Transcripts For CNBC Squawk On The Street 20161214 : compare

we are inches away from the record. futures steady as we wait for the fed at 2:00. tech titans will meet with donald trump today at trump tower. we're going live to midtown manhattan, watch them as they walk in. >> two new names officially announced to take a spot in goldman. more on the changes. first, 89 points, that's how much it will take for the dow to hit 20k. the blue chips coming off their 16th record closing high. s&p and nasdaq hitting record territory. all aed head of the fed's rate announcement at 2:00. live coverage will begin right here on cnbc at that time. we will get the forecast. we'll get the dot plots and the q & a. >> i have to tell you that interest rates are down today. you can see how this market is changed. oil is not up. interest rates are down. the futures are not higher. the banks have -- a lot of people feel like that the banks are the ones for this rate hike. even the rate hike is now baked in or maybe feel that -- some people feel the economy has peaked out for the moment. that's not what i have been feeling. but when you get the retail sales number, it says, all the bottoms up work i do is not worth it. i think the bottoms up work is worth it. the wholesale prices ran hot. they are talking about food deflation. i struggle between the top numbers and the down numbers. come out and say, rate hike, don't fret the banks. maybe buy them after they go down. >> it does to mind the question of what yellen needs to talk about, fed ind peependenceindep. does she need to delve into fiscalspending or can they lean on their own wheelhouse? >> i'm hoping she doesn't do the perp walk in the trump tower. what did i say? it feels like when the cameras are there, everyone is on board, which i think they are hoping for is independence and she does exactly what you do. talk about great job growth. maybe it's not the right jobs for some people. things are on target to begin -- the bond market is signaling the normalization lass has begun. she has the ability of having the market saying what she is right. we did not have that last year at this time. we had comedity prices falling. we had the oil kries. it's sanguine for rate hike. >> it would have an affect on stocks and actually housing as well. >> i know that the various housing ceos on their conference calls have said, look, we're in a moment where it's pretty good. the overall cost of housing is good. there is a derth of housing supply -- as soon as we get a rate hike, they there are people that say we will have multiple rate hikes. >> david mentioned this. i think above 3% is a problem. if the ten-year goes above 3%, would you have to say you have seen the end of the bond bull market. of course, a 30-year trend, he talks about the impact of li liquidity. >> he has hated the stock market. we have had one of the great runs of my career. 2,000 in dow points since the election. the election that the market is now over -- it was over a long time ago. it was over july 7. i don't get the call. i think we are correct in respecting his analysis and reporting on it. this has been a rally for the ages. if you sat it out, you do have some explaining to do. you don't come and double down and say we're really about to hit it down. i may be misjudged the impact of an election that brought a different kind of president in. but you don't come out and tell us that this -- it's time -- it's going to go down. you don't do that. you owe us. if you are going to make these public pronouncements, you have to say, i got it wrong. >> he is looking for an equity sell-off around inauguration day. >> that's totally understandable. you have a big run. you have profit taking. i come back to the notion, you know what? a lot of people thought this market was going to crater brexit, crater italy, crater the election. >> crater the election if trump was elected. there was no one i spoke to of the most highly paid investors who didn't believe there would be some sort of sell-off. it depended on the percentage amount. all of whom are buying puts to protect themselves and all of whom were wrong, not perhaps anticipating as well you would have control of all three parts of the government by one party. that may be part of it, because that then suddenly said tax reform is going to happen. that's been a key underpinning. >> how about we go back in time? look at all the people who said we were about to embark on a big decline and gridlock it will get worse and have a change in the senate? i think when you make a pronouncement that says this is the top and i look at your previous pronouncement and you say this is the top and the previous and this is the top and they are lower, i look at scans. i'm skeptical. >> you are. some people try to bring up the reagan analysis. the stock market had a nice run-up into his inauguration and the first year was a down year. not terrible, but a down year for the broader markets. before you started to have significant rallies in years following. >> from an elevated level. i remember when the cross -- i was reminiscing about when the dow crossed 2000. then we had the 2700 and 2800. then the crash. took us back down to 1400. look, if you want to say that -- i can see gundlach saying it was too early to get out. but now it makes sense. i find that's more -- >> understood. >> probably more rigorous. how about that? >> meanwhile, the president-elect meeting with tech ceos today. some of the biggest names will make their way to trump tower. here is a live shot of the now iconic lobby and elevators. expected to attend, tim cook, e larry page among others. and three business leaders have been added to the policy forum. the one that's chaired by schwartzman. >> this is a business presidency that we're about to embark on. these are all famous people who have done amazing things. that's a recognition of the new economy and the new economy we know can be as much job creation as job destroying. you have frequently commented on the notion of the driverless car. and i think you get a guy -- you get gary cohn who has been eloquent about technology and its negative impact. this is good. you want people who are -- >> gary cohn has been eloquent about that? >> last year. he was talking about the deflationary nature of tech. it means wage deflation. remember, we haven't seen a pickup in wages because i think that technology is so powerful. i had someone from a company last night talking about the 3.5 million cash years that we won't need if we adopt his plan. >> 3.5 million? >> we're going to make them into advisors. >> in a letter today in "usa today," the ceo of ib mr indica indicates there are openings that are not necessarily focused on having a four-year degree of any kind. undergraduate degree, but need specific roles that do require some technical proficiency that can be taught at a vocational school. there's a quote, we're hiring because the nature of the work is evolving. as i said, it's not necessarily because you need to have gone to college. >> no. i have the good fortune of taking the -- some of the younger scholars they have had out to dinner, the people whom they have really lifted up. the company has done a remarkable job at trying to get people -- trying to change the school system so it's more conducive to producing people who could work at an ibm. it's all one off. this is something that may be too large -- >> still come back to the larger question with the proliferation of artificial intelligence. in its earliest stages and automation and robotics. i know there are other people on the other side say, don't worry, the jobs are going to be created. but it's going to take away so many jobs. >> there's checker jobs. i'm thinking about what amazon is doing and how great that is when i can go into a store and i don't have to do the self-checkout. the person in front of me can never figure it out. >> you need the person to help you or -- >> that person scans. it's for a thing of rice cakes. it holds up the whole store. this new world of just walking through with your iphone and being able -- >> you are conditioning consumers. human interaction, why would you want that? >> they hate interaction. i never minded human interaction. >> i know. i know. a lot of reporters these days don't actually talk to anybody. i don't believe that's an effective way to report. apparently, it works for some. >> what's the percentage of time that you talk to your kids in your apartment versus texting them? >> i do not text my children. >> you don't? >> no. i speak to them. >> mine is 50/50. we have three floors. >> when we come back, the meeting with donald trump. kara swisher made a strong condemnation about that earlier. we will talk to her. look at the pre-market. dows going for an eight-day streak. twitter with an announcement about a new live component on their time line. we will get to more on that. more squawk on the street in a minute. you got it! what do you think? if you're going to wish, wish big at the lexus december to remember sales event get up to $2500 customer cash on select 2016 and 2017 models for these terms. see your lexus dealer. is that they contour to your body.r-pedic mattresses... it keeps us comfortable and asleep at night. get your tempur-pedic. the most highly recommended bed in america for as low as $25 per month and 90 night free trial. going to get breaking news on industrial production. let's get to rick in chicago on this wednesday. good morning. >> good morning. we have had cool inflation -- excuse me, hot inflation, cool retail sales. let's see what the november read on industrial production looks like. this is more north pole here, minus four-tenths. we are looking for a down number but not necessarily this far down. if i look at capacity utilization, 75.0. it's a smith light. last look, upgraded by the tenth we missed to 75.4. the problem is, 75.0 is one of the -- it's the secretary smallest number of the year outside of march where it was a bit under 75 at 74.8. interest rates have moved down. the long end is down four basis points. even though we may be on 20,000 watch, we're going to open lower based on futures for equities. of course, second day of the fed meeting, press conference, looks like 25 basis points is built in with a small course of those thinking 50. i don't think 50 with regard to the fed. i wouldn't disagree if they did it. back to you. >> rick, thanks. busy morning for you. another cabinet pick official. rick perry will be donald trump's energy secretary. then following the announcement of goldman's gary cohn, the bank making their plan official. >> yeah. they typically have split this role and then cohn -- originally he was splitting it. so that's not an atypical for goldman to do that. schwartz, cfo. a very important role at goldman s sachs. >> it was very important. they had to interact with the government and trying to explain what the book really was and how clean it was. i gotta tell you this really verifies a lot of what he left. i think schwartz is excellent. goldman sachs was hurt by dodd/frank. they had an excellent record. that's reflected by the fact the stock moved up. that can happen again. >> you hear people talking about succession. mr. cohn, you have to believe didn't think that was coming any time soon for him in terms of mr. blankfein will not leave the job. you wait four and five years and you are too old. these guys are a bit younger. >> it's not my generation anymore. it's interesting. it sounds terrible. this was my generation. we started at a similar time. it's over. a lot of the people that we thought at one point -- sherr lo -- there were a lot of people -- this is one of those firms that grooms a big group of people. this is not a succession where there's one guy. it's not a bakeoff. i think gary's departure is striking because that's a great job to be in. it's not like -- >> also, not bad to be the top economic adviser to the president. >> these are great jobs. i heard someone saying, that's a stepping stone to treasury. it might be a stepping stone for the fed. >> what might be a stepping stone? >> gary cohn to -- >> you think in '18? >> i think it's realistic. >> gary cohn fed chairman? >> as between the two that could come from that, i don't think it would be treasury. i think it would be federal reserve. >> it also seems much more conceivable under a trump administration that the next fed chair would be somebody from business. >> thank you. >> given everything we have seen so far in terms of the cabinet appointments. >> that's my point. i'm still going over tillerson. we should not minimize perry coming in. >> now the choice for interior, montana congressman who is very much in favor of using federal lands and natural resources to accelerate our ability to get things out of the ground. >> this is the fossil fuel generation suddenly. look at -- >> people running these departments who are not necessarily in favor of what they do. >> department of energy has been if you look through the last few, that's been people trying to get us off fossil fuels. rick perry is on the board of energy transfer partners which had a spill yesterday. i don't know if you saw that spill. >> energy also controls the nucs? >> yes. >> the atomic material. >> he will say, they have done a tremendous job with wind. rick perry is on the board of one of the largest peep liipeli companies in the world. it's a pipeline david knows well. they were going to merge with williams. i just -- i'm not used to seeing fossil fuel -- put it this way. the ground extractors are back. don't forget, the epa head would be a man who is suing the epa. rbm was talking about how there's been a dramatic increase in the number of earthquakes in oklahoma. >> there has been. they know it's a result of fracking. >> versus multiple years before. some of them are happening near cushing. it cop comes at a time when the hillary clinton administration would have looked at that issue. i think that's not top in mind now. >> perry is on the board of eta and sunoco logistics. >> maybe this is a sign -- a lot of people feel natural gas is -- i'm going to be a little more circumspect. people feel natural gas is the bridge fuel and that we have -- they are famous for getti intit >> hopefully they won't mine in yell lestone. >> that would be a downer. >> maybe they will keep it out. >> very nice. >> okay. >> beautiful place. >> we will get cramer's mad dash. take one more look at the pre-market on this fed day. more squawk from the street straight ahead. welcome back to a mad dash on what we like to call her hump day. what are we going to talk about? the stock of gm will trade down. there's an antitrust investigation of china talking about what's going on between gm and saic motors. i would be remiss not to say that this is -- sounds like tit for tat. gm does have large cars they sell there. this may be the beginning of when the chinese communist party does not say, be careful, mr. trump. just says, all right, here is a company made its bed with -- this is the up side for gm is china. an antitrust investigation is kind of -- would be fancifufanc even three months ago. this is something that gm has been in the good side of the chinese communist party. beware it's starting. that's all i want to say. gm has a very good move here because expansion, numbers are good, cash flow is good. a lot is because china has been such a standout for them. never expected to see this so quickly. >> it's a reminder of how many of our companies have significant amounts of business in china that that are profitable. i can think of one that has the largest market cap in the world. makes a great deal of money in china. >> do you think that willhe sum? >> lhow could it not? >> china and too much money being paid by the federal government to your company, these are new risk factors. they were not risk fak fctors te months ago. this is an inexpensive stock that may have gotten more expensive. >> a lot of work do between now and then for you and me in terms of trying to understand this and what's going to develop here in terms of the u.s. and china. first, we have the opening bell. that we can understand more easily. it's coming up right after this. hey gary, what are you doing? oh hey john, i'm connecting our brains so we can share our amazing trading knowledge. that's a great idea, but why don't you just go to thinkorswim's chat rooms where you can share strategies, ideas, even actual trades with market professionals and thousands of other traders? i know. your brain told my brain before you told my face. mmm, blueberry? tap into the knowledge of other traders on thinkorswim. only at td ameritrade. the opening bell is sponsored by splv. distributed by investco distributors inc. you are watching squawk on the street live from the financial capital of the world. the opening bell in 60 seconds on this wednesday, this fed day, this day where president-elect trump is going to meet with tech ceos at trump tower, this day where we continue to watch for dow 20k. came within 50 points yesterday. i mean, these round numbers get ridiculed all the time. does it do something to sentiment on a week where we have four straight weeks of above 55? >> okay. i remember many round numbers as producing people who would come out and say this is a tie. be aware that 20,000 does not attract buyers, it attracts sellers. even though this should do nothing. it does get headlines. people talk about it. i mentioned 2,000. i think it's -- >> let's get to the opening bell and the s&p at the bottom of your screen. it's new york cares highlights its annual holiday coat drive at the nasdaq tetra tech, providing consulting and engineering services, celebrating its 25th listing anniversary. a slew of tech news where the ceos are meeting. amazon is releasing details of prime air. this is a delivery system designed to get packages to you in 30 minutes by using unmanned drones. wind hotels will install an echo into 4700 rooms in las vegas. >> i know when i had dct on, this is this real estate investment trust that provides actual warehouses near where urban people are, this is an amazon -- amazon needs all the space it can get to do these things. an interesting article today, u.p.s. and fedex could be behind. u.p.s. missed its quarters a couple years augugo because the were behind. this is an amazon holiday season. i know that today with interest rates going lower, that has been something that is not expected by anybody. that's led to down markets. which is crazy. anyway, just watch amazon has a lot of good news. we didn't mention wells fargo. >> the living will. >> it's been a terrible stock, frozen forever. i want to point out the living will, it is not anything you would necessarily say is something that is dire. obviously, the letter that wells got about how -- the letter that it got from the fed and fdic that it's not completed an assessment. some people are going to say this is part of the downfall of wells. i think that's too strong. this article is terrible. >> it does go to an issue of how on top of everything is the bank given the problems that we know about. there's been a change at the top. these living wills are -- everybody -- every other bank managed through it and got the approval. >> right. >> except them. >> it seems like the news flow for wells is opposite of what it was just four months ago where wells was the most pristine bank. we never thought of wells as doing of the things that others have done. it's funny because you know what was the cleanest one was citi? it got the flying colors. that had been the whipping boy and wells had been the golden boy. the reversal is amazing. interest rates down drives the bank stocks down. >> you saw that picture of that drone, an autonomous aerial product. >> how many people does that cut out? >> yeah. interesting because you mention other tech companies, the ceo of uber, not a public company, they are introducing autonomous ubers in san francisco. they will have a driver and actually an engineer in the front seat. but they will be taking passengers -- they have been doing this in pittsburgh. it's starting. then you've got google separating out and giving a new name to its autonomous vehicle every. >> i thought that was significant. i know people who have been in that division. that division had been kind of -- they wanted to do the car itself. now it's going to be fit in. i think that's a sign when you put it over there that we're going to see the numbers. maybe there's actual revenues going to come from this. >> good piece in business week. the financial discipline for google calling out things that don't have interest or not going to be good return on investment down the road. >> someone who knows her work, you don't hire ruth in order to be able to just kind of have a good time and open a lot of new facilities that are meant for nail salons and gyms. anyone who has been in google -- alphabet knows that ruth changed the culture. she's changed the culture. you have an operating budget that's severe. they have 50 billion overseas. >> they generate enormous amounts of cash. they are committed to r & d and coming up with whatever is going to be the next thing. so far, they haven't had a worry. search is the thing. >> moon shots -- there are critics that say moon shots have done very little. then again, say because of ruth i can see what the rest of the company did. it's generating a huge amount of cash. it's cheaper than a lot of the industrials that have moved up dramatically since the election. >> speaking of moving up dramatically, invidia is the best s&p. it is taken to a buy after 178% rise this year. >> a lot of people have been dragged kicking and skrecreamin. people have to understand that this is what intel looked like in '91. what you need is chips for machine learning. they have the chips. you need the chips for cars. they have the most sophisticated chips for in -- >> intel in '91. that was quite a run. >> you think they can mirror that performance? >> that's a tough question. if you want to go look at markets they play in, they are the equivalent of the personal computer market of '91. andy gross said, we're going to microprocessors. the tremendous -- the move to pentium. they have all the chips -- when you hear internet of thinks, think of nvidia. greatest growth market is gaming. they have double digits. they have the gaming chip. >> arm holdings got taken out by soft bank. a huge growth area. >> is it an early call? no. it has -- it stalled for a couple of days. >> a couple of days. >> i had a caller on mad money, this nvidia has done nothing. >> it tripled. it has done nothing in the last 48 hours. what a momentum horse. >> like it. >> there's a horse that was triple crown in 1974, i believe. >> he didn't know he played the ponies. >> won the belmont by how many? 17. >> i went to see secretariat. >> you were ten? >> i went down to the farms down there. they have a great statue. great kentucky horse and great statue. secretariat, got my picture taken with that. >> passed not that long ago. >> he hung in there for a long time. >> it would be -- you know what? they do the horse lineage. nvidia and secretariat. >> that's saying a lot. >> who was our last triple crown winner. >> died '89. >> ran in the early '70s. >> i saw secretariat. monster horse. >> you had seattle slew and affirmed and then you had a very long wait. what was the last -- who was that last triple crown winner? it was a couple years ago. >> horse racing doesn't capture the public imagination anymore. >> i had it at belmont stakes. i gave the jockey -- he gave me his horse. >> american farrell. >> that jockey was so regretful he didn't -- i did american pharoah. >> i tell you which is better. what pharoah do? it's a rate of return situation. >> i'm lost. we're going to move on to something i know a bit about, which is m & a. the most recent story that's captured the imagination of a number of investors. left some of them feeling quite queasy early this morning and even late let's call it last night. i'm talking about the swiss company actelion that treats rare diseases that has been in talks about a potential transaction in which j & j would have bought the company. it fell apart after the price got to a point in terms of the ask that j & j said no. even though they were willing to go down a road in terms of crafting a structure for a potential deal that would have met the specifications of the company's ceo allowing early stage drugs to be carved off. when they got past 250 in the ask, j & j said, too much. walked away. publically made it clear they walked away because of price discipline. m & a has become perhaps a more important part of the strategy at j & j. this was one example of them willing to engage on it. while everybody was going, oh, no -- not everybody, but a lot out there who saw the years going away if they have one working already, most of them don't, but then sanofi was interested and was there. in fact, they are. wall street journal -- sanofi's potential interest about a week and a half ago. didn't seem to be much there. they are there now. in fact, they may have been contacted by actelion when they thought things might not be there with j & j. they were all assembled on the pierre hotel trying to get a deal done. they didn't get there. now they are talking to sanofi. will they get a deal done here? structure again is an issue. it does appear actelion wants the same structure they were going to get with j & j. and then price is the main issue. is sanofi willing to pay up? this is a company that hasn't done that much m & a. they started off but they didn't end up there. pfizer came in, bought medivation. sanofi fell to number three there. in this case the question is, are they going to be willing to pay the price they need to? there are many people who believe they need to do something big. rare diseases may compliment them and give them another leg. >> what did you think about -- j & j has been really price. they don't want to overbid. i know from my background working with china to find out more about this, it's very clear that j & j felt good about avoiding the crazy m & a of biotech. they have done a lot of soul searching about how they have saved their cash. but, is there something to j & j the hard ball they play where they are willing to walk away? people don't realize and just feel like, hey, this -- >> these talks have been going on for months. of course, they have been publically reported for some time. they are showing price discipline. not that they are willing to not pay a decent amount. will sanofi be willing to go well over 250? all i can tell you is, they are taking a close look. don't expect it to be days away. it may take a bit longer for that for them to get to some sort of conclusion one way or the other. >> it's interesting, j & j -- the article last weekend about how it was -- it's continuing to go up. i think people -- the ceo has done a good job there. has stressed over and over again not going to overpay, not going to overpay. i think people felt he might be -- the stock got hit hard. j & j has a lot of money overseas. j & j has the best balance sheet in the world. j & j didn't want to hurt its balance sheet. >> aaa. >> aaa. that's not a battery. that's j & j. >> dow down seven points. we await the fed statement this afternoon. see what's moving on the floor. >> good morning. mixed market. that's a good tlihing because we're getting the rotation, the theme we have been talking about for last week. let's look at your major etf sectors. remember the leadership groups, banks and energy and materials and industrials. generally, those are under a little pressure today, particularly banks and energy. that's a healthy thing. a lot of the stocks have gone parabolic recently. consumer staples, a lager through november, the last week or so we noted and utilities and real estate has come to the floor. that's why you get these mixed market. there's been a lot of technical talk this week. technicians are arguing about certain sectors being dramatically overbought. indeed, they are right. if you look at one simple measurement that technicians use, relative strength indicator, a lot of big names are overbought. you get mean reversion. you can't keep going up. you eventually stop by the law of gravity. jp morgan, many finals like travellers are over80. boeing, exxon, a lot of big napes, intercontinental exchange, for example. the exchanges have been on fire recently. the point of being really overbought is you can be overbought for a few days but eventually you stop. you can't keep going up. this is exactly what's happening today. you are starting to get a little resistance. the stocks have gone up so dramatically in the last seven weeks. i'm choosing five. i could put up 25 very easily right now. speaking of overbought, i got a lot of questions about the russian etf. it's just gone -- talk about parabolic. the amount of money going in comes up dramatically, that's an overbought indicator. this is 2.5, $3 billion it attracted. it has gone up in the last several weeks. this is vaneck. they all trade over in russia. energy -- it's mostly commodities. a a few financials. the amazing thing is the amount of money it attracted and it has gone straight up. keep your eye on that. i'm starting to get questions on it. when everybody starting focusing on it, that's when you have to be careful. he would look at the auto today. gm and ford under some pressure. we have very vague reports out of china that china may impose a penalty on u.s. carmakers. senior chinese official says read anything improper into that. you see what it's doing to gm and ford. in terms of the fed here, markets expecting them to acknowledge an improving economy but not expecting them to be overly aggressive on the rate hike. they have told us about this and about the effect of trump and his changes in the fiscal policy. yellen said they will update our economic outlook as the policy landscape becomes clearer but not until then. d dudley said it was premature to change the outlook because we don't know what the fiscal policy is yet. you might hear people say the fed is behind the curve. but i expect them to stick to the policy and not dramatically change the economic forecast. right now, dow down ten points. >> a few hours away. thanks so much. let's get to the bond pits. check in with rick in chicago. good morning. >> good morning. i tell you, you could feel the excitement in the air. we know that last year in december it was the first tightening in close to a decade. one year later, we're going to have another rerun or redo, do it all over again. many are going to look at 20,000. many are going to look at 2.5%. let's look at one week of twos. you could see the upward drift. they are virtually unchanged. as you move down the curve, a little different scenario. remember, we did have an interest t intra-day violation. let's go overseas. ten-year, they have the drop affect. we're rounding on the long end. they are below what was the weekly close a week ago. that's significant. we expect to monitor the spread between the two rates, especially after the fed this decision. let's have a fun chart. we all talk about the yield curve. if you look at tens minus twos, there's been some real movement here. most of it has been steepening. if you go back four more years and you check a longer-term chart, you can see the macro view has been flattening. we want to pay attention. quickly, $3 index charts. if you look at a 24 hour you can see the volatility. i say on fed day, the dollar index is the most concise way to get a weathervane direction. if you look at one, it's flat. flattening is the word with the dollar as well as sometimes with the curve. if you open it up to november 1, you see that we have been hovering in a tight range, 101. the high yield back to '03. this is one widest spreads. we are down about a penny from the high. >> rick, thank you very much. breaking news. the general services administration says president-elect trump must fully divest his ownership in the trump international hotel in washington to avoid a conflict of interest. that's according to house democrats. the gsa gave its response to the house oversight committee in response to a request. the trump team has not yet had any communication with the gsa about that hotel. it raises serious questions about how he plans to proceed. they are calling this an imminent breach that will take place on january 20th. the primary point of contact has been ivanka trump. >> these are real estate properties. they're not -- you can't turn on a dime. i thought andrew ross sorkin had a great idea. a little interim. you can't just -- these aren't stocks. you can't say, could you buy that for me? these are very complicated properties. it's an interesting ruling. there's a lot of rear guard action happening. >> problems for shippers but maybe good news for retail. online shopping and shipping is booming. look at trump tower this morning. we are awaiting the arrival of tim cook and more as the biggest names in tech meeting with trump continues. come on! why doesn't verizon offer unlimited data like t-mobile? is it because their lte network was built six years ago? six years ago? that's like a hundred... in phone years! their lte network is older, slower and they limit you. switch to t-mobile, the newer, faster and unlimited network. we cover 99% of the americans verizon covers. switch your family of four to t-mobile and we'll give you $800 to spend anywhere you want. is happening before our eyes. shift in human history sixty to seventy million people are moving to cities every year. at pgim we help investors see the implications of long term megatrends like the prime time of urban expansion, pinpointing opportunities to capture alpha in real estate, infrastructure and emerging markets. partner with pgim the global investment management businesses of prudential. dow's down 18. some of the recent winners are the laggards today, like boeing, cat, exxon, j.p. morgan being led by pfizer and merck. we'll get stop trading with jim in just a moment. time for cramer and stop trading. >> sometimes stocks are metap r metaphor metaphorical. and proctor & gamble has been that. we had yesterday an analyst saying perhaps this is not the right time, but when the dollar goes down and interest rates go lower, people return. they return to these same stocks. and the fact proctor's up says once again the money doesn't leave the market like it used to. it doesn't desert. it just rotates. out of industrials into the proctors. this is actually a bullish sign for the market because the money doesn't just say good-bye. so keep in mind that the rotations have been breathtaking. and they're 24 hours long now. >> yeah, like moving to a different room. you don't want to leave the party. just maybe get out of the -- >> exactly. i look at a proctor which is a very fine company and say, geez, they hate it yesterday, love it today. i say it's a sign the market doesn't want to leave -- the money doesn't want to leave the stock market. wants to stay in? >> what are you doing tonight? >> remember when stocks rallied, maybe people will circle and this dialpad is a company that will outmode technology so often the case these days. i have a 2:00 facebook live on the fed. i don't know, guys, when i look at these rotations like nvidia, there was nothing in that upgrade to nvidia that's up two bucks. i want to caution people. i mean, these stocks have been going up over and over again. >> jim, see you tonight. big day ahead. "mad money" 6:00 p.m. eastern time. facebook live at 2:00. when we come back, more on the dow's march toward 20k. and then investors awaiting that rate decision at 2:00. janet yellen's news conference is after that. that will be all right here on cnbc in about four hours. ♪ ♪ for decades, investors have used a 60/40 stock and bond model, with little in alternatives. yet alternatives can tap opportunities that traditional assets can't. and even though they're called alternatives, they're actually designed to help meet very traditional goals. that's why invesco believes people should look past conventional models and make alternatives a core part of their portfolios. translation? goodbye 60/40, hello 50/30/20. enjoy your phone! you too. all right, be cool. you got the amazing new iphone 7 on the house by switching to at&t... what??.... aand you got unlimited data because you have directv?? (laughs to self in disbelief) okay, just a few more steps... door! it's cool! get the iphone 7 on us and unlimited data when you switch to at&t and have directv. this is my retirement. retiring retired tires. and i never get tired of it. are you entirely prepared to retire? plan your never tiring retiring retired tires retirement with e*trade. i'm in vests and as a vested investor in vests i invest with e*trade, where investors can investigate and invest in vests... or not in vests. sign up at etrade.com and get up to six hundred dollars. is that they contour to your body.r-pedic mattresses... it keeps us comfortable and asleep at night. get your tempur-pedic. the most highly recommended bed in america for as low as $25 per month and 90 night free trial. ♪ good wednesday morning. welcome back to "squawk on the street." i'm carl quintanilla with sara eisen, david faber at the new york stock exchange. dow 20k a touch farther away this morning. dow's down 31 points waiting for the fed statement this afternoon. trump meeting with tech executives, rick perry, a lot to watch today as oil is down a full dollar. more economic data crossing the tape at this hour. ahead of the fed, rick santelli has the numbers for us. rick. >> yes, i do. our october read on business inventories, you know, not a top tier number but something fascinating here. it's down 0.2%, a little more than we were looking for. but here's the interesting point. down 0.2% would be the weakest of the year, weakest all the way back to november of last year. and we've had a lot of minus two tens, to find a bigger number you have to go to december '09. that's kind of the defining baseline. we want to pay attention to that. suffice to say dollar's lower, rates are lower and for the time being stocks are lower. we'll see how all that sets up at 2:00 eastern when janet yellen drops some data bombs on the marketplace. back to you. >> okay, rick, thank you very much. it is d-day at the fed, as rick says, fed chair janet yellen expected to announce a hike in rates for the first and only time this year. stocks right now in waiting mode. dow's down, s&p's down 2. let's bring in chief investment officer at bmo private bank, good morning, guys, good to see you both again. >> good morning. >> good morning. >> michelle, i'm trying to handicap some potential surprises this afternoon. if it's not about whether they move or how much they move, could it be about the dots? >> right. it could be about the dots. it could be about the language. both in a statement and the press conference i would say the dots are probably what people are most focused on. if you look at the last sep, in september the dots came down pretty significantly not just immediate term but longer term expectations. so i think the risk is that you could potentially see a small shift back up for 2017 dots given that the unemployment rate has been down, given that some of the inflation numbers have left a little stronger. but i think the most likely outcome is they hold exactly as is given there's still a lot of uncertainty as to some of these potential policy changes are going to filter into the economy. >> how does the economy look next year, michelle? and does this market rally that we've seen about 9% higher for the dow inching toward 20,000 match up with your economic forecast for the u.s. economy? >> so we do think that growth is going to be better in 2017 than it's been this year. so for this year we're averaging 1.6% gdp growth given that really challenging start to the year. next year we think we're going to see 2% growth. and then as we look ahead into 2018 you can see a further acceleration once stimulus kicks in. but one of the things that is essential to our forecast is that it is certainly the case we're going to see fiscal stimulus. but that fiscal stimulus is more a story for late 2017 or 2018 than it is for the start of the year. now, you could see animal spirits improve. you could see confidence improve which will spur growth, but in terms of actual stimulus impacting growth, it's hard to see how that filters in before the second half of next year. >> hey, jack, you wake up this morning, you've got gundlach warning about 3%, you still think the stirrings in '17 will be more positive than negative? >> i think the economy certainly will be. i tend to agree with michelle, but michelle's talking about 2.3% or so for next year. and i'm not sure that dow 20,000 and 2.3% growth kind of compute. i do think that interest rates will continue to ratchet higher. and of course the one key piece that the stock bulls have latched onto over the course of 2016 is the fact that stocks were cheap relative to bonds. well, stocks are up, yields are up and that gap has closed pretty dramatically. >> you think sentiment's too elevated here, jack, or not? >> i do. i think so. i think that sentiment has shifted. you know, it's shifted away from international into the u.s. it's shifted from into mid and small cap. so i think that there are going to be some disappointments in probably u.s. large caps. there may be some positive surprises in the international side. so i think that we still want to stay engaged in equities no doubt, but i think there's probably more room to run internationally than there is here at home. >> interesting. let's say you wanted to stay at the party domestically. where would you be looking? we just had a discussion with cramer about p&g's ability to hang in there, the lesson being money doesn't want to exit. it's willing to rotate though. >> yeah. we've shifted into mid cap. thankfully we did that in like july or august where they were certainly more favorably valued than the megacaps. and if you continue -- if you believe that equate the megacaps with the quote/unquote elite, here's a sector of the market that pretty much embedded there in the global supply chain as part of their business. and now they're trying to, you know, influence that -- or they have in the past influenced congress to, you know, carve legislation to help their business. perhaps if we start to see a pushback there, then of course their middle and smaller cap competitors should be relatively advantaged in that kind of environment. >> michelle, finally, with the fed in focus and with the trump rally in focus, clearly the president-elect has some appointments to make. you could change the shape of the fed coming up here and into the next few years. do you view the fed getting more entangled into the political sphere as a key risk for the markets and the economy in the coming months and years? >> i think that's a big unknown. i think it's an important question to ask, which is, you know, will the fed's independence be compromised at all? not necessarily from the new appointees but just in terms of the change in perception in washington around the fed's mandate and the fed's independence. so i do think that's one area of concern. and then in terms of the new potential joiners, that's a big wild card. we have two vacancies right now, potentially three depending on what happens with fed governor tarullo. and then fed chair yellen's term is up early next year. so there's a lot that can change in terms of the leadership of the fed. >> michelle, jack, good to talk to both of you guys on an important day. we'll see you soon. michelle meyer and jack. >> thank you. >> stay with us on cnbc here all day. we will have live special coverage of the announcement at 2:00 p.m. eastern. fed chair yellen's announcement 2:30 p.m. the countdown clock is on. meantime, tech leaders are gathering to meet with president-elect donald trump. our jon fortt joins us with more. jon, so many different angles here from the social views to jobs and the economy. what will you be looking for? >> well, this is really just probably a level setting meeting. we expect to see, again, ibm, tim cook of apple, jeff bezos of amazon, larry page of google, sheryl sandberg of facebook and so many others, safra catz of oracle. we'll told steve mnuchin already made their way upstairs. the whole trump team gathering as you would expect. many of these leaders opposed the president-elect during the campaign season. but these of course are people who are pragmatists who know how to work with governments and administrations around the world who they might not have always agreed with. expect to see them looking for common ground talking about jobs and the economy. ibm speaking hours ago yesterday about a plan to add 25,000 jobs in the u.s. over the next several years. now, i'm told from ibm trying to get some clarity on that, that is new jobs. of course ibm will be making some cuts at the same time, but these are jobs that have to do with cloud, with data center and some of the areas where ibm's planning to grow. so i would expect to hear that they're focusing in on those issues of common grounds and perhaps trying to avoid the areas of disagreements, some things perhaps around encryption and immigration. though you never know. of course we'll be listening up for all the information we can get once they're out of the meeting later this afternoon, guys. >> it's interesting, jon, the degree to which tech and telecom to some extent have tried to appear to be bringing something to the table, whether that's an ibm today, a softbank last week, even arguably amazon this prime air announcement this morning, jon, hard to think it's completely just a coincidence. >> well, i think we've got to read a little something into everything nowadays, but when you think about it, i mean, there's a lot of talk about manufacturing jobs. but that carrier deal even to keep some jobs here you got to recall, i mean, most of the jobs that we're talking about in that deal are leaving. and think about the number of jobs that apple has added to the economy not just technology jobs in california, but we've got an apple store right down the street here. the majority of apple's employees now are in retail, most of apple stores are in the u.s. those are jobs that carry benefits that people can take who don't necessarily have, you know, graduate level degrees and software engineering. all of that is important and comes into play as these leaders meet here today, carl. >> by all accounts, jon, peter thiel is organizing this, the one man in silicon valley that was supporting trump on the team from the very beginning. what do we need to know about him, where his relationships lie and what his views are? >> well, he was certainly the most vocal. that's one of the questions that i have leading into this. i think we're going to look to see exactly how he advises the president-elect about how to interact with these leaders. you know, the last time i can remember a group of leaders from a particular industry coming to trump tower was early on when members of the media and media executives came into trump tower and got a dressing down from the president-elect. i'll be curious to see if the tone is very different with these tech leaders who kofk have a lot of jobs potentially to add to the u.s. economy, they do business around the world, and certainly have a different image when it comes to what the united states projects into the world. so many people of course use facebook, so many people use google, and so the president-elect sitting down with these people perhaps trying to find common ground could put an important marker in the preparations for his presidency, which of course is just a few weeks away. >> jon, we'll be checking in with you throughout the morning and into the afternoon. our jon fortt outside that meeting at trump tower in midtown manhattan. when we come back, our exclusive interview with blue har bour founder cliff robbins. later on mark olson join us talk about that important meeting today. dow losses continue to gather down 39 points. we're back in a moment. is my h. this is where i trade and manage my portfolio. since i added futures, i have access to the oil markets and gold markets. okay. i'm plugged into equities- trade confirmed- and i have global access 24/7. meaning i can do what i need to do, then i can focus on what i want to do. visit learnfuturestoday.com to see what adding futures can do for you. a new report in the china daily newspaper says china's government will soon slap a penalty on an unnamed u.s. automaker for monopolistic behavior. we have the latest on this important story from beijing. >> china is sending a not-so-veiled threat to president-elect trump after he questioned the one-china policy. today the state-run media has been forecasting potential trouble for american companies here. the global times, a communist party paper, specifically referenced starbucks saying the coffee chain, which has 2,500 stores, may perhaps have to watch its competitor, the uk's costa, seize market share. separately the china daily reported that antitrust authorities are now reviewing business practices of an unnamed american automaker which would likely be slapped with a penalty soon. ford says it's unaware of any investigation, gm won't comment but says it abides by the country's laws. for both companies as far as starbucks china is a major market. howard schultz says he believes china is going to become an even bigger market for starbucks than the united states. china has a pattern of taking punitive measures on a country's businesses if it's in a disagreement with the government. the am cham head here says all the companies want here is just for some stability. beijing through its official state media has also indicated it wants a stable relationship with the united states but it has now been signaling that it is willing to pull on some levers of influence if trump should rock the boat. eunice yoon, cnbc business news. >> our thanks to eunice yoon, carl, as we continue to watch the rhetoric heating up on both sides of that relationship. absolutely true. bracing for a volatile stock market in 2017, that's according to cliff robbins. the hedge fund titan will join us exclusively in just a moment. matters. d 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. while many activist hedge funds have struggled to post gains this year, one firm that never engages in potential schemes but deems itself activist of at least a certain type has managed to outpace its rivals. chuck robbins joining us here at the nyse. again, we talk about this sometimes not actively an activist, but you take large positions over long time dealing with management. you've had a very good year, cliff. what has worked this year that will work next year as well? >> yeah. you know, the seeds are sewn a year or two ago. our program is we invest in these companies buy 5% or 10% stakes with our companies in partner with management teams, and largely the selected a couple years ago and our efforts to unlock value. most specifically this year we had two large m&a events in our portfolio earlier in the year. progressive waste, one of our companies acquired by waste connections, we were very involved in orchestrating that deal. and another company, rack space, was recently acquired by apollo. so those were two notable events. there's also been lots of other things working in the portfolio. and i'm quite excited about some of those developments and what they might mean for next year. >> such as? >> such as investors bankcorp, which is a community bank in new jersey, pennsylvania and new york. that's a company that's benefitting from rate increases which we're likely to see later today which will improve margins for banks and improving economy. this is a company we're doing a major sort of capital redeployment. a company has a lot of excess capital on its balance sheet. this year they bought back 10% of its stock with our urging. 20%'s been bought back since we've been involved. they've been increasing dividends significantly, paying special dividends. this is a company also with strategic value. i would keep an eye on that for the years ahead. that's one position where it worked very well for us. i think given improvements in the economy and rising rates we'll continue to do well. >> right. when you look at the portfolio you've had, and again you point out you've made investments a couple years ago, some of which paid off in m&a and therefore getting taken out at a premium. how do you adjust as we head into something unknown here but certainly a lot of expectations, including higher ratings? or do you adjust at all when you look at your portfolio? >> no, we do adjust. we're definitely investors, not traders. we'll talk more anxious to share thoughts with you about what i see happening next year, but i do adjust but not in a major way. certainly we went into this year thinking banks would be a good place to go irrespective of where the election might have wound up, we thought rates would be going higher and bank margins would improve. specifically we love this bank because of its excellent management team and the balance sheet it has. we've been investing in defense because we had a view that defense would be a place where we would be putting more dollars irrespective of how the election would move. we have a very large and significant position in a company called bwx technologies, which makes jet propulsion systems for submarines and aircraft carriers. you know, that company is really on a tear and i think the future looks -- >> don't have cost overruns and president-elect doesn't tweet about them. >> exactly. but this is a company with a monopoly position with the u.s. navy and we're going to be building a lot more submarines. another company that i really like is a company called xy links, make something called fpga has a software package attached to it and great applicant for driverless cars, also data center growth. it's really a very unique business. this is a company sitting on $2 billion in net cash. this year we asked the board and they agreed announced a $1 billion share buyback. this company also has very strategic significant value. its one peer was purchased for about 42 times earnings last year. this is a company with strategic value and growth in business and management is doing a great job growing business. >> a name for your portfolio maybe the year or next year after you would see a takeout of? >> wouldn't be surprised. independently company but not only growing business using balance sheet and in the market so confident about its future that it's buying $1 billion of its shares. >> yeah. let's talk a bit about not just the current market but what your expectations are for the trump administration and all those things it will mean whether it is tax reform, infrastructure spending, higher interest rates that may come our way, deregulation, is the market going to benefit or have we already pulled forward a lot of the benefits we're talking about as a result of potentially high growth? >> we're in a very interesting time here, david. i think in the last since the election it's been remarkable what's happened. you've got a combination of animal spirits, everyone is thinking more positively. and there's quite a circumstance la -- circular it tity to that. you'll see significant wealth effect of consumers spending more money. >> do you believe that? >> i believe it. and confidence in the boardroom. i talk to ceos every day, they're thinking more positively and that has a circulari circularity possibility as well. i definitely think animal spirits are here and market has moved up because of that. in respect to next year we're at a very interesting point. i think one of two things are going to happen. one, either we're going to get the growth that the market is expecting, we're going to get significant tax cuts, regulatory reform, we're going to get infrastructure spending, avoid trade wars, all those things will come together and we'll get the growth that will not only underpin the valuations we're seeing today but could move the market materially higher. or, you know, we could find policy changes or legislative impasses to the trump agenda and then therefore, you know, we wouldn't see that growth. but i think the team down there from my early reading is quite determined. you've got the house, you know, and the senate, and the presidency all in republican hands, and we're definitely set up for a pro-business, pro-market economy. but we haven't even gotten to the inauguration yet. >> let me break in for a second speaking of the new administration, gary khon doing what we see so often these guys walking in and saying hello and getting in the gold plated elevator to go up and visit with the president-elect. but this goes specifically to your point about what you can expect under a trump economy. you did mention and so many people do, trade wars, certainly something that has to be something that's watched closely and china and what that means if it goes awry. >> absolutely. we have to watch for trade wars and legislative impasse. but if the setup that trump is talking about comes to play, i think stocks could go materially higher. >> you're quite bullish. >> i am bullish. but again, we haven't gotten to the inauguration yet. i'm watching this every day in our portfolios. but i do think for 2017 i am bullish. you are going to see volatility because there's going to be lurches as we see changes in policy or potential changes in policy. i also think the geopolitical risk is higher than it's ever been and i don't think that's fully discounted by the market. so we'll see volatility, but that's good for active investors, stock selectors. i know what i want to buy if the markets go down, and i know -- >> let me in on that note because you are a stock picker. i mean, you turn yourself obviously, i don't know, friendly activist. but stock picking is at the root of it. active management, i mean, you guys are on the run here. everybody buys etfs, they own index funds and everybody says active managers keep underperforming. is that ever going to change? >> thankfully we haven't been one of those that have. i think that's wrong -- look, the market has gone up five or six years in a row so it's been tough for active management. that's not going to be the case going forward. i think we are at a period where active management's going to be good. i think m&a's going to be strong. there's a lot of confidence in the boardrooms, strategic buyers are there. we know how to position ourselves for that. if you get the repatriation trump's talking about that will be a big boom to m&a. i also think some mid cap smaller companies are going to do well. those are continuing to be strong because they're not as exposed to the dollar's strength and certainly not exposed to these trade wars that you mentioned potential trade issues. so i'm pretty excited about opportunity set, but i think we all have to keep an eye on what's going to happen. because a lot's been said, nothing's been done yet. and we have to get through the inauguration and the first part of year. >> yeah, cliff, we appreciate you joining us for some insight at the end of this year. >> always great to be with you, david. >> nice to have you, cliff robbins from blue harbour group. fed chair janet yellen expected to announce the first and only rate hike for 2016. this afternoon three hours, 32 minutes away, we'll discuss that and more with former fed governor mark olson. and later, will the president-elect pick rex tillerson as secretary of state face an uphill battle on capitol hill? by all accounts the answer is yes. we'll be joined by former assistant secretary of state ambassador lincoln bloomfield to discuss coming up. hey nicole. hey! i just wanted to thank your support team for walking me through my first options trade. we only do it for everyone gary. well, i feel pretty smart. well, we're all about educating people on options strategies. well, don't worry, i won't let this accomplishment go to my head. i'm still the same old gary. wait, you forgot your french dictionary. oh, mucho gracias. get help on options trading with thinkorswim, only at td ameritrade. we need to be ready for my name's scott strenfel and r i'm a meteorologist at pg&e. we make sure that our crews as well as our customers are prepared to how weather may impact their energy. so every single day we're monitoring the weather, and when storm events arise our forecast get crews out ahead of the storm to minimize any outages. during storm season we want our customers to be ready and stay safe. learn how you can be prepared at pge.com/beprepared. together, we're building a better california. good morning everyone. i'm sue herera. here is your cnbc news update at this hour. former cia director le on panetta says he's concerned about recent views expressed by president-elect trump regarding the importance of intelligence briefings. he made the comment speaking to journalists at the arab strategy forum in dubai. >> i'm concerned in general with his view with regards to intelligence and the importance of intelligence. i think it's extremely important for the president of the united states to protect our country. and in order to protect our country that president needs to understand threats. new and chilling video of accused charleston church shooter dylann roof. images released in court today show the 22-year-old taking target practice in the days leading up to the shooting. he has confessed to killing nine church members during a bible study group in 2015. a line has already formed for thursday night's "star wars" rogue one premiere. the multiday camp outwait in line will raise funds for the starlight foundation. at least it's for a good cause. that's the cnbc news update this hour. let's send it to bertha coombs at the nymex with the eia inventory report. good morning, bertha. >> good morning, sue. thanks very much. we've got a bullish inventory report, a drawdown of 2.56 million barrels of crude. and in terms of a gasoline build not as big as expected. 497,000. the expectation had been for a build in excess of 1.5 million. it's not really helping crude prices all that much. today the concern continues to be production. the opec production cut the analysts over at goldman sachs point out over the last 17 production cuts since 1982 in general participants really cut about 60% of what they say they're going to cut. on top of that here in the u.s. the government is projecting that shale oil production is going to rise by about 2,000 barrels a day in january. and already in north dakota this month they're already seeing production up, back up at about 1 million barrels a day, guys, that's after having dropped below that. that's still about 18% below where it was this time last year. but nonetheless as prices have come up, folks are starting to produce a little more as well. back to you. >> we're going to watch oil for sure after that, bertha, thank you very much. bertha coombs. meanwhile, as you know the federal reserve expected to raise interest rates today for the first time in a year. our steve liesman is in washington getting ready for that and joins us with more. hey, steve. >> carl, thanks very much. this looks to be for the fed a safe hike, but i would call it a risky forecast. now, it's a safe hike because yields in the market are already above where the fed is thought to be going today with that expected quarter-point hike. that's going to bring overnight lending rate for the federal reserve up to around 63 basis points, its first hike in a year, as carl said. here are some of the questions we want to look at. in its forecast does it kind of get on the trump optimism train? does it boost its rate forecast, growth forecast or inflation outlook? two rate hikes in 2017. talk about that in a second. and how does yellen respond to questions certainly coming from the press, i wonder who, on the possibility effects of trump -- of president-elect donald trump's policies. new york fed president bill dudley told me earlier this month on this very show that the fed can't change or won't change its forecast until it knows how much fiscal stimulus is coming, what form it's going to take and when it will happen. but here's what he said could happen if it does. >> if fiscal policy were to turn more expansive and lend support to economic activity, then probably the federal reserve would probably remove accommodation a little bit more quickly over time. >> so it's going to take only two sent ris fed members in order for median fed hike to rise from two in 2017, since the market seems to have that priced in seems the possibility as recent rise in rates, inflation and market could bring out what i'm calling, guys, the inner hawk in central bankers may want lower rates but don't like running the economy at around zero interest rates. carl. >> steve, we look forward to seeing you in a little bit as we get ready for that announcement at 2:00 eastern time. for more on the fed and how markets will react we're joined by ubs director of floor operations art cashin joins us this morning at post nine. art, good to have you back. >> good morning. >> as usual a lot of us are playing checkers, you're playing chess. you bring up in your note this morning it may not just be about a hike but president-elect trump's response to one if it comes. >> he was critical of the fed for being political and they were holding off any rate hikes until the election, which he thought favored his opponent. i wonder now that he's elected whether he really wants to see a more hawkish fed. i would think his economic advisors would counsel him against that. but what i will be watching for is when they come out and then yellen i think will talk about a wait and see policy. and then will we get a twitter from the president? will he say something? i think that will be very important. and particularly the tone. if he says, see, i told you they were political all along. now that i'm in they're raising rates. that could set up for a little bit of nose-to-nose between the president and fed. >> you think investors would not take well to that? >> i think it would make them nervous. it would certainly make me nervous. >> just getting the fed caught up in all of the politics and what that might mean? >> well, it would hint that the pre-election signs of hostility with the fed may be a bit more sincere than some people thought. and that could continue. and then you get all the other possibilities, will he try to ask her for an early resignation. she's in the chair seat until january or february of '18. >> we're looking at the dollar here. it's weakening about 0.3. i have to think that is a risk for the federal reserve right now. it has been very strong. that's going to pressure earnings all over again. the fed is the only major central bank that's actually raising rates right now. everybody else is going in the opposite direction. is that going to hurt their ability to raise next year? >> i absolutely believe so. secondarily, let's remember that the president-elect has been talking about slowing imports and raising exports. and the strong dollar has the opposite effect on that. even though he might have talked up interest rates before in his best interest keeping rates down and limiting imports maybe would bring back those jobs he talked about. >> we're going to play up 20k when it comes, if it comes, no matter what. is that smart? does it matter to you? >> no, not as much as it did way back in the lower numbers. because now it's obviously a smaller percentage move. and you can see them happen. i've seen a lot of people predicting while we spent a great deal of time at 10,000, we may do that again at 20. i'm not entirely sure about that. i think it far more depends upon the president's programs and proposals where he goes from there, i'm beginning to hear from some sources in washington that we may not get to the proposals as early as we wanted. we think we're going to see executive orders signed quickly. many of them reversing what president obama has done. secondarily you may get some bills that were passed but not signed by obama repassed and signed. but the next turn, which may surprise me when i first heard it, is they may go directly to the supreme court and try and get that ninth justice in there. i'm not a student of that, but they tell me that there are several decisions about to come down in the mid level courts that if you wound up with a tie could not be reversed. and those decisions are probably going to lean in a way that the republicans are not happy with. >> interesting. that would be a twist given expectations. art, thanks very much. see you this afternoon for sure. >> that doesn't mean you don't have a dow 20k had rt ready to right? make sure you stay with us we'll have special coverage of the fed announcement at 2:00 eastern time. fed chair yellen's fed testimony at 2:30 eastern. coming up we'll speak with former fed governor mark olson ahead of today's big announcement. and as we head to break quick look at shares of nvidia on the rise after an evercore upgrade. stock up 181% so far this year before today. but evercore says it has more room to run. and it is running up about 3.5% right now. much more ahead. stay with us. happy anniversary dinner, darlin' can this much love be cleaned by a little bit of dawn ultra? oh yeah one bottle has the grease cleaning power of two bottles of this bargain brand. a drop of dawn and grease is gone. according to economist david rosenberg, the big rally is about to run into big trouble. he reveals the five things that worry him right now at tradingnation.cnbc.com. more "squawk on the street" coming up. welcome back to "squawk on the street." stocks are lower marginally in early trading with the fomc rate announcement in focus. energy stocks are taking a hit as oil falls about 1% following a reported rise in crude oil inventories. laggards like chesapeake energy, murphy oil and williams companies are among the mix of laggards today. the sector is still leading this year though on pace for its best year, david, since 2007. back over to you. all right, thank you very much, dom chu. now let's get over to the cme group and join rick santelli who gives us "the santelli exchange." good morning, rick. >> good morning, david. thank you. i'd like to welcome my fed day guest, mark olson, fed governor, former fed governor, great to have you today, mark. >> thank you, rick. always a pleasure being here. >> well, you know, it's sort of a historic day. you know, last december 25, first time in close to a decade of a raise, looks like we're going to get one today. but jumping the gun. what do you think the fed will do, mark? >> i think they will go up a quarter, and i think that they should go up a quarter. there was no reason not to at the last meeting other than i think they were waiting for a little bit more information. but the inflation we're starting to see some evidence of inflation. job growth is solid 2.5 million more jobs. more people working than a year ago. a quarter-point adjustment would be very appropriate at this meeting. also, i think the market anticipates it. and it would would be -- i don't think they will surprise the market this time. >> i got ya. all right. now, let's look at the lay of the land with regard from a fed perspective. they have witnessed a rather historic market move, many market moves, whether it's rates moving up, stocks moving up, dollar moving up, although all three markets taking a bit of a hiccup today, how should these post election moves be implemented or dovetailed inside the strategic policy of the fed with regard to their normalization? >> well, i think one important caveat has to be mentioned at the front end, the markets are not the economy. and i think that that is sometimes misunderstood particularly by the market makers. and so what the fed will focus on is the underlying economy. and what one of your previous speakers just said a lot has been said but nothing has been done. the market in my judgment is responding to what has been said. not what has been done. so i think that the fed's focus will continue to be on that underlying economy. >> all right. and finally, i noticed today that two and three-year notes in europe are making new intraday historic negative low yields. now, depending on where they close, these are going to be the worst ever, the lowest ever, the most negative ever. so simply put, how does our second tightening and the fact we're taking a different direction than all other central banks affect them? in other words, the relative policy trade with respect to the ecb, bank of england, bank of japan? >> my guess is that's a function of our trade deficits and a function of the extent to which our intercountry trade has been impacted either by the discussions or by some of the things that have been happening in the marketplace including the strong dollar. and i think that the adjustment of the dollar will definitely affect the interest rates of some of our key trading partners. >> you know, finally you bring up the dollar. great segment with sara. is the dollar's strength a risk? my question is, is it really a category of risk, or is it a given that has to go up? your final thagtoughts. >> i think what you can't do is you cannot talk the dollar either up or down because the markets will respond just the other way. i think that we can expect that over time we're going to have a very strong dollar. and then of course going to have a huge impact on trade. >> thank you as always, mark. let's see what they do in a few hours. david, back to you. >> okay. thank you very much, mr. santelli. now let's send it to jon fortt at trump tower who has a look at what's coming up on "squawk alley." jon. >> well, david, of course we're continuing to track the markets, major indices trading a little choppily ahead of the fed meeting later today, and of course the tech meeting right here at trump tower with some of the biggest major executives in silicon valley and tech in general. we'll bring you a look at all of that coming up on "squawk alley." the president-elect officially tapping rick perry to serve as energy secretary. after announcing rex tillerson for secretary of state yesterday, for more on trump's growing cabinet, we're joined by the form area siftant secretary of state for political affairs lincoln bloomfield. good of you to join us. in all of your experience in the secretary of state, how do you feel about having a business titan, one of the top energy executives in this country, be america's top diplomat? >> good morning. well, it's a change. president-elect has reached outside of the washington culture and brought in someone who has, i would have to say, vast experience negotiating on behalf of this company. so he will be no stranger to diplomacy. although he has a lot to learn. >> you have gone through the senate confirmation hearings yourself. what do you think will be the biggest challenges for mr. tillerson? >> i expect there will be a lot of questions about whether he can transfer his focus from the interest of exxonmobil as an energy company to the united states -- hang on, mr. ambassador. we're showing you a live shot of trump tower. there say tech meeting with donald trump. that is the co-ceo of a meeting this afternoon. we'll continue to see it. fwhaut meeting is scheduled for 2:00 p.m. she's here early, potentially to be speaking with the president-elect. we already saw gary cohen, the president and coo of goldman sax taking a role in the national economic council. ambassador bloomfield, sorry to cut you off. back to what you were saying about rex tillerson and the fiery confirmation hearings we're expecting in the senate. go ahead. >> i think that what the senate foreign relations committee can do is set a serious debate on russia policy. what we're not hearing in the current commentary in washington is that for the last several years things are not going well in russia. they need to change. continues 2008, i mean, putin has been on the move, taking over ports in georgia and then an exing crimea and moving down carrier to syria and running bombing missions against humanitarian -- against hospitals and children, committing war crimes in syria. we haven't heard a word from this administration except that secretary john kerry has been relying on the russian foreign minister to help bail us out of this disaster in sear yachlt and meanwhile, the russians have put nuclear capable missiles to the west of the baltic states. they issued nuclear threats. something has to stop here. and the question for mr. tillerson will be can he take on a portfolio that will engage russia but will also deter them from further action of the kind that we've seen building up over the last eight years? it thooz stop. >> do you think tactically that involves being even more of a hawk or essentially giving them a bear hug of sorts? >> look, under president george w. bush, we had bilateral talks led by the deputy secretary of state on terrorism in moscow. with several high officials. the european military command had an annual schedule of exercises with the red army. so at the same time, we were expanding nato. and we were repositioning our forces including in toward the near abroad as they call it in russia which made them servous. so we were operating in two ways. we were engaging russia as we should. and it is fine for certain kinds of activity to gone oshgs but not the ones that empower the regime and security forces and the corruption that is at the heart of mr. putin's regime. >> sounds like you're somewhat optimistic versus what we've seen from the current administration. what about just this idea in general, mr. ambassador, with all of your work in washington of having washington run more like a business with business executives with virtually in this case rex tillerson no experience at all in government? is that a good idea? >> we'll see. i don't -- i'm not running for anything. i'm very sympathetic to washington. i have friends on the centrists. i served republican administrations but have friends on both sides of the aisle. what's interesting about mr. trump's new administration is that he is really reaching outside of washington. and this caused a fairly significant psychosis inside the beltway. i would be a little careful about what you're hearing from people inside washington. they're very unsettled. they don't know what the future holds. but don't forget, wleen hillary clinton was secretary of state, she created a bureau of energy resources. and she said at the time you can't talk about u.s. foreign policy without -- or economics without talking about energy. so i think that some of these concerns are a little bit exaggerated. we don't know for sure that mr. tillerson will be a success. i remember james baker and worked under him. there was a deal maker who would come from texas as a lawyer. he probably worked for oil and gas interests. he was hugely successful in mobilizing a coalition and then to put a peace process together that brought syria and israel to the same table. >> just onest challenges that we're going to see. the policy in the middle east. ambassador, thank you for joining us, linkian bloomfield. we have much more ahead with the dow a little more than 100 points away from that 20,000 level. pretty quiet here ahead of the fed. the dow down 32 points. s&p 500 down four. nasdaq doing the best of the bunch, pretty much flat. my business was built with passion... but i keep it growing by making every dollar count. that's why i have the spark cash card from capital one. with it, i earn unlimited 2% cash back on all of my purchasing. and that unlimited 2% cash back from spark means thousands of dollars each year going back into my business... which adds fuel to my bottom line. what's in your wallet? president-elect donald trump pledging to reform health care including bring down the sky high costs of drug prices. we have a reporter from washington with more on what we can expect. good morning. >> good morning. here at the fdac summit where the topic is future of drugs and how we pay for them. that laert question has been the issue weighing on the ibb all year. we did see a little alleviation, a little relief rally among biotech stocks after the election on the anticipation that donald trump might take a softer hand at drug prices. in his person of the year interview, he said i don't know what is happening with drug prices, i'm going bring those down. so what can he do about drug prices? folks speculate whether he can give medicare the power to negotiate. a lot of people don't think that will happen. it would require congress to step in. also, he's proposed reimportation of drugs from overseas. and the most important thing people are focusing on now is this ability to influence public opinion through tweets. we've seen a lot of that interest donald trump recently and other industries. folks are just waiting for sort of the next epipen for donald trump to step in here. a lot of that conversation going on today. back to you. >> carl, we send it over to you. >> sarah, thank you so much. good morning. it is 11:00 a.m. at donald trump tower and "squawk alley" is live. ♪

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