Bad. Say again . Theres reversal in some of them. Yeah, little change lets call it. Volumes still up, 80 above the threemonth average by the way. Global fixed income had a bit of a rally also. Speaking of fixed income, lets look at the 10year. There you see it, 2. 246. Crude is up. Yesterday too, wasnt it . Yeah, i mean, again people hope that the end of november theyll be some sort of cutbacks. It all just seems very chimerical, but it will say this. Traders get short and get between 42 and 43 and get crushed over and over again by the opening. Right. Lets get to the road map this morning. Of course it starts with janet yellen on the hill testifying on the health of the u. S. Economy and the timing for a rate hike. Plus donald trump taking some interesting meetings in new york today. Shinzo abe going to find his way to trump tower, we believe. A handful of ceos as well. And well have an update on the transition effort. Walmart out with results, sales were not quite where the company had hoped for, stock moving lower in the premarket. Jim and i will discuss that. Well probably get to best buy. Of course well be talking a lot of cisco when we get Chuck Robbins joining us. First though yellens appearance before joint Economic Committee of congress. This comes ahead of next months fed policy meeting. In her prepared text yellen says a rate hike could be appropriate relatively soon, adding, quote, were the fomc were to delay increases in the federal funds rate for too long, it could end up having to tighten policy relatively abruptly to keep the economy from significantly overshooting both of the committees longerrun policy goals. We will bring you live coverage of the fed chairs testimony. Well have the q a of course with lawmakers beginning right around lets call it 10 00, 10 15 a. M. Any surprises . No, but remember the democrats historically want to raise taxes. Okay. Right, thats been spending, raise taxes. And republicans want to cut taxes but also cut spending. We have a guy, a hybrid. He wants to raise spending. Yes. And cut taxes. And i think thats a recipe for multiple rate hikes. And i wouldnt be surprised if she didnt talk about that. Although, i mean, i would also think shes going to be somewhat reticent, proper use of the word, in terms of discussing what she doesnt know. And a lot of it is what we dont know in terms of where is it going to end up in the trump agenda in terms of tax cuts and infrastructure or potential Infrastructure Bank and so many other things. Well, she can give herself a pass very easily by saying we dont know. When we talk to Chuck Robbins later, theres a question about their huge cash hoard. And they went with the they dont know. But there is a directional approach by mr. Trump. And his approach is to combine the best growth portions of both parties short term, but maybe longer term that will lead to higher rate hikes. Yeah, could even lead to inflation. Now, is the move in the bond over with though since the election . I mean, are we going to sort of settle in here, do you think . Unless president elect trump starts detailing some of the need for the funds the trillion dollars he wants to spend in infrastructure would suggest a move. I think the dollar strong lots of people want to buy our bonds, we also have people in this country selling bonds to be able to get involved, i think, in the stock rally. And i think that thats what were going to find when we dig down about what really happened here. We had people selling bonds to be in some of the stocks that are value stocks. So i think that the cross currents make it so that you could have bonds hang here for a second, but i do think you have to lock in as i mentioned the mortgage. Yeah. Because you just dont know. I think many people bought floating rate mortgages and that could end up being foolish. You talked about the rotation. Excuse me, weve seen it for five trading days. And it of course was pretty vicious out of the growth names that weve all come to know and many investors love. Yeah. Because in some ways, jim, growth is going to be there for your old line industrials or cyclicals because when their tax rate gets cut, well, thats going to help earnings growth, isnt it . Yes. I think people have to understand theres a downgrade today of freeport that i would take issue with because people want things like alcoa, letter aa, now, if you put together the pieces of alcoa and arconic, youve seen a remarkable move. Thats what people want. They want commodity. The analysts are not embracing the bank moves. Theyre saying too far too fast. Theyre defending all the tech stocks. David, i think the too far too fast is going to be by half. I dont think youll be able to get back into some of these stocks because the new theme i bumped into bill miller yesterday on the street. Okay. Hed obviously been the new theme is optimism. And optimism means at the beginning of the year people used to say, listen, its time to buy the metal stocks. Well, you cant reverse that in seven days. In seven days, david, freeport does not rest. It doesnt . No. It doesnt rest in seven days . Donald trump doesnt seem to rest either. Hes going to be busy today. Shinzo abe, the Prime Minister of japan by the way they did have that surprise announcement from the boj overnight issues an unlimited fixed rate bond tender offering an unlimited amount of twoyear jgbs as well as unlimited amount of fiveyear jgbs to try to keep things going over there in terms of the japanese bond market. Sort of yield curve control if you want to call it that. This may be the beginning of what we start hearing when he talks about, look, i think that you guys are taking advantage of that currency. This is something when ive spoken to him many times hes very acutely aware of currencies. Now, if youre caterpillar, which your stock has been on fire, okay, because of infrastructure. With the dollar where it is, komatsu wins in the headtohead. But would it shock you to hear that the federal Highway Administration if they were going to get the money from the trump infrastructure that they were told, look, youre not going to ewe komatsu because the japanese are trading i know that seems extreme. But when you listen to the rhetoric over the years, he wants to play tough with komatsu. Thats six and a half in one and a dozen there are a lot of companies that would say whats komatsu on the dollar right now versus whats cat . Wouldnt shock me at all if the president elect doesnt mention that. Remember, he came abe came to new york came to america and he only met with candidate clinton. That may have proved to be an ill advised decision. Well, it will be interesting to see with the meeting today actually encompasses. Right. Also a few ceos making their way to trump tower. Past the barricades. Right. Including software cats from oracle. They had a very big ad today. Now that theyve closed that deal, they are number one in the cloud. Helped orchestrate the closing of that deal against all odds. Can i just say, you want a treasury secretary, coceo of oracle, that would be my choice. Shed be a brilliant treasury secretary. I say brilliant. I mean like huge, david. Like absolutely brilliant. Like number one. She would be it. If we got her, it would be something. You get that . I think youre sending a message out there. I dont think thats what the meeting is about. Thats too bad. Shes fabulous. She knows money. She knows business. I dont think jamie dimon is taking that job. No, but safra, i have ie namerred for years. Larry nelson theyre playing that music already. Thats because we have to get to Chuck Robbins from cisco joining us after this break. We also have to talk about earnings from walmart and a number of others. Heres a look at futures before we send you to the break. And when we come back Chuck Robbins joining us, ceo of cisco. Hey nicole. Hey i just wanted to thank your support team for walking me through my First Options trade. We only do it for everyone gary. Well, i feel pretty smart. Well, were all about educating people on options strategies. Well, dont worry, i wont let this accomplishment go to my head. Im still the same old gary. Wait, you forgot your french dictionary. Oh, mucho gracias. Get help on options trading with thinkorswim, only at td ameritrade. Can i have a 2017 leyeah x 570. Wish big. At the lexus december to remember sales event. Get up to 2,500 customer cash on select 2016 and 2017 models for these terms. See your lexus dealer. Cisco out last night with a very good strong quarter, but its forecast for the next quarter has the stock down in premarket, as it should because it was quite dismal. So joining us now is the ceo of cisco, Chuck Robbins. Chuck, i feel like we have a tale of two cities here. Youve told a great story for this quarter, but, chuck, could you have been more down beat about the next quarter . I mean, honestly, im hoping youre going to come on this show saying you were being conservative, not just frustrated and angry and disappointed. Well, hey, jim. Good morning. Its good to see you and david this morning. You know, we had we reported obviously as you said a very good quarter for our q1 results. And if you look at the highlights of the quarter, we had some really strong performances in our business. And we called out this general weakness that we saw in just some of our Larger Service providers. But at the same time we had our Global Enterprise business up 5 . Weve been focused on driving subscription and s. A. S. Businesses and deferred revenue from those businesses was up 48 . Our security business continued to be very strong. Collaboration was very strong. So there are a lot of areas for us to be excited about. And the primary driver for the guide was this Service Provider weakness we saw just particularly in the quarter. Well, lets talk about that. I mean, down 12 made me feel like it couldnt just be macro. Made me feel like i know theres some freeze going on in some places including education. But, chuck, are you losing share to other companies . It was the first question on the cue and it chilled me to think that what some of these analysts are saying is its not the macro, its your sales force. Well, jim, if you look at the Service Provider business for us, we have a lot of large accounts around the world. There are lots of dynamics that are going on in this space right now with the political climate, some of the macro uncertainty thats existed for the last year, weve got some consolidation thats occurring. And you can assume that we have visibility on an account by account basis. And i can tell you that im not concerned about losses. That it truly has been a variation of reasons for the cap x freezes in some big accounts that weve seen. But i dont view it as losss that have caused a challenge for us this quarter. All right, chuck, the elephant in the room 71 billion in cash. If your stock opens up where it is, youre talking about a market cap where literally almost half of it is in cash and we have a new president. And weve got a congress controlled by republicans. I know kelly cramer, your fabulous cfo was asked about this, but chuck, youve got to admit on air right now that if there was repatriation, your company may be the principle beneficiary of it. Well, jim, certainly we have been a proponent of repatriation for quite a long time. We believe that if that occurs in the next year, which were very optimistic, then we have been working on scenarios as you would expect over the last few years in hopes that we would get to this place. It hasnt kept us from doing anything, as you can see from the number of acquisitions that weve done in the last year and a half. But certainly we would look at a combination of, you know, our dividend, our buybacks as well as strategic m a. So were excited about the possibilities that it could create for us. Yeah, chuck, its david. Of course i think the possibility is certainly very strong its going to happen. So its interesting to hear you list some of the things youre thinking about. Is there an order of preference in your mind lets assume we get the bill out of congress, probably lets call it the spring, whats number one . Is it strategic m a . Is it a combination of all three that you just mentioned . Well, david, weve been committed to 50 return of cash flow. And so we would stay committed to that. And i think youre right, it would be a combination of those three. We would look at any given point the Strategic Acquisitions would be based on whats available and where we are in our strategy along the way. But i think its safe to say it would be a combination of the three. Something else that of course has come up in our conversations with ceos like yourself is not just the benefits from potential Corporate Tax reform, but immigration. And a lot of ceos come out on the other side of that. Im curious if mr. Trump follows through on his campaign promises, will that hurt your business . You know, one of the things that i believe to be very true is if president elect trump is probusiness and he is very focused on driving strength in the u. S. Economy, and i think if you listen to the things he said since hes been elected, he is ensuring that the decisions that he makes are aligned with driving growth in the u. S. And i think that will apply across all the things that we care about including immigration, patent reform, tax reform. And so i think that when you get right down to the decisions that have to be made, hell ensure that hes making the right ones for the u. S. Economy and for the global economy. And as the u. S. Economy strengthens, thats certainly good for Companies Like cisco. All right. But if he follows through on his deportation pledges and on deporting a lot of people, you dont believe thats going to have a negative effect for your business or your ability to attract talent . David, we focus on bringing in, you know, high end h1b candidates who have high end engineering degrees that i think are good to drive innovation in this country. One of his big priorities is how do we create jobs and drive innovation in the United States. So i think that as you get into the details of all of these programs, i still think that whatevers good for the u. S. Economy is where hell land. Chuck, going back to the fundamentals here. Switching down 7 , Company Facing a challenging transition pain. But at the same time the softwares a service business, the security business really on fire. Are we can we look at your company as one part hurt by macro, just a transition where theres a refresh thats been held off because of exactly what youre talking about. And the other part very, very strong. And that the macro portion could really catch up to the very strong portion making it so that youre somewhat down beat forecast could be exceeded . You know, jim, i think that as you look at our business, you have to look at it beyond one quarter. And so our routing business this past quarter was up 6 . Our Enterprise Sales were up 5 . And at the same time our switching revenue was down 7. And to your point the areas that weve been strategically investing in, which is how do we transition our security portfolio, Cloud Networking business, that business was up, the subscription and deferred revenue on the Software Side was up 48 , so i think the areas were working on are working. Weve talked about the fact that during times of uncertainty which really began in january with the market meltdown we saw while we were in davos, really the enterprise customers basically said if my infrastructures working, then im going to sweat the assets as long as i can. And i think our job over the next year is to provide a reason for them to upgrade, which i think our teams will do. Chuck, do you have to do another rationalization of the workforce . Some of your businesses are so strong you have to put more resources behind them. Other businesses have tailed off that perhaps there are too many people and youre not getting the margins on that part, or at least this quarter i know margins were good. But you know what i mean. If things drop off a year from now, i think you might have too many people in older businesses, legacy businesses, and you dont need them. Well, jim, if you look at the moves that weve made in the last 120 days, we talked about that as being a reallocation of resources towards some of these key growth areas. And i think youre seeing the results. We got strength in collaboration, we have strength in security, strength in the software business. And well continue to run our business as we always have and we align resources as needed and ensure that we maintain the strong financials that weve always been known for. Chuck, finally, back to sort of the term presidency, the expectations on the regulatory front when it comes to telecommunications are pretty significant. We dont know what were going to see. Is it a possibility that also tends to freeze business among some of the Telecom Providers as they wait to see how the landscape shapes . Well, david, i think if you look at the global Service Providers around the world and as they assess their cap x right now, youve got some concerned about the currency dynamics and some in the middle of regulation and some waiting for more regulatory things to become more clear to your point, and i think as that clarity comes forward, then i think the business could improve, it could stay a little tougher for awhile until we get that clarity. But i think those are the primary drivers right now. All right, terrific. Chuck, thank you so much for coming on. Thats Chuck Robbins, the ceo of cisco. Always good to see you, sir. Thank you. Thank you, guys. Quick news alert here on wells fargo. The Bank Reported its october Retail Banking activity a few moments ago. New customer accounts were down 44 versus a year ago. Customer interactions with tellers were down 10 versus a year ago. New credit card applications continue to fall down 50 year over year. So, jim, continued impact from the scandal itself. The stock not doing much. It has been of course very strong since the election. Right. Now, the legacy business is so strong at any given single month will not matter. You know, its funny, there was a downgrade today of chipotle, and i know the wells fargo people wont necessarily like the analogy, but the American People forget. Okay. But it takes time for them to forget. 12 to 18 months. I think youre going to see a series of numbers that will be more difficult, but at the same time you get fed rate hikes, david, well be looking at this number and say who cares. Yeah, well, that already seems to be the case amongst many investors given that incredible move in the stock price. I dont think this is good they issue these statements, the transparency of how theyre doing. Nobody else does. Theyre telling us. This is the but i would say its a tough thing its not really great advertisement. I saw this stagecoach the other day in new york, i said just bring it back, man. All right, speaking of coming back, when we come back, were going to count down to the opening bell with jims mad dash. My headquarters. This is where i trade and manage my portfolio. Since i added futures, i have access to the oil markets and gold markets. Okay. Im plugged into equities trade confirmed and i have Global Access 24 7. Meaning i can do what i need to do, then i can focus on what i want to do. Visit learnfuturestoday. Com to see what adding futures can do for you. Why pause a spontaneous moment . Cialis for daily use treats ed and the urinary symptoms of bph. Tell your doctor about your medicines, and ask if your heart is healthy enough for sex. Do not take cialis if you take nitrates for chest pain, or adempas® for pulmonary hypertension, as this may cause an unsafe drop in blood pressure. Do not drink alcohol in excess. To avoid longterm injury, get medical help right away for an erection lasting more than four hours. If you have a sudden decrease or loss of hearing or vision, or an allergic reaction, stop taking cialis and get medical help right away. Ask your doctor about cialis. All right. You can see look at walmart were going to be talking about that momentarily. The stock down after Company Reported earnings. Guidance perhaps is worrying some people including margins. Weve got the opening bell a few minutes away. Is it a force of nature . Or a sales event . The season of audi sales event is here. Audi will cover your first months lease payment on select models during the season of audi sales event. bing its the sound we make before the mad dash. Woke me up right there. Where are we headed . I know where were headed. Walmart. Walmart. Same store sales u. S. Little below estimates. Yes, i want to point out huge cash flow. I dont think people focus on that enough. 19. 6 billion yeartodate. I mention that only because operating income, david, decreased 10. 4 , as expected, investments in people and technology. David, theyre trying to battle amazon, but they still are graded on earnings per share. The reason why amazon was able to be amazon is we never graded on that. So walmart constrained by the four walls of the spread sheet. Has been and always a frustration to them for many, many years that theyve been competing against amazon. It hasnt really gone that well for them either. Look, walmart doesnt give as much information as target. I want to circle back yesterday, target, that was the most upbeat that ive heard target since the days of mac. This was one of those where i look at walmart where theyre spend, spend, spend for online. But david, in the end, this is not the kind of quarter that inspires. But there are people who believe jet. Com their acquisition. Will end up being a positive. Yes. Gross margins up 50 basis points to 26 , but sga as percentage of sales up 90 basis points to 19. 6 . Labor costs, as you say, losses related to ecommerce part of sga. Well, look, walmart has been given a pass because all they have to invest. And i think the pass will continue. People realize that i dont know if you use the walmart app, but it has improved. I dont use it. Well, you should. I hear theyre great values. The target app is great. Is it . The only one i use is amazon. Only app i use. You should look around. Use the dominos app too. I will never use the dominos app. Were in new york city. Theres great pizza. I dont know how many times we have to have this debate. I got to tell you something, dominos going to be a challenge you cant get around midtown. So i dont know you cant get around midtown anymore. Well, they have bicycles. They do it on bikes. There you have the opening bell of course here at the New York Stock Exchange at the big Board Delphi Automotive celebrates fifth listing anniversary. Over at the nasdaq its the new york mets. Yeah, baby. You can buy Single Game Tickets for 2017 starting tomorrow. Theres mr. Met. How are you doing . All right. We going to sign for this . Probably not. Good luck. A very large head. We have a lot of retail. Only four fingers. You really focused on that. Yeah, well, im a mets fan. Just everything queens. Everything is queens, man. I didnt take the seven. David, can we talk for a moment about best buy . Yes. Best buy was electric and a lot of people feel like, wait a second, amazons got to be killing them. Their ecommerce business was very strong. And what did they call out . The same thing as target, mobile phones, david. Mobile phones, to be specific they say from a merchandise perspective comparable sales growth and home theater for rich people upgrading their house to be able to watch movies at home and mobile phones and wearables, but be careful fitbit didnt make any money off that last time. But, david, yesterday on the target call they specifically called out apple and how strong it is. And that turned around apple stock. I know apple is being one of the most footballed stocks around, but the best buy quarter confirms the target quarter. And i dont think targets going to end up being down a week from now. Its down today. That quarter was too strong. Its funny, it wasnt that long ago when we were talking about the eventual demise of best buy. All it was was a showroom for amazon. It doesnt seem that that conversation is nearly as prevalent anymore. Its called management. Jolly, hes jolly. This is a good quarter. And this is this is not the first good quarter. This is one of many, you know, again, i got to quote this. Oracle right near 52week high. 90 of people still shocked in physical stores as cornell said on their target call, and best buy has, i dont know if youve been there lately but i like to look and feel. I like to touch Expensive Electronics before i buy them. So important though that you have people who are capable of helping you in understanding in making the decision. Ive used the yeah, no, i know. I walked into a home depot recently. They were unbelievable. Isnt it great . My god, theyre all over me. Like on saturday my wife said what do you want to do today . I said costco and home depot. She said no, no, west elm. I said, no, no, please, my costco david. When you go with me i wasnt happy about being at the home depot. Its such a frightening thought. Get excited about it. The lowes quarter was not that good. By their own admission home depot got salesforce. Com oh, my, salesforce. Com reports tonight. Yes, it does. After the closing. Marc benioff will be on mad money. Im sure he will. When hes in new york hes more or less attached to the hip to you. No, but he got a haircut last night so that picture is old. Got a haircut before i saw him at the gather which is the initiative, fabulous. He won the corporate man of the year. Thats for leadership. One of the great charities. I got to meet billie gene king. I havent done this in a long time, i said can i take a picture . And i got it. Great champion. Not a lot of deals to tell you about this morning though i will say certainly the prospect for m a as we move towards the end of this year and into next year given the deregulatory environment, the fact that a lot of cash you heard Chuck Robbins talking about it. Yes. M a will be a key part of any strategy when they bring back what could be as much as 71 billion. Call a tax of 10 or 12 , whatever you want, its going to leave a lot behind for them to do things with. But we do have a deal this morning in an area that you know something about requiring western refining about 4. 1 billion in terms of equity value. 0. 435 we should take a look at shares. Ive been waiting for consolidation in this industry. I mean, delta was the last one to really be involved when they bought a refinery. One of the reasons the stock has not done as well as the others. But this is a brilliant move for both companies. Shale oil company old enough to remember tesoro, but this consolidation is going to be immediately accretive in 2018. Gasoline is in such strong demand. A lot of this is just the kind of collapse of mexico. They need our natural gas and they need our gasoline. They need everything. But we export a lot of gasoline now. So the refining business is looking up. Im not a big fan of it because its commodity, which is why i like the combination so much. Commodity business have to get together in order to be able to do well. I almost said raise prices. Tough business to raise prices in the refining business. And as you can see tesoro stock doing well, which was certainly an important point. In 2015 it was what led to really a record year in many ways when we so often saw the acquiring Company Stock price react positively to a deal. This year its been more of a mixed bag. True, but this is the kind of consolidation that a lot of us have been waiting for because in almost any commodity industry the only way to grow is to merge. They cant shrink to grow, david. They have to grow to grow. They have to grow to grow. Now, the news on valeant there, negative criminal stuff yeah, somebody got arrested. But its past. Old. Valeant 17. Thats old. Not somebody associated with the company any longer. Im looking and watching what is moving and what is not moving. I want to just bring up, david, people who are playing these dry bulk ship companies, please understand this is just massive short squeeze. Youre talking now about the dry ships. Im switching here. The baltic drive freight is up to 11. 1100, so there is a substantive reason why people might like them, but david, the group is in the grips of one of the most amazing short ive seen, its a Musical Chairs game. They go up until they collapse. I want to point that out. They are not up on an earnings basis. A lot of people feel infrastructure will be shipping things. That group is up even more than private Prisons Group which i profiled last night on mad money. Just a cautionary term, not saying its going to roll over today. Im saying when you see this kind of froth activity and youre playing in it, youre playing with fire, okay, smoky . You got it, baby. All right . Im with you. Im with you. Only certain people can prevent this kind of forest fire. Its true. You know what, we want to get a little bit more on this valeant news. You saw the stock down about 3. 5 . Dom chu can fill us in back at hq. David, what we have right now is at least a notice given out by Preet Bhararas office in it saying theyre going to hold a press Conference Today to announce charges against gary tanner, a former executive at Valeant Pharmaceuticals, as well as andrew davenport, former chief executive of philidor for engaging in multimillion dollar fraud and kickback scheme, those are allegations put forth by Preet Bharara office. A document will be made available as well. Theyre going to announce this at a press Conference Today at noon eastern time from the offices out of new york. Thats the latest we have here, two people are going to be charged in connection with what they allege is a multimillion dollar fraud and kickback scheme, guys. Back over to you. Thanks, tom. Of course when it comes to valeant, jim, its also just about the current pressures the companys under. We have not by the way yet seen those deals that were reported on as possible. Key one being basically the sale to takata which was in the works got to check on that. And potentially other asset sales, stock responded positively to that. They did not have a particularly good quarter. No, are you talking about past people and that fhilidor is something called yes, pharmaceutical setup people knowing any time Preet Bharara calls you, its usually a suboptimal situation. Not a call you want to take . Well, its like mike wallis and but you got to take it. They usually dont stop at that level, is what i would say. Preet bharara is a tough guy. And he doesnt stop at the philidor level. Right. Before we get to bob, i did want to mention tesla, jim, because later today shareholders are going to have an opportunity to vote on that solarcity deal. Okay. Solarcity. And theres an expectation the deals going to happen. Yeah, i think so. First solar by the way disaster, not that its related to solarcity. But elon musk, when you get out and Start Talking to individuals ive been on the charity circuit, it still comes up. And people dont talk about solarcity except for jim chanos. When he talks he says this is the kind of deal you should be up in arms about. David, whatever elon musk does, theres a cohort of people who say i love the car, i got to own the stock. Which by the way, just to be fair, a lot of people felt that way about disney at 92, 93. Love the theme parks. And citi comes out today and says it too believes this is jason, i know you know these guys i do. More than 20 years youve covered media, and i do believe that disney is thats a facetious thing because theres a commercial that makes you look fabulous. My dad would call me if he were alive hed call me and say how come his commercial is so much better than your commercial . Put me on a billboard he always has that david faber is very smart. If you did the work like that until 92. It was like that when i was in first grade. Its like that in 92. I dont know if youve seen that documentary, ive watched it five times. He has it down. As for disney, the earnings were not particularly good. But remember the question of nathanson . He was feeling more positive on espn and this citi note says that maybe things are kind of winding down on the negative side of espn. Talks about bam tech. I tell you, man, every banker i talk to is all over this thing. Just trying to figure out what theyre going to do if theyre going to do something what it will be. Its a very interesting world in media, particularly as we watch a new fcc and what really is going to happen there in terms of whether or not theyre going to be forced any longer. Its amazing. The distributors to not favor content thats their own because thats on the table at least. So many things on the table. I think people have to recognize that the president has tremendous power when it comes to the agencies. The president s antiregulation. Thats hallmark besides being builder in chief. So you can just kind of not staff these are staff theme with people who are likeminded, of which there are plenty. And youre going to see a very changed universe. Which is why this market continues to have what i call a bid underneath. I think it matters. Plus, i think that theres a sense that retail is doing better. So you look at a childrens place, which you know i recommended heavily, here we go stock up 10 . Why . Because shes a great ceo and shes got a positive story to tell. Plce, a stock that i said must be owned because i like her so much. She is a great executive. Underrated because why . Shes not promotional. So it takes people like me to do the promotion. All right. And with that lets get to bob pisani, fill us in on the Broader Market this morning as well on whats moving. Bob. Good morning, david. And we have a mixed market this morning, but not mixed in terms of the Economic Data because it was positive across the board. Look what we got here, claims, jobless claims, four decade low, Housing Starts and multifamily terrific. Cpi on solid footing right now. All this gives fed license to raise as far as im concerned. Im dying to hear what janet yellen has to say whether shes going to tip her hand this morning well of course be carrying that. Look at sectors, energy up, oil over 45. Telecom, tech, Health Care Still a bit of trouble, and financials just turned positive although bank stocks were negative early on. So very mixed market overall. Home builders are doing well, were doing well at the open, not surprising given the Housing Starts numbers that were good. Modest gain since the election and adding to that now today. All this occurred before the spike in Interest Rates. And thats encouraging to see these stocks up despite the move up in Interest Rates. Talked a lot about the fang stocks in the last week how trump may or may not be friendly to technology stocks. You see the impact this has had for the big fang names since the election. It was nice to see gene munster, big acts in the space come out this morning over at Piper Jaffray making reports will not roll back net neutrality, will not alter status of h1be caps and would not encourage science and tech education. Bank stocks up today nice to see that. These are growth stocks, guys, amazon, facebook, netflix, clear longterm tail winds for revenue and earnings growth, valuation framework look attractively priced there and modest moves to the upside. A lot set on walmart. I can show you the problem quickly because numbers were pretty good. Same store sales up 1. 2 . Thats the ninth straight quarter gains. Traffic up 0. 7 . All right. It was 1. 2 in the prior quarter. Thats okay. Ecommerce 21 . Thats terrific. There is the problem, the guidance. Q4 guidance 1. 17 to 1. 32, thats implied guidance, c consensus is 1. 33, so basically analyst estimates have to come down thats why youre seeing a move in the stock price there. Just a bit of disappointment. Finally, monday may be the anticipated launch of something weve been waiting for for awhile in china the shenzhen hong kong stock connect, remember we told you about the shangh shanghai, this may begin the shenzhen stock link could begin on monday. We dont have a firm date, but it will allow International Investors to trade almost 900 shenzhen listed stocks via hong kong brokers. Foreigners will be able to get to these stocks for the first time directly. Shenzhen only described as the nasdaq more tech heavy than the shanghai, more entrepreneurial, less old school, less Money Center Bank kind of things. So it will be very interesting to see that. One thing interest fg that does happen is msci has been considering for a year now including the Mainland China stock shanghai and shenzhen in their exchanges. And if that happens, Something Like the eem, which is now 25 china, all hong kong, no mainland, could switch to up to 40 china if they include the mainland stock. So this is very, very important this decision about opening this link because it may be that may be the sufficient condition for msci to finally include Mainland China in all their global indexes. And like i said, the politics of indexing very important now with people moving to etfs and indexing in general. Right now the dow up 15 points. David, back to you. Thank you very much, bob pisani. With that lets head to the bond pits now check in with Rick Santelli at the cme group in chicago. Rick. Good morning, david, you know, i always use the term old floor trader term when markets are proactive, meaning theyre testing significant areas, breaking out of ranges, establishing new ranges, their guns hot. And i tell you what, i know janet inen is speaking today. We know how important the fomc meeting is, but its the markets that are hot, not necessarily the fed i think thats an important concept to hold onto as markets are muscling their way into where they want to be traded versus where outcomes are controlled by central bankers. Then add in the election. Then add in all the other variables. And, well, look at a oneweek chart of 2s and keep in mind pretty much every session this week and thus forward thursday the forward session we seem to be closing one basis point either side of 1 . If you see the oneyear chart things come back to early in the year. No difference for 10s comping back early in the year. I know the curve has steepened but really the entire curve for the most part this week is acting pretty much the same. And on 10s weve closed 2. 26, weve closed at 2. 22, thats the range this week. 2. 26 is one basis point from unchanged as we hover right below it. And as you look at 10s minus 2s, certainly there has been a steepening, but for the most part this week even with todays very interesting and strong data, especially Housing Starts, not really a yield curve implication. Mostly a parallel shift. Switch gears to Foreign Exchange, twoday of the dollar index, whats notable is yesterday. 133 was the breakout on a closing basis. And we did get it although right now we are hovering pretty much right there. And the breakout range takes us to and weve been talking about this for awhile, the spring of 2003. How much vinegar is left in this trade . How much intensitys left in this trade . Well, whether you look at a Foreign Exchange or our treasuries or global sovereigns in general, especially the long maturities, its that they havent given up anything on this big runup in rates. Equities havent given much on this big runup in price. And the dollar index certainly hasnt given up much on a very historic runup as well. And finally, the last chart, manipulator or not, its your decision, actually, it may be the president elects decision because as you look at this chart from the end of 2008, thats the last time the yuan was this weak against the greenback. And this year in particular its really been a big move. David, back to you. Thank you very much, Rick Santelli. Whats one of the best performing bank stocks of the year . One of the best performing bank stock sns. Yeah, one of the best today . Today . Yes. Is it wells fargo . Yes, of course. We dont care about stinking accounts, like stinking badges. Care about Interest Rates. Interest rates and dereg. Dont need no stinking badges. The Bank Protection bureau, what does he have going there . Yeah, the Consumer Protection bureau. Lets face it, this wells Fargo Janet Yellen talks about rate hikes, the stock you want to reach for other than bank of america will be wells fargo. Jamie dimon has also told us. Jamie, treasury secretary, dimon, not. But fred smith, what a great economist he is. I mean dropped by to say hi. I dont know how he got through the barricades. I try to go to tiffany there yesterday. Thats a problem. That is a problem that tiffany. Speaking of the fed by the way, the recovery, the fed, where a Trump Presidency fits into the picture, join Economic Committee members will have lots of questions from fed chair yellen. Well have live coverage of her testimony coming up. Attention are you eligible for medicare . The medicare enrollment deadline is just a few weeks away. Now is the time to find the coverage thats right for you. At the right price. The way to do that is to explore your options. You can spend hours doing that yourself. Or you can call healthmarkets. And let us do the legwork for you with no cost or obligation. Healthmarkets has access to thousands of medicare plans from nationally recognized companies. We find the coverage thats the best fit for you. At a price that fits your budget. And well do it at no charge to you. Just tell us what youre looking for. What deductibles you prefer. What doctors you want to see. Let us know if you want Prescription Drug coverage. Or vision care. Not sure what you want in a plan . At Health Markets we evaluate your needs and offer options that meet them. At no cost or obligation. You can talk to us over the phone. Or meet with a local licensed agent in person. Why pay a penny more that you have to for a medicare plan . Healthmarkets has already enrolled americans in more than 3 million insurance policies. Put our free service to work for you. At no charge. Britt of indiana did. And she writes. When we became eligible for medicare, we were overwhelmed. I called healthmarkets and they helped us find the right plan. Leon of california says. Healthmarkets was excellent. They explained all our medicare choices and followed up at every level. And heres what judy of indiana writes. Medicare shopping was very confusing if only we talked to you first at healthmarkets, we make finding the coverage you need fast and easy. Because we know you have Better Things to do. Call this number and let healthmarkets find the right medicare plan for you without cost or obligation. You have only weeks left call now before the medicare deadline. Call now. If youre going to wish, mommy, yourwish bigme true at the lexus december to remember sales event. Get up to 2,500 customer cash on select 2016 and 2017 models for these terms. See your lexus dealer. Mark up. We got stop trading with jim next. Ive spent my life planting a sizesix, nonslip shoe into that door. On this side, i want my customers to relax and enjoy themselves. But these days its phones before forks. They want wifi out here. But behind that door, i need a private connection for my business. Wifi pro from comcast business. Public wifi for your customers. Private wifi for your business. Strong and secure. Good for a door. And a network. Comcast business. Built for security. Built for business. Time for thursdays version of stop trading with jim. Well, one of my favorite analysts i guess just couldnt resist and caved. Heather boez positive on microsoft, which has been weaker of late. Hold to buy. This is Sacha Nadella basically being a very aggressive mover in the cloud talking about 18, 19, 20 billion in the cloud. She likes the strategy. I have been vocal that this is a good stock. And she knows too. And i just think this was a sign that a very prominent, very smart analyst believes in the Cloud Strategy and i think its working. Margin ramps as gross margin estimates are still below Amazon Web Services compared to the same revenue scale, a number of Different Things here. Amazon is where i was going next. This is the challenge. Microsoft is the challenge. Microsoft d not your old microsoft. Theyre being very smart. And Sacha Nadella is very smart, underestimated. Again, not a selfpromoter. Sel selfeffacing man. You got benioff tonight. I know that. Yes. We have you know, there isnt that much else when he reports because he kind of controls. Sucks all of the air out of the room that guy. That is not nice. He thinks youre a great guy. No he doesnt. But thats okay. But i meant in a good way. Hes a big presence. Well, he said jack dorsey was a good friend. You could be a good friend. Larry ellison is described as a good friend. You could be a good friend. Vote for larry. That is interesting, ellison. I wonder. I do wonder. Im going to be watching. Are you watching benioff . Im watching benioff and you. When we come back yellens testimony and q a with lawmakers. Were back after this. Is happening before our eyes. Shift in Human History sixty to seventy Million People are moving to cities every year. At pgim we help investors see the implications of long term megatrends like the prime time of urban expansion, pinpointing opportunities to capture alpha in real estate, infrastructure and emerging markets. Partner with pgim the Global Investment management businesses of prudential. Good morning and welcome back to squawk on the street. Im david faber along with Kayla Tausche and mike santoli. We are live from post nine at the New York Stock Exchange. Carl quintanilla and sara eisen both off today. Lets get a look at the markets and oil. Were up on both. The s p at this point up about 0. 31 and wti having quite a good day with 1. 7 move higher. In the meantime, for reserve chair janet yellen getting ready to testify on capitol hill before congresss joint Economic Committee. Steve liesman joins us now to fill us in on what we can expect. Steve. Good morning, david. Janet yellen testimony just a few minutes from now, shes going to use some of her most definitive language yet to signal a coming rate hike saying one could be, quote, appropriate relatively soon. She repeats the words from the feds most recent policy statement that the case for rate hike has strengthened. And she adds a new warning about the dangers of delaying a rate hike. The market judges a nearly 90 chance of a rate hike in december. And yellens comments seem to backup that conviction. The fed chair said they were a risk to Financial Stability from not hiking because it could encourage excessive risk taking and also could force the fed to raise rates more quickly than it currently plans. In the past yellen has talked about both sides of the risk equation, hiking too fast and too slowly. Now shes focused just on the risk of going too slow. The fed chair added that at the moment the fed sees only a need to raise rates gradually. On the economy she said its making further progress towards the feds goals on inflation and on employment though it has a bit room to run on the labor front. Heres what else she said, gdp growth has picked up, Consumer Spending has shown moderate gains but Business Investment is soft with a drag from energy, manufacturing restrained by foreign growth and stronger dollar. We had Stronger Economic reports on jobless claims and Housing Starts along with muted inflation number, that could bolster the case for that december rate hike, david. All right. Steve, well of course be watching and checking in with you again. Steve liesman. Lets go to dom chu now. Hes going to get us the latest on these two charges or charges for two executives in that probe of Valeant Pharmaceuticals from the u. S. Attorneys office from the southern district. Dom. Correct. David, what im holding right now is the actual charges, the indictment here and its four counts including conspiracy to commit wire fraud, wire fraud and Money Laundering as well. This, again, against gary tan r tannery, former executive at Valeant Pharmaceuticals and davenport. Again, those are the four charges will be laid out made evidence at a noon press Conference Today. The back story of course the idea there could have been possible fraud when whether or not some of these specialty Pharma Companies tried to get reimbursements from insurers for some of the medications and some of the treatments being offered and continually submitting claims and their relationship with valeant as well. So the pricing schemes, the way that some of the reimbursements from insurers worked out all part of the story. But well learn more. Im going to go through the rest of this particular indictment, but again, we dont know yet if the people have been arrested but those two have been charged with these alleged fraud items and well bring you know when we know more. Back to you. Thank you so much, dominic chu. Back to the days big story on capitol hill where awaiting testimony from janet yellen, fed chair. Lets bring in brian jacobsen, Wells Fargo Fund chief and jeffrey rosenberg, blackrocks chief investment strategist for fixed income. Brian, ill start with you. The hearing is a previously scheduled one and the topic is the Economic Outlook for our country based on todays data, how would you say it looks . Well, i think that the outlook is actually pretty rosy, at least if youre looking at some of the underlying trends as far as with Housing Starts, initial unemployment claims. I think that we do have some room to run though as far as with improvement. And thats what chair yellen is going to highlight as a classic economist. Shes going to say on one hand this, on the other hand that. But i think she wants to say were going to hike in december without actually saying december. So shes gone from saying were going to hike soon to relatively soon. If you ask her next week, its probably going to be imminently. And as we heard from her testimony already that has been released this morning the case for a rate hike continues to strengthen. Jeff, do you expect the fed chair to comment on the election and the performance of the markets in the week since . Well, i certainly expect her to get some questions. I think shell try to avoid the politics. Certainly she may focus on the Market Reaction because what you saw happen in markets very importantly to the fed outlook was an increase in Inflation Expectations. And remember thats the big story that the fed is concerned about or has been concerned about very low Inflation Expectations. So this is a very Good Development from the feds perspective. And it certainly factors into the story shes telling with the testimony that the feds ready to raise Interest Rates and why they need to get on with raising Interest Rates. I think that will be, you know, one of the important highlights. Jeff, you say its a Good Development to have these Inflation Expectations going up, but does it bleed over at some point into being a challenge to the feds outlook . In other words, you know, janet yellen has said theyd like to let the economy run kind of hot for a little while, but does the market start to worry about being behind the curve after the fed has spent most of this year kind of tamping down estimates of just how high shortterm rates will ultimately go . It could. And thats something well have to watch over a little bit of a longer term perspective. But remember, were talking about Inflation Expectations that are very low, 1. 5, 1. 3 in terms of Market Expectations coming up closer to a 2 level. Were very far away from any kind of environment with regards to the inflation data today 1. 6 . So were not talking about inflation figures that are above the 2 level. Were talking about how quickly can we get to that 2 level. And thats why the initial increase here has been viewed. And you can see it in equity market performance. Its been viewed as a positive rather than a negative. Certainly if you get well ahead of that you could change the story. But thats not really what the markets are focused on right now. Brian, when you were on our show last week you were talking about the fact you wanted to stay in u. S. Centeric assets, stay away from International Exposure here. That would have proven to be a good trade unless you wanted to be in equities in se argentina, but do you think that rebalances Going Forward . I think that it will, but you have to wait for it. I think right now were sort of in the part of the whole transition cycle from one president to the next where the news could get a little worse before it gets better. We know that oftentimes markets overshoot because i think were with International Markets in this almost like a sell the rumor. And you could take a little while to transition to the buy the news. I think the rumors might get worse. Lets see what happens as far as the shinzo abe meeting with trump as far as anything coming out of there as far as shift in attitudes towards trade. That could turn things on a dime. So why i would still continue to underweight nonu. S. Assets, i would look for good entry points because i think we will transition to from the sell the rumor to the buy the news type of mentality. Jeff, if were looking at things to be aware of as we head towards this december expected december rate hike, as we look back to a year ago, people got concerned the dollar was rallying into that, it did cause some kind of a global squeeze when we get into january and february. Is there a reason to think conditions are different right now as we head to december this time . You know, thats a great question is what i was going to talk about. You know, both for the testimony and the q a it will be very important to see whether or not janet yellen gets a question or comments on that. The dollars up about 8 from its recent low. Were back up to kind of the highs we saw at the beginning of the year. This is a concern. Remember last year the strengthening of the dollar was one of the reasons why the fed backed off of its pace of normalization. And its one of the things we got to watch out here. Post election theres a lot of bullishness in terms of Inflation Expectations, expectations around shifts in fiscal policy, raising the attractiveness of u. S. Assets. And from a global perspective from a u. S. Perspective may be good, globally a strong dollar is really quite challenging for the rest of the world. And that becomes a constraint here on how quickly the fed can act. So its definitely something ill be looking for and i think it will be very important for Market Participants both coming out of the testimony but as well as for the performance of risky assets, the performance of the dollar here. Jeff, you know, its a good concern to have when everybody gets too bullish. Maybe that is the time to start being more skeptical. But at the same time you have the russell up nearly 5 in the last week. And that is usually a leading indicator for the market more broadly. What do you make of that . Well, i think it goes back to one of the questions you had just asked about the international versus the domestic perspective. Certainly the dollar impact for International Investing makes it more challenging for u. S. Investors to contemplate nonu. S. Dollar investments because youre effectively shorting the dollar. So more u. S. Centric investments benefit from that perspective. Certainly the perspective of fiscal stimulus, certainly the perspective of better u. S. Economic growth raises the attractiveness of more u. S. Centric assets. So you see more u. S. Centric indices like the russell you mentioned having better performance, i think its a reflection of those trends, those themes. Brian, if youre a fixed income investor, as you are, just exactly where are you expectations in terms of how high treasury yields go and also how the Corporate Bond market, how the credit markets stomach this adjustment in yields . Of course theyve done fine so far, but a lot of people are getting their sights pretty high in terms of say where the 10year can get to. What would that mean for fixed income more broadly . Sure. I thought that the 10year would get up to about 1. 95 to 2 before the fed hiked again. Well, we overshot that, i think. And i do think this is a type of overshooting where we suddenly are around 2 or 3 , but keep in mind when the fed hiked last year i think the 10year was around 2. 34 , so almost this entire year weve just sort of tried to revert back to a more normal almost reset type of situation. Brian jacobsen, jeff rosenberg, always good to see you. We have some Appointment Television coming up. So our thanks to both of you. Art cashin just joined us quickly. Your expectations, art. Well, i think shes not going to say anything revolutionary here. And she will try and avoid any commentary on the president ial election other than to say it might present some uncertainty to the market as to where the direction will go. So no surprises . I dont see it. You know, shes not going to commit to a specific date. And i think theyre going to go ahead. I think rates are going to continue to inch up. Pretty good at calling where rates are going thinks its going to get up around 2. 38, 2. 4 very quickly within the next eight days or so. So well see. The real trick will be when, as and if they raise rates does the market react, or is it already builtin as the market moves for already. What do you think . I think it might be slightly disruptive. I think initially they will say its builtin. Weve got it here. Then youll begin to see around the edges everything moves. Art, thank you. The fed chair has begun speaking in front of the joint Economic Committee. Lets listen in. The economy has made further progress this year toward the Federal Reserves dual mandate objectives of minimum employment. Job gains 180,000 a month from january through october. A somewhat slower pace than last year, but still well above the estimates of the pace necessary to absorb new entrants to the labor force. The Unemployment Rate, which stood at 4. 9 in october, has held relatively steady since the beginning of the year. The stability of the Unemployment Rate combined with above trend job growth suggests that the u. S. Economy has had a bit more room to run than anticipated earlier. This favorable outcome has been reflected in the Labor Force Participation rate, which has held steady this year despite an underlying downward trend stemming from the aging of the u. S. Population. While above trend growth of the Labor Force Unemployment cannot continue indefinitely, there nonetheless appears to be scope for some further improvement in the labor market. The Unemployment Rate is still a little above the median of federal open Market Committee participants estimates of its longer run level. And involuntary part time employment remains elevated compared to historical norms. May help support Labor Force Participation as well as wage gains. Indeed there are some signs that the pace of wage growth has stepped up recently. While the improvements in the labor market over the past year have been widespread across racial and ethnic groups, its troubling that Unemployment Rates for africanamericans and hispanics remain higher than for the nation overall and that the annual income of the median africanamerican household is still well below the Median Income of other u. S. Households. Meanwhile, u. S. Economic growth appears to have picked up from its subdued pace earlier this year. After rising at an annual rate of just 1 in the first half of this year, inflation adjusted Gross Domestic Product is estimated to have increased nearly 3 in the third quarter. In part, the pickup reflected some rebuilding of inventories and the surge in soybean exports. In addition, Consumer Spending has continued to post moderate gains, supported by solid growth in real disposable income, upbeat consumer confidence, low borrowing rates and the ongoing effects of earlier increases in household wealth. By contrast, Business Investment has remained relatively soft. In part because of the drag on outlays for drilling and mining structures that resulted from earlier declines in oil prices. Manufacturing output continues to be restrained by the weakness in Economic Growth abroad and by the appreciation in the u. S. Dollar over the past two years. And while new Housing Construction has been subdued in recent quarters, despite rising prices, the underlying fundamentals including a lean stock of homes for sale and improving labor market and the low level of Mortgage Rates are favorable for a pickup. Turning to inflation, overall Consumer Prices as measured by the price index for personal consumption expenditures increased 1. 25 over the 12 months ending in september. A somewhat higher pace than earlier this year, but still below the fomcs 2 objective. Much of this shortfall continues to reflect earlier declines in Energy Prices and in prices of nonenergy imports. Core inflation, which excludes the more volatile energy and food prices and tends to be a better indicator of future overall inflation, has been running closer to 1. 75 . With regard to the outlook, i expect Economic Growth to continue at a moderate pace sufficient to generate some further strengthening in labor Market Conditions and a return to the committees 2 objective over the next couple of years. This judgment reflects my view that Monetary Policy remains moderately accommodative and that ongoing job gains along with low oil prices should continue to support household purchasing power and therefore Consumer Spending. In addition, global Economic Growth should firm, supported by accommodative monetary policies abroad. As the labor market strengthens further and the transitory influences holding down inflation fade, i expect inflation to rise to 2 . I will turn now to the implications of recent economic developments and the Economic Outlook for Monetary Policy. The stance of Monetary Policy has supported improvement in the labor market this year along with the return of inflation toward the fomcs 2 objective. In september, the committee decided to maintain the target range for the federal funds rate at 0. 25 to 0. 50 , and stated that while the case for an increase in the target range had strengthened, it would for the time being wait for further evidence of continued progress toward its objectives. At our meeting earlier this month, the committee judged that the case for an increase in the target range had continued to strengthen and that such an increase could well become appropriate relatively soon if incoming data provides some further evidence of continued progress toward the committees objectives. This judgment recognized the progress in the labor market has continued and that Economic Activity has picked up from the modest pace seen in the first half of this year. And inflation while still below the committees 2 objective has increased somewhat since earlier this year. Furthermore, the committee judge that nearterm risk to the outlook were roughly balanced. Waiting for further evidence does not reflect a lack of confidence in the economy, rather with the Unemployment Rate remaining steady this year despite above trend job gains and with inflation continuing to run below its target, the committee judged that there was somewhat more room for the labor market to improve on the sustainable basis than the committee had anticipated at the beginning of the year. Nonetheless, the committee must remain forward looking in setting Monetary Policy. Were the fomc to delay increases in the federal funds rate for too long, it could end up having to tighten policy relatively abruptly to keep the economy from significantly overshooting both of the committees longer run policy goals. Moreover, holding the federal funds rate at its current level for too long could also encourage excessive risk taking and ultimately undermine Financial Stability. The fomc continues to expect that the evolution of the economy will warrant only gradual increases in the federal funds rate over time to achieve and maintain maximum employment and price stability. This assessment is based on the view that the neutral federal funds rate meaning the rate that is neither expansionary nor contractionary and keeps the economy operating on an even keel appears to be currently quite low by historical standards. Consistent with this view, growth in aggregate spending has been moderate in recent years despite support from the low level of the federal funds rate and the Federal Reserves Large Holdings of longer term securities. With the federal funds rate currently only somewhat below estimates of the neutral rate, the stance of Monetary Policy is likely moderately accommodative, which is appropriate to foster further progress toward the fomcs objectives. But because Monetary Policy is only moderately accommodative, the risk of falling behind the curve in the near future appears limited and gradual increases in the federal funds rate will likely be sufficient so get to a neutral policy stance over the next few years. Of course the Economic Outlook is inherently uncertain and as always the appropriate path for the federal funds rate will change in response to changes to the outlook and associated risks. Thank you. And i would be pleased to answer your questions. Chair yellen, thank you for your opening statement. Something caught my attention during that statement that i hadnt in reading your statement earlier i hadnt caught my attention. You stated that the case for an increase in the prime rate relatively soon unless, the word unless that perked me up a bit, unless further evidence indicated to the contrary. My question to you, are the results of the election and does that fall in the category of unless . And what does the fomc, how is it looking at that in terms of the decision that the case for an increase is still relatively soon . Well, my own judgment is looking at incoming Economic Data and developments thus far affecting the outlook that the evidence weve seen since we met in november is consistent with our expectation of strengthening growth and improving labor market inflation moving up. So we indicated that the case had strengthened for an increase in the federal funds rate. And to my mind the evidence weve seen since that time remains consistent with the judgment the committee reached in november. Now, obviously there are many economic policies that congress and the administration will be considering in the months and years to come. And when theres greater clarity about the economic policies that might be put into effect, the committee will have to factor those assessments of their impacts on employment and inflation and perhaps adjust our outlook depending on what happe happens. So many factors over time affect the Economic Outlook and the appropriate stance of policy thats needed to achieve our dual mandate, employment and inflation objectives. But at this stage i do think that the economys making very Good Progress toward our goals and that the judgment the committee reached in november still pertains. Thank you. Youve suggested publicly that fiscal policy should play a role in stimulating Economic Growth. As i mentioned in my opening statement, any new Economic Growth initiatives envisioned by the next congress, and the next administration, should include a full accounting of its potential effects on the economy. And from your perspective, how would you balance the need to promote Economic Growth with the realities associated with deficit spending and high and rising debt . I assume we are looking at some type of a balance there. How can that be achieved . Well, its clearly up to congress and the administration to weigh the costs and benefits of fiscal policies that you will be considering. My advice would be that several principles should be taken into account as you make these judgments. First of all, although first of all, the economy is operating relatively close to full employment at this point. So in contrast to where the economy was after the financial crisis when a large demand boost was needed to lower unemployment were no longer in that state. You mentioned the longer term fiscal outlook, cbos assessment as you know is that there are longer term fiscal challenges that the debttogdp ratio at this point looks likely to rise as the age as the baby boomers retire and population aging occurs. And that longer run deficit problem needs to be kept in mind. In addition with debttogdp ratio at around 7 , theres not a lot of fiscal space should a shock to the economy occur, an adverse shock that did require fiscal stimulus. I think whats been very disappointing about the economys performance over the last really since the financial crisis or maybe going back before that is that the pace of productivity growth has been exceptionally slow. The last five years a half percent per year the last decade 1. 25 per year. The previous two decades before that were about a percentage point higher. And thats what ultimately determines the pace of improvement and living standards. So my advice would be as you consider fiscal policies to keep in mind and look carefully at the impact those policies are likely to have on the economys productive capacity on productivity growth and to the maximum extent possible choose policies that would improve that longrun growth and productivity outlook. Thank you. My time has expired. Im going to turn to congresswoman maloney for her questions. Thank you, mr. Chairman. Thank you for your service. We will miss you. Thank you. Can you envision any circumstances where you would not serve out your term as chair of the Federal Reserve . No, i cannot. I was confirmed by the senate to a fouryear term which ends at the end of january of 2018. And it is fully my intention to serve out that term. Thank you. The election outcome introduced new uncertainties that the markets and the private sector had not expected and priced in. And how do you how do these uncertainties affect the feds decision in the next meeting . Well, the markets try to anticipate what policies congress and the administration will put into effect. And we have seen some significant market moves since the election, in particular longer term treasury yields are up about 40 basis points. And the dollar is strengthened about 3. 5 broad index. My interpretation would be that markets are anticipating that you will ultimately choose a fiscal package that involves a net expansionary stance of policy. And that in a context of an economy thats operating reasonably close to maximum employment with inflation heading back toward 2 that such a package could have inflationary consequences that the fed would be have to take into account in devising policy and that the market response is consistent with that view. So, you know, from our point of view we dont know whats going to happen. Theres a great deal of uncertainty right now. Ive tried to offer you my assessment of where the economy is and what policy response is appropriate in the months ahead given my Current Assessment we will be watching the decisions that Congress Makes and updating our Economic Outlook as the policy landscape becomes clearer. And taking into account those shifts in the Economic Outlook for the appropriate stance of policy. But i think that is how i would interpret the market response. But things could turn out very differently. We understand. And, you know, we will simply watch what decisions are made and factor them into our thinking Going Forward. Does the lack of information warrant a delay in raising the interest rate, say until the january meeting when youll have more information . Well, my guess is that uncertainty about these matters will last for some considerable time. And we have had an accommodative Monetary Policy, i do think, and we have said and the committee has said for a long time that gradual increases in the federal funds rate are likely to be appropriate to promote our objectives. And my assessment of where the economy is and how its been operating and the fact that nearterm risks do seem reasonably balanced, i would think that the judgment that the committee reached in november remains the appropriate one. And chair yellen, one of the most significant responses to the financial crisis was passage of the dodd frank law. Today as a result of this law the Financial System is stronger, safer and more stable. How do you feel about repealing dodd frank . Well, i agree with your assessme assessment. We live through a devastating financial crisis. And a high priority i think for all americans should be that we want to see put in place safeguards through stipulation that result in a safer and sounder Financial System. And i think we have been doing that, and our Financial System as a consequence is safer and sounder. And many of the appropriate reforms are embodied in dodd frank. We now have much higher capital than before the crisis, much more stringent liquidity requirements, derivatives, standardized derivatives are now subject to central clearing. And derivatives both cleared and uncleared are subject to margin requirements that increase their safety. We have a new Orderly Liquidation Authority were focusing on resolution through and ending too big to fail through the living wills process, which i think is really changing the mindset of large Financial Firms about how they need to run their businesses. And making them safer and sounder. And dodd frank plays considerable emphasis on Financial Stability. We now have a group, the fsoc that meets all the regulators to consider threats to Financial Stability. So i think dodd frank was very important in fostering those changes. And we should feel glad that our Financial System is now operating on a safer and sounder footing. Thank you. And my time has expired, but i just have to ask you very quickly, do you have concerns that the repeal would make another financial crisis more likely . I certainly would not want to see all the improvements that we have put in place, i wouldnt want to see the clock turn back on those because i do think theyre important in diminishing the odds of another financial crisis. Thank you for your service. Thank you. Thank you, congresswoman. Our vice chairman. Thank you, chairman. I am bookended by two individuals who are going to retire at the end of this session. And its an honor and privilege to serve over the past year on this committee with both of you. Mr. Hannah has brought so much business expertise. And chairman, if there were a picture in the dictionary of indiana nice, you would be that picture. Thats a nice compliment. Thank you. Its been an honor and privilege to serve with you. You will be missed. Im comforted only by knowing that your replacement, my colleague senator todd young is as nice and as smart as you. So a great successor. Hes actually smarter. But thank you for the compliment. Thank you. Its been an honor to serve with you here. Chair yellen, its an honor to have you here. Thank you. Thanks for your time. A story this month in the wall street journal, they reported that for the first time in more than 30 years banks, Credit Unions and other depository institutions share of the Mortgage Market fell below 50 because of banks aversion to risk and fear of legal and regulatory issues. While some lending has increased, banks have shifted clearly to jumbo mortgages and borrowers who have the best credit. Loans to Small Businesses have lagged. And new rules for credit cards may be hindering lending as well. President elect trump has said that dodd frank is, and i quote, a tremendous burden to the banks. Hes expressed the same concerns that the banks are unable to lend to people who actually need it, people who want to start a new business or expand a current business, which has made us less competitive and has slowed growth. His view is shared by Many Community bankers, by small and medium size Business Owners and by many economists across our country. Further, the gao just released study at the Federal Reserve Bank Stress Test procedures and had 15, as you know, recommendations for making improvements that go beyond what governor tarullo recently outlined as next steps. Chair, what are your responses with respect to the following issues, the current state of bank lending, the constraining effects of regulation generally, and stress tests in particular, and finally, the impact on the economys ability to grow and create jobs. And one last thing, do you plan on adopting the gao stress test recommendations on improving transparency, model design and management and cost benefit analysis . And any of that that i asked if you cant respond to today i certainly understand, if you could reply in writing would certainly appreciate it. Let me take a shot at replying. And if theres something that i dont cover, id be glad to respond. Thank you. So let me just start by saying something about the burdens on Community Banks. Community banks play a very Important Role in our economy in lending understanding the conditions in their communities and providing lending that supports Economic Growth. And its really critical that they be able to function and to thrive. We recognize, we talk to Community Bankers regularly and recognize that the burdens that theyre operating under are significant. And want to do everything that we can to reduce those burdens and to simplify the Compliance Regime for those banks. Weve taken many steps on our own to reduce the burdens of our supervision. And were contemplating ourselves the regulators working on possible proposals for a simplified capital regime that would apply to Smaller Community ban banks. I completely agree those banks play a Critical Role and we need to focus on reducing burden. Now, of the dodd frank rules, many of them apply particularly to the largest Financial Institutions. And the most significant increases in Capital Requirements including surcharges for the largest capital surcharges for the largest firms that create the greatest systemic risk, the burdens of stress tests and other regulatory requirements fall on those firms that i do think pose potential threats to Financial Stability. And it is important that those institutions maintain Higher Standards of safety and soundness. You nengsed the stress tests and gaos findings, stress tests have been central to the Federal Reserves efforts to increase capital and ensure that Capital Planning in large systemic Financial Institutions that Capital Planning takes into account an accurate assessment of the risks that could, and the gao found in their review that tests are effective, are useful. They suggested some changes many of which we had already considered or had underway. And their suggestions are useful. And we intend to take them up or look carefully at it. So it was a very useful report. But bottom line it concluded that our stress testing regime has resulted in a very substantial improvement to safety and soundness. I should say that we recently put out a new regulation that will reduce the burden of the stress testing regime on institutions between 10 billion and 250 billion i guess 50 billion and 250 billion that those institutions will no longer be subject to the qualitative part of our socalled ccar capital review process that we will no longer object to capital distributions based on qualitative evaluation of their Capital Planning process. We will look at their Capital Planning process through normal supervisory methods. And i think that will serve to reduce burden on a number of large but smaller institutions subject to the stress test. And finally you asked me about bank lending and mortgages. I think certainly mortgage credit standards have tightened up. And there are borrowers who are finding it difficult with lower Credit Ratings to obtain mortgage credit. I think it is a consequence of the financial crisis regulations and greater caution on the part of lenders. I think we wouldnt want to go back to the mortgage lending standards that we had between we had in the first decade of this century that led to the financial crisis, but they certainly have increased. On Small Business lending, i think my assessment there would be that it remains largely available and that banks find, and this is something you also see in surveys that the demand for lending for borrowing by Small Businesses has not been very robust in recent years. In part i think they see their sales are not growing sufficiently rapidly to justify much borrowing. Certainly the Community Banks and other banks that we talk to and monitor suggest that they stand ready and have adequate resources to support additional lending to smaller businesses. But there is a question there as to whether that is a demand or supply issue. Thank you, congressman. Ive just been alerted that the house has been called for a vote, which may scramble. But wed love for you to vote and come back and well keep your place. My senators as i look down the line are smiling because that means they move up on the list. Lets see, senator klobuchar, youre next on the list. Vote, come back, wed love to have you back. Well keep you on the list. Okay, very good. Well, thank you very much, madame chair. And i just to follow up on representative tibiris questions on Community Banks, i appreciate that. You and i have discussed that many times. I think ill put some additional questions on the record. As you know im concerned about the status of Community Banks and whats been happening the last few years. I just wanted to start out with a question about the importance of independence for the central bank. I know you cant comment on political goings on, but you may have noticed there was some campaigning going on in the last year and the Federal Reserve was discussed a few times. Could you comment on the importance of preserving the independence of the Federal Reserve bank from interference by either the executive branch or the legislative branch and what that would mean for Monetary Policy effectiveness if there wasnt a sense of independence of the bank . Thank you for that question. I think independence by a central bank to make tactical decisions about implementation of Monetary Policy subject to a congressional mandate which we have. Obviously we are accountable to congress. Were a creature of congress. Congress has established goals for us of maximum employment and price stability. But its critically important that a central bank have the ability to make judgments about how best to pursue those goals while being accountable for explaining its decisions and transparent in its decision making. Central banks around the world in recent decades have gained this independence. And the economic outcomes that have resulted from this trend towards Central Bank Independence we have seen much better Macro Economic so theres actually studies showing that banks that have that sense of independence that thereve been improvements in those countries . Yes. There is clear evidence of Better Outcomes in countries where Central Banks can take the long view, are not subject to shortterm political pressures, and sometimes Central Banks need to do things that are not immediately popular for the health of the economy. And weve really seen terrible economic outcomes in countries where Central Banks have been subject to political pressure. Often its the case when a country is not able to balance its budget, is running large deficits, is finding it hard to finance those deficits. How can you finance it . You realize you can go to the central bank and force it to buy the debt thats being issued. And the story in every country thats experienced very high or even hyperinflation is one where a central bank has been forced to follow the dictates of a government that has compromised its independence. So markets come to expect low and stable inflation from a central bank that has political independence and good economic performance. And i believe weve seen that both in the United States and globally. Thank you. You know, we have the fed dual goal of maximum employment and price stability, thereve been some talk out there of just eliminating one of the goals and just focusing on price stability. And theres also been comments to have the fed target a certain growth rate for the economy. What do you think that would be the effect of that . Either limit the feds focus to stabilizing prices, get rid of the other part of the dual mandate, or putting in targeting a certain growth rate . So i am a strong believer in the feds feds dual mandate. It was Congress Decision and of course it is up to congress what our mandate should be. But i believe that both of these both price stability, the rate of inflation, having that low and stable and Employment Matter greatly to the American People. They both impact the welfare of households and individuals in this economy to a great extent and i think theyre both appropriate goals. Price stability is a goal of every central bank. Most Central Banks also take employment or real side performance into account in achieving it. There is rarely conflict in pursuing these two cases. They could be in conflict, but most of the time theyre not. If you think about what weve faced, the Federal Reserve in the aftermath of the crisis, weve had very high unemployment that we wanted to bring down as rapidly as possible and inflation that has been almost consistently below our 2 objective, so our efforts to put in place a highly accommodative policy were directed toward achieving both of those goals, and they have not been in conflict. With respect to a growth rate objective, we cant independent independently, if we are to achieve our inflation objective, simply choose some arbitrarily chosen growth rate objective and try to achieve it. If we try to do that and its one thats not consistent with the underlying productive potential of the economy and the economys ability to grow based on changes in technology and capital and labor over time, we would end up with an economy that either has inflation thats above acceptable levels or conceivably deflation if the target were chosen too low. All right. Thank you very much. Ill ask my questions on the record, mr. Chair, on infrastructure, funding the economy, something the president elect has discussed, and then also and the positive of doing that, and then income inequality and some of your views on that. Thank you very much. Thank you, senator. Thank you. Senator, thank you. And i know the members members of the committee will miss your presence as youre moving on to greater responsibilities. Yes. I may still be on the committee, but yes, my presence at the front of the line, you mean . The front of the line. All right. Thank you. Congressman hanna. Thank you. We talked about dodd frank. Prior to dodd frank, the Federal Reserve members took responsibility for the safeness and soundness of money and production oversight. Dodd frank moved that to the cfpd. And yet in 2015 the l. A. Times reported that wells fargo with cross selling pressures on consumer bankers was encouraged and encouraging fraud. Wells fargo paid 185 billion in fines. And i know this is somewhat of a hypothetical, but im curious. So dodd frank in this instance with these whoevers doing this missed this and its a profound miss. Do you think it would have been any different had it been left with the Federal Reserve . Well, we have cooperated hills or the al or theally with other regulatory agencies to engage in examinations. And in this case, the Consumer Financial Protection Bureau was involved. The comptroller of the currency. Most of the abuses that occurred were in the National Bank where the controller of the currency has responsibilities. Thats been historically true. So, you know, they did find these problems. They have levied significant fines and put in place Enforcement Actions to correct them. We in 2011 looked at a subsidiary we were then responsible for, which was the independent Mortgage Company and found abuses which we fined wells fargo for and put in place Enforcement Actions. I think weve all worked together pretty constructively to try to address abuses. I mean, i would say that we Going Forward in the institutions that we supervise our state member banks are looking to see if there are similar practices that could cause problems and with the Holding Companies we supervise of the largest institutions, we have undertaken a thorough horizontal review of compliance practices. But we do work constructively and lab ra tifly with the other agencies. So theres no real disconnect that you can find but a of this dodd frank. There are many agencies in the United States involved in supervision, and we do try to work constructively together. And i think weve had a good working relationship with those other agencies. So i wouldnt want to levy a criticism there. Sure. I understand. In previous hearings weve discussed student debt, the massive amount of student debt, and how that impacts starting a family, having a home, doing all those things that people used to do at a much younger age. How do you take into account how does the fed take it into account when they consider all the things that they look at . I mean, it is somewhat like a consumer do it death out there, this trilliondollar number that is haunting and hanging over everyones head. But how does the fed think about it Going Forward . So we have been very attentive to trends in student debt and as you say it really has escalated to an extraordinary degree. Theres a good deal of research that is trying to determine whether or not student debt burdens might be impeding household formation. Household formation has been very low. The number of young people who were purchasing new singlefamily homes has been quite depressed. And weve seen less of a recovery in the housing sector and pickup in Housing Starts than we would have expected. Multifamily has been quite strong, but Single Family construction has been depressed. There are a number of factors i think that are contributing to that, and there are, you know, some research that suggests student debt is a factor that is leading to the decision to reduce willingness of millenn l millennials to buy singlefamily homes. Theyre marrying later, getting more education, living more in cities, have more student debt. Its difficult to sort out exactly what the most important drivers are, but that could be one of them. Thank you. Thank you. Its interesting how we study things. Bob dylan said, i think it was him, he said you dont need a weatherman to know which way the wind blows but we spend a lot of time figuring out things that are patently obvious. Thank you for your time today. Thank you. Thank you, congressman. Senator peters. Well, thank you, chairman coats. Before i begin questioning, i want to thank you. Its been a pleasure and honor to be on this this committee with you and wish you well in your future endeavors. Thank you for taking the time and i certainly know that you understand that politics shapes american democracy in sometimes very unpredictable ways, and we have to be prepared for that you know predictability. In times of uncertainty and change, one thing that always seems clear, that always stands out, is that Americans Care about the economy, usually first and foremost, and they ear concerned about their pocketbooks, their futures, they want good jobs, they want growth, better chance for their children. And while politics that shape our democracy dont always follow any kind of predictable pattern, all of us need some measure of stability and certain certainty, be it markets, consumers, savers, spenders, retirees, young professionals. The list goes on. Thankfully, to paraphrase president obama, the federal government remains an ocean liner, not a speedboat, but there still remains without question a level of uncertainty about the near term of fiscal policies in this nation. So i just wanted to say how much i appreciated your comments on the independence of the fed and the necessity for that. Monetary policy has been and i think must continue to be a balance and a complement to fiscal policies of the federal government. And i also think that unfounded accusations that the Federal Reserve monetary policies are somehow political in nature can be one of the most damaging claims that can happen in a modern democracy. Certainly as policymakers, i believe that we have a role to express our views on individual mone