pasani. Well, with the dojs case against the merger of anthem and cigna little more than two months from going to trial, recent development in the governments case has led some Market Participants to believe anthem and cignas chance of victory has slightly improved. Slightly. When the lawsuit was first unsealed, the government took aim at what it said would be a lack of competition on the public exchanges for Health Insurance that would arise from the deal. Anthem and cigna, the government argued, were Key Competitors in metropolitan areas such as denver and st. Louis. You can read it right there. And the merger would therefore depress competition in those markets. It was one of four grounds the government cited as its reason for moving to block the deal. On september 1st, the government quietly folded on that argument after anthem requested documents related to the governments focus on public exchanges. The government told the court it would no longer offer evidence relating to the sale of individual insurance on public exchanges. No documents would be needed because the government would no longer argue that point. Perhaps not that big a surprise given the rapidly eroding participation amongst insurers in the public exchanges s leaving just one insurer as the only option in some states. Thats not a fact the governments seem likely to want to concede. The key focus on anthems case has never been the public exchanges. But sources close to the company tell me the governments decision to withdraw that objection to the deal is nonetheless in their words material. Of the original four objections cited by the doj, it was the only one that could not be solved through a divestiture. The dojs case against the aetn aetn aetna humana deal also while the government has not abandoned antitrust claims in the Public Market for that deal, does seem likely to pursue them in one case and not in the other. Officials from the doj did not return calls for comment. The focus of the governments case against anthem remains the concentration of market power the company will have in the commercial markets in the 14 states where the two compete for what are deemed national accounts, and the 35 metropolitan areas the doj has said they compete for large group employers. And that is why, guys, there continues to be a high likelihood at least in the view of the marketplace judging from the spread on the deal that the doj will win that case. Aetna humana if you take out public exchanges, theres only one issue which again is the key one, whether or not medicare and Medicare Advantage are separate markets. And there the odds seem to be more higher that aetna humana will emerge victorious. But wanted to note this at the very least because were a couple months away from whats going to be the beginning of an important trial, the aetna humana deal starting in december. Ive been looking at those trying to figure out whats going on. There you go. Thank you. Youre welcome. By the way, should point out at the same Time Health Care inflation 51. Cant keep it down. Price rise and hospitals and the last month of life. Trying to bend the cost curve is very difficult to do. Lets head to the bond pits now. Rick santellis at the cme group in chicago. Rick. Good morning, david. Theres a bit of a tug of war going on with treasuries. Look at an intraday of 2year notes. Just in isolated fashion they definitely popped up on the hotter than expected cpi, especially the year over year core 10 months as weve been saying on cnbc at 2 or higher. Lets look at a oneweek of bunds. Oneweek of bunds should show us two things, they also popped on our hotter than expected 8 30 data, but coming into it they were really losing some steam dabbling in negative territory again. Now, if we look at a 623 start to bunds, it looks as though maybe its run its course to some extent. Maybe the dog that didnt bark on Mario Draghis statement day is giving way to the notion of this loop that the markets look, they see inflation data in europe yesterday, and even though there wasnt anything shocking about it, its leading investors in europe nonetheless to think, oh, mario draghi will come around, bank of japan may be looking at the dark side of some of their policies, but theyre still going to keep on marching. This seems to be the notion going into a weekend. Now, if you look at our 10year starting on 6 23, not as pronounced but also looks though maybe were turning. I know that the yield curve, forget what it means from an economic standpoint, lately its pretty easy. When it starts to steepen, the long end leads. It isnt the short end so much moving lower. And today we see that the opposite is true. Its backing away a bit. Granted on the 10s, 2s yesterday hovering at 96, today 93. Only three basis points, but traders look at that as leading indicator on how they want to trade the long end. And finally, oneweek of the dollar index, look at fed percentages and fed funds, dont think theres anything real there. But i think looking at the dollar index is about as real as it gets, definitely popping out of its range to the upside, carl, back to you. Rick, thank you very much. Rick santelli. When we come back, this 1,000 call on amazon, rbcs mark mahaney on why he raced his price target on that stock and why there are several on the street with four digits. Meantime dow down 76 points. Back in a minute. Ok team, what if 30,000 people download the new app . Were good. Okay. What if a Million People download the new app . Were good. Five million . Good. We scale on demand. Hybrid infrastructure, boom. Ok. What if 30 Million People download the app . Were not good. Were total heroes. Scale on demand with the Number One Company in cloud infrastructure. Hewlett packard enterprise. Using 60,000 points from my chase ink card i bought all the fruit. Veggies. And herbs needed to create a popup pickyourown juice bar in the middle of the city, so now everyone knows. We have some of the freshest juice in town. See what the power of points can do for your business. Learn more at chase. Com ink see what the power of points can do for your business. [ yes. Yes. ] uhhh, youre really getting the hang of this. Anncr want feedback that helps . Verified reviews. Another reason to join angies list for free. This new ac guy is not that good. No hes not. Anncr. need a job done right . Search toprated providers on angies list. Join for free. Banks under pressure as you can see oil adding to that pressure. Thats why the dow is down 91 points. Well get stop trading with jim in a minute. 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 strategies 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 expertise of highconviction investing. Translation . Why invest in average . Experience the thrill of the lexus is f sport. Because the ultimate expression of power, is control. This is the pursuit of perfection. This man creates software, to protect this customer, who lives here and flies to hong kong, to visit this company that makes smart phones, used by this Vice President , this little kid, oops, and this obstetrician, who works across the street from this man, who creates software. They all have insurance crafted personally for them. Not just coverage, craftsmanship. Not just insured. Chubb insured. Time for cramer and stop trading. One of my travel trust names i like is citi. Obviously Goldman Sachs does not like that, downgrades citi, says less opportunity Growth Capital constrain constraints, come on, mike. I dont think citi has any capital constraints i know of. Theyre the ones that got the best grade from the fdic. I think mike should be more vocal, maybe even come on mad money and talk about that situation. Theres an invite for you. They like bank of america. And bank of america they think its going to have expect earnings per share go to 13 , which would be very, very good. They love bank of america. And i think thats a very interesting switch, because they have been behind citi for a long time. And, wow, pretty critical. Pretty critical of citi. Yeah. Between that and wells, deutsche, its been an eventful week for financials. Just the banks and then maybe no the Deutsche Bank is really incredible. Theyre playing it all wrong. Well, i dont know, im not advising them. Whats on mad tonight . I have the biggest winner of brexit. Im not revealing but biggest winner by far. Of what . Brexit. Oh. Stay tuned. Its a secret. That is a tease. Yes, it is. Well see you tonight. We can show, its great. Good week ahead. Yes. Footballs back. Yep. Mad money 6 00 p. M. Eastern. When we come back as jim said, a rough morning for Deutsche Bank, the doj demanding 14 billion to settle this morning security probe. Meantime, the dows down 80 points. E new glasses . They are. Do i look smarter . Yeah, a little. Youre making money now, are you investing . Well, ive been doing some research. Let me introduce you to our broker. How much does he charge . I dont know. Okay. Uh, do you get your fees back if youre not happy . dad laughs wow, youre laughing. Thats not the way the world works. Well, the worlds changing. Are you asking enough questions about the way your wealth is managed . Wealth management, at charles schwab. Theres a lot of places you never want to see 7. 95. [ beep ] but youll be glad to see it here. Fidelity where smarter investors will always be. If only the signs were as obvious when you trade. Fidelitys active trader pro can help you find smarter entry and exit points and can help protect your potential profits. Fidelity where smarter investors will always be. The light bulb, a bright idea if you use the right ones. Led bulbs use 85 less energy and last a long time, saving you up to 100 over their lifetime. Heres an idea replace yours today. [light instrumental music] good friday morning. Welcome back to squawk on the street. Im Carl Quintanilla with sarah eisen and david faber at post nine of the new york stock exchange. The best week for tech since may continues today as intel boosts its q3 revenue guide. But when you put the banks weakness and oils weakness together you have the dow down about 75 points. Some Economic Data crossing the tape. Lets go to Rick Santelli with that. Rick. Well, we end up with a sub 90 look at our preliminary september read on university of michigan sentiment. We were looking for a number slightly over 90. We ended up with exactly what the last months final read was, august final was 89. 8. Thats our september preliminary, 89. 8. Which means that, you know, this would be the third number in a row if it stays this way when we get the final to be under 90. Ill give you some context, the low read of the year is april at 89 even. Then it goes back to september of last year at 87. 2. So these arent necessarily spectacular reads, but theyre not that far off. Inflation data did cause a bit of a pop in yields, but that came on the back of a drop in yields that really emanated more from europe. Carl and the gang, back to you. Okay. Ill take it, rick. Thank you, Rick Santelli. Deutsche bank shares falling sharply this morning on news that the u. S. Justice department has an ask of the german lender that is 14 billion. That at least is part of what would be a settlement for mortgage fraud from the financial crisis. Our wilfred frost joining us now with more on this developing story. Wilfred. Yes, thanks, david. Shares down some 9 as investors fear a large fine for Deutsche Bank. However, its important to note this is not the final amount. And speaking earlier the head of communications at deutsche, Joerg Eigendorf had this to say. Our peers in the united states, we all saw numbers go down significantly then. So we are very confident that we are able that we will be able to negotiate this number significantly down when we are sure that we are treated fairly in this process. So quite optimistic that this number definitely wont be the final one. And there is precedent here. The big u. S. Banks all negotiated down their fines for the same issue in recent years. Goldman sachs for example was initially asked to pay 15 billion, it ended up paying 5 billion. That said, deutsche only has 5. 4 billion set aside for litigation expenses, including for various other pending cases and has been expected by most analysts to pay around 2 to 3 for this fine. Thus the risk from here is they have to pay more than that. The other reason for the outsized share price reaction is deutsches valuation of 0 to 3 times book meaning disproportionately affected by any large fine as raising capital would be so costly from here. They maintain they wont need to do so. Finally, its interesting to see other european banks suffering far more, according to this than has been the case for u. S. Banks relative to the recent wells fargo scandal. State side highlighting the tough environment for banks in europe at the moment, guys. Yeah, well, wilfred, of course thats in part because of the prospect that were not done, meaning we, the u. S. , with some of those european banks and the potential fines having to do with their actions leading up to the financial crisis, correct . I guess were talking barclays and some others there as well. Well, absolutely. And of course these fines in terms of billions rather than the millions that wells fargo saw, and as you rightly said we believe the wells fargo issue is more contained. This issue less contained. But i think there is a second leg to it. It is that point of valuations in europe much, much lower, if capital does have to be raised, its far more punitive when youre trading below price to book value. And on top of that the aspect of contagion, of negative Interest Rates across the european banking space where profitability so much lower when you do get negative headlines, its affecting things far more significantly. And Deutsche Bank specifically, wilfred, i mean, they have been going through a very difficult time as it is of course given the state of their Balance Sheet, not to mention management has changed a number of times over the last few years. This cant help things. Oh, absolutely not. Management, as you said, changed the last couple years. John crion taking the role, one must realize he didnt know how tough this job was. 18 billion mark cap in terms of eur euros, but a Balance Sheet enormous at 1. 6 trillion euros and highlights that gulf between the valuation and the size of the operations which they continue to shrink. And of course once you do start pulling back from being one of those Global Players Offering Services in every area, it starts to sort of selffulfill as you try and pull back people start to question is it worth trading in all sorts of other areas. Its been a tough point for them as we heard today, again, in terms of the share price movement. Yeah, that shares down about little over 8 . Wilfred, thank you, wilfred frost. Looking at the Broader Market now, the dow is down about 101 points, it is quadruple witching day which is typically a volatile day of trading, joint of futures and options contracts for indices capping off what has been a roller coaster week for the markets. And the volatility could continue into next weeks fed meeting. Joining us now to discuss is jim paulson, chief investment strategist at Wells Capital management. Good morning, jim. Good morning, sarah. Just on this point about the financials, u. S. Banks underperforming, european banks underperforming on that deutsche fine, does it highlight the fact there is still Regulatory Risk around this group even if we do start to see a move higher in Interest Rates . Well, certainly there is. And, you know, thats pretty evident by whats happened here. But i think the key for the financials as a group at least is going to be the Economic Data skpr , and if weve turned the corner of yields. If the july lows and yields across the globe in terms of long term yields were indeed the low, weve gone from around a 130 to a 170 here in the 10year in the united states, if that tend continues trend regularly higher and the fed gets in the game and i think financials are going to come back to be one of the leading sectors here of the stock market over the next couple years. The fed gets in the game, so what does that mean . Does that mean you still see a chance that they could raise Interest Rates as soon as next week . Markets given it about a 20 probability right now. Yeah. It doesnt look very likely, sarah, that theyre going to do it next week. Id love to see them go ahead and do it, and to suggest here that theyre confident they can do this. That the economys okay. But it looks like at a minimum theres going to be at least a good deal of dissension, i think, on the board. It will be interesting to see what the final vote is if nothing else for raising versus not. But we probably wont get one, which means were going to continue to be in this fog of wondering if theyll do it here probably in december. But i do think that the bond market is taking over rates here in a way that hadnt happened earlier where youve got long term bond vigilantes kind of leading the fed again for the first time. Not only here but globally. And that is going to bring more and more pressure for the fed to start raising rates. What does it mean for stocks . Because weve seen a period where bonds and stocks have been selling off together. But you still have a relatively optimistic view of the equity market. So how can the stock market make new highs if we do start to see this backup in yields really start to gather pace . Well, i think if we find out the yields are rising because Global Growth is actually improving, sarah, which i kind of think has been going on, you go back and think about the Global Equity rally weve had since the february lows, and then the commodity price rally weve had over that period of time. And now the yield rally and the spread tightening and corporates, theres a message coming out of the Financial Markets that this is more maybe fundamentally based than people appreciate. And if we do find that out, then i think rate increases a key ingredient weve dealt with two years of declining earnings. Now, i think they might be turning a corner back up as well. And if earnings estimates start climbing again, that would give some help to for the stock market to withstand against rising yields. You could actually have a rally yet over the next several months in the stock market and still have lower price earnings multiples because earnings might go up even a bit more. Its certainly a rosy view of the Federal Reserve hiking Interest Rates this year, jim. Does that mean you still want to be in technology, banks and i think, energy, were your picks . Well, i think you want to lighten up on the bondlike areas and the consumer stocks. So consumer discretionary, consumer staples, utilities, telecoms, and redeploy funds towards more of the industrial and producer and material sectors, capital goods if you will, that includes technology and industrials and materials and energy. And i also think the one sector that probably does well in a rising rate environment on a relative basis, the financials. Id also look overseas because i think those stock markets are starting to outperform the u. S. , and look a little towards smaller and mid cap stocks over large caps. Jim, thank you. Good to see you. With the dow down 107, jim paulsen from Wells Capital management. Have a great weekend. Thanks, sarah. Meanwhile, the new iphone 7 and 7 plus hit the market today. Our josh lipton is at an apple store in palo alto where were all trying to judge the success of this product once again, josh, by the lines. Good morning. Reporter well, carl, so this apple store right behind me here is going to open up in just about one hour. Now, i did catch up with the first guy online. He has been online, carl, since 6 30 in the morning yesterday. Its the new camera, he tells me, that has him excited about these new phones. More and more people dont have their point and shoot cameras, dont have a dlsr with them when they need to take pictures. So more and more they use their mobile phone to take pictures. And the better camera, better low light pictures, better action pictures, better distance pictures. Reporter besides the camera, these new phones are faster, about 40 faster than the 6s. Display is 25 brighter. Improved Water Resistance and longer battery life. Also, no headphone jack. Apple executives say thats because they need more space to pack in Greater Technology into these phones. Also, they obviously believe they can deliver you a better audio experience with those new wireless air pods. Investors have recently bid up apples stock. It touched a ninemonth high this week thanks to those better than expected preorder numbers. And maybe the continued pressure that rival samsung is under. Now, ceo tim cook has been known to make a guest appearance at this store right behind me. No signs of cook yet, but well keep you guys posted. Back to you. Yeah, still early out there on the west coast, josh, thank you for the update. Josh lipton in palo alto. When we return, donald trump is getting ready to give a speech in washington. Well hit the campaign trail. Plus, putting trump and clintons tax plans to the test with Pulitzer Prize winning New York Times columnist jim stewart joining us with his brand new analysis. Much more ahead on squawk on the street with the dow down 113. Across new york state, from 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 live shot of washington, d. C. Where we do expect donald trump to give a speech some time this hour, perhaps. Timing is uncertain, but of course when we get some highlights or possibly some q a, we will take it live. In the meantime john harwood is watching that and a lot more. Good morning, john. Good morning, carl. You know, this is the day that attention has returned in a huge way to the socalled birther issue. Last night donald trump gave an interview to the Washington Post in which he refused to say that obama was born in the united states. Now, let me just step back and make something clear. Obama was born in the united states, he was born in honolulu, hawaii. That has been known by serious people of good faith for from the beginning of the time president obamas been in office. Donald trump made his career as a National Political figure by raising questions about that. Now, Hillary Clinton, who donald trump has blamed for originally raising those questions, just gave a statement a moment ago and called upon donald trump to apologize. Take a listen. Barack obama was born in america, plain and simple. And donald trump owes him and the American People an apology. Now, we dont know what donald trump is going to say. His aides put out a Statement Last night reiterating that Hillary Clinton was responsible for starting this birther movement. That is false. Its not true. Hillary clinton never actually raised that issue. And if donald trump comes out as we expect and disavows the birther questions, keep in mind that is not as a result of information because of course president obama released his birth certificate five years ago. Its because were in the middle of a general election campaign. And donald trump will have decided that its not in his interest to keep saying something that isnt true anymore. However, its never been true. So well wait and see what actually comes out of his mouth. We will definitely await that. Of course just a week and a half or so less than that before the first president ial debate. John, thank for that. Well come back to you later on. John harwood. Meantime, trump continuing to promise tax kutss for the wealthiest taxpayers at a speech in new york. Clinton vowed to raise the tax burden on the rich. One clear winner in the tax plans, tax lawyers. Joining us here at post nine, Pulitzer Prize winning New York Times columnist and cnbc contributor jim stewart. Jim, good to have you back. Nice to be here. 50 some odd days before the race, were finally starting to try to grade the two plans, right . Finally. You made an effort at that. At least talking about a real issue as opposed to many others i could mention. But, you know, ive spent the last few weeks talking to tax experts, both conservative republicans and liberal democrats and people in the middle. And generally the sense is trumps plan if you can call it a plan is so reckless its almost hard to take seriously. First of all, its changed three times. Most recently yesterday. For fiscal conservatives, it just blows open the deficit. I mean, the original plan had about 10 trillion in tax cuts with no obvious offsetting expense cut. So how are you going to pay for that . I dont know. Yesterday, nobodys really been able to run those numbers yet, looks like maybe hes getting it down to 4 trillion or 5 trillion, but we are still talking trillion. Well, he says you pay for it with much faster Economic Growth, which he says could get up to weve heard that before. No serious economist believes you can generate 10 trillion or more in tax revenue through faster Economic Growth through tax cuts. Especially at the high end where theyre focused. And not only that, his cuts are Real Estate Developers are already probably the most favored class of person in the tax code. And he doubles down on that and opens up some new breaks for Real Estate Developers. Its absolutely breathtaking. I think he is abandoning the worst of that, which is the 15 raise for llcs, because most of his stuff comes through llcs, but most law firms are llcs, so hes proposing reducing lawyers taxes to 15 . Frankly its reckless. You pointed out in previous column of course the fact having consulted many experts he may likely pay nothing in taxes. Yes. But specific to hillary, and i read the column this morning, actually in the newspaper, which is rare i do that. How quaint. It was a nice drink with my coffee, but hillarys is complicated and theres a lot of things going on here in terms of the rates and different places things kick in. It is so complicated. I mean, it basically preserves all the complexities of the existing code, which by the way includes the provisions that benefit trump. She hasnt really addressed those yet. And then layers on more. I mean, viewers of this show presumably have Capital Gains. She wants to take Capital Gains rates from 2 to 7. I cant even imagine the complexity of that and how that would actually work. Thats going to add thousands of pages to the already 75,000 page tax code. Does trump get any credit for just simplicity . For going from 7 to 9 . No, not really. Yeah, he reduces the number of brackets, which simplifies it a little bit, but he hasnt touched any of the enormously complicated exemptions and deductions. Which by the way what is really disappointing to a lot of tax people both sides of the political equation is that you cant call either one of these reform proposals. This is nothing like the grand bargain that we almost had in the obama administration, or really which is what ryan has been aiming for, which is some way to simplify, make it more fair, strip out all of these unbelievably complicated loopholes and then lower the rates for everybody. Which you could probably do. You could get rid of some of these deductions. Philosophies are interesting behind this as well. So clintons plan ultimately raises taxes on the wealthy and on business, correct . Right. That used to be much more popular. It seems like donald trump has turned the whole populous idea. One thing i have to say for the clinton plan is its clear. Its very straightforward. By the way, it doesnt blow out the deficit. It doesnt address long term entitlements, but nevertheless finds a way to pay for the social program shes proposing. I give her credit for that. How is she going to do it . Soak the rich. Its the upper 5 . Claims 95 and everybody agreed this is correct would not pay any more. So its just 5 . And shes going to, you know, get another 450 billion maybe out of this. Along with other proposed tax increases. Its you know, it only effects a few people, but it doesnt seem to be people arent getting excited about it. On the other hand, whos even talking about the clinton tax plan . Very few people. I started talking to people who were not tax experts. Most people couldnt tell me what they were. How come republicans arent talking more about deficit busting, you know, havent they typically been more focused on deficits than the democrats . Thats traditionally been a republican issue. By the way the Business Roundtable doesnt like the trump plan because it cuts corporate taxes too much. Can you imagine that leaders of business saying this is going too far . Theyd be happy with 20 or 25 from the current 35 . He wants to take it down even lower. That just blows open the deficit. No serious fiscal economist believes you can afford these kinds of tax cuts. At the very least its starting to get talked about, starting to. Well, it should be because these are really big issues that effect the economy, the pocketbook and ultimately will effect every single, you know, american. Weve got seven weeks to go over it with a fine tooth comb. Jim, thanks. Sure. Jim stewart of New York Times. Well, new highlights being shed on the Trump Foundation. Robert frank joins us now with more on that story. Robert. Good morning, david. While new York State Attorney general Eric Schneiderman investigating about the possible misuse of funds. The Washington Post investigation found that after 2008 almost all the money given by the Trump Foundation came from donors other than donald trump. Now, the biggest contributors to that foundation included the owners of the World Wrestling entertainment, carpet wholesaling company and a new york ticket broker. Now, none of that would seem to violate nonprofit rules. Its not unusual for foundations to give away other peoples money, but some of the Trump Foundations gifts and expenses are coming under fire. Charity spent 12,000 to buy tim tebows football helmet and 20,000 for a portrait of donald trump that may have hung at one of his golf courses. Lawyers tell me that if these dont serve the tax exempt mission of the charity, they could be considered self dealing. Trump recently paid a fine after the foundation gave 25,000 to a Group Supporting Florida State attorney general pam bondi. That violated rules against charitable donations to political campaigns, the Trump Campaign says mr. Trump has given away tens of millions of dollars to charity and that schneiderman is a, quote, partisan hack whos turned a blind eye to the clinton foundation, so clearly the battle of the foundations here. One of the sub texts of this election just heating up after the Washington Post report. Yeah, just keeps coming, robert. Thank you very much. Thank you guys. As we head to break, take a look at oil prices. Crude falling below 33 a barrel here, down more than 2 at about a onemonth low. Energy underperforming in the stock market as well. And take a look at amazon. It is trading higher today after that 1,000 call on the stock it comes from rbcs mark mahaney. Why hes raising his price target right now. Hell be talking to squawk alley about that 11 00 a. M. Eastern. Much more squawk on the street ahead with the dow down 102. Announcer theyll test you. Try to break your will. But however loud the loudness gets. However many cheese puffs may fly. Youre the driver. The one in control. Stand firm. Just wait. [click] and move only when you hear the click that says theyre buckled in for the drive. Never give up till they buckle up. Mapping the oceans. Where we explore. Protecting biodiversity. Everywhere we work. Defeating malaria. Improving energy efficiency. Developing more clean burning natural gas. My job . My job at exxonmobil . Turning algae into biofuels. Reducing Energy Poverty in the developing world. Making cars go further with less. Fueling the global economy. And you thought we just made the gas. Energy lives here. 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. We are looking at a selloff on wall street capping what has been a choppy trading week. The dow is down 109. S p 500 is down little more than 0. 6 . The nasdaq still outperforming as it has been doing all week down little less than 0. 5 . Technology still the best performing sector of the week. Theres the price of crude oil wti slipping below 43 a barrel. It is down another 2. 25 to a onemonth low. Brent the International Benchmark down there below 46 a barrel. As far as sector performance, energy and financials are suffering the hardest. Thats your chart of the week though, that would be the price of apple. It is still up about 12 for the week having its best week in years. The apple iphones going on sale in the stores today. Its down about 0. 5 , but still a tremendous week helping the overall tech sector outperform. Best week for tech since may, absolutely. Yeah. When we come back, customers lining up to get their hands on the new iphone. Are there enough of them though . Will the latest product be enough to keep the stock going . Its been on a tear outpacing the s p for the quarter, sarah said dow down 116. Back in a minute. Emily skinner, each day was fueled by thorough preparation for events to come. Well somewhere along the way, emily went right on living. But you see, with the help of her Raymond James financial advisor, she had planned for every eventuality. Which meant she continued to have the means to live on. Even at the ripe old age of 187. Life well planned. See what a Raymond James advisor can do for you. With dand bold styling to to stay ahead of the curve. The lexus rx, rx hybrid and rx f sport. This is the rx, elevated. This is the pursuit of perfection. I was diagnosed withwants parin early 2013. Lly it took awhile to sink in. We had to think a little more seriously about saving money for the future and for the kids. The income of airbnb really helped to mitigate the stress. But we have that flexibility of knowing that if you know things get worse, we have this to help keep us afloat. So thats very, very important for us. Good morning everyone. Im sue herera, and heres your cnbc news update this hour. New video this morning showing the cleaver attack on an off duty new York City Police officer on thursday. The video shows a frustrated trying to remove the boot placed on his car. Minutes later he attacked three officers before being shot multiple times and taken to a hospital where he is in critical condition. At least eight people have been reported dead after a powerful typhoon struck southeastern china and taiwan. Nine people are missing. The typhoon forced the relocation of some 33 Million People and destroyed 1,600 homes. European Union Leaders gathering in bratislava for a summit. High on the agenda, reinvigorating the eu following britains decision to leave. If youre looking to nab one of these, the unlimited pasta pass from olive garden for 100, forget it. The company says it sold out 21,000 passes in one second on thursday. Unlimited pasta, bread sticks, soup, salad and branded coke on the menu for seven weeks beginning october 3rd. Carl, this one belongs to katie little, comes with a pass right in there. So lunch is on katie, and maybe dinner too. Im going to email her right after the show. Exactly. Shes a popular lady in the newsroom. Yes. Sue herera, thanks. Meantime, customers lining up to get their hands on the layest iphone 7 and 7 plus, heres a live shot of i believe either palo alto or times square. Midtown manhattan. Tmobile saying and samsungs recall may give apple an additional boost. Weighing in including apples fashion appeal are Connectivity Technology analyst at canaccord, Vanessa Friedman of New York Times. Good morning. We dont have numbers to go on, so what is forcing you to adjust your models and go to 140 . Yeah, sure. So what we did is we rolled out our fiscal 201. But what caused us to raise our estimates in the nearterm is really how strong the initial demand is for the iphone. We believe because really with the samsung recall the carriers have one new premium tier phone and theyve been very aggressive in the subsidies. Its really surprised us. Basically as a u. S. Consumer if youve paid off your iphone 6 through your installment plans, you basically could get the 32 gig iphone 7 for free. These new subsidies is quite a change from last year relating to strong demand. We estimate today 20 million u. S. Consumers have now paid off their 6 and too good a deal to pass up and caused us to bump up nearterm estimates on really strong initial u. S. Orders were seeing. So we dont get Opening Weekend numbers but they have reiterated guidance for the quarter and well get units then. But should we be bracing for a down tick in asps . Does it bother you that these subsidies are increasing . Should we pay more attention to the services annuity down the road . Yeah, so its really the carriers that are taking the hits on the subsidies, which is a change in their Business Model. Its more the verizons, sprints, t mobls subsidizing the phone to the consumer. What were finding could be positive for apples asps is consumers are choosing to spend extra and choosing higher memory 128 which is better for apple asp. So we think apple should put up strong asps. We think would move the stock higher and why we raised our price target is that Second Derivative rate of change for apple is getting much better. Iphone sales down 16 year over year in march, down 15 in june with raise numbers today only down 5 since september and go to flat and then growth especially iphone 8 cycle next quarter could go into growth mode. We think ultimately thats going to continue to drive apple shares higher over the next several quarters. Backdrop of all of this, vanessa, is the discussion of design. The air pods and the question of whether were actually going to wear those in the coming years. Uhhuh. Of course the watch, which youve been on before to talk about as a fashion accessory, now appearing to pivot to a sports accessory. How would you grade apple right now . You know whats really striking to me is that this time last year because the launch always coincides with the start of new York Fashion Week, its all anyone was talking about at the catwalks. You know, forget the clothes, it was all about apple, all about the apple watch. Same thing happened this time and no one was talking about apple. It was back to fashion. So i think you really see a kind of, you know, withdrawal both on apples part but also kind of on fashions part. Theres separating out a bit. Youre friend of the watch specifically . The watch specifically but also the ear buds. I was wondering what you make of the airpods, a lot written about them. Change is never easy for con sulers i think from a technology standpoint, but how do they look . Maybe like a new fangle kind of earring. Ear cuffs are in. I said it looked like a tampon. You know, i think they could maybe add some color, some pattern. Thats the thing, its like they still look like, you know, listening devices. And if youre really going to do something different, you have to change the design paradigm. So what they should do is make them look like jewelry, look like something you would actually want to put, you know, independently on your body. Thats a design challenge when youre trying to put actual function to them as well as the form. Mike, what do you think . To what degree is the watch going to be material, if not this quarter or this year then the next two or three . Yeah, i think the watch continues to improve. We think theyll be maybe even up to 5 million sales this holiday season. But really if you look at apples stock, its the phone that drives it. We estimate theyre going to exit just under 600 Million Consumers worldwide with an iphone. Thats a big number that compare with the watch. A lot of wealthier people own the iphone. Those are the type of people for the holiday season, Great Holiday giving gift ideas is the watch as a premium brand. And we think the features of this one with the waterproof is much better than the prior watch. We think its growing. I mean, on a stand alone company doing billions of dollars in sales would be great, but relative to apple its still small compared to the iphone and how that drives the Business Model today. And because the phone is whats really important to the company, vanessa, youve said not a fashion. Its about design, but as my colleague said the design hasnt changed significantly in the last two launches. So, you know, its kind of stopped becoming this sort of trendy, constantly evolving product that we really look to apple for. You know, i mean, they were the company that put fashion originally into technology, into Consumer Products. And its kind of slowing now. Yeah. Leaves us to wait for 2018 and see 2017 and see what they have in store on the next cycle. Mike, vanessa, thank you guys, appreciate it very much. As we keep take stock of apples launch day. Coming up, speaking of fashion week, athleisure is making its runway debut. Well discuss the transformation in the fashion industry with designers Nanette Lepore and marissa webb, much more ahead on squawk on the street. When you travel, you want your needs to be understood no matter where you go. You want an experience that feels highly personalized. With watson on the ibm cloud, travel Companies Like wayblazer can apply cognitive analytics to social data to understand what a destination is really like. And who exactly, it will appeal to. Today watson is helping businesses create experiences that revolve around you. Because thats what the ibm cloud is built for. That revolve around you. This is my new alert system for whenever anything happens in the market. But thinkorswim already lets you create custom alerts for all the things that are important to you. I guess we dont need the kid anymore. Custom alerts on thinkorswim. Only at td ameritrade. [phone buzzing] some things are simply impossible to ignore. The strikingly designed lexus nx turbo and hybrid. The suv that dares to go beyond utility. This is the pursuit of perfection. Hey, jesse. Who are you . Im vern, the orange money retirement rabbit from voya. Orange money represents the money you put away for retirement. Over time, your money could multiply. Hello, all of you. Get organized at voya. Com. Theres a lot of places you never want to see 7. 95. [ beep ] but youll be glad to see it here. Fidelity where smarter investors will always be. If only the signs were as obvious when you trade. Fidelitys active trader pro can help you find smarter entry and exit points and can help protect your potential profits. Fidelity where smarter investors will always be. This car is traveling over 200 miles per hour. To win, every millisecond matters. 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 are getting warm. Confirmed, 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. The 10year is hovering below 1. 70. Lets send it to chicago at the cme group. Rick santelli with the santelli exchange. Hi, rick. Hi, and thank you, sarah. Id like to welcome my final guest of the week, chris rupke, thanks for taking the time, sir. Thank you. All right. Lets set the table here. I look up at the dax, its given up ground. Looks like its going to be closing at the lowest level since early august. S ps are about seven points higher meaning they drop seven points from here they could be at the lowest levels since early july. While all thats going on, all of a sudden were revisiting negative Interest Rates in europe, our rates are not as upward mobile as they were several sessions ago. And the wall street journal today, chris, front page, says bank of japan divided as economy sin sinks, of course talking about negative rates. Right. What do you think . Are the markets basically nowe lis itting the response, they always do, youre not giving us enough, draghis not giving us enough, but see what were doing to the equity markets because we want more . Does that make sense to you . What do you think . Yeah, i think so. The markets seem to be very, very confused. Its very unfortunate. Sometimes i wish the fed would just start raising rates at a measured pace and let the stock Market Investors adjust to that. You know, the whole idea of going from 0. 5 to 0. 75 on the fed funds rate, like thats going to retard growth, thats just an absurd thing to think. But, yeah, these negative rates very interesting. Remember kurodo broke the split boj when they initially went to negative rates. I think its very, very difficult to explain to the public in any country on any continent why negative rates help their economies and put people back to work. Its not helping the stock markets anymore. Its not helping the banks. Its not helping the pensions. And i dont think its helping any or pushing Central Banks towards the goals they desire. Heres what i dont understand for your final thoughts, chris. Yes. You know, ben bernanke, smart guy, he doesnt want to ever seem to embrace the notions that these strategies are not motivating the marketplace or investors to behave in the way they thought they would. But hes so eager to embrace an even more deviant form of the experiment in the form of negative rates, setting the groundwork for my opinion on his blog. Your final thought. Yeah, i think its very difficult when they do that. As i, again, i said these are very difficult policies to explain to people. I dont want to say theyre dangerous, but im really afraid of if theres weakness in the u. S. What will be bernanke yellen, what will be the response of our central bank to weakness in the u. S. . Will they drive 10year treasury yields down below 1 . That kind of frightens me because i think its something that shakes the foundation of the Financial System here in the u. S. Big mistake. Quick yes or no answer, were just about out of time. When the bank of japan meets next week, are they going to give more or rethink strategy . What do you think . Well, im very afraid theyre going to try and cut rates, negative rates. Cut it a little bit deeper, maybe on some of those reserve holdings from 0. 1 to negative 0. 2. Lets see. I hope not. The chairman of our bank is hoping not as well. Theyve been criticized lightly over there, the boj, by our bank. Well see. I know they want the yen to go down. Well see what they try. Yeah, boy, it hasnt worked well. The yens going exactly the opposite direction. Chris, thank you for your thoughts. Sarah, back to you. Two big Central Bank Meetings next week, rick, thank you. Coming up, fashion week wrapping up here in new york city. Well hit the runway with fashion legends Nanette Lepore and marissa webb. Much more on squawk on the street, stay with us, the dow cutting its losses now down 58 points. 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. Great time for a shiny floor wax, no . Not if you just put the finishing touches on your latest masterpiece. Timings important. Comcast business knows that. Thats why you can schedule an installation at a time that works for you. Even late at night, or on the weekend, if thats what you need. Because you have enough to worry about. I did not see that coming. Dont deal with disruptions. Get Better Internet installed on your schedule. Comcast business. Built for business. Athleisure is hitting the runways big time. Under armour launching a new line, uas at new York Fashion Week yesterday. Think cam mo trenches and futuristic looking sweats by rock star mens wear designer tim coppins, formerly of adidas. Top out at 1,500 for the more tailored items. The Company Going for a whole new market, very ununder armour, going after millennials and high fashion. Something competitors have been doing as well. Nikes been trying to raise its fashion game for a while today opening a nordstrom x nike shop, according to womens wear daily. Adidas launching surprise collaboration with alexander wang, unisex track uniforms ye helping make adidas cool again and turning around its business in the u. S. So this is all happening with questions swiring around whether at leisure has peaked or perhaps that is one reason why under armour hates that word. Im not a big fan of the word. Why . Because it pinpoints a very specific look. And there are items in here that have a sports reference, but the majority is very you know, the fabrics are very conservative. We work with a marino terry. We work with oxfords, cotton fabrics, wool. So theres a tailored aspect to the fit and choice of the materials and the way the details are considered. No question its been a bright spot. Doubledigit growth for athleisure in what has been a shrinking apparel business. Analysts are raising the red flag, jeffries cutting lululemon, peopler jaff ray on nike. An analyst who went to the show says its not about looking to be a strong seller in terms of the new line. Its more intended to shift the Consumer Perception of under armour out of pure sports gear. With new York Fashion Week over, what is fashions next biggest thing and what are designers doing to keep wum trends . Famed fashion designers, annette and larisa, welcome to you both. On this question of athleisure going into fashion at a time when at leisure is increasingly being questioned as fad, what do you think about it, annette . I think its going to become something that happens where it levels off and women incorporate at Leisure Clothing into their wardrobes and mix it requestin with their workplace or whatever. Its going to be an everyday usage. Its kind of happened already. I agree. Indeed. What about some of these Sports Apparel companies . Theyre known for performance going into the world of high fashion, and competing with designers like yourself. I think its a natural progression and like nanette was saying it has already started. It continues to. Im seeing it more and more every day being incorporated even in work wear, into the evenings, and i think it has become the norm right now, and i dont see it slowing down anytime soon. I dont know if you disagree. I really feel like its what should happen is there should be like a mixing, and what women are tending towards right now are loving really special, really Pretty Things and a miss of vintage clothing, vintage clothing is on a huge trend. As with anything else, women who are creative and love to get dressed will start mixing their, like, track jackets with their beautiful soft, flowy dresses. So its going become a fun new way to get dressed p. Whats wrong with Department Stores . Is it a broader apparel issue or something unique to their format and the way theyve interacted with consumers . I dont think its the Department Stores. I think the element of surprise is missing from fashion. I think everything is exposed too quickly. I think the problem is everyone loads everything up on the web as soon as its leased to the press and buyers and the secrecy is gone. And i think we need to bring that back. How do you diagnose with problem, marissa . Im particularly curious with your work at Banana Republic, gap has been one of the hardesthit retailers. And banana under your watch has even suffered. Well, with the large corporations i think its there is well, in general i feel like theres so much everything is accessible immediately, like nanette was saying. And so it is not just a matter of my apologies, ladies. Want to just interrupt rudely here to show our viewers tim cook arriving to high fives at the opening of the palo alto store in california, of course, where theyll start selling the iphone 7 and 7 plus. Speaking of design, i mean, they certainly are important in that realm, maybe even in fashion. But we like to show video here so, there is mr. Cook. Tradition, right, when they have a new yes. Iphone released. Apologies for that interruption. I would like to get your thoughts on gap and Banana Republic with your time there. Again, i dont think its a a problem just with gap or Banana Republic pim think itis a globa situation. With the Department Stores i dont think its about the product. I think its about the relationships that we are developing with our consumers and that seems to be less of our focus and really focusing on the actual product. All right. Thank you so much for coming in to talk about some of the consumer changes with us. Nanette lepore and marissa webb. Thank you. All right. There is a look at mr. Cook again at that palo alto store. Lets go out to josh lipton now for a little more on whats going on. Josh . Reporter yeah, guys. This apple store in downtown palo alto is just about to open its doors. You can see there, there is a special guest, ceo tim cook is here. This has become the store where cook has made appearances in the past welcoming in his first customers. I was talking to fans online here today. A lot of new features and functions with these phones, obviously theyre a lot faster, right, about 40 faster than your 6s, a brighter display, improved Water Resistance. That means youre not dwoik to go swimming or surfing with these phones but you dont have to worry if you spill some water on them. Also apple saying this is the best camera it has designed. Speaking to fans online at this store early this morning, that is the feature that had them the most excited. You also get longer battery life with these phones. Apple saying on average about go hours more of battery life. And no headphone jack. That was a big, bold design call by cook here. Apple executives telling us they made that call because they want to just pack more technology into every phone. They needed the space. They obviously also believe theyll be able to aggressive a better experience with those new wireless air pods. But here we see tim cook just about to open these doors, guys. For our audience, traders, investors, how many people will judgment grade to the new phones and can the iphone 7 help jumpstart this iphone franchise . Back to you. All right, josh. Thank you. Again, interesting pictures there as we watch mr. Cook applauding of course. The stock he can also applaud having seen Incredible Movement this week judgment wards, Weekly Performance likes of which apple shares have not seen since 2009. 12 before we started trading today. Absolutely. And the question is were was the expectation for demand of this new iphone too low . Does this do anything to change the conversation . Theres always this bull bear debate around apples stock. Has the iphone growth peaked . Because its still the product where it gets more than twothirds of its revenues from. And has apple lost its next big thing, innovative streak . Its unclear as to whether we have answers for those. Clearly there was a mismatch in expectations between the sales of this new i phone and investors and what weve started to see and hear from the likes of sprint and tmobile and apple itself. Yeah. As you say, muted expectations to a certain extent, benefiting greatly from perhaps outdoing those expectations. Weve got squawk alley coming up next. 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Exxonmobil is a leader in carbon capture. Our team is working to make this technology better, more affordable so it can reduce emissions around the world. Thats what were working on right now. Energy lives here. That is a live shot of the apple store in palo alto, california. Seconds ago the doors opened. The first people in line with quite a treat, greeted by ceo tim cook of apple as the iphone 7 goes on sale today. Weve been showing this picture for the past few minutes with josh lipton in palo alto. Well go back to josh right now. Good morning. Reporter good morning. As you can see, a special guest at the apple store in downtown palo alto. Ceo tim cook was here, getting the employees pumped up. As you can see, he has opened the doors and