futures. the dow and s&p are indicated higher. nasdaq is lower by about 4.5%. >> alphabet. >> alphabet and google. ubs reporting a drop in fourth quarter net profit but results beating forecasts thanks to a better than expected showing in the equity business. the bank is pointing to improving investor confidence in the u.s. at the end of 2016. speaking to cnbc earlier today, ceo sergio ermotti says that could be a sign clients are ready to ged ot off the sidelin. >> we are realistic because we have data points pointing at clients and investors being more optimists and ready to be constructive about the situation. they are really looking for concrete actions by the new administration in the u.s. >> he said there could be mom t momentous changes for the financial sector if there is a hard brexit. today we get results from chevron, honeywell, american airlines, general dynamics and abbvie. and key economic data as well. a first read on fourth quarter gdp at read on fourth quarter gdp at 8:30, durable goods at that time, and 10:00, consumer sentiment. stocks to watch today. we mentioned alphabet, google. the parent of google missing analyst estimates, but revenue beat expectations, soaring 22% on strength in mobile search and video advertising. the stock is getting -- it's 2%, but such a high price, down $17. the journal in the -- what is this thing called? the journal points out -- remember, we always wanted revenue growth. revenue growth was three times as fast as profit growth. now that -- you know, now they don't like that. because if you're not going to make money on revenue growth -- >> you want it to be profitable. you don't want your margins to get squeezed. >> for years we've been wanting revenue growth, profit growth has been accomplished through all this. >> you want profitable revenue growth. >> maybe that's it. >> intel also in tech land beating on the top and bottom lines. results were helped by growth in its data center business and a more stable pc market. as you can see, that stock is up fractionally. microsoft reporting earnings that topped wall street consensus. the cloud computing business nearly doubling revenue for the quarter. the stock, we'll talk to an analyst about microsoft and how it compares to alphabet in the next hour. those two are resurging. microsoft vies for that -- we talked to anne windblat about who goes to a trillion first. the demise of microsoft is greatly exaggerated. we knew that as it was stuck for years and years at that level between 25 and 40, but churning out revenues. people -- things still run on windows somewhere. >> right here. >> now they run on the cloud. >> but microsoft is in there. with the cloud. >> most companies can't change what they do. this is what is interesting about -- i think ibm has done it an microsoft has done it. you start off selling hamburgers, it's hard to change to sell health food. >> so you wait for the trends to come back to you? >> or go out of business. it looks like microsoft is able to change what it does in its character and culture and is making this migration to the cloud. >> microsoft still almost 100 billion a year in revenues. somehow -- 94 billion. >> yeah. >> somebody is buying something that says microsoft on it or windows. >> let's get a check on the global markets. we showed you the futures here are mixed. if you look at the early trading in europe, you will see a similar story. dax is down by a quarter percent. the cac is off by a half percent. the ftse up slightly, up by 0.2%. this as theresa may meets with donald trump here in the united states. look at what's been happening or what happened overnight in asia. japan was up by three quarter -- or a third of a percent. shanghai composite up about the same. hang seng was relatively flat. looking at oil prices, up by about 2% yesterday, you'll see they're giving back a bit. wti down by 43 cents to 53.35. the ten-year note yesterday hit a yield of 2.55%. that's the highest level in a month. prices are up with the yield down to 2.514. currency check, the dollar is down against the you're rov at 1.0683. up against the yen at 1.1805. british prime minister theresa may getting ready to visit the white house today. the treatment will be in stark contrast with what we've seen with mexico the last couple of days. michelle caruso-cabrera joins us now with more details. the world is a funny place. there was a threat, you go through with brexit, you go to the back of the queue, that was before they realized trump might get elected. instead of being back of the queue, you're at the front of the queue. i dented knon't know what you c believe. >> you just took a third of my hit, joe. the united kingdom is our seventh largest trading partner. we send them more stuff than they send us, which is different from what we see with most other big trading partners. here's what's on the agenda. we'll talk about the future of nato over at the white house today. fighting terrorism, and then also a direct trade agreement. president obama goes to the united kingdom ahead of the brexit vote and says if you leave the european union you'll end up at the back of the queue. the new president feels different about that. he wants the united kingdom to be at the front of the queue. we expect a joint news conference at about 1:00 this afternoon. we'll hear both from those heads of state, the first joint heads of state news conference from president trump. that's looking forward. last night the foreign minister of mexico and the commerce secretary of mexico held a news conference at the embassy after their two days of meetings over at the white house. 7 1/2 hours on wednesday. an hour and a half yesterday. this was at times somber, defiant, sad at moments. they described sitting in the white house, planning the protocol for president enrique pena nieto's trip next week, when trump's tweet came out saying if mexico is not going to pay for the wall, maybe we shouldn't have them at all. they immediately stopped the meeting. they were surprised, aghast. a lot of questions, particularly about sean spicer, the white house press secretary saying yesterday that perhaps one way to pay for the wall was a 20% tax on mexican imports. the minister there says that would be bad economic policy. >> the tax of exports from mexico into the u.s., you will make -- you'll make things ranging from avocados to appliances to flat screen tvs, you'll make them more expensive. that will be paid by the american consumer. i'm not sure that's the objective that is pursued here. >> we have to put a big asterisk next to that sound bite. when you hear the whole news conference, they were skeptical about it because white house press secretary sean spicer, when you listen to the whole sound bite of how he was describing this import tax, he wasn't talking about a tariff, a punitive import tariff, when you hear the whole description, he was clearly talking about the border adjustment tax provision that is in paul ryan's house gop corporate tax reform, which is very different and both of these gentlemen, who are both trained economists, clearly understood the difference and articulated that at this meeting last night. that they thought this was a discussion about a border adjustment tax rather than an import tariff. they didn't seem as concerned about that. they're much more concerned about the dignity of what they say the -- the suffering and the dignity of the mexican people as a result of the discussion about paying for the wall. >> they may be talking about the border at adjustment tax, but the retd rihetoric gets to the place, talking about using it punitively. >> when you listen to sean spicer he cloaked it in a protectionist term and lingo. when you listen to the details, it's the border adjustment tax provision within the gop plan which is far less protectionist than what it sounds like on its face. it is a cash flow tax as the commerce secretary discussed last night. yeah. all of it is used to raise the tension between the two. you're right about that. >> so many -- i wish we had a lot of time, michelle. so many things swirling around in my head. initially -- i could easily drink molson if i had to. you know what i mean? i drink corona now. sometimes. but if that was 20% higher, that's -- that's -- >> when is the last time you looked at a price tag before you drank? >> that's true, too. i think the united states has a lot of leverage here. >> it does. >> then i go to the journal. the journal's take is we have a green horn in the white house now. he's treating countries like they're a corporation. do we want mexico to go back to the way it was. the journal things they will be pushed into the arms of single party rule and it will turn into venezuela. that's a stretch, too, isn't it? >> so there's a guy that -- in shorthand everybody refers to him as amlo, manuel lope lopez ovrador who has tried to run for president many times. he was the mayor of mexico city. he's a hard-core leftist and a populist. what's happening now, people in mexico tell me, is serving him very, very well in terms of his standing. so the risk is -- presidents in mexico only seventy-orve one te years. so next could we see somebody who hates the united states become the president of mexico? >> i don't know. they have to get their own act together. you look at some of the numbers, i've been reading these articles that try to make the opposite point that we are not getting taken advantage of. but everything i see, my god. there was a surplus with mexico until 1995. now it's a $60 billion deficit. canada, huge trading partner. the deficit is $9 billion with canada as far as jobs. u.s. companies in mexico employ 1.3 million mexicans. mexican companies in the united states employ 70,000 americans. it's so lopsided. you see where the feelings come from. you see why it resonated in the election. you really do. this is notwithstanding just, you know, all the problems we have with illegal immigration. just in terms of the trade. i don't know. they're poking the bear. i'm not sure the bear will back down that easily this time. >> oh, i don't think so at all. i think that this is -- you talked about how the criticism or maybe it's just the analysis that president trump is treating countries like he's in negotiation with companies. >> yeah. >> get ready. that's the way it will be. even if we do a deal with the uk, i'm sure it's going to be something that's pretty tough. because that's the way he is. >> michelle, yesterday i -- i'm watching power lunch. i see the top of the show. tyler looking great. everybody gets intro'd. they come to you and you go right to bill richardson. you remember his first comment to you? i was gone. i didn't see whether you pushed back on that. did you push back? did you see him coming and go, god, do i have to do this? did you push back on that? >> i think the first thing he said was that we're at a real low in relations with mexico. i think that's pretty accurate. >> no, he said -- when you let a reality star tweet and that becomes our foreign policy, we're going in the dumper, just total partisan -- he didn't want to talk. >> it was partisan. >> he just wanted to trash. more of the same. >> it was so last administration, yes, absolutely. i can't -- >> all right. >> you, joe, have a stamina that impresses me every day. you go to battle every day. >> you don't? >> some days i can't do it. >> i wondered about that. i said at least we have michelle here. >> yeah. >> but i didn't stay -- unfortunately i didn't stay -- i don't have a neilsen box. >> can i ask michelle, you mentioned the president of mexico is one term, six years. can anyone run again? we have vicente fox on later. he has been outspoken about this. >> it's a complicated question. yeah, anyone can run. there's been one guy who has wanted to run as an independent, but he had been prohibited by law, filed a lawsuit. i don't remember how that worked out. what normally happened in the past was -- they call it the current president points to who the next president should be, because one party led the country for so long. that's changed a little bit. so, the answer is i don't really know strictly the answer to your question, but this guy amlo is certainly a potential candidate to run for president. >> anyone who wonders why you were our international correspondent, we need you on retainer when we talk about -- >> not to mention videgar is back. >> he was the finance minister, now foreign minister. >> left, resigned -- >> pushed out. >> after trump was there last time around. now he's back. >> we'll check in later. the dow pushing to another record high. the s&p 500 set a new intraday high above 2300 yesterday but failed to hold on to gains. joining us now to talk more about the markets is simien hym eshe and, chris, how much of this is something that worries investors? >> i think we will push through and there's a bump in the near-term, but what president trump is allowing a empowering management teams to say no to shareholders looking for a quick short-term gain. >> empowering or leaving cheese people shaking in their boots? >> we're not talking about significant numbers. because in the past they were moving companies overseas because share holders were looking for quick short-term gains. now -- now you'll have a potentially better tax environment, deregulation. so costs that you were incorporating to move before are being removed. again, he's allowing the management teams to go up against and say to shareholders it's not just a one-way street. >> to be able to compete on a level playing field. >> correct. that's good for american workers. i'm all for it. you agree with that? >> i think this could be a catalyst for continued outperformance of small and mid cap stocks that can take advantage of the fiscal stimulus, lower taxes and regulation, but maybe less hair on them with respect to the international trade aspects and some headline risks. >> so they're already competing here in the united states. >> they're a bit more domestically focused. so they can take advantage of the expansionary stuff but have less down side from the potential trade wars and other international issues. >> we talk about these big, round numbers, 2300 yesterday for the s&p. does that matter to you. in. >> it's getting a little overextended. it's hard to find companies that we wanted to be invested in those that are working, you stay in them. let them ride for now. we've been concerned. we traded sideways through december and january. earnings season is kicking off better. guidance, i don't think, will be exaggerated to the upside. why should you this early in the season when you don't have clarity on the political front. and the timing of those policies. those are headwinds, strong dollar. but that seems to be stabilizing. generally, you know, we're positive on the economy and what we're seeing going out 18 months. >> pro shares focuses on etfs, investors trending towards etfs. do you expect that trend to continue? is there something you think could shake people? >> i think that trend clearly will continue. i think one of the real sweet spots are what we call rules-based strategies that have elements of active management but at lower costs and much lower transparency. >> what does that mean? >> strategies that look to screen for, say, stocks that continually grow their dividends. rules that screen the market to look for some opportunities to outperform indices, but have much more of a predictable screen and a predictable way to look for outperformance at a lower cost and transparency. >> thanks for coming in. >> thank you. coming up, microsoft beat wall street expectations in nearly every metric of that quarterly report. we'll take a closer look at the results including a big jump in the cloud revenue. that is next. mobility is very important to me. that's why i use e*trade mobile. it's on all my mobile devices, so it suits my mobile lifestyle. and it keeps my investments fully mobile... even when i'm on the move. sign up at etrade.com and get up to six hundred dollars. welcome back. microsoft earnings beat expectations on the top and bottom lines thanks to the cloud service azur. joining us with more on microsoft and the importance of the cloud business, the senior research analyst at griffin securities. so i was reading in the notes that they bring a lot of stuff over to the cloud but they lose the other thing they do, the license. how do they balance it out? ultimately it appears positive for the net earnings. >> there is positive growth. net earnings beat despite some drags. the phone business, which they probably should have never bought in the first place, that was far more of a decline. notwithstanding that, the most important business doing with software, cloud services, exceeded expectations. and even the older business, the one you refer to being in decline previously -- >> the one everyone knows. you buy microsoft software, buy the office thing, put it on your computer -- >> that outperformed. the windows oem business tied to the market outperformed. the traditional server software business, the predecessor to cloud, that beat our numbers. and the cloud numbers nearly doubled. >> i like to put this tech stuff in things that people can understand. the thing that everybody is doing now, this makes me sound like a lud head i'm sure, you don't have the software in your hard drive on your desk top. it's over there on these microsoft server farms, that's the way companies are running their businesses more and more. they don't have local software, it's all on the cloud. >> correct. >> it was originally going to be just for keeping your files there. then they put the software over. and more and more companies are doing that. was there an acceleration in the last quarter of this? >> if you are referring to the cloud services revenue, it didn't more than double, it nearly doubled. it was not as fast in the most recent quarter, but the trend remains this is the future and it's the present. >> and you're dealing with bigger numbers. >> this touches upon the point i made last time i was on, why is microsoft doing well? it's not just storage. it's the fundamental applications that you can do as a business, as a consume their are delivered and paid for in a new way. >> back in the '80s or so, ibm benefited because a purchasing manager could never be accused of making a mistake by going with ibm. they're the best. is microsoft benefitting from that same thing? if i'm figuring out where to use the cloud, microsoft has a leading reputation in the industry. >> i wouldn't quite use that same analogy, but it's very clear they have built a very defensive, strong, competitive position. the profitability is improving. they hit our margin expectations, which is a critical metric for investors. maybe it will get to that point. >> we're trying to figure out here confidence numbers for ceos are up, confidence numbers for consumers are up. trying to figure out does that translate into real economic growth. do you think any of the recent quarter is a post-election confidence showing up in the numbers where people are saying, you know what, it's time to good out and buy system of this stuff and do these things. >> two things are going on, i think. there's partly that, but also a fundamental trend that with have been in place any way which is how companies make decisions on how to invest. we published a report showing how microsoft is focusing on their internal investments, where they are meaning to inter what they would have done any way. >> can you tell us your price target? started at 30, there's been a double. there's more upside. the last official price target is 72. >> so quite a bit of upside from the 65 here. >> correct. >> thanks for joining us. >> thank you. >> you go to a5 in the journal, steve. >> today? >> good to a5, read about monterey, mexico, and what's happening -- >> how disappointed they are? >> no, how well they've done. >> yeah. >> thousands and thousands of workers and families. then read about what's happened in georgia, north carolina, south carolina, indiana and read -- just think about, you know, you say goods are cheaper, blah, blash blah, blah, blah, but check ou -- are moving to cities every year. at pgim we help investors see the implications of long term megatrends like the prime time of urban expansion, pinpointing opportunities to capture alpha in real estate, infrastructure and emerging markets. partner with pgim the global investment management businesses of prudential. to err is human. to anticipate..... ...is lexus. the lexus rx with advanced safety standard. when whirlpool builds an appliance, they put everything they know into it. but once it's sold, there usually isn't a way to keep improving that product. today, whirlpool can analyze iot sensor data from connected appliances on the ibm cloud. so they can continuously learn how customers are using their products. and how the machines respond. harnessing data to make great products better - that's what the ibm cloud is built for. welcome back. you're watching "squawk box" live from the nasdaq market site in times square. ♪ >> good morning. welcome back to "squawk box" here on cnbc. let's look at the u.s. equity futures. after a mixed day yesterday for the markets, you'll see a similar story this morning. dow futures are indicated higher. up 25 points. the dow is on track to have the best week in the last seven weeks. s&p 500 futures up by 1.5. the nasdaq futures slightly lower, down by 2.5 points. some stocks to watch, paypal's revenues jumping 17% thanks to a rise in online holiday shopping. the company is offering a cautious outlook. starbucks shares under some pressure after the company posted a smaller than expected rise in quarterly sales. star babucks blamed congestion stores prompting some people to leave before ordering anything. starbucks is now trimming its full-year revenue forecast. incoming ceo kevin johnson on the call last night. >> now when customers walk into the store, you know, we have alleviated the congestion at the point of sale line, now we have congestion at the hand-off line. they might look at the number of customers around the handoff lane, the number of beverages there, that might create the signal to them that they will wait to do their transaction. we can't specifically quantify the number. we do think that was the most significant contributing factor to our 3% comp. >> they love us too much. look at juniper network shares getting slammed after the company forecast lower than expected current quarter results. that stock is off by 8% this morning. >> you believe this? they put that in the prompter for me. >> go ahead. >> i'm not saying it. the president today -- it says all eyes. >> one of joe's many pet peeves. >> going forward, pet peeves, exact opposite. i know -- >> it's a brand-new record. all-time record high. so -- all eyes. >> what about time will tell? >> at the end of the day -- >> i just got -- i'm reeling because i got kicked in the stomach. micrke connors died. remember manix? he had a cool car and everything. we have to find that theme songful he had a great theme song on that show. he was 91. god bless him, but, look, they have a picture of matlock -- no, dick van dyke, who was mary tyler moore's husband. >> we were watching mary tyler moore reruns last night. it holds up. >> you're a doppelganger. >> i think that's the first insult you said to me on television. i looked like ed asner. >> that's not an insult. >> take the tie off -- >> look, they took it out. president trump rounding out a busy first week in office. our next guest said investors should also keep -- all right. -- if all eyes are on trump, we will need one eye on s.e.c. leadership. we'll need somebody with three eyes. let's bring in mark grant, chief strategist from hilltop securities. mark, we had a conversation earlier. i've gone 180 degrees. fair is foul, foul is fair. reading about monterey, mexico. i'm furious at these companies that have moved down there to get an extra 50 basis points because of labor costs, and areas here -- no flies on me. it's been happening for 20 years and i'm just noticing. >> that's true. >> i know. it's not just me. the globalism -- we missed this, the pendulum swings from stretched on that side, has come back and almost sounds reasonable at times some of these things, don't they. >> you and i have been on cnbc "squawk box" together for 20 years, yes, i've seen you do this for that long. i'll answer your question. let me say this first. becky, welcome back, congratulations. >> thank you, mark. great to see you. >> so the answer is my last commentary out of the box was incorporation of the united states of america. it doesn't matter if you like donald trump or you don't like donald trump, it makes no difference. the guy will run this country as a business. i happen to be optimistic about it. i think it's a great thing. we're getting rid of the elitest, career politicians, career bureaucrats, career lawyers, career lobbyers, we will run this like a business. the most important thing in my mind, joe, to understand these markets and make money in equities and debt is to understand that america will get run like a business. here's -- i think we can make a distinction here. a business would outsource jobs to where labor was cheaper. that's a business looking out for itself. if you think of the whole country as a business you realize that's just one part. that's one company out of the s&p 500 moves, and you're thinking of yourself. if you run the country like a business, maybe you keep jobs here. that's the difference, i think. >> 100% donald trump wants to keep jobs in the united states. i go back to a quote i saw recently from the famous humorous will rogers, talking about he wanted henry ford to run the united states in 1923. he said we need a businessman, because the united states is the biggest business in the world. i think here we are in 2017, that's what we're getting. >> let me push back then. how do you -- when do you cross the line from the government running the country like a business and statism, and the government sticking its nose in all these free markets saying this is what we want. not what would do based on your own free market tendencies. that sounds like central planning, which is what we don't want either. >> i agree with that. i don't see it that way. i think your comment earlier was accurate. running america as a business means taking care of the people in america. when donald trump says america first, that's what he meant. i'm pursuing a strategy with five of six very major money managers in the country, we're looking at the companies, corporations that pay the highest taxes, because they'll get cut significantly, earnings will rise, pe multiples will drop. we're looking at companies that pay the least amount of taxes, because there's going to be more taxes in my opinion added on to those people. i think it's the government operating to prop up america and keep america first. and make sure that america prospers. i'm delighted with that. >> i just feel like there's a lot of irony involved here. i was talking to earlier. what i used to hear from steve was that the -- you know, a strong middle class that has money to spend is the answer. whether that -- the way i think steve wanted to do it was with higher minimum wages, all these things that were an athema to the right, now i'm saying we need to keep jobs here. we need a strong middle class. so now i'm steve. now steve is me saying you can't -- >> you can't tell whens what to d companies what to do. >> you can't tell companies what to do. now i'm liesman. it's a bizarre world. >> you're becoming george. >> do you see how that's happening? >> good morning, mark. >> now the democrats, you know, we spent $800 billion on filling a couple potholes, now if we spend 15 billion on a wall, the world will end. are you kidding? 15 billion? the world has turned upside down, mark. >> i don't think the world has become upside down unless you back liesman an liesman becomes you. >> that would be matter antimatterment. >> that's why becky is in between us now. >> andrew couldn't even come in today after yesterday. he's locked in his room. >> for several decades, it was the express intent and foreign policy of the united states to create a prosperous and stable mexico. by doing what we're doing now. i understand joe -- joe, welcome over here to the devastated factories we were talking about. welcome to the world of empathy and all that great stuff. when we talk america first, what means america first? you are a man of the world. you travel all over the place, you spend a ridiculous amount of time on your boat going places. >> it's not like leo's boat. >> he has a nice boat. >> not like larry ellison's boat. >> steve, you have a boat, too. >> i have a 23-foot center console, which is all about fishing. >> i was talking about your kayak. >> do we risk not putting america's agenda first if we destabilize and ultimately reduce mexican economic growth here. >> let me answer that question. the answer in my opinion is no, we don't have a responsibility for mexican growth. we have a responsible for american growth. under the old political system, not just obama, but going back decades, we handed out money to people. we handed out money to people that didn't want to work. we had a lot of ridiculous policies in this country. in my opinion. >> i want to respond -- >> just one second. >> please don't. >> i think what will happen now is we'll give tax credits to employers, we'll give tax credits to the middle class. we'll encourage people to go back to work. the biggest strengthening that we can do for the middle class of the united states is to put people back to work and let them have jobs and have money. >> music plays. it used to be we were so big and so rich we said, you know what? let's help the rest of the world it will come back to us when they start buying from us. and you know, you can go far that way if you're not look out for number one. >> there's the joe we know and love. >> yes! yes! not me number one, the u.s. number one. mark. we need you every day. we need you every day. >> it is great to see you. >> love to be with you all. >> when we come back, former mexican president vicente fox weighing in on the changing relationship with the united states under president trump. then the former u.s. ambassador to the united kingdom talks about the meeting between president trump and prime minister theresa may. and we have jason furman. 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(other languages spoken) look abbot, i got it. it's a miracle. ♪ we're drowning in information. where, in all of this, is the stuff that matters? the stakes are so high, your finances, your future. how do you solve this? you don't. you partner with a firm that advises governments and the fortune 500, and, can deliver insight person to person, on what matters to you. morgan stanley. . welcome back. it is time for the executive edge. transcanada has resubmitted its application to the u.s. state department for the approval of the keystone xl pipeline. the move comes a few days after president trump signed an executive order clearing the way for the completion of keystone and dakota access pipelines. the keystone line had been rejected by president obama in 2015 on environmental concerns. president trump going after defense contractors again. in an interview with fox news late last night, the president said the u.s. needs more submarines, but he wants to buy them at a lower cost. >> i'm cutting the prices of submarines. we're lacking submarines, we'll build new submarines, but the price is too high. i'm cutting the prices way down. >> we're watching shares now of the two companies that make submarines for the government, general dynamics and huntington ingalls. no clear trend yet in those shares. we'll see what happens at 9:30. coming up, an earnings miss for alphabet, google's parent company trading lower after a decline in the closely watched cost per click ad rate. we'll dig through the report with an analyst next. and as we go to break, a quick check of what's happening in european markets right now. this car is traveling over 200 miles per hour. to win, every millisecond matters. both on the track and thousands of miles away. with the help of at&t, red bull racing can share critical information about every inch of the car from virtually anywhere. brakes are getting warm. confirmed, daniel you need to cool your brakes. understood, brake bias back 2 clicks. giving them the agility to have speed & precision. because no one knows & like at&t. there's a lot of places you never want to see "$7.95." [ beep ] but you'll be glad to see it here. fidelity -- where smarter investors will always be. if only the signs were as obvious when you trade. fidelity's active trader pro can help you find smarter entry and exit points and can help protect your potential profits. fidelity -- where smarter investors will always be. google parent company alphabet out with earnings. the technology giant missing analyst estimates by 28 cents but reporting a 22% jump in revenue on strength in mobile search and advertising. joining us now is viktor anthony. when you look at what happened last night with alphabet, they came in with revenue numbers that were better than you expected, but earnings per share below your expectations. what happened? >> so the revenue beat was, i think, in large part due to the hardware sales. their eps miss, there were some one-time costs. there was a tax hit in the u.s. if you back that out, they had, i think, would have beaten estimates for the quarter. >> so if they didn't have to pay taxes or pay for higher costs, then they could meet it. >> it was a one-time as well. if you back that out, they likely would have beaten estimates. i think the pinpoint for investors is the market contraction for the second consecutive quarter in a row. >> additional revenue, we've been wanting more revenue. if you're looking at revenue that you're not necessarily making as much profit on, is it a good thing. how would you decide that? >> i think it's a good thing. i think investors will have to come to terms with the fact that google segment margins will contract for several more quarters because they are presuming growth areas. the reason it's contracting is because of the mobile shift and hardware sales which are a lower margin. that's another secular growth story for them, as well as youtube content. youtube is growing like weeds for them. so the content spanned against that. so these are all secular growth stories for google. it's good money that they're invested in. >> you think those margins will eventually improve? are these areas they're getting into where they can eventually say, okay, now we're going to be able to charge a little bit more, or you just have to get used to the idea this is not going to be as profitable a business in terms of the revenue they're bringing in? >> so for the google segment, i think margins will be under pressure for quite some time. at some point, they'll get some leverage and you'll see an expansion. overall, alphabet the company, because they're paring back losses, the overall margins will continue to expand, i think. so i think investors would have to, you know, just look at the entire google story. the business has benefitted from multiple secular tail winds. you have hardware, artificial intelligence. you have cheap multiple stock, very well capitalized balance sheet, $86 billion in cash. these are the reasons you want to buy. investors will have to overlook the market compression. >> you think some of those moon shots that alphabet is investing in are things that eventually pay off in a big way? >> well, i think google hopes so. i think some of them may hold promise. they're scaling back a little bit. driverless cars, they're looking to monetize that investment. it's just optionalty. that's the way you look at it. i don't put too much value in my valuation on the stock. hopefully it pans out. >> how much competition is google feeling from facebook's push into video? >> there is competition. right now facebook and google are kind of a two-man horse race for capturing advertising share. that shifts over to the internet. so they are fighting, i think, intensely for that video advertising dollar. we have youtube versus ultimately facebook. but i think the internet is big enough. until that secular shift abates, investors in either one of these companies have nothing to worry about. >> all my guys in the music world that i live in are now streaming facebook live. that's a huge part of the facebook experience. my buddy jay goes to every show. every night i can turn something on and jay is sitting there with his hand held. and i'm not using youtube for that. i'm using facebook. i don't know if that matters. >> youtube, by the way, has a huge live presence as well. i think facebook is in a position right now. the user growth is so enormous. but youtube live is huge as well. it's a huge investment for them. they're competing quite effectively there. >> victor, thank you. coming up, vicente fox will join us to talk about the canceled meeting between the current mexican president and president trump. becky is going to try and generate an ep my thet, if possible. a busy morning for earnings. "squawk box" will be right back. ♪ there's a lot of places you never want to see "$7.95." [ beep ] but you'll be glad to see it here. fidelity -- where smarter investors will always be. if only the signs were as obvious when you trade. fidelity's active trader pro can help you find smarter entry and exit points and can help protect your potential profits. fidelity -- where smarter investors will always be. investors looking to end the week on a high note. the dow closing at a record high. in this hour, a look at some key dow names you might be thinking of adding to your portfolio. washington watch. president trump and british prime minister theresa may meeting at the white house today. plus, immigration and trade front and center with mexico. former mexican president vicente fox is our special guest. plus, the tale of two tech titans with very different endings. a look at microsoft, google, and other big earnings announcements happening as the second hour of "squawk box" begins right now. ♪ live from the beating heart of business, new york city, this is "squawk box." good morning, everybody. welcome back to "squawk box" here on cnbc. we are live from the nasdaq market site in times square. i'm becky quick along with joe kernen and steve liesman. andrew is out this morning. take a look at the futures after a mixed day for the markets yesterday. we did see the dow push higher. once again, another 32 points. this morning, dow futures indicated up by another 19 points. s&p yesterday briefly moved above 2300. the nasdaq is down by just about three points. at least it's implied to open there. >> here's what's making headlines at this hour. earnings out this morning from industrial conglomerate honeywell. the company matching forecasts with earns of $1.74 per share. revenue did come in below forecast. we're going to get the first read on fourth quarter gdp in about 90 minutes. economists are looking for a 2.2% annual growth rate. at the same time, we're going to get december durable goods orders, expected to rise by 2.3%. bill ackman's pershing square has made new investments. the document doesn't specify the companies, in contrast to ackman's public stances on stocks. in other news, a wave of protectionism taking over the "squawk box" set this morning. anti-globalization. >> no, just an honest discussion about whether this is fair trade, whether it's free trade, and how you measure these things. we have been arguing all through every commercial break. how do you measure the relationship with mexico? who gets the short end of the stick? we're going to talk about all of this with former mexican president vicente fox, who's joining us in about ten minutes' time. >> and we have the former mexican central banker coming on as well. >> i was thinking 9% of ackman's portfolio, used to be about 16% of his portfolio. no, i didn't work that out right. i would like to know what they are too. i love watching them now after valiant and herbalife and some of the other disasters. >> you think that's why he's not disclosing them now? >> maybe he's actively buying or selling. >> he's got a billion dollars, so who am i. i think he's been on a bit of a cold streak. stocks to watch today. earnings from google parent alphabet missing analyst estimates but revenue beat expectations, soaring 22% on strength in mobile and video advertising. intel beat on the top and bottom lines, helped by growth in its data center business and a more stable pc market. and microsoft reporting earnings that topped wall street con s consensus. british prime minister theresa may getting ready to visit the white house today, becoming the first foreign leader to meet with president trump. michelle caruso-cabrera joins us with more on today's agenda and what's shaping up to be another busy day in washington. >> hey there, becky. the uk, our seventh largest trading partner, and we actually have a trade surplus with the united kingdom. we send them more stuff than they send us. here's what's on the agenda today for the meeting between the two heads of state. future of nato, fighting terrorism, and also a direct trade agreement. very, very different attitude from president donald trump toward the united kingdom compared to president obama. remember, president obama went to the united kingdom ahead of the key brexit vote and said, if you vote to leave the european union, you're going to be at the back of the queue. president trump has said he wants the united kingdom to be at the front of the queue when it comes to a trade deal. we'll hear from both those heads of state. we expect around 1:00 today over at the white house. that's what's going on today. last night, the foreign minister of mexico, the commerce secretary of mexico held a news conference here in d.c. at the embassy to talk about their two days worth of meetings over at the white house. they described that they were in the white house planning the protocol for the president of mexico's visit next tuesday when president trump's tweet went out saying if mexico doesn't want to pay for the wall, maybe we should cancel the meeting. they ended the meeting. they said they were surprised, aghast. they were clearly angry. they spoke with the president, and that was it. that's how the meeting ultimately was canceled for next week. the foreign minister and commerce secretary were also asked about sean spicer's comments about a 20% tax on mexican imports. foreign minister says that would bad economics. >> if you tax exports from mexico into the u.s., you're going to make things ranging from avocados to appliances to flat screen tvs, you're going to make them more expensive. that's going to be paid by the american consumer. i'm not sure that's the objective that is pursued here. >> big asterisk next to that sound bite. sean spicer, the white house press secretary who first articulated that idea of the 20% import tax, when you listen to the whole thing, sounded more like he was talking about the border adjustment tax provision and paul ryan's plan over in the house gop for changing the corporate tax structure. and both of these gentlemen very much understood that. they said they were also trying to figure out whether what he was actually talking about was this cash flow tax that's being suggested by the house when it comes to corporate tax reform. another thing to tell you about, carlos slim holding a news conference today last minute. came about late last night. i had spoken to his office a couple days ago. they said he would not be speaking about any issues between mexico and the united states. clearly the situation the last couple days has changed his mind. we might hear from him later today as well. >> you did so great in the last hour asking questions that you didn't know were coming. i want to throw one more at you here. there was a report i heard earlier this morning that britain cannot negotiate a trade agreement with the united states until it actually leaves the eu because it's a member of the eu. so we're all talking about whether or not britain can come first. i don't understand what that means, if they can't even negotiate. >> neither do i, and i have asked that question. does that mean they can have lots of informal discussions and come up with some kind of archetype, et cetera, and the minute they walk out, then this becomes part of the plan? that's part of the discussion going on in back rooms, over in the united kingdom and here. but you're right, there's a rule you're not supposed to be negotiating other trade deals when you're part of the european union. so what are they going to do about that. >> still haven't stumped michelle. i think we have another hour to do it. >> thanks, guys. >> a big free trader. she seems to understand -- she understands the issues a little better than some. your much vaunted fair trade has done wonders for income inequality. the old steve liesman cared about wage disparity. now eight of your buddies have halve the world's wealth. >> my buddies? the ones who you revered. >> eight of your buddies control half the world's wealth. that's okay with you. >> don't you play golf with them? >> no, i don't think i have. >> seven of those guys you've been on the golf course with. >> the dow already on the way to its next major milestone, crossing 20,100. the index is nearing a 10% gain since the election. joining us now is president of the wells fargo investment institute. that sounds like some nonprofit. >> no, it is definitely not a nonprofit. >> okay. but it's an institute. >> it's an institute. i should be wearing a white straight jacket. >> i don't know if you're going to get to say anything. he's in charge of an institute. >> i said i want to walk off set. >> and todd gordon, founder of tradinganalysis.com. who wants to start? i don't want to mess up the trader. are we overbought? >> yes. >> we are? >> yes. you and i are going back and forth. i still like 2500 by the end of this year. i think the story is so powerful right now, so compelling to be long. we have all sectors firing on all cylinders. we have financials coming back, industrials, materials, technology. everything looks good. i'm long but i'm very nervous. i think the trade is becoming crowded. >> you're very nervous. >> i am. i'm nervously long. i think the -- i can't even speak this morning. the trade is crowded. >> you're so nervous you can't speak. >> it's just too early. no, no. i'm going to be exiting. there's a lot of technical resistance. i'm going to be exiting most of my longs, going short the market. i think there's going to be a bit of a pullback. after we shake it out, we'll go up to 2500. >> a lot of times developments have a way of coinciding with shakeouts. i could think of a lot of things in the first hundred days that if they don't go perfectly could be used as an excuse. >> i think actually more legislation gets done in the last hundred days of 2017 than the first hundred days. but we'll get a clearer path. >> going to mess up our programming. we're doing a bunch of hundred day stuff. we'll have to change everything. >> but i think todd is right. we just took some profit in the large cap space. we think the rally is a little overextended here. we want our investors to kind of pull back the reins. typically in the first year of the presidency, the s&p goes up 8.9%. we've pulled a lot of that forward. but you do have -- i think what's you anemunique here is ya few sectors where the fundamentals are aligning with policy, which is a powerful concoction. you talk about the financials, the industrials, consumer discretionary, which has had a weak fourth quarter earnings number across the board. i think there's some value there right now for investors. >> darrell, it you just take the -- even if you do 20% for corporate taxes, they're going to do something probably, then you just all the sudden get a new s&p earnings number after tax. that -- you can get to higher numbers just on multiples where they are. >> first of all, i would say watch the discussion over the next 30, 60 days. it may ebb and flow from tax reform to tax cuts, which are two very different things. tax reform is hard to do. it takes a long time to do. tax cuts and just cutting the rate could be the short-term path the administration looks at. if you do get that, joe, you're right, there could be a nice boost to earnings numbers. >> over to monetary policy and looking in the bond market, so why has the stock market broken late 2016 highs and bonds have not? why has the dollar all the sudden sold off? we're starting to see a back up in yields. i take the currency markets and fixed income markets warning a little more than stock market just going parabolic. >> everybody talks about the strength of the dollar. it's trade weighted since the beginning of the year. it's flat to down slightly. it has not appreciated in 2017. >> all right. guys, thanks. we got president fox waiting. do you need money to continue your good work there? >> absolutely, we do. whenever you want to do that, i'll buy you lunch and we'll talk. >> wells fargo institute. aren't you the guys that did all the sales practices stuff, like creating accounts? becky's uncomfortable. >> now is a good time to cut this off. >> that doesn't sound like an institute to me. when we return, tensions running high between the white house and mexico and between joe and the producers. trade and immigration policies front and center on both sides of the border. a special interview with the former president of mexico, vicente fox. he's going to be our guest after the break. and later, three stocks to buy now. saira malik of tiaa global will join us with a rundown. stay tuned. you're watching "squawk box." there's a lot going on here. welcome back, everyone. a war of words leading to standoff between the united states and mexico. white house press secretary sean spicer mentioning a proposal of a 20% tax on all mexican imports to pay for the border wall. those remarks prompted some sharp criticism. spicer later saying it was just one option in many. all of this came after the cancellation of talks between president trump and mexican president pena nieto that had been scheduled for next week. joining us to talk more on the state of relations, the former president of mexico, vicente fox. thank you for being here today. >> good morning and thank you for inviting me to be here. we're very sad on one side because of what's going on between united states and mexico after building such a strong, nice, harmonious relationship among our two countries after becoming partners. then we get this ceo trump coming in to sit in the presidential chair and keep acting as a child, as a ceo of his corporations, making deals, he says, but he in reality is making mad everybody, like it happened with mexico. fortunately, president pena stood up, faced him, and canceled the visit. of course, ceo trump has very clear the message. you don't play around with mexico. you want to tax 20%, you really are taxes corporation importing cars from mexico. you're not taxing mexico. you're taxing u.s. corporation, and you're putting a heavy burden on u.s. consumers. they will be to pay at least 20% more for the car they're buying. that's where you say you're getting the money to pay the wall. you're getting it from the pockets of u.s. citizens, pockets of u.s. workers, from the pockets of u.s. taxpayers. >> let's try and break a lot of this down because there's a lot of different things that we're discussing here. first of all, you say ceo trump as if it's a bad thing to be a ceo, but he's looked at this and said, look, i don't think the american people are getting a fair deal. do you think there's room for renegotiation when it comes to nafta? >> mexico has always been ready, has always been a friend of the united states. we've worked strong on our side to build up opportunities for our own people. we work strong in trying to retain drugs from coming to u.s. consumers in united states. we're a good friend. terrorism come through mexico to united states. there are many things at stake that president trump or ceo trump is not taking into consideration. i mean, who needs a poor neighbor down south? who needs a poor backyard neighbor? that's stupid to think. it's going to complicate things more and more. and mexico has pride. fortunately we have very, very strong examples for this like president cardenas back in 1936 where he nationalized the oil industry. he took away the companies from the american companies after exploiting mexico's oil. >> that hurt mexico quite a bit more than it hurt the united states. now we're at the point where we have our own mass i have amounts of oil production. you said that nasdaq is something that the united states needs more than mexico. how do you back that up? >> i know nobody wins on a trade war this is where we have to make this kid understand, this ceo. it's not the same as business. trading is a win-win situation. why he does not speak about canada -- canada exports more cars to united states than mexico. he doesn't say a word there. india is taking away 4.5 million jobs from united states on the outsourcing to call centers, to software manufacturing in india. and he doesn't say a word. the deficit with china is over $350 billion, and he doesn't say a word about that. so i don't know why he is so badly positioned with mexico. why he wants to harm mexico and mexican ss. that he says are criminals. mexicans are not criminals. he has to be very careful on what he says. >> i understand the concern about the rhetoric around it, sir, but let's look very simply at the trade agreement. in terms of -- >> it's not rhetoric anymore, i'm sorry. >> i'm talking simply about the numbers. >> we don't accept it here. we are standing in front of him. we're not going to play around with him. and he will take us seriously. and the harm will be to the u.s. economy. >> exports make up 17% -- let's just talk through some of the numbers. exports make up 17% of mexico's economy. 84% of those exports head to the united states. exports are only 8.4% of the u.s. gdp. you actually are shipping much more -- many more goods here than we're shipping there. if you're just talking about the shut down of trade, it seems to me mexico would be hurt quite a bit more than the united states would. >> i mean, we've already been hurt in our honor, in our dignity. you don't negotiate sovereignty. you don't negotiate your feelings when they are offended. it has happened. we don't care about the money. i mean, you should care about it in united states because having a poor neighbor, having a neighbor with huge rates of unemployment is not going to be good for united states. we have to work together. we are friends. we are neighbors. we are partners. i am really sad that this is happening. i just remembered my grandfather coming from cincinnati, ohio, as a migrant from mexico learning for the american dream. i learned so much from him. today united states, i don't understand. that's why i don't think ceo trump is an american in his soul, in his beliefs, in his feelings. >> mr. president, you rightly talked about how any taxes could eventually be paid by u.s. citizens, but let's look at what's really happening with the peso now. the more that this rhetoric comes out and the more sort of conflict that there is, the peso goes down more. your central bank then spends billions of dollars to defend the peso and it raises interest rates too. nothing is helping defend the peso. so you're already spending billions doing this rather than, you know, sort of cutting off your nose to spite your face in terms of wall. you've probably already spent $15 billion defending the peso. mexico is already paying for the wall. >> no, no, please, please. don't say that. that's trump style. we're not paying for that wall. not now, not ever. let me say, yes, we are being harmed. we don't like that. why a u.s. ceo sitting on the presidential chair wants to hurt and press mexico. what's the whole idea? we want our friend, united states, we want our partner ready to sit and work, but the way this guy moves, it just harms everywhere. i don't know what to say, but the only thing for sure is that mexico will stand up to the challenge, and we will come along. we don't worry about trading. we have china to trade with. the second largest world economy. south america is doing a lot of trading with china. china will come and invest. i'm sure senor trump would not like to see chinese telecom towers on the border, but that's what he's forcing us to do. the world is much, much larger than united states. united states is only 20% of the world's economy. there's another 80% to negotiate with, to work with. that's what we're doing. that's why we're now full employment. that's why we're progressing mexico. that's why -- yes? >> president fox, how many car companies are building cars in mexico, foreign car companies, u.s. car companies, because mexico has free trade agreements with other countries and allows them to build there -- >> 43 trade agreements. so we have many places to go. just right here in the area we are, 11 manufacturing automobile plants are set here. no other region in the world -- nobody is doing better business because we're competitive, because we're productive. we produce high-quality cars. we're not taking away the jobs from united states. >> doesn't that mean that maybe more cars would be produced in the united states if we had more free trade agreements with other countries, rather than fewer? >> you produce cars in united states at such a high price, at such a mediocre quality that you cannot compete. you cannot compete manufacturing in united states. that's why ford, chrysler, general motors went broke, went broke five years ago and taxpayers again had to rescue those corporations. it's incredible. the chancellor merkel said that the united states produces high-quality cars, competitive in price, you will have market. today by ramping up the production in mexico, united states, and canada, they're back in business. if they're going to be within four walls, within united states, imagine, you will lose 80% of the world's market to be enclosed in four walls. it's stupid. >> president fox, let me ask you this. when we've spoken with president trump, he told us he's not opposed to free trade, he just wants to see fair trade. he doesn't think the agreements are fair at this point. i don't think that it's going to be business as usual, no matter what happens with donald trump in the white house. and i just wonder what it is that you could live with and what it is that you can't live with. could you live with some renegotiation of the naft deal? are you opposed to the wall or is it just paying for the wall that you're opposed to? there's a lot of bombast on both sides. >> we don't want it, but we can live without united states. >> but i'm asking, is there any room for renegotiation or if the trump administration says they want to renegotiation -- >> of course, of course. >> what is something you can live with? >> 100% open for negotiation. president pena in mexico. but the initiatives on that side is trump the guy who doesn't want to go along with the negotiation. if he starts saying i'm going to tax you 35% and let's sit down and negotiate, stupid, we will not do that. we know how to deal. he's not the only good deal maker person. we know how to negotiate. we now how to deal. we don't want to -- yes? >> is there a way that both size could come out winning? i look at this and because it's gotten so bombastic, i wonder if there has to be a clear winner and a clear loser or if you see a way both sides could come together. >> yes, yes, yes. the day ceo trump respects others, he will be respected. as long as he doesn't respect anybody, not even his own citizens and not even respect media, so the day he respects people, people will respect him. until then, i will not call him a president. i will call him ceo. >> president fox, we want to thank you very much for joining us today. we really appreciate your time and we hope we get to talk to you again soon. >> a pleasure. a pleasure. thank you. coming up, two stocks near 52-week highs and why you maybe should be a buyer. tiaa investment managing director saira malik will join us to talk about why she likes these two stocks that you need to watch to hear about. okay. home depot and bank america. now you can go to work. anyway, tensions running high between mexico and the u.s. government, immigration and trade policy could change the business landscape. a former bank of mexico governor. hopefully he'll tell us what he really thinks. join us in just a bit to discuss the economic impacts. 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(child giggles) symbicort. breathe better starting within 5 minutes. get symbicort free for up to one year. visit saveonsymbicort.com today to learn more. now the answer to today's aflac trivia question. who was the first and only u.s. president to hold his daughter's high school prom at the white house? the answer, gerald ford in 1975. welcome back to "squawk box," everybody. this is cnbc. we are live from the nasdaq market site in times square. among the stories that are front and center this morning, retail giant walmart is making some changes to its pay policies. it is shortening a training program that new employees have to complete to bump their pay to $10 an hour. it will now take three months rather than six. this comes two years after it raised minimum wages for its store employees to $9 an hour. union membership fell to its lowest on record last year, according to a labor department statistic. according to those statistics, only 10.7% of workers were union members last year. that's down from 11.1% in 2015. in the early 1990s, that figure was above 20%. ford is hoping to fit older cars with newer conveniences. it plans to sell a plug-in device that enables features like remote starting, wi-fi hot spots, and security alerts. the company hasn't yet said how much that will cost. with so much tension on the big stocks, we wanted to see if there were still opportunities to be found in the large cap space. for that, we turn to sair saira malik, head of global equity fort folio management at tiaa assets. great to see you. >> thanks for having me. >> we've run a long way, but you think there are still opportunities here. >> we do. we think stronger economic data and earnings growth will drive the markets higher from here. we still like cyclicals. with investors talking about the dow crossing 20,000, we think it's time to focus on the other dow. that's dow chemical. the dow/dupont merger is going to create this global power house. we expect $4 billion in synergies. infrastructure spending should help the company. their balance sheet should strengthen and be able to return that cash to shareholders and pay down debt. >> so in terms of dow, the largest issue just being that because of the merger itself, you still like it even though it's run up so much? >> we do because the merger gives us a lot of optionalty in terms of cost savings. by itself, it's a great cyclical spending. they have a strong balance sheet. >> the other thing that we've seen run the furthest, in fact some of the best performers have been the financials. you still think that already financials that could be worth watching, particularly you like bank of america. >> we do. bank of america is very leveraged to higher interest rates. they're focusing on higher quality customers, which should strengthen their business model. we like they have great cost control in place. they're focused on controlling costs tightly through 2018 and beyond. >> do you like any of the other financials as well? >> we like some of the other financials, but bank of america is pretty much our favorite. we like jpmorgan and morgan stanley. >> in terms of credit quality and consumers borrowing, how much of this is a similar play? as you mentioned, you like dow because you're going to see things cyclicly picking up. you think that's the same story with the banks, that you'll be seeing more consumer loans coming in, more business loans? >> we think cyclicals are going to be the story this year. you did see economic data in the u.s. start to pick up in the middle of 20 16. we think that continues into 2017. >> and very quickly, a lot of people are running from the retailers, but you like one of thm. you think home depot is a good buy. >> we do like home depot. they have strong same-store sales. housing market, even though rates are going up, we think affordability looks good. strong free cash flow story to back up this company with $7 billion in shares repurchased every year. at over 2% dividend yield. >> okay. thank you. great to see you. >> thanks for having me. we talked about this a little earlier, but mike connors has died at the age of 91 of leukemia. "mannix" was a staple in my house growing up, for eight years on cbs, beginning in 1967. connors once said, until "mannix," tv private investors were hard nosed and cynical. while he got emotionally involved in his cases. as important as "mannix" was, his secretary peggy, played by gail fischer, who broke so many racial barriers back in the '60s and early '70s. in fact, it got terrible ratings the first year. then they brought in his assistant peggy. she'd help him on cases, go on disguise as a housekeeper. she was the first black actress to win a golden globe, first to win an emmy. broke a lot of barriers. i remember -- it was a great show, but he also had a tornado. >> listen to how awesome the music is. they don't make them like that anymore. >> they weren't going to hire gail fischer initially. bruce geller, he insisted on hiring her, then the ratings soared the first year she was on. anyway, we'll miss him. he was 91. good life. a life well lived. coming up, trade and cross-border business. the latest on the war of words between the u.s. and mexico. former bank of mexico governor guillermo ortiz will join us after the break. check out the futures at this hour. indicated up again, up 23 this morning. the s&p and nasdaq also called marginally higher. under armour has always been more than an apparel company. we've always been an innovation company. using technology is a critical differentiator. changing the expectation that the consumer will have for what a sports brand should be for them. this is where we're going to need a big, bad, technology partner. bring in. cue the bell. sap. under armour is a live business. we can anticipate the issues and needs that you're going to have using live data, to really understand the needs of the athlete. to make better decisions that meet our consumer where they are. the right place with the right product at the right time. the days of the eighteen month supply chain are something that we are quickly putting in our rearview mirror. with plans in place right now to cut that by as much as twenty, to thirty, to forty percent. so what sap really does for the under armour brand, it truly allows me to run our business end-to-end. tensions are rising on both sides of the border as the war of words escalates between the united states and mexico. president vicente fox joins us a moment ago. here's what he said. >> you don't play around with mexico. if you want to tax 20%, you really are taxing corporation importing cars from mexico. that's where you say you're getting the money to pay the wall. you're getting it from the pockets of u.s. citizens, pockets of u.s. workers, from the pockets of u.s. taxpayers. >> joining us now, former bank of mexico governor guillermo ortiz. i'm really happy you're here because i appear to have lost becky. i've lost joe on the issue of free trade. in fact, it looks like free trade or the trade agreements we have, have lost a large part of the nation. let me ask you this idea. if we have a $60 billion trade deficit with mexico, doesn't that mean it's an unfair trade agreement? >> i don't think so at all. you know, the -- nafta, all economic studies show it has been positive not only for mexico but for the u.s. the supply chains are integrated. nafta has also benefit u.s. industry in the sense that it's made it more competitive. the gains for mexico have been large, but also the gains to the u.s. have been significant. i think nafta has already been a win-win situation. >> how do you say the gains for the u.s. have been positive when we have this $60 billion trade deficit? in other words, we buy $60 billion more from them than they buy from us. why isn't that on the face of it just unfair? >> well, it's not unfair. the deficit means absolutely nothing. the deficits of the u.s. with mexico and with the rest of the world is a reflection of how much you spent in relation with what you earn. so it doesn't really reflect a concept of fairness. it's just the difference between what americans want to consume and what americans earn. >> guillermo, what is your thinking about the overall outlook for free trade? not just with mexico but -- and i think economists have done a very bad job. i think the politicians have listening have done a bad job explaining it but more importantly talking about those who are affected. whatever the overall impact, there's no doubt there are cities that have been devastated, people who have lost their jobs, maybe not millions, but certainly thousands of people who have lost their jobs. how do you resurrect in the world what economists think is a very critical factor that ultimately enriches the whole world, which is this notion of free trade? >> well, obviously trade brings, you know, some losers and gainers. this is true with globalization. but in general, trade and globalization have lifted millions of people out of poverty. the job losses that you're referring to in manufacturing, particularly in some states, they have been on a trend for decades. so the way to remedy that is to increase the income -- we're talking about mexico now -- to increase the income of mexicans so they can buy more u.s. products. also, the integration of the supply chains, for example in the automobile industry, makes the u.s. economy more competitive. the job losses would have taken place anyway mostly because of automization. industrial output has been going 80% over the past three decades. yet, millions of jobs have been lost. >> guillermo, let's talk about what's happening in mexico right now. the peso has come down. the stall bank has spent money to support it. is mexico losing economically now? >> well, of course. the first impact has been currency depreciation and the uncertainty regarding the bilateral relations between u.s. and mexico have taken a toll on investment expectations, higher inflation, and so on. i think the really important thing goes between the relationship between the u.s. and mexico goes beyond trade. it is one of the most important bilateral relations in the world. you have literally millions of people crossing the border back and forth. in the border, the regions are very much integrated. mexico and the u.s. have to have a cooperative relation, not only in trade, but also in border security, in immigration, in the flow of arms going to mexico and the flow of drugs going to the united states. cooperation has been increasing over the past decade, over the past decade and a half. it is in the interest of both countries to seek this cooperative solution. >> last question, guillermo. if we put tariffs, import taxes on mexican goods, does the u.s. lose because of that, or is it a winner? >> i think the u.s. loses because ultimately if you have a tax, you know, that taxes mexican imports, it's going to be paid by u.s. consumers. also, if you tax mexican exports, what's going to happen is that the dollar is going to rise because this is not a tax that's going to be applied only to mexico. this is a worldwide tax. so there will be many losers and winners within the u.s. for example, all the important companies that depend heavily on imports are going to be obviously in a disadvantage. >> guillermo, we're out of time, but you're kind to get up. i know it's early there in mexico city. thank you very much. guillermo ortiz. >> thank you very much. >> thank you, steve. when we come back, stocks to watch. plus, is it clear skies ahead for american air? the company reporting a short time ago. we'll take a closer look at the numbers and what the company is saying about the airline business. right now as we head to break, take a look at the futures. a little higher across the board right now with dow futures up by 23. the s&p futures up by two. the nasdaq also up by two. "squawk box" will be right back. that ride share? you actually rode here on the cloud. did not feel like a cloud... that driverless car? i have seen it all. intel's driving...the future! traffic lights, street lamps. business runs on the cloud... and the cloud runs on intel. ♪ i wonder what the other 2% runs on...(car horn) let's take a look at some stocks to watch this morning. wynn resorts jumping in premarket trading, investors focusing on better than expected revenue at the company's resort, the wynn palace in macao. vmware also rising in premarket trading. the company reported quarterly profit of $1.43 a share, 4 cents above estimates. it also announced a $1.2 billion stock repurchase plan. who's going -- it says morgan. good morgan, morgan. >> good morgan. so let's take a look at some defense names i reported this morning. general dynamics. the contractor could be the latest target of president trump. gdp reported mixed results. earnings of $2.62 a share was a beat. they build warships and subs, making the president's comments in a fox interview last night that, quote, we're lacking submarines and going to build new submarines, but the price is too high so i'm cutting the prices way down. that's sure to be a topic that dominates the call this morning. trump has been vocal about growing the navy and nuclearizing the sub fleet. gd is not the only company with defense business that has reported this morning. so honeywell posted in line earnings but revenue missed with sales in every segment below estimates. aerospace has been a big drag, but profits were better than expected last quarter. the soft business jet market has impacted a number of companies. also, general dynamics, which owns gulfstream. it's david cody's last earnings report as ceo there. shares of both of these companies, if you take a look, general dynamics is up ever so slightly. honeywell is down nearly half a percent. i should note on light volume, but we'll see what comings out of both of these conference calls this morning. guys? >> all right, morgan. thank you very much. we're also getting earnings out of american airlines. phil lebeau has been covering that story for us and join us this morning. >> becky, these numbers came in, in line with estimates, earning 92 cents a share. that's what american did if the fourth quarter. that was what the estimate was on the street. revenue also basically in line, slightly above estimates, coming in at $9.78 billion. the thing you want to look at with american, as with all airlines, what happened with passenger revenue in the fourth quarter. for american, it was up total revenue per seat mile 1.7%. that's the first fourth quarter increase in revenue per seat mile since 2014. i'll jump on the conference call a little later on to see what they have to say about whether or not they noticed a big increase in business post-election, as we've heard from delta, united, other airlines. we'll be on that call later this morning. back to you. >> hey, phil, we just -- i don't know whether you saw vicente fox. he said -- this was beautiful. i hope we put this on cnbc.com. he said the reason the big three almost went bankrupt is because american workers make high-cost cars of mediocre quality. that's why we need the mexican workmanship, to sell decent cars. what would you have said to him? >> he needs to go back and check out the real reason why the automakers collapsed. >> yeah, yeah. all right. >> thanks, phil. >> very diplomatic of him. when we come back, mark yusko. stick around. more "squawk" after this. london calling. british prime minister theresa may heads to the oval office for a meeting with president trump . on the top of the agenda, trade. breaking economic news, the first read on fourth quarter gdp just minutes away. we'll bring you the numbers. plus, instant reaction from former white house cea jason furman, as the final hour of "squawk box" begins right now. ♪ live from the most powerful city in the world, new york, this is "squawk box." good morning and welcome back to "squawk box" here on cnbc, live from the nasdaq market site in times square. i'm joe kernen along with becky quick and steve liesman. futures right now are once again indicating a higher opening, up almost 30 points on the dow. up just under three on the s&p. up a little over two on the nasdaq. treasury yields, i guess we want them to go higher now to confirm the growth. they are a little lower today. let's get you caught up on the other headlines this morning. hon hon honeywell earnings matching wall street estimates, but the revenue fell a little below what was expected on aerospace weakness. you can see that stock is down by just about 1%. earnings from google parent alphabet missing analyst estimates. still, the company saw its revenue soar better than 22%. advertisers are not willing to pay as much for mobile searches as they are for their desk top equivalents. that stock is down by about 1.25%. and intel beating on the top and bottom lines. microsoft reporting earnings that topped wall street's consensus. the company's cloud computing business nearly doubling its revenue for the quarter. it looks like microsoft shares are up by 1.7%. >> the whole pc environment of this country has gotten much less stage since the election, i would think. >> the pc environment. oh, political correctness. >> don't you think? we are not nearly -- would you say the pc environment has been stable or unstable? >> talking about desk tops? >> i would still say at your peril, joe. just be careful. >> oh, i know. >> you've been pushing the envelope for a while. you were out there in terms of a guy who was out there. >> i know. just in general -- >> the things accepted. >> madonna. there's a guy over in some newspaper publisher over in europe tweeted something about what should happen at the white house. the stuff that's going on right now, both sides have lost their minds. >> i agree. i'm now the socialist free trader. and you're the capitalist isolationist. is that -- >> no, i'm the capitalist america firster. >> i just realized, i need to call up fender. there's a mexican strat thing where they made cheap strats, they were terrible, and now they're better. we should get fender on to talk about production in mexico. >> why, because vicente fox trashed our workers? >> they make good guitars in mexico, but they're not as good. it's a cool story. >> so if you were going to have the lead for a story on vicente fox, my lead if i were going to write it would be, calls cars produce ehere high cost and mediocre. what do you think "the huffington post" lead would be? vicente says trump is not president but ceo and not a legitimate president. what do you think cnbc.com would you? >> i think you're leading us down the road for me to figure out where we went. >> i'm in the sure. i haven't seen. >> i'm supposed to introduce mr. dominic chu here. nearly a fifth of all s&p 500 companies are now trading at highs. dom chu is going to tell us about some of those stocks and which ones could be vulnerable if the market pulls back. >> all right. so the idea here is when we say at highs, nearly 100 stocks, guys, in the s&p 500 are trading at statistically high levels. they're talking about something called a standard deviation. that's a fancy way of saying there are certain times in the market when things get really ahead of themselves or behind themselves. we did a screen using our data partners at kensho and looked beyond the s&p 500 to the mega caps. we focused our screen on the dow stocks. which of those 30 stocks have a 200-day average price and that 200-day average price is now well below where the stock is trading? so in other words, these are stockings that have gone up so far, so fast, that they're in statistically unlikely areas for how far they've traded to the upside. of those stocks, 30 of them, five are trading at these very, very extremely overbought levels. ibm top of that list. now, ibm has had a rough past few years. it's been a real laggard. this past year in 2016, showing some real signs of life. perhaps a turnaround story brewing there. however, in recent -- at least the last few months, has traded to a level that's really, really too far, too fast some traders would say. boeing is also in that category. dupont, american express, and disney. these are all trading at very high levels. this is not to say, guys, that any of these stocks is doomed for a fall. it's just when some traders and some portfolio managers look at positions, they say, hey, how do i manage around a stock that's gone up really far, really fast? you guys were talking about alphabet earlier today. going into earnings, alphabet is one of those s&p 500 stocks that's gone up really far, really fast, and then is pulling back today because of an earnings report that maybe didn't meet some expectations. >> those are all household names. i just wonder, let's say, something we've been trying to figure out, the average investor has gotten into the market. what are the chances that stocks with those household names see a bump greater than other stocks because people come in and say, oh, boeing, that's a good stock, or, oh, american express, i have one of those cards. do those stocks get a bump when the average investor comes in? >> it depends. these days we talk about this idea of passive versus active management. everyone goes into index funds these days. the most widely traded fund out there is the s&p 500. whether it's a mutual fund or an exchange traded fund. those stocks hold less in relative terms of some of those big household names than, say, the dimons do. that's the dow 30 etf. significantly smaller. if people are only using these index-related vehicles, perhaps you don't see that as much. in the past 10 or 20, 30 years beyond, people used to look at brand name stocks and say, i want top own that stock. >> there was the nifty 50. >> all these names people would identify as brand names. proctor & gamble, i know what they make. they make diapers, all these household products. you wonder whether or not that effect is a little more diminished because of the fact that passive investments or index investments are a bigger part of the environment now. >> cool. >> so. >> you're going to tell me i'm not with the program. >> i think you're with the program. i think you are. are you not bullish on america, bullish on stocks? >> i am absolutely bullish on america. >> good. >> i am absolutely bullish on america. i would just say the reason why some traders look at these types of things is because they try to find more attractive entry points. maybe it comes back 2% like google is doing right now, and then you buy, instead of buying 2% higher. >> you can get basically almost 100% agreement. you can be bullish on america because of trump or in spite of trump. that kind of covers the whole gamut. even warren buffett said, look, america has the secret sauce, i don't care who's president. so take your -- well, we know where you are. take your pick. you can be bullish in spite of or because of. >> "the wall street journal" this morning called it amateur hour. editorial page. >> i know. in terms of mexico. i saw that piece. >> they've been on both sides. >> holman jenkins the other day, very critical. "wall street journal," i would say i see both sides as opposed to, in most "washington post," "new york times." it's the de facto opposition party. >> do you go home and talk with your family about what donald trump did today? that's the entire conversation about my dinner table. >> my kids already know. >> but you don't talk about it? i've never seen politics consumed dinner hour at the liesman house. my 16-year-old is all over it. >> we have a couple high fives then we eat. thank, dom. joining us now, mark yusko, chief investment officer of morgan creek capital. you could do 20% of the wall with that, mark. >> infrastructure spending. >> exactly. are you bullish overall on our prospects in this country, even at these levels? >> look, bullish on economic prospects somewhat. i actually think we're going to have a slight decline in economic activity this year. one of our big surprises -- i just did my ten surprises for the year. i think one of them is that economic growth is going to surprise to the downside, unfortunately. it's not going to be a disaster. i don't think we'll slip into recession, but it's certainly possible. there's some indicators out there. one of the things that people forget is deficit spending actually lowers interest rate, not raises interest rates and slows economic growth because of crowding out. >> that is definitely a nonconsensus view. you mean the gdp will be below 2016 or that it will be below what people are -- what people are saying, are looking for 3%, 3.5%? you're saying below that or -- what did we do in '16? >> to about 1%. >> so you think it's going to be below 1.9%? >> no, we'll be well below the 3.5 people are talking about. >> you said it's going to be lower than last year. is it going to be below 1.9%? growth is going to slow? >> no, i said growth has been much lower than expectations, whether it's below 2% or not, i don't know. i could see it below 2%, well below 2%, actually, by the end of the year. >> you mean like in the quarter. and for the year, you figure around 2% is what we're looking at. so you're assuming that all the things that trump wants to do in terms of infrastructure or tax cuts, you're assuming these all go through, and then the deficit becomes larger and there's crowding out and therefore the economy slows. is that what you're saying? >> well, that and the fact that, you know, fiscal spending probably won't happen until '18. tax impact probably won't happen until at least mid year to late in the year. the reality is that demographically, we're just ageing. every day 10,000 people turn 65 in the u.s. that slows economic growth. >> you told me the reason that it's going to slow is because of the deficit. then you told me there won't be a deficit until the year after. it's going to anticipate -- >> no, no, no. i said that deficit spending -- markets are anticipatory, right. they anticipate what's going to happen. so the upside of fiscal spending you won't see probably until 2018. but you have to borrow the money first so you have it in the bank to spend, right. >> well, this is definitely not what markets expect. so how overvalued is the market given that this is not what the average person or the average money manager is predicting right now? we must be way out over our skis then. >> no, look, i think most wall street estimates have year-end 2300, 2350, which is kind of where we are in the s&p right now. one of my surprises is #welcometohooverville. we have a lot of similarities between the current president and president hoover back in 1929. i could clearly see a bubble form because of all the enthusiasm and all of the positive energy, the animal spirits. we could rally up to -- if we hit 2650, that would be the equivalent of the 1929 bubble that happened after hoover got elected in '28. >> what was the number you just said, mark? >> 2,650. >> be fun getting there. if it didn't end the same way, it would be a pretty good ride. we're only at 2300 right now. all right. we'll check back with you, mark. thanks. >> thanks, guys. when we come back this morning, british prime minister theresa may is heading to the white house. former u.s. ambassador to the uk, robert tuttle will join us with what he thinks could come from the talks with president trump. plus, the fourth quarter gdp report is due out in the next half hour. joining us to react is former cea chairman jason furman. stay tuned. you're watching "squawk box" on cnbc. hey gary, what'd you got here? this bad boy is a mobile trading desk so that i can take my trading platform wherever i go. you know that thinkorswim seamlessly syncs across all your devices, right? oh, so my custom studies will go with me? anywhere you want to go! the market's hot! sync your platform on any device with thinkorswim. only at td ameritrade welcome back, everyone. british prime minister theresa may is heading to the oval office today for a meeting with president trump. joining us now is robert tuttle. this is something we have been watching closely, as she is the first head of a foreign state who is here visiting the new white house. i just wonder what you think about our relationship with the uk right now historically. >> historically, as you know, it's been very strong for over a hundred years. if you think back to the relationship between president roosevelt and winston churchill and president reagan and prime minister thatcher, it's been very strong. we do not have a stronger alliance in the world than the united kingdom and the same for them. i think it's very significant that she's the first foreign head of government to visit with president trump. i'm very excited about it, and i think it'll be a very productive visit. >> there have been some questions after the brexit vote with the last administration about where exactly that special relationship would land. where do you see things right now in terms of where we have common ground and where there are differences between us and the uk? >> well, we share intelligence. we share military. the british still have, i think it's around a thousand troops in afghanistan and in iraq, along with us. i think it's our military alliance and our strength in nato. don't forget, we have an autocrat and a very clever bully, mr. putin, who's annexed crimea, the first thing anything like that has happened since hitler. the baltic states are petrified. i'm sure he'd like to swallow ukraine. so it's so important that the nato alliance be strengthened and affirmed. i think that'll be a big part of the discussion between the prime minister and the president. >> although, that may be an area where you see a lack of common ground or at least some subtle differences at the very lead. president trump when he was still campaigning was talking about how there are a lot of people in nato, a lot of countries that are aren't paying their way, aren't paying what they're supposed to be doing. plenty of people look at that and think we might be stepping back from that nato alliance. what do you think? >> i suspect that won't be the case. one of the nice things about this meeting is the uk is one of the five countries, including the united states, that does contribute 2% of their gdp to the military. so i think that of course both countries should encourage the other members of nato to step up to their commitments, but these are two countries that are committed, that are strong, and who can stand up against the autocrat on the eastern border of nato. >> mr. ambassador, the churchill bust is back, i understand. so it means it was gone, i guess, for a while. do you know the behind the scenes story for what was going on there? you're smiling. what do you make of it? was it about his -- i don't know, his imperialistic -- i mean, why would the bust have been removed, do you think? because of imperialism? i don't know. can you explain it to me? >> joe, i cannot explain it. maybe we should wait for the memoirs of the people of the previous administration. i'm just glad it's back, and i'm glad that the prime minister is visiting with the president. it reaffirms this incredible relationship. when you think of it, the two strongest democracies in the world aligning together and meeting for the first time, this is really what's important. >> you love churchill. >> i do. i read all of his memoirs from world war ii. >> can you tell me why? >> i think it had something to do with his support for racist countries in africa and things like that. that was my understanding. but i don't want to make the explanation. >> if i can intercede, though president roosevelt had a strong influence on churchill and the fact that the -- after world war ii, the british gave up in a fairly short order most of their colonies. there have been disputes at times between roosevelt and churchill as we know now from reading history, and of course between my hero, president reagan, and prime minister thatcher. but in general, they were headed -- they were two strong democracies at the forefront of spreading democracy around the world, which is so darned important. >> ambassador tuttle, thank you very much for joining us this morning. >> you're welcome. coming up, breaking economic news. a first read on fourth quarter gdp. that's next, straight ahead. welcome back. president trump wants to spur $1 trillion in infrastructure spending with public/private partnerships. jane wells joins us live in long beach, california. >> reporter: good morning, steve. this half billion dollar new civic center for the city isn't being funded by some huge bond. it's not going to take a decade to design, permit, and build. it's been done in three years. for taxpayers, it's basically a push. that's because a private company is building all of this in exchange for land and rental payments from the city. rental payments over the next 40 years which will equal what the city is pretty much paying now to maintain the old city hall. how is this possible? these public/private partnerships are much more popular overseas than in the u.s., where we have a very strong traditional municipal bond market. a lot of places coming against their bond limit. the president wants to provide incentive for these partnerships. moody's says the united states could become the largest p-3 market in the world. >> there's always some level of risk, but the benefit dramatically outweighs any kind of risk on a project like this. there would have been much more risk had we done this ourselves just using public dollars. >> reporter: now, these things do not always work out. for example, this indiana toll road went bankrupt. here in california, they can't find any private investors to put a dime into the high-speed rail. but a company called planery resources is having success. though, yes, they do carry risk. >> in the event they don't perform in the way that we promise, so if the elevators are out or there's a leak in the roof, there's some problem with the facility that disrupts city operations, the city's payment may be reduced. so our annual payment is at risk based on our performance. >> reporter: now, the return on investment is relatively low, but it is long-term and steady. that's why these ppps are attracting a lot of investment from public pension funds. back to you. >> wow. ppp. see, we try to avoid the term pp around here. >> except for ppi. >> but ppp i think is okay. public pensions, private partner public -- >> reporter: that would be a p-4. no, p-5. that's a lot of p. >> that's a lot of ps. >> that's why we try and avoid it. janie ing jane, thank you very much. when we come back, fourth quarter gdp about to hit the tape. we'll bring you the numbers and market reaction after this. plus, we'll talk to the former white house cea chairman jason furman to get reaction. stick around. "squawk box" will be right back. with this level of engineering... it's a performance machine. with this degree of intelligence... it's a supercomputer. with this grade of protection... it's a fortress. and with this standard of luxury... it's an oasis. the 2017 e-class. it's everything you need it to be... and more. lease the e300 for $549 a month at your local mercedes-benz dealer. mercedes-benz. the best or nothing. welcome back to "squawk box." happy 19th birthday to will smith's hit "getting jiggy with it." we're just seconds away from a first read on fourth quarter gdp. rick santelli has that. he's at the cme. rick, the numbers, please. >> holy cow. we didn't make the two handle. 1.9. definitely a lot lower than i was expect iing, the market was expecting. so my ciphering is we had 0.8 the first quarter. that brings you in around 1.91. if we'd have had a number around 2.3, we could have actually had 2% for the year. this number will change. let's look at the internals. consumption, 2.5%. that's as expected. a half percent light to our last look. price index, 2.1, as expected. a bit dramatically more than 1.4, our last look. now let's look at personal consumption expenditure. we get into the durable goods orders. that was 1.3 versus 1.7. that was down a bit. durable good orders, and this is a december preliminary read. as steve pointed out quite aptly with trade balance yesterday, these preliminaries, you know, it's like a dna strand that's missing a lot. think kw"jurassic park," add in dna. it is down 0.4. so it sounds bad. we're expecting over two. maybe it doesn't look so bad considering last look on this was minus 4.8. take out transportation at minus 0.4, it goes to 0.5, positive 0.5. 0.8 on the most important order. that follows upwardly advised 1.5. even so, that's better than expected. these numbers need to dramatically get higher. we want to see that capital coming in so we can plant more seeds. if you look at orders that now goes to shipment, shipments are up 1%. that's not a bad thunumber. better than expected. 1.91 for the year so far. using that, what have the markets done? still hovering around 2.5 in tens. dollar index up just a little bit. of course, we're still over 20,000. we're going to have to do a 20,000 chicago song, kind of like the super bowl supermarket shuffle. gang, back to you. have a good weekend. >> all right, rick. thank you. steve, you're next. >> i'm trying to figure out where this number was weak. we'll get to jason furman in a second. consumer spending down half a point. business investment up a point. housing investment is a big positive turnaround. we have exports rolling off because apparently the soybean. we'll get to jason in a minute. business investment we talked about. government purchases up as well. jason furman, peterson institute senior fellow, former chair of the council of economic advisers under president obama. why is this number weaker than we were thinking it was going to be? >> first of all, when something is a few tenths a i wway from w you think it is, this is growth of 1.9. that's the same growth rate we've had over the last four quarters. that's the growth rate we had in 2015. the underlying trend in the u.s. economy right now probably is about, you know, 1.5 for potential. we're getting a little extra on top of that as the unemployment rate comes down and the labor force participation rate goes up. it would be nice to have potential growth be higher than that. >> i want to stop you there. what struck me as one of the most profound changes when president trump took office, compared to the old administration and actually compared to conventional economic wisdom is potential can be higher. you just said it's 1.5. i wonder if to some extent this election is about the american people rejecting that notion or at least a good chunk of them, saying, you know what, i'm not satisfied. let's try and go for more. why can't we do 3% or 4%? >> we should do the best growth rate we possibly can, but if you're building an economic strategy based on an incredibly unrealistic idea that's at odds with what we've seen recently, you're likely to end up in a situation where your deficits are higher than you think. you look right now, deficits are 3%. that's okay. but then the latest cbo forecast has them going up to about 5% of gdp. if you fool yourself into thinking you don't have that problem because you think you can have much higher growth than what you've seen around the world, that's a recipe for problems. >> this notion of secular stagnation or whatever, that the growth rate came down, but i also feel like why not give it a try. why not see if deregulation -- why not see if tax cuts on businesses can be things that actually spur growth and maybe get a percentage point of growth, which would be huge. >> i think we should be doing everything we can to raise our growth rate, but we have multiple problems. you don't want to solve one problem and make another problem worse. for example, we can reform our business tax code, but we can do that in a revenue neutral way so you're not making the business tax code better and at the same time making the deficit, you know, even worse. trade is a great way to expand our productivity growth. and by the way, a great way to kill our productivity growth is to run around willy nilly putting tariffs on things because you're offended by what someone said. >> we've been having this conversation all morning. if you look at where we stand in terms of our trade deficit with mexico or with china or something, does trump have a point and that maybe we could have some better deals or even the playing field a little bit? >> no, if you want to lower our trade deficit overall, we as a country need to either save more or invest less so that we're borrowing less from the rest of the world. right now the flip side of our trade deficit is a large capital account surplus as capital flows into our country. i certainly wouldn't want to see us investing less. i hope that's not the economic strategy. >> so we made the greatest deal for nafta that could have possibly ever been made, we just nailed it, every single thing about it was perfect and there's no way it could be renegotiated. >> absolutely it can be improved. >> oh, it can be? maybe we're not where we could be. >> the transpacific partnership was an improvement on nafta. that was jumped earlier this week. insulting the president of one of our closest allies is not the way to strike a better deal. >> our president could not get his party to get on board for tpp. that dead long before trump killed it, jason. you know that. you guys couldn't talk your own party into it. you had more cooperation with the republicans on trying to get tpp through. >> oh, absolutely. it was a great combination of the president of the united states with the leaders of both parties in favor of it. now you have a president of the united states and for some reason the leaders of both parties against it. >> why didn't it go through? >> didn't have enough of them. i think a little extra effort, and we could have gotten it through. >> you had bernie and hillary who hated it probably more than trump. >> if you can see a large change to nafta that would have an impact on our trade deficit with mexico, that's delusional. >> you can say overall america makes out great on these deals, i understand the idea consumers are getting cheaper goods as a result of this. but you can also look at it and say, look, there's an entire class of people that got left behind. people who were doing these manufacturing jobs, and when you can do it for 40% cheaper in mexico or for cheaper in canada or something, those jobs are gone. we haven't found anything. that seems to be why populism turned on the global trade argument and why it was such a huge issue for both parties in the last presidential election. >> absolutely agree with that. that's why you're going to want to invest more in training. you're going to want to invest more in job search. you're going to want to have a more progressive tax system as some of the people who benefit the most are helping to finance those who don't do as well in the system. you're going to want something like the affordable care act so if you lose your health insurance as a result of this, you can keep your health insurance. so i agree completely with your diagnosis. i think that's a part of what people were concerned by. you want something that follows up on that. tariffs aren't going to help people. they're going to cost us more jobs. we need jobs. we need better jobs. we need to protect the people who are losing out from globalization. >> jason, how does it feel now to watch so much of this stuff that you worked on being dismantled? >> i think a lot of it's going to be hard to dismantle. i think it's going to be hard to take away health insurance from 20 million people, especially when the current plan to do so would actually take it away from 30 million people. i think, you know, dodd-frank is -- we'll see changes to it, is my guess. you're not going to be able to wholesale dismantle that. >> do you have regrets, though, that it couldn't have been done in a way that might have ga garnered more support? >> i think the degree of partisanship is unfortunate. i'd like to think we tried pretty hard. we ended up stringing out the discussions over the affordable care act a whole lot longer in 2009 because we were trying to get a couple republicans on board from the senate finance committee. basically adopted governor romney's plan, a plan that was originally developed by the heritage foundation an aei. but there's something about our politics or the republican party that's much more polarized than it was. i think you're faced with a choice. are you going to do something about the people you were talking about, becky, who have facing a cost of globalization, and one of the costs was losing health insurance. are you going to do something for them or wait for everyone to agree? president obama thought it was important to do something about those issues. >> we'll leave it there. jason, come again. i think it would be good to have you on, now that you're out of office. thanks for joining us. >> thank you. >> jason furman. coming up, dow 20,000 and beyond. an american century investment portfolio manager will join us with this top stock pick next. first, though, in earnings news, chevron posting quarterly results, missing by a wide margin, earning 22 cents a share. the consensus was for 64 cents. as you can see, the stock is down about 3%. falling in premarket trading. stay tuned. you're watching "squawk box" on cnbc. what's critical thinking like? a basketball costs $14. what's team spirit worth? (cheers) what's it worth to talk to your mom? what's the value of a walk in the woods? the value of capital is to create, not just wealth, but things that matter. morgan stanley good morning, everybody. welcome back to "squawk box" here on cnbc. we are live from the nasdaq market site in times square. among the stories that are front and center on this friday morning, german officials are expanding their investigation into volkswagon's emissions scandal. they say they have evidence that the former ceo knew about the emissions cheating software earlier than he had previously claimed. he stepped down as ceo in september of 2015. among the earnings reports crossing the tape this morning, consumer products maker colgate earning 75 cents a share, matching estimates. the company did post a bigger than expected decline in sales. is says the currency fluk shagtss were a key challenge. wow. that stock is off by 5.5%. also coming in matching street's forecast this morning, drug maker abbvie. its popular arthritis treatment continued to sell well. joe? the big market headline obviously this week in most newspapers -- andrew's not here today. did you see that? was it on the cover of "the new york times" or "the washington post"? >> it was on the bottom of the cover. >> you could turn to page a-16 to see it. nothing to do with trump being president when it happened. the dow crossing 20,000. joining us now with stock picks in this market, richard weiss, american century investment senior portfolio manager. oh, my god. 25 billion? >> how much have you raised this morning, joe? >> you're not completely gray, richard, but your shoulders are all slumped over. that's a lot of responsibility. it's multiasset, not just equities. >> that's right. multiasset portfolios. >> that's the west way to go. i guess global as well. i don't have 25 billion. if steve and i put our money together, we might beat 25,000. what would you suggest we do with this big move up we've already seen in the last three months or so? >> well, you know, we've taken the opportunity in this recent move up in equities to take some off the table. we're not going to be double down with our clients' money right here. we've been overweighted in equities for some time now several years, but we see this is an opportunity to ratchet back our previously overweighted equity positions, bring them more back to neutral, and diversify into some other areas where we see some more attractive valuations. with valuation levels in the u.s. now getting to levels where we're a little concerned, rising interest rates, rising inflation expectations, and indeed inflation, we see better buys elsewhere. >> trying to figure out what that would be. that's been the problem for so long, that there's nothing else. bonds or junk or gold or commodities? i mean, what? >> well, some of those, but we're really looking more towards europe, overseas developed equity markets. >> oh, all right. so equities but not domestic netsly. >> right. well, over in developed europe, they're showing, what, one handles on their real gdp growth numbers, whereas we're still firmly in the two range. this morning's number notwithstanding. but the room for increase or improvement overseas, much greater. basically, the markets overseas have discounted much of the negative news, not a lot of the positive news, where we'd say -- the way we view it, it's the opposite here. we've discounted a lot of the potential pro-growth, pro-corporate profit growth policies of the new administration, but not much of the downside at this point. >> do you think those policies will end up working, and if so, would you expect europe to finally address some of their structural problems and put in some pro-growth initiatives? that'd be good for everybody, probably. >> yes, and yes. so we fully expect the policies to work here, especially lower corporate taxes, lower personal taxes, regulatory streamlining. these are all pro-growth and pro corporate america. europe can once again ride our coat tails. very rarely have we seen recoveries in bull markets where we don't lead. we're still the engine of the global economic locomotive. and europe will follow in suit, as they typically do. >> i'm not going to ascribe all the gains -- japan might finally have some inflation and get out of this horrific cycle we've seen. it's not all because the united states. maybe it's just happening simultaneously. some of it probably is us exporting some inflation and some economic growth. i would think we're partly responsible for that. some good things are happening as well over there. >> no question. we are market weighted in most of the developed marks overseas, including japan. but again, we see the real opportunities over in developed europe where so much of the negative news and the geopolitical issues seem to have clouded the economic outlook. >> so no bonds really. you're just talking spread out across the globe with equities. you would probably say, you know, anyone that's buying bonds here better figure out a good way to, i don't know, some junk or maybe bonds from other countries. i don't know. where do you find any yield? or do you just go into cash? is that a no-no? >> not, not necessarily. cash can be king, as we all know, at certain times in the economic cycle. we're not avoiding bonds. many of our asset allocation portfoli portfolios, we have well-dive e well-diversifieied bond positio. it's spread out across sectors, geography. we're not necessarily dipping down into the low into the low y to reach for yield now. and if you have a horizon longer than 30 minutes, a diversified bond fund could do very well even with a rising interest rate environment. as long as the interest rate rises are not precipitous or surprising, you reinvest your proceeds into higher and higher yielding securities. and you could still make out with a nice single digit return. and this is very appropriate for many of our investors and portfolios, especially in the retirement community. >> okay. all right, richard. thank you. good to see you this morning. >> thank you. >> when we come back, jim cramer live from the new york stock exchange. take a look at the futures right now as we head to break, on the positive side but just barely on all three major indices. which sectors perform best during the first 100 days of a u.s. president? financials and energy outperform up an average of let's get down to the new york stock exchange. jim cramer joins us now. jim, should i buy microsoft or google this morning? >> google was down 20 last night, that was ridiculous. i think that you should buy both of them. i think microsoft should be up a couple. it was a really great quarter. great conference call. i thought google was unbelievably good. i think the fact revenues are up so big, they're diversifying away from advertising. that's all we ever wanted. they've got a huge amount of cash on the sidelines. stock was down only because people didn't bother listening to the conference call. had you listened to the call you would have bought it right on the call. >> so, jim, time flies. i got liesman here, mr. free trade, and i was thinking about when we first sort of had that meeting of the minds, it was over a year ago i think where both of us kind of looked at each other and said, god, it would be nice to make some things here. maybe if it's not quite as cheap in terms of labor. couldn't that help? consumer spending from the ground up, stronger middle class, we all want a stronger middle class, is it really that ridiculous to say maybe keep a few jobs here? >> i think the currency is outrageous. i think the currency advantage is what you have to talk about. it is true that the average car, the labor on a worker in mexico is one-tenth of the lowest cost car worker in america. but the fact is this currency at 21. i know, i know, trump accelerated the decline of the peso, but the fact is if nafta isn't adjusted for the peso, how do you ever get a bmw plant? forget ford, forget gm, how do you get a mercedes benz plant? a toyota plant? no way, that currency is too much of an advantage. not also medical care that's free, pollution control that's light, it's an inability to compete no matter how great our cars are. by the way i think our cars made here are darn great. of which i have one. i have one and i like and my daughter has one and she likes and i'm kind of like not so crazy. and i like vicente fox, but don't slam our country like that. i know he's hot on the collar. i'm like, okay, i can handle it, but how about the other guys? >> it's too simplistic to think we have a standard of living along with europe, the tier and there's a lot of parts of the world that don't have our standard of living. but we don't need to feel guilty if we're not meeting somewhere in the middle giving up our standard of living so that everybody -- i don't know, that's sort of a george soros, no borders, everybody needs to meet 80% lower than where we are. do i have to feel guilty if i say i want to keep some of it here? >> no, look. steve had great comments in his conference call, but they felt they had to raise wages there. mexicans need to raise wages and currency has to be offset. this may be going 25-to-1, nafta has to be adjusted. no one thought -- i mean there's an article today in the paper about how nafta's not that big a deal. go look at the gdp number today. look at what exports knocked off. i know a lot was soybeans. this is real life now, but i don't think putting a tax on is going to do the thing. it's got to be bigger than that. >> we'll see you in a few minutes. coming up, don't miss starbucks ceo howard schultz at 9:40 eastern. . whether it's in health care, customer care, technology, transportation or government. we touch millions of lives every day. conduent. advancing the everyday. we've done well in life, with help from our advisor, we made it through many market swings. sure we could travel, take it easy... but we've never been the type to just sit back... not when we've got so much more to give when you have the right financial advisor, life can be brilliant. ameriprise bp gives its offshore teams 24/7 support from onshore experts, so we have extra sets of eyes on our wells every day. because safety is never being satisfied. and always working to be better. what's brewing at starbucks now? company founder howard schultz on earnings buzz, new products and his next move, "squawk on the street" 9:00 a.m. eastern. that does it for us today. steve, thank you for being here. >> pleasure to be here, thanks. >> have a great weekend, everybody. see you on monday. ♪ good friday morning. welcome to "squawk on the street." i'm carl quintanilla with jim cramer, david faber at the new york stock exchange. coming up this hour, an exclusive with starbucks howard schultz. we'll talk earnings, this new revenue outlook in politics. meanwhile futures little changed. all major indices on track for some solid weekly gains. europe is red. theresa may of course visits the president today. q-4 gdp up 1.9. that's below estimates of 2.2. our roadmap begins with the white house, president trump and

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