Transcripts For CNBC Squawk On The Street 20171024

Since may. As we said, big beats from cat, 3m and utx zpl global same sales closing 6 for mcdonalds. And pipeline concerns before the ten orders again shipments may only be half of what was expected. Stocks are poised for a strong open help the by results dow components and caterpillar and others, a significant increase in demand for Construction Equipment, 3m and utx beat on the top and bottom line and upbeat guidance for the full year those are going to be the stars today. Some of pretty amazing, caterpillar appepared back the workforce. Its almost as if they pared exactly the right time when orders explode, you get that leverage and youre seeing earnings weve been waiting for caterpillar i would say since 1983 or 84, finally getting the breakout 3 m chugging forward greg haze, great organic growth. I dont want to overlook this Stanley Black and decker, tools up 9 . Some numbers are rather extraordinary and catching attention because these are the same numbers that say gdp will be much better some of the numbers, United Technologies, you break down, hvac up 25 . Interestingly, utx is the only one of the names weve just looked at that is indicating a little bit of a decline at the open. Cash flow funky on a pension contribution. And pressure from otis. China was bad. Thats not unimportant for them. No, i think it is quite surprising china was bad because youre not seeing a lot of these earnings are not being driven by china, being driven by asia gm very strong, First Quarter since last quarter 2014. Every market up. Im looking at 3m, looking at caterpillar. Im kind of caterpillar is so good you almost have to laugh. There were people like my friend alex blanton saying it could earn 10 and 12, when, when, when now. Even the company has had trouble keeping up this is the third revenue guide increase this year they just raised revenue guide in july and again today. Where they raised is really interesting. Its insane growth, mining is good and china construction good and onshore oil and gas, we tend to think that business isnt that good. Machinery, energy, transportation, all much better, firing on all cylinders. Largest sale increases in north america. Amazing. And asia pacific. I hope he had long term options he was able to keep on his departure. I kind of kid but they had a ceo change and its always a question of how much this is actually his responsibility . As much his responsibility i would say it was the previous gentleman who ran ge i think its that important, what doug did when he was at caterpillar. He recognized that there was a moment when the stock when the company was really in balance because they had far too much workforce and far too much inconvenieventor inventory, dollar went well too. A victim of the cycle, right, the timing that was such a bad and he got sometimes you just good had. And the doj investigation too, right it was a joe blake series of things that happened to him. It is interesting because the stock has more or less done nothing but go up since he departed. How much did mcnerny have to do with boeing i think darius is doing a great job at honeywell, but dave cody gave him a good hand and immelt gave flannery a hand. And well probably talk more about it given the reversal in ge after fridays very surprising reversal itself during the course your interview made it clear hes breaking with the past. The problem breaking with the past may be a cash flow that is dramatically lower than we thought. To another g, gm you said it, every business up around the world theres a look at ge but theres gm looking up 3 new high. Jim should be packing the dow and take ge out of the dow. Cash flow was a billion dollars lower. That was a miss on cash flow at gm Chuck Stevens in morning with phil lebeau on squawk. He was terrific when you look at the companies reporting, you realize why weve gone up so much. I dont know what the the treasury secretary said if youre not focused on tax reform, you may be focused on j powell versus whoever. The president going after bob corker again, i mention it not because of the back and forth but more because doesnt he know he needs these votes conceivably and attacking tax reform look, he could just talk about carson wentz and we could be like, the eagles quarterback and it would be a uniter. Corker hit the morning shows first and said things like on National Security id like to see the president leave it to the professionals for a while. He said the president s visits to capitol hill are not really about substance and said the governing model of this white house is positive purposefully divide and then youve got the president s tweets within minutes. Kind of like faber, more of the university. Faber college. I thought it was a f university. It was a college. College is good. Could have been animal house. Nice if those guys understood that too. I do find that washington cannot be the focus on a day like today where you see guys 3m, you see the people at stanley and black and decker and polaris, not sitting there waiting for tax reform they are saying, you know what this is the time the consumer wants product the consumer worldwide is a little stronger and growth is a little stronger. Lets get out of the way congress people. Get out of our way well take care of it. Yeah. Gm released another one of those funky releases where they got all sorts of weird stuff in here but always like to read about ought automated vehicles. Phil said thats going to be the story. Thats the lead in some ways. Third generation test vehicle will meet the safety requirements necessary to operate without a driver and they are going to be driving this thing all over san francisco. Or i should say it will be driving itself all over san francisco. Waymo drives around parts of san francisco. If you look at the driver registration numbers they are way ahead. You know whats missing . That great question that phil lebeau asked about lyft. They are given the money from alphabet listen, i think a lot of people think about the future when it comes to Autonomous Vehicles because it will change so many things and how many years out it is, we have people come on all the time we get very different numbers in terms of how many years they believe its something were dealing with on a daily basis but its going to change so many things and you get to things like the model of an uber and idea of fleets of vehicles out there that people will simply be a part of like paying your cable bill isnt gm in a better position than the lyfts or ubers . A lot of this is the chip set. A lot is the recognition i hate to default to nvidia, but the big issue, is it a pedestrian or is it a car and what do you do if its a pedestrian, do you stop does it read it correctly. When i was in a driverless car, take me to the best pizza place and it cheats and knows when to go out and knows the blind spot. But all of the problems are how do you calculate the risk of you getting hurt versus the person ahead of you and that i think is kind of an ethereal issue. Theyll figure it out and then it will be the fourth screen, all of the Media Companies fighting for attention. We didnt think computers could understand it when we spoke to them. Absolutely. Didnt think you could look at somebody on your phone and talk to them. Shoe phone. They would never ever have driver cars had we started now we would never let given alcohol and how they get tired and how poorly they can given texting, we would never have it. The people talk about the idea, a 747 falling from the sky every hour if you look what happens with accidents around the world. If you just reverse history, we would say dont ever let a person behind a wheel, ever. Thats how good these Driverless Cars are going to be. When we come back, Andrew Ross Sorkin live from saudi arab arabia and steve has a new note it morning as well. As we said earlier, cat and 3m will add 100 points to the dow at the open. Other issues obviously at play as well. More squawk on the street from post nine in a moment. You know who likes to be in control . This guy. Check it out selfappendectomy oh, thats really attached. Thats why i rent from national. Where i get the control to choose any car in the aisle i want, not some car they choose for me. Which makes me one smooth operator. Ah still a little tender. vo go national. Go like a pro. From godaddy in fact, 68 of people who have built their. Website using gocentral, did it in under an hour, and you can too. Build a better website in under an hour. With gocentral from godaddy. Or a little internet machine . It makes you wonder shouldnt we get our phones and internet from the same company . Thats why Xfinity Mobile comes with your internet. You get up to 5 lines of talk and text at no extra cost. So all you pay for is data. See how much you can save. Choose by the gig or unlimited. Xfinity mobile. A new kind of network designed to save you money. Call, visit, or go to xfinitymobile. Com. Following the news coming this morning out of saudi arabias vision 2030 summit. Andrew ross sorkin has been there and joins us this morning. Hey, andrew. Reporter hey, carl, a big conference going on here with many of the biggest names in the world here one of whom is a long time guest here on cnbc, larry fink is here from black rock. We had an interesting conversation was going on in the rally taking place in the market his answer about whats driving it may surprise you. I think much of the market rally has been based on this Global Growth effort im talking about not based on policy. No, policy or even the idea of policy and what may come. I think policy has proven to be disappointing so far. I think if we get tax reform, which i think were going to get, whether its in the Fourth Quarter or First Quarter, i think were going to get it. I think the market will say another leg up mr. Fink also made headlines and almost pause in the room during the panel this morning when he said over the next ten years the average investor should expect a return of only 4 we had that and a lot of other news, clause klein field former ceo of alcoa, hired to run a 500 billion Economic Zone in the southwest of saudi arabia. You heard you talking about selfdriving cars and share riding earlier, kalanik also here and just speaking earlier he also involved a number of big ai projects. Thats whats going on here in riyadh, carl. Andrew, overall, i mean just looking at the list of players that are there with you, wlz it schwartzman or fink or teal or mnuchin, it says a lot about the appetite for investment both in and out of the country reporter this country is going through perhaps what may be described as the reremarkable his toral transformation of its time embarking on something unique. The aramco ipo, talk of when it would happen and what the proceeds will mean to this country and where they get to invested to so many of the guests here really demonstrates and illustrates whats taking place. Its been eye opening coverage this morning, aej yesterday on on air and we hope to talk to you later today can you believe some of the conversations coming out of that were in a strange time because i think were very gripped by politics here, rest of the world kind of gripped by global expansion, putting a lot of people to work, we would be i think more upbeat if we were not mired in things like whats going on with repeal and replace and tax. Because it is a moment where Industry Worldwide is seeing a big growth in orders, very reminiscent of the early 90s, not reminiscent of what weve seen in the last decade. Yeah, were all grappling with the idea, how can companies have four or five or six or seven percent organic growth im looking at industrials and thinking this was a lost decade for the United States. Suddenly were seeing numbers that in the aerospace, numbers in construction. Obviously a terrible thing about the hurricanes but they put people to work the cleanup is very big. Theres a lot of things that are really convoluted in washington but not when it comes to main street main street is doing quite well. Corker just now tweeting same untruths from an utterly untruthful president but as you said, jim, this morning the focus cant be on that. No, it cant. I think a lot of us grew up in an era where we are uncomfortable with the stuff. If secretary of the treasurys analysis was correct, this would potentially be having more of an impact on the market. We argue that it is not correct and there is a large premium, he said last week in the stock market with the expectation of tax reform because frankly, corker is an important vote. Hes an important voice and not running for reelection, this will only continue, his continued criticism, whether or where he ends up when they do take the votes in the senate, if and when we get to it on tax reform, who knows. Its funny, a lot of companies i spoke to a bunch of ceos this morning and asked at the end, uch how about tax reform ive been down there i hope we need repatriation. But the organic the growth in europe, they want to move on too. There isnt anyone who doesnt feel that the side show is hurting us so its funny to see secretary mnuchin say the rally is because of the hope for tax reform i think it is happening despite washington and its im not trying to create fake news, im i speak to a lot of ceos and ceos who are hopeful that washington we all hear the same thing when you talk to them. Its a little embarrassing. They are all kind of like cringe, they dont want to talk about it theres not still people are still very hopeful but for the most part they are saying, look, theyll just immediately go to europe and say, listen, jim, i understand how you feel about tax reform did you see the term in europe okay, im doing my job and asking questions they are more comfortable talking about sports than they are talking about they would rather divert the conversation to sports. People are mortified i know senator corker is a distinguished man and worked as a judge on the apprentice, hopeful you can solve things and go for maybe a beer or sandwich nothing happens people want that too maybe theyll go for a sandwich. No one seems to go for anything. Senator corker is reasonable how did it get to this. Hes a reasonable guy, having some exposure through the years. Food fight. Were going to get cramers mad dash and weve still got to get to mcdonalds and apple and lilly. 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Little less than seven minutes before we get to an opening bell the market looks like its going to open higher this morning in part on industrial earnings. But we didnt talk about mcdonalds. Ive been a big fan of steveststeve est easterbrook what has he done here . He has simplified the menu around the world second, he reenergized all of the franchisees, youre getting global comps plus 6 this is a big change u. S. Comps plus 4. 1. Now one of the reasons why this matter is i have here in my hand a report by an outfit m science, the stock mcdonalds was at 161 and fell to 156 but they said that they felt the systemwide numbers would be much much lower in the u. S. Talking about a check that basically was comps at 1. 7 to 2. 7. That caused the decline but more importantly caused a big short position. Are you questioning the rigor of their analysis . They claim they have data. I remember on that day we were trying to understand why the stock was down and you found that report. Ive spoken to them they have a receipts and huge amount of work. A lot of data. But the problem is when you get credit card data. I pay cash when i go to mcdonalds, its not as reliable more importantly, what im saying, Steve Easterbrook keeps being doubted. Hes been doubted, doubted, doubted. Those who like mcdonalds, we question whether anyone of these people going against it realize how much more stream lined and faster it is mistakes are fewer and the franchisees, every time i speak to him, give me one word about why its good. And he says mojo its mojo per share. Austin powers. Thats right. I think easterbrook has done a remarkable job he should be celebrated, hes jovial and bringing technology around the world and takes whatever is working in one place and brings it to another i love the egg mcmuffin and the coffee is hot and when you go to the one on long island, next time it was like this. 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I dont like the situation where the expectations are so high, they were low for a lot of these companies coming in. Obviously more lilly, very low. Very low theres the opening bell in the s p, at the bottom of your screen it is blue star indexes celebrating the Blue Star Technology etf at the nasdaq, Casino Entertainment provider, caesars entertainment. Mentioned whirlpool which not only misses on both the top and bot ol line, doesnt only cut the guide and get into a pricing dispute with sears, jim, which has a 20 market share in appliances and also downgraded at rbc. Theres problems overseas and whirlpool is part of a thesis that youre going to be rebuilding homes looks like it didnt happen. Caterpillar could be involved with a redo but whirlpool, i question how its run. I remember 1993, are they going to get out of brazil brazil is in a severe recession. Whirlpool not that good, Sherwin Williams had an undercut and Stanley Black and decker and really good earnings 9 growth. Its hit or miss in home depot by the way, Stanley Black and decker didnt even have craftsman yet, thats next year. Sears, do you remember when sears was teaming up with amazon well, kenmore, yeah. Then which they are selling on amazon whirlpool makes kenmore, they will be in sears but the whirlpool brand itself will not. One of the things its amazing to think not that long ago, 10, 12 years ago, 40 of all appliances were sold at sears still. Its still a great share donor, thats what the great carol tomei says, its a gift that keeps on giving and it will continue to give until its done i had Brian Goldman on toys r us, hasbro, one day they got a call like, look, guys wevegot a problem with paying you. You know what, youre never supposed to say that but there are bricks and mortar places where they have a problem and hasbro can come back because barclays upgraded it. Be aware this whole idea that bricks and mortar that youre fine and shipping stuff to sears, dont worry about it, i have nothing more to say those rumors will come around as they often do and theyll write a check they are continuing to try to cut costs at sears its almost an afterthought from a market cap perspective and by the way given his control and berk weits owns a lot they did knock home depot down when amazon announced that deal when craftsman is sold by Stanley Black and decker you can give away everything the problem with retail when i listen last night, you dont know Sports Authority boom, goes toys r us will try to stay open through the holiday but the Balance Sheet on some of these, the Balance Sheet when anybody loaded up in your world any retailer, they got to get liquid. They do you dont want to have a lot of leverage either. Thats one reason for example nordstrom, that financing to go private, imagine why people would be reluctant to lend levering up a retailer in this environment maybe not the best idea. Dont want to lever up oil and gas, not coming back yet. No, not necessarily by the way on another day we would talk more and more about earnings but the president has yet another tweet about bob corker who earlier said he couldnt get elected dog catcher. This one now coming, isnt it sad that bob corker who couldnt get reelected in the great state of tennessee will now fight tax cuts plus. I dont know what that means, plus. Do we know that corker has said something publicly about fighting tax cuts . I dont think so. Im not aware i didnt see the interviews this morning in terms of whether he came out and said something. His comments were more about National Security, north korea, undermining tillerson, creating unnecessary binary outcomes when it comes to dealing with north koreans. Im so glad you mentioned tillerson. I bring him up with all ceos, had such Great Respect at exxon. Its universal praise for this guy in what hes trying to do. Rex tillerson is everyone thinks hes a very serious guy i was critical of some of the things exxon has done but they take a 50year view. Hes trying to take a long term view like exxon. Although long term is not a term to used what is his expected tenure at the state department and there are those critics who say the state department itself has not been filling jobs at the rate it should be and that we have a lot of vacancies that are of an important nature that his main focus has been slimming it down. There are certainly arguments on either id whether that is the case. Ceoz often like one of their own. They do wilbur ross always said good things heres jp morgan through 100 it did happen. Now that jeff dukas is retiring, is jamie dimon a Great American . I dont know. Im going to think long and hard about that just in general, maybe we should bestow the title on somebody else maybe maybe jeff bezos. Is ee lon musk a citizen . Im not sure. Ge, we prefaced this earlier, down 1. 5 . In some ways making up for the bizarre gain on friday because it was bizarre, lets admit it the stock looked to be down 8 on the horrible earnings thats the word of the of the chairman and ceo, not my own reversed course on friday and ended up up on the day and today down oanother 1. 5. The problem is the cash flow, not to talk out of school. But almost every ceo i speak to talks about the General Electric and flannery is well respected, the ceo, the hand he got looks like a busted straight and everyone is feeling for the guy when youre feeling for a guy, i know he likes other divisions, it was very clear from our conversation, from his comments on the Conference Call and other conversations ive had with people close to the company that everything is on the table well have to wait and see the market certainly seem to be focused on the near term november 13th is the big analyst day. Were going to get a lot that day. Will they cult the dividend on that day, will they explain the thoughts on Capital Allocation on the day the market does seem to come around to the view elon musk is a u. S. Citizen. Hes a Great American. On ge, its downgraded, ubs and Morgan Stanley yesterday. I know pretty well, trying to figure out how much to raise the dividend do we do it 6 , 9 , 4 , do we do it 12 and then you have ge only one company you have to think about cutting a dividend for and thats a tough situation. By the way the numbers, the way you nailed it and numbers ge reports and the way they account is like no other company thats going to end . When you do cash accounting, youll see the cash flow drop dramatically it was amazing, there was a board there at ge. There was a board. Theres a lot of Board Members, we did talk about that, 18 members, a lot of people wonder why you need such a large board. I think that a lot of them should resign . There time is coming on. I think there is a potential here for flannery to remake the board as well. I thnk he has to. There really there should be a level of embarrassment, like, guys, look, move on, move on Board Members. Give flannery his own board. Its time. Be a little more rigorous. That company was run like it was run very much like in a nonrigorous way and Board Members checked off on everything when you look at the board and say even procter gamble, filled with heavyweights General Electric too but theres too much heavyweights. Its the biggest market cap loser on the s p since election day. Run like a college. College board of trustees. Started in the top ten of market cap, now its 18 or so. Taken below 200 and youre somewhere out of the top 20 i think. Were at 191 right now, 192 billion market cap for ge is what ive got. He seemed bullish about the oir divisions. He did. Health care he seemed confident he could make this thing work how long will it take . That was everybody is pulling for it not a single bad word. Everybody wants him to win the people who got passed over to give jeff the job, some of them went on to do good things. Lets talk a little apple nowhere near forecast, they say they are struggling to solve tech issues like the face awe thenty indication, the company says the x will be available in stores on the 3rd which some speculated would not be the case. Katie uberty often disputes these different channel checks and shes saying its going to be a big 2018 story. I think theres going to be demand for both . The system is strong. Lg and backup supplier is sharp and its the camera module for the 3d sensing module, apparently they are having real issues some people say is it product that appears to be experimental the x, look it up. You innovate, things go wrong. You innovate and i think that they are trying to do something really, really important but look, just get katie ubertys note, a very unbiceu unbiased individual. If you look at different channel checks you sell low and buy high, sell low, buy high this is not an expensive stock you get more clarity, but tech is not the focus other than low multiple tech, were seeing a lot of these sleep at night semiconductors do well the interesting thing, we saw good forecast raise for microsoft. Microsoft is down. Tech is not it right now tech is not the place that people are buying. Tied at the 10year at 2. 4 . You get Interest Rates higher and people buy the banks and facebook will report great numbers, it can be something i dont know alphabet, hey, you know what, dont you worry about alphabet, you start seeing gee, wasnt that worried about, maybe i should have been worried im not worried about eli lilly because they are spinning off a division that people want so badly. Animal health is amazing in terms of how much its done well but at the same time, it didnt blow out the numbers people dont want they want industrials. Industrials. Creeping into the conversation on facebook and alphabet is this idea the eu and a potential tax of some kind or just continued ramping up of regulation on internet companies. You mean just as a general thats started to at least ive had a number of conversations where thats been brought up by investors as at least a potential risk for first time so that would be amazon alphabet. Well, thatsfacebook. Are you talking good fang, not netflix . Not netflix in europe the eu, a lot of questions. Too dominant, the companies are too dominant facebook i think youre just seeing every day you pick up the paper, story on left side of the New York Times about russia and youtube, its like i read it and say, i dismiss it because its not on the business section but thats probably wrong. Youtube is a way to be able to advertise and theres google down again. On amazon, by the way, theres a deloit survey that says for first time shoppers plan to spend more of the holiday Budget Online than in stores 5142. That would be such a disaster for so many of these bricks and mortar players people really keep track. Do you have any idea what percentage youre spending of your overall spending online versus in the store . Probably 70, 80 , i dont know i got a drug store across the street, i havent been there 2 online. And heres what you dont understand what david doesnt understand. I do a lot of shopping im aware of that. I do a lot of shopping. Heres how i shop because i dont want to slep things around. Not going through Revolving Doors anymore. Thats for ties and see, this thats beautiful. Super 200s. Super 200 its like butter amazon doesnt have it but i think that america this is a very important statistic because whats happening, so you guys now, people who have leases, high leases in stores, expect cash flow and if you have that number for amazon, they are not going to get the cash flow. Whats going to happen whats going to happen . To the stores. To the cash flow . The cash flow goes the stores are going to close. Thank you. How hard was that to get out of you i didnt realize you really wanted me to answer that question lets get to bob pisani with cat and 3m leading the dow. What a lead it is good morning, carl, 31 to advancing stocks caterpillar, 3m and mcdonalds are 140 points of the 167 point gain in the dow. Three stocks are almost 90 of the gain in the dow and the s p is essentially flat up two points the dow is up 0. 7 here. Thats a price weighted index versus market cap weighted index. Look at the sectors, you know it know what the reflation trade looks like, banks up, industrials up and energy up and materials up discretionary is flat. Consumer staples are lagging today. So all of the more defensive names but that is your reflation trade. I want to point out how really unusual the guidance has been today but particularly on caterpillar. Its not unusual for somebody to raise their guidance in the Third Quarter when things are Getting Better but you can see caterpillar, united tech and Stanley Black and decker on the upside today nicely, but the amount they have raised and percentage is what truly is unusual kalter pillar has raised the guidance 25 , 5, 6, 25 . Thats a 25 raise that is extraordinary for a company of caterpillars size to do that with two quarters left in the year. The other companies, 3m, stanley and black and decker and lilly, they raised about 1 that is not unusual. It is fairly typical do it by 1 , 2 , 3 gets eyebrows and 25 is huh, whats that and thats what got people really talking and illustrates the power behind this particular rally. They have three divisions and talk positively about all of them they have a Construction Division and they talk about the strength in china. That was up 57 prsz. China construction was up 57 . Theyve got an oil and gas resource they call it and Energy Division was up 22 north america. They talked about how strong that was, then mining division, that was left for dead a couple of years ago and they talk about more Capital Expenditures there. The mining revenues were up 36 right across the board strength that youre seeing here the question is whether or not the sales slump is actually over at caterpillar remember, they sort of fell apart when we saw the slowdown last year. Theres the number, 44 billion, they raise it to for the revenues and you can see now they are getting close to where they were in 2015 after the big slump that happened for the last 18 months. Thats the question now, is the slump over meantime, the hurricanes, you see whats still impacting, they do cabinets and plumbing, but the stock is down a little bit a slight disappointment on the guidance but dont worry, its going to be a short term thing and everybody believes them. Historic high yesterday. Everyone believes the effects of the storm are temporary, same thing with Stanley Black and decker historic high. Folks 7 organic growth. Tools were up 9 again, nothing but growth here in the short term. Finally, take a look at the earnings numbers right now and a lot of people saying its only 4 for the Third Quarter but again, insurance companies, big whammies from the hurricane. Thats knocking the numbers down and Oil Companies also got a bit of a whammy from some of the hurricanes and bottom line is hey lot of people, you pull that out, im quite sure were going to end up with 7 or 8 growth in the Third Quarter. Even with the damage that weve been seeing from the insurance companies, right now the dow new high, 158 points to the upside carl, back to you. Thank you very much when we come back, mcdonalds rising despite an earnings miss, first miss since q2 of 16 comps pretty good. Well get reaction from ed rensi. Look at the movement in treasuries this morning as the 10year gets to the highest level since may. Gglobal bonds, and highdividend strategies. Sure, these are investments. But theyre not what people really invest in. What people really invest in, is what they hope to get out of life. But helping them get there takes a pure focus. Because when you invest their money without distraction, hidden agenda or competing interests, Something Wonderful can happen. They might just get what they want out of life, and maybe even more. Of cat and 3m. Adding 100 points. Another 15 from mcnasdold for a minute there, the dow had its biggest gain since september 11th well get stop trading with jim in a moment. Sense of it al. Well, victor, do you have something for him . Check this out. Td ameritrade aggregates thousands of earnings estimates into a single data point. That way you can keep your eyes on the big picture. Huh. Feel better . Much better. Yeah, me too. Wow, you really did a number on this thing. Sorry about that. Thats alright. I got a box of em. Thousands of opinions. One estimate. The earnings tool from td ameritrade. Lets get to jim and stop trading. One guy we havent heard about is the owner of arkoa. In the meantime, arconic reported and it was not a good number they picked a terrific man from ge who then moved on to hire, and theres a bunch of notes Deutsche Bank says overdone sell off. But the thing i want to point out is if they really want to make this an Aerospace Program thats where the action is thats been the strongest part of the worldwide scomae. You make arconic into more of a play on aerospace, then you get, a lot of this, by the way, elliott has done a great job in trying to get youre looking askance, youre nodding. Elliott is in so many different situations elliott is in a lot of places they do quality work, come in, and i think that their work on arconic has been extraordinary its really rather remarkable. They want to make that company into an aerospace power. And i think they can do it a lot of people wanted him keep an eye on arconic im wishing clous luck whats on mad tonight were going to kind of go over whether the s p versus the dow, and this is, you know, the nasdaq versus the dow, but this guy, nick stone, has a coffee. A Coffee Company a lot of people think its going to be the next starbucks the next starbucks. Next starbucks. Well see you tonight for mad money. 6 00 p. M. Eastern. When we come back, record day for the blue chips dows up 149 dont go away. My ambition . Helping people get what they want, understanding were not in this alone, and teaching my kids that no ambitions out of reach. Ambitions live everywhere. Synchrony financial helps make them happen with data, insights, financing and technologies. Synchrony financial. What are you working forward to . Thats it. Im calling kohler about their walkin bath. Nah. Not gonna happen. My name is ken. How may i help you . Hi, im calling about kohlers walkin bath. Excellent happy to help. Huh . Hold one moment please. [ finger snaps ] mmm. The kohler walkin bath features an extrawide opening and a low stepin at three inches, which is 25 to 60 lower than some leading competitors. The bath fills and drains quickly, while the heated seat soothes your back, neck and shoulders. Kohler is an expert in bathing, so you can count on a deep soaking experience. Are you seeing this . The kohler walkin bath comes with fully adjustable hydrotherapy jets and our exclusive bubblemassage. Everything is installed in as little as a day by a kohlercertified installer. And its made by kohler americas leading plumbing brand. We need this bath. Yes. Yes you do. A kohler walkin bath provides independence with peace of mind. For a free kohler nightlight toilet seat with consultation or visit kohlerwalkinbath. Com for more info. Ive got a nice long life ahead. Big plans. So when i found out medicare doesnt pay all my medical expenses, i got a Medicare Supplement insurance plan. [ male announcer ] if youre eligible for medicare, you may know it only covers about 80 of your part b medical expenses. The rest is up to you. Call now and find out about an aarp Medicare Supplement insurance plan, insured by unitedhealthcare insurance company. Like all standardized Medicare Supplement insurance plans, it could save you in outofpocket medical costs. Call now to request your free decision guide. Ive been with my doctor for 12 years. Now i know ill be able to stick with him. [ male announcer ] youll be able to visit any doctor or hospital that accepts medicare patients. Plus, there are no networks, and virtually no referrals needed. See why millions of people have already enrolled in the only Medicare Supplement insurance plans endorsed by aarp. Dont wait. Call now. Good tuesday morning. Welcome back to squawk on the street. Im carl with sara and david at post nine of the New York Stock Exchange dow riding the wave of two big stocks cat and 3m cat has now overtaken boeing as the top performer over three months an earnings story today. Our road map for the hour does begin with the earnings blitz. Mcdonalds, gm, caterpillar, 3m, all leading a triple digit rally for the dow. Big day on chill as the house is poised to pass a budget speaker ryan will take a set of questions shortly, and a war of words between bob corker and the president heating up finally, were going to take a deeper dive into mcdonalds. Former ceo ed renlsy is going to sit down with us next. First up, the busiest week of earnings season this week. Caterpillar is surging this week, posting a big beat on earnings revenue mcdonalds saw comps rise globally and at home, and gm beat on both the top and bottom line for more, were joined by our markets commentator, mark san tolly who has been drinking out of a fire hose you got to not even all of the stocks theres going to be a quarter, the market is braced for some quarter when expectations get ahead of what companies can deliver. Its not really this one the major theme is the industrials. We know this rally has been about this very global rebound ism coming in at great levels and were seeing that now in the numbers. Up 3m, of caterpillar, of utx, to a lesser degree Stanley Black decker another one. I think this idea of a capital goods rally is very much in force. Youre not seeing the sell on the news response as much with these stocks because they were they beat on top line, beat on bottom line, and you got a raise in the outlook thats the triple play that i do think can support stocks of the companies that have reported so far, about a quarter of the way through the s p, you have almost 8 growth. The estimates, if you blend those in, is 4 . Clearly, companies are outdoing what people were xpecting. I will say last earnings season, you did have a similar effect. Numbers came in great. A little more of a sell on the news response, and the market topped around july 27th. You had a couple good weeks of response, and then people got the idea, okay, fine, earnings are good we got that in the bag, maybe we have them all priced in. If you add mcdonalds to the list, i know its not an industrial, but u. S. Comp store sales up 4 . Traffic rising in its all important u. S. Market. That paints a pretty good picture of the u. S. Economy. Thats the top line piece, not just the dollar, as you say. The u. S. Market, not just about translation effect of weak dollar no real weak regions for any of these large broadbased companies this year. And it has really been a dow story. I know you guys have hit on it, but the dow outperformance is so pronounced because of the qui y quirkiness of its weighting. Its not to say the rest of the market isnt doing well, but youre only up about a half a percent in the s p since earnings season began a couple weeks ago. On financials, are they vulnerable because of the back and forth we see today lets say in this case, corker and the president , or is the world that industrials are describing mean things are in their favor . I think if the world that industrial is describing remains in force and the tenyear yield can kind of inch higher and well be pricing it, financials are fine financials can perform in that environment. I really dont think people are buying financials based on the fact they are high taxed and might get a tax cut. Yields are up sending up to the top of the s p. Whirlpool worth hitting because that is an anomaly, versus all the big movers higher this morning. The partnership with sears that goes back more than a century. Incredibly tough business even though sears wasnt doing all that well, the appliance, that was really an Appliance Center it was. And i do think thats really a story of obviously overseas competition. Its been trade skirmishes about this i think its not necessarily telling you much about the housing or home renovation market as much as it is about how hard it is to compete in that business for a u. S. Company right now. Stock is getting hammered mike, stay with us if you would because we want to also bring into the conversation about earnings and the markets jack, chief Investment Officer of Bmo Private Bank talking earnings here, jack, but cant ignore the fact that the president of the United States is engaged in another twitter war. Trading, i dont know, name calling back and forth with the prominent senator in his own party. Does that give you pause when it comes to the optimism on tax reform it does i mean, the fact is, as you know, he shot at john mccain right after the inauguration, and of course, he was one vote shy on health care and it was john mccain so you know, hes getting into twitter wars with representatives who arent interested in reelection. Neither mccain nor corker are interested in running again. So it really shows that at least politically, you know, trump can sometimes shoot himself in the foot and this particular feud, mike, is about tax cuts. And corker has sounded the alarm over increasing the deficit. Exactly like we might be expecting over republicans to do yeah, thats really, i mean, if it kind of focuses on policy as opposed to personal sniping, thats where it comes to the rubber hits the road, which is that corker has basically said hes reluctant to vote on any tax package that would expand the deficit very much. So hes kind of in the senate, it represents deficit hawks, and thats kind of where this argument is going to play out when it comes to taxes you know, were not really talking about comprehensive reform, so do you have the 1. 5 trillion market to expand the deficit over ten years in the proposed package do you go beyond that . You really cant when you just want to pass it with 50 votes. Jack, what do you tell your clients . Is it wise for them to be buying the Domestic Companies or other groups that might benefit specifically from Corporate Tax cuts i think it does make sense. Russell 2000 certainly has outperformed the s p in recent weeks. I think it started when President Trump had his meetings with chuck and nancy and that started to get a little bit of lift to the upside. Our estimation is that the market has priced in roughly a 50 50 chance of Corporate Tax reform based on just the relationship between small cap stocks and large cap stocks from the election until today jack, as mike and as we have been reporting this morning as well, noted, earnings are good this morning certainly from the vast majority of the Larger Companies that have reported. Particularly reflecting it would seem growth from the worldwide economy. In so many markets not just here in the u. S. , but outside of the u. S. What does that do from your perspective in terms of i know you always like to look at the multiple and valuation i think that, you know, we are and we have been now for the last several months underweight u. S. With an overweight in international and emerging largely because of what you just described. That the International Markets generally have been trailing our markets over the last, you know, by about two or three years. Their economies, same thing. So now, what im doing is, you know, positioned overseas, were benefitting there. And now im looking for financial indicators that would suggest, that would signal, perhaps, the end of this risk taking environment and really, the number one thing would be whatever would cause Interest Rates to rise faster than earnings. So whether its credit spreads, perhaps, right now theyre great. But if credit spreads were to widen, that premium that lenders require to extend credit to lower quality borrowers, thats usually an early indicator were not seeing that yet. Or inflation to suggest that maybe were toward the end of a Business Cycle and were running out of capacity. Were not really seeing much of that either. So if i start to see those things start to shift, that will likely cause us to reassess our risk position overall. Mike, this is your favorite topic. Looking for warning signs that the rally is running out of steam. Its difficult to find immediate ones jack mentioned credit spreads. I mean, in terms of investment grade, Corporate Bond spreads are down below 1 percentage point as of today. They have tracked near lows for the cycle. Thats not giving you the yellow flashing light i do think sentiment has the possibility of getting extended as the market kind of wears out the skeptics and bears, and you get the index stretched higher even if its just these small increments, maybe its the reason for a gut check at some point. You run out of eager buyers just in the short term. Its not. The dow is up 170 points not today not today. Not this month, not this year any obvious crazy excess, because this has not been a runaway market. Its been a walkaway rally. The thing is, credit spreads have done a good job as an Early Warning indicator. You know, remember that credit spreads actually went to negative to kind of a warning signal Fourth Quarter of 2007. Four quarters before we saw that market slide that gave investors an adequate warning to say you know what, maybe this risk environment is rolling over were not there yet. Jack, its certainly taken some bears as a victim we talk about high yield spreads. Im thinking back to how they had to throw in the towel because they did see high yields giving them a clue earlier in the year, didnt happen. We asked this question yesterday. Year end target, getting late, but is it too late to revise them, and what do we start to see with targets for year end 18 . Well, i think year end target this year, if we do get tax reform, that adds about 10, 8 to 10 of s p earnings so you figure, half of its priced in. We could probably get, you know, 2 , 3 , 4 pop out of a tax reform package depending on how its structured. I suspect, and i would be interested in mikes take on this, i suspect we are going to start seeing the ernie warning signs by the middle of next year well likely pull us back in risk and 2018 could be a flat year if we see those warning signs crop up in the first couple quarters. Eight months is an eternity from now, jack the middle of next year. But i do think whats worth remembering, if we get tax reform, and you say maybe it adds 10 in s p this year. You know how much it adds in 2018 zero which means were one big step closer toward a pay raise for middleincome families, for Hardworking Taxpayers that is who this thing is all about. It is about the people you have to remember, more than half the people in this country are living paycheck to paycheck, and a lot more people are living one paycheck away from living paycheck to paycheck that is whats happening in this country. So its about these people who are struggling to get by its about giving those families a real break on their taxes so that you get to keep more of your own money in the first place. Its about making this system simpler and fairer removing the hassles and the headaches to the point you can do your taxes on a form the size of a postcard, which steve showed you, because all that time and money that americans spend doing their taxes, that is time and money that could be better spent on other things that are important to families in addition to all of that, were going to help workers in a big way by leveling the Playing Field for american businesses big and small. What thats going to do, its going to help bring back jobs and capital that have gone overseas so it is no surprise that we have already seen a number of estimates showing that this alone is going to mean more takehome pay for families, higher wages, bigger paychecks helping middleincome people isnt just a goal of this plan its the whole purpose of this plan adopting this budget is another sign of real momentum for tax reform, for getting the train on the track and getting this moving so we can deliver real tax relief and a stronger, healthier economy for the American People. I want to thank President Trump for his leadership, for expressing to our members just how urgent this is for our country and how needed it is for our workers. Were on the verge of doing something very historic, something that is going to make a big difference for so many families thats why were excited about getting the budget moving and moving on to tax reform. Questions . So youre going to ask a question not related to tax reform the president is talking about tax reform, but much of this morning is a back and forth with senator corker. What does that do to your efforts for tax reform if the president cant stay focused i dont think it changes our efforts on tax reform. I know bob wants to get tax reform the president wants to get tax reform im glad the president is coming to lunch because i believe its best to settle these things in person, and i hope they can get a chance to do that. [ inaudible question ] and corker is calling him a liar what should voters think about this what they should think about are the results we achieve for the American People. So you know what were focused on what within our control. Whats within our control in congress is getting stuff done for the American People and getting a healthier economy, bigger paychecks, more takehome pay. Thats to me is important. I know bob well. Bob is going to vote for tennessee, for america, hes going to vote for tax reform because he knows its in the best interest of americans so put this twitter dispute aside. The fact is, we have a historic chance of actually fixing this tax code, giving people pay raises, and getting the American Economy growing at the rate where we can actually get bigger paychecks, more takehome pay, a healthier economy. Thats what matters. So all this stuff you see on a daily basis, twitter this and twitter that forget about it. Where lets focus on helping people, improving peoples lives and doing the things we said we would do thats what were focused on you going to ask about this . On tax reform good. Fine how do you plan to lower rates without any i would love to answer that question because thats what the ways and Means Committee chairman does. But im going to have to defer you to kevin brady theyre the ones who hold the pen, who are negotiating the bill, writing the bill so all these questions will be answered shortly when the ways and Means Committee puts out their mark if you have specific questions you want to ask, i would encourage you to ask the ways and Means Committee. [ inaudible question ] in the house, yes so theres different deer seasons. Theres bow season, theres gun season theres so you see the beard, youll know when the season is so yeah, if we get this done by thanksgiving, thanksgiving week is opening week of gun season. So our goal is to get it out of the house by then. The senate is going to be a little slower on their track, because as you know, tax code is first in the house thats the constitution. By muzzle loader season, i cant remember exactly let me check with the wisconsin muzzle loader season our goal is to get it done by the end of this year i thought you were giving it up yeah, well give up christmas if we have to for tax reform thats what i said before. Youre going to quote me on that im just joking. Were going to get this done look my mother will kill me. Youre staying here with us too. Thats what conference committees are all about thank you, everybody that is speaker ryan arguing that this feud this morning between senator corker and the president does not change the chances for tax reform even saying at one point he predicts corker will vote for tax reform while thats happening, the president tweets yet again about bob corker, calling him incompetent. Lets bring in john harwood and talk about, john, how much of this actually matters. I think it matters a lot, carl the president has an extremely narrow margin for error on tax reform not only in the senate, but also in the house i mean, the house has better odds of passing a tax bill, but there are a lot of complicated details. Thats why they havent put out the details. Its difficult for them to get the votes. And to have the president at this moment lash out at bob corker, say hes fighting tax cuts on the day that hes going to meet with Senate Republicans is incomprehensible and counterproductive for him. Does it suggest to you that the president feels he has enough of a margin in the senate that he can afford to antagonize corker like this no, it suggests to me that the president cannot sublimate his ego to a larger goal this is the same thing we saw, carl, in the flap over the condolence call, when the president feels called out or on the defensive, as he was at that News Conference about you havent spoken out on niger, then he is compelled to make some claim which turns out to be untrue, and then he clumsily tried to make a call was called out on that sent john kelly out to say some things that were untrue. That became a complete disaster. The same thing is true with Bob Corker Bob Corker is on television criticizing him. Hes been criticizing him for some time, saying things that many other republicans believe but are reluctant to say out loud and the president cannot resist the temptation to strike back. Same thing with john mccain the other day. John mccain gave a speech about nationalism and sort of trumpest nationalism, and the president said, well, you better watch out, john mccain im going to fight back and i wont be very nice this is not helping him achieve his goal and its putting the entire tax reform enterprise in danger. John, hang on for a second. We want to bring ylan into the conversation she was in the room with House Speaker ryan what else can you tell us about what he said clearly, he hates going into the back and forth tweets, but he is forced to address it, ylan thats right. I mean, its not just the president weighing in on politics and sort of this twitter beef between himself and senator corker, but its also the president weighing in on policy as he did yesterday with that tweet saying there would be no change to the 401 k plan so what the challenge is for House Republicans is to try to craft this bill even as the president continues to constrain their options. Ryan said today that they are on track to get this done before thanksgiving or deer hunting season, as he said thats going to require a very aggressive timeline and really a show of unity among the house in order to get this done, before you can even get into the politics of whether or not this will pass the senate ylan, its funny listening to the speaker and this narrative that seems to be seized on by the administration and those who are obviously trying to push this forward, which is middle class tax cuts, wages will go up there are a lot of reasonable arguments to be made why we need a lower Corporate Tax rate, and you could imagine workers might benefit from fewer companies leaving or moving their headquarters to other areas. Socalled inversions we covered a number of years ago when they were happening very quickly, but do we have details on how they get to this very large wage number they keep talking about, as much as 4,000 a person yeah, what theyre arguing was that wages and corporate profits used to be tightly linked that connection has since been broken because so much of corporate profits are held overseas so if you can restore that connection, you will see a corresponding increase in wages and in corporate profits at the same time. And you really see republicans, you saw it today in this press conference, doubling down on that idea of this tax reform effort resulting in a wage increase for middle class americans. The reason why they have been so gung ho on that is because thats how they need to sell this politically really, this tax reform plan is a much bigger Corporate Tax cut than it is an individual tax cut. So in order to make this fly with the American People, you need to connect those two halves of the tax code, and this is how theyre trying to do it. Its hard, john, to figure out whether you can actually say that without getting details on where the deductions are going to come from and how theyre going to affect american households you put out a column in the last 24 hours looking at the 1. 5 trillion problem and that it raises less revenue. What kind of math have you been looking at and what does it say about where the republicans go from here on the plan . First of all, sara, on your point about the details, thats exactly right. Its notable that for a tax reform process that republicans initially said was going to be on the president s desk by august, Mitch Mcconnell over the weekend said its way too early to say what the details will be. Were just beginning to craft it heres what we know from the Senate Budget resolution we have a 2017 deficit of 487 billion. We know from the cbo that by 2027, thats going to triple to 1. 4 trillion, cumulative deficit, 9. 4 trillion over that period of time to that what drives those deficits is the rising entitlement roles, youve got right now 45 Million People on Social Security. That will go up to 60 million by 2027 77 million by 2033, and the Senate Budget allows for 1. 5 trillion of additional borrowing to ncrease the deficit and federal debt to make the tax cut work now, republicans make the claim that they will generate so much in additional growth that they will make the nation better off in the long run. But just as the point that ylan was discussing about who benefits from a Corporate Tax cut, that is highly debatable who benefits from a Corporate Tax cut. Its highly debatable how much revenue they can make up through tax cuts at a time when we know with certainty that were going to need more money to fund those Social Security and medicare benefits yeah. I think Washington Post yesterday said weve since 1961, we have had deficit spending in all but five years in this country, can clearly more on the way. John, ylan, thank you guys dow gains continue to remain robust up 175, although ibm has now pled greace as the big lagger. Down 2 . Dont go away. , these are inves. But theyre not what people really invest in. What people really invest in, is what they hope to get out of life. But helping them get there takes a pure focus. Because when you invest their money without distraction, hidden agenda or competing interests, Something Wonderful can happen. They might just get what they want out of life, and maybe even more. Covering all morning long. Good morning, phil lets start with General Motors i think barkley summarizes this Earnings Report by saying its not a high quality beat, but its not going to decline the momentum gm did beat the street by a wide margin, earning 1. 32 a share, but the Third Quarter earnings were hurt by a 26 cut in production and thats why when you look at the business right now for the Third Quarter, it was okay not great. Nothing to write home about. But the real momentum in this stock, and you see it today with the shares moving higher, its all about the possibilities when it comes to autonomous drive vehicles and rideshare platforms and how gm monetizes its investments in those businesses heres cfo Chuck Stevens talking with us on squawk box about that whether or not we partner,one, develop our own network over the time, a lot of people talking to a lot of people and a lot of potential outcomes, but the most important aspect of it is we want to make sure we control the customer relationship, the customer experience, in the vehicle on a goforward basis and quickly, lets take a look at shares of fiat, chrysler, also moving higher it beat the street in terms of its Earnings Reporting a 17 increase in operating profit that Conference Call starting in about 45 minutes quickly, on the gm Conference Call, i just listened to it. Ceo mary asked several times about how do you monetize this autonomous drive business, and what she said is nothing to tell people right now were keeping our options open thats enough to have momentum behind the staug right now phil, its david. Why is there this expectation theyre going to monetize at all and not continue to invest and obviously be ready for this future that is fast approaching. Well, theyve already said that they plan to own whatever platform that they have. Now, they may have some people invest in that platform. They may partner with other companies, but they do plan to own that investment, david, in some fashion and they have indicated in past Conference Calls, in press events, they do see a future where that is a profitable business, perhaps even more profitable than the business they have right now. Thats whats fueling the stock and pushing it higher. The question is, when do we get those details . Is it two quarters, three quarters, two years from now thats what people are waiting on and how long will investors remain optimistic, phil, thank you very much for the update from the gm Conference Call. Caterpillar leading the way for the dow this morning if you add up 3m and caterpillar, thats 126 dow points out of the 177point rally we have going on more on the earning story, stay with us. With advanced safety. Standard. Lease the 2017 rx 350 for 399 a month for 36 months. Experience amazing at your lexus dealer. Im contessa brewer. Heres your news update. Microsoft will drop a lawsuit against the u. S. Government. After the Justice Department changed rules over Data Requests the company says the new policy limits the use of socalled secrecy orders sears has stopped selling whirlpool products, ending a more than 100year partnership the decision comes amid a pricing dispute with the appliance maker. Sears and kmart will sell the remaining inventory in their stores and they have stopped listing items on their websites. Snapchat is having a tough time making its spectacles disappear. The Company Reportedly has hundreds of thousands of pairs of its spectacles sitting in chinese warehouses, and taco bell is thinking way outside the bun. The fast food chain is testing a chocoladilla, a quesadilla filled with pieces of melted kitkat bars instead of cheese. Its available in wisconsin. Through midnovember so if youre really hankering for that, hopefully you live in wisconsin or are planning a trip there soon thats our update at this hour back to you, carl. Road trip to wisconsin, contessa thank you very much. Im in. When we come back, mcdonalds earnings this morning. Global comps up 6 revenue beat, stock currently up more than a percent. Well talk to the former ceo ed rensi with us after the break. Dont go away. [vo] when it comes to investing, looking from a fresh perspective can make all the difference. It can provide what we call an unlock a realization that often reveals a better path forward. At wells fargo, its our expertise in finding this kind of insight that has lead us to become one of the largest investment and Wealth Management firms in the country. Discover how we can help find your unlock. Stocks are higher across the board right now, but it is the Dow Jones Industrial average that is the standout performer on a number of big blockbuster industrial earnings coming in better than expected, guys 3m adding now 85 points to the dows basically 170point rally. Caterpillar also very strong with a nice picture of the north america and china. Boeing is also doing it. Youre see agnumber of industrial shares. Not just the weaker dollar helping out. Its actually better conditions for manufacturing and industrial america, and Global Industry as well yeah. All organic growth in all segments for 3m. Big broad Earnings Report. Watching shares of mcdonalds this morning the company is out with Third Quarter results, coming in just shy of estimates revenue beat with more than four global comps up six. Ed rensi, always good to talk to you. Good morning, glad to be here a lot to talk about in the report, whether its traffic, the earnings themselves. What struck you . I think Steve Easterbrooks strategic leadership is paying off more and more every day. You see that hes increased the price of stock 60 since he came onboard. The thing that struck me the most is the core business is one that grows based on innovation and progress and the Menu Development theyre doing with the chef servings, their value menu on the bottom sign, the barbell approach, the continual innovation in the restaurants, the accelerated sale of Company Stores to the franchises mcdonalds franchisees are the best Small Businesses in the world, in my opinion, and theyre close to the customer every day, belly to belly with them they know what they want and they perform every day, and they dont have divided loyalties the only businesses they have are mcdonalds so their focus is complete traffic for the quarter up 2. 1 , but its essentially flat for the year to date, ed i wonder how much of this can be done on pricing alone. Well, i have been away from the company for a good while, so i dont have the intimate details, but talking to my friends who are franchisees, very few of them have raised prices in the United States. On the extreme coasts like new york, san francisco, l. A. , their prices have gone up. Seattle has gone up because of the minimum wage onsense but overall, i think the prices have been pretty much just a little bit above inflation, and better products with better pricing is not a bad idea. Good value so you were ceo in the 90s i believe youre credited with the Game Changing innovation known as chicken mcnuggets, correct . I wouldnt take credit for it at all that was fred turner and the chef who put that together i just happened to be running Product Development at the time. But Product Innovation is essential in restaurants if you look at Subway Sandwich shop, for example, theyre paralyzed. They have done nothing in the last 20 years. And if you dont innovate the menu and dont look at chicken tenders in buttermilk, for example, and make those kinds of product improvements youre not going to grow the business right, and thats just what i was going to ask you now the chicken mcnuggets dont have antibiotics or artificial preservatives. How much do you think easterbrooks strategy is centered on menu changes, changes in beef and the quality of the food, not just allday breakfast . Sure, i think his focus is exactly rights the world changes. Consumers change about every five to seven years. Its a generational thing. If you dont improve your products and stay close to your customers, youre going to get left behind. And the world is concerned about sustainability, antibiotic free animals. I dont buy into it 100 , personally, but im 73 years old. But young people do buy into it. If youre going to have them as customers in the future, you better listen to what theyre saying and easterbrooks got his ear on the consumer how important is this refranchising effort, ed 4,000 stores, thats ahead of schedule whats the benefit for having fewer of these restaurants being corporate owned . I think that, i have always thought that the great power of mcdonalds is to get rid of Company Operated restaurants and get down to a bare minimum that you need to develop people to run the company. Otherwise, theres no need for Company Stores the franchisees do an outstanding job. The Company Stores make a Great Laboratory to test things so the franchisees arent out of pocket, but in the grand scheme of things, strategically, long term, franchisees do a better job than Company Stores. Although the Company Stores do a good job, theyre just not as good now, youre doing work for fad brands now and weve seen other small chains try to nibble at this larger piece of the pie that mcdonalds and its rivals own. Why has that not bitten, or has it i tell you, all these small chains are trying to find niches they can fit into it, and andy at fad brands has done a great job of identifying niches. The International Development is going to be fabulous hes buying legacy brands that have been neglected. Hes rebuilding those like ponderosa and bonanza, but nobody is ever going to triumph like mcdonalds does ed, last time you were on with us, we were in this stranjs period where ceos started stepping off the president s advisory council, led by ken frazer after the response to charlottesville. You were pretty stathing in your criticism for President Trump. Talked a lot about this idea of a social conscience that ceos need to face i wonder what you make of the president s efforts on tax reform now its something that ceos and Business People like yourself have been waiting for for a long time, but at the same time, its coming with this morning twitter attacks on prominent republican senators like bob corker this morning. Well, trump is not a Political Animal hes a business guy, and he doesnt like politics at all he doesnt really much care for democrats or republicans hes very interested in the American People because he understands that if the American People arent Going Forward and growing and progressing and having opportunities, this world is going to fail our democracy depends on a healthy populous, and he knows that a tax decrease will be good for jobs we have to get this Corporate Tax rate down. Were at a huge disadvantage our american citizens need more money. We need more disposable income for people to be able to buy things and hes got it. Hes got it figured out. I dont like the fact that hes so inarticulate so often, but hes got the right strategic ideas. I think everybody ought to just shut up, settle down, listen to what he means and not exactly what he says and lets get this tax reform done lets get it done now. Obamacare is an absolute disaster, eating up the Household Budget we have to get that fixed. Our infrastructure, it took me two hours to get to this studio. 19 miles this morning. Our infrastructure is a disaster in this country. Hes got that right. We have to secure our borders. Listen to his strategy ignore his idiot tweets. Ed, our thanks to you helping us at least look through the mcd quarter. Hope to talk to you again soon ed rensi a big mac and a fat burger. As ed said, the president has been active on twitter this morning. About eight minutes ago tweets, stock market just hit another record high. Jobs looking very good which is the first tweet this morning about the markets having tweeted about a bunch of other stuff so far first part of that is absolutely true. Second part, jobs worth the same rate as we were the last couple years. Although the Unemployment Rate does continue to go down to new lows that has been strong job growth, though, addition of jobs per month average is no more than it was over the last couple years one of the biggest questions economists have around the tax reform plan is putting a fiscal stimulus like tax cuts in place in this eighth year of the Economic Cycle just how much more juice can you get in terms of job creation wages could stand to benefit a little bit this gets back to the whole point about the economic impact. When we return on the show, more from caterpillars monster quarter as the Company Posts a beat on earnings and revenues after seeing increased demand for its Construction Equipment quk t seesoaring, up almost 6 . Sawonhetrt will be right back hi, im the internet you know whats difficult . Armless bowling. You got this, jimmy you know whats easy . Building your website with godaddy. Pick a domain name. Choose a design. You can build a website in under an hour. Now thats a strike get your domain today and get a free trial of gocentral. Build a better website in under an hour. I love you. This is a strategyis, fid recommend. Huh. This actually makes sense. Now on the next page youll see a breakdown of costs. What . Its just. We were going to ask about it but we werent sure when. So thanks. Yeah, thats great. Being clear and upfront. Multiplied by 14,000 financial advisors, its a big deal. And its how edward jones makes sense of investing. Energy stocks are big market laggards this year, but one fund manager is making a contrarian call on the space. Find out why at tradingnation. Cnbc. Com more squawk on the street coming up. Caterpillar surging this morning after a big beat on earnings Morgan Brennan is back at hq with more and color from the call thats right. Caterpillar crushing expectations by 68 cents this morning. Revenue also better than expected the sales growing across all the machinery makers key businesses including construction in china, onshore oil and gas in north america, and more spending by Mining Companies now, cat saying it now expects revenue of 44 billion for 2017 and adjusted fullyear earnings were also boosted to 6. 25 per share. Thats from an earlier forecast by the company of 5 per share so this is a big raise and it speaks to the accelerating Global Growth signs of recovery in the commodity complex, also the fact that industrials that have been making investments to streamline and make smarter the manufacturing process, not to mention the actual products theyre selling themselves, are beginning to reap the rewards. Those themes are playing out with caterpillar, but also blue chip industrials 3m and United Technologies which also reported beats and raises this morning as well, but caterpillars really the standout stocks up almost 6 today and quite a run this year. Its second performer in the dow behind boeing. Its up 50 for the year the Conference Call started momentarily, 11 00 a. M. Eastern. One of the things to keep in mind here, the company has been under federal investigation for taxes. That hasnt really that hasnt really dampened thfs tor enthusiasm so far, but its certainly going to be something to watch for on the call, which starts in just about ten minutes. Guys, back over to you carl just tweeted a list of alltime highs on the industrial complex, cat, gm, cummins, rockwell, and you know who is not on the list, ge, which is in that group and business, adding insult to injury of the kind of time its having absolutely, and if you look at shares of ge today, they are at a fresh multiyear low and it brings into stark contrast the difference between that company and some of the other industrials. Honeywell being the one that comes to mind most frequently that the performance and growth that those companies are seeing. So certainly a very different dynamic between the broader industrials and that company but well see what happens, right . Theyve got a new ceo and looking to cut costs and theres a lot of potential for a makeover there, as well. You want to have some fun with charts, do a fiveyear ge versus 3m. It is striking opposite directions unbelievable. If you go back to 2000, max meyers back at hq went back, 400 billion in lost market value for ge 400 billion in lost market value. For a long time they were blaming the challenging macro environment, but with these earnings coming out, its hard to do that they were blaming a lot of things for a long period of time obviously, it wasnt just buying high and selling low morgan, thank you. Sure. Morgan brennan. Lets get over to john fortt and get a look at whats coming up on squawk alley. John were going to look at ups and downs for amazon on the downside, another executive departure in the video department, but on the upside, survey shows in the u. S. Amazons expected to capture 40 of the ecommerce market whats that mean f torhe stock well dig in coming up on squawk alley i think its terrific. Your kids go to college and you start trading. Yeah, 5 years already. 5 years, hmm. You ever call your broker for help . Once, when volatility spiked. And . By the time they got me an answer, it was too late. Td ameritrades elite service team can handle your toughest questions right away with volatility, its all about your risk distribution. Good to know. Thanks, mike. We got your back kate. Does he do that all the time . Oh yeah, sometimes he pops out of the couch. Help from real traders. Only with td ameritrade. I can tell you, we do have the capabilities and competencies within the United States to counter the north korean threat, and we just need to continue to fund that capability, so we have the systems in place that can counter the threats. Also asked kennedy about the United States defense spending listen this is not a time to be cutting defense budgets. This is the time of significant turmoil around the world and if any time in the history of the United States where we need to support a strong defense, its today. Certainly, they are not talking about cutting defense spending in washington they are talking about ramping it back up, and youve seen that in the stocks, not just raytheon, but the entire index has outperformed the entire s p this year by double, up more than 30 these stocks have been on a tear the president talking about getting rid of limits to boost pentagon spending. By the way, defense is going to be 16 of the 2017 budget. Back in the 50s and 60s, it was half before entitlement spending and Social Security and medicare and medicaid became such a large part. But coming back up a bit. And we still spend more than the next seven countries combined dollar for dollar. Yes, yeah some amazing moves on the dow. Session highs, we were up 192, so not very far away from that, but, obviously, cat, 3m, utx, all moving the blue chips in a big way. When we come back, why one analyst says demand for the iphone x is at the highest since the 6. First, a quick check where we stand in the markets dow close to session hhsig s p up to 2,568. And respond 6. It lets you know where your data lives, down to the very server. It keeps your insights from prying eyes, so theyre used by no one else but you. It. Is. The cloud. The ibm cloud. The cloud thats designed for your data. Ai ready. Secure to the core. The ibm cloud is the cloud for business. Yours. When this bell rings. It starts a chain reaction. Thats heard throughout the connected business world. At t Network Security helps protect business, from the largest Financial Markets to the smallest transactions, by sensing cyberattacks in near real time and automatically deploying countermeasures. Keeping the world of business connected and protected. Thats the power of and. Health care the worse performing sector in the s p 500 and by a considerable margin the sector is being dragged down by shares of bio gen other laggers include eli lilly, the Health Care Sector overall up 1 this month and 20 so far this year. That does it for squawk on the street. Lets send it down to the start of squawk alley. Back over to you dom, thank you very much. Good morning, it is 8 00 a. M. At facebook headquarters on menlo park, 11 00 a. M. On wall street, and squawk alley is live good tuesday morning, welcome to squawk alley. I