Investors await hichbt it hintsr hawkish play apple reportedly moving to buy cobalt directly from miners. And amazon gets healthy in a potential challenge to pharmacy retailers. They are launching their own line of overthecounter Health Products the dow and the s p ended a sixsecon si sixsession win streak on tuesday. This afternoon, the fed minute. Will be released these are the minutes from yellens last meeting. May be hard to know from the last minutes, they were before the selloff, before the spike in yields so you dont get a real assessment so also before the big spending plan, the 300 billion. But it is after the tax cut. The first time we see the minutes after the tax cut to see how they think that will ripple through the economy. Multiples pretty much peaked around the time of the passage of that bill yes around 18. Now 16. 8 right in the middle of a 16 to 18 range of whats normal were back into the debate of whether the Second Quarter will bring a tricky handoff Economic Indicators start to moderate inflation accelerates and if Equity Investors can tolerate that. People will look at any number of things to see where inflation stands we will hear from powell and others on that subject it will be four weeks friday since we got the employment report that sparked this yep, we dont know if the minutes will reflect that. No. Its been a long 3 1 2 weeks it has. As you were talking we were showing the tenyear yields, which keeps bumping up against that 3 level. Refis are 4 away from the lowest if you didnt do it over the last few years, when were you going to do it you had a long time though in the total of 40 years or whatever, you still are probably looking at extremely low rates versus where you know, where you once might have had a refi 30year fixed at 4. 64 for more, lets bring in juian tim timer and barry you have been cautious on the markets. I wonder if this moderation on prices has cued your appetite a bit. We had expected and called on january 26th for a correction. It overshot our initial expectations for the correction. Youre right it is about the fed, its about inflation, rates this is a moneydriven market. Cheap money has fueled it for the better part of five years. Barry, were having audio issues not sure if viewers heard that we at the desk could not while they do that well go back to this issue of rates and also the Dollar Dollar index highest since valentines day we saw a series of days where it could not catch a bit. Were waiting to see if walmart does the follow on from the big decline yesterday. That huge question raised. The whole premise for walmart was figuring out whats going on with their internet strategy versus amazon. They finally come up with one where they could face off against the internet giant and the numbers raise the question again, were they correct about that now the New York Post story about mark lore. Yes speculating, whether or not hes preparing to leave after he was not on the Conference Call yeah. To discuss the internet strategy when in theory hes in charge of it but there was significant samestore sales growth at walmart u. S. Which is a reflection of robust economic growth, the consumer being in a decent place it wasnt about the broader issue of that. No. Hasbeen quite a number of quarters where weve seen that it was more specific to their ability to continue to show progress the more you sell, the margins do go down an increase of 20 plus percent, versus 50 . Yes, growth, but a deceleration. You wonder if they just didnt quite figure out the mix in december right they said they had lots of tvs, lots of big stuff, holiday stuff, but not enough of the basics, like toothpaste. Inventory management online incredibly difficult i know because lots of stuff doesnt arrive when its supposed to if youre not using amazon. Com barry, i hope you wont mind me asking you to repeat the point, you made. But has any of this selling made things more attractive in your view yeah. We expected a correction and called for one on january 26th it overshot our expectations, it touched the 200 day moving average, which was about 11 but really i think one of the biggest problems is the things you mentioned, that this is built on a house of sand of cheap money. If the market is affected in the nut pictu future in a negative way, its the Interest Rates that depends on policy, not just here but abroad. The bank of japan and the European Central bank have kept down our cost of money and tied the feds hands as they try to normalize Interest Rates that begins to change in september, and does that add to risks as we get to the summer and beyond i agree with barry. For me the big issue is that the market has a valuation problem, if you will. And then if you look at a discounted cash flow model, you put earnings in the numerator, the Interest Rate in the denominator, and that Interest Rate has been low because of the era of Monetary Policy weve been in. Some of these problems have been corrected with this correction one issue that ive been talking about since last august when we had this reset of tax cuts getting priced in again was that the stock market completely ignored the bond market and it made me think of deja vu from 1987 then in late january the stock market did Pay Attention last august the tenyear was at 2 the market was pricing in one rate hike for the next two years, which is silly. Now the tenyear is near 3 , the market is pricing in 4 1 2, 5 rate hikes, which i think is more reasonable. Ultimately financial conditions or liquidity conditions have been driving valuations. While we have good earnings and gave back two of the pe poit p that we gained since last august, we still will have this valuation headwind Going Forward as the fed not only normalizes policy Going Forward when earnings are growing 20 , the pe can come down and the markets go up, but price will go up less than earnings. Thats what i was going to bring up a lot of people make the point when Interest Rates go up, money gets more expensive, more competition for stocks, but if earnings are going up, it can offset that multiple compression and still get a higher market. You dont buy that no, i think money is seriously mispriced globally the European Bank is trying to hold a flawed Monetary Union without fiscal union japan has a demographic implosion and theyre pursuing a qi qixotic rate if china goes down, theyll export deflation to all of us. Their currency will drop and our currency will rise if that happens, its adverse for the markets. Earnings up, Interest Rates up, pe down. As the fed put expires, you have to require a higher equity risk premium to own stocks above that tenyear yield, which implies a lower pe its really an offset. Pe down, earnings up for several years. Well see what the coming weeks bring us thank you for helping us kick off the hour today thank you when we come back, well go to Andrew Ross Sorkin at the Winter Olympics in pyeongchang, south korea europe in the red, but a stable opening on deck at the nyse. More from post nine in a minute. Is the monolithic view of emerging markets obsolete . At pgim, we see alpa in the trends, driving specific sectors of out performance. Where a rising middle class powers a booming auto industry. A leap into the digital era draws youthful populations to mobile banking and ecommerce. Trade and travel surge between emerging markets. Everyday our 1,100 investment professionals around the world search out opportunities for alpha. Partner with pgim, the Global Investment management businesses of prudential. Lets get to Andrew Ross Sorkin in pyeongchang, south korea. Another day where results for the u. S. Not exactly what we had been hoping for. Its been a tough time for the u. S. But we still have a chance lindsey vonn taking bronze in the womens downhill alpine event in what it likely her final olympic downhill run shes the oldest female medalist in Alpine Skiing at age 33 they won gold in the 2010 vancouver olympics but sat out the sochi games due to a torn acl. Heres what she had to say about her bronze medal im not disappointed. I have a medal i gave it everything i have. I worked so hard, especially the last eight years, with all my injuries its been a tough road im back on the podium thats what counts earlier today she tweeted her bronze medal felt like gold. She races again tomorrow in the ladies alpine combined slalom. Said she dedicated her bronze medal to her late grandfather and a lot of people still rooting for her here want to show you the medal board. U. S. Tied for fourth place its getting a bit better. We werent even on the screen earlier. We are tied with netherlands with 16 medals canada at 21 germany at 24. Norway at 33 when we come back, we showed you video yesterday of liz swaney, who got on the hungarian team, an american skier. She made her way to the olympics she doesnt do anything too fancy. Some people are calling it a scam shes here. Well show that you interview when we return you guys had a good debate on squawk this morning i guess about the sporesponsibility athletes have to represent their home country and what that means. This case, thats part of the question clearly her own performance is dare i say subpar relative to every other athlete in her category then theres a question should she be here, does she deserve to be here . The ioc spoke out. Well show you some of that. Its become a hot button issue, sort of an object of fascination. But there is a real question mark about not just her or whether the rules will change as a function of it that sometimes happens in mens basketball people come here from other countries, play for the nba, but want to go back and represent the country theyre from used to be true for hockey, when we played in the olympics but theyre good. Theyre really good. You and i could have gone out there and done that. Look forward to hearing it. She played the numbers game well we should tell you you know what, well tell you when we see you next time. Theres a funny part of the story. Well do that as the tease interesting everybody is an arbitrage in life everything is full of tradeoffs yes. Thanks, andrew. Thanks. Coming up, art cashin on what hes expecting from todays Market Action as we count down to the opening bell. Looking at the futures, they are suggesting we would have a mixed to flat open s p opening flat dow opening lower by 11 points nasdaq up by 29. More squawk on the street from the nyse straight ahd. Ea this is my headquarters. This is where i trade and manage my portfolio. Since i added futures, i have access to the oil markets and gold markets. Okay. Im plugged into equities trade confirmed and i have Global Access 24 7. Meaning i can do what i need to do, then i can focus on what i want to do. Visit learnfuturestoday. Com to see what adding futures can do for you. And made it liberating. We took safe, and made it daring. We took intelligent, and made it utterly irresistible. We took the most advanced eclass ever, and made the most exciting eclass ever. The 2018 eclass coupe and sedan. Lease the e300 sedan for 569 a month at your local mercedesbenz dealer. Mercedesbenz. The best or nothing. Apples next big purchase may be cobalt. Reports say apple is in talks to buy cobalt directly from micners for use in its batteries the price of cobalt has been soaring because of electric cars and their batteries and the cobalt goes into them. The vast majority of cobalt comes from the congo, human rights issues, children mining its horrific. If they can get it from other parts of the world, it will be better off one would expect this would be a growing issue because of the growth of electronic vehicles and they use 8 grams of cobalt for a battery if an iphone, but 1,000 times that for a car. Obviously there are 1. 3 billion iphones out there. So theres more of them than electric vehicles, but we all know thats growing. Right now the congo is a disaster. Also twothirds of production for all cobalt glencore, one of the big miners they had a great quarter. Just to mention that yes mining with other metals. Copper, things of that nature and their trading operation. But its worth mentioning market looks different then when they were having serious issues was on the watch list its not apples to apples remember delta started going more vertical on crude as these Big Companies say we cannot be victims to the sways of commodity cycles they went as far as to buy an oil refinery i dont think apple is thinking about buying a cobalt mine, but absolutely vertical integration. It makes me laugh about green cars when you know what it takes to produce the ethical green cars, all the coal you need, all the cobalt until elon musk puts solar panels on your car, then youre good he will try it. He has more time because his launch today was scrapped. Spacex was going to launch four minutes ago they had to scrub it for winds part of that mission is to beam broadband from space back on to earth in areas that have been dying for Broadband Access for years. They were going to put up two experimental satellites that will be a chain of 4,000 close to earth so they can provide broadband in places where you cant get it now or and in space, where you need it you are planning to go . Eventually. Not mars. Until they figure out how to get back then id consider it opening bell seven minutes away ein the 2018 lexus es,y system plus, standard. And the es hybrid. Take advantage of special president s day offers now through the 28th, on the 2018 es 350. Experience amazing at your lexus dealer. Today, the new new york is ready for takeoff. Were invested in creating the worlds first stateoftheart drone testing facility in Central New York and the mohawk valley, which marks the start of our nations first 50mile unmanned flight corridor. And allows us to attract the worlds top drone talent. All across new york state, were building the new new york. To grow your business with us in new york state, visit esd. Ny. Gov. Youre watching squawk on the street live from the Financial Capital of the world the opening bell set to ring in about four minutes joining us is art cashin, director of floor operations with ubs welcome. My honor. Thank you. Wonder what you made of this argument yesterday between some of the big strategy firms on whether or not the selloff weve seen this month is an appetizer or something that cleanses the palate it is a process it may clean things up that having been said, its probably a 35 chance that we still have to retest the earlier lows from a week and a half, two weeks ago. Most of the pull backs that parallel this do not end in a v shape. You end in a w, retest that. Why only 35 anything is 100 . It would be pretty easy. So you look at whats happened in the past. The market has kind of shrugged its shoulders at seasonal patterns so you take them all with a grain of salt. What do you think people should be paying for nextiers ea next years earnings so far i think were where we should be. Okay. Times has a big piece with how the public has comearound on the tax bill. Helping for hopes for republicans in the midterms. Maybe a little bit. Theyre seeing it in the paychecks. If the republicans can hone in on it we can get things done properly also the issue of the transports they have not retraced the selloff as the industrials or the s p, some wonder if thats a worrisome trend or no. Its a bother we will watch. You could get dow theory implications built in there as well that is being talked among traders avidly as we have seen the overall market come off the lows, when you dig down to the interest sensitive sectors, they continue to yunderperform dramatically. Thats a tell about how worried people are yeah. People are concerned dont forget, part of the trigger for this has been Interest Rates when the wage data came out and that got everybody a little uppity, now that we dug down into it, its not as scary as the time well see. Im going to hold back a little, wait and see if we see that rollover start all over again. People talked about the markets searching for leadership is there a breakdown in leadership within the index, within the sector or within f. A. N. G. People are pointing to amazon and facebook as not leading in the way they did what does that mean . I think theres some of that. But by in larm the tech s larger as a whole has been good amazon, youre starting to get more antitrust talk about coming in, theyre hitting out at all kinds of people. Some of these Industry Sectors that feel threatened may go out and look for a friendly legislator and see if they can get something groing or reexamine the sherman act or the clayton act because those had not much to do with prices going down youre right about this. Its important to keep an eye on it, though it could be years before we see it culminate in anything no question if you feel threatened youll find a legislate tore talk dggo right away lets get to the opening bell s p at the bottom of your screen at the big board, its cycle for survival celebrating their 12th season of cycling events at the nasdaq, radware, a leading provider of cybersecurity and Application Delivery watching all that. Before we let you go, art, well get fed minutes today reflecting a meeting that was yellens, her last one do you suspect there will be a big change in tone between her and powell no. I dont think so i think a better way to find that out will be next week when he gives what used to be called the Humphrey Hawkins testimony the minutes are important, but they were under her. So you might get the conversation being more differential let her go out with a happy heart, a clear conscious and whatever then let powell think about what he wants to do also before the big selloff and rise in rates, so its hard to know what they tell us at this point it is interesting they were after the tax change, however. Right well see how animated they are about the physicfiscal sidef things coming in the twoyear briefly hits 2. 28 highest since september of 2008. Are you watching the short end very much or expecting an eventual flat curve . Im watching it but the other thing im watching is whats going on offshore. Japan continues to get more and more dovish despite their conversational attitude and mario draghi, again, i will start tightening up. I dont see signs of it. As muchas we look to the fed, they have exterm nal influences they have to bear in mind. As i believe somebody said on air earlier, if things begin to bottle up in china, they will begin to try to export like crazy which could bring the threat of deflation back into the game we should point out we talked about it somewhat this week, but the amount of treasury supply coming online this week, and the effect its having on yields overall, is it significant . Not so far. But among traders, its an item of great concern you have one less theoretically you have one less key buyer in the fed, and expanded supply coming in. Usually that spells higher rates. At any given time theres always one or two things that the market focuses on. It feels like we have shifted to when Rick Santelli announces the results of the auctions and the cpi, ppi and wage data yes i think theyll be more careful as we learned last time what looked in the headline to be Inflationary Pressure and turned out to be the opposite it did not disperse down among the large portion of the working class. We just had a discussion about walmart and amazon, and albertsons and riteaid. Looking for inflation in consumer goods, its tough it is competition is growing as you point out, here amazon now announcing that theyre going to be in there traditionally if you went in to get a bottle of ibuprofen or something, you would pick up one or two other things in the store. Now if youre not going to the store, sales are going to go down, not op nly of ibuprofen bt other things theyre trying. Technology stocks are doing fairly well, including amazon in the early going. Up 1. 4 . Even facebook actually up after what has been recent weakness. The stock flat for the year versus many of its socalled the f. A. N. G. Group, at least you cant even count netflix anymore. Up 48 this year crazy facebook continues to face that ongoing pressure as a result of the mueller probe, ru russias influence on the election, using the platform theyve been keeping a low profile other than mr. Goldman who mistakenly tried to speak up that was not smart on his part for a company trying not to beat its chest in any way incredible Financial Performance does facebook. 44 Revenue Growth thats right. Find that somewhere else in the s p. Pivotal, has some analysis of neilsen data, this is november data, core facebook engagement down 11. That doesnt count insta or whatsapp, but more evidence that on the core app on engagement i wonder whether their Artificial Intelligence at facebook improved so much that advertisers are having a better experience with engagement going down it will be interesting to see if the numbers no longer correlate. If we get engagement going down, but at the same time their numbers continue to move up because advertisers are having such success targeting on the platform got to mention qualcomm and bro Broadcom Broadcom lowered its offer for qualcomm, at least in price. They would say its an adjustment and raised its offer. The offer goes to 7 79 a share overall. 57 in cash 22 in broadcom stock but they say, hey, you just spent 4. 10 a share raising your bid for nxp to 127. 50. So in fact were only lowering our bid by 3 bucks a share, hence really raising our bid by 1. 10 follow what does it all mean . Theyre willing to pay less for share for call cqualcomm qualcomm signing that deal over the weekend with nxp they lowered the tender threshold. Iss did come out and said it elected four of broadcoms board of directors they had begun negotiations prior to getting the iss report on friday with the likes of elliott. It probably makes it less likely overall that broadcom will succeed here but theyre trying to give them a slap and say you guys were bad actors in a sense. One quote to me, we cant pay for their mistakes basic question, why do they want it so bad broadcom. Yeah. Thats a good question. Some would say the key is continuing to acquire its size when youre a company like broadcom for which acquisitions is a key strategic imperative. But they also believe it will fill in different gaps, moving into 5g in particular and the importance of that for their product portfolio. Have any moved their headquarters yet they have not gotten the approvals quite yet. Still singaporebased. But the plan is to become a u. S. Corporation. Expressly to do these deals because of sifi. Yes if they were to get to the finish line or six directors were dominated and they took over the board t would still take 12 months at least to get the antitrust approvals. Also yesterday saying 82 is nowhere near broadcom will say what is he thinking, quoting a multiple that qualcomm never traded at to justify that the market is saying 82, 7 9, y9, you can see where the difference is. Everyone always thinks their house is the nicest on the block. Jpmorgan saying they intend to build a new 2. 5 million square foot headquarters at 270 park for 15,000 employees. I heard becky say theyll have jamie dimon on squawk box tomorrow, i believe. Perhaps theyll discuss that will take them a long time. Sounds like they have to move a lot of employees 270 park is already their headquarters theyre going to redo it and as a result of zoning changes, they can build a far larger building. Thats important for new york, keeping a key employer here. And no impact on their earnings they said over time. Even though theyll be spending a lot of money on the new Head Quarters its been a controversial story in new york city, the whole zoning it will bring more money, and midtown is changing so dramatically the towers around grand central, they want to build a lot higher now they will be able to theyre the first to take advantage of it. Walmart rebounding a touch. Advanced auto parts a leader on earnings dow is up almost 100 lets get to bob pisani. Good morning. Mixed open 32 advancing versus declining stocks moving towards the highs of the day. Two sectors stand out in the last cup touple days growth there in the Semiconductor Stocks and the bank stocks. Also the materials, energy have been laggards. Energy has been down 10 for the month. Oil has essentially collapsed. It moved down 10 as well. Mixed performance. Reits and utilities, all getting hit as well. We have earnings europe has had some good earnings this morning good heaearnings f glencore, good mining corporation. Deutsche borse was strong. The big european borse Lloyds Banking was good. And orange telekom is also strong in the u. S. , winding down Fourth Quarter 2017 earnings. About 85 have reported. 15 growth, but if you just include those 85 that have reported, not the other ones, t 15. 5 earnings growth. The best in six years. Revenues holding up around 88 numbers we have not seen in a long time. Whats important is 012018 thats where everybody is trying to find out where the numbers are looking. Look at this double digit growth for the first, second, third, Fourth Quarter. Normally you see numbers come down in the middle of the First Quarter that hasnt been happening. Thats one of the reasons the market has been so high. A lot of debate about rate hikes. Should we have three or four some people are moving over to the four camp. Raising projections for rate increases in the last week or so most people are in the mial of the camp that it will not destroy the stock market jpmorgan out with a note, i think theyre the consensus opinion out there that even though we have a rise in rates, the impact will be gradual on the stock market they noted that the recent rise has been tied to Stronger Economic growth, positive earnings revision, tax reform, and higher Government Spending all of that, when you get that in this kind of environment you can have modestly rising rates and it will not derail the stock market jpmorgan is typical of their comments out to their clients, while rising longterm rates will ultimately become a negative for profits and multiples, we do not see current levels as a reason to derisk and sell equities. Thats the key thing where were at now just off the highs of the day. Dow is up. Earlier we were talking about art cashin and the antitrust the big thing is at t, time warner versus the department of justice, less than a month away that trial will begin. Scheduled for march 19th a lot of focus on it given it is a vertical deal, and, in fact, if the government does prevail it will set sort of new bars in terms of vertical mergers, and what is or what theyre willing to deal with megan dell rahim has made it clear he does not believe behavioral remedies are enough for these deals. A lot of focus on it yesterday the government got a win because jeff sessions, they wanted him to come testify about whether there was contact between his office and the president about this potential deal and delrahim is in europe addressing the eu antitrust people he said in the u. S. We have thousands of vertical merger experts who think we have not enforced anything in 50 years. Thats pretty strong. Then he said this were 30 lawyers against 700, but as my rabbi used to say, david beat goliath for a reason, because he was right wow yeah. Okay. Makan feeling it. People focusing on statements like that because they think is there a possibility for a settlement could that happen . When you hear trash talking like that, you think maybe not. Well see. Certainly worthy of peoples focus. As it comes closer, it will be a key trial for the merger and acquisition industry overall and for antitrust. The way the stocks are trading. What does it tell us about the way the market thinks of the likelihood i have not actually looked at the spread itself. Theres still a belief and a likelihood has the doj will lose that said, i think many are also saying, listen, you never know for any number of reasons, including statements like that from delrahim, that david won for a reason yesterday this news broke during power lunch. Time warner shares fell, which i would expect so did at t shares in the past you may have seen, oh, its less likely at t will get this you have seen those shares actually climb but they didnt. Im curious as to whether the market has gotten more comfortable with this idea that content could be good for at t or it was controversial at first. Somewhat. But no one or few people thought it would be opposed by the department of justice. Agreed. Tlafrnlgts was not the that was not there behavioral remedy yes. Blocking, no what do what does it take now to be singled out by the president , and his ability to criticize parties of all kinds the cnn criticism which will come back is one that many people have been focused on in part because they have wondered what is the justification mr. D eshg l elrahim are are taking and is it because they own cnn. Lets get to ber stha coombsa the Nasdaq Market site the nasdaq 3 from its all time high earlier this year. It was the last domino to fall during that downturn over the last couple of weeks its recovered fairly quickly. The big large cap names have all bounced back as well about 1 in 5 of the nasdaq 100 large cap names are positive for the month and the year, including apple which has a huge weight there you have amazon and netflix both about 1 below the alltime highs. You have to wonder over the last couple of weeks, as these stocks had fallen into correction whether a lot of these companies were not in there buying back their own stock, getting more bang for their buyback buck during the time. Chips have certainly been one of the big areas of recovery. Some of the biggest gainers so far month to date coming background trip include some of those chip names that are afteral suppliers, like skyworks up 9 for the month. Micron up 2. 5 for the month nvidia back to hitting alltime highs. This morning its slightly lower. And really sad sort of story for me priceline changing its name to booking. Even changing its ticker i dont know, it was one of those names that always kind of represented the nasdaq to me its kind of sad to see it go. I dont get that. Michelle is upset about it. I think its terrible the new name, booking holdings so generic who thought that was a good idea bring back william shatner. Yeah. Exactly. Exactly. I dont get it. It was a great brand. Great brand. Thank you lets get to the bond pits Rick Santelli at cme good morning good morning if you look up at the board, 2. 26, we continue to march higher in all rates. The short maturities are mostly in line with the fed, theyre marching, so we count back to the fall of 2008 we will for a while considering that year we traded over 3 . It is up four base points f, th poye 30year unchanged. Lets look at some year to date charts twoyear, up 38 basis points european twoyear, up 12 basis points on the year our tenyear note yield, toying with a half percent. 50 basis points. Right now off those 2. 90 yields we traded at yesterday up 47. Bund yields up 28, hovering at 71 the reason i bring this up, weve seen some differences, expansions in the differences between u. S. Rates and european rates. Every time it expand it puts pressure on mario draghi and the ecb. Thats avoiding the whole notion that the bank of japan, you heard art earlier say theres no Real Communications about them easing back any amount on the stimulus finally lets look at whats going on in Foreign Exchange dollar index putting together a rally over a few days. See the oneweek chart, but also be cognizant of the fact we settled at 212 at end of last year down 2. 25 since. You want to Pay Attention to 90. 60, mid point on the closing basis between the high and the low of the year. Big fiveyear note auction at 1 00 eastern yes, well see you after lunch. Coming up, big tech and antitrust. A Pulitzer Prize winner joins us to talk about his piece on the case againstPulitzer Prize winner talking about it, coming back in a moment. It starts a chain reaction. Thats heard throughout the connected business world. At t Network Security helps protect business, from the largest Financial Markets to the smallest transactions, by sensing cyberattacks in near real time and automatically deploying countermeasures. Keeping the world of business connected and protected. Thats the power of and. You or joints. Something for your heart. But do you take something for your brain. With an ingredient originally found in jellyfish, prevagen is the number one selling brainhealth supplement in drug stores nationwide. Prevagen. The name to remember. At holiday inn express, we cant guarantee that youll be able to contain yourself at our breakfast bar. Morning, egg white omelet. Sup lady bacon fruit, there it is but we can guarantee that youll get the best price when you book with us. Holiday inn express. Be the readiest. 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 new developments, well turn to kayl arka tausche. The existing it allowing regulators to ease and wind down a failing bank they say that government backstop should be a last resort instead suggesting changes to the Bankruptcy Code that would make dissolving a bank less risky. It shifts it away from the federal government and on to the credit holders they have sought for years to start that Authority Treasury is not recommending that, but report is the result of an april executive order at the white house to evaluate this issue. The proposals are not final, they will require implementation from congress. It is putting treasury stamp on exactly where the Administration Stands on this very controversial issue. Thank you, kayla for that update the do yw is up 83, being adle mcdonald going back to the red, in a minute we took legendary, and made it liberating. We took safe, and made it daring. We took intelligent, and made it utterly irresistible. We took the most advanced eclass ever, and made the most exciting eclass ever. The 2018 eclass coupe and sedan. Lease the e300 sedan for 569 a month at your local mercedesbenz dealer. Mercedesbenz. The best or nothing. You know whats not awesome . Gigspeed internet. When only certain people can get it. Lets fix that. Lets give this guy gig really . And these kids, and these guys, him, ah. Oh hello. That lady, these houses yes, yes and yes. And dont forget about them. Uh huh, sure. Still yes xfinity delivers gig speed to more homes than anyone. Now you can get it, too. Welcome to the party. When we come back, more on e lmt. Thdow is up 81 points, were back in a moment where can investors seek predictable income in an uncertain world . Pgim sees alpha in real assets. Like agriculture to feed the world. And energy to fuel its growth. Real estate such as ecommerce warehouses. And private debt to finance transportation and infrastructure. Building blocks of strategies to pursue consistent returns over time from over one hundred fifty billion dollars in real assets. Partner with pgim. The Global Investment management businesses of prudential. Welcome back to squawk on the street. Im back with the news on the association of realtors down they are down to 5. 38 million units. That is a big miss the street was looking for 5. 61 million units. Sales now down 4. 8 and that is the largest annual decline in three years since august of 2015 real t realtors saying it is a weak start to 2018. They also say this represents closings so the rising Mortgage Rates would not have signed in december nothing for sale, 1. 52 million homes for sale at the end of january, that is down 9. 5 year over year to 3. 4 month supply. That is the lowest since 1999 when the realtors started tracking this number so the lowest ever for them. Median home price going up that is up 5. 8 year over year affordability is holding back potential home buyers according to realtors especially on the low end. Sales down, of course on the higher end, sales are moving higher, First Time Buyers at 2 d in the mark. So First Time Buyers getting hit hard and now looking at higher Mortgage Rates thank you for that diane that welcome back to all of you were here at the new york session to the do you is w is up 29 points. Our roadmap begins with the amazon betting big on over the counter Health Products. And apples battery push details on that. Bit coin making a come back, eyes 12,000, up 12 in the last week, well break down why it is on the move. Lets talk stocks because they are higher this morning. The dow and the s p are up as markets away fed minutes later today. Lets bring in david lebowitz. Even as we see stocks recovery, were asking a real score question here. This big selloff that we saw, what was that . Was it technically driven or was there a fundamental change in the macro fundamentals there was a catalyst, and the catalyst was rate. Theyre not at a level where they should compete with stocks, but they are at a level where volatility will start to pick up as they get close to three, that is a real paradigm shift what do you tell people in the wake of a paradigm shift about what they should be doing with stocks . We tell people if you have the longer term time horizon, 12 or 24 months out, we think stocks will be higher. For our clients, were not worry about if there is or isnt a retest can we get enough money put to work during the short pull backs. David, what do you think, he thinks it can off set the Interest Rates i agree i think were good until were around 3. 5 on the tenure that seems to be the point at which the correlation between equities and rates goes from positive to negative you should see them have less of a sensitivity but anything above 3. 5 will put downward pressure but with equities at 15 to 20 growth this year, you need to go back to fundamentals it feels like the cash flows will be present. What do you make of the argument that it has gotten worse . The margin issue to me is a later 2018 issue rates are only beginning to move higher wages we saw one at 3 we prefer to look at production and nonsupervisory it should push the Unemployment Rate to the lowest level to me thats when wages and rates will rise and have that negative impact on margins whats magic about 3. 5 we have looked at it from two angles the other is more quantitative it is a real return of 1. 5 and youll probably have a real earnings yield on stocks, but a volatility of 15 plus. So i think they will chance. Not to get too deep into your data set, was it when you say about the correlation and it starts to split off, that would be in a period where rates are starting to rise, i guess. You have to go back a long time to find hitting that exactly and when you go back. Looking at the limited data that we have, were in unchartered territory here and obviously we have never been in a period of rising rates with Financial Markets as developed as they are today. I chuckle when he talks about not getting paid to be in fixed income and the bond markets rally to where they are because people are fwogobbling them up what is the paint point for the tenure and the off set against stocks i would say again, 3 is probably the line where volatility will pick up because you do see people saying okay, it is compelling but it is a head wind for stocks that will lead to greater volatility when they start to really compete with stocks, some people have a hurdle rate in that 4 to 5 rate of return. A long ways away from there from an interest point. Unless youre mandated to buy fixed income, stocks still beat bonds. Corrections like the one we just had dont always, in fact most of the time, dont result in recession or a bear market. In that case they recover in 12 weeks, 16 weeks, Something Like that, right . Yes, were talking about a big 10 pull back in the last 38 years. The average entry has been close to 4 . This is a testament to coming out of the low volatility environment and how that may have misaligned some Investor Expectations in terms of volatility Going Forward were late cycle, inflation is going up, rates will rise. What was going on last year, not what is so different about this year because this year looks pretty normal relative to what we have seen historically. I think we will grind higher over the rest of the year and volatility will be remaining do you a target yeah, 2800 to 2900, so upside here good to have you on when we come back, apples next big purchase says the tech giant is looking to buy cobalt from minors. Well look at that competitive landscape, and walmart shares changing see thats funny, i thought you traded options. Im not really a wall street guy. Whats the hesitation . Eh, it just feels too complicated, you know . Well sure, at first, but jj can help you with that. Jj, will you break it down for this gentleman . Hey, ian. You know, at Td Ameritrade, we can walk you through your options trades step by step until youre comfortable. I could be up for that. Thats taking options trading from wall st. To main st. Hey guys, wanna play some pool . Eh, im not really a pool guy. Whats the hesitation . Its just complicated. Stepbystep options trading support from Td Ameritrade continues volatility over the short run, use it as a buying opportunity. We have not been able to say this in decades, the market and the economy are both ripping ahead. They need to get into the market i think the market has not had to handl apple is reportedly considering buying cobalt directly from minors we have more details on what this means exactly tim cook know thats a key battery ingredient he needs is in hot demand. So he could be taking steps to make sure he has enough supply of it. They say apple is in talks to buy longterm supplies of cobalt director from miners cobalt is a hard, shiny grayish medal with a variety of industrial uses. Half of the worlds supply is used in rehargeble batteries ie phones and ie pa pads, it ise biggest use in the years ahead electric cars use it in their batteries. It is rockets higher in the past 18 months. A Trading Company based in the u. K. That specializes in cobalt says it makes sense to him that apple is trying to lock it down directly from minners themselve. It would be a key battery ingredient, and the access to the volumes of the metal that he needs and he will also know where it is coming from. Last year apple suspended buying cobalt from a supplier in the congo because of reports of child labor and dangerous work conditions there sourcing the metal directly removes uncertainty about where it is coming from. China and canada are also major sources of the metal all right, josh, thank you for that we will continue to watch the apple story. Walmart coming off of the worst day for the stock. Is this the Amazon Effect once again hitting the Worlds Largest retailer and lets bring in our analysts who upped his price target on the stock to 91 because of tax reform what led you there . We basically, walmart in the last couple years, they reformed their business quite a bit, and the categories down here, and the talk of of how well it is doing and how much share theyre taking what happened was a phenomenon where they bid up the stock so much on the thought that it was a cheap way to buy amazon, and i think that trade got in front of itself if you look at core walmart here in the u. S. , it is doing remarkably well. They have done a remarkable job improving that chain i think there is like two things going on here. One is a very strong u. S. Stores business and the trouble in e commerce to what degree does it deserve to trade it did begin to trade on the hopes of being an amazon 2. 0 or the next best thing. Thanks for having me. I dont think the reaction was due to the e commerce news the margins were down 60 points, and then you had management and that fiscal year guidance assuming more up in margin pressure we think that is a testament to the competitive environment, and it was probably more due to smart money realizing that a business has their cash flows overtime, and thats what we look at and we think they can come under pressure, or not be as rosy as the mark was assuming a couple weeks ago you would not even get in here after this big sell off 91 assumes a robust growth for a high dollar retailer, but as you look at what happened in the last five years, you have seen margins and Top Line Sales go up. They have their operating margins drop from 5. 6 to 4. 4 . And amazon that can reinvest all of their proceeds how can walmart stop spending. Theyll have to continue to reinvest, and i dont think that they appreciate the lower permanent profitability that walmart has Going Forward. A. Amazon is playing by different rules. They are blowing all of their profits back into the business it is amazing to see. We put out a big report on what we think they can do in the food and home area. It is basically money from the suppliers to be top of mind on that website so they make money in so many different ways and theyre an incredible competitor. Walmarts margins are under pressure they are gaining a lot of share. So to a degree it is actually working. But we put out a note called me, myself, and irene where walmart had to compete against the deep discounters and chase after amazon and the cost of doing so is so significant. Really what you were seeing as the stock went up last year was the idea of putting a revenue multiple on the e commerce and that is how it spinals up so much but we agree, the margin pressures on this company are not twoigoing away were deeply concerned that amazons moves with wholefoods, amazon now, amazon fresh, now consolidated under one Leadership Team that amazon, only 3 of the 1. 5 trillion Consumables Market is going to be much, much bigger and it will be a huge problem for anyone selling the every day items. I think the whole sector is vulnerable when investors look at those prices. The whole sector is incredibly vulnerable. I think amazon, people refer to them as the grim reaper and they are coming to the staples industry and coming in a big way, some people are being thrown a little bit right now because execution of whole foods has been off, amazon now has been off, but steve kessel is now running all three, fresh, now, and whole foods, and he is a core guy theyre likely to get it right and it is very scary walmart is the worst performing down component at the moment, at least well see how it all develops. Good discussion, thank you shares of qualcomm right now are down about 1. 6 . They have been seeking to buy that company for some time and it is lowered. Now broadcom will say that giving their decision to pay more for nxp, that deal negotiated yesterday, and moved up, give than is roughly a 4. 10 share charge, theyre increasing their offer because it went from 82 to 79 down three, but really they could have adjusted it down 4. 10 a share. None the less, shareholders will have an opportunity to decide on march 6th. There has been no new engagement between these two companies. That is where the board stands right now and broadcom as they indicated a couple weeks back with us did lower their price given what they say it is money being spent in a bad investment. Coming up, more ahead, do not go away. Your brain changes as you get older. But prevagen helps your brain with an ingredient originally discovered. In jellyfish. In clinical trials, prevagen has been shown to improve shortterm memory. Prevagen. The name to remember. With its hightech the cameras and radar, contemporary cockpit, 360 Degree Network of driverassist technologies, and sporty performance, whats most impressive about the glc . All depends on your point of view. Lease the glc300 for just 449 a month at your local mercedesbenz dealer. Mercedesbenz. The best or nothing. Welcome back, time now for our eft spotlight. Hey, bob good to see you as always been away for two or three trading days and what struck me was how much calmer it has been. A lot of panic, mania, pulling money out of big funds, putting money into certain funds look at the flows in the last few days not a lot of big, big inflows. Here are the funds that had the biggest inflows recently emerging markets, schwab international. I would say theyre about average. If you look at outflows, the same kind of thing this is the s p 500 funds. Thats a big, big fund that moves around a lot that is the Investment Grade Corporate Bond the biggest, but all of them have those outflows. I would say these are in the last three days, theyre modest. That is important because we have all of this craziness in the last few weeks where people are pulling it out of these funds and that is a good sign. As far as where we are in the last month, something stands out very briefly most internet type things, snap, twitter, and pandora have come back the s p is down about 3 for the bont something i find disconcerting is the cyclical sectors and the pry nor several weeks. They have all kind of under performed. And collapsest to collapsed to below 60. Coming back, amazon betting big on drugs well talk about that when we come back when squawk on the street continues. Students who survived the Florida School shooting are preparing to march at the state capital. Their vowing to make changes in the november election. Billie graham has died he transformed american religious life through preaching and activism. He died at his home in North Carolina at 99 years old one of netanyahus closest confidents has been a state witness and will incriminate him. He is under arrest for promoting regulation worth hundreds of millions of dollars to an is raily tell come company. Residents waking up to flooded roads and streets. Some drivers had to be rescued from their vehicles. Carl, back over to you thanks very much. Retail news that were following this morning, amazon launched a line of overthe counter Health Products we will turn to San Francisco this morning good morning, it is called basic care and it quietly launched back in august and it has 60 products from ibuprofen to nicotine gum. This time pharmacy retail janes. Look at rival label prices of ibuprofen. Amazon and walmart is 7 that is less than half of the price. Basic Care Products wont fluctua fluctuate, but they will have to get used to buying medicine on amazon sales of pharmacy products sold directly to amazon grew by 55 last year. This is certainly a number that is not lost on pharmacy retailers. The three largest chains, cvs, walgreens and rite aide are trying to protect themselves as you guys well know the Health Care Industry at large is watching amazons moves in the space very closely, not just pharmacies that is one to watch. Thank you for that lets bring in gene munster. In the case this week for walmart, how much of it do you attribute to a district Amazon Effect i would say it is 70 i just want to take one step back and look at the big picture here walmart is down because they grew ecommerce at 23 that maps the exact growth that amazon grew in the Fourth Quarter. They are eight times bigger than walmart so they should be growing stathder and i think that puts some context into the magnitude. I think it is largely driven by amazon i think what were talking about today will be another battlefield that they will have to face against amazon as well walmart and other chains as well who, gene, in your view has developed the best fix the lock for this key . When we think about the broaderbroa er ecommerce piece, they have 240 fulfillment centers. So just the stockout issue that walmart had in the december quarter, amazon is not going to have that quarter. As we move forward and think about what are the next big areas that amazon wants to capitalize on, talking about the impact of what is going on in pharma and health care this is particularly complex problem for amazon you cant solve that by just an online offering. People need some form of health care this is what cvs has done a great job of a bigger trend that you will see in the next several years where amazon will get more aggressive at brick and mortal, traditional areas that people can walk into for instant gratification purpose or for getting some quick Health Care Like a Minute Clinic type of a thing gene, aside the pharmaceutical issues as you highlight more difficult, but when it comes to consumer staples, we had two previous walmart analysts on, they said that amazon is the grim reaper for this Consumer Sector doesnt sound like you disagree. Target has done some really creative things, they have a pup offering now that uses a geo fence. You pick up items as you approach the store, it notifies someone in the store and they bring it out for you i think there are pockets of retailers that are getting aggressive in terms of creating new types of offerings that can be indefensible. If youre right about their am fwoigs havebition to have a offline performance, how do they solve that it is not, were still believers that it makes most sense for amazon to acquire target that would give them much, you know were talking about a couple thousand scores as opposed to whole foods th thissy is clever, but it doesnt scale. It is limited to the number of people that can be in there. If in the future, long term, offline is called 45 of what is bought, the amazon ghost stores just wont get it done provisioning real estate is a bigger problem i think this rate longer term is the right move for amazon. Now down it , has not been down since early november. Gene, good to talk to you again, see you soon lets get over to andrew who is at the winter Olympic Games in south korea after an eventble night eventful night she has become a senation but not for any medal winning performance. I am striving to achieve that level, and on the ski water ramps i do 720s, 520s, front flips and back flips, i have the skills to do it at the world cup level, i just have not been comfortable enough to land the tricks on snow an interesting answer for an athlete at the olympics. Some have suggested her participation at the games for hungary is a scam, i asked her about that i dont understand the word scam, i competed at all of the world cups in the past two years and did the World Championship and tried my best. I just didnt performance my best at the olympics and i look for opportunities that are interesting i just try to keep an open mind but the olympics have pretty much in my lifetime been a goal for everything else. She reached her goal of becomes an olympic athlete, well see what she tries next, but for now shes going back to her day job. She works at thumb tack in the bay area she tries for big things when she was 19 years old she ran for governor of california against arnold schwarzenegger. Before she did this sport, she tried the skelton and that didnt work out for her. Lets go to our other series, ask the athlete. What other sport would you like to try other than your own i always wanted to try bob sled curling i would love to try snowboarding i would like to try some skiing snowboard half pipe i know im way too big to be a short track speed skater, but it looks so much fun, it is fast and intense. Ski jump. I would be really scared, so maybe after im finished competing. So big question for you guys back in new york i will start with carl given that we know his real sport is ice skating. What would be your ideal sport, carl i mean i dont think it is any question, luge, dont you think . 80 miles per hour, 4 or 5 gs on the turns. Skelton is face forward do i dare Say Something really girly like figure skating. I can turn it around. If you werent doing what you were doing now, what would you be doing thats the kind of question we would be asking the olympian, right . A cia agent i would be in the cia, i would be a spy i would be good at that. Thats a good point she tried you did try. Chief internation nal correspondent . You went from being in the olympic to what you inspect life any winter olympic sport, and then here, yes thats it, im not doings existential tough. The downhill i would just go straight down like i did wlhen i learned how o ski. Cue the agony of defeat video right there. Thank you, well see glow a bit. The fed should gradually and patiently raise rates this year. Also says the corporate part of tax reform should lead to greater productivity were expecting the fed minutes out around 2 00 p. M. Eastern time mcdonalds leading the charge, walmart up 104, more squawk on the street in a minute. Weve been preparing for this day. Over the years, paul and i have met regularly with our ameriprise advisor. We plan for everything from retirement to college savings. Giving us the ability to add on for an important member of our family. Welcome home mom. With the right financial advisor, life can be brilliant. Two travel stocks going in very Different Directions for the beginning of the year. Well tell you if either are worth your money now more squawk on the street in a moment it can detect a threat using ai, and respond 60 times faster. It lets you know where your data lives, down to the very server. It keeps your insights from prying eyes, so theyre used by no one else but you. It is. The cloud. The ibm cloud. The cloud thats designed for your data. Ai ready. Secure to the core. The ibm cloud is the cloud for smarter business. Lets get to the cme group in chicago patrick, good to see you, rick im glad youre joining us Newberger Berman we have a lot of volatility of late you say it is a structural issue. I agree, explain why you think that we think the increase is structural as opposed to voluntary. We think it is directly related town flags and interest ra to Interest Rates. In terms of volatility we think the fed will get out of the way. Youre saying its like a pot of water on a stove. You say we turned up the flame and it is going to stay. That it will stay a little wild for awhile yes, and that is not necessarily good or bad for the prices, but youre getting to the construction crux. Everyone is thinking were going to see a negative feedback loop. It is very possible that could happen, but if we get a bigger growth spurt in the u. S. Economy and productivity, it more than makes up for that, would it not. Especially in high yield bonds, you have companies with Balance Sheets that are generating more revenues or cash flows, it will earn more than the more than the spread because defaults will be lower i glad you mentioned high yield. Anyone watching us right now thinking hey the Interest Rates are going up, bear market, im not trading any fixed income at all. The cautionary tone is pick a maturity, a length of time that this instrument takes to return, and you dont sell, you just take whatever Interest Rate you get. Exactly what were doing is adding to shorter duration paper that has spread like high yield bonds. So even if the two en if the five year or two year treasury moves up quite a bit, you still earn that excess spread. So you get to keep your 5 every year for five years and even if the price comes down, which means after you approach your security, youre getting 6. 5 , it doesnt matter. Its a credit issue at this point, is it not that is exactly what we want to focus on. So perhaps the corporation youre buying high yield paper from doesnt go bankruptcy yes, and were expecting it to be quite low. Michelle, back to you thank you, rick solving issues for people, thank you. Bit coin looking to test 12,000. Theyre up 85 from lows feen on february 6th were slightly lower today, but a dramatic come back hitting a threeweek high of 11760. Ari paul who runs the block Tower Capital says a negative Regulatory News in january has proven to be kpexaggerated as te have affirmed their support for cryptocurrencies separately, the ability to disrupt the payments world be incorporating the lightning network. It will also make bit coin faster this morning, they say new editions can enhance the role in payments and that industry incumbents should embrace block chain and cryptocurrencies and embrace collaboration. But it may take some time. The recent decline took over 50 days despite the volatility, Companies Continue to use initial coin operatings. Their target is 1 billion and a country did it yesterday with venezuela doing their own initial coin offering. Yes, and i think theyre up to 750 million so for distressed nations they may work theyre looking for alternative ways to get money flowing and this may be a good option. Yep, sure, they can use every dime they could get. Seema, thanks. Send it to jon fortt, see whats coming up on squawk alley. The case against Google Charles duhig from New York Times will join us coming up. Is the monolithic view of emerging markets obsolete . At pgim, we see alpa in the trends, driving specific sectors of out performance. Where a rising middle class powers a booming auto industry. A leap into the digital era draws youthful populations to mobile banking and ecommerce. Trade and travel surge between emerging markets. Everyday our 1,100 investment professionals around the world search out opportunities for alpha. Partner with pgim, the Global Investment management businesses of prudential. Welcome back to squawk on the street. Advance auto parts, best performing stock on heels of an earnings report. Also gap stars, ralph lauren among tech leaders, target this sector is neck in neck with technology as the best performing sector of 2018 year to date. Certainly ones to watch. Home builders is a big part of that also. Keep an eye on all of the Retail Business back to you. Thanks very much. Heard a lot about Sexual Harassment since the me too movement gained steam. No business or industry is immune to it a survey of the Confidence Index gives an interesting look at the harassment problem faced in Small Business kate rogers joins us with more on that. Hi, kate hi. Cnn and survey monkey looked at harassment policies at Small Businesses, what we found is quite interesting. At all businesses polled, half have an official policy in place. But the smallest Business Owners that make up the majority of Small Businesses in the country or much less likely to have an official policy. Only 39 with 0 to 4 employees have a policy in place, compared to 85 with 50 or more workers and whats more, at the smallest businesses just over twothirds said the owner is often the one handling harassment claims and 3 said claims are actually handled by Human Resources professional as larger businesses, 15 of owners said claims are handled by the owner nearly twothirds said claims are sent to Human Resources. 11 of Small Businesses said they issued company Wide Communications to remind people of Sexual Harassment policies and reporting procedures 9 have reviewed policies regarding diversity and gender equality, hiring and promotion 5 say they fired or suspended employees over misconduct. Back to you. I have a question i assume most Small Businesses have fewer policies in general if you have four employees, whatever the boss wants, regardless of the underlying question or topic, right same when it comes to filing taxes, a lot of burden falls on the owner of the business to take care of that, they have fewer employees, less time to handle things. Professionals say no business or industry is immune from these issues having policy is important from day one. Even though you may set a cultural standard within the Small Business, anyone is susceptible to this type of behavior. Normally you dont if youre scaling, youre not hiring an hr manager yet you can do it yourself which is important thats true kate rogers, thanks for that. Dallas having a good da dw is having a good day walmart, if you noticed, and amazon 4 away from alltime high some of the names try to reclaim what they lost in february amazon is larger than microsoft now. Number three after alphabet and amazon. Walmart, yesterdays selloff, people went back, looked again, decided to sell more at this point. No recovery there. Netflix up. Market values is 123 plus billion dollars. Not far from disney. I mean, disney is 160, but at the rate it is advancing tweet about black panther. Never seen reaction from critics and society to a film out of disney. I havent seen it i saw it, it was good good as star wars depends strong endorsement there. Squawk alley starts in a moment its absolute confidence in 30,000 precision parts. Or it isnt. Its inspected by mercedesbenz factorytrained technicians. Or it isnt. Its backed by an unlimited mileage warranty, or it isnt. For those who never settle, its either mercedesbenz certified preowned, or it isnt. The mercedesbenz certified preowned sales event. Now through february 28th. Only at your authorized mercedesbenz dealer. Each day our planet awakens but with opportunity comes risk. And to manage this risk, the world turns to cme group. We help farmers lock in future prices, banks manage Interest Rate changes and airlines hedge fuel costs. All so they can manage their risks and move forward. Its simply a matter of following the signs. They all lead here. Cme group how the world advances. Good morning it is 8 00 a. M. At google headquarters, 11 00 a. M. On wall street squawk alley is