Transcripts For CNBC Squawk On The Street 20161222

Slightly in the european markets for this thursday morning. The tenyear note yield crossed that 2. 5 level and now 2. 572 is where we find ourselves with wti firmly above 50 a barrel as well. Lets get to our road map this morning. And it starts with the markets. Of course we are still on 20,000 watch for the dow. Lots of data as well to digest this morning. And in president elect Donald Trumps meeting with defense ceos, what did boeing and lockheed say . And what are they saying now . And two more names familiar to the cnbc audience named to trumps team, carl icahn and Peter Navarro both set to join as advisors to the president elect. The economy grew faster in the Third Quarter than the government originally thought. The final reading up 3. 5 , that is the fastest pace in two years, better than the previous estimate of 3. 2 growth. The data comes as the dow continues of course to take aim at 20,000, jim, weve been ever so close. Ive been monitoring it from my few days off, but we didnt quite get there. Im sure they have the hats ready. What do you make of where we stand in the markets . Okay. I think that weve been stalled for the last couple days, but the momentums been incredible and rotation has been amazing. Yesterday we lacked a leader frankly. We didnt have anyone we could do blocking or tackling to follow. I would tell you this, david, today is a very important test because weve got very strong macro, which is that Gross Domestic Product number. And then we have a company that i reported a number that was so strong that it could be an umbrella to lift a lot of other companies, which is micron. Microns cymbal, mu, youll see it underneath us in the crawl running up big. Its been going up big literally since the moment it reported. The quarter so much better than anyone expected. And that could be a readthrough for so many different Tech Companies that you get good gdp number, good tech number, it does combine to be able to create an atmosphere where you can take out dow 20,000. It does . Yes, it does. Lets talk briefly about mu given that kind of moment happened not very long ago, drams looking favorable for 2017, looking quickly at a couple rapid notes that have come out. But generally very positive. The Conference Call is really funny because this is a company that when it gets it right, it gets it incredibly right. Im not saying this is going to be the 94 cycle where it went from 8 to 47 over a period of a year or where it went from 20 to 99, but this is one of those moments where they cant where supply has been greatly exceeded by demand for both their disk drive business i mean, for their dram business, good readthrough to disk drives why Western Digital is going up, and their ram business, literally whats happened is they cant build the equipment fast enough. Its fantastic for Semiconductor Equipment companies, particularly for Applied Materials and make a good read in general for the group which would be lam research. What you end up is automobile, mobile, all strong, takes the whole complex up. Conference call im not saying that drip with contempt because i love the ceo so much, but analysts were so far behind the curve in terms of realizing how much demand there is for internet of things products and how little supply there is. These arent like the 94 cycle or the 2000 cycle. You can put a greenfield dram plant in six months back in 94. Not anymore. This is going to go longer, and its going to go louder than people think. Its funny we think about themes of course. Internet of things you and i discuss it a lot here, typically im sitting on that side of you, but its the same discussion talk about the growth and whos going to benefit from that. Right. Nvidias a name you bring up oh, the triple crown winner. The gaming chips seemingly have all sorts of uses perhaps they werent fully aware of for this internet of things we talk of where everythings going to be connected, sending off reams of data then going to allow the end user to optimize, function in a lot of ways and help for future so well put. Future intelligence really for these things. Right. Its machine learning. This is artificial intelligence. Theres a guy i follow, we talked to him during the salesforce period with twitter, afshar, he is the guy i use, literally he posts on twitter the most important things you can learn about all about machine learning. If anyone wants to realize the reach of this and then they will realize why you can buy micron at 23 and not be concerned because the data, the data of a driverless car david, i had a data form Real Estate Trust on recently the data required to deliver product same da, the data required for driverless car, theres just not enough warehouses in this country to handle all the machines and whats in those machines when you smash them open . Micron parts. Right. The key to intelligence to learning is of course data. Massing more and more data. If youre in autonomous cars, its the miles driven for the car that are the key to it. Thats why google may be ahead of others in terms of collecting data and understanding every single situation and instance that occurs and therefore the car will know how to react. Absolutely. Analog device this is just the earliest days of this world were disc s discussing. Let me give you discussion behind the scenes, analogs behind a. I. Made a connection to this ability like a radar system for cars. The guy was the ceo was terrific saying, listen, when we get these chips theyre going to be able to detect things, know whats ahead of you, thats going to cost thousands of dollars. He goes, no, its going to cost 100. Technology is coming down in price. Reminds me so much of mainframe going down to pc. Whats happening is its happening not just because the technologys getting better, but the technology is getting rapidly cheaper. So a car you might think would cost 200,000 to be driverless will cost just a couple thousand more than one that isnt. And that is the big thats the big change. Thank you so much for all that information. Just wait until the robots know everything. Well do everything. Analog devices has Robot Technology that will take the place, again, of a lot of people. Of workers. Theres a huge story there. Not time for us to go into in terms of whats going to happen in automation, not just here in this country but around the world. Around the world for all the people who sew things, for example. Well, remember, the led prenafta that was one of the largest single categories of workforce in our country. Not here but around the world, still is, hundreds of millions. Yeah. Now, when i go into whats the most recent technology that i keep coming that everybodys doing, its the ability to be able to scan this, okay, and not have to use checkers. We know thats 3. 5 million people. Cashiers, correct. And nice guys who have a system to be able to make it right now so you can walk out, they say, listen, those people will be better shopping advisors. Thats a nice thought, but when i shop, i dont want any advice. I know exactly what she tells me to get. I cant deviate from what she tells me. Understood. I dont want advice just going to conflict with the advice ive already gotten from the boss. From her, yes. So i dont need advisors, i have one. From she who shall not be named does not watch. No, right know shes with her daughter and said knock yourself out youre with faber and enjoy yourself. All right. I love her too. Lets move onto president elect trump. He met with the ceos of boeing and Lockheed Martin yesterday after calling programs for boeings new air force one jet and lockheeds f35 too expensive. At trumps resort in florida where the meetings took place, boeing ceo said hes committed to building the new air force one for less than 4 billion. Lockheed martin done for less than that, and were committed to working together to make sure that happens. And i was able to give the president elect my personal commitment on behalf of the boeing company this is a business thats important to us. We work on air force one because its important to our country. And were going to make sure he gets the best capability and that its done affordably. Lockheed martin ceo issued a statement calling her meeting with the president elect productive adding, quote, the f35 is a Critical Program to our national security. And i conveyed our continued commitment to delivering an affordable aircraft to our u. S. Military and to our allies. You know, jim, that 4 billion number was what the president elect used in the tweet, never got any confirmation the number was actually 4 billion. Youre a stickler, i know, thats one of the hardest things about working with you. Yeah. Well, i wanted to know what the actual cost is. Demand of facts is so old world. Youre like the gutenberg bible it changed the world let me tell you how Old Fashioned i am though to completely date myself. When he worked out of the building, cutting numbers, boeing. No, no ones beginning to do that. Were in a new era. If she had to charge the government less for the f35, shed have to eat that. It would come out of her gross margins, right . Yes. But no one cares right now. Hes saying to both hewson a and lower your gross margins. Analysts are not ready to go that deep and say he means business and that means we have to be more circumspect, but i wouldnt be surprised given the detailed nature of the people hes appointing around him someone doesnt say, you know, i saw your gross margins, theyre too high. This is a man who deals with contractors all the time. Exactly right. Exactly. And if you speak to them or know about the history, it is a lot of back and forth, and a lot of pounding down on cost. That concrete that is something costs too much. This one is what ive heard, hey, you know what, ill pay you what you wanted, but ill never recommend you again. Or ill pay a lot less, but ill tell everybody you were great. Wow. Thats one ive heard many times. From him . Yes. It works. And apparently it works. As a vendor thats what youre left with, either ill do it and ill take a lot less than i thought i was going to. And hes going to recommend me. Right. Or ill get paid in full but never work for him again. Thats the deal he offered greg hayes from united technologies. Remember what he did people forget the corollary. Greg hayes agreed to keep some of those workers from going to mexico, and at the same time in the beginning of the press Conference Trump said people should use carrier. Right. Now, you know what, when hes meeting with people, he may actually who have a choice at building a factory, he may say, listen, you ought to use carrier. Its going to be an interesting dichotomy between the populism on one side and the support of Corporate America strongly and dereg on the other and where were going to come out and extends to m a, an area i know well too, where a lot of people think, well, kbar the dor theres not going to be anything in terms of regulation, at the same time you may have a president who chooses to cite specific transactions where there may be csignificant job losses and says, no. We dont know. Peter navarro are getting picked now theyre getting picked off cnbc. Its like who Peter Navarro is on constantly. The cnbc shadow cabinet is almost as big as the goldman shadow cabinet guy. Peter is a guy who stands for bashing the chinese. Trump has a lot of titles now. Like chief china basher. And carl icahn is special advisor on regulatory reform. Why arent these people czars . They should be czars. Right, ebola czar . Right. That lasted for a couple days. So we make navarro sdczar, you could say he stands for tariffs. So if youre a nike, you look and say, well, navarros not really the guy we want in there. Were free traders. Im saying we should be a little more were not seeing any of the downside yet. Wow, navarro, that could be bad for business with china, but thats what it is. What about apple . Apple makes a lot of products in china. They do . Some people feel that makes them more immune. Less susceptible to the chinese trying to exact some sort of retribution if we right. I keep hearing that to be the deciding point. How many people have you hired in china can immunize. They dont want you flooding the zone with your goods unless theyre made there. Speaking of china, were going to talk about alibaba by the way when we come back. Defending itself after the u. S. Put one of the companys units on its blacklist for counterfeiting. Another look at futures here. Of course were looking for that dow 20,000. And, well, we may get it. Were also keeping a close eye on europe. More squawk on the street live from post nine at the nyse. The u. S. Has put a unit of chinas Online Market alibaba back on the notorious blacklist. The platform one of the key platforms alibaba has one of its shopping websites not doing enough to police the sale of counterfeit goods and violations of intellectual property rights. Alibaba president Michael Evans saying the company very disappointed adding the ustrs decision leads us to question whether the ustr acted based on the actual facts or influenced by the current Political Climate. Interesting statement there. Of course the Obama Administrations ustr is still in charge. Right. They seem to be getting ahead of it at alibaba claiming of course that theyve done an enormous amount to police counterfeiting on the platform. Tmal is the big brands, tabau is smaller retailers, almost you sort of do it from your home to somebody else and you run your business that way. Can you walk me through . Does this mean you might be buying something say a Branded Company product and it turns out to be branded but a knockoff . Yes. So i buy a coach bag, like off canal street, they have coach bags for 10 and 15 and im always marveling at how inexpensive they are. Yes, the same thing. That rolex watch youre buying my father had a collection of 2,000 watches when he passed. Did he . Yes. Most marvel one from 134 canal street. Not too far. But if you buy a phillippe patac is that how you pronounce it . I dont know, i wear an apple watch. Im aware. They dont have any way to verify or endorse it . This seems like our government is saying they t you and i have talked to j joe removing best it can anything it believes is a counterfeit item. But apparently theyre not doing a good enough job, at least according to the ustr. It is interesting to me, jim, based on our previous conversation prior to the break they would bring in the current Political Climate in their statement. You just have to wonder with Peter Navarro advising on china with so many other things that clearly are articulating a very different approach to china from the incoming administration. Yes. What things are going to be like, whether it is for an alibaba or an apple to your previous point about having a lot of employment over the country, or nike, so many. This has to be a key consideration. Thats why ive been calling it a risk factor. Listen, heres a new risk factor you have to think. For instance, alphabet doesnt have that risk factor, they dont do business in china. You should give that a higher premium than a company that does a tremendous amount of china but doesnt make it there. A proctor gamble, we got another downgrade on proctor, nothing in it about china. But i would say thats a very big risk. They have a very big business in china. David, let me ask you because you know amazon better than anyone. What does amazon do to police . A lot. They do . Yeah, a good amount. They try to verify all of their sellers. Its not as though there arent people who conceivably have nefarious intent on any of these platforms. Ebay also dealt with it for many years and continues to as well. But amazons a bit different. Okay. One thing people should remember these are people hes picking. We have to go to break, they believe weve been in a war with china, trade war, for a long time, just been losing. Theyre not trying to start one, they think weve been in one. And alibaba has millions of sellers. More akin to ebay than amazon. Lets take a quick break when we come back jims going to have mad dash as we countdown to the opening bell. Heres another look at futures. More squawk on the street right after this. Today i am helping people everywhere do what they do. Better. I work with startups like alpha modus to predict markets five times more accurately. I am helping tv networks use social data to predict what people want to watch. And i worked with marchesa to turn fan feeds into a dress that thinks. Hello, my name is watson. Working together, we can outthink anything. Six minutes before the opening bell. Time for a mad dash. Where are we headed . A lot of people have been waiting for a turn at bed, bath beyond. Thats because bed, bath beyond bought a big step up from their usual offerings. Last night they reported and basically saying, listen, its an investment year, were going to get this right. Theyve got a huge, huge complex opening in brooklyn in sunset park. I think it could be a game changer when people start realizing how impressive all the new bed, bath has been doing. The analysts are turning on it. Heres a classic, Raymond James goes to market perform from buy just saying, okay, enough is enough. We can only be patient for so long. David, i think theyre losing patience at the wrong time. I do believe that this p mall they bought which is personalization mall will impact in a positive way, but these guys basically are kind of like saying, hey, listen, were going to get it when we get it so give me a break. This stock has been biding time for a long time. Amazon has hurt its core business. Youve talked often, they bought back a lot of stock. A creeping lbo, you had thought for awhile, gee, wouldnt it be interesting. I guess thats been off the table for a bit now. Well, what happens is they decided to spend, invest to fight amazon and a lot of people feel is what happened is the train left the station. I have to tell you, david, i think one kings lane is very impress skpif what they can do with this personalized mall, its called p mall, really blow things out. But lets see the new in january you and i will go to sunset park and check it out. Okay. We have a big, big couple days of retail ahead of us, you and me. A lot of revolving doors. Opening bell a few minutes away. 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The opening bell going to ring in about a minute and a half on this thursday. Things are certainly getting quieter this week. Next week, jim, going to be a quiet week. Many vacations coming for many people including yourself. Well deserved. But what can we expect to see during the course of today . And what as i often like to ask you in carls absence is the key to this market . Im glad you asked, its microsoft. A very important piece came out today by Morgan Stanley talking about linkedin raises numbers. When you see Western Digital go up and micron go up, you say how far can this extend . Well, if it extends to microsoft, then microsoft can be a big enough factor in this endless pursuit of dow 20,000 that it might be the one that breaks the log jam. Of course we know that dow 20,000 doesnt really matter. Right. But you needed a leader. Yesterday, we thought nike would get us there, nike isnt big enough, microsoft can do it. Microsoft can do it . Yeah. Microsoft can do it. Goldman sachs certainly has done its part. Goldmans been asked to do too much for its country and for the dow. You hear the applause building behind us, of course as we get ready to ring the opening bell here take a look at the p s p, how we match up green versus red, here at the big board catch a lift fund helping wounded veterans with physical limitation. At the nasdaq the new york foundling, both very worthwhile organizations this morning at both exchanges. All right, you mentioned microsoft is the key to this market. I mentioned goldman sachs. Lets start on financials. Just continue to have this run that is one for the ages in some ways, at least if you were smart enough to have bought them on the day you found out donald trump would be president. Goldman sachs up 30 and j. P. Morgan is one i think we havent talked enough about frankly because j. P. Morgan deregulations great, j. P. Morgan, david, lets just understand that when you if you get four rate hikes, which is what Steve Liesman and auto guys say would be four rate hikes, thats 3 billion to the bottom line. 3 billion, for doing nothing. Right . Just for being in the banking business. And that is called unbelievable gross margin expansion. They dont have to hire more people to get that 3 billion. So think of the leverage of that bank if you have deregulation, they can return capital without the government necessarily meddling. They can do more loaning. And the fact is that the stock sells at 14 times earnings. So for those of you say this whole thing is chimerical, the markets move too much, i urge you to think about all the ramifications of what could happen to the Worlds Largest bank and how important it would be. It is interesting when you think about many of the changes that were created as a result of dodd frank and other reasons in terms of compensation, jim, and so much of compensation now takes the form of equity as opposed to cash. Right. And they leg into it over usually what are fiveyear periods. Right, to keep them in. If you have been waiting or you are legging into some stock this year, you are very happy if you are at any of the big financial institutions, whether its goldman or Morgan Stanley or j. P. Morgan or citi. You can go on through the big names of course. Whoa, these guys are going to make a fortune. Yet not yet reflected in the highest end new york real estate, which peaked according to toll brothers, which is not the upper you know, they have high echelon. Theyre high echelon, but the biggest guys, whether its the Russian Oligarch or that market not controlled domestic, its controlled by international. Right. So i think people want to correlate those two, recognize that the retreat of the oligarchs is more important to the very highest end. But if youre in the market for just a 4 million house in the hamptons, thats probably the market were talking about. Thats the lower end market. A banker watches their j. P. Morgan shares that yeah, by the way, we are coming to comp season and bonus season pretty soon too. Ive got to tell you when people look at the compensation, i keep thinking about what you talked about how the return on equity we never thought would ever get back to the old days. We did not foresee we did not foresee a Trump Presidency where one of the principle things that they want to undercut is the ability for a firm to be able to use its own capital, be able to generate higher returns, which is exactly what goldman used to do. Which is why goldmans the best performer. That is a good point. Goldman did to its credit pivot effectively also as the world changed goldman changed. And they have certainly shown through the years their ability to do that as an institution probably one of their key strengths. Yes, but there was like no place to run after dodd frank. And now there will be. At the arbitrage desk that bob rubin ran when i worked there that was phenomenal generator of profit, but you really cant position like that for your own company now. But they will be if you listen to some of the deregulation meanwhile, 3. 5 gdp, thats not a bad number. I mean, all you heard about was 2 , 2 , were stuck at 2 . It really is incredible how unfortunately inarticulate the Obama Administration has been, i think, at taking claim. Right. And i think one of the reasons why is because they feel as long as there are so many people who are disadvantaged, not making a lot of money, what good does it do to say we have great gdp because the people left behind youre rubbing it in their faces. And that is a real issue. Look, 3. 5 gdp but still wage growth of nil. On 3. 5 gdp but still dont have the business formation. So i understand the rock and hard place obamas found himself in which is we want to go trump how great gdp is how great is that for the person who just got laid off for Machine Technology . So it is a difficult position for the president to be able to claim that things are better when not everybody wants to do better right. But you and i often talk about the trends themselves and that in fact does point to more challenges when it comes to jobs. Yes. The longer term trends. Not sure typically when you hear applause build here its typically a member of the military, somebody in uniform. Not clear whos entered. That is often why you hear applause. Disabled veterans. Disabled veterans. Of course we hcertainly worthy our applause when they come in. Paychex, small to medium size payroll, looking better. Small to medium guys. Can we take a break . I want to do the right thing. Yeah. Interesting having just been to washington, d. C. And visited the memorials we have, of course, the second world war, from vietnam, not enough time. Do the right thing. Yeah. People who give so much to this country. [ applause ] and back to business we go. This morning you talked a bit about technology, mu, lets take another look at those shares, jim, because they are going to be as you pointed out the star performer this morning in many ways. Given the numbers from the company. You know, theyre going to [ cheers and applause ] you know what lets listen. Yeah, deserving of our applause. [ applause ] real life. When i look at whats going on, its not enough to i mentioned that the microsoft spillover went so far not doing its job. Right. I mean, endless horse race to try to figure out which skill players are going to take the dow to 20,000. I find myself thinking, well, that one right now that one its like handicapping for fantasy football. Oh, geez, that one i dont know if that ones playing. You have to check shafter to see if duponts going to do it. Youve missed the last couple days. Yes, i did. But yesterday when Oil Inventories came out they were better than people thought in terms of being good for oil, but chevron and exxon ticked down today and its like, all right, that takes care of that. No special tonight. No special tonight. Like whos screwing up today . Get easterbrook on the phone, tell him to go preannounce better than expected mcdonalds numbers because thats a 123 stock. Somebody just do something so we can get it over with. How about monte dei paschi. How about it . The oldest bank of the world, looks like its going to collapse. Easy come, easy go, right . Although there are some who believe europe and the banks actually are going to have a nice move next year i think they are. In terms of the ability of the european economy to recover a bit and recapitalization you discussed its actually going to happen. Italy has very poor gdp growth. A lot of people feel the workforce is not economic, a lot of people feel chinese exports, not true, northern part of italy is tremendous manufacturing and very good. They dont have a Banking System in italy. I can tell you that firsthand. They do not have a Banking System that functions. If you get unicredit, second largest, 13 billion recap, you get some banking going on there, that countrys going to do better. The pensioners who bought the monte dei paschi there was 5 billion euros done last couple years, they could be hung out to dry. That will bring a strain of nationalism upon italy beyond even what we saw in the most recent election. So youve got two things in play, youve got the possibility of more nationalistic streak developing in italy because of the losses and you have the potential for reignition of their actual growth because of a Banking System. You know theres no real Mortgage Market in italy . You have told me. You are well you have become a student of the italian Mortgage Market. Yes. And Banking System. And monte dei paschi is an Excellent Bank and they speak english there, which is helpful. I dont mean that to be im saying they have a very big office in new york. But what has bothered me about that Banking System is its just its a cash system. That countrys way too much into a cash economy. Right. And maybe these recaps will make it so its much more bought into the rest of the europe. The modern age, what you seem to be saying. In the world did want to get to m a briefly. Stock is up this morning after j j comes out yesterday and says were back in, exclusive conversations with the swiss rare drug company. Not clear to me. Not enough people answering and or returning phone calls from me this morning to give you great insight there. Sanofi of course had been there and i reported the last thing i reported was a deal was not imminent. And certainly is not imminent for them. But j j coming back like this one would assume youre going to get something fairly soon given they came very close to getting a deal done originally before j j walked away. The fact that theyre back in inclusive talks would indicate youre going to get something in the nearterm, whether that is before or after the new year i cant tell you. Now, did you in your reporting detect there was no scorched earth when j j walked away . No. There was anticipation on the part of sanofis advisors that there was, perhaps a hope on their part that there was. And typically when you do see a company like a j j publicly announce its no longer involved, it is rare to see them choose to reengage and certainly so quickly. Im glad you said that because i was shocked. I thought it was a typo, literally. Because i had gone through and followed j j closely and while theyre a high road firm, okay. I felt that the dismissal was based on the fact that these guys were unrealistic and j j was realistic which therefore let me think that it was just cut and dry never going to happen. So obviously alex gorski, ceo of j j, more of an olive branch behind scenes than we would normally think. Remember that right. So it does happen. Companies withdraw and come back and reengage. Usually the second time wins. So well see whether that is the case. Hey, i just mentioned the spirit of google, alex gorsky, went to west point, in terms of ceos who are committed to doing charity during and making and asking others to help, which i think is really important, alex gorsky. Not seeing a lot of movement by the way in the part of Lockheed Martin or boeing. In fact, boeings shares are up, not that they wouldnt be. Right. As a result of the meeting yesterday with the ceos of both companies and president elect trump, jim. One thing that youve been missing, david, is the excitement in the oil patch of Companies Still issuing stock and buying more. Now, heres an odd one, anadarko actually selling marseilles share assets. I see natural gas tightening all over the country. Its interesting if theyre going the other way. I expect more in the next few weeks. In the next few week sns. The not big mergers. No, assets for sale. But theres lots of assets for sale and the market is so every one of these deals works. Gpor, a company im not really that big fan of, gulfport energy, they did a deal to work. Stocks at 101, they bought some assets, that worked. So keep seeing that happening. Thats that reliquefy kags. Theyre using equity markets with ease to raise as much money as they want. That is one of the Better Things about our system and our Capital Markets, isnt it . That we are able to sustain these companies and theyre able to sustain themselves through difficult times without there havent been certainly that many public bankruptcies. There have been plenty of bankruptcies of Smaller Service providers that we never talk about. Right. But the big guys were relevant. The pioneers, my hat is off to pioneer. They did they went from being a very good independent to being the colossal of independence. These are great growth stocks. Permian guys, right . Permian guys. All right, lets get to bob pisani who has more for us this morning on whats moving, bob. Were going in the wrong direction here. Were talking about a dow 20,000 thing and its not happening right now because theres a complete lack of leadership in the last five days. This has been an ongoing trend. Let me show you sectors today. This is nothing stepping up to the plate here. So everything is just kind of flat, energy, tech, materials, industrials, banks, which was the major Leadership Group in november, none of them are really stepping forward. You can see this in the action in the individual stocks the last five days. Just put up industrials and financials, show you a few of them. United techs been doing all right. These are the last five days were talking about. But caterpillar, also industrial, hasnt been doing anything. Travelers and financials have been doing all right, but goldman which i called yesterday, the most important stock in the dow for this quarter because its about 25 of the dows gains, has just faded away in the last five or six days. Thats not good. Take a look at some of the tech and consumer names. Jim was mentioning microsoft. Its true, microsoft has been a leader the last few days but then cisco does nothing. So you dont get any consistency within the sectors. And none of the consumer stocks, Johnson Johnson hasnt done anything, pfizer and merck have done anything at all. Theyve kind of faded away here on very, very light volume. By the way, this lack of leadership, its not just the stock market. Were having this problem because really all Asset Classes in the last several days so the dollar stopped going up. Gold has stopped going down. Long dated treasuries have stopped going everything is a great flattening in the last five or six days. Thats why were having trouble getting over dow 20,000 right now. So heres where we are in terms of the markets right now. Well call it a leadership pause. The volume is understandably drying up. Its a seasonal thing here. We do usually rise the last two weeks of the year. The dow has a tendency to rise about 1. 5 in the last two weeks. I still believe thats probably going to happen. The market is still the momentum is still on the side of the optimists and the bulls. The internals are very, very strong. There is no stock for sale. Nobodys dumping large amounts of blocks to get out of the market. Everyone is waiting and hoping the market will drop 5 so they can get in more at a lower price. Thats not the sign of a market thats in any kind of real longterm trouble. One quick comment on the semis, you heard a lot of comments this morning on micron. Remember, micron and nvidia, have been absolute monsters, very positive comments from micron this morning. Positive market momentum, favorable demand trends, limited supply. Looks like dram and manned prices are going up in 2017. Its a huge move. But nvidia, advanced micro and micron enormous moves. You can see advanced micro up 65 . Nvidia, micron doing really well. Nvidias up, gosh, just a lot this year. Probably 200 advanced micros probably up 200 for the year. Microns probably up 60 , 70 . These stocks have had enormous moves and the stock you want to own is sxd has been going up for a long, long time. Its essentially doubled in price since 2013. So the overall market has been strong as chips are virtually in every item these days. And thats the internet of things out there. Guys, right now the dow 28 points to the downside. Back to you, david. Thanks very much, bob pisani. Lets head to the bond pits. Rick santelli joins us from the cme in chicago. Rick. Good morning, david. You know, the fixed income markets, Foreign Exchange markets, equity markets, many are trying to find exactly baht rhythm is to this with regard to fundamentals versus things like hope, but i can tell you theres a lot more with regard to clues there. Weve had a very orderly move. Now, check out oneweek in tens. Really tight range. Hovering basically in the mid 2. 50s and consider this the high yield close currently is a whisker under 2. 60. Closed last year at 2. 9. So if the high yield close for this cycle is at 2. 50, were four away, 29 up on the year. Look at fives, its cycle high close on the yield side is 2. 09, its currently trading at 2. 04, five basis points away. Its settled at 1. 76, its also up 29 like the tenyear settle at 2. 7 up 29. If you look at the credit spreads, theyve actually narrowed. So pretty much every indication that we have at this point is that when you try to understand if whats going on in stocks the hopium down the road has some reality to it, i look to these markets, the Capital Markets. Because in the past when we had more faux outlook for the level of equities, it was much tougher to look at the Capital Markets and say, oh, its calm, even though rates are going up, signaling growth. It was much more sporadic, especially credit spreads, Foreign Exchange oneweek the euro versus dollar, yes, its hovering in the neighborhood of 14year lows, a bit of an upward drift. I think whats important look at that fouryear chart we used to use all the time. When we said 1. 05 was the key. It closed under 1. 05 a week ago tuesday. Okay. And when i look at it, its closed under 1. 05 every time. We had one session this week where you close under 1. 05. So from a technical standpoint its still on the soft side. Po monte dei paschi bank, everybodys been talking about it, look at it since the beginning of november, a tenyear chart basically approaching 16. Its at historic lows. No matter what kind of a spin you put on things, the other easy fundamental to recognize with banks like this is it any wonder or question where capital is going to be going in 2017 . Right here in these markets. David, back to you. Okay. Thank you very much. Theres that monte dei paschi again. Thanks, rick. Yep. Coming up, a new setback for uber and what that could mean for the ride haling service. Squawk on the street is coming right back. On a morning when the s p is down about a quarter of a percent, there are your biggest gainers led by micron, of course which with better than expected earnings. Were right back. One of millions of orders on this companys servers. Accessible by thousands of suppliers and employees globally. But with Cyber Threats on the rise, marys data could be under attack. With the help of at t, and security that senses and mitigates Cyber Threats, their Critical Data is safer than ever. Giving them the agility to be open secure. Because no one knows like at t. Generosity is its oyou can handle being a mom for half an hour. Im in all the way. Is that understood . I dont know what shes up to, but its not good. Cant the world be my noodles and butter . Get your mind out of the gutter. Mornings are for coffee and contemplation. That was a really profound observation. You got a mean case of the detox blues. Dont start a war you know youre going to lose. Finally you can now find all of netflix in the same place as all your other entertainment. On xfinity x1. Its the final stop trading for 2016. Yes. Ive got to tell you im surprised that there isnt enough readthrough from this amazing micron order to the need for more Semiconductor Capital equipment. Applied materials obvious gainer, also lam, but Applied Materials should be up a dollar, at least. This is a company thats very inexpensive versus what is obviously the demand for Capital Equipment is going to be monstrous because internet of things. This stocks been a huge winner as is the whole group. Just understand that the readthrough if you go through entirely the Conference Call is we dont have enough equipment to make enough chips in order to meet the demand. So there will be orders placed, the cycle will eventually destroy itself way too far away for that, in the interim asmlf, lam, but most importantly Applied Materials deserve to trade at higher prices than they are now. What do we have on mad tonight . Well, i was going to do this one as stop trading because its probably the biggest downer today, which is, wow, redhat, which was a bad quarter. And the cfo resigned. I know the cfo, hes going to be a ceo of another company. Hes a terrific guy. But Jim Whitehurst has a lot to talk about because it was a bad miss, disappointing and still have things about larger contract but there are issues involving redhat pulling down the rest of the nasdaq. Jim, have a great break. You too. Thank you. I know you and i will be chatting of course as we always do. We will. But try and get some sleep. I need this one. I have to admit, i need this one. Rest a bit. Enjoy, have a wonderful holiday, happy new year. All the great holidays. Thanks. Jim cramer, of course hell be back soon, dont worry. Coming up, breaking Economic News that could move the markets. Good morning and welcome back to squawk on the street. Im david faber along with sara eisen and mike santoli. We are live from the new york stock exchange. Carl quintanilla has the morning off. Lets give you a look at the futures futures, that was last hour. We actually have an open market. You can see we are down less than 0. 25 . That had been sort of the low for the morning for the s p, the nasdaq also in the red and we have crude oil rallying a bit. Our road map for the hour begins with a march to 20,000 after the dow tapered off from its alltime highs, will we reach that historic number in 2017 . Our market experts will weigh in. Names familiar to our viewers, carl icahn and Peter Navarro have been tapped by president elect to serve as advisors. Were going to break down what that means for this administration. And donald trump meeting with the ceos of boeing and Lockheed Martin yesterday to bring aircraft costs down. We will speak to retired u. S. Army colonel jack jacobs for his insight on the Defense Industry. But first, weve got more Economic Data breaking at this hour. Rick santelli in chicago with those numbers, rick. Yes. And im going to give you a couple of surprising ones too, actually. So lets look at the november read for personal income and spending. We were looking for up 0. 3 on both, we missed on both, unchanged on the income side, up 0. 2 at the spending side, there is bright news here though. Our last look originally reported on the income side at 0. 6, well, that was lofty, lost a little at 0. 5 but held most gains. We gained 0. 1 on the spending, originally reported up 0. 3, up 0. 4. Personal consumption expenditure, core year over year something the fed likes to look at, our last look was 1. 7, this time it was 1. 6; arguably a tenth lighter. Heres the interesting factoid, last month was revised up to 1. 8. We havent seen a 1. 8 year over year pce core since 20 october of 2012. October of 2012. So basically over four years. That is something i think the markets going to react to. Lets watch the long end see if those rates tick up a little bit. Finally, november read on leading indicators just missed 0. 1 expectation came in at unchanged and last month at 0. 1 remains unchanged. David, back to you. Thank you very much, mr. Santelli. Lets bring in Steve Liesman get his take on the gdp revision, what economists are forecasting for next year and the numbers we just heard from rick. Steve. Who gets more excited than rick about a 1. 8 pce number . It did come down 1. 4 on the pce price index. Thats kind of, you know, unchanged pretty much. And i think the feds going to look at that and thot be too concerned over gathering inflationary pressures. What really bothers me about from this number not only is the unchanged on personal income, its the minus 0. 1 on wages and salaries. I think ultimately its a wash for growth in the Fourth Quarter running at 1. Pme7. Durable goods a big miss partly because of boeing deliveries were down 4. 6 . Lower than it had been. Business investment though ticking up nearly 1 . And jobless claims also ticking up 275, still a good number but not as good as it had been near the 250 range. Cnbc look at the 2017 and 18 outlooks for wall streets top economists. We found theyve not yet embraced president elect Donald Trumps optimism. While president elects team and his teams said could lead to 4 , 5 , very few economists see 3 in the next two years. The data of the forecast for the next year sees growth rising, so there is some optimism. There is estimate of 2016 at 1. 7, 2. 3 in 2017 and that ticks up just be 0. 2 in 2018 to 2. 5 . Some economists say we dont have enough info to really make a detailed forecast, but everybody points out that whats being discussed has some positives and also some negatives. So heres a kind of red light green light on trumps policies. You can see on the left side there they like this infrastructure spending. The economists like deregulation, like tax cuts, like this idea of repatriating data and they talk about this idea maybe all of that ignites animal spirits. But then theres the red side, negative side, inflation could tick up, stronger dollar could hurtin iearnings and economy overall. Economists want more clarity on what exactly donald trump means when he talks about import tariffs. Of course the fed could end up being a bit more aggressive in raising rates because of all this. And finally the deficit issue could tick up quite a bit. The survey underscores, guys, i think a split here. You have economists on one side, dont call dismal science for nothing and then stock investors on the other side, and, sara, they seem much more optimistic than economists are right now about the outlook for growth. Just a quick question, steve, on the recent data, especially that durable goods numbers, snapshot of business investment. Were sort of in the period where some of the data is out post election, some is still prior. Who gets credit for this sort of strength that we are seeing in the economy, president elect trump on the boost in confidence or president obama at this point . So this is obamas economy. And i would say probably through march or april or so there is going to be some trump effect on the economy. And that entire effect comes through the markets, right . Thats the only thing hes changed here so far, which is the level of stock prices. There could be a positive effect on the economy through that. And some of that may be offset just a bit by the higher Interest Rates. So those are the things for which donald trump is responsible for. And really, when i talk to these economists, they dont see anything happening in terms of trump policies until the second half of 2017. And then really the bigger effects seem to be more towards 2018. But again, a lack of clarity, lack of data. I think also a lack of consistency. Theres a lot of different push me, pull you stuff in the trump plans that economists are baking in and they dont get to those 3 numbers. Steve, thank you. Pleasure. Keep an eye on it. Also we will keep an eye on the dow. Pulling back here further down 23, which puts us about 80 points away from the big 20,000 number. Joining us now to discuss the markets, mark, pimcos cio of global credit and jason pride, glenmeade director. Mark, we often look to the credit market for clues on where stocks are going. What sort of message are you going right now . Well, were getting a message thats very supportive of trump. Credit has been a fantastic year in 2016, the high yield markets up 14 since trump was elected equities are up 6 , the dollars up 6 and the yen has actually depreciated 12. High yield spreads are 50 tighter since trump. So basically markets are really embracing these animal spirits right now. And theres a lot of optimism in the market at least post trump. So, jason, clearly weve seen that. Where does that leave us from here . Do you see this dash to 20,000 hitting this year and continuing and following through in 2017 . Look, i dont know about it hitting 20,000 this year. And actually, i dont know if the numbers really all that important other than kind of a benchmark in peoples mind. What we do know is that while equities have run pretty fast here at the end of the year, maybe its trump election inspired, maybe its just the fact Economic Growth has ticked up which was even occurring before the election. Either way the market and sfotos have run up at the end of the year, going into 2017 though our outlook is though, you know, all these policies theyre being tossed about and the turn in Economic Data were seeing both domestically and internationally hints at this idea that this already long in the tooth expansion actually gets prolonged even longer. Whether we hit 3 growth or not, it really doesnt matter as much as the fact this expansion keeps going into the eighth year, perhaps into the ninth and maybe the tenth later on because we just dont have the excesses and the extreme animal spirits that have built up that normally bring about the end of an expansion. Thats good for equities. It should be good for equities going into the year and should be good for equities going into next year. You know, thats kind of backdrop were seeing. Were not necessarily calling for a lot of 10 and 15 gains, but we are seeing this is a supportive environment for the economics and for Equity Investors on the whole. Mark, you mentioned the good news from a Bond Investors perspective that corporate debt has done very well since the election essentially as absorbed the entire increase in treasury yields. But can that continue . In other words, from here on out if treasury yields go higher, will it not also hurt those other types of bonds that have been kind of a shelter . And really, whats the correct level, do you think, for say the tenyear treasury note environment were likely to see . Right. Let me tackle the credit markets first. I think theres a lot of optimism. Even before trump there has been a transition off of monetary towards fiscal. Weve gone from globalization to deglobalization anded chinau. S. Relationship i think is deteriorating. China last year sold 150 billion of treasuries. So this means higher Interest Rates and, yes, earnings are picking up, which should support the equity market. But equities also have to deal with higher inflation. And that means higher Interest Rates. And also a stronger dollar, which will impact manufacturers. So the bottom line is, you know, we could see the tenyear go to 3 . And while the markets romancing all the positives of trump, what theyre not romancing is basically the protectionist policies, the antiimmigration policies, the strong dollar, the higher Interest Rates and quite frankly that will slow growth. And so theres positives and negatives. And our message is derisk right now because theres twoway risks in the market. And right now the market has really embraced mainly the positives. Absolutely, jason, animal spirits. You used it. Mark used it. Ray dalio used it in a recent link linkedin post. Seems to be the trendy what is investment growth for next year . Well, i think you need to put into two context. One is extreme animal spirits we tend to see at the end of an Economic Cycle where you have a buildup of manufacturing capacity, of business capacity, a big buildup of debt, those sort of things tend to end in a very difficult manner and bring about the recession. We havent really seen that now. What were seeing right now is a buildup of confidence. Maybe there are admittedly some animal spirits in the markets driving valuations a little bit on the high side, but still we havent seen the extremes that normally bring about very difficult environments. Yes, we could see a little pullback here and there. Yes, i actually think that Corporate Bond mashlgt, the credit exposure, that may be more extended than it should be. But on the whole its kind of an area of gray. We have a buildup of some animal spirits in the marketplace, but in terms of stwaul buildout of capacity and economics and build out of debt at the consumer level, we havent seen a very dramatic amount of that, not enough to bring about a recession, just enough to perhaps say, look, the markets may be a little ahead of themselves and may see some difficulty on a nearterm future. But on the whole the big backdrop is still a positive one and a positive direction. And we will leave it there. Gentlemen, thank you for joining us. Mark keisel of pimco and jason pride. Coming up next, the president elect naming billionaire investor carl icahn as his special advisor on overhauling federal regulation. So what impact will it have on the Trump Administration . Scott wapner will join us with that next. But first, take a look at redhat. Companys share is getting crushed this morning after reporting revenue below street estimates as well as seeing its cfo depart for another company. Redhat currently trading down up 17 over 13. More squawk on the street coming up next. My business was built with passion. But i keep it growing by making every dollar count. Thats why i have the spark cash card from capital one. With it, i earn unlimited 2 cash back on all of my purchasing. And that unlimited 2 cash back from spark means thousands of dollars each year going back into my business. Which adds fuel to my bottom line. Whats in your wallet . Tadirectv now. Stream all your entertainment anywhere anytime can we lose the all. Theres no cbs and we dont have a ton of sports. Anywhere, any. Lets lose the anywhere, anytime too. You cant download onthego, theres no dvr, yada yada yada. Stream some stuff somewhere sometimes you totally nailed that buddy. Simple. Dont let directv now limit your entertainment. Only xfinity gives you more to stream to any screen. President elect trump announcing carl icahn has agreed to serve as his special advisor on regulatory reform. The billionaire investor was one of the earliest supporters of trumps president ial campaign. The president elect issued a statement saying icahns help on the strangling regulations that our countrys faced with will be invaluable. Of course icahn has made no stranger, guys, of his opposition to certain regulations in part dealing with them in his businesses, whether it be rail cars, which hes a huge owner of, or refining. Yeah. He is coming up on halftime, by the way. Scott wapner is going to have him discuss a lot of this with him. I feel like weve already heard a lot of what he has to say in his previous appearances on our air. We know hes been talking to president elect trump quite often, as have a number of other significant investors i know as well whove sort of been in the trump camp from early on. Yeah, seems like theyre giving a name with a special advisor but without really any federally role, so maybe just kind of putting a label on what hes already been doing, taking phone calls, giving advice on very specific perhaps regulations or regulatory approach. His stocks are rallying, icahns. How does that not present a conflict of interest though . Hes advising on Certain Industries and can still hold the companies that will clearly benefit from some of these policies hes advising on . I mean, not being a federal employee, sure. But that would means, i think, he doesnt have to sell any businesses to be advising trump. No, and im sure he will not be as youre right hes an advisor for whatever term that actually means. To your point, he has been. And my understanding is and speaking to people whove been speaking regularly with the president elect, he talks to a number of significant people in the investment industry who at least were supporters of his, whether it be a carl icahn or a paulson or a nelson peltz, they have the president elects ear. And they speak with him frequently. And im sure icahn has been doing that. Yeah, actually, since the election, so his publicly traded vehicle, icahn enterprises, is up more than 20 because he owns a lot of the heavy industries, so in other words the market already figured out things are going to be going in the direction perhaps that would be helpful to owners of those types of assets and the fact that icahn had president elect trumps ear already. So maybe just calling him a special advisor is just again formalizing the relationship. Well, were going to hear a lot more about it, right . Yes, he will be on at noon. To your point, were not talking about a confirmable appointment here of any kind. Right. But others were also brought on as advisors, sara, i know as well. Yes, tapping donald trump tapping noted china critic Peter Navarro to a top trade post to head a newly formed white house counc council, has been a very harsh critic of china in the past, has basically helped shape, according to reports, president elect trumps views to some extent on china and help articulate them including those imports that were suggested on china. Heres what navarro said back in july on cnbc. What donald trump has said is that we are going to use tariffs as a negotiating tool, not an end game, as a negotiating tool to force countries like china, half of our trade deficit, hes called them the biggest cheater. Hes right. To force these trading partners to stop the currency manipulation, and illegal subsidies, to stop the intellectual property theft that takes 300 billion out of our economy. Just to emphasize how tough navarro is on china, he did write this book, death by china. Heres a quote at some of the language he uses when it comes to china as a currency manipulator, which really isnt an out of the box idea, but his views and the way he characterizes it really does go past the mainstream, if money is the root of all evil, then chinas manipulation of its currency, the yuan, is the tap root of everything wrong with the u. S. China trade relationship. For more than a decade chronic u. S. Trade deficits with china have dramatically slowed americas Economic Growth rates, our employment rate but yet it would be impossible for china to keep sucking life blood out of our economy without the fangs of currency manipulation. I wonder how this is going to go down in beijing. Its not the first shot trumps fired at china and hes not even inaugurated. Its kind of an intense dance without a doubt though there doesnt seem to be anything delicate about what mr. Trump as president elect is doing at this point to say that theres going to be a reset of relations between the chinese and the u. S. I think is an understatement at this point. And you have to consider this very carefully, michael, as you look at your portfolio i think as an investor. Of course its going to have so many ramifications far beyond what its going to do to stocks in terms of trade and so many other areas. I would city note they do hold an awful lot of treasury notes without a doubt. Whats interesting a lot of the elements chinas trade in currency policy seem like theyre rooted in a little bit of a prior time, right . Sara, what do your fx people tell you what would happen if china would let their currency float freely . It might fall. Exactly. Theyre holding it up more than theyre holding it down. So that was a prior time. Also, theyre no longer the labor cost producer. Its about the scale of automated manufacturing you had. You had a lot of reports on that this week. So the game was certainly this way for awhile. And look you have a lot of u. S. Companies that have pulled out and said, look, we cant profitably do much business in china, certainly valid criticisms. As of course Cyber Espionage but even there things have quieted a bit from what was an extraordinarily active effort by the chinese to steal corporate secrets. And im not saying that isnt happening any longer, but you did have president obama and xi jinping have a meeting awhile back where obama made it very clear that this had to stop and things have calmed down there too. Well, russias taken over headlines a lot on that front. Yes. Just in terms of the journal piece saying who could be at risk here if this gets worse, this whole u. S. China back and forth, Corporate America likely targets the journal, says, include boeing and farm exports from midwestern states as a real way to get at the republican senators, for instance, where it hurts. In some of their own states. But you got to look at consumer names too, apple, starbucks, nike, proctor gamble. Theyve been investing so much in using china as a consumer growth engine, general motors, the list goes on. Yep and this is not the last time were going to be speaking about a very important issue, of course. As we head to break, lets give you a look at shares of boeing, sara just mentioned, and Lockheed Martin. Now, these Companies Ceos met with president elect yesterday to discuss aircraft costs. Were going to talk to retired u. S. Army colonel jack jacobs after this break. More squawk on the street. Stuck at a work thing. Y,e with directv and at t you can stream all your favorite shows without using your data. That makes you more powerful than a table for 60. Wednesdays are the new thursdays or the mandatory after party. How early is too early to leave . Youre not going anywhere. Im not going anywhere. Its your tv, take it with you. Watch all your live directv channels, on at t, data free. President elect donald trump meeting with the ceos of both Lockheed Martin and boeing yesterday. The topic du jour, federal costs for the f35 Fighter Jet Program and as well the replacement for air force one. After the meeting, boeings ceo pledged to keep costs for the president ial planes below 4 billion. Take a listen. Were going to get it done for less than that, and were committed to working together to make sure that happens. And i was able to get the president elect my personal commitment on behalf of the boeing company. This is a business thats important to us. We work on air force one because its important to our country. And were going to make sure that he gets the best capability and that its done affordably. Joining us now former assistant air force secretary for acquisition and research marvin samber, and nbcs military analyst, retired u. S. Army colonel jack jacobs. Mr. Samber, let me begin with you, its no secret to those of us who even dont report on the military that the f35 has been a troubled program. But what could the president do assuming these contracts are well reviewed, written to span many, many years, what can you actually do when youre a president to change the trajectory and or the payments . Well, the president has the ultimate clout. When youre a part of the pentagons staff here, youre treated as if a political appointee as if youre the summer help. People know youre a transient, you move out. And if you want to do anything significant in terms of changing anything, political antibodies come into being because they say, okay, so many people will be let go in a certain state if the program is canceled or if the program is basically changed. So you dont really have as much clout as the president. So when the president gets involved intimately as president elect trump is doing, it really causes a lot of good things to happen. A lot of people really take this seriously because, as i said, he has the ultimate clout to do things. To change things. To make things happen. Even if you have a contract, there are options in that contract, there are ways of making modifications. But theyre difficult to do unless you are the president of the united states. Colonel jacobs, you know, im curious to see your take particularly on that answer. Is there really room here to operate if youre president to make significant changes in a program of this type . Well, you can always make changes. Its interesting to note that i think in most cases if you want to cancel a program, it costs more to cancel a program particularly in the new years than it does to keep it rolling, which is one of the reasons we have kind of the problem that we have in a lot of systems that weve contracted to do. But sure the president can if he wants to micromanage anything, he can get the cost down. The real question is whether or not the effort to do so is really worth it. You are going to save some money. And of course the president elect has used some political clout and physical muscle to get denny mullenberg to say, yeah, were going to get the cost down, but getting the cost down is usually a function of change specifications and at the end of the day you really dont save that much more money changing little bits and pieces of the specifications. You need an aircraft a series of aircrafts to tell you the president and National Command authority around particularly in an instance in which theres a threat to the united states. That costs money. And in this case its going to cost around 4 billion no matter what you do. Marvin, im having trouble figuring out should the Defense Industry broadly be nervous about president elect trump or excited about the prospect of more military spending . Well, i think they should be excited about the prospect, but with respect to that answer that the colonel gave, in isolation when you look at this program in and of itself, you may say theres nothing you can do. But the fact is lockheed and boeing have many, many, many defense contracts. Some of them are coming in the future. And that gives a president or something of his ability the ability to negotiate things. You want some changes here, then youre going to have to give us, you know, something going forward. So theres always negotiating room to change things when you have future business that may or may not be at stake here. So you do have the capability to make changes given the enormity of the Defense Budget and the lockheed and boeing share of that. And a lot of it is to come, as you just mentioned. Defense spending is going to increase. Yeah, i mean, so colonel jacobs, whether you do have leverage or not, clearly hes going to try to target and impose some sort of cost discipline on these companies. Can you just address the question broadly about what Defense Companies should expect from a Trump Administration and how scared they should be of getting singled out like this on twitter . Well, secretary sandbur brought up an interesting point about contracts. I think theres going to be some bare knuckle closed door sessions in which youre liable to see a reduction in a large number of the contracts that the government has with Government Contractors in the defense sphere. And maybe not going to be a lot of savings in any individual contract, but to quote everett dirkson, a billion here, a billion there, i think there eventually will be a number the cost of each contract, recognizing every time you do that theres some risk, sitting down and cutting out the fat is good work, needs to be done and its going to take a lot of hard work and going to be labor intensive to do. But, yes, youre going to see that among all the government contracts. All right. Well be watching closely. Gentlemen, thank you both for joining us. Marvin sambur and our own colonel jack jacobs. Lets get over to sue herera right now for a cnbc news update. Hi, sue. Hi, sara, good morning. Heres your news update this hour everybody. Three car bombs ripped through an outdoor market in mosul killing at least 15 civilians and eight policemen and wounding dozens more. Several of the injured were send u sent to a hospital in irbil. A Human Rights Organization says isis fighters were deliberately targeting civilians in areas theyd lost to government forces. And russian president Vladimir Putin laying flowers and offering condolences to widow at the ceremony at the Foreign Ministry in moscow. California gun owners scrambling on wednesday to purchase assault rifles before a new years ban goes into effect. Governor jerry brown signed the measure into law back in july. It includes a tenday waiting period for all guns. And u. S. Home affordability has hit an eightyear low according to adam davis solutions flt during the Fourth Quarter 29 of county housing markets were less affordable than previous periods. Thats the news update this hour. Sara, back to you. And Mortgage Rates are just going up. Not getting any bet sgler they are. Sue herera, thank you. When we come back, Morgan Brennan will be here to break down how those defense stocks we were just talking about are performing after president elects meeting with boeing and Lockheed Martin. And next, well talk technicals with btigs chief Technical Strategist katie stockton, what those big round numbers like dow 20,000 actually mean. Stay with us. Whats Critical Thinking like . A basketball costs 14. Whats team spirit worth . cheers whats it worth to talk to your mom . Whats the value of a walk in the woods . The value of capital is to create, not just wealth, but things that matter. Morgan stanley lets quickly send it over to Jackie Deangelis at the energy desk with some breaking eia data. Jackie. Good morning, david. Thats right. Were looking at Natural Gas Prices after the department of energy reported a 209 billion cubic feet drawdown in supplies last week. Thats four times what we saw this time last year. Its about double the fiveyear average. So you can see prices were a little bit higher in anticipation of that report. We were in line with expectations, so weve come off a little bit. But remember, back in early december we hit a high of 3. 75. So a lot of people are wondering if were going to sort of stabilize a little bit. It really all depends on the weather. This kind of drawn e drawdown comes because you see a rise in demand because of the colder temperatures. Right now different models are saying Different Things as they always do. Were going to have to see how this plays out. But i want to say by all accounts weve seen a big move in natch rural gas, about a 20 spike. Consumers tend to get concerned about this, but remember when your natural gas gets to your home its negotiated through a long term contract. The futures dont really impact it say the way prices at the pump are impacted. So futures are something to watch to see for longer term trends, but a lot of people concerned about whats going to happen this winter. Back to you. Jackie, thank you very much. While the trump rally has slowed down, the indexes flattened out a little bit lately as the dow flirts with 20,000, were here with katie stockton, chief strategist at btig to see what the charts could say next. Good to see you. Good to see you. We have the dow flirting with its alltime high, what does this tell you in terms of what the index can do . Theres momentum, right . We saw breakouts in november and immediate positive follow through. That tends to be bullish from a longer term perspective. As you mentioned theres been a little bit of a loss of momentum recently on a short term basis as weve approached 20,000 for the dow industrials. Thats not really a resistance level, but somehow market psychology creates resistance at times near those round numbers. This would be a very natural place for pullback. Also come s p 500 at an alltime high and overbought conditions and maybe the market is tired. Overbought and uberly bullish sentiment based on the transactional data like the vix or put call ratio. Natural time for pullback and i think it would be healthy to relieve that over what weve seen a 9 plus rally. The dow has been an outperformer since the election, that looks like a sharp vertical line. This is a tenyear chart. Right. Very impressive long term uptrend. But when we look at the Downside Potential to the 50day moving average for one its more than 5 at this stage so does create a little worrisome setup again over the short term. I think we should look for an opportunity closer to the breakout points we saw in november to add exposure early next year. So we might be in for another one of these patterns where we finish the year strong and january you have some pullback . Ive been the belief pullback will start before year end. No santa claus rally, which is typically last five days of the year into the first five of the new year. We might not see that because we have some momentum, some rising just now. I think that will unfold and take us into early january. But not a replay as far as you can tell of last year when you really had kind of a very nasty correction into february . I certainly hope not, for one, but pullbacks do tend to be somewhat fast and furious. In a way thats actually indicative of a counter trend move. What well be looking for is not only an oversold condition but also the market internal measures, things like breadth and leadership and sentiment to reach levels where theyre at extremes quite the opposite of what weve seen recently. So where does it take you in terms of an s p target . We get some kind of pullback here, you think its a good entry, where does it go . Its essentially already met the short term breakout that was around 2285 but you can arrive longer term target about 2400, theres a round number for you, right . Thats from the breakout that occurred over the summer. To me thats very realistic still for q1 and thats our upside. So when we see a pullback, we want to add exposure to potentially take advantage of that. Katie stockton, thank you very much. Thank you. Lets send it to dom chu for a quick market flash here, dom. Sara, we have a small cap company, its weight loss related, its Weight Watchers. Shares are up really big, why . You guessed it, its oprah. In the latest Marketing Campaign the media mogul says she lost 40 pounds since joining the system. Youre seeing some of the ad right now. The gains are big, but they need to make up a lot of ground. Even with the gains those shares have lost half their value yeartodate, but Weight Watchers a stock catching peoples attention in todays trade. Isnt she a shareholder . She is. Thats a great incentive to lose weight. And a board member, a 10 shareholder and board member as well. A big move. The power of oprah winfrey, dom, thank you. As we head to break, lets check in on the markets here. The dow is off about 20 points. We have not seen backtoback losses for the dow since before the election, november 4th. But we are heading into our second day here. So well see what happens. S p is down less than 0. 2 . Nasdaq down about 12 points. Later, Jason Calacanis will join squawk alley for his take on alibaba and all things tech. Much more squawk on the street when we come right back. The infamous traitor. And i know a thing or two about trading. So i trade with e trade, where true traders trade on a trademarked trade platform that has all the. Get off the computer traitor i wont. cannon sound mobility is very important to me. Thats why i use e trade mobile. Its on all my mobile devices, so it suits my mobile lifestyle and it keeps my investments fully mobile. Even when im on the move. Sign up at etrade. Com and get up to six hundred dollars. How are defense stocks reacting to the president elects tweets and callouts . Our Morgan Brennan has been tracking their performances and has more on the moves. Mike, thats right. Take a look at shares of Lockheed Martin. Still down about 2 from last monday when president elect trump first tweeted about the, quote, out of control cost of the f35 joint Strike Fighter program which lockheed is prime contractor. On the heels of the meeting yesterday, the two discussed the companys progress to bring costs down with, quote, continued commitment to delivering affordable aircraft to the u. S. Military and the u. S. s allies. Prior to the f35 tweet shares of lmt had soared 9 post election. They soldoff last week on the heels of that tweet. They have retraced but not regained all of it. A similar chart for northrop grumman, but its been a bit better for boeing which also met with trump yesterday with Ceo Dennis Muilenberg vowing to keep air force one replacement costs below 4 billion. That stocks up 3 since trumps stweet on that company and nearly 10 since the election. So overall defense stocks theyve had a great run this year. The aerospace up 20 for the year, up 10 since the election. One of the reasons is defense spending is expected to grow both here and abroad, both because of the new administration and also because cyclicly the sector is due to grow. So the big question, how will that funding shake out . And how mituch more risk sharin of these costs will contractors be expected to assume for the high profile platforms . Thats making the Trump Administrations fiscal 2018 Defense Budget proposal a must read when it comes out likely the spring, likely in april. Guys. Yeah, considered one of the big winners. Morgan, thank you, Morgan Brennan on the defense stocks. Now to Rick Santelli in chicago with the santelli exchange. Good morning, rick. Good morning, thank you, sara. Id like to welcome my special guest, driving all over the country it seems this week, mark, thanks for stopping and taking the time. Yeah, im headed to utah for the holidays and then california to teach at chapman university. But im here in denver to talk to you about the markets. Excellent. Listen, we had last revision, last look at Third Quarter gdp at 3. 5. It wasnt a bad quarter, but problem with the quarters last handful of years is that when you average all four of them, you dont end up with much over 2, sometimes a little less than 2. Atlanta fed now at 2. 6, but everybody else is under 2. Theyll make a revision. Give me your thoughts on the current state of gdp and how president elect can ramp it up. Well, i certainly think he has a good chance of doing it since under obama we had eight years of less than 3 growth. I dont think weve ever had that before. Except go back to the great depression. So theres its a weak economy. My own statistic gross output and my b to b index showed anemic growth. It did have a little bit of a jump here, but i think the markets are telling us both the rise in Interest Rates and the stock market rallying that were looking for a robust economy under trump. Now, i think its Pretty Amazing that weve gone 32 years, maybe 34 years of a bull market in bonds but your favorite area. I think that golden age is over, and its pretty shocking we went as long as we did with that kind of change. So now were going to see dramatic change, higher Interest Rates, higher inflation, probably higher deficits. And maybe even a stronger dollar even after the weak Obama Administration gave us a strong dollar, we may even see a stronger dollar under trump. Who knows. All right. Listen, final minute, mark. You know, we have a Real Tea Party guy elected in 2010, mick mulvan mulvaney, omb virtually uses static scoring for things like tax changes. Do you think well see a shift to more dynamic scoring . Do you think its something that we should do . Well, first of all, let me just say that only in your dreams, rick. Isnt this a truly amazing that eight years after your tea party ran to we have Tea Party People running the government, especially the budget . I mean, i have to give you a little bit of credit for that. And, yes, i think dynamic scoring is going to take place, but were talking about i just had a meeting with a supply side Transition Team that included steve moore, larry kudlow, and both were giddy about the sharp drop in the Corporate Tax to 15 , the deregulation, the encouragement of small business. So im a big fan of the russell 2000 as far as a market is concerned. But, yes, i think the dynamics are very favorable. But trump is, i think, a supply side change man. Well see if he can really cut government spending. I have my doubts. Excellent. Happy holidays, merry christmas, cant wait to talk to you after the new year. That was mark david faber and gang. All right. Thank you, rick. Send it over the mike, now, as well. All right. Well send it over to jon fortt with a look at whats coming up on squawk alley at the top of the hour. Like a fleaflicker, mike. Yes. Coming up on squawk alley, new evidence that russia was, in fact, behind those political election season hacks. Also uber slapped on selfdriving cars in san francisco. Well find out where theyre going to go with several driving next. Finally, billionaire carl icahn has a controversial role in the Trump Administration. We will dig in on that and find out what the controversy is coming up on squawk alley. As 2016 draws to a close, cnbc is looking at ways you can make money in the coming year. This hour were going window shopping with retail. Heres courtney reagan. Retail was all about Online Shopping in 2016, and 2017 it may be all about leadership and policy changes. Here are three predictions for the new year. Longtime macys, starbucks, and df ceos have announced theyre retiring in early next year and they wont be alone. As the piece of change in retail accelerates, look for more longerterm ceo seats to change as well with a combination of retirement announcements and upheavals. Look for new ceos with more diverse experience to step in. Retailers that source clothing and shoes from overseas may have to go back to the drawing board when it comes to their supply chain. If trump talk of major change on trade, tariff, and imports regulations are realized, it could increase costs and compressed profitability because passing on costs to consumers will be nearly impossible. While many are looking for inflation under a Trump Administration, you wont see it in the prices shoppers pay in the near term. For more than 30 years, prices consumers pay have been flat or lower compared to the year prior, even when cotton prices doubled. Price crusher from newer players like forever 21 plus stalwarts like walmart and t. J. Maxx make it too hard. So thats 2017, but you have to get through 2016 first and there are three very critical days left for retail, especially if you havent finished your shopping. Were here at amazons prime location in new york city where you can get at least a select number of items delivered to you if youre in one of the 30 locations. You can get them in under two hours. Back over the you. It is crunch time over there, courtney. One question. Youve been doing so much good work on this border adjustment policy we could get out of trump and Congress Next year, really would affect the retailers. Inconceivable policy cliff from cowan. How can prices not go up for consumers if theyre going to have to deal with this massive tax . I think its one of those things the retailers would love to do. They would love to be able to pass on the prices to the consumers and have you take away some of that cost for them. I just dont think consumers will take it. They already want 50 off during the holiday season. It will be real hard for them to pay 30 more for a sweat theyre didnt change. A tricky balance. Thank you, courtney. See you later at amazon today. Coming up, donald trump backing up his tough talk on china with a new hire. Ian bremer will weigh in. Great guest on a hot topic. The dow is back to levels near 19, 900, so were about 100 points away from dow 20,000. One stock to watch would be goldman sachs. It has been a key to this march higher in the dow. And of course its the highest priced stock in the dow. Therefore it has the most influence. Its backing off another to have another news of settlement about some fraud, but it is the one to watch although really the entire market has found itself without a lot of fuel in the tank as the dow got there. Keep in mind, the s p 500 also pushing up against its alltime high and has retreated from there. Well see if that interim period the last week of the year is going to have any strength. Been a good run for stocks. Been a better run for bitcoin. Just wanted to mention this because the price is above 800 again. One of the best investments of the year up 87 . So for all you haters out there, china, india also. Well looift on that for squawk on the street and send it to you, kayla, for squawk alley. Thanks, guys. 8 00 a. M. At uber headquarters in san francisco, 11 00 a. M. Here on wall street and squawk alley is live