Transcripts For CNBC Squawk On The Street 20161123

Estimates. Road map begins with eli lily abandoning an important Alzheimer Drug, stocks down more than 13 in the premarket. Well have an exclusive interview with meg whitman, corporate americas relationship with president elect trump on the agenda. And the countdown to black friday and a cheerier Holiday Outlook for retailers. The winners straight ahead. First though to some news this morning on the continued search in the transition for the next treasury secretary of the United States. That list does appear to be shrinking. We can tell you this morning that jon gray, the man who runs the real estate business at blackstone, one of the more senior members of course of that firm, is no longer being considered for treasury. It had been reported earlier this week after meetings over the weekend that mr. Gray along with of course Steve Mnuchin who was the Campaign Finance manager for the Trump Campaign were perhaps two of the few candidates left for that post. But this morning i can tell you that mr. Gray no longer in the running. Do have a statement from jon gray who said, quote, i had a terrific meeting and robust policy discussion with the president elect. It was an honor to be considered for treasury secretary, but i still have much work to do at blackstone. So, guys, unclear when we will see that appointment. One would have to believe given mr. Gray no longer being considered that Steve Mnuchins certainly a front runner. Jeb hensarling. Havent heard as much in the reporting, not by me others that follow closely but he was one of the names as sglel gray is also speculated to be the next chief of blackstone. One of many widely considered to be if and when Steve Schwartzman decides to no longer be ceo of blackstone. Gray whos had Great Success running the real estate business which is the single largest portion of blackstone at this point, considered to be the future ceo of that company. And given his age, you know, there could be a role in Public Service for him, many years from now because he is a young man. How old is he . I dont think jons even in his 50s, i think hes in his late 40s. Yes, in the times language pulling back on some of the more strident policy like torture, Climate Change, tom friedman with an article saying pay close attention to how much hes willing to bend here as he gets the ear of a wider spectrum of advisors. Thats going to be fun to watch. Meantime, the watch is on to the stock market a day after the dow closed above 19k for the first time ever, all three major indices and the russell record closing highs. But its a rough morning for lily. Shares tumbling after its experimental Alzheimer Drug failed to meet goals in a phase 3 study. This is what the current and incoming ceo told our meg tirrell earlier this morning on squawk box. You should expect were going to look carefully at these results. That will take weeks or months to fai far ret out all of the information. Learn everything we can from this trial and go back and apply that to the Development Programs we have. Weve been planning for our future with or without solar for some time. We knew it was a high risk and high reward program. Were disappointed with the result, but we have a lot going on beyond alzheimers. So it will be a rough morning for lilly. 12 gain for november. Industrials are a distant second. And the dow now with this postelection rally is up 9. 2 for the yeartodate. Hasnt had a double digit percentage gain since 2013. It really has been a relentless rally to record highs after the election. About 3. 5 of that 9 gain for the year came after the election, which actually pails in comparison to the banks. Rocket like performance. If you look at the kbw bank index, you see nearly every member of that group at 52week highs. The other group i would point out in terms of the stock Market Performance is the russell 2000. The small caps really making a move higher here beating the megastocks in terms of performance. We have seen small caps on a 13 run higher. So its this breakout in the bank, david. Yep. Breakout in the small caps as the domestic agenda economically looks brighter. And the question is how much steam does this rally have . I did notice, and carl i think you found this, that the rally has made its way to the front pages. 19,000, dow on the cover of usa today, on the cover of new york post. We always look at these things to see there it is. Sentiment is getting bullish. The Investor Intelligence report which a lot of people look at for sentiment, Peter Boockvar points out is at a threemonth high. Were not above 60 yet, which is considered uber bullish and could be a turning point, but the fact that weve made it to the front page says something. Interestingly, you know, they quote some people, seth masters, who called remember when dow 20k kind of sounded ridiculous in 2012 when we were at 13k. So usa today giving some of those folks an early victory lap. Actually, its only a 5 move from 19 to 20. I know. It is worth pointing out the simple math here. That percentages become a lot smaller. Did you know we were below 18,000 in early november . I mean, we rallied over 1,000 points. We have. Even the s p as well, which i tend to focus on rather than the dow. Although the dow is outperforming. The dow has significant outperformance which we dont typically see but as a result of a few components theyre not tracking as closely as they have in the past the s p and dow. Big part of that is going to be best dow component for the year, any guesses . It is cat. Number one yeartodate gainer certainly not the story in 2015. Although more people trying to argue the market is ignoring a 10year now at 2. 3, 2. 35 after we got this durables number at a 30. And the dollar index 1. 01 and change, up 10 of 11, when does that correct, sara . 13year high for the dollar if you look at the dollar index against some of the big trading partners like the euro, will the dollars rise and stand in the way of this yield rally, well see what happens to the Economic Data, by the way this durables number was before the election. So as mike was pointing out upstairs it was already recovery and Business Sentiment and activity. The dollar is certainly one of many things hpe has to think about. Shares of that company by the way slipping a bit on its Quarterly Earnings report which we got after the bell yesterday. Revenue down 2 year over year a bit short of analyst estimates. Hewlett packard ceo jomeg whitm joins us, like she always does, after each quarter. Nice to see you. Nice to see you. Lets focus on the quarter, it can get confusing, you have two mergers, Software Business into microfocus. Next year youre going to be largely an Enterprise Business company. Lets start with servers where i know there was some weakness that at least some people on the call were focused on. What can you tell us about that market . Are you expecting to see any sort of a rebound given revenues were down 6 on an adjusted basis . Sure. Well, i think the first thing to focus on is the full year of 2016 was a very good year for the company. Actually, Enterprise Group, which youre focused on appropriately, grew 3 on a full year basis. The first part of the year was very rapid growth with slight with margin pressure. The second half was more margin but a little bit less growth. So weve got to in 2017 do both. Weve got to grow the Enterprise Group business and weve got to improve margins and a core part of that is servers. So, listen, weve got to shore up the Industry Standard servers, the core rack servers. And thats really about focusing on the channel, making sure weve got the right programs, right ability to respond quickly. And then make sure weve got the right alliances in place with Companies Like pwc and deloitte and the Indian Outsourcers because those companies interestingly enough thought of us as competitors when we still owned ds. Now theyre fully embracing us because we are completely complimentary to what they do. And then of course accelerate growth in the other parts of servers, High Performance compute, synergy, which is our new composable infrastructure offering as well as our conversion hyperconverged offerings. So i think weve got a plan to grow servers and all of eg in 2016. Right. But what about the performance of this quarter then, meg, gives you the confidence you can execute on the plan you just outlined . Yeah. Well, first of all, we did have very good growth in as i said High Performance compute mission servers and weve got to shore up the Industry Standard servers and migrate from when we do our big scaleout servers for Tier One Service providers, we need to compliment that with tier two and Tier Three Service providers. But listen, weve got a plan. Pretty sure we can do it. I think, listen, there are a lot of changes in our industry and we are a big believer that hybrid i. T. Is going to be the strategy going forward. So, you know, companies will decide what applications and workloads they want in their data center, what they want on prim, what they want in a managed service and public cloud. And weve got to be able to do on prim private cloud at public cloud like economics and were getting very close to that. Sara of course was talking about the strong dollar. Yep. You and i talked a lot about it when Hewlett Packard now includes hp inc. , in Japanese Companies but in terms of your business now how is the dollar going to impact you if it continues to be as strong as it has over the last few day sns. Well, a strong dollar creates currency headwinds for us as it has for much of the last three to four years. I was interested to hear earlier in your program that the dollar hit a 13year high, thats the way it feels running Hewlett Packard every year, the currency headwinds are very real. When goods are strong, our goods are more expensive overseas. Say someone in europe going to buy 1,000 servers, now maybe only buy 800 because the dollar is so strong. So, listen, weve got to manage that. Thats part of our new reality. Weve got to get our cost structure in line to continue to make sure we can handle a strong dollar because my view is its going to be strong for another couple of years at least. So, you know, its part of the landscape and thats what we do as Business People is manage around things that are likely not going to change. You mention the cost structure. Of course over your tenure youve cut a lot of costs, shaved a lot of businesses off, now obviously slimming down a great deal from there, is there more to be done in terms of cost at this point . Are there going to be even more cuts in employment. Well, youre never done in terms of making your company efficient. I think we are largely done with, you know, reducing the number of employees because so many employees go with Enterprise Services and software. But we can always be more efficient. We can make investments and systems. We can continue to redefine our business proscesses and we can o that. But really the reason for all these separations is focus. My view is our industry is changing so fast that the futures going to belong to the people who are nimble and agile and can jump on new trends faster. And our view was it was very hard to be as nimble and fast as we need to be running such an enormous company with such complications around the number of different business units. The new Hewlett Packard enterprise is going to be focused really on three things. First is make hybrid i. T. Simple for the cio and hybrid today is not simple. Were going to power the intelligent edge by capitalizing on growth and branch and edge as well as compute and storage at the edge and we have the services to make it all possible and cios need help today because the world is changing so fast they have to make sure theyre on the cutting edge and dont miss a thing but its hard to do on your own. Right. Obviously when people think of your tenure they think of slimming down, but you did by three com, three par, aruba, do acquisitions become more important part of your strategy once you complete the spin merges of Enterprise Services and software . Sure. Well, i didnt buy that was done under a prieevious administration. Right. But to your part they are the exact kinds of acquisitions we would make going forward. Its Complimentary Technology in growth areas that can leverage or go to market and can be integrated into some of our Systems Software products like one view. But when i think about growth, david, i think of four things chlgt first is organic innovation like the new synergy product that were going to be highlighting at discover next week, our big customer event. Then partnerships with Companies Like chef, doctor, turbo nomic that make our solutions more relevant to cios and third is organic m a. Again, thats the kind of thing well look for. Complimentary technology that leverages our distribution system. And well be very disciplined about that process. I think over the last five years weve demonstrated that wed take a returns based return on investment approach to m a and were going to continue to do that. But m a will be part of our future. Speaking of previous administrations, we have a new administration coming to town in washington, d. C. In our previous interviews, meg, we talked a lot about the president ial election. You as a longtime republican of course were outspoken in your opposition to donald trump. And actually embraced Hillary Clinton despite as i said being a republican yourself. How are you now viewing this Incoming Administration . And what are your expectations with the Trump Presidency . Well, first of all, now that the election is over and the debates have occurred, you know, what i said i sent a note to all of our employees saying, listen, the election did not turn out as i had hoped, but now weve got to come together and weve got to give the president elect the benefit of the doubt and encourage him to lead a very diverse nation. So i for one am supporting the president. Listen, were going to find out exactly what he is going to do. Some things hes talked about, i think, could be quite good for Hewlett Packard enterprise and business in general and some things i think wed have to manage and could be, you know, somewhat harmful to the company. So, listen, Corporate Tax rate reductions to make us more competitive on a world stage would be helpful. A tax holiday on all the cash that we have overseas, bringing that back at a 10 rate that would be helpful to us as well. Some of the trade issues around putting a big tariff on goods that are made outside the United States coming into the United States would be problematic. Wed have to completely change our supply chain. And then finally, immigration. You know, h1b visas are very important to the technology industry. If they were limited dramatically, wed have to rethink how we did r d. So of all of those do you have any sense at this point to a lot of people expect tax reform is going to happen. Your tax rate as a corporation may come down. Your ability to repay tratriati going to be there. Is that a positive for Hewlett Packard enterprise . It would be, for sure. Because it would make america more tax competitive place to be. And we like so Many Companies not just tech companies, we have a lot of cash offshore, which we would bring back. Which we would either use for investment or to Share Buyback or repurchase. So those two things would be very helpful to Hewlett Packard enterprise and i think business in general. And, meg, in the many years weve been doing interviews weve often talked about youre wanting to return Hewlett Packard, whether it was the huge company you inherited or the much smaller one you now run, to growth. As we enter a new year, given this quarter, can you promise that there is actually going to be top line growth at Hewlett Packard enterprises . Well, remember, in 2016 if you exclus collude divestitures in currency, we actually grew 2 . We did it in 2016 and we intend to do it again in 2017. I feel great about the portfolio that we have. The innovation engine is really now youre starting to see all the work weve done over the past three or four years starting to come to the fore. And were excited about some of the partnerships were doing. So, yes, we can grow this company in 2017 in Constant Currency id have to add, david. I mean, if this dollar continues to strengthen, that could be a challenge. But in Constant Currency we intend to grow the company in 2017. Of course you do face a lot of competition. Yes. I know theres fewer names but theyre pretty fierce whether its cisco, wau way not in this market but around the world, meg, theres a lot of significant competitors. Lenovo, we dont talk about that often are you concerned about coming off the mat at some point and competing, isnt that right . Yes. Welcome to our world. This is one of the most Competitive Industries that i have ever seen. And its constantly changing. And its not only from the entrenched competitors, its from new entrants. So we have to be on our game. And that is, again, part of the reason we decided to separate the company and focus in a much more targeted way. Because when youre running a Smaller Company thats more focused, you can be faster, more nimble and be a more fierce competitor. Thats what we intend to do. But youre right, all those competitors are trying hard to, you know, make gains on their own. We are too, but i feel very good about the strategy. I feel great about, you know, the cash position that we now have. Weve got a fantastic balance sheet, very strong company, innovation alive and well, but its dog eat dog no question about it. As always, we appreciate you joining us. Meg whitman of course ceo of Hewlett Packard enterprises. Thank you. Great, david. Happy thanksgiving. And to you. All right, still to come on this show, well take a closer look at the trump transition. Well talk with former minnesota governor tim pawlenty. And taking another look here at u. S. Equity futures after another record close yesterday. Looks like we may be taking a pause, though its early dow futures down 12, s p down 6, nasdaq futures down 18. A little more than ten minutes to go before the opening bell. Much more squawk on the street live from post nine at the nyse when we come right back. As we count you down to the opening bell, wanted to point out shares of deere on the move in the premarket on track to open at a new alltime high. The company blowing past wall street estimates with its Quarterly Earnings this morning. Well talk about deere and the overall market when squawk on the street straight from the nyse comes right back. Manage my portfolio. Ere id 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. Youre watching cnbcs squawk on the street live from the Financial Capital of the world. If that isnt a sign of the holidays arriving, i dont know what is. Santa claus making his way on to the floor, up to the podium where macys will ring the opening bell celebrating of course 90 years of the macys thanksgiving day parade. Meanwhile, watching the futures as sara said earlier, we might take a bit of a respite from this twoweek postelection rally. Mike santoli joins us at post nine covering a bunch of angles over what weve seen the past two weeks, what is it sometimes you say the cliches fit. Yeah. What does that mean . I think in this case the whole path of least resistance seems to be up. People seem to be rotating out of safety out of bonds into stocks. And i think were in this comfort zone along a few fronts. At least this explains why we got here in stocks. Which means inflation going from too low but not yet too high. Oil is not collapsing, but its also not near the old highs. Everything seems to be in that period where, you know, rates, i think, as well. 2. 35 on the 10year only seems high because we were at 1. 36 a few months ago. Its not otherwise high. So i think you had Warren Buffett say until the 30year gets to 4 , stocks seem to be a better deal. Well, were just over 3 . So until all this falls apart or until you have some disorderly selloffs in the bond market, i think everything can be okay for a little while. You are obviously on guard for things getting bubbly as you put it. Yeah. But you say were not there yet. Again, its a process. Its not a moment. So i think you see some of the shortterm sentiment indicators getting a little bit too overexcited. You saw some of the surveys and the newsletter writers entering that zone of saying, okay, everyones kind of on board, the markets gone up a lot in a hurry and people believe in it now. But its not yet to that point where you say, wow, everybody is too balled up. Its interesting b of a Merrill Lynch came out and raised to 2100 which is still a decline. Well below where we are right now. So it does seem as if i think its a process of people acclimating themselves to the idea that the markets in a decent spot. All the strategists have come out, j. P. Morgan raising target, Deutsche Bank raising target after the election. Trump does get a lot of credit and so does the republicans winning the senate, but we should point out weve had some pretty decent Economic Data and you pointed out earlier which started before the election. Right. And earnings have come out of their five quarter in a row slump. The fundamentals at least here are looking better. Right. Yields started rising from summertime lows. You saw the european purchasing manager index, manufacturing indicators, rising already. And of course durable goods order today were from october. Even retail sales in october were better than expected by a lot of different measures. So i do think what youre seeing is things are moving along. But what did the election do . It put a story to that data. And so it had people say, hey, maybe this isnt just one of these firm patches in a very stop start economy, maybe this can actually get some fuel on some of this sort of kindling fire. It also, and we heard meg whitman talking about this brought strongly the idea that not just repatriation but lower rates overall are going to improve profitability, which i guess would have the impact of lowering multiples given the earnings you might expect from corporations who are paying a lower tax rate and lets call it late 17 or 18. Right. So you have the windfalls coming in areas like corporate profits, like even tax cuts for the upper income households, which isnt something that the economy was screaming for and you already got the economy slow and steady into a spot of kind of full employment and high profitability and now youre going to add to it. So thats why i think longer term if you get a ground swell of interest in stocks, thats overheating ingredients right there. Lets get to the opening bell here as we said, santa and macys ringing the bell to celebrate the thanksgiving day parade tomorrow of course. 50 Million Viewers across the country. 3. 5 million spectators lining up along the streets of new york city, which by the way will have cross streets closed off. Security getting a lot tighter than it was a year ago, in part because of things that happened in parades around other parts of the world. That will be on nbc nationwide starting at 9 00 a. M. Tomorrow. Nasdaq moxian. So let the holidays begin. Speaking of which, mike, as we pay more attention to retail and get ready for black friday, Big Questions going to be whether or not there was some kind of pent up demand from the consumer that was held back because of election uncertainty. I think you have some people making that case. You had a lot of retailers coming out, you know, in prior weeks saying, look, we see some kind of hesitation in the preelection period. So whether that was an excuse or whether that was real, were going to start to see it. Now, i think you have to keep in mind the s p retail index is up 12 in two weeks. So you already have the market saying, hey, maybe things did get better, maybe a flush of spending. And then the question is chain by chain, you know, company by company are you going to see the evidence. Urban outfitters last night missing on comps. That stock had run a little bit. So youre going to have to see whether it shakes out for individual companies. Run a little bit . It was up more than 60 so far this year, one of the best performers in the s p. Right now its at the bottom of the list taking gains for the year down to up 50 , particularly disapointing in Urban Outfitters is anthropology which gets the biggest chunk of sales. Overall comps up 1 , less than expected but again, it was that anthropology comp down 2. 7 , another brand it owns down 1. 7 . The name sake brand was actually up. I guess theyre facing some markdown pressures. Theyre going to increasingly see lower prices. Our retail expert and contributor saying that anthropology got a little ahead of itself on trends, sort of missed the mark when it came to trends. But it has been a story of a strong stock and higher valuation than some of these other retail names. Definitely. I think when youre talking about trends and you have these narrowly focused brands, its basically did they hit it or not this period. And if the conclusion is no, whats interesting is the time to have bought the stock in retrospect is when they were getting ridiculed over buying the pizza chain. Pizza. Talk about a buyable signal, right . Exactly. You have to be mindful of field position and sentiment, which is interesting to watch how gamestop trades, which is talk about really negative washed out sentiment, heavily shorted stock. People think its in secular decline. That stock hasnt benefitted from any lift and sort of trading in a different way i think after the numbers last night. Yeah. Gamestop was a slight beat, 49 cents by a couple of pennies. Revenue was in line but the holiday guide, again, this transition from physical games to digital is which has been years and years in the making. Reminds me of the software as a Service Subscription model. It takes the street a while to get used to it. And where are you in the console cycle. But six or seven times earnings. The stock is kind of priced for the company to really not be around for that much longer. So its up to the company to prove it wrong. It is worth taking a look at shares of eli lilly. The company of course announcing its phase three trial of a drug to treat the cognitive effects of alzheimers failed to meet its primary end point. They will no longer be pursuing that. And it is pressuring the stock as you might expect 14 . Also take a look at shares of biogen. Different approach, but its getting hurt as well. Biogen of course also has a drug for alzheimers underway. And that stock down about 6 . This has been, you know, i can remember a number of weeks back it was bristolmyers got crushed when unexpectedly that was nonsmall cell lung cancer there, i believe the drug there, but this is always key risk for people who are investors in this sector and its big seeing with that 15 loss. A lot of analysts saying this was the key catalyst for q4. Not like lilly doesnt have any drugs which the executives this morning were sure to make that point. But there was this article in the wall street journal the day before that there was a lot riding on this because so many previous alzheimers treatments that would stop or halt the disease had failed. This 2014 study by the Cleveland Clinic researchers found 99. 6 out of more than 400 alzheimers trial failed over a tenyear period. So just disappointing from a society perspective. But meg did ask executives this morning whether they were still committed to this and they said theres a ton of Research Still going and a ton of money going in. Unfortunately its been barren landscape in terms of effective treatments. But as you might imagine given potential patient population, if one of these companies does find something that actually does improve cognition, rollback the ability of the disease to destroy your brain, its going to be a huge, huge drug. Perhaps the largest drug weve ever seen if they ever get there. Its just amazing, an 80 billion market cap company. These very mature pharmaceutical companies can swing this much on one line of research. Were not kind of used to that. Its not really a kind of make or break biotech situation where the entire companys being bet on one product. But it shows you how big a swing factor was because of that potential market. Yeah. One fascinating story for me today is deere. 100, which looks to me like its going to be an alltime high. The environment doesnt sound like something in which would outperform but declines in sales have been less than expected, cost cuts higher than expected and amazing. The market at least wants to sniff out a turn in this cycle. I mean, whether its right or not, youre not seeing crop prices, youre not seeing farm incomes, all the stuff you look for and its not that cheap of stock, but i think its that rule of you dont buy deep cyclicals when they look cheap, you buy when you think earnings estimates are going higher. I also did look this morning close to 10 of the shares still short in deere. So its one of those macro shorts people have leaned on for a while. Just looking in terms of industry groups, industrials and financials are leading the s p right now. Thats the trump trade, right . Thats what weve been accustom t to. Its also the higher yield curve, better Economic Data and this overall trend shorts inflation. Health care is at the bottom of the pack. And i also just wanted to point out energy because we have a big event risk coming up next week and that is the big opec meeting that weve been talking about, Major Oil Producers getting together to figure out whether they can agree to some sort of production cut. Iran still appears to be the swing factor. There was some sort of Expert Meeting this week and no consensus really on what was going to happen. Theres optimism though. We were told this morning that the options traders are betting bullish that this time theres going to be a deal. Crude backing off about half a percent. It was similar to september when we did have the crude oil trading at a similar range. And everyone kept saying, well, we keep just hoping for supply cuts and we dont get it. To me as long as it kind of kicks around this range, i feel like the rest of the markets can be okay. And telling me its been supportive for the high yield bond market, which has continued to trade very well even as treasury yields go up. High yield has tightened, the spreads have tightened and i think thats been the thing thats kind of helping the stock markets stay at these levels. Sara mentions opec, we have an italian referendum in a couple of weekends. Are there lingering tape bombs . Do you think theyre significant . Obviously i think they do but theyre all kind of out there. Whether talk about the french election, you want to go all the way to may or whenever its going to be. Whats also uncertain is how the market will trade. Everyone thought the consensus was if trump won the election the market would selloff, if brexit would pass the market would sell off. Its unclear how the market reacts to these populist waves and winds. Thats true. Ecb today small news going to lend out more bonds, but yields go up over there and maybe thats what you kind of want to see even though it was a bit of a market shot. One area thats not benefitted as much from the Trump Victory has been High Growth Technology despite what are fairly low multiples in names we know well whether its facebook, apple, certainly google, they are all down today. Amazon, they have not been performing s ining terribly. Just not up as much as the overall market. Thats something of a conone drum to those who run actively managed hedge funds which once again are trailing the benchmark s p which we have up 7. 5 for the year. Most of those funds not theyre long these names and the names theyve been short by the way have been crushing a lot of them. You try to do multiple disparity of a name you might think and you think its going to go down and goes up in your face. These were stocks for too many investors where you bought them because you werent confident about growth in the overall economy, right . These were the companies that could do a little bit of growth no matter what. Nothing thats happened since the election makes you say really any of these companies is better positioned or earnings estimates will go up more or anything like that. I think on a relative basis they lose capital. With all that pretty flat action here. Dows down one point. Lets get to dominic chu whos made his way down to the nyse. Just to hit on some of the things you were speaking about, the idea were seeing divergence in the market one of the places to mikes original point here, right now russell 1000 value still outperforming on growth. After looking at overall indices we are seeing flat markets and no surprise here the day before thanksgiving holiday. Early winners so far some of the earnings stories you spoke about, deere approaching new highs right now, really helping industrials outperform up by about 0. 5 in early trading. Financials, yes, theyre only flat right now but theyre continuing to demonstrate some sort of leadership in this market. Theyve driven a lot of the gains post election. Health care a big laggard today. Eli lilly and alzheimers results not helping there. If you look at the gold trade, thats helping to drive some of the action in some of the names we often talk about when it comes to gold prices and thats the miners. Newmont mining, barrick, all those taking a hit. And the etf that tracks them, gdxj, those are moving lower gold price one to watch. And ill end with one discrepancy here. You spoke about high yield and whats happening overall with treasuries. The tlt, one of the etfs that tracks the longer end of the treasury market certainly divergent right now from the hyg, thats the high yield etf. So as high yield is held up along with the stock market and treasuries have sold off, perhaps that divergence there showing some signs that the stock market rally can continue. Well see if that ends up happening, but guys, overall the Market Sentiment down here right now is, yes, there is still surprise, maybe the trump rally can continue. But besides that people just want to see how things shake out over the next couple of weeks, back to you. Dom, thank you very much from the floor. For more on todays movers lets get to Bertha Coombs at the nasdaq with tech underperforming. Good morning, bertha. Good morning, sara. Tech performed since the election up just about 2 in terms of the big caps, yet weve seen its the small caps that have been on fire. The russell 2000 has been up every day or closed higher every day since november 4th. The mid cap 400, the s p mid cap 400 has closed higher almost every day except for one since november 4th right along with them. So this is kind of a sector rotation. Chips today taking a pause, but thats been the one area in tech that has done well. The real laggard area has been biotech and today its getting hurt, Collateral Damage over that failed lilly drug hitting biogen, thats dragging the index down. On top of that we also have disappointing news from juno. Its halted a trial of its leukemia blood cancer drug because another patient has died, another in critical condition. This follows three patients having died on that experimental drug last july. Finally, taking a look at retail its kind of a mixed picture. You touched on Urban Outfitters, anthropology the big drag there, thats their high end level of Urban Outfitters, but ross stores, discount ir continues to Power Forward looking good going into the holidays. Amazon may have some trouble. Pilots for the planes that it chartered on its own are on strike. Not good timing for that, sara. All right. Thank you very much, Bertha Coombs. And with the dollar breaking out here, lets head over to the bond pits. Rick santelli at the cme group in chicago. Good morning, rick. Good morning, sara. You know, a lot of the moves that weve seen started in july. We were at 1. 36 in july. Were in the 1. 70s, 1. 80s before election ended. So this is kind of the second wave for treasuries. Durable goods preliminary, a volatile set of data points, definitely wasnt a bad number. Rates were already somewhat on the move. They were on the move more after. Lets look at some big charts. 10year and 2year, why . Shows you theres room. But 2year are now hovering at a level should they close theyll be the highest close since april of 2010. Lets look at a oneweek of tens, shall we . Why did i pick oneweek for 10s . Maybe the biggest driver of 10s at least on the latest round was technical. See they took out that move on the topside, thats key. Now look at the 10year chart, definitely some room, isnt there . When was the last time we were closing there . This is the next chart around july of 2015. Foreign exchange always been the dollar index in many ways leading the charge. And many are talking about how much horsepower it has. Well, of course, look at a 10year. Weve talked about this. Weve knocked at 100 once, twice, third time hot knife through butter. Here we are getting close to 102 handle. Many dont believe its over. Certainly the charts dont. Now lets look at something interesti ining thats unique t today. Spread of 10s minus bunds still hovering at an unbelievable 209 basis points. About the same as yesterday. And were much higher in yield yesterday, aha, finally, european rates are following our rates. Look at a twoday of bunds. It would be the same for a twoday of fives and twoday of twos. Were seeing collateral shortages. We had them here, we see them there. This is what happens when Central Banks hoard too many of these high quality sovereigns. Theyre going to be in the box. What does that mean . Their rates are going to start to move up somewhat similar to ours but probably not as breathtaking considering Mario Draghis issues. Carl, back to you. Rick, thank you very much. Rick santelli. Turning our attention to the energy complex, lets get to Jackie Deangelis at the nymex. Good morning to you, carl. Energy prices lower today across the board. Crude oil about 25 cents lower. Some selling off the recent bounce weve seen remember this is a market thats expecting an opec deal and that is where weve seen some of the support coming here. But certainly its a market that doesnt know what kind of deal to expect. Opec seems to do this to us every single time. Also, selling into the holidays normal probably at low volume on friday but then monday this will all come back into focus again. So expect some volatility ahead of wednesdays meeting in vienna. Remember, there are still some countries that are resistant here. The iraqis, iranians, they dont want to freeze, they dont want to cut, but the saudis are pushing very strongly for this. And as we know theyre the strong arm in opec so they may win out. The dollar index as Rick Santelli mentioned inching up closer to 102, thats going to have impact on the crude trade as well. Theres no way traders can ignore this. And i will point out 10 30 weve got the inventory number, api saw a draw in crude of 1. 3 million last night. Thats slightly supportive, so this could be a little bit of a rough day for the wti trade. Back to you. All right, jackie, thanks so much. When we come back, airlines are counting on thanksgiving to be their busiest travel period. Well get a live report on the big getaway which begins today. Dows down 15 points. Weve not seen three consecutive intraday highs on the dow since earlier this month. Were back in a minute. [vo] quickbooks introduces jeanette. And her new business i do, to go. Jeanette was excellent at marrying people. But had trouble getting paid. Not a good time, jeanette. Even worse. Now im uncomfortable. But heres the good news, jeanette got quickbooks. Send that invoice, jeanette. Looks like they viewed it. And, tada paid twice as fast. Oh, shes an efficient officiant. Way to grow, jeanette. Get paid twice as fast. Visit quickbooksdotcom. The traffic getting out of new york. This thanksgivings travel season is expected to be the busiest in nine years. Thats according to to aaa. Our phil lebeau is live this morning from chicagos Ohare Airport with the story. Good morning, phil. Reporter good morning, sara. Overall theres going to be almost 50 Million People in the u. S. Who are traveling this thanksgiving weekend. Most are driving, but for the people here at ohare and at other airports theyre thankful so far that were off to a rather quiet and uneventful start to the thanksgiving holiday rush. In the air 3. 7 Million People will be flying this holiday weekend. The busiest day by the way is sunday. Today is just behind sunday but the busiest will be on sunday. As for today, the good news is when you look around the country there are few delays and very few cancellations. We thought it was going to be a lot crazier. So i guess they did a good job. We absolutely were worried about traffic and the long lines. So far so good. Ill tell you when i get through security. Reporter and by the way, the security lines here at ohare, theyve been very quick, very short. We have not seen the delays that we saw just a couple of months ago. People were worried about that with the rush of thanksgiving travelers going through. Quickly take a look at the airline index, it has like so many other indexes and sectors seen a decent pop since the election of donald trump. It will be interesting to see what happens with these Airline Stocks and this sector as we move into the next year. Remember, whats driving a lot of that enthusiasm for Airline Stocks the belief that they eventually can move towards positive passenger revenue in the first or second quarter. Guys, back to you. All right, phil. Let the crush begin, as they say. Our phil lebeau joining us talking about Holiday Travel period. As for shopping on black friday, National Retail federation guys says 74 of shoppers plan to shop the day after thanksgiving. And deloitte has the number around 79. Thats a lot. Its a lot. And its an important reminder that this Still Matters a lot for the retailers. We talk a lot about the shift in online spending and thats meaningful. We see retailers like walmart moving up their online deals to friday instead of cyber monday. So the whole thing is getting spread out a lot more, but clearly this is still a key period for a lot of retailers. The Holiday Season still represents 30 to 40 of sales. Yeah. Fourth quarter. You going to shop . Am i going to shop . I usually stay away from the sales and the stores. I work. I prefer to Pay Attention to the markets on friday which are open. But i do online. Its a lot easier. Lately. Do you shop . Do you take your daughter shopping . No. I dont shop. Nope. Thats an established fact, yes, i do not shop. Often anyway. When we come back, well talk some Holiday Travel and more with amtrak ceo wick moorman. Meantime, dow down three points 19,020. Back in a minute. Hey nicole. Hey i just wanted to think your support team for walking me through my First Options trade. Well, were all about educating people on options strategies. I wont let this accomplishment go to my head. Get help on options trading with thinkorswim, only at Td Ameritrade. Losing your hair is no fun and no one wants to be bald but there is hope. Getting my hair back was the best thing that ever happened to me. Im happy with the way i look now. Im very excited about my hair. I feel beautiful. I love my hair. [ male announcer ] hair club offers all proven Hair Loss Solutions backed by our commitment to satisfaction guaranteed. 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Of course theyve been banned from china for several years. Interesting that theyre trying to tell people stateside that theyre unable to call fake from real news although over there theyre willing to censor news entirely. And you would think with these tools they clearly have the ability to decipher what is real and what is not, or at least to some extent do that, carl. Theyve been facing a lot of different issues, whether its removing Iconic Images from the site because they havent met because of policies, machines essentially are making, or the fake news controversy or this in china. Or growing user growth. That is another issue, right . Theyve reached 1. 8 billion monthly visitors on the site. Wheres the next leg of growth going to come from . Well, china has 1. 4 billion people. It will be interesting to see if they compromise their mission statement, which the times piece made to do this to make the world more open and more connected with these questions about censorship. More monthly users than the population of the world 100 years ago. Amazing. Thats pretty crazy. Absolutely. When we come back this morning, former minnesota governor tim pawlenty on the trump transition so far and a quiet day at least on the indices for now. Dows down eight points. Dont go away. Welcome back to squawk on the street. Im Carl Quintanilla with sara eisen and david faber at post nine. On track for three solid weeks of gains, dow is up 10 of 12 and really only needs about 30 points for another intraday high. Got some Economic Data crossing the tape this morning. Lets get to Rick Santelli. Rick. Well, october read on new home sales 563,000, a bit less than expected. And we lost 19,000 on a revision from 593 to 594. So thats down just under 2 . Keep in mind 1. 39 million was a High Water Mark in july of 09. Weakest number since june. Now, lets look at our final november read on university of michigan sentiment. At 93. 8 it replaces the mid month read at 91. 6, so an improvement there. Best level at 93. 8 since 94. 7 in may. And the inflation numbers, one year outlook eased back from mid re read of 2. 7. Fiveyear also a mid month read of 2. 7 and eased back to 2. 6. All this is important on housing especially after yesterdays blowout existing home sales. And for the granular detail as always we head east to diana olick. Diana. Well, rick, youre asking why was it a blowout number for existing home sales and a big disappointment for new home sales . These are based on signed contracts in october, not closings. These are folks out shopping in october whereas the existing homes folks are out shopping in july, august, september, that closed in september. That said the big number here is the revision down for last month from 593 to 574, then we come down again to 563,000, thats a big disapointd. The street was looking for basically flat on the new home sales number, but here may be the reason why. We have a big jump in the home price. The median price of a newly built home is 304,500 in october. Thats up from 298,700. And that likely reflects the higher cost for land, labor, materials that the builders are facing. And with affordability weakening on that front in october, youre going to see fewer buyers out there. We saw supplies for newly built homes move to a 5. 2month supply, up from 4. 8. So thats a pretty big sizable shift as well. Now, with that higher price you have to talk about november. We had a huge jump in mortgage rates. And today we could take even another move higher given what were seeing on the yield in the 10year. So affordability for the builders is going to be weakening through the next couple of weeks next month and i wonder if these sales arent going to fall even further. Back to you guys. Well keep an eye on it. Diana, thank you. Meantime looking at the Broader Market backing off levels over traditionally quiet thanksgiving week. Oil trading lower as traders weigh over a deal whether opec will cut production next week. Joining us, francisco blanch, who says oil may drop to 40 if the cartel cannot agree to a cut. And quincy crosby, prudential financials strategist. Quincy, industrials and financials remain bright spots in a down market. Theyre now at the top of the list so far this year along with Energy Thanks to the Trump Victory. Are you a buyer of some of those trump trades . Yeah, absolutely. You cant fight the tape. I mean, the market basically sold off those sectors in order to raise capital to pivot over to the trump trade. So its not as if weve had new money coming in necessarily. We sold off in utilities, emerging markets all been doing very well. And going into the financials, going into industrials, and that definitely fits in with the trump trade. Financials have been craving a steeper yield curve, have been craving the less regulation. You see how theyve moved, industrials as well. Again, the underpinning is the potential for a progrowth strategy. We certainly are getting those higher yields today. I guess the question investors have to be asking, quincy, is how much more can this rally run given we dont exactly have clarity on new policies, timing and what theyre going to look like. Absolutely. But, you know, the market always looks ahead six months. If this doesnt materialize youll see the market pivot back, the 10year yield will come back down and well probably move the trade. But right now the market is banking on this, at least in the first 100 days of tax cuts, of repatriation, of capital or the announcements thereof. So thats i think the markets moving. I want to keep something in mind. Were going to run into a roadblock if new money doesnt come in. This has been at the core selling in one sector to raise capital in another. What we want to see is markets slow down, pull back a tad and then have new money coming in. Money goes to where its best treated and right now it is the u. S. Stock market. Whats going to take to get that new money to come in if you havent seen it already . Seeing the market moving higher, look, in terms of seasonality, this is a good spot for the market going into december. But again, wed like to see a little bit of this froth burnt off and then again have more money come in and have the 20day moving average sort of broaden out. Thats the kind of thing that were looking for. But right now you cant fight this. It is a, i hate to use the word tsunami, but a tsunami of a major pivot. Remember, this market was destroyed at the thought of a Trump Victory. That only lasted a few hours. The market basically takes what it has, invests in trades in the market it has, not the one it wants. The day before it was Hillary Clinton. The day that trump was elected it said, okay, well deal with this and well accept it and well take it for and thats when the rotation start. Thats exactly it. Francisco, oil has also been a pillar of this market. Its been stronger inching toward 50 ahead of a key meeting next week. What are your expectations at this point . We think opec is going to come to a deal most likely. We are looking at a million barrel a day cut mostly given by saudi arabia and joined in by kuwait, emirates and qatar. We see iran and iraq kind of staying where they are for the next six to 12 months, and we see russia joining the deal too. So this is going to probably end the price war within the cartel. Thats what the negotiations over the next few days are about. So they can get that deal done, we think prices bounce up and we see an average around 55 a barrel for the first half of next year. If we dont get the deal however which we attribute a lower chance, we think we slip straight back down to 40 because a price war between saudi, russia, iran and iraq is not going to bring higher prices. It hasnt so far. I wonder how the Trump Victory factors into all of this. Theres already talk about whether he will stick to the iran deal that this Administration Made and just how that photoco factors into the geopolitical picture and the price of oil. Theres three elements of the trump and more importantly frankly the republican clean sweep that affect oil. First is were looking at stronger dollar and highest u. S. Interest rates. All of that is not good for emerging markets. Demand could be softer next year. Its very important opec comes back together given the potential weakness in emerging market demand. Remember, this will be particularly true if some of those tariffs are imposed on emerging markets like china. Second thing is supply. Trump has promised to unleash american energy. So now opec has to deal with a rising threat of more supply from the u. S. At a lower cost because thats what lower regulatory hurdles mean for supply in this country. And then third but not least, the iran deal could end at break and thats one reason for iran to be a little more friendly towards a deal with saudi. Effectively their worst Case Scenario for next year, which is keeping supply where it is today, probably just became their best case. I dont see a lot of International Companies going into iran, not a lot of Financial Institutions going into iran given all the uncertainty as to what a new Trump Administration with a republican clean sweep is going to do to iran. I think theyre going to play ball at this point. Big risk factor to watch into next year, guys, thank you. Francisco blanch and quincey crosby. When we come back the next secretary treasury will have a crucial role in Financial Regulation including true ining Trumps Campaign promise. Well be joined by governor tim pawlenty in a moment. Dows up ten points. Ways wins. Especially in my business. With slow internet from the phone company, you cant keep up. Youre stuck, watching spinning wheels and progress bars until someone else scoops your story. Switch to comcast business. With highspeed internet up to 10 gigabits per second. You wouldnt pick a slow race car. Then why settle for slow internet . Comcast business. Built for speed. Built for business. President elect donald trump will be at maralago this weekend where hes expected to spend thanksgiving. Our eamon javers is back in washington with the latest on that. Hi, carl, we have a live picture from the pool cam in maralago. Its not exactly rough duty for the pool reporters who have to be down there when its this chilly up here in the northeast corridor, it looks warm and sunny in palm beach, florida. Thats where donald trump will spend thanksgiving holiday with his family over the weekend. Were getting a little bit of new news, the pace is slowing down ahead of thanksgiving, but they have noted that they will appoint nikki haley, the governor of South Carolina, to be Donald Trumps ambassador to the united nations. And then yesterday we saw this meeting with the New York Times. We got a couple of new policy positions from donald trump and a couple of bullet points here. He backed off his stance on water boarding, said that hed have a conversation with general maddison that and changed his mind possibly on where he stands on the issue of water boarding as torture. Also said New York Times would be very happy with his stance on the first amendment. He said he disavows the altright socalled after a meeting here in washington where some folks gave the nazi onearmed salute. And then he said he has no legal obligation to separate his Business Empire as president of the United States, but he might come up with some structure to try to do that. And, carl, as you look at donald trump here shifting his positions on so many of these key issues since the election on obamacare, talking about keeping pieces of it, on the wall with mexico, not even mentioning that in his video about his first 100day agenda. So many different positions here. You see theres a lot of wiggle room, apparently, in terms of policy for donald trump as president elect of the United States. What you dont see wiggle room on though is the personal. That is his grievances with the press have not seemed to have changed. And also his management of his Business Empire, his relationship with his family, that doesnt seem to change. So not so much wiggle room on personal issues, a lot of wiggle room, maybe more than many expected in terms of policy, carl. Yeah. Sometimes it seems its nothing but wiggle room, eamon, when he calls the times a great, Great American jewel after all that criticism. Hes going to be tough to pin down. Thats for sure. Yeah, you know, well get a sense of whether thats tactical or just instinctive and where that lands him and whether his supporters will continue to support him if he moves from some of the issues theyve voted for in this election. Thanks. Eamon javers in washington. Of course as the waiting game continues for some of the key cabinet level picks including who will take charge of treasury, which will have far reaching influence on everything from Bank Regulatory reform, tax reform, the economic agenda at the g7 and g20 next year and potentially cracking down on china currency manipulation. Joining us this morning former minnesota governor and Financial Services roundtable ceo governor tim pawlenty. Governor, good to have you back this morning. Good morning to you. It got argued on our program yesterday, this is really the pick maybe state equally is important but i just wonder what your expectations are for treasury as these names get n narrowed down . Well, hopefully president elect will pick somebody who both understands the issues at a level of substance and complexity but also reflects president elects priorities. For him hes going to have to navigate possible criticism as somebody associated with the industry or issues in the past versus actually having somebody in the office who knows what he or she is doing. Your best guess . Hard to tell. You know, the names that have been mentioned include Steve Mnuchin, who is one of his finance chairs, somebody whos been involved with these issues over the arc of his life. He by some accounts looks to be the leading candidate, but there are other intriguing names as well. Nikki haley is in the news this morning reportedly to be considered for u. N. Ambassador. People have been going back to his record on twitter where he said the people of South Carolina are embarrassed by nikki haley. I wonder if youve seen incoming president select warming to people whom they were brutal to during the campaign process . Well, i think theres precedent for that. I mean, look at barack obama and Hillary Clinton criticized each other pretty sternly and harshly during their campaign and ended up being colleagues, one as president , one as secretary of the state. I think first appointments, wave of general flynn, Jeff Sessions and representative pompeo reflected capable people who reflect the president elects key priorities but also loyalists. And now the second wave is going to be some people hes trying to check some other boxes or reach some other goals on. Nikki haley is very capable, smart, young, i think can do the job and brings diversity to the table. But keep in mind the Lieutenant Governor in South Carolina was an early and vocal trump supporter, one of the biggest in the nation. And now that person becomes governor of South Carolina. So theres a domino effect to that appointment. Governor pawlenty, i wanted to ask you about the banks which are up again in todays session. Weve seen a nice little breakout for these stocks. Yes, were seeing a higher yield curve, which is helpful, but there is this idea that the Trump Administration is going to roll back regulation, roll back parts or all of dodd frank. What is realistic, in your role not only in politics but Financial Services roundtable ceo do you expect . Sure. Keep in mind in the senate theres still a filibuster requirement for most things, thats 60 votes. The republicans have 52, so in any major sort of retrenchment or reform or change, unless theyre willing to do it on a streamline basis called reconciliation, which theres no indication thats how they might do Financial Services reform, youre still going to need to get 60 votes. And so the idea that dodd frank can just be, you know, torn up from its roots in whole i think is probably unrealistic. So its more about reform. Hopefully aggressive reform and needed reform, but the idea its going to be wholesale wiped out is probably unrealistic. Governor, to what extent do you think that the president elect needs to have consistency of his statements . And how important that will be for the way he governs . I mention that because in the meeting yesterday at New York Times he seemed to change his stance to a certain extent on key issues, at least a couple, or perhaps has more of an open mi mind. Some would say thats a good thing but at some point you need more consistency, dont you . I think the public has baked in political discourse some degree or flipflopping that seems to happen unfortunately, in the case of donald trump though hes now going through that in a way thats got a rapid and dramatic clip and magnitude to it. So well see what the tolerance is, but one thing we know for sure to date is what he says doesnt seem to impact his level of support or enthusiasm amongst his supporters. Well see if that accumulative effect or over time changes, but to date his change in words or the way that he uses words dont seem to change the trajectory of his success. Well, i mean, its more than just changing words. On meeting with potus he said i really enjoyed him a lot. This is a man whose National Identity he spent months if not years trying to discredit. On Climate Change he called it a hoax created by the chinese. Now hes open minded about the u. S. Leadership. I mean, the market at least is trying to establish some world view. Yeah, i think the backstop though is congress. They made it clear theyre going to serve him up tax reform, theyre going to serve him up health care reform, theyre going to serve him up infrastructure proposals. And so within a range of finding those things generally acceptable, hes going to have a chance to be a very productive, maybe prolific president domestically. In terms of the flipflopping or evolution of his positions, anybody who has studied Donald Trumps life and his comments in that regard would understand that this is part of a pattern. Certainly one we are all national leaders, International Leaders will have to get used to, governor. We hope to see you again soon. It shouldnt be a surprise. This is consistent with how hes sort of made representations but it does make things more difficult, doesnt it, eventually . Youve got to have a policy of some kind particularly when it comes to things like foreign relations. That would be helpful. Im hoping he can rise to the occasion and get more consistent and get a compass setting that people can kind of follow and predict that would help ensure the security, stability, predictability that youre talking about. Certainly a unique candidate and will be a unique president by all expectations. Governor, well see you soon. Thanks. Okay. Thank you. Governor tim pawlenty. An estimated 750,000 passengers are set to travel on rail this week. Coming up, the turnaround at am track and Infrastructure Spending potentially under trumps presidency. Well talk to the ceo of amtrak who is also the former head of Norfolk Southern wick moorman joins us after a quick break with the dow turning positive now up eight points. Holiday travel season kicking off. Busiest time of the year for amtrak. Over 150,000 people expected to ride the rails over the next week. Joining us is the president and ceo of amtrak wick moorman along with our own morgan brennan. Good morning. Wick, thank you for joining us today. I want to kick off with earnings, you released full year earnings last week. Right. We saw record revenue, record ridership, smallest operating loss since the early 1970s. Could we actually see amtrak turn a profit . I think that that is something that we should aspire to and may happen some day, but its extraordinarily difficult. If you really look at any passenger carrying railroad anywhere in the world, they generally dont make money, particularly if you fully load it with infrastructure costs and things like that. But, listen, thats what were in business to do is to deliver a great product and not lose money. And you just mentioned infrastructure. Got to talk about infrastructure. Right. I know youve gotten a 2. 5 billion loan, its the largest from the d. O. T. Ever. Right. So youre already rolling out or buying new train sets, looking to upgrade some stations. Right. If we see a Trump Administration actually get a major infrastructure bill passed, what is the very first thing you want to see invested in . Wed love to see him fund the socalled gateway project, which really is the new york infrastructure. Its the new tunnels under the hudson which are desperately needed. Its the rehabilitation of penn station, which is desperately needed. Its replacing some 100yearold bridges. And these are things that the country needs, right . And this region needs. And that would be our number one priority. Deregulations been a big topic as welcoming into this administration. Right. Positive train control. Right. Tens of billions of dollars worth of costs for the overall railroad industry. Right. Does that actually get rolled back . I wouldnt imagine so. In my former life at Norfolk Southern, we spent, and i think they are still spending an enormous amount of money. The industrys committed to positive train control. And the good news for amtrak is the northeast corridor has it. Its installed. So were in good shape. Great. How far behind are americas tracks, which dont allow us to have fast trains like say in japan or in france . Well, if you look at the freight railroads, the condition of the infrastructure is as good as it has been in a long, long time. If you look at amtrak in particular and the freight rails in general, remember most of these routes were laid out when 40 miles an hour was an aspirational speed. So what restricts us is geometry, too much curvature, things like that. So to really get those high speed trains like you have in europe, asia, you have to build a new rightofway. Is anyone talking about that . Yeah, those things are happening. Thats certainly the california high speed rail vision. Theres an initiative underway in texas. And theres been a lot of conversation about the corridor. You think subsidies survive for amtrak . Yes, i do. For one thing, its not that much money in terms of the value we deliver. We haul 31 million passengers. And there are so many places, the corridor being a great example but there are others where people have to have it, right . You cant imagine how this part of the country functions without regional trains and northeast corridor. So, yeah, i think that survives. What would have to happen to ticket prices if it went away . They would go up very drastically. You know, ive never run the numbers. I dont think it would be that. But theyd have to go up substantially. And thats not what were looking at. Although its a great question because we are looking at a lot of elasticity of demand versus price now to see what we can do to try to bring in more revenue. On that note, i mean, listen, amen to Infrastructure Spending on the new york corridor and everything that would mean for so many of us who commute to washington or boston. Right. What are the ridership capacities right now . I mean, under that scenario, where do you think amtrak could be in terms of how many people actually would use the service . Oh, i think that we could see substantial growth, double digit growth on the quarter certainly, with new equipment, particularly the fast trains, the replacements, were going to have more of them, theyre going to be higher capacity. I think our growth in the quarter has a big, big upside for us. And the other trains in the states particularly that help support those trains, they believe in the trains and were seeing growth in a lot of those corridors as well. People want to take the train more these days than they used to. Its very interesting. We dont go through security, metal detectors, i think of everything that happens to get on an airplane. Its very different to get on a train. I think to some extent tsa preconditioned, but i can tell you at penn station today we have multiple security agencies, we have all kinds of initiatives there to ensure that its as secure as it possibly can be. Now if you can only do something about that god awful station. Morgan, wick, thank you for coming in. More to come. Thank you so much. All right. The dow and russell we should point out are both hitting new record highs as we speak. Seeing a turnaround, stocks started off bumpy but now the dow is up by about 19. 5 points and that is good for a record. Well keep an eye on it for you. Much more on squawk on the street ahead next. World ugly and messy. They are the natural born enemy of the way things are. Yes, ideas are scary, and messy and fragile. But under the proper care, they become something beautiful. This is my retirement. Retiring retired tires. And i never get tired of it. Are you entirely prepared to retire . Plan your never tiring retiring retired tires retirement with e trade. Im in vests and as a vested investor in vests i invest with e trade, where investors can investigate and invest in vests. Or not in vests. Sign up at etrade. Com and get up to six hundred dollars. Good morning everybody. Im sue herera. Here is your cnbc news update at this hour. The community of chattanooga gathering at a local church for a vigil to remember five children killed in a bus crash this week. Mourners prayed for those still in the hospital and released balloons into the air. The driver of that bus has been arrested and charged with vehicular homicide. A key piece of president obamas domestic policy appears to have hit a dead end. A federal judge in texas has blocked the start of a rule that would have made 4 million workers eligible for overtime. President elect donald trump is against the ruling. So its unlikely the change will take place under his administration. Pilots at German Airline lufthansa are striking for a second day after failing to reach a deal over their pay. Roughly over 900 short and long haul flights are being and number of honor rees took time to strike a pose and hold it. Video shows robert de niro, rita wilson and Ellen Degeneres participating in the mannequin challenge. Thats our cnbc news update this hour. Lets head over to Jackie Deangelis with the eia inventory report. Good morning, jackie. Good morning to you, sue. Thanks so much. Thats right, department of energy out with the crude Oil Inventory as we got a drawdown of 1. 25 Million Barrels, that was in line with what we saw from the api last night. Its slightly bullish. Then we got a build in gasoline, 2. 3 Million Barrels also in line and slightly bearish. So these two cancel each other out. But you can see crude oil turned positive and now its back over 48 a barrel. I think its from the reuters headline that just came out saying that iraq supports opec efforts to cut oil output, thats according to its prime minister. Right when this headline came out is when we really started to see oil prices move. Remember, iraq was one of the countries that was a standout, we werent necessarily sure if they were going to agree. It seems like they might here positive for crude, back to you. Yeah, the Energy Sector turning around as well. Jackie, thank you. Were also watching the dow. It is hitting a new record high this morning ahead of the thanksgiving holiday. Retail has certainly kept up with the rally. In fact, outperformed over the last few weeks. Will the recent trump stock rally extend into the Holiday Shopping season . Joining us now former office depot ceo and current head of the committee for Economic Development steve odland, good morning, steve. Great to see you. This out performance in retail, some stocks, department stores, specialty really perking up since the election. Is it justified . I think so. It looks like its going to be a really big shopping season. Its already started of course early in november you saw some deals already. Used to be all one day, black friday, the day after thanksgiving. And now its really extended throughout the month. And youre seeing it in all the reports from the online retailers as well as bricks and mortar retailers. Projections could be 6. 3 growth maybe higher with double digit growth online. So its really spread broadly across all sectors. You know, weve got a great day today and wednesday, but now the stores are open on thanksgiving, tomorrow, black friday youve got Small Business saturday where theyre trying to push a lot of business to main street. And then of course cyber monday which now is almost as big as black friday. So its going to be an extended period of time and a lot of growth this year. Just elaborate a little bit beyond the Holiday Season as we think about the implications for various sectors as a result of the Trump Presidency and the republican sweep for retail. Do you buy this idea that not just the election uncertainty will lead to more spending but potentially lower personal taxes skprks what is really the upshot for this industry . Well, i think at this stage a lot of its psychological, right . I think early on we were hearing from retail ceos that people had backed off, but i think now that the election is over youve got about half the people that are totally depressed and they want to shop in order to relieve their depression, and you have half the people that are elated and want to celebrate. You know, an interesting statistic, early polls show or early metrics show that about 15 to 20 of sales during this Holiday Season is gifts for me. Imagine that, gifts for me. So everybodys going to reward themselves. Retailers love gifts for me because they have lower comebacks, of course. But thats the kind of season that were in. So we think its going to be a record Holiday Season now. Thats great news for the economy because of course as we know gdp is 70 consumer. There are headwinds though. A lot of these companies do a lot of business overseas. Were looking at the dollar scale new multiyear highs as we speak. There are also some trade concerns, nike for instance has been a big advocate of tpp. Donald trump saying in his video this week that hes going to withdraw the u. S. On his first day of office. Nike supports free trade. Most of their sneakers are made in places like asia, so they would like that tariff eliminated. Do you have to be ware of the multinationals . Can you go into some of the losers potentially from this administration . Well, remember the Holiday Season was predetermined a long time ago. All the stuff thats in stores or online today came over in the spring and as late as june and july. So all the discussion on tpp and any future impacts are going to start hitting next Holiday Season if they hit at all. I happen to believe that Donald Trumps statements on tpp is an opening bid. Hes talked a lot about wanting to do bilateral trade agreements rather than this huge multilateral agreement which gave a lot of power to unelected authorities. Who knows whats really going to happen. I think were going to have to wait and see on that. But it certainly wont affect this Holiday Season. I think thats already underway. Steve, earlier this week an article was written about best buy and how its one of the few retailers thats managed to pick the lock with consumers in an amazon era. Is that something specific to electronics . Are they providing lessons that others can learn . Well, i think the smart retailers, bricks and mortar retailers like best buy have done a great job of expanding to their online presence. You know, most again, online is growing at double digit and amazon is picking up 60 to 70 of that growth. So theyre killing everybody. And so its a matter of survival. And i think best buys done a great job. You see Consumer Electronics and toys of course as big holiday items, other sectors dont benefit from the holiday quite as much. But, you know, of course youve got the hot toys and i dont know what a hatch animal is but its the hottest thing this season. I guess its this generations furby or maybe grandchildren of the trolls, i dont know. But here we are again. I think you see the bricks and mortar retailers having to scramble and get smart. You see walmart buying jet. Com and trying to get ahead of the game here. But theyre all behind and its good to see them jumping ahead. Consumer discretionary just turning positive. Maybe on your optimism, steve. Thats it. Its on my report. Steve, thank you. Steve odland, good to talk to you as always. Thank you. Shares of eli lilly are down sharply this morning this after latestage trial of Alzheimer Drug failed to achieve its goal. Patients treetded did not experience a statistically significant slowing in cognitive design. Ceo and incoming ceo were both on squawk box this morning talking about the trial. You should expect that were going to look carefully at these results. That will take weeks or months to really ferret out all of the information in this study that involved more than 2,000 patients, learn everything we can from this trial and go back and apply that to the other Development Programs we have. Weve been planning for our future with or without solar for some time. We knew it was a high risk and high reward program. Were disappointed with the result, but we have a lot going on beyond alzheimers. As we go to break, a1s vocal supporter of Hillary Clinton meg whitman on the Incoming Administration, our exclusive with the Hewlett Packard ceo coming up. And we have the third record high for the dow. More squawk on the street in a moment. One of millions of ordn this companys servers. Accessible by thousands of suppliers and employees globally. But with Cyber Threats on the rise, marys data could be under attack. With the help of at t, and security that senses and mitigates Cyber Threats, their Critical Data is safer than ever. Giving them the agility to be open secure. Because no one knows like at t. Apples been a big laggard in this market bounce, but is the tech giant poised to catch up . Find out on tradingnation. Cnbc. Com. More squawk on the street coming up. Welcome back to squawk on the street. Im susan lee. Markets are mostly lower this morning, but industrials are trading to the upside. Standing out as a best performing s p 500 sector today helping to lift the industry are shares of deere. Shares of the heavy equipment maker are hitting a fresh alltime high on a strong Fourth Quarter beat. Other leaders include caterpillar, Jacobs Engineering and also united rentals. For the year industrials are up some 15 . Back to you. Susan, thank you very much. With this big move in treasuries and the dollar, lets get out to the cme group. Rick santelli with the Santelli Exchange ahead of the fed minutes this afternoon, rick. Yes. Fed minutes this afternoon. Most likely not going to garner us any new clues, but one person that could give us new clues especially on implementation on health care is my guest today. Bob, thanks for taking the time. Youre welcome. Hello, rick. All right. Lets break this down into two things. Issues and then implementation. On the issues side i find it so fascinating. Everybodys freaking out about, wow, hes not going to change obamacare, Affordable Care act because he wants to keep 26yearolds on their parents policy, he wants to deal with preexisting conditions, and then of course he wants to add in the notion of interstate competition between Insurance Companies. I have no problem with that. Thats the reality of a Good Health Care program getting rid of things like subsidies, medicaid expansion, faux cost in funding, the issues that gave various parts of the government like Congressional Budget Office input bad, output bad. Your thoughts on the actual issues that can be dealt with to modify enhance Affordable Health care . Well, too much is being made of president elect trumps remarks that he wants to keep preexisting conditions and kids to 26. He actually in a february town hall debate with cnn said he would keep preexisting conditions. So this is not news. There are a limited number of moving pieces in Health Insurance reform. Preexisting conditions being one of them. These issues are all going to have to be dealt with. So its not as though the preexisting condition problem is somehow going to go away. Republicans will deal with it. They will deal with it in a different way. They will deal with it with Market Based Solutions as opposed to more regulation. But youve got the same moving parts, but dealt with a different ideology or philosophy. All right. Now the thing thats going to be surprising to many, and ill let you have the rest of the time, you think implementation is going to be much more difficult than anybody believes. Its all yours for one minute. Okay. There are three parts to what has to be done here. First is repeal. Then is replace with something different. And then the third one i think people are missing is transition. The republicans will repeal obamacare, if you will, by defunding it, by taking money away. And then theyll say that the existing Obamacare Program will remain until january of 2019 while they work out the new program. All right. Working out the new program is going to be much more difficult. It only takes 51 votes in the senate, which the republicans have, to defund it. But it will take 60 votes in the United States senate to craft the new program. That means getting democrats on side. So thats going to be a lot tougher than people think. But the big one i think people are missing and the one even the republicans may be missing is the transition. Because republicans will not have a new program in place until at the earliest january of 2019. That means that the old style obamacare is going to operate for 2017 and 2018, and guess what, the republicans are going to have to run it. And one of the biggest issues theyre going to have to face is making sure there are Insurance Companies in place in 2018. Because the Insurance Companies most of them are losing their shirts in obamacare now. They likely will in 2017. It will probably get worse in 2018. The big thing republicans better be worried about other than repeal and replace is theyre able to keep the wheels on obamacare, make the program adequate for the Insurance Companies to stand because what do we do if the Insurance Companies bail in 2018 a year before the new program gets here . Excellent, bob, so much to think about there. And i like your objectivity on all fronts. Thank you for being my last guest before the holiday. Happy thanksgiving. You too, happy thanksgiving. Now of course lets go back to david faber. All right. I will take it. Thank you, rick. Lets give you another check on the dow by the way hitting fresh record highs. You can see that there. I like to keep an eye on the s p since it is the statistically relevant index and the one actually followed by money managers. You can see that is actually down on the session. Squawk on the street back right after this. 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. Shares of hewlettpackard enterprises up after reporting earnings after the bell yesterday that on the revenue line, at least, were a bit of a miss. This does not seem, however, to be disturbing investors in the stock. Again, it was down after hours but up this morning. The key, perhaps, its servers business, down 6 adjusted in terms of revenues. Ceo meg whitman, though, earlier speaking about the positives in the year ahead, the mixed shift in terms of going after more profitable market share. Something else, of course, that meg whitman is known for over the last few months was being an outspoken opponent of now president elect trump. And so, i asked the hp ceo, given that outspokenness previously, how does she feel about the coming Trump Presidency. I sent a note to all of our employees saying, listen, the election did not turn out as high hoped, but now weve got to come together and weve got to give the president elect the benefit of the doubt and encourage him to lead a very diverse nation. So i for one am supporting the president. Listen, were going to find out exactly what he is going to do. Some things hes talked about i think could be quite good for hewlettpackard enterprise and business in general, and some things i think wed have to manage and could be, you know, somewhat harmful to the company. So listen, Corporate Tax rate reductions to make us more competitive on a world stage would be helpful. A tax holiday on all the cash that we have overseas, bringing that back at a 10 rate, that would be helpful to us as well. Some of the trade issues around putting a big tariff on goods that are made outside the United States coming into the United States would be problematic. Wed have to completely change our supply chain. And then finally, immigration. You know, h1b visas are very important to the technology industry, and if those visas were limited dramatically, wed have to rethink how we did r d. Interesting rundown from meg whitman in terms of the pros and cons of a Trump Presidency, potentially, given, of course, we dont yet know what that will actually be, sara. One thing we do know, the dollar as far is stronger. That does impact hp sales overseas. Whitman did detail sort of that and give us an expectation that she thinks the dollars going to remain strong. I know. You dont hear that every day from a ceo, having a forecast of the dollar, but the dollar is a lot stronger, and that is shaping up to be a major theme in todays trade. There is the dollar index, highest level since back in 2003. Youve got this perfect storm of factors that is sending the dollar stronger. Number one, this improved Economic Outlook for the u. S. As a result of the Trump Presidency, this idea that fiscal stimulus and inflation could return. You have higher yields. Higher yields chasing returns, thats money coming out of other currencies which are low yielders, especially in europe today, into the u. S. Dollar, and you have almost 100 probability that the Federal Reserve raises Interest Rates in december. All of that while the dollar guys were talking about parity again for the Euro Dollar Exchange rate, 1 euro to 1, havent seen it since 2002, but Deutsche Bank says we finish the year at 95 cents citi as well has a similar citi 98 cents, socgen says well see it by the First Quarter of 2017. Weve heard this before, maybe well actually go shopping in europe if this happens. Italy, here i come. Yeah. Maybe france, too. They could certainly use the tourism after a rough 2016. Its true. People choosing not to go for a variety of reasons. And if you have a trip this Holiday Season, that euro will come in handy. When we return on this thanksgiving eve, were breaking down the cost of a turkey dinner. How much will have to actually shell out if you plan on going organic . And as we head to break, the dow leaders, as we notch record highs here. Caterpillar for the year, as carl mentioned earlier, and for the day. Banks are also strong, Goldman Sachs up a percent. Well be right back. Can i have a 2017 lexus lx 570. Yeah 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. Hthis bad boy is a mobile trading desk so that i can take my Trading Platform wherever i go. You know that thinkorswim seamlessly syncs across all your devices, right . Oh, so my custom studies will go with me . Anywhere you want to go the markets hot sync your platform on any device with thinkorswim. Only at Td Ameritrade mapping the oceans. Where we explore. Protecting biodiversity. Everywhere we work. Defeating malaria. Improving energy efficiency. Developing more clean burning natural gas. My job . My job at exxonmobil . Turning algae into biofuels. Reducing Energy Poverty in the developing world. Making cars go further with less. Fueling the global economy. And you thought we just made the gas. Energy lives here. Last year was a record year for organic food sales in the u. S. Our jane wells is with us taking a look at how much this years thanksgiving meal will set you back with a number of organiclooking products there, jane. Some organic, some conventional, sara. One mans turkey fries is another mans car payment. We have two meals and three price tags were going to show you. First of all, the good news is, though, grocery prices have been falling, and the American Farm Bureau Federation says to feed a family of ten this thanksgiving has dropped back below 50. Were talking, you know, turkey, the pie, the stuffing, the whole thing. Now, over here, if you want to go organic, youre going to have to pay considerably more. And even though you say organic food sales are up, the usda tells us organic turkey production is down 30 from two years ago. So, what are the price tags for the whole meal . The Farm Bureau Says to buy all the fixings this year is 49. 87. Thats down 24 cents from a year ago. I have no idea where they got that price, because when we went out and bought everything, it was more like 72, though that was still 7 cheaper than a year ago. And as for an organic meal, all the fixings, 129 and change. I dont know what it cost a year ago because i dont have the comps. Organic is still really expensive. For example, this organic milk, over 7 for a gallon . Four glutenfree, eggfree dinner rolls, 6 bucks for four but the deflation has happened in the turkeys. Turkey prices are down. There was an avian flu last year that impacted supplies. This year, the Farm Bureau Federation says the average 16pound turkey down a little over 1 to 22. 74. We paid over 36 for a conventional turkey, and for an organic turkey, almost 62, meaning the price of this was more than the entire average price for this. Guys, happy thanksgiving. All right, jane. Thank you. Thank you. Thank you youre welcome. Given its thanksgiving, i wanted to thank you three times. And she does it every year. Yes. Her thanksgiving schedule. Well be back on friday, black friday. Now to carl for squawk alley. Good morning. It is 8 00 a. M. Out west, 11 00 a. M. On wall street, and squawk alley is live