Transcripts For CNBC Squawk On The Street 20170905

Faber. Lots of news, m and a, Congress Returns to work, daca decision and Hurricane Irma, cat 5 storm. Rollback begins with Global Markets on the move as tensions with north korea remain high as the most powerful nuclear test was performed yet. U. N. Security Council Holding emergency talks. 30 billion when you throw in debt, one of the Biggest Aerospace deals ever Gregory Hayes will join us in an exclusive interview 30 minutes from now. Congress back in session. Deferred action for child arrivals is back in the spotlight. A big week ahead for the agenda as congress is back in session. The president is expected to end protections for young immigrants who were brought into the country illegally as children. This is the deferred action for Childhood Arrivals Program or daca markets looking to open in the red as investors get their first chance to react to the latest north korea threats. Harvey recovery, budget debt ceiling. Well see where tax reform falls in all of this after a weekend where barons is saying the bull market is going to end, guys i would say cautious. Not a lot of alarm in the markets. Markets were lower in terms of futures overnight after the north korean news. Its a familiar feeling where theres a lot of excuses for the market to seize on to kind of pull back in a sharper way doesnt look like it will do it right now at the open. Its interesting how the market did proceed last week. It recouped a lot of the losses of the prior couple of weeks very Light Trading but got the s p up to the doorstep of its old closing high now well see if theres a quorum as to whether that was justified or not. The week went along because of the belief that aid for victims of harvey might be linked to increase in the debt ceiling. Taking that out of the field of play is a real risk. But now with daca, that seems to be there seems, at least, to be a new thought that perhaps the democrats could look to demand some legislation there to pair so we may be starting to see some concern yet again about the debt ceiling that at least last week seems to abate a bit. Right you have even some republicans saying no, no, no, we dont want to kind of grease the skids for debt ceiling increase by putting it with the harvey aid so, its another element of the noise. And i think its something that Something Else or a couple of things vaulted in front of lets get the budget debt ceiling down so we get on to proactive lots of things keep being put in line. Tax reform who knows where that fits on the agenda as for irma, category 5, maximum sustained winds 175 miles an hour by some measures this is the strongest hurricane of the satellite era, some were saying and certainly the only cat 5 weve seen in the atlantic in the last decade other than matthew. So, it would do a straight shot across puerto rico by some of the models, hit all the resort islands in caribbean cuba and turn north into miami where there are 6 Million People in the metro area. Exactly what you dont want or need at this point. Obviously you dont know how its going to stay this strong or not it basically is as strong as katrina ever got, right . Yes. In terms of the power of it if you want to talk from a market perspective, its going to make all the numbers kind of suspect and take it with a grain of salt in terms of the economy. Youll start hearing companies talk about how its going to affect them and, of course, disruption and. We try to figure out what the toll is in houston and different numbers out there, whether it exceeds katrina or not, it will be enormous. A lot of things are coming at this market, mike, that arent necessarily things you typically digest, whether it is harvey or the potential for irma and or, of course, north korea, which weve been dealing with for weeks now. But the tension keeps getting ratcheted up unclear how the impact is going to be felt tenyear note yield falling back toward those levels. We sought beginning of last week, right around 2. 10 or so. Thats the caution thats filtered in there. It doesnt necessarily seem to get the attention of the equity traders, at least at the outset. Well see if that changes. August was supposed to be scary. There was a little bit of chopiness. It kind of reasserted itself there. The economic numbers have been the thing that the stock market wants to focus on. And thats been good enough. You wouldnt say great but good enough. Right well get to some of that stuff, including utx deal later this morning. Turning to north korea this morning, sherry kang is in seoul, south korea, with more on the latest after the president spoke to the president of south korea over the weekend. Reporter good morning, carl. We are getting reports and one report in south korea as well as south Koreas Defense Ministry and Intelligence Service saying that there are signs that north korea could be getting ready for yet another Missile Launch, raising the possibility of it being an intercontinental ballistic missile. Of course, against this backdrop of a series of missile tests and nuclear test by north korea just over the weekend, a lot of us scrambling for a lot of world leaders, especially those of relevant countries, including south korea. So, lets go back to that phone call between the leaders of south korea and the u. S. And with south korea really trying to beef up its own defensive readiness. The two countries agreed to do away with those restrictions on south koreas missile payload capability i think thats one good example of what is going on in this region in the meantime, though, south korean president will be visiting russia tomorrow and he is scheduled to meet with his russian and Japanese Counterparts that will be part of this busy diplomatic week, trying to put together potential sanctions package on north korea but do note, his russian counterpart, along with that of china, could potentially be a challenge here we just heard from the russian president that imposing stronger sanctions on north korea could be counterproductive carl chery kang in seoul, thank you. Jet engine maker United Technologies agrees to buy Rockwell Collins for 30 billion, including debt. Ceo greg hayes, well talk to him exclusively around 9 30 eastern time Biggest Aerospace deal ever. Ever, when you throw in the 7 billion of debt at rockwell colli collins, of course the market has been thinking about this potential deal for about a month. Bloomberg first reported early august that utx was weighing that acquisition some people at that time going really, given that Rockwell Collins only recently completed its acquisition. If they wanted it why didnt they try to buy collins before they completed that deal roughly a month later the deal is done, as we said. 93. 33 in cash the remainder is in utx stock for a total consideration of 140 a share thats about 14 1 2 times the fiscal year expectations at Rockwell Collins not a bad multiple not a bad premium as well. 25 over the unaffected stock price. In other words, where Rockwell Collins was trading prior to the first press reports of utxs interest 500 million of cost energies after, lets call it, four years. Right after the first year as well you can see utx shares are down a bit. Rockwell collins incorporated a great deal of price expectations, given the reporting that had gone on particularly, again, last week, wall street journal saying that this deal was getting very close. Plenty to talk to greg hayes about, mike, including this possibility that down the road this company could be split. Yes. Because, remember, utx, of course,ity carrier, which we remember well, given all the jobs the focus on the jobs, i should say. And it is largely now going to be aerospace. Obviously the aerospace piece is going to be more than a third of the resulting company utx. Its going to immediately start that conversation in terms of whether that business has the market loves the Aerospace Sector right now they love the aerospace cycle. The market would crave a pure play of that scale, no doubt im guessing that there would be no hurry at utx to do that if you look at a somewhat similar mix, Johnson Controls was one that had a kind of Building Systems real estate business that they did i think that will be the talk. The full price that United Technologies is paying. Yeah. About 23 billion in total sales pro forma when we talk about the aero systems business, military, after market or international for these two companies. By far the single largest component of their overall youre right this talk of a split, its a while. Greg hayes said on the Conference Call again, well talk be talking to him in 25 minutes from now the focus on the split, of course, is more onny honeywell, which is still considering that proposal to potentially hive off its Aerospace Business honeywell was trying to get utx to a deal to bring those two companies together, which would have been far larger than this deal. Never going to happen, according to greg. And it didnt happen and no prospect, of course, for it at this point. Well talk more about those deals. Greg hayes will join david in a few moments. When we come back, the latest from Hurricane Harvey. Live in houston as texas continues the cleanup process there. One of the largest deals ever in the Aerospace Sector utx buying Rockwell Collins. Calls on disney, on oracle interesting letter from the former p g i count on my dell Small Business advisor for tech advice. With one phone call, i get products that suit my needs and i get back to business. We cut the price of trades to give investors even more value. And at 4. 95, you can trade with a clear advantage. Fidelity, where smarter investors will always be. Theyre calling her Hurricane Irma, labeled as a powerful category 5 storm that could be headed toward the caribbean and the southern United States. Florida and puerto rico have already declared states of emergency. National Hurricane Center says the storm could become even more powerful over the next two days, just as it is forecast to reach the u. S. Virgin islands and puerto rico. By some measures the strongest storm of any kind in the atlantic since felix back in 07 and youll start to see traffic pick up, im sure, on the interstates leading north out of miami. Well keep a close eye on that we continue to keep a close eye on the aftermath of harvey, meanwhile. Residents of hughouston still working to clean up. Scott cohn is in houston, texas, monitoring the toxic fallout from those Chemical Plant explosions good morning, scott. Reporter good morning, carl. You know, what weve learned, if you didnt know it already, is that when the hurricane hits the gulf coast it intersects with a lot of chemicals in fact, 41 epa superfund sites. Former brio Chemical Plant on the edge of houston. Let me show you whats going on here back down that road that used to be, years and years ago, a subdivision with homes and families until they found increased incidences of cancer, birth defects, eventually bought out the families this turned into a superfund site, which it still is. 58 acres there was some flooding in this area the epa says this site came through it okay but other sites are a bit more tricky. Take a look at the san jacinto waste pits outside houston sand paper waste theyll have to send in divers to make sure that the cap that covers the waste and presumably keeps it from leaching into the san jacinto river, is still intact theyre doing this now with about 200 people from the epa in and around the gulf coast. The Trump Administration talking about cutting superfund budget 30 . I asked the epas acting region al manager what that kind of cut would mean. We have sufficient resources to do our job. Our administrator works with Congress Congress appropriates the resources and so we will use whatever resources the agency has to do the job. Reporter so, he didnt exactly answer the question. But they do know that theres going to be a strain on resources no matter what, depending how the budget goes through. Right now, they say they are keeping on top of things they have people monitoring. But there are 13 sites that are still a bit of a question. Theyre trying to check actually on site and theyve promised an update later on today. Carl scott, just a question on the geography here how much of this impedes the recovery of residential . Are these things so far away that they dont preclude people from trying to get back to their homes . Reporter well, it really depends. This site here, there actually are subdivisions that back right up to it, subdivisions across the road some of them did flood people are coming back theyve kind of gotten used to this site being here there are other areas we talked all last week about that Chemical Plant which is not a Super Fund Site but the arkema Chemical Plant in crosby early yesterday morning they ended the evacuation there after they burned off the last of those volatile chemicals in that respect, yes, it hinders people getting back. But its also just a matter of making sure that these sites, which are supposedly designed to withstand this kind of flooding and storm damage, make sure that they actually did what they were supposed to do. Yeah. Thats a good look, scott, at not just the housing recovery, which we talk about a lot, but the industry recovery, which is happening at the same time scott, thanks. Scott cohn in houston. As we take a break, take another look at the premarkets soft action on this Tuesday Morning as everybody returns to work squawk on the street from nyc continues straight ahead where the heart beats warm and true, thats texas. Where we always welcome you, thats texas. Where we always find a way, thats texas. Marcopolo marco. polo marco. polo marco. polo marco. si . Polo marco. polo scusa . Ma io sono marco polo, ma. Marco. playing marco polo with marco polo . Surprising. Ragazzini, io sono marco polo. Si, sono qui. Whats not surprising . How much money amanda and keith saved by switching to geico. Ahhh. Polo. Marco. polo fifteen minutes could save you fifteen percent or more. Polo what . Pony neighing] hey gary. Oh. Whats with the dogsized horse . Im crazy stressed trying to figure out this complex trade so i brought in my comfort pony, warren, to help me deal. Isnt that right warren . Well, you could get support from thinkorswims inapp chat. It lets you chat and share your screen directly with a live person right from the app, so you dont need a comfort pony. Oh, so what about my motivational meerkat . Inapp chat on thinkorswim. Only at Td Ameritrade. With congress back in session and any information on the growing tensions with north korea, joining us this morning, oppenheim Senior Market strategist, and cohead of market Asset Solutions good morning, guys welcome back to work as were all trying to get our heads around the obstacles like tax reform can we have a reasonable discussion going Everything Else thats going on . I think green day sang wake me up when it ends with regard to tax reform, its very difficult to do we saw Ronald Reagan win 49 states to one and it took a couple of years to get tax reform done and he had democrats on board with him i would be cautious, expecting well have a credible tax plan. Well sit back and watch. I guess the abiding question has been for a while now, just exactly how much does this market need . Some kind of policy progress obviously youve had this story of the globe growing in sync and the dollar has been weak all year, acting as a pretty good lubricant. Do markets need Something Like policy progress from washington . I think through today, its essentially the weak dollar thats essentially replaced the fiscal policy as a key driver, key stimulus in the market if you look from about february, companies with high tax rates, the ones that were supposedly going to be the biggest beneficiaries of tax reform have underperformed significantly investors have become increasingly skeptical that tax reform is coming theres not a lot of debt priced into the market today. On the other hand the weak dollar has been a Huge Positive and has enabled companies to deliver against earnings expectations and thats going to be the key. And do you think that trend will continue, i guess, is the question then. I think it will continue in the short term i do think that the euro, in particular, is starting to reach levels where dragi will become quite uncomfortable about export competitiveness and that could lead to a much more dovish policy if that happens the dollar could reverse. In the very short term the trend is continuing weakness. Meantime, though, it does sort of explain why the dow has done relatively well versus the russ russell. That is true. What were really talking about is composition of returns. Not whether or not broad market can continue to press higher no real inflation. Weve been favoring large cap end growth because were not expecting these goodies of fiscal stimulus. If we dont get them, that will continue value, size will need a catalyst rates will need a catalyst if you get a package and, you know, you see rates go to 3 , thats going to be favoring more value and more size. Short of that, rates will remain low for long and investors are still going to be better off being in large cap and growth and places where there are growth, like emerging markets. On that last note, one last question we get a lot of fed speak this week i wonder if you think any of the color will alter meaningfully projections of rate hikes going into the end of the year. I think market is extremely dovish in terms of the expectations if you look at the fed fund futures, probability of rates ending up above 2 at the end of next year say couple of points its for very dovish fed speak to an extent there is a surprise it could be surprise in terms of higher rates or more aggressive tightening, which would be a negative i dont think its a high probability but thats where the surprises are skewed today, given what the market is expecting. Vadim and brian, thanks guys. See you next time. Opening bell about five minutes away an exclusive interview with ceo of United Technologies, greg hayes, on the heels of the announcement its buying Rockwell Collins dont go away. This is not a cloud. This is a tomato tracked from farm to table on a blockchain, helping keep shoppers safe. This is a financial Transaction Secure from hacks and threats others cant see. This is a skyscraper whose elevators use iot data and ai to help thousands get to work safely and efficiently. This is not the cloud you know. This is the ibm cloud. The ibm cloud is the cloud for enterprise. Yours. The ibm cloud is the cloud for enterprise. So let me get this straight. Youre a rabbit . Im vern, the orange money retirement rabbit, from voya. Riiight. And that means. . Im the money you save for retirement. I help you get organized so your money could multiply. See . Got it. Whos he . Hes green money for spending today. You know, paying bills, maybe a little online shopping. Makes it easy to tell you apart. That, and i am better looking. I heard that. When its time to get organized for retirement, its time to get voya. [he has a new business teaching lessons. Rodney wanted to know how his business was doing. So he got quickbooks. It organizes all his accounts, so he can see his bottom line. Ahhh. Thats a profit. Know where you stand instantly. Visit quickbooksdotcom. upbeat dance music bell ringing youre watching cnbc, squawk on the street opening bell in a couple of minutes as we return from this holiday. Utx buying Rockwell Collins for 23 billion. David will sit here for a minute and then make his way to see greg hayes on the floor. There is a collar, 7. 5 either way on that so the risk overtures setting all this up this morning maybe thats why utx is showing a little bit of weakness not a bad price either if youre a Rockwell Collins shareholder, doesnt appear any expected competition at this point. We always need to review the proxy to see if anybody else had any real interest or how things advanced over the last few months as they got to a deal. And interesting to see if the rest of Aerospace Stocks actually get any kind of a look. The idea there mft migight be a knockoff effect that could get swept up in the talk at least. Day two, boeing had a nice decision from wto, reversing a ruling earlier that it had received illegal support for xxx7 jets s p at the bottom of your screen at the big board, Ecommerce Company shopify and at nasdaq its cone cranes what did you make of this piece in barons over the weekend, taking a look at bull market, geopolitics . The question that will bring this bull market to an end reflects the fact that its hard to get away from the idea that this is late cycle conditions. The economy has been expanding this long. The market has gotten where its gotten the takeaway was no real need to worry so soon. Undermine a bull market. Of course, recession and things leading up to it are the main things fed policy mistake is another one. That would be tightening too much all those things, i think they kind of invoked them and pushed them away and said not yet i think thats where most investors mind are. Yes, we have to be mindful of the fact that its come a long way. But if i look at the here and now and the things that would precipitate a major stock market, Credit Conditions are very strong. You know, you have slow and steady growth thats just fine for the market and it can kind of keep getting expensive. I wonder if you say if you want to draw an analogy what youre were in. 1997 you were starting to say, look, lets look at the exits, right it was crazy for a while. Got much crazier. Quadrupled its craziness. Like marking up of its equity values is what weve had so far. Joyless i dont know if it has to get exciting t didnt get exciting in 2007. We had the advent in the late 90s what do we have now . Ai ending the world, according to elon musk. You have movie studio in your pocket you could make the argument that the portability of the internet is the next on that note, micro calls today. Disney on the notion that you want to follow Media Companies that have a clearly defined streaming strategy. Right. Unlike viacom which they cut to market reform for the same reason. Interesting call. 115 price target. Its less than 15 up from here. I think the general thought process is where the market is at lets look at the better position Media Companies but, i mean, what are you going to charge for this no idea. How many people are going to subscribe to it . No idea. How does the transition look from the cable to where youre getting paid very generously we dont really know so many things get in the way of saying theyve got it figured out. Theyve got a lot to figure out. Unlike so many other Media Companies, of course, millions of people walk into their parks all the time during the course of a year who conceivy are an audience that they may want to try to service with a direct consumer offering. Disney is good at that part of it we reported at the time on really the hostility of some of his peers, that being bob iger i did. They didnt want to be named but people who run other big Media Companies saying try to recommit and figure this out as opposed to going to direct consumer and streaming. Igers response is im going where the audience is going. You dont want to go there, thats your problem, not mine. The dream for a company like this is to be agnostic about how somebody consumes their stuff. If you want to line them up, who is in the better and worse position disney is in the better position camp weve seen these transitions now were a Cloud Company and change the way customers buy our stuff. Its great once they get to that Critical Mass and clear some threshold of saying its working. I dont think youre there yet. Speaking of cloud, you lead me to the other big call of the day, oracle, saying the market is largely underappreciating their cloud products and we know other Big Companies get a lot of attention in that space. Without a doubt thats exactly the point for a while, boy, is oracle going to be able to compete in this new universe . Now that theyve gotten to that point through m a and transitioning of their customers you have to revalue the company . Maybe. Oracle is in an interesting spot between old tech and not old tech, 17 times earnings as opposed to 12 and 13 so theyre giving some credit. The call here is that enough relative to what the other big cloud players are able to do pepper basically to employees and shareholders, talking about nelson peltz, recalling his own history with the firm, arguing he still is closely tied to it, at least geographically. He says here, i dont know mr. Peltz and cant predict with certainty how he would act on the p g board. But what ive read his presence risks putting serious brakes on our momentum we talked about the degree to which this teteatete would happen but its happening. P g folks circling the wagons saying we have a certain culture, certain strategy. P g, its an insular company thats the criticism and also becoming their strength in terms of fending away this encouragement by peltz saying we believe in our own way of doing things and will stick to it. The headwinds, mike, the packaged Goods Supplier headwinds we talk about after every amazon, whole foods, kroger conversation, right inescapable if youre p g, you say thats the big picture trend we have to fight. Its not a p g problem, right . Were going to do what we have a plan to do it. What has mr. Peltz proposed in terms of solving all that . Theyre making the case nothing in particular he has brought. Really quickly, energy trades, as we said at the top of the show, being unwound. Wti is up 1. 30. We beganto worry what would happen to gas prices. Refineries coming back. Some of that is being reversed have you to figure out how irma will play into that, if it will be a threat to production. We really dont know, honestly. At this early stage, the thinking that its not the threat. Not to gasoline supply. Right. But gulf drilling, do you start to worry about we dont know how its shaking out. The bottom line is, crude got down toward the lower end of its range. Its picking up a little bit and gasoline has seemed to have overshot. Lot of leaders today, halliburton, marathon all trying to recover from obviously the concerns over the past week. Dow is down almost 100 and just a few handful of components in the green. Mainly home depot and chevron. Lets get to seema mody and see whats moving on the floor. Traders are returning from the holiday weekend. We are lower across the board. The dow down about 90 points this follows backtoback weekly gains for the s p 500. Nasdaq had its best 2017 Weekly Performance last week. Lets take a look at the big movers this morning. Defense names leading the charge lockheed martin, even raytheon higher as well free port mcmoran and newport higher reading the morning notes, no consensus view on how to trade the north korean risk. Certainly those brought forth an active discussion as to whether its better to own record high territory or retreat to the safe haven defensive plays as tensions with north korea continues to rise. Gold up 10 over the past two months currencies like the japanese yen and the swiss franc continue to Gain Momentum as well. This idea of trump using economic sanctions as a way to challenge north korea, kting off sources of capital, whether it be crude oil or coal the bigger risk being if china retaliates, what it could do to harm the United States u. S. Dollar as well, now down 10 this year. Of course, a tailwind for u. S. Stocks euro trading at a 2 1 2 year high ahead of this highly anticipated European Central bank meeting when looking at the 2017 performance, the weaker dollar again a tailwind for u. S. Stocks stronger euro, this year up only 5 check out emerging markets six times the performance up 26 thanks to strong earnings. Even brazil at a sixyear high, despite being involved in the ongoing bribery scandal. Why . Resurgence ban on initial bitcoin offering. Not the first time theyve tried to crack down on the space back to you. Seema, thank you very much seema mody, as we await david faber and greg hayes on the floor. David, well send it over to you. Thank you, carl we are here on the floor with greg hayes, of course, ceo of United Technologies. This morning actually, yesterday they announced deal to acquire Rockwell Collins most of it in cash the rest in utx stock which is down a bit today thank you for being here. Thanks for having me. You know i was looking back your last earnings call, july 25th at least made your interests known when they were trying to buy bea. They may not have been for sale. But we all know how those things can work why werent you interested then and why now, particularly since the integration is still on going . I would think that has risk in it. It does i like to tell our people when i started in the Aerospace Business in 1989, our number one target for takeovers with Rockwell Collins because of the similarities in our business this has been on our radar screen for a long time and for almost that entire period it hasnt been for sale weve had conversations on and off over the years when the be aerospace deal happened i had an opportunity to call the chairman, congratulate him on the deal and said we ought to look to see if theres something we cant do together beyond this. It just started down a path that said how can we bring the businesses together, partnership, joint venture the best way to continue to innovate and drive costs out was to bring the companies together. For a business that was never for sale they came quickly to the decision this was the right deal for them, right combination. After they completed the bea deal that you said can you think about this it was literally may. And the deal closed in april or closed in april about a month later. And i called them up and said look, we should talk we did kelly had a very open mind to this thing we threw a lot of different ideas around it ultimately stuck and its the right deal. Ill ask it again you are paying double premium in a sense. Rockwell paid a premium for bea. Percentage of a whole. Its not that large. Why, again, have you done that are you happy with bea does that fit appropriately into this deal in its interiors, not the digitization of the airplane. You have to remember as part of our Aerospace Business, we have an interior business of our own, injection seats to cabin attendant seating to lighting in the cabin. From the bea Aerospace Operation than what Rockwell Collins was going to see and they had about 190 million as far as the premium goes, full price. Think about it, we back out the be aerospace equity portion of this, what were really paying is a 30 premium for legacy Rockwell Collins when youre buying beach front property at a 30 premium thats a pretty good deal 140, its full price. 500 million synergies, 6 of sales, added value by bringing them together. That 500 million number now. Analysts had time to opine on this given the leaks or press coverage given none of them came up with that number why are you confident . We say 500 million plus 6 of sales. Its Pretty Simple duplicate, overhead costs of running the businesses, that goes away. Supply chain savings, being able to leverage the scale, procurement organization, both direct and indirect. Theres a little bit of factory. This is not a jobs story this is not about closing a lot of factories. Lets hope not. Youve been down that road already. Yeah. Im sure it was distracting, if nothing else. Its behind us, is the good news i think we look at rockrockwell, its such a great fit and so little overlap and antitrust issues are minimum, less than a couple hundred Million Dollars of product overlap we should get this thing closed and get those synergies quickly. Last time we spoke was a long time ago, a year and a half ago. I remember. You do remember aint gonna happen its a famous quote. Jim and i talk about it a lot. This is. Of course, youre talking about any interest that honeywell might have had in acquiring utx largely because of antitrust. Right. That deal is never going to happen we get that. The guys who were trying to make it happen at honey well look at this deal and say wait a second. Put out this big map of the plane and say look how much of the plane. Its too much. Customers wont accept it. The government wont say hey, wait a second its very similar what you had, what you would have had had you accepted honeywell. The difference, david, in this case we have 200, 300 million of products, very small out of a 23 billion business. With honey well there was 8 to 10 billion of overlap, Environmental Control systems. You name it. It was a great deal if you think about the synergies you could have gotten. 3. 5 billion, if i recall. It would have been a great deal but di vesting most of the arrowspace where they would be generated. Very different deal. Very little overlap. Antitrust risk is very low and, quite frankly, well bring these companies together and can create a lot of value for our customers by bringing the businesses together this is not about eliminating competition. This is about enhancing our Product Offering to have a better product for the customers at a lower cost. We wont spend a lot of time on antitrust. I have not heard that people believe it will be an issue. Emerging theme seems to be this idea that youre going to split this company up down the road. Bulking up in aerospace and otis and carrier can go their own way. Is that true one thing we put in the press release was a very simple statement that said once we paid out some debt, get the integration done, well take a look at a range of portfolio options. 60 aerospace, 40 commercial buildings with carrier and otis. The question is always do those businesses belong together i would tell you today well need all those businesses to start paying down some of this debt if we continue to see a big disconnect between what we think is Intrinsic Value of utc and the actual stock price well look to do Something Different thats what im committed to our board and shareholders, if doesnt Work Together well take a look at splitting it up. Youll be your own activist in a sense that is the idea. You hear it a lot from ceos its a smart thing to be but how long what is the sense in terms of the 13 billion for this deal how long until you actually begin to think about that potential problem in terms of what you believe is the Intrinsic Value . Well close this deal somewhere between nine and 12 months out integration will take a year plus well start getting most of the synergies in the first two years. Well be in a position to start doing the evaluation keep in mind if our price runs up, it makes the case much less compelling to split off these businesses youre talking about a lot of what we call negative synergies, 200 million to make these businesses stand alone you want to make sure that the vaulation on a stand alone business supports that in the meantime you need the cash otis and carrier are great cash generators and theyre benefiting from the same thing that the aerospace benefits from, growing urbanization, middle class. We always want to talk to you about otis when we bring you on and china, in particular whats your sense of global growth, given the lens you have to see it through with carrier its picking up quite nicely. The concern has always been europe when will europe come back were starting to see very strong orders from otis and carrier in europe. Middle east is still a bit of a drag with oil prices china has stabilized and the u. S. , of course, is growing nicely its not 4 but ill take 2. 5 or 3 . We look at the world today, we see growth accelerating, little bit of inflation in the Metals Prices thats okay. A little inflation is not a bad thing. Back to aerospace aforementioned honey well is currently reviewing whether or not it will consider separating off its Aerospace Business will you watch that closely if, in fact that, keoccuror or does occur . Well have about 50 billion of debt when were done with this deal. We wont be in a position to do anything on the m a front for a few years unless we use stock which im not in particular favor of doing honeywell, most of those businesses are right on top of our businesses same antitrust issues will exist if we were to go look at those assets. 14 1 2 times for this company. It is a full price you said it yourself. Full price. Are you concerned at all . Your stock is down 2. 5 today. Those businesses were there 30, 40 years we build engines today that will be on the wing for 30 years. Elevators will be there for 50 years. You dont do it for today but for the next 30, 50 years. You weighed in occasionally on larger issues this morning, were dealing with the president saying the dream act may no longer be in effect immigration is something you talked about, i think, a bit, your Diverse Workforce any thoughts at all on that and where things are going im not a politician. Getting into this whole issue of the deferred action, its a difficult issue. Obviously, immigration policy has to be established that follows the rule of law. But at the same time we have to be compassionate for those people already here. Hopefully theyll find a compromised solution that makes sense to take care of those kids. The carrier thing is long behind you now all done. All done and this deal will be done nine to ten months nine to 12 months. Seems like a long time actually. 17 or so jurisdictions have to approve it, everywhere from the u. S. To europe to china. It just takes time. We appreciate your time today. Thank you so much appreciate it. Youre very welcome greg hayes, of course, ceo of United Technologies. Back to you. David faber on the floor. As we go to brak, dow is down about 90 points, close to the opening lows of the session. Treasuries as well, as the tenyear today falls below 2. 12. Listen up, heart disease. you too, unnecessary er visits. And hey, unmanaged depression, dont get too comfortable. Were talking to you, cost inefficiencies and data without insights. And fragmented care stop getting in the way of patient recovery and pay attention. Every single one of you is on our list. For those who wont rest until the world is healthier, neither will we. Optum. How well gets done. Has gotten to know our business so well that is feels like hes a part of our team. With one phone call, he sets me up with tailored products and services. And when my advisor is focused on my tech, i can focus on my Small Business. A dell advisor can help you choose the right products with powerful intel® core™ processors. A lot of the leaders today are unwinds, not just home depot and chevron leading the dow, but s p. Oah up clean 2 today still obviously a tough month. Little bit of a bouncer. Needed bounce. On the other side, tech is weak and the banks are weak thats been the seesaw that the market has been on whats up with the financial weakness today the bond market obviously, youve gotten that sort of sight risk off move, yield curve compressing a little bit more probably the main cause. Interesting. And also the pnc insurers, naturally, are starting to brace for irma, for another hit in quick succession some of the reinsurers and pnc guys are you are seeing some weakness in leisure specifically the cruise lines. Yeah. We know how many of those leave out of miami royal craribbean is down 3 plus carnival down 1. 5 they had already been disrupted from some ships that were adrift or locked in at sea during harvey. Right its obviously not a just looking for disruptions in the next few weeks and what could foul up a quarter. When we come back, more on the latest threats from north korea and what it means from the markets. Li rort from the region when squawk on the street continues. Dow is down 93 theres nothing more important than your health. So if youre on medicare or will be soon, you may want more than parts a and b heres why. Medicare only covers about 80 of your part b medical expenses. The rest is up to you. You might want to consider an aarp Medicare Supplement insurance plan, insured by unitedhealthcare insurance company. Like any Medicare Supplement insurance plan, these help pick up some of what medicare doesnt pay. And, these plans let you choose any doctor or hospital that accepts medicare patients. You could stay with the doctor or specialist you trust. Or go with someone new. Youre not stuck in a network. Because there arent any. So dont wait. Call now to request your free decision guide and find the aarp Medicare Supplement plan that works for you. Theres a range to choose from, depending on your needs and your budget. Rates are competitive. And theyre the only plans of their kind endorsed by aarp. Like any of these types of plans, they let you apply whenever you want. Theres no enrollment window. No waiting to apply. So call now. Remember, Medicare Supplement plans help cover some of what medicare doesnt pay. Youll be able to choose any doctor or hospital that accepts medicare patients. Whether youre on medicare now or turning 65 soon, its a good time to get your ducks in a row. Duck quack call to request your free decision guide now. Because the time to think about tomorrow is today. Good Tuesday Morning im Carl Quintanilla with david faber. Sara eisen is off today. Markets down about 90 as we return from the labor day. Full slate of news from harvey, north korea, daca and more. Road map begins with threat rising, north korea testing a Nuclear Weapon over the weekend. U. N. Ambassador Nikki Haley Says theyre, quote, begging for war. We take you live to south korea for the latest congress back in session. The administration is expected to end a program protecting immigrants who came to the u. S. Illegally as children. Well head to washington for whats topping the agenda. Plus a 30 billion deal to kick off the week. We spoke to utx ceo just a short while ago. North korea, chief Foreign Correspondent Richard Engel is in seoul, south korea, with the latest good morning, richard. Reporter good morning. The next few days here could be quite important and quite volatile the day to watch, in particular, is saturday, particularly saturday morning, local time thats when officials expect that north korea could carry out another Missile Launch there have been many Missile Launches this year alone is the direction. Missile launch that goes out to sea, probably nothing changes. Might be some condemnation, but nothing more if it flies over japan, which would be surprising, its yet another affront to japan the most critical thing would be if that missile is fired in the direction of guam. And if it threatens guam in any way and the u. S. Decides to shoot it down or try to shoot it down which would probably be exactly what the North Koreans would want that would raise the tension, escalate things to a level that we have not seen yet in this crisis when you look at the back drop with the latest nuclear test, Thermo Nuclear device, very stern warnings from the Trump Administration and the general uneasiness where i am in seoul about the leadership in washington right now. Richard the times this morning does a piece on how bewildered Foreign Policy analysts have been for years about what kim wants, in the end. What his end game truly is do you have a good theory on that reporter i saw that piece and didnt agree with it kim regime wants survival, mafia state run by this cult of personality, this kim dynasty. They want recognition, they want survival, to enrich themselves and keep what they have going, if not enlarging it further. And the reason they want Nuclear Weapons, its not hard to understand they want to keep them because they think if they have Nuclear Weapons then they will survive forever. And they look at other countries like gaud aftery he gave up his Nuclear Weapons voluntarily and ended up being dragged out of a Drainage Pipe and stabbed and beaten to death. Saddam hussein was suspected of having Nuclear Weapons his regime was toppled and was put by the americans on the gallows to be hanged by his former shiite enemies. I think what they want is pretty clear. What is far less clear is how the u. S. Responds to it. Russia made it clear that they do not support new sanctions and china has responded with a great deal of a. M. Biv lance so far, issuing condemnations against what north korea has done but fairly half hearted statements. And well see how the cross currents of trade negotiations interact with those military and policy negotiations as well. Richard, we appreciate your insight as always. Good to see you, Richard Engel of nbc in seoul, south korea today. For more on how the markets are reacting, were joined by wells fargo senior Global Equities strategist. Scott, you heard what richard just told us its hard to square what prices have done even over the last few weeks. Is it not . Richard hit the nail on the head kim wants to survive they want to enrich themselves thats the bottom line the chance of this turning into a really major league conflict or war is still pretty low even with whats been going on lately clearly the stock market doesnt think it will escalate into a multicountry conflictin any way, shape or form you need to think about what the u. S. Economy is going to do. Is the fed going to hike rates in 2018 . Those things that you would think about when youre trying to think about what stocks you want to own. I think the market has been focused on 2018 and the fed for really the last few months the economic data, for the most part, has been below expectations markets like that. Clearly were still stuck in a range and are at the higher end of it now. Whats going to happen is in september the fed will start to taper the balance sheet. Then they are going to raise in december i think the market will give them that. What the market wants to hear and what i think well hear more about in the september meeting is whats going to happen with 2018 the dot plot will be adjusted and all of that. But i think that and what the press conference has and what is in the statement, well start to hear some hints that, hey, three hikes might not happen in 2018 and certainly one could argue with where inflation is and Everything Else, three hikes seems high to me i think the economy will be better weve been overweight financials thats been an up and down trade. Thats a 12 to 24month workout situation. We want to continue to lean toward those sectors that are sensitive to a continuation of this recovery. The cycle is not over. We want our clients leaning toward industrials, financials, Consumer Discretionary were also overweight health care its too early to get defensive, you know we dont want our clients overweight staples at some point that will be what we want to do. I dont think its through 2018 and maybe a little bit further out than that. Scott, what about geographically where you invested this year is almost as important as sector. In fact u. S. Stocks are down this year. Will that continue to bolster nonu. S. Stocks i think probably if we had to stack rank the five Asset Classes where were at, efa index would look best. Emerging markets still look fine even though theyve had a big run. Really the s p 500 mid caps and small caps, that would be that class ranking. For us, the opportunity internationally, little bit earlier in the ball game, so to speak, than we are were in the eighth inning they might be in the third or fourth really the opportunities for most Retail Investors are overseas and one reason i say that, too, is because our retail clients, just like virtually every other retail client, they are underweight everything international. What weve been talking about is take a little money off the table and redeploy these other equity Asset Classes. One last point here, scott. As i recall, your target for year end has been to the down side for several months. It has been. Its been so gradual it doesnt seem to have tested your resolve. It really hasnt. Carl, we set those targets in september of 2016, inched them up a little bit. Weve been looking for a modest pullback, inflation is lower than we felt it would be earnings better than what we thought it would be. Overall even with this push to the upside of the range, still looks to us with the work were doing that well end the year a little bit lower once again the psych sl not over we think we still have more upside before it is over. Scott, good to see you. Thanks for the help today. Okay. Have a good week, guys. You, too. Scott wren, wells fargo fwloebl he can security strat jitist irma upgraded to a category 5. Plus the aftermath of Hurricane Harvey the floodwaters begin to recede as insurers assess the damage. Meouo usn a thotoin mont where the heart beats warm and true, thats texas. Where we always welcome you, thats texas. Where we always find a way, thats texas. Not rebalancing your portfolio. Pursuing your passion, not reacting to market downturns. Focused on what you love, not how your money will last through retirement. Let us help you with those decisions, and get on with your life. We make it easier to plan for retirement with day one target date funds from prudential. Look forward to your 401k plan. Hurricane irma, category 5 storm that could be heading to the caribbean and the United States florida and puerto rico have declared states of Emergency National Hurricane Center says the storm could become even more powerful over the next few days as its forecast to reach the u. S. Virgin islands and puerto rico residents of houston, of course, looking to clean up after Hurricane Harvey massive amounts of rainfall were dumped on some of the most toxic waste sites in the country hello, scott. Reporter thats right. The gulf coast is often called the chemical coast for good reason there are all kinds of chemical sites around here. Also a rot of chemical wastes. People are generally kind of okay with that let me gev you a sense of how that works new homes, 300,000 homes, which are pretty good sized for around here take a look over there, a few hundred yards away, a Hazardous Waste site, former brio site that was closed years ago. A subdivision used to be right in it. Even so, people are generally okay with living here. But now were talking about a thousand year flood. Now that the hurricane weather has hit, it is a concern but were keeping our fingers crossed that nothing will come out of it and are pretty confident somebody will let us know if theres an issue. Reporter thats chris monita who bought in the subdivision a year ago, grew up in this neighborhood the subdivision here didnt flood. Not far away, other neighborhoods did. People there are generally more concerned about getting their homes cleaned out, not thinking so much yet about what was in all of that floodwater now this is one of dozens of sites that the epa is looking into, the brio site where im at generally seems to be okay but there are 13 of the 41 superfund sites in the path of harvey that theyre still checking out some of those sites still partially under water. This is part of the cleanup and what you have to deal with when a hurricane hits the chemical coast. Guys yeah. Seems pretty daunting. Scott, thank you very much now lets get over to Morgan Brennan with a look at the price tag of Hurricane Harvey for insurers morgan hey, mike, its still pretty early in terms of what this price tag will look like royal purple raceway, 500eric racetrack in baytown from this video were showing you, you can see its been temporarily converted into a salvage yard its still pretty early in terms of activity right now. We were here yesterday and, boy, was this busy. Thats because thats where thousands of cars, trucks that were damaged by Hurricane Harvey are being taken for insurance companies. Theyre coming in, assessing these vehicles and deciding whether they can repurpose them or ultimately will be scrapped Farmers Insurance is one of the companies that is sending hundreds of vehicles here per day as of sunday afternoon, it had more than 30,000 claims from personal and commercial clients so far about a third of those were auto related and the insurer expects that number to jump this week as more people begin to return to their homes. Those claims, by the way, are stretching as far as san antonio and austin, with r were actually seeing wind damage from this storm as well farmers, alongside progressive, allstate, birk shir hathaway state farm also has vehicles coming here. That insurer says so far its received 62,000 claims as of yesterday, about 29,000 of those claims are auto related. About threequarter of those vehicles they expect to be totaled. With analysts estimating upwards of half a million vehicles damaged by the storm or, put another way, more vehicles than Hurricane Katrina and Superstorm Sandy combined, insured losses on the auto side are expected to climb into the billions of dollars. And that means that salvage yards like this converted racetrack are going to be very busy for the foreseeable future. Guys morgan, this comes at a time when there has been a concern about weak numbers in the market can they be resold or are they just scrap reporter that is the big question a lot of them, i think, will be scrapped some of them, potentially, will be repurposed. By the way when they are repurposed and sold its supposed to be with a salvage title. One thing youll potentially see we saw this with katrina and sandy, potential for some of these damaged vehicles to go under the radar and potentially make their way back on to the market not with salvage titles and essentially mask raiding as vehicles that were not impacted by the storm that will be a big story that plays out in coming weeks and months. Indeed. Cover a lot of the data well be getting for a while. Thank you, Morgan Brennan. One of the largest deals ever in the Aerospace Sector, United Technologies buying Rockwell Collins david talked to the ceo exclusively. Stocks havent moved a lot dow down 100 home depot in the lead im here at the Td Ameritrade trader offices. Steve, other than making me move stuff, what are you working on . Let me show you. Okay. Our thinkorswim Trading Platform aggregates all the options data you need in one place and lets you visualize that information for any options series. Okay, cool. Hang on a second. You can even see the anticipated range of a stock expecting earnings. Impressive. Whats up, tim. See options data like never before. With thinkorswim only at Td Ameritrade. United technologies announcing it will acquire Rockwell Collins for 30 billion including some debt. We discussed the possibility of his splitting up this company a couple of years from now take a listen. Once we get done with this deal and get the integration complete and pay down some debt well be able to take a look at a full range of portfolio options. At the end of the day, well be about 60 aerospace. The question is always do those businesses belong together i would tell you today were going to need all those businesses to start paying down some of this debt. If we continue to see a big disconnect between what we think is Intrinsic Value of utc and the actual stock price well look to do Something Different thats what ive committed to our board and shareholders if it doesnt Work Together well take a look at splitting it up. Fairly clear road map, in fact, for shareholders. Again the time line he did give, given, of course, another nine to ten months, at least, until close and integration is likely to be a couple of years from now. Thats not insignificant to hear that from greg hayes and, you know, he may be in that chair. Perhaps he will oversee that split and then exist himself if it doesnt trade at Intrinsic Value which, of course, is the question in terms of where the pure multiples are if honeywell were to move ahead you would have a clear appear to judge it off of in terms of multiple bases clearly theyre not getting the representation in the marketplace. That conglomerate that you can never fix perfectly. Clear message acknowledging that there will be people who say a split at some point makes sense. It was a sensible one. At one point he did say that the same macro trends that benefit aerospace also benefit their other businesses, which are elevators and commercial buildings in which, sure, you can make that case i dont think an investor frustrated with the multiple that utx traded at would say therefore they should always stay together. Right somewhat disappointing stock for utx to share price not that the market did not already know to a large extent that that deal was coming. Yet you can see United Technologies down over 4 . Perhaps there had been an expectation there wouldnt be quite as much stock as there is. Its about twothirds cash, onethird stock. Perhaps some of the other things were hearing, 500 million in synergies and mr. Hayes said shouldnt be a problem at all given what they got out of goodrich at all, 6 of sales overall. The marketplace, at least right now, saying not that excited about it. Well see time will tell. Yes, it will. When we come back, possible new battle brewing in congress as the Trump Administration is expected to end a program protecting some immigrants who came to the u. S. Illegally as children well take you live to washington for the latest. Live shot at the Justice Department dow is down 118. Stay with me, mr. Parker. When a critical patient is far from the hospital, the hospital must come to the patient. Stay with me, mr. Parker. The at t network is helping First Responders connect with medical teams in near real time. Stay with me, mr. Parker. Saving time when it matters most. Stay with me, mrs. Parker. Thats the power of and. When this guy got a flat tire in the middle of the night. So he got home safe. Yeah, my dad says our insurance doesnt have that. What . . With liberty mutuals 24hour roadside assistance, get a jump, tow, and more any time of day. Switch and you could save 782 on home and auto insurance. Call for a free quote today. You can leave worry behind when liberty stands with you™. Liberty stands with you™. Liberty mutual insurance. Good morning, everyone im sue herera here is your cnbc news update at this hour. South koreas navy has conducted an exercise off the waters of the eastern coast as seoul continues its display of military capability following north koreas latest nuclear test more naval drills are planned for the rest of the week Hurricane Irma, strengthening into a dangerous category 5 storm as it heads into the caribbean on a path toward the u. S nasa just releasing this video from space irma is expected to pass puerto rico late wednesday. Floridas governor, meanwhile, has declared a state of emergency. Wildfire burning near steamboat springs, colorado, has exploded in size, fueled by dry brush and strong winds, steer creek fire grew from two to 419 acres in hours residents have been told to prepare for evacuations. And britains Prince William attending the National Mental health conference, his first public appearance since he and his wife, kate, announced they will have a third child. No details, though, on when the baby is due. Carl, back down to you. Sue herera, thank you so much a busy week and busy month in washington as congress is back in session administration, of course, getting ready to make an announcement on daca for more on the latest out of washington, lets bring in the fellow at the American Enterprise institute, jimmy, good to see you. Welcome back. Thanks for having me. People making lists of the todo list, 12 working days, as we know. Fund the government, raise the debt limit, stabilize the aca. Tax cuts or reform somewhere in there and daca today whats going to get whats going to take up the most of their available bandwidth . When you put it like that, it seems like a lot because it absolutely is a lot the bandwidth issue is a key one. Theres only so much time. Theres only so much energies and only so much focus and Political Capital you can spend on these issues. Certainly it seems extraordinarily weird, given the busy schedule that you just pointed out, to pick fights on immigration and big really potentially very big fights on trade whether its south korea or potentially china and many other u. S. Trading partners, to do that at the same time what should be taking up their time at this point is getting a budget deal, raising the debt ceiling and tax reform skru just those things would be a lot. Jared bernstein joins us as well, former chief economic adviser to Vice President biden. Good morning to you, jared. Good morning is this going to be a debt limit budget story by the end of the month . Yes, and im confident i hope im not being too optimistic but im confident that the debt ceiling will be raised and that we will we wont have a Government Shutdown and one of the reasons im more confident now than i was in recent discussions weve had about this has to do with the hurricane. Perhaps Hurricane Relief for texas will be tied to a debt ceiling bill the optics of shutting down congress at a time when clearly a role for government is so obviously necessary is just too strong, even for some of the folks who, i guess, i wouldnt classify as grownups up there im feeling more optimistic on both fronts. Thats the good news. What gets displaced . Well, i dont think youre going to see tax reform this year im pretty confident about that. I would give tax reform in 2017 a 20 probability and, you know, that might be high and i think thats next. Now to me, what theyre calling tax reform, i call tax cuts. So, delaying that is a feature not a bug, in my view. Now, daca, throwing daca into the mix, this idea that trump wants to phase that out, that puts an even heavier load on what would be tough for a functional congress. Im not saying that there wont be displacements, but the two biggies, i think, will be okay. Look, theres no reason tacks cant get down in 2018 its harder. Mid term Election Year its not that it cant get done. The way its looking what gets done isnt going to be nothing like what republicans and many people on wall street were hoping for back in january, which is fairly sizeable tax cuts and Infrastructure Spending what were going to get now whether its late 2017 or 18 looks much diminished from those regular expectations and hopes. Jimmy, you mentioned one thing thats not needed given the packed agenda is picking fights on trades is it an effort to pick a fight if youre saying in six months we want you to do something. Congress, we know, doesnt act that well unless theres an imminent deadline. And the trade thing is a declaration, trying to exert some leverage there. I wonder if those things will have an effect on how congress does its business or is it just more of the noise . I dont know. I think it does have an effect congress will have to deal with immigration, perhaps, at the same time as it may have to put through what could be a controversial tax plan at the very same time we were talking about expectations you can write it off as just tweets or bluster but so far what we have seen real things happen on trade, which is withdrawing from the pacific trade deal so we have nafta in doubt, south korea in doubt perhaps trade relationships with all our Major Trading partners in doubt maybe you could say thats just bluster or thats just tweets. But forgetting that you have a Republican Party so worried about Economic Uncertainty, this seems like a recipe for Economic Uncertainty if you think thats an important economic factor. Jared yeah. So i think that most of what you ticked through is probably bluster, particularly on trade i think what happens with trade is donald trump goes forth and makes these proclamations. He doesnt really understand the machinations of global trade and Global Finance what he does understand and i give him some credit for this, is the impact of the down side he gets that when it comes to sending his trade representative to the negotiating table, things immediately get a lot more complex and i basically dont see either Global Finance or global trade flows being much affected by any of this bluster. Daca is a whole other problem, the immigration piece. I think it would be kicking the ball in our own goal many times over in economic terms to allow daca to phase out. But the politics there are complicated. Congress already has a tough agenda i have a hard time seeing them getting to yes in six months even though there are lots of republicans, business, chamber of commerce republicans who support the idea. Six months is not much time for a complicated issue. Exactly. On trade, jared, if youre confident we dont see flows disrupted, what happens if north korea goes into a new gear wow people over the weekend talked about the likelihood of aiming your trade canon at china. Others argue thats not feasible, not realistic. What do you think . Not feasible. Its a great question. I should have said, to my comment, this presumes no thermal nuclear war with anybody. Thats obviously beyond crazy. Now the extent to which north korea is going to disrupt trade is yet to be seen. I dont simply have the insight to tell you where thats going what i really dont understand is why trump would pick a fight with south korea on trade right now. Diplomatically speaking, that seems pretty insane to me. This is a time for solidarity with that particular neighbor. I get it we have a 27 billion trade deficit with south korea i understand why those unilateral deficits are problems to trump but what a ridiculously horrible time to pick that fi t fight. Wouldnt hand wave way those problems, picking fights when he doesnt have to, on issues he doesnt have theres plenty enough to identify it. If you were looking back in january im not sure theres a worst case scenario, but this is not what you were hoping to see at this point in the year. As we end here, i would love to get your quick answers to three questions. Debt ceiling raised, budget passed, tax cut done in 2017 which, if any of those three occur . Let me go first. Okay. Go first, jared. I say 85 debt ceiling gets raised i say 60 government says open i say 20 tax reform, tax cuts this year. High chance for being raised, very high chance of us getting a budget and i think certainly a less than 50 chance of getting tax reform or tax cuts this year. Gentlemen, good to see you both always good together Congress Keeping an eye, of course, on the cost of Hurricane Harvey Kayla Tausche joins us on that angle. With just 12 working days between now and the end of the month when many key deadlines you guys were just discussing currently loom keeping the government funded, debt ceiling and potentially reaching a Health Care Deal. Approval that funding for Hurricane Harvey relief package. The house will vote on a roughly 7. 9 billion package, what Texas Governor abbott says could be up to 180 billion in relief needed the package will likely serve as the vehicle to raise the debt ceiling. Thats according to multiple strategists, according to the conversation you were just having and now, potentially, according to the white house over the weekend, treasury secretary Steve Mnuchin say he and the president believe the two should be listeninged otherwise running the risk that politics impedes the countrys ability to borrow. If Congress Appropriates the money but i dont have the ability to borrow more money and pay for it, were not going to be able to get that money to the state. We need to put politics aside and were going to be urging congress to get both of those things done as quickly as they can. If the u. S. Misses a debt payment, moodies says it would downgrade the countrys aaa credit rating. On the funding issue, fouryear deal looks unlikely with a shortterm extension perhaps more doable instead. And then the senates ability to pass a Health Care Deal with 51 votes runs out at the end of the month, too now a Key Senate Committee is Holding Hearings for a lastditch bipartisan pitch to stabilize the system the president tweeting congress, get ready to do your job, daca referencing this new deadline hes about to set for them, Immigration Program for children of undocumented immigrants that is a long list. And, david, it doesnt even include flood insurance, health insurance. Some other issues that congress is potentially going to take up. You can see its very long list and not a lot of time as appears to be the new normal for washington. No, not at all, given how many days theyll actually be working. Kayla tausche in the nations capital. As we head to break, take a look at shares of disney upgrade today. The bank citing increase presence in direct Consumer Program streaming, that announcement coming last month really shook up the Media Industry it will be a while before we see those direct consumer offerings. Squawk on the street will be right back im living that yacht life, life, life top speed fifty knots life on the caribbean seas its a champagne and models potpourri on my yacht made of cuban mahogany, gany, gany, gany, gany watch this dont get mad bell mnemonic get e trade and get invested has gotten to know our business so well that is feels like hes a part of our team. With one phone call, he sets me up with tailored products and services. And when my advisor is focused on my tech, i can focus on my Small Business. A dell advisor can help you choose the right products with powerful intel® core™ processors. Is it time to take your portfolio global thats what one Portfolio Manager says adnd out why at tringnation. Cnbc. Com dont move more squawk on the street is coming up. Where the heart beats warm and true, thats texas. Where we always welcome you, thats texas. Where we always find a way, thats texas. We are keeping a close eye on energy in the wake of Hurricane Harvey, leading a down market this morning. Jackie deang list joins us with more on. Jackie, good morning. Good morning, mike. Things are starting to get back on track in texas, so hard hit by Hurricane Harvey. 2 Million Barrels a day of texas Refining Capacity still offline. In the scheme of things, its not huge major refineries are working hard to get operations back up as soon as possible after fire and flood damage pipelines were a concern as well down portion of the Colonial Pipeline in houston is running today. Lets talk about prices. Crude still under 50 a barrel getting a nice bounce today as the refining operations come back, crude will be refined and inventoies wont build as much. Well hear from the ati tonight. Department of energy tomorrow. Those impacts will most likely show builds in crude and draws in gas hitting a twoyear high because of harvey. National average of gas 2. 65 according to aaa, 45 cents higher than this time last year. Couple of things to keep in mind at this point. It could take several weeks for the harvey damage to be fully managed. That means another 15 to 20cent gas price hike is possible though rbob is recovering nicely today. Though its lower. Storms to watch. Irma, if that storm hits the gulf coast, producers could be impact there had Hurricane Season is not over yet. Of course, we need to watch it seasonally speaking, prices should be dipping now that labor day is done. These storms definitely will keep us higher i would highlight the fact that because supplies were reboast in crude and gas, spikes weve seen have been less dramatic than theyve been in years past mike jackie, thank you very much for a very good setup here for this conversation. Were now joined by tamara esner and Michael Cohen, barclays head of market research. Michael, first, let me get your read on what youre seeing in the markets today. We get this nice bounce in crude, gasoline futures coming off a bit. Did they just overshoot and were seeing a reversal today or is the Market Pricing Something Else down the road tea always hard to determine these things on a daytoday basis. Clearly after the summer holiday, people are back into the office and trying to position themselves for the end of the year and for the next couple of weeks. The important thing to realize, as jackie mentioned, is that well see a lot of noise over the next couple of weeks as we try to figure out what the impact of this hurricane had on crude and product stocks and i think the important thing also to note is that, you know, for the First Time Since the shale boom started the u. S. Gulf coast has become a major product exporter, both to latin america and asia thats new and i think that the effects of this hurricane have still not yet been fully understood by the market. And, tamara, what would you add to that . Were also trying to figure out how we might be impacted by Hurricane Irma and, of course, opec members making potentially this supply deal. Absolutely. One of the issues from Hurricane Harvey thats unknown is what will the impact for us producers as a result, operational updates and in the gulf of mexico and operations have been largely undamaged and unscathed. But if they dont have sufficient end Market Access on the refinery or petrol chemical side they could be slow to ramp up their operations to preproduction levels thats another thing to consider i think with Hurricane Irma where its forecasted to land now in southeast United States, florida, there arent a lot of refining or infrastructure asset there is it would be more destructive for demand and potentially harmful for prices, unlike harvey. Michael, that is something that maybe we havent talked about as much as the potential for weakened demand following these storms just because of the economic disruption. Obviously, miles driven down is that more n a fleeting effect i think it will be, actually, pretty significant what weve seen in the aftermath of hurricanes katrina and rita in 2005 and gustav and ike in 2008 month on month, you know, normally demand goes down between august and september but in those years when we saw that significant flooding, we saw twice as much of a reduction in demand so almost one to 1. 5 Million Barrels of demand lost between the time when flooding happened and normal and, tamar, do you think this all plays in, in a big way, into whatever the opec suppliers decide to do here . How are we gaming that out at this point this further incentivizes opec when they meet in november to extend the production cuts. As destructive and terrible as Hurricane Harvey was, i dont think it fundamentally alters the paradigm weve been in the market well understands anything above 50 will incentivize producers in the u. S. To hedge and really sow the seeds for the market to be well supplied in oil in 2018 that is a natural range bound and i think the market understands that opec will probably extend compliance may vary but that will inherently put in a floor things continue in a rangebound tight way for the foreseeable future despite these destructive storms. Michael, weigh in on that brent is also up today, which is obviously more about the global picture. Yeah. Look, the market is tighter than, i think, many people assume compared to last year sorry, first half of the year compared to the second half of the year where clearly in draw mode we could be surprised as we move into the Fourth Quarter if prices move out of that range, at least temporarily and who knows what opec will do in terms of extending their cut. But, clearly, weve not yet seen the full impact of that draw in terms of the Global Supply and demand balance on inventories. Thats clearly going to play a role as we get closer and closer to fiveyear average toward the end of this year. All right Michael Cohen and tamar essner thank you for hitting this on all angles. Thanks for having me. Thank you. To dom chu who has a quick market flash for us. North koreas latest bomb test, helping to lift the gold mining stock, that ticker gdx up 2 so far, first majestic, new gold, harmony gold all up more than 3 on the day etf now on its pace for its Third Straight day of gains, of course, on a lot of volume as of late because of all those geopolitical concerns. Back to you. Tenyear note yield below 2. 1, another safe haven, thank you, dom lets send it over to john david, apple, amazon, facebook, google among the ceos weighing in on favor of keeping daca, the policy that allows undocumented immigrants to stay. But do they have enough pull with the white house or political power at large to make any difference were going to take a look duncan just protected his family with a 500,000 Life Insurance policy. How much do you think it cost him . 100 a month . 75 . 50 . Actually, duncan got his 500,000 for under 28 a month. Less than 1 a day his secret . Selectquote. In just minutes a selectquote agent will comparison shop nearly a dozen highly rated Life Insurance companies, and give you a choice of your five best rates. Duncans wife cassie got a 750,000 policy for under 21 per month. Give your family the security it needs, at a price you can afford. Since 1985, selectquote has saved over a million families millions of dollars on Life Insurance. Dow down 169 or so keep your eye on the ten year. Its going to be testing pretty much the lows of the year on the benchmark yield. Labor day weekend marking the end of the summer slowdown and the start of the fall Housing Market which is the first time we have a breakdown of the salary you will need to buy a home this fall hey, diana carl, a new report out this morning shows that the nations largest Housing Markets nearly half are considered overvalued that is home prices are at least 10 higher than the long term sustainable level. Thats according to core logic prices jumped 6. 7 in july the latest reading it is due to a near historic lack of supply of homes for sale last week the realtors said that home sales would continue to weaken unless appli weaken unless supply miraculously improved. Nationally in q2, you need just over 56,000 to buy themedium priced home based on principal, insurance, taxes using a 30year fixed mortgage at over 4 . That may not sound like a lot but its up 10 from q1 the top market, big surprise, san jose, california you need 221,000 in salary to buy the median priced home, san francisco, not far behind. That but compared to new york city where surprisingly you need less than half that just over 99,000 in annual salary to buy the median priced home boston, seattle, and right here in d. C. Are not far behind all in the 90,000s. On the cheaper side, cleveland, the most affordable Housing Market you only need 36,500 for salary charlotte, minneapolis and dallas are affordable. Heres the catch, in charlotte and dallas, that necessary salary needed is up over 10 compared to just a year ago. It begs the bubble word although most economists will tell you dont know if youre in a bubble until it popped. Back to you. Well see how the fall season goes thank you very much. Got a very different story out of houston today someone is buying the Houston Rockets for 2. 2 billion that is a record sales price for an nba franchise tops the purchase of the clippers for 2 billion. Of course, he is the ceo of houston based landrys he tweeted to day its an honor to be partst nba i look forward to serving the city of houston and continuing the success of the Houston Rockets. He previously offered to bite rockets for 81 million back in 93. Hes also one of the original investors in the Houston Texans and the host of cnbcs billion dollar buyer should have gone higher in 93. You know, were pointing out shares of msg are up 5 because there is certainly a peer kind of owner of the knicks obvious lit owner of the Cable Network and the rangers. Wish the knicks were anywhere as gao g. Good as the Houston Rockets. As soon as you think someone overpaid for the franchises, someone comes in and tops it the new contract they signed not that long with the nba is unbelievable as we go to break, youre looking at a live shot here of the department of justice. Jeff sessions, we expect in a few moments to announce the president s decision on daca at 11 00 a. M. Eastern time. When that happens, well take you there live dow down 170 with the biggest tumble for stocks in about three weeks. music plays throughout not rebalancing your portfolio. Pursuing your passion, not reacting to market downturns. Focused on what you love, not how your money will last through retirement. Let us help you with those decisions, and get on with your life. We make it easier to plan for retirement with day one target date funds from prudential. Look forward to your 401k plan. Stay with me, mr. Parker. When a critical patient is far from the hospital, the hospital must come to the patient. Stay with me, mr. Parker. The at t network is helping First Responders connect with medical teams in near real time. Stay with me, mr. Parker. Saving time when it matters most. Stay with me, mrs. Parker. Thats the power of and. Welcome back markets lower with the financials the worst performing sector check out some of the big movers out. There the financials again, stocks to watch. Among the laggers, xl group, now back down to squawk on the street for the start of squawk alley. Back to you. All right thank you very much, dominick. Good morning welcome to squawk alley. Were at post nine this morning. Busy day ahead of a busy week of news were a few minutes away from Jeff Sessions holding a briefinging to address the deferred action for Childhood Arrivals Program or daca a number of ceos to wall street coming out in support of daca in recent days. As the dow trades close to session lows, down almost 175 points blue chips are down in the worst tumble for stocks since abou