Transcripts For CNBC Squawk Box 20180213

S p off by 13. Yesterday we saw a swing of 400 points or more we were up by 100, 350 i need more than 140 to get worried . No, thats a yawn at this point. 0. 6 at this point if you think back to all of last year watching, if it starts down 140, you could look away, look back, be down 800. You saw what was happening with treasuries. Lets look at that board once again. Looking at treasuries, these are the yields, the tenyear yielding 2. 831 . Stepping back from the 2. 9 it crossed yesterday. Check out the twoyear, 2. 069 look at europe thats where the markets are open for early trading at this point it looks like no, no back that up asia closed, but the nikkei down by 0. 6 hang. Shanghai up by 1 in europe, you can see active trading now, at least at this point things are relatively mixed ftse slightly higher but declines of a quarter percentage point for the dax in germany and the cac in france. Earnings still coming in this is a big one. Pepsico reported 1. 31 for the Fourth Quarter, a penny above estimates. Revenue also above forecast. The company says the new tax law will lower its tax bill for 2018 and strengthen its business in other ways pepsis cfo will join squawk on the street at 9 10 a. M. Eastern. You know what else is launching now . Whats that bubbly. This is pepsis new big effort to do sparkling water with, like, a little hint of flavor. Zero calories. Zero. Zero. We all do sparkling water now. I drink whatever just sparkling water that might have flavor its a new choice they sent me some mountain dew which has 60 calories, but 60 is 60 too many. I like it. I like lacroix do you know what im talking about yeah, i know. Bertha coombs is here i know its quinoa. Great for you quinoa. Thats not a beverage todays top corporate story. Walgreens in talks to buy drug distributor amerisourcebergen. They already own 26 of it. Just over a quarter of it this is one thing they do. Firms are in preliminary talks according to the wall street journal. Shares of amerisourcamerisourcep 19 in the premarket hours this is like the cvs aetna merger in that walgreens is looking to buy the drug wholesaler which is its biggest supplier the ceo telegraphed that the company would be in the market for a strategic deal after its failure to buy riteaid. Walgreens pattern has been one of partnering first, make taking a stake and then doing the deal. Thats the case here walgreens has the 26 stake in amerisourcebergen. No discussion on a price, but amerisourcebergens market valuation at the close was just under 20 billion. Forewa for walgreens the acquisition would secure a drug supply chain and cut costs for drugs and make it more attractive address a Pharmacy Network for insurers and pharmacy benefit managers and help stave off a potential threat from amazon entering the pharmacy or drug supply business and it would give it greater heft against the proposed merger between cvs and aetna, though walgreens itself was moving in that direction, partnering with united health. Theyre doing a Pilot Program called med express, where they manage the benefits in the drugstore and the clinic you look at all of these big mergers that are taking place across the industry. Everybody figures they have to get bigger to cut costs. Do those cost savings get passed on to shareholders or passed on to customers when theres so much pressure coming from washington it depends on who youre talking about being the customer there are two end customers. Theres the payer who is often the large employer, or in the case of a medicaid program, the state and federal government or medicare, and then theres the consumer sometimes the consumer saves, but certainly for the payer, that is the object to bring down the costs, which hopefully gets past on to the consumer. I try to figure out how the market should look at these things good news if you can strip out costs but as an investor will you be getting more of that or is it saving themselves from the additional pressure. As an investor if they get market share, you would, if earnings go up the idea is that everybody is trying to figure out cutting out the middle men costs, that reduces some costs but also getting at the goal of more coordinated care. If you right now have to manage say poif youre an elderly patient, youre trying to deal with the drugstore, the insurer, deal with your physicians. Its hard to keep all of that straight all of the time if you can get a bit more coordinated care and if someone actually watches whats going on, you can help avoid potential complications. So many people talk about the consumer, even if all these things hatch appen and theyre successful, for most people we will not feel it ourselves in terms of money, companies and employers will we hope that they share it with us. If they decide to continue to keep your out of pocket costs higher, a couple of companies have said theyll freeze benefits with this tax bill, humana said they would freeze benefits this year with the tax windfall so youre not paying more in premiums so maybe costs wont go up, but the chances are one day we wake up and they say we have a human discount huge discount is. I would say unlikely, but you never know depending on how someone comes up with the new way to structure the plan theres so much money you can continue to force the individual to take out of pocket, then you get dim mindiminishing returns so lacroix, is that what youre talking about lacroix it sounds french, but made in new jersey bertha, is that it . I have never known what i will tell you i go with the u. S. Seltzer. We drink the poland springs we go through it like its water. Is water. Where are you on soda stream . Soda stream in the house i havent done that heres what i think about pepsi. I like innovation, but they have a lot of stuff that theyre trying throwing against the wall. Do you remember sony had 14,000 different products they had too many. But theyre vertically integrated pepsi now youre moving from walgreens to this . Theyre listed at the nasdaq. You should be here all the time have you tried the cohog fritos . What . I havent eaten them in a couple years youre addicted to the hot ones the clamflavoreds to teat tstitos they have 5 organic growth in the salty snacks and organic snacks whenever im in a sauna, i always say its like a sauna in here i do the same thing. You know why . Because youre a dad those are dad jokes. Those are dad jokes stocks to watch they said in my ear stocks to watch. Its hot here today. General motors is closing one of its four plants in south korea as it restructures unprofitable operations in that country. Gm will take an 8 850 million charge related to the move shares of vipshop are surging after the chinese Ecommerce Firm reported better than expected results. Revenue jumped 30 the number of active users has gone up. The company signed a Strategic Partnership with tencent during the quarter. Barnes and noble is laying off staff after a weak Holiday Shopping season. The company is not specifying the number of cuts exactly last month barnes and noble said holiday sales fell 6 . Online sales dropped 4. 5 . This is a small company. Barnes and nobles market cap is below 400 million. Who said that at the New York Times yesterday you got ten years, you got some terminal disease or something . Ten years before print is gone thompson said that. You didnt see his . It was like the lead story for drudge drudge is where i get my news from it was your ceo that said it on cnbc. Drudge or no drudge tenyear what was this i dont know. Look it up it may not be profitable to print the newspaper. What were you doing i was writing a column, working. I had stuff going on. Youre lucky that youre working here as well as at the New York Times, this is an insurance policy it will be gone in ten years he didnt say the New York Times will be gone. The print unfortunately he didnt say the New York Times unfortunately that will still be around, but not in print have you looked at the stock price of the New York Times company. I have. Is it worth a billion dollars . How about four . Its up 100 in the past 12 months ehh yeah . How about that yeah. How about that trump rally. You and cnn can thank trump back to the broader markets u. S. Stocks seeing the biggest gain in two years after seeing their worst week in two years last week. Joining us now to talk about the markets is Julian Emmanuel and is it time for people to breathe a sigh of relief are we still through this . Were not out of the woods yet. These things dont reconcile themselves in two weeks. Especially given the surge in volatility we had. Basically we have to get used to seeing 300, 400 point swings and know these corrections typically take several months to work themselves out we think the economy and the earnings propels the markets higher in the second half. 300 to 400 point swings are not that big of a deal where you consider where stocks are at this point we just got used to this incredibly low volatility last year and beyond. Thats right th the other thing to bear in mind is people are nervous for a lot of reasons when theres a fed transition, Financial Assets underperform real assets m peopand people te you it doesnt make a difference you mean the jay powell transition yeah. If you look at the history, fed transitions, the next six months, Financial Assets dont do as well as real assets. Theres such changes, and it scares people. I thought you meant an ic Inflection Point on no, its the personality. People may think they know what jay powell is about but they want to wait and see . Youre doing well for such a long period of time, youre looking for a reason to be worried. People fixate on a reason to be worried. You should probably look through there, because you should look at things that benefit from an extending cycle. Thefrom our point of view, is bet their were worrying about things the whole problem with this january february sequence is the market got arrogant the beginning of january enthusiasm, speculative fever increased. This market has run nine years on this constant building of the wall of worry. We think about things. We think about problems, maybe its inflation now its is there more deleveraging to come these are good things and ultimately as we overcome communication problems with the fed andso on and so forth the markets end up moving higher is inflation a valid worry . Is that something youre worried about . Its not. If you look at the pick up in tenyear yields, its been yield based since the start of the year so its not an inflation component. People are getting more bulled up on the economy. It used to be if the fed was hiking rates because the economy was doing better that everything was fine and people responded favorably to that, its a weird situation that markets are not in better shape than they are now because of the way they should be responding to the fed moving gradually without an inflation risk pushing them to act. How much room do you think this has to move on the upside we have got the yearend price target of 3,000. Again, you work your way through this correction, a little bit more fear, we dont necessarily even think last friday was the bottom its going to be retested. You know, looking towards powells First Press Conference on march 21st, theres going to be uncertainty, but what drives stocks in the long run are earnings and the economy and as drew said both of them look good i think if you look at an increase in yields, some activity were seeing is good. You want to see firms trying to grow rather than just trying to return capital to shareholders this is rising rates helping the economy. Its making investors reward firm else th its making investors reward firm else th trying to grow andd all these good things going on, the growing economy, fed raising things gradually, we are talking about a fed that has to unwind a significant balance sleet. There ar sheet and there are questions we have not been down this road before are there things that worry you about that are, but theyve been smoother than i would have thought. I was saying an unwinding of the Balance Sheet will be more nerveracking. That being said yields began to move up as the fed was unwinding its Balance Sheet. Economists will be debating why that happened. The benefit of unwinding the pla Balance Sheet is youre normalizing the price of risk. Julianeweulian you say were of the woods yet, if theres a pullback do you think thats a buying opportunity we think pullbacks are buying opportunities here when you think about it of the context of up 400 yesterday, down 150, you have to be patient. You cant chase the rallies. They have faded and will probably continue to fade for some weeks to come, but these are buying opportunities if youre an average Retail Investor you dont get to pick the point, you buy when you see markets move 1,000 points a day, when you put the buy order in, it may not go in today, it may take a day or longer to settle out would you tell people to buy based on what theyre seeing knowing they cant pick what you can pick is the price you want to enter at thats very important. You have to stay disciplined the temptation is when we have days like yesterday, were out of the woods, were up 500 dont chase those prices. The other temptation is for those waiting for this the other big one you say theres going to be another testing of the bottom. Then people will say will it test the bottom or go lower to figure out where that bottom is and people are waiting for that moment thats always the debate. From our point of view, if you look at the post2009 environment this is correction number five thats moved greater than 10 the average time it takes is something over two months eventually we have seen new highs on all the other occasions. We think this time is not different. Thank you both for being here 3. 8 billion New York Times is not 4 billion. 3. 8. But its almost worth half as much as lululemon now. Yeah . Yeah. It has the same market cap as a private valuation of mypillow. Com it is. Youve been busy during this conversation im cop plymenting you. Its getting up to half of the yoga ware. This is squawk square, were not naming this after a micro cap. Coming up, steve cohens firm accused of hostility to women or maybe coanchors. Details of a new lawsuit next. Look at futures now. We are in the red. Well see whether we will test the lows again dow off by 167 points. Is the monolithic view of emerging markets obsolete . At pgim, we see alpa in the trends, driving specific sectors of out performance. Where a rising middle class powers a booming auto industry. A leap into the digital era draws youthful populations to mobile banking and ecommerce. Trade and travel surge between emerging markets. Everyday our 1,100 investment professionals around the world search out opportunities for alpha. Partner with pgim, the Global Investment management businesses of prudential. Steven cohens Investment Firm being sued for sexism in the workplace and Sexual Harassment leslie picker has the details. An employee is suing point72, its ceo, steve cohen alleging that executives engaged in a pattern of discrimination against women and unequal pay. It also details a tox ic Work Environment where women were criticized for their appearance, forced to draft powerpoint presentations after giving birth. The plaintiff is Lauren Bonner who runs an Analytics Team at point72. Ms. Bonner is seeking an order to permanently restrain point72 from engaging in unfurther furte unlawful conduct and an undisclosed amount of monetary and punitive damages point72 says the firm emphatically denies these allegations and will defend itself in a more appropriate venue than the media the firm went on to say we stand by our record of hiring and developing women cnbc was unable to independently verify the allegations in the lawsuit. The complaint was filed in the Southern District of new york, the same court that charged cohens prior firm with Insider Trading. In 2013 they settled for 1. 8 billion and cohen agreed to convert his firm into an 11 billion family office, point72 on january 1st the u. S. Attorneys ban had been lifted on preventing cohen from managing outside capital and he had been quietly raising a few billion dollars. Does this have impact on the ambition to be a public fund a fund that managing outside capital . Exactly thats the big question now with these revelations i should mention within the complaint cohens main accusation is aiding and abetting some of this behavior the complaint does not detail the behavior of steve cohen specifically as it relates to harassment of women or creating this toxic culture its more that aiding and abetting theres stories in this lawsuit about a whiteboard, the ceo or the president has a whiteboard with the p word up on the white board its on the whiteboard for weeks on end profits not profits not profits. I think we talked about this before on squawk box, this idea that whether his the previous allegations surrounding Insider Trading have affected his ability to raise money. In talking with lps there are certain classes of investors and hedge funds that would be turned off bioff by Insider Trading, te type that would be turned off by these types of allegations a lot of Pension Funds have steered clear of that. Funds on behalf of wealthy individuals are also skeptical leslie picker, thank you for that prison . Knot profitnot profits. The word that our president used oh, president apple shares, a big driver of yesterdays bounce back as the tech giant climbs out of correction the company is holding a big event today, well get an analysts take next. Take a deeeep breath in. And. Exhale. Aflac and a gentle wavelike motion. Liberate your spine. Aflac and reach, toes blossoming. Not that great at yoga ya but when i slipped a disc, he paid my claim in just one day. So he had your back . Yup in just one day, we process, approve and pay. One day pay. Only from aflac Flexshares Etfs are built around the Way Investors think. With objectives like building capital for the future, managing Portfolio Risk and liquidity and generating income. Thats real etf innovation. Flexshares. Built by investors, for investors. Before investing consider the Funds Investment objectives, risks, charges and expenses. Go to flexshares. Com for a prospectus containing this information. Read it carefully. Run your business at cloud speed. And do more with systems you have in place. The ibm cloud. The cloud for smarter business. Welcome back youre watching squawk box live from the Nasdaq Market site in times square. Good morning check it out the u. S. Equity futures under pressure down by 156 points for the dow futures. Of course that comes after a gain of 410 points yesterday the dow was up by 1. 7 s p 500 and the nasdaq also up by better than 1 yesterday. This morning s p down by 14 points below fair value. Nasdaq opening up by 35 points lower. Well keep an eye on it. The opening bell still three hours away walgreens boo s has made a take approach to amerisourcebergen. All these names are getting really long. Walgreens Boots Alliance and amerisourcebergen. Talks are in the early stages and there is not an offer on the table now. These discussions follow cvss deal to try to buy aetna new this morning, the National Federation of independent business out with its monthly read on confidence kate rogers has the details. Good morning. The nfib optimism index kleined in january to 106. 09 this is coming up a the best yearly average in the indexs history. The biggest increases were in actual earnings, those who say now is a good time to expand and those who expect the my to improve. The lobbying group noted that those Business Owners who say now is a good time to expand is at the highest level in the indexs history at 32 , likely due to tax reform. One big concern is Skilled Labor. Its moved into the top spot for main streets single biggest problem followed by taxes and government regulations and red tape more maul bSmall Businesses are reporting raising wages. Plans to raise compensation rose to 24 , the highest rating since 1989 that Skilled Labor problem is something to keep an eye on. We see it with where the jobs are, not necessarily with the Small Businesses, but something that is expanding outside of Small Business and hitting every industry it will be harder and harder as we continue in this market. Absolutely. Shares of apple climbing out of correction. The stock has been one of the worst dow performers over the last month they will hold their annual Shareholder Meeting later today. Joining us is William Powell funny how things work in hindsight. The iphone x, whatever it was that caused the consternation among apple shareholders, it seemed to happen right at the same time that the market broke. Its funny that was the leading company in the world, one of the leading dow components, and market decides to pull back as the apple x questions about whether sales are as robust as they had seemed it almost seems fitting but weird the way it works i have to get a New York Times truck to sit behind me. Do you see your shot the New York Postbehind you. You got the New York Post behind you that looks good i have times square behind me i dont need to worry about that the New York Post is not monolithic theres times i get disgusted with the New York Post. I havent found other than squawk box, squawk box is the only media entity that gets it right almost the time i think the markets are recognizing there are monolithic elements to apple. Despite the focus on iphone x and the shipment challenges relative to where expectations might have been, this company grew double digits, and looking forward to the march quarter, it is still a company that will grow double digits its easy to focus on the trees instead of the broader forest, but its a campaign that has grown at a healthy clip and we expect that to continue through 2018 for the market to set new highs, you think market has to get back to 180 or get to 10 and head higher . I would think theyre correlated would help, the tech market now has been driven by a bunch of other monoliths as well we think, as i start to move through the march quarter doldrums, you get into the june questions, the focus will return to the next cycle if we have another couple different things, oled screen devices, return to services, some of these wearable devices, that you can start to see renewed momentum but youre in a per where shares what is the next hot thing on your radar that theyre doing . The biggest unanswered question is what can they do to catapult services . Its already a 30 billion business growing double digits, but its never quite enough for investors. On the content front what can they do to own the living room thats where apple still has Unanswered Questions if there was a megamerger tomorrow where you saw apple jump into lets say the at t time warner deal doesnt happen and they want to buy time warner or cbs and viacom ordisney, wou, wow, this is great, they have a whole new services arm, or would they say, my goodness, theyre getting into a business they know nothing about im worried this will be a big mistake . Thats a good question. I think investors would applaud content, but i dont think they need to buy a disney thats a transformative deal that changes the nature of the company. One thing tim cook will probably talk about is apple is laser focused on a few great products. If you move out towards the broader content universe, that diversifies them quite a bit so you would like to see come content something that would jump start content. What does that look like . I dont think they need to own tleem paheme parks or Broad Networks is that something that brings in a production staff some sort of studio capable . Miramax what are you talking im not sure where that leads them or Harvey Weinstein or maybe pieces that could be carved out that are fit for apple. Their dna is to do small, acqui something larger in scope. Its still an iphone company. Its an iphone company but also an ecosystem company. The stockstocky the stocks off iphones. When you go back to the iphone 6 cycle, one of the bigger drivers was the bigger screen you think theyll go bigger than this . This is the 10 or the x, sorry do you think it goes bigger . Next year do you think theyll have a bigger version . Theyll have a couple variants that drives demand when i walk into apple stores you have some customers that want to buy the 8 plus because they think its a bigger screen, in terms of surface area, its about the same right so it will hit a trillion when do we keep buying back stock and that prevents it im worried it getting back to 170, 180, 190, then well address that it could approach that okay. Thanks thanks. When we come back, we have a live report from the olympics. We have the highlights, the medal count and the events to watch today. Carl will join us after this at the top of the hour, well get a market call from deutsche banks chief global strategist. And later, the showdown over the president s spending plan. Stay tuned, youre watching squawk box on cnbc welcome back the Olympic Games are kicking into overdrive Carl Quintanilla joins us live from south korea things are getting interesting now with some of these medal wins its getting fun to watch especially if you enjoy seeing u. S. Olympians making their debut in snowboard winning gold at 17 years of age the name you will hear today after red gerard yesterday is chloe kim from torrance, california she wins gold in the womens halfpipe snowboarding since she was a teeny kid. Practiced on the trampoline as young as age five. Today shes on the cover of the wall street journal which basically says shes instantly become the face of her sport pretty incredible. Fivetime gold medal speed skater bonnie blair was 19 when she made her debut in sarajevo we caught up with her earlier today and asked her whats going through these kids minds when they have so much success at an early age . Its got to be unbelievable my daughter is 17 and just competed in her first olympic trials so i know what that was like for her just to be in the olympic trials but to come here and leave with a medal, im sure for them and these youngsters that are winning at such a young age, it does take a little bit of time for it to all sink in and understand what you have done. But what special moments theyll have, and to have it on tv and watch it for a lifetime is special. Advice for them what do you think . They have the added pressures of social Media Internet staring them in the face thats also very different than from i grew up with with getting a telegram after you won it is a different day and age that these athletes are living in now but i think that the thing they have to really realize is remember where they came from, remember their roots, and try to stay address stay as grounded address possib as possible. Well catch up with chloe kim later this morning her list of sponsors, burton, target, oakley, samsung, toyota, visa, nike shes done some work with intel. 17 years old and working with some of the Biggest Companies in the world. Must be an amazing feeling and a good chance shell have a lot of success outside the sport. I saw an interview that hoda did with chloe and her parents that they aired last night it was amazing her father said she is the living embodiment of his American Dream you know, a lot been riding on her. Shes taken all of that in stride i saw some stuff she was doing when she was four years old and going through already out on the sloechaon the sloech s the sloechlopininining slopes amazing. Her teachers would come in to school and she would be on the trampoline and say good morning, chloe as she was bouncing up and down with the snowboard on her feet the sacrifices made were incredible apparently before her run, he texted her, today you become the dragon, year of the dragon she left everybody in the dust we should make the point that it was this was not competitive. She did not win by a tiny bit on a judge. This was a massive blowout we had very High Expectations walking in she did not disappoint amazing to see carl, thank you. Well check back in in a little bit. A programming note, you can watch all the olympic curling action on cnbc it starts at 5 00 p. M. Eastern time cnbc first in curling worldwide. Get your sweeper out. What do they call that swiffer no. Thats not what they call it coming up, taking flight if youre in the hunt for a used business jet, get ready to pay up why . Think tax reform well explain for all of you looking for private jets this morning. First as we head to break, a quick check on whats happening in european markets now. Back in a moment bcure watching squawk box on cn lets build a better world for investing. Lets hold ourselves to the highest standards of ethics. As Investment Management professionals, lets measure up. Cfa institute. Today, a focus on innovation in the Southern Tier is helping build the new new york. Starting with advanced manufacturing that brings big ideas to life. And cuttingedge Transportation Development to connect those ideas to the world. Along with urban redevelopment projects worthy of the worlds top talent. All across new york state, were building the new new york. To grow your business with us in new york state visit esd. Ny. Gov. To grow your business with us in new york state i thwell wait. What did you meetthink about her . Its definitely a new idea, but theres no business track record. Well, have you seen her work . No. Is it good . Good . At cognizant, were helping todays leading banks make better lending decisions with new sources of data so, multiply that by her followers, speaking engagements, work experience. Credit history. That more accurately assess a business chances of success. This is a good investment. Shes a good investment. Get ready, because were helping leading companies see it and see it throughwith digital. Transparency. Expertise. These are the Building Blocks enduring relationships are built on. As Investment Management professionals, lets measure up. Cfa institute. Welcome back to squawk box, everyone weve been watching the futures after a big day in the markets yesterday. The dow futures were down by 166 points this is the type of back and forth that weve seen for quite a while. Yesterday the dow was up by 410 points at the end of the day this morning you see the red arrows s p futures down by 15 points. Nasdaq off by 42. Tax reform plan turning into a game changer for business sales. Phil lebeau has that story. Andrew, we talk about the winners and losers when it comes to the tax law this is clearly one of the winners. Heres whats going on when you talk about the Business Jet Market brokers will tell you its increasingly tough to find a used business jet. Why . Thats because the changes in the tax law which well explain. Theyre already seeing great demand used prices curbing up if you buy a used business jet for business purposes, you now get a 100 bonus depreciation tax writeoff used to be 50 so thats a huge incentive for people like marcus desele. Hes out of gainesville. He just bought this jet for 1. 7 million. To him, this was the thing that finally sealed the deal to make this purchase. This kind of came as a Christmas Gift i was already in the process of doing a prebuy on this plane when i read through the tax law and i saw, hey, 100 bonus depreciation on new and used aircraft Merry Christmas. Yeah, Merry Christmas to a number of people who will be buying a used business jet take a look at shares of General Dynamics which owns both the head of their sales, we caught up with him in singapore at the Singapore Air show. We see a strong pipeline for 2018 whats happening, guys, is because of the demand in the used market with the change in the tax law, the expectation is that we will finally start to see greater demand in the new Business Jet Market. You know, this is a boom and bust industry. This may be finally the boom that theyve been waiting a number of years for because they really have been down in the dumps really struggling for traction since the recession i dont know, phil. Its still not were not going to do it, phil talking to andrew, were not going to do it the depreciation so 1. 7 million then, youve got to hes flying your own jet i guess you dont need a pilot whats it cost an hour its still got to be 3, 4,000 an hour to operate that thing, then you have to store it. It depends on the plane and the length of the route youre flying and how often you get use out of that plane. Look, he flies three or four times a month up and down the east coast as well as a couple of trips up to canada. For him, hes going to fly anyhow he had a jet before. This was natural to move up to a bigger, more efficient jet and thats what were seeing in the used market right now. A lot of jet owners are saying this is a great opportunity with the change in the tax law to upgrade to a more expensive, more efficient business jet and ultimately, you know how this works, joe, ultimately thats going to force a lot of people to say, heck, if im buying used for this price, why dont i buy a new cessna, new lear jet, whatever it might be. If its at the 1. 7, its a lot of money that doesnt seem necessarily for certain people to be prohibitively expensive. My guy has me upgrading i talked to my broker. He thinks its the 1. 7 is not the problem. Its the cost to maintain it probably costs a Million Dollars a year to operate the thing . I keep three pilots on staff and so its the fourth pilot that i sometimes need to have jump in. Ive got to visit andrew with these little toy jets and pilots, the three that you were talking an actual thing. I know. I know. You dont have that you have i dont i have a little keep it on my desk run it on my desk. You dont have an empire, you have a gulf stream model. On my desk. Why settle for that when you can get a gulf stream model. No, its not for us, phil. Some day maybe a card. If they have a zillionth fractional ownership is there any tax break for the car . Youll see increased demand for fractional ownership as a result of this as well as the growth of the economy. Were already starting to see that as well i just want to be in, you know, a boarding group thats not number six, you know like that come up with that. You can do that im going to set my sights on that, phil thanks phil lookslike hes in the market for this youre not thinking about this, are you, phil . You travel a lot, right, to do these stories . Oh, i would love to put that through an expense report. I would love to hear the hearty laughter that would be coming from the offices of our executives. Youre used to greyhound. All right. Thanks. In other corporate news, uber will now require drivers to take a sixhour break after theyve been on the road for 12 hours straight a new version of the app logs off after 12 hours and wont let drivers log back in until its off line for six hours Drowsy Driving accounts for about 6,000 fatal crashes a year. Coming up, the countdown to the opening bell futures pointing to a lower open going to talk to some top strategists from deutsch bank and Russell Investments, thats next so please stay tuned youre watching squawk box next on cnbc 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. 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 ] hmm. 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. Call and ask about saving 1000 on your walkin bath, or visit kohlerwalkinbath. Com for more info. Sure. Mom,whats up son . Alk . I cant be your it guy anymore. What . You guys have xfinity. You can do this. Whats a good wifi password, mom . You still have to visit us. I will. No. Make that the password you stillohave toovisit us. Thats a good one. [ chuckles ] seems a bit long, but okay. Set a memorable wifi password with xfinity my account. One more way comcast is working to fit into your life, not the other way around. Live from the beating heart of business, new york city this is squawk box. Good morning welcome back to squawk box right here on cnbc were live at the Nasdaq Market site in times square im Andrew Ross Sorkin along with becky quick and joe kernen. We are in the red triple digits. Dow 135 points off thats a little better than where we were before we will see where things end up right before the market opens itself this morning. Nasdaq opening off 31 points down and the s p 500 will open down 12 points couple headlines making news this hour. Pepsico out with its Quarterly Earnings earning 1. 31 per share one cent above estimates and it gave an outlook for the full year at slightly above consensus announced a 15 Dividend Increase cfo hugh johnson will hang out with the gang on squawk on the street. Im told the apple, the Apple Essence is the one to try, their new bubbly drink. How many they have grapefruit. They have all sorts of different ones apparently apple my people are your people ive got people Small Business confidence near a record level according to new figures from the National Federation of independent business groups monthly index jumped 2 points in january to 106. 9 thats the third highest reading since the survey began back in 1973 Business Owners are up beat about Economic Conditions although they worry about finding qualified workers. More controversy surrounds wynn resorts. One of its competitors, yeah, celebrating the opening of a new facility mgm resorts has opened a new 3. 4 billion resort in macau mgms opening comes just ahead of the Lunar New Year holiday and more than triple its hotel room capacity in the chinese territory. Stocks to watch include under armour out with quarterly numbers. They reported a breakeven quarter. Doesnt sound great but it was in line with where wall street expectations were. Revenue was above consensus. North american sales did fall but that was offset by Strong Performance internationally. The companys also announcing an expansion to a previously announced Restructuring Plan that will result in a further charge of up to 130 million more on the numbers with an analyst in a couple of minutes General Motors is closing one of its four plants in south korea as it restructures its unprofitable operations in that company. Gm will take an 850 million charge related to the move and the automaker will decide the future of its remaining operations in that company in coming weeks. The dow rising 410 points after its worst week in two years. Mike santoli joins us right now with more. And i guess everybodys trying to figure out, does this mean were out of the woods was that enough pain for the short term can the market get its legs under it i think this is the kind of activity youd expect. It brings us to an interesting moment exactly two months ago today, december 13th, was the first time the s p hit todays level on the up side it has made a round trip in these two months thats a nice little tidy way of looking at before and after. So within a few points of the s p 500 is where were going to open where it was on december 13th, 2662 that was before the tax cut law passed, of course, so earnings have been ramped up expected for 2018 from 146 for the s p 500 to 157 bringing down the pe multiple as a lot of people have pointed out from over 18 down below 17. That is interesting looking at how much if you look at the chart, its a hockey stick. You dont usually see that its a big step function adjustment but you look at what happens to ten year yields. Half a percentage point, that obviously is one of the things in the mix, the vix going from 10 to 25 means its this whole episode has in part been the market figuring out exactly what value to put on those good earning fundamentals in light of a potentially more volatile environment and rates going up i would point out the twoyear note has gone from 183 to 207. The market expects more out of the fed. Right so if you dont if you didnt think stocks were over valued back on december 13th though look at the valuations today it depends how utility ter Interest Rates into that i dont think theres any magic trigger level of the ten year yield that says stocks are now more or less expensive, but during this cycle stocks relative to bonds, earnings yields relative to bond yields have not stretched beyond where they got in late january so that was kind of a test and i guess were going to see if stocks can make their peace with that. If you were the god of the stock market that decided how things work, this could be a perfectly laid plan for how you might do it, you know, to have it run up, have the reversion in the mean, have the correction everybodys looking for. Suddenly, you know, youd look at where multiples are earnings go up it all makes sense. It does. Unless were wrong and theres a big 30 blow off from here sure. And its like, oh, my god, what happened . But if a year from now we look at this and see this for what it is, it makes perfect sense. Could make perfect sense. I also think back to where we were in late january saying, look, this market wants the risk appetites are rising so fast the positioning is getting so aggressive the market wants to put higher and higher value on the good news thats what adjusts. If the god of the stock market was watching davos, you know what i mean yeah. Everybody was optimistic. Yeah. Elitists are always wrong its like, it was that monday when it started. Second we left. So, i mean, its funny the way its either murphys law or someone knows what one of those. Someones planning it out anyway, im going to do this as if its not in the prompter, okay you see this hey, mike, stick around. That sounded natural, didnt it . Did that sound instead of mike, stick around joining us now is steve wood, chief Market Strategist at Russell Investments and bingy chada. Chief global strategist at deutsch bank who wants to start youre listening to all of this. Is this when its all said and done, will this be sort of something that makes sense on the long term vol . I think it will i dont think were in the beginning of a bull market there is some shake through. Maybe the gods of irony were meeting after davos, but i think probably the most operative data point on your chart was the ten year moving from 240 to 285. Weve adjusted that te effectively. Really . A flattening yield curve. The Federal Reserve over the last two plus years has been very comfortable tightening into mediocrity we have stimulus coming from a number of sides. I think that the Federal Reserve is going to feel even more confident at a three rate hike this year. By the time we get to the Second Quarter of next year that can be a couple of more the yield curve is something we want we have a recessionary cull in the u. S. Adding the stimulus into that, the economic earnings and subtract what its likely to do. Binky, i dont think anyones said this is the beginning of a sustained down turn. That makes me uncomfortable that everyone says this is a natural correction just because they say it, people are still nervous to buy it. I dont know if theyre ready. Sure. I would make two points. Number one, the equity market is about the Business Cycle thinking theres going to be a business, sustained selloff is calling an end to the cycle. That, i would argue, is the main reason why no one is expecting a big selloff because every single indicator, the isms are running at 60. The session is well into the 40s. The second point i would make is that, you know, from a positioning point of view things were very, very stretched, not just in equities across Asset Classes so, you know, you needed, you know, an excuse for a pull back. I would argue we are making way too much about rates i mean, in round numbers we are 285. We were at 285 day before payrolls the equity market is talking about inflation. If you look at breakeven inflation rates, the day we got the payrolls the higher than expected wage number breakeven inflation rates went up by two basis points and over the next week they came down so if somebody tells me that this is a you know, the market getting really worried about inflation, what i would say is somebody should tell the bond market, okay . Because, you know, were talking about this alot in the equity market but, you know you know, i think its a great story but i think what we were meant to have is a regular pull back, 3 to 5 . I think, you know, on the monday after technical factors kicked in the vol funds and the like which we all know more about than we ever plan to learn and so weve got a bigger pull back and i think, you know, two or three days later weve got a much more sort of, you know, broadbased derisking and i would say the equity markets probably overcut positioning on the down side now. So i would be constructive, but we did have a big vol spike and once you have a vol spike it takes a while for it to pass not going to be over tomorrow morning. Jim cramer has tweeted out a story this morning talking about how a whistleblower has told u. S. Regulators of a scheme to manipulate the volatility index. The client found a flaw that allows traders to move the vix because they could put up and down quotes without actually having to trade some of them so much of this was caused by that spike in volatility. There was talk after the close on monday that this basically was a raid yeah, that basically that the vix was kind of manipulated up you could pass around the prospectuses of these funds and say, look, this thing has to basically be wound down. I have no basis for knowing if thats true or not i think the way it all came down there was a lot of talk this could have been whether legally or not, by the way, that this could have been somehow managed. Theyre saying theres a mystery buyer of the vix options. Somebody called 50 cent was estimated to have made 2 million. That guys been talked about. 50 cent. 50 cent. This is business 50 cent. This is actually 50 cent. Not betting no. Different guy dpy. This is actually 50 cent. This sounds like its 50. Yeah. You needed the preconditions for that to be possible, right you needed the vix to get up a lot in the day yeah. So you just had to kind of wait for your moment to do something. And then go in. Thats scary. Stephen, the last point you saw the chart not that one but the one we were looking at if the market were to recover, you could draw i dont know about charts, believe me, because they make snens hiense hindsight. You could draw an up trend even through the correction and draw it through the middle and its still an up trend at this point. No one knows. I think so. Its a return to normal as volatility the last year and a half plus have been very abnormal. This is a reintroduction of normal volatility. Theres not a lot of stress when you look globally, high yield credit in the United States. They look to be doing okay we dont have a recessionary call for the u. S earnings outlooks looks good but return to normal volatility seems reasonable and we think that, you know, being more global, more nimble, i think multiasset. I think this is a Good Environment to see how active management can add to value in a portfolio as well. If we can consolidate the game since election day, this is a 40 gain, right . Yeah. Just consolidate that and not even go anywhere for six months youd be probably happy. Sure. If you look at that chart, it looks like you were going sideways. Just the 50 retracement is what would be bad. Thats the one that changes the whole equation and makes people think something a lot worse is happening its a good time. Buying you your stuff . Barons never bought you anything, did it yeah, barely, right probably not a great lunch either yeah. Do i have you to thank for this one i think so. Squawk box. I appreciate it. Carries a lot of revenue at the firm so i dont think you can draw a Straight Line between squawk box and your tie but probably not. You could. Yeah, i think you can i like your tie. Thank you not not not a fan no. Going to look at look over and just went, yeah, lets go to break. Coming up when we return, these guys dont make ties, but they do make other clothing and apparel. Under armour reporting earnings in line with expectations this morning. The company tries to position itself for longterm growth. Going to run through the numbers with an analyst right after the break. Later, Trump Administration releasing the full text of its infrastructure plan that relies heavily on State Governments and private business but will it fly in congress . We will discuss all of that in just a menomt. Stay tuned youre watching squawk box on cnbc thanks lets begin. Yes or no . Do you want the same tools and seamless experience across web and tablet . Do you want 4. 95 commissions for stocks, 0. 50 options contracts . 1. 50 futures contracts . What about a dedicated service team of trading specialists . Did you say yes . Good, then its time for power e trade. The platform, price and service that gives you the edge you need. Looks like we have a couple seconds left. Lets do some card twirling twirling cards e trade. The original place to invest online. Sure. Mom,whats up son . Alk . I cant be your it guy anymore. What . You guys have xfinity. You can do this. Whats a good wifi password, mom . You still have to visit us. I will. No. Make that the password you stillohave toovisit us. Thats a good one. [ chuckles ] seems a bit long, but okay. Set a memorable wifi password with xfinity my account. One more way comcast is working to fit into your life, not the other way around. Welcome back to squawk box. Under armour out with Fourth Quarter results just moments ago. The Sports Wear Company reporting break even quarter with more we have the senior managing director at Guggenheim Securities good to see you. Your headline on these numbers in line with expectation. Right and i think the market was poised, you know, for a disappointment, and they delivered what they said they were going to deliver. There was a lot of skepticism on their ability to do that. Then the question becomes, is this the pivot is this the moment which they get their mojo back . Look, i think under armour is a great brand but a good company. They have a lot of work ahead of them in 2018 you know, the Gross Margins were still under pressure, better than we expected, but the sg a, theres a lot of wood to chop. Stocks at 14 . Yeah. I think that tells you on the expectation side in 2018 inventories were up 26 . How much of this is a cutting story and how much of this is a repositioning story and new product story . I think i mean, i think this is a story of five years of very call it hyper growth. Right. And now, you know, revenues up 5 and they have to adjust to this new environment that theyre operating in, and, you know, their sg a was continually you know, was high they have a lot of, you know, work on the sg a line. Inventories are still high ton of competition i still think they have are there lines that you think they should not be in . Because thats been a big discussion among the investor community. I think they have to improve their distribution theres a lot of conflict in terms of product that theyre selling into athletic specialty that theyre selling into amazon that theyre selling into khols the segmentation is as important. Where are they over exposed i think that its too broad, you know, in the mass channel. You mean khols. You dont want them in there at all no, but it has to be better segmented. They need to distinguish between the product lines in each of them yes the same product is in Dicks Sporting Goods thats in khols. Theyre really happy with the product. Some arent as happy if you were looking at under armour relative to nike, relative to you name your power retailer, how do they stack up now i think one of the biggest areas that under armour needs to invest in is in the performance area nike went through and adidas came through two years of very strong nike has a lot of seeds, you know, that theyve sown for 2018 with new product, new innovation, footwear, apparel. Under armour has to double down on the innovation side and improve the Product Pipeline i think they are i think its going to take some time. Under armour received a lot of criticism over the years now. At the time people were excited about it, including myself, i should say, when they bought into some of these digital apps and other products where they really were trying to do a lot of tracking and things like that you think they need to pull completely and utterly away from that theyve written a lot of those down they brought on debt. You want them out of those businesses completely . Meaning, would you like to see them sell that stuff i think theres a place for it, but i think it has to be managed from the investment dollars given a slower growing top line from where they are right now. So i dont think they need to exit it totally, but i think it has to be managed really, really tightly given the competitive set that theyre facing right now. Where does under armour rank anything key has been in. Theyre launching. Its very solid. New footwear lieu lieu we also think is really resonating well with the consumer under armour is neutral as well as adidas. Were going to leave it there. Appreciate it, bob under armour up up 14 . When we looked at that board that was a comparison it was very different thank you. Coming up, a full breakdown of the president s infrastructure plan and what you need to know about whether or not it will fall apart in congress. Plus, has the train left the station for the transport stocks dow jones breaking out of correction territory yesterday should you get on board . Well take a look at some of the names. Squawk box will be right back. Thank you. Imagine if the things you bought every day. Earned you miles to get to the places you really want to go. With the united mileageplus explorer card, youll get a free checked bag. Two united club passes. Priority boarding. And earn fifty thousand bonus miles after you spend three thousand dollars on purchases in the first three months from account opening plus, zerodollar intro annual fee for the first year, then ninetyfive dollars. Learn more at theexplorercard. Com wow record time. S. At cognizant, were helping todays leading Life Sciences companies go beyond developing prescriptions to offering subscriptions with personalized, realtime advice for lifelong, healthy living. Honey . You almost done . Nope. 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Yesterday we crossed above 2. 9 but this morning you can see we are sitting at 2. 833 . Oil prices which were back above 60 yesterday you will see at least this point are back below with wti down at 59. 04. Coming up, the president s infrastructure plan explained how a local and State Government ised funds for new projects. Were going to find out right after the break. You cant always predict them, but you can game plan for them. For 150 years, generations of families have chosen pacific life for retirement and Life Insurance solutions to help them reach their goals. Being ready for wherever life leads. Thats the power of pacific. Ask a Financial Advisor about pacific life. And made it liberating. We took safe, and made it daring. We took intelligent, and made it utterly irresistible. We took the most advanced eclass ever, and made the most exciting eclass ever. The 2018 eclass coupe and sedan. Lease the e300 sedan for 569 a month at your local mercedesbenz dealer. Mercedesbenz. The best or nothing. Good morning welcome back to squawk box here on cnbc were at the Nasdaq Market center among the stories front and center, big deal amerisour amerisourcebergen. Gnc holdings which these days is a small cap holding, matched estimates of quarterly profit up 25 Cents Per Share the Health Care Products retailer did see a jump in same store sales of 5. 7 . Its seeing results from a simpler pricing model and enhanced Loyalty Program those who buy protein these days. Amazons newest push in the medical journals theyve held several meetings with Hospital Executives about becoming a major supplier. Currently they sell a limited selection. The president s plan. What was very important to me this is of great importance. Joining us now. Anderson, ceo of washington d. C. Its more like a long tough haul had to prioritize. Real question about productivity its locked up productivity in the economy. The only way to really address it is through a pretty significant cant infrastructure bill. Ron, it used to be that it was a pretty bipartisan issue to Start Talking about Infrastructure Spending. How did we get to the point where this is going to turn into an absolute battle on both sides of the line . Becky, i think it is going to be a battle. There could be a happy ending. We got here because President Trump promised during the campaign hed have a trillion dollar infrastructure plan, hed do it in the first 100 days of his presidency as you heard him say in the clip that you played at the outset, he put a higher priority on the military buildup, the tax cuts and left this for the end. Were out of money he proposes to reverse a 30 year commitment to federal leadership on infrastructure and dump it on the states which are squeezed already, particularly in the northeast quarter where our gas taxes and tolls are already high telling people we should pay for it through more gas taxes and more tolls isnt going to get the job done. Although if we end up doing this squabbling back and forth on both sides its going to mean that there is no money that is spent on this and this problem gets kicked down the road even further and the situation becomes worse, right well, you know, i think one of the problems is in the president s budget he actually proposes to cut as much Infrastructure Spending from existing programs as this bill would add to it. Look, i think the good news is i do think people on both sides of the aisle on capitol hill, democrats and republicans may well throw this nonplan out and start and write a plan that is more consistent with the way this has been done in the past, more federal leadership, and i do think that this will be an impetus for folks on the hill to get going on Something Else. I think this train isnt leaving the station but another train very well might. What do you think that plan would look like . Look, i think that plan would look like something closer to 5050, maybe even higher on the federal matching side. A little less tilted to the rural areas. This plan takes 25 of the money, puts it where 14 of americans are and a plan that probably would not gutt the kinds of programs that the trump budget does, which is a lot of cuts in mass transit, in amtrak. I mean, it is a weird plan to say were going to build up infrastructure but start by cutting existing Infrastructure Programs. Norm, do you think that sounds realistic by the way, how does that match up with what weve done traditionally . 80 from the federal government so even if you get to 50 you still have the president getting some of his way. In the old days 1980, 80 federal government, 20 states a better way to look at it is 86 of our infrastructure is owned by states and municipalities its not wrong to say that states and municipalities have the problem, have to figure out how to address the problem you know, i think with trillion dollar deficits youve got to figure out how to get private investment and Infrastructure Projects and youve got to figure out how to help states make Intelligent Decisions about shedding assets. A lot of the stuff that they own they dont necessarily need to own. A lot of the transit facilities, for instance, that arent necessarily state owned assets everyone sees a huge opportunity there, including the riders. Ron, what do you think about that look, i think, you know, some we havent seen anymore private investment we have to find ways to incentivize private investment in the end, all of us, democrats, republicans, liberals, conservatives, we need infrastructure thats a common good its a public good this is why we have government in the first place the idea that the Public Sector is going to do some of the things like our most urgent needs, crumbling water systems, desperately needed repairs to existing infrastructure, there has to be governmental leadership this has to be one thing even if you dont believe in Big Government that we all benefit. If thats the case, if we think the government should be spending all of this money, why are you opposed to a gas tax as a way of funding it . We havent seen the gas tax go up in years and years and years. I think the gas tax is a possibility. Dumping that on the states as opposed to what other president s have done which is to use the federal gas tax to leverage this puts the squeeze on states that are already reeling from the repeal, for example, of the salt reduction in the tax bill. You know, its just an unfortunate choice that congress made already to juice up the deficit to fund that tax bill and not do something more there like the Kasich Delaney plan, for example, that would have taken some of that tax relief and pushed it into infrastructure we gave away a lot of money but that doesnt mean we dont need federal leadership now on the critical infrastructures. The journal points out you look at what are called payments for individuals which encompasses income transfers, medicare, medicaid, social security, food stamps. This category in 1989 was 47. 7 of outlays its going to be 69. 2 in 2019 so as a democrat you just said, you know, geez, this was the one thing that government should be for is infrastructure. Thats the one thing were why did you already blow 70 not blow it but this is a the transfer payments, thats sort of something you think of they dont want they dont want this touched, the 70 democrats at this point. So to say, well, geez, this is what we really need when youve already spent everything on something already, its not the republicans that blew it on the tax bill, its that were already saddled with 70 of our expenses are on these transfer payments. Joe, people pay for those transfer payments. People pay out of their paychecks every week for social security, for medicare so i dont know about democrats blowing it i think a lot of work hard working americans think theyre entitled to the benefits that they pay for, joe. But its not just infrastructure what government does government of course. Is in all aspects of our life now and its hard to do infrastructure now because so much else is sucking out, you know, all of the all of our resources. Its like its like californias going to do single payer, youre not going to have a fire department. There are priorities that we need, right . It seems like to be so resistant against private investment, its just weird that if its not federal, you dont even want to do it. No, no, i am a big fan of private Infrastructure Investment, but there are some things you know, we all need we all use infrastructure as a public good. Theres some things that the private sector is just not going to want to fund. Right i think for those things we need government investment, no question about it. Let me jump in real quick you know, it really isnt an either or issue at all you need smarter government that can monitor the performance of private sector Infrastructure Investment works all over the world what weve got to do is have this conversation and think about where this countrys going in 10, 15, 20 years. Infrastructure cant be a partisan issue youve got to have smarter government that monitors the performance of smarter assets and the private sector one of the things thats interesting is the private sector can do a lot of things that the Public Sector cant do and they can do it a lot more quickly and theres a lot of money available to invest in infrastructure so youve got to be smart about it. Very quickly, norm, youre saying youre an optimist. How do you feel the odds are of something getting accomplished on this this year . Thats the hard part when youre selfdescribed as an optimist look, i actually think theres going to be as i mentioned at the beginning, becky, i think this is the beginning of this conversation that we have to have federal government, no more money to invest in infrastructure youve got to get the private sector involved. If you look at what they said yesterday about dulles airport, dulles airports a perfect opportunity for the private sector to run an asset that is under utilized like youve never seen and to set a notal for getting the private sector involved in modernizing airports all across the country its about 200 billion worth of investment all it requires is Public Sector monitoring, Public Sector control over the performance of the asset, but youve got to bring in the private sector. Look at the privatization of many of the airports in europe, you think that was a success yeah, i think it was tremendously successful. You have a heathrow and you have a fantastic experience all around. Because if you i would also say that theres a lot of misgiving also though among the public about that, about heathrow and about a number of these airports and other Public Institutions that have been taken over. Yeah. I mean, i think im not saying its good or bad, depends where you land. No, i land on airports for sure private sector should be totally involved its like hospitals as well. Now youre getting into trouble, but huge amount of technology. Public sector has real trouble on the procurement side. Takes them three or four years its like having an iphone 5 for your kidney dialysis, not great. Private sector is much better in invoesing in technology, heavy industries. Ron, last question. Do you see any way that democrats will work on either infrastructure or immigration prior to the mid terms with donald trump do you see them being conciliatory or saying yes to anything between now and november of 2018 thats what makes me pessimistic . You cant normalize this guy if you normalize this guy he might actually be seen as a legitimate president some day so yeah. I think if he acted normal that would be the best way to normalize it. Thats what i hear all the time normal in your eyes. What you see as normal. Normal by the standards of the other 44 president s. I dont want to be normal in heres the point though. Or maxine. Heres the point. Democrats on the hill will work with republicans on the hill to build a consensus infrastructure. Well see. I think youre going to see that. All right theyll say yes, lets Work Together i dont know we havent seen much of that. We havent seen much from the white house either so ron, norm, want to thank you both for being with us today appreciate your time. Thanks, becky. Pepsico posting better than normal earnings. Dom chu got off the phone with the companys cfo. You are i mean, like dom calls and the guy drops everything, right . I dont know if Pepsico Hugh Johnston dropped everything, but i was able to, yes, sir, grab a couple of minutes of hughs time its obviously a very busy morning for those folks over at pepsico. Theyre about ready to start their Earnings Conference Call i wanted to get a few thoughts with regard to some of their Earnings Report numbers. We know what the numbers were. You highlighted them earlier this morning one of the things i wanted to highlight that might not be making its way through the press is pepsi could he wikpepsico or people that will award bonuses they will provide approximately 100 million in bonuses up to 1,000 each in 2018 to u. S. Based front Line Associates again, this is for front line employees, not management. They will also take some of that savings and provide Global Training for associates around the world. Also invest in ecommerce, Digital Skills and brand marketing. They plan to hire 20,000 people in 2018. Thats commensurate with their hiring in the years given the growth of their company. Also Hugh Johnston says that the macro environment around the world is still generally pretty good but the Consumer Products continue to be in a little bit of a slower moving environment right now. Retail itself as an industry is tougher. They also said that in 2018 their plan is to focus on big brands like their new mountain dew ice product and their bubbly sparkling Water Products instead of focusing on smaller niche categories for growth like they did in 2017. Some of the highlights guys, im about to hop on this Conference Call which starts in two or three minutes ill bring you any updates and details as i know them on the call back over to you. Dom, let us know. Theres a thats a nice shot of hugh that weve got there. Hell be on squawk on the street coming up. Also coming up, gold keeps piling up for team u. S. A. In pyeongchang. An update on the Winter Olympics is next. Then the dow transports breaking out of correction territory yesterday. Is now the time to get on board . Were going to find out in just quk xilbe right back. Big thinking in the finger lakes is pushing the new new york forward. Were the number one dairy and apple producers in the eastern United States supported by innovative packaging that extends the shelf life of foods and infrastructure upgrades that help us share our produce with the world. All across new york state, were building the new new york. To grow your business with us in new york state, visit esd. Ny. Gov see the infrastructure they havent changed the signs, the squawk square yet. We do need to i think time now for your olympic update. Carl i mean, squawk is could be squak in the street, squawk alley, squawk, squawk, squawk carl Carl Quininilla is in pyeongchang. A lot of letters. Good afternoon, good evening. Its well into the evening here morning for you guys what a day its going to be as we pay more and more attention to yet another american making their olympic debut at the age of 17 winning gold in the halfpipe chloe kim is the name today winning gold in the womens halfpipe becoming the youngest female olympic champion ever on snow. And we were talking earlier with becky about how these Young Athletes are drawing sponsors really just at the drop of a hat. Take a look at what chloe kim was able to do with a couple of tweets right in the middle of competition. Wish i finished my breakfast sandwich but my stubborn self decided not to and now im getting hangry you did it, heard you were hangry that gold medal deserves this oreo ice cream treat well see if that sponsorship develops earlier she wrote could be down for some ice cream now ben ander as responds, best and luck for you favorite ben jerrys flavor asking for a friend. Not a mystery that Corporate America is going to be searching for some involvement with chloe kim. Speaking of medals, the medal count continues to see the United States in third, fourth place or so. Take a look at the total and what were doing in terms of gold i think norway is still in the lead but hopefully that will change over time as we get closer to some alpine skiing, guys the weather, as you can tell from my lighter sweater today, a lot more cooperative we think it might be closer to 50 degrees tomorrow so maybe some of those runs that have been postponed in monday and tuesday finally happen on wednesday. Guys trying to figure out whether its good or not, carl i saw your apolo ohno interview. When he first did it no one had was carrying an iphone. Is that good that everyone is walking along with the selfie stick and theyre not really in the moment at all for any of the stuff . Theyre preserving it with selfies . Are we moving forward in society . I guess thats a bigger question, not for now. I mean, its its double edged. I mean, ohno said the benefit is when he came in, its all about your race. You can focus totally on your race no cameras really in your face, certainly no phone cameras we talked to Bonnie Blaire earlier today and she said, you know, i was lucky to get a telegram if i did well on the other hand, the exposure affords you opportunity and revenue. Did you get a selfie with Bonnie Blaire . Tell me the truth . I did i did. See ill talk about that later. Talk about this since every moment that youre having over there is being preserved and tweeted. I im an olympic fan, boy. Theres no objectivity here. You know that. Exactly. I like your name in korean. Yes yeah. The first character is carl and the rest is all quintanilla. Yes yes. I tweeted andrews name in korean because his name plate is waiting for him. I dont know which character is an or drew or ross. Looking forward to that im happy to see that youre just wearing a sweater this morning. I imagine that means its warmer than yesterday and could mean the sorkin collection that we get to preview. Yes, sweater of the month well work that out. Carl, its great to see you theyre playing us out we will check in with you very soon folks, when we come back, the dow transports breaking out of correction territory yesterday so is now the time to actually ride the rails just an excuse for us to play ozzy this morning. Well take a look at the names in the sector. Take a look at european markets at this hour ftse still in positive territory. Up by over. 2 of a percent the cac and the dax down by a percent. Well be back. No matter how the markets change. At t. Rowe price. Our disciplined approach remains. Global markets may be uncertain. But you can feel confident in our investment experience around the world. Call us or your advisor. T. Rowe price. Invest with confidence. Dow transports breaking a twoday losing streak and pulling out of correction territory yesterday. Joining us is donald braut don, whats most important, the price of oil, the whether we get 3 gdp theres a myriad of things that affect rails versus the Airline Stocks i mean, theyre all different, but is there some Common Thread where we should know whether to buy these or not absolutely. You know, i Pay Attention to the underlying goods flow attention. How many goods are being moved via truck, rail, air freight, parcel thats the heartbeat of the economy. Everybody wants to talk about dow transport theory and how the dow transport stocks somehow predict the overall market, but its not the stocks themselves or the management teams of those companies that are somehow there, its the underlying goods flow that is predicting whats going on in the economy. Thats been ramping up . Do we see it in all the its continued to grow. Its continued to grow we havent had a recession without first seeing a downturn in the goods flow. We havent seen an improvement in the economy without first seeing an improvement in the goods flow you know, these are all very capital intensive companies. The improvements in goods flows tell us that the economys continuing to improve. Right now the good news is the goods flow is telling us that this is just a correction. This is just emotion this is just maybe stock getting a little ahead of themselves and needed a breather because the underlying goods flow is continuing to grow and just almost every segment except coal we understand why that is because of fracking and the abundance of natural gas, but almost every other goods flow is continuing to improve up and to the right. Youre talking about transports, but i would say you were saying transport stocks that you can just extrapolate to the overall s p i would think from that, too maybe the pull back that we saw was not oh, yeah. Based the good flows matter to the entire s p absolutely. Because you can think about the entire s p you think about all almost all stocks in general. I mean, there are a few out there. Microsoft really doesnt ship anything anymore and google doesnt ship anything, but almost every Company Moves tangible goods in some form and they move them from the Raw Materials stage. So this becomes a leading indicator because long before it becomes a housing start it becomes lumber, before it becomes lumber its a primary for forest, its aprimary tree in the forest if you go out there and track the data, thats where the investing world is heading its becoming lessee motionly based and more databased you see companies out there like balafin leading that charge. As we go to more databased investing youre going to get less emotion. 60 oil seems about right kind of a sweet spot for a good economy but not prohibitively not hurting margins. Don, thanks. Absolutely. Thanks. Weve got to run. Thank you. Still to come this morning, will stock volatility translate into gdp headwinds Steve Liesman joins us after the break. Squawk box will be right back. Nah. Not gonna happen. Thats it. Im calling kohler about their walkin bath. 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 ] hmm. 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. Call and ask about saving 1000 on your walkin bath, or visit kohlerwalkinbath. Com for more info. Stocks in the red after a big rebound on wall street, dow futures are pointing to a triple digit loss at the open. Volatility and growth. Are we in for gdp headwinds thanks to lower stock prices well have the debate with the economist coming up. Plus, a tasty quarter. Well tell you why investors are snacking on blue apron this morning. The final hour of squawk box begins right now live from the most powerful city in the world, new york. This is squawk box. Good morning and welcome back to squawk box here on cnbc live from the Nasdaq Market site in times square im joe kernen along with becky quick and Andrew Ross Sorkin lets get a check on the markets. The futures have been down over 100, 150, 160. Now less than 100. They have pared their losses down about 80 points right now down 16 on the nasdaq, the s p down about 7 in europe, the averages are mixed for the most part this morning, but mostly negative not huge losses anywhere treasury yields, the bonds are going up a little bit today. Yields coming down 2. 83 on the ten year. Past that. 2. 9, now back down to 2. 83. In our headlines this morning, under armour reporting a breakeven quarter matching wall streets expectations revenue came in above estimates and north american sales actually fell but that was offset by Strong Performances internationally. Under armour is announcing an expansion to a previously announced Restructuring Plan which will result into a charge of 130 million. Check this out, the stock is up by over 12. 5 . We have an analyst, bob durbo, who said thats because the company met expectations but the whisper number was that they would miss Something Else would be thrown in and that was not the case. Pepsico reporting earnings at 1. 31. That was a penny above estimates. The company says the new tax law is expected to lower its tax bill for 2018 and strengthen its business in other ways by the way, dont mix Pepsico Hugh Johnston. Hell be on squawk on the street at 9 00 a. M. That is a cnbc exclusive interview. Also, walgreens is reportedly in talks to buy drug distributor amerisourcebergen. Walgreens already owns 20 of amerisourcebergen and has a representative on the board. A whistleblower is saying theres vix manipulation they hold senior roles in the business and a person representing the law firm said they discovered a market manipulation scheme. The Law Firm Says that the liquidation of vix Exchange Traded funds last week was driven by what they are calling rampant manipulation of the vix index. Apparently theres a situation where you can post bids that dont actually get traded that you dont have to pay for in any of these and thats what they say was happening last week. Now weve reached out to the cboe for comment and well update you with a comment when we get one. Will the recent market volatility impact growth in Consumer Spending . Steve liesmans been looking into this very topic he joins us now. Joe, thanks did you book a more expensive vacation than you otherwise would have because your stock portfolio was swollen with gains maybe you bought a more expensive car because your home value was way up if you did any of these things, you contributed to the wealth effect thats the tendency to buy more and save less when stock and real estate values rise. Economist estimate people spend 3 to 5 cents in every dollar from their windfalls that may not sound like much but it adds up Goldman Sachs thinks it may have added an additional half a point to growth. Now with the market down and the outlook for stocks not as rosie, goldman forecasts that half a point could go away, a head wind to gdp since 2009 Household Income is up more because that stops in the quarter of 2017. Jpmorgan says 3. 5 trillion of value has been wiped out in this selloff. You can actually see the wealth effect this is in the savings rate. Here are three instances where surging stocks and real estate values prompted americans to save less and spend more the savings rate you can see at the very end recently plunged while stocks thats the the red line is the savings rate and you dont get a better example than the one weve recently had where peoples portfolios were up big time and their savings rate has gone down a lot. There are going to be some offsets, folks better wage gains, tax cuts, more jobs could ease the negative effects of the wealth effect decline americans could think twice about that fancy vacation, loaded car or the guitar they bought that they didnt need because their portfolio was looking very robust. Was that you . I dont know who were talking about here. Wouldnt this be a better story if you were doing it 18,000 to 26,000. Right. Thats 8,000 points and now were down 2twentyfour six. Isnt the story that threequarters of it is in a year thats an excellent question. I just dont get it and you wanted a correction. You were worried its a behavioral question. Do we do the behavior on the other side when we were up 8,000 points probably takes a while for people to feel wealthy. Something economists debate 2,000 makes a difference when weve got 8,000. We spend stuff on the way up and when we get stuff like this do we stop spending very quickly . Do we or do we not . My guess would be like it wouldnt just do that but if they were another 10 down i dont know if we can go back to the wall we only adjust the savings rate in recessions. I saw that, yeah. You see those gray bars thats where people readjust. Because we panic. We panic and start hoarding our cash. Thats right. All of a sudden you have a recession. Things like confidence play in this is what makes forecasting so difficult is theres all these different behavioral youre right, joe. It could be that theres no effect. You still have threequarters of ive seen Larry Summers say, ive told you so steve rapner who says, i told you so. Im not in that camp. Im not saying you are, but theres a lot of people that every point that it moved up since the election it made them sick. Yes. They get 2,000 points let me ask you this question. I dont get it. Youre booksing the vacation for the family, okay youre making a decision the market is up 40 30 and youre saying, do i go for the suite or do i go and get separate rooms and now youre booking that same vacation when, in fact, the markets down 10 . Let me ask what do you do . Let me ask you a separate question is it a function of exactly where the market is or is it a little bit of a function of the volatility, which is to say, as long as if you believe were going to live over the next year in some kind of massive swing situation where were up 5 , down 10 , that i think the volatility i would argue the volatility even more necessarily than where we are. Before you ask that question, ask this one how much do people really know about the stuff that we come in here and we report every minute, 400 down, 400 up its not clear to me that the broader public is paying as much attention. Theres another piece of this. Right i also think theres a tipping point. Once you get to the it begins to be headline news. When the taxi drivers are asking the questions about the money. Thats your definite sign. Bitcoin. Another important piece here which is some stocks are held directly and some stocks are held indirectly. The stuff thats indirect, like in your pension plan and is maybe not of much importance as the direct stuff theres another thing which mike furolli of jpmorgan says he thinks theres less wealth effect because theres more inequality in the distribution of stocks. If more rich people own more stocks than the average person, then the propensity to spend makes it lower if thats true. If its more one little factoid to think about. Theres a lot to think about. Because everybody has a phone people are much more aware of where they are even on a daily or weekly basis than they used to be because they used to wait for the statement to show up im 10 richer, im 5 now you look and go, oh, my goodness gracious. You could always know and the question is did you want be to know the real answer to that now it will push notify you. We know this from fidelity. When stocks are on the way up people are checking their portfolios all the time. When they start going down, people stop checking them. I dont want to know. I dont want to know you all know that cnbc well, ive been here 25 years. You know the one thing ratings are correlated with. Volatility. The down market. Volatility. Volatility. Your hair, joe. Well, youd be in trouble. I am in trouble ive been in trouble for years. No, im just saying for us these are the glory days these are the halcion days embrace it. Think about this, traders love volatility. Yes. Which also would explain why they want to watch this stuff. Right all im suggesting is you cant erase volatility you think ultimately it has an impact i have not seen a study correlating the wealth effect with volatility. Housing, in other words, people may spend less of their housing gains, more of their stock gains and that those are different on the way upward but i have not seen the volatility correlation. Maybe somebody has done that study. Thank you, steve. That was very interesting. Pleasure. Youre nice, becky. That was interesting. We just had a fiveminute conversation. All right is this whos this . Back to you steves going to stay. Youre going to continue this. Steve, stick around lets bring in bruce kazman, j. P. Morgan chase. You know, bruce, i was sort of gratified by youre at 3 now, arent you, for gdp yeah, we are. You know how many times ive been saying to you youre behind why dont you economists instead of saying, wow, its been 2 for the last eight years, im sticking with 2, why dont you look ahead, say maybe we go to 3 and then you listened to me and you did it but its not all for great things, is it . The 3 youre looking for long term with the deficit there could be some issues, i guess, is one way of putting it well get the gdp but we might pay for it in other ways, is that fair . Yeah. Well, i think were getting the 3 because were getting a lot more fiscal support than we expected theres a little bit in the forecast reductions that reflects the better economy. Its Government Spending that is juicing the numbers is that good long term i think it depends on how you view what its being spent on. Certainly with the deficits going up and also importantly with this stimulus coming at a time we believe the economy is at full employment, we think were going to get a capex strength here and thats partly related to the tax cut we dont think the supply side is going to respond to the demand side. We think the economy is starting to move into overheating. Its weird because you guys are never happy, economists. You get you get the 3 gdp and then you say, you know what, were at full employment if we get to 3 gdp wages could start going up thats everything we wanted. We wanted 3 we wanted wages to start going up and so you get all of that and then youre like, you know, weve got to start worrying now because wages are going up and were at full i dont get it. I want you to be happy its like youre a dismal science for a reason youre dismal people. Maybe we are, and i dont actually want to complain about wages going up or even inflation going up theyve been low and moving up is a constructive thing. I think what we do believe is there are some constraints on how far we can run with that, and i think importantly in the near term and looking at what markets are doing right now, what weve seen is a complacency in markets with regard to the implications of growth, synchronized growth in terms of what that means for inflation in Central Banks. I think thats part of the adjustment were going through right now. Bruce, i dont think youre a dismal person. Ive had the pleasure of knowing you great minds great minds think alike. Separately from on air. Let me ask you this question is it right to say that tomorrow all eyes will be on the all important, allinclusive Inflation Report going forward. Oh, geez sus. At the end of the day they will. What do you expect from the Inflation Report how is the market going to react . Weve been trading on the virtual idea of inflation for four days or even over a week and tomorrow we get some actual data how does the market react . First, i think theres two messages from tomorrow one is the headline number, which is going to be high. You should look at that against the retail sales report. I think were going to be feeling that the consumer is downshifting somewhat into the first quarter. Thats probably the less Important Message than another. 2 rise in core cpi, the third out of the last four months i think thats going to reinforce the idea that there is a trajectory upward taking place. Again, 2 or so core inflation is not something to feel bad about. It is one in which i think the market still has to digest were looking for eight fed tightenings over the next years. A quarter move the market is pricing in. Thats a lot. Wow. Theres still further to go on that. Y yes. Is it right to say before over heating theres simmering, then theres warming, then theres heating and then theres over heating youve got a long way to go before over heating. Then the frog is dead. I think thats fair, steve. You do it slowly. More core charge than what i think in the forecast. We think core inflation a year from now will be a little bit above 2 we will have a bestill my heart, bruce, on 2 thats not that big a deal. Its a good thing, but its a i good thing with more stimulus coming in the picture next year. So the story keeps moving forward. Im not actually trying to be negative about the economy this year or next, but i think we need to understand the implications of this as we look out over the next two to three years. But, bruce, couldnt the Participation Rate be partly the boomers and aging but also partly that people dont have the jobs they want and the full employment worry that you talk about, i dont know, can you really be at full are you really is the economy really at, you know, in high gear at 2 i dont know it seems like 3 huh it depends on what if you have a low Participation Rate, people working a couple of jobs, a lot of parttime people. Some people think we can raise the Participation Rate and do 3 without the negative consequences it just seems like a half you can have a half full view on this im just happy youre at 3 . Im going to leave it at that. Im so happy you got there. Im glad im cheering you up, joe. You are. I want to make it clear that full employment doesnt mean that there arent workers to draw what were actually arguing is exactly what you suggest, that there are more workers you can pull in the work force, but at this point to bring them in youre going to have to pay them higher wages. Good that is good. I think it is something we should be constructive about, but we should also understand that has implications for the fed, that has implications for fixed markets and its also telling us something about the constraints that actually exist underneath the surface that will eventually bite. I think you want to look at this from a positive near term point of view and the constraints it suggests for the two to three year out view. Andrew has, like, what do you have, four jobs . Four fulltime jobs basically . Trying to hedge always got to hedge my bets. Two jobs just to send his kids to school. Ive got to New York Times, you know, ten years its going to be kaput. No, they said the print version of it. The print okay. But the other bruce, thank you. Thank you for going is the higher margin piece. Thank you for going to 3, bruce. Your ere early. Headline just crossing the wire, xerox responding to a critical letter from investor carl icahn and darwin diesen who own about 15 of xerox the two of them opposed xeroxs deal with japans fuji film which would combine xerox. However, they say the deal followed a year long comprehensive review to enhance shareholder value and this transaction would deliver significantly more value than having xerox remain on its own xerox also agrees with icahn and deasons contention. Lots to watch on that one. Also still ahead when we come back, budget backlash in washington were going to talk to the new house budget chair, congressman steve womack right after the break. 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And cuttingedge Transportation Development to connect those ideas to the world. Along with urban redevelopment projects worthy of the worlds top talent. All across new york state, were building the new new york. To grow your business with us in new york state visit esd. Ny. Gov. Welcome back to squawk box. President trump unveiled a budget proposal. The house plans to write its own budget proposal. Joining us is steve womack good morning. Dare i say the press suggests that this budget is dead on arrival . Well, look, its a first step in a process that involves not just the white house but the congress, the house and the senate and so its an important first step its very important that the Congress Hear from the president , what its priorities are. Well take a look at those priorities and then well sort through the entire process the house will work its will the senate will work its will and out of that well come up hopefully with a concurrent budget resolution that will serve the interests of the american public. What in the budget do you think is possible . What is possible . I think it is possible to deliver on a lot of the president s spending priorities. Obviously after last week we have pushed up our defense number, which we really needed to do. We have taken a lot of cuts over at the pentagon that have affected readiness of our military forces, and thats a core constitutional provision that we provide for the common defense. I think were set there. His Infrastructure Program just introduced i think is a very Doable Program 200 billion of federal money to go with a lot of other money from other sources you know, obviously we have some other issues that the president is very high on. Border security to be one, opioid treatment is another. So we have a lot of things that the president wants to do and we want to embrace those ideas and be able to deliver those i think were do you embrace the idea of adding to the deficits well, i think theres going to be an initial near term addition to the deficit. If we can get longterm growth look, you cant look at this just through the lens of one thing, whether its a tax cut or whether its some other process, but if you look at what weve been able to do, if you look at what the president has advocated, weve gone after regulatory reform. Weve been very successful there. Weve passed the tax cut and jobs act program were putting more money in the hands of people and while there are going to be some near term deficit increases, we think the longterm health of the American Economy is going to be much better as a result of that we just heard chairman, the republican discussion about 3 growth. If we can get sustained 3 growth then we will have achieved great victory. Chairman, the Republican Party has talked about itself as being fiscally responsible, has talked about avoiding deficits and debt this plan puts 7 trillion on the table, thats in addition to the tax plan does that not do you think somethings changed within the party . No, i dont think anything has changed within the party were still a party that believes in a very Strong National defense posture, National Security is very important to a lot of us, and i think that building the nations infrastructure is a key to helping jump start an economy thats been in some anemic growth pattern for the last several years. So, look tax spending is part of an economic spending package . Well, im not going to call it economic stimulus its a core requirement of the constitution to provide for the common defense it was 26 in 1989. Thats barely budging but entitlements are 70 . We know that and nobody is doing anything with entitlements. The republicans are the ones that are going to have to do it. Youre never going to hear it from the democrats. Remember what i said, its a process that involves the white house and the congress and well take up the reforms on the 70 of spending which is mandatory. Thats what we need. Absolutely. Eventually i think hell figure that out but, you know, he promised no medicare cuts and thats the populist approach but its just staring us in the face. The president proposes, the congress will dispose. All right when we come back, we will tell you why shares of blue apron are higher this moinrng. Stick around squawk box is right back after this quick break whats Critical Thinking like . A basketball costs 14. Whats team spirit worth . cheers whats it worth to talk to your mom . Whats the value of a walk in the woods . The value of capital is to create, not just wealth, but things that matter. Morgan stanley when we come back, shares of Meal Kit Service blue apron are heating up well have details about the companys quarter right after this oh yeah. No. At cognizant, were helping todays leading manufacturers make things that think and do automatically. Imagine that, a world of new Digital Products and services all working together for you. Can i borrow the car when its back . Get ready, because were helping leading companies see it and see it throughwith digital. Good morning and welcome back to squawk box here on cnbc live from the Nasdaq Market site in times square im joe kernen along with becky quick and Andrew Ross Sorkin hes outside. Yeah . Hes adjusting. He has to get ready for the cold and things in south korea. Im excited among the stories front and center, andrew is outside is our top story. No, shares of hospital suppliers are under pressure this morning. Thats after a wall street journal report that amazon is making plans to ramp up its presence in the medical supplies business paper says amazon has held several meetings with Major Hospital companies about becoming a supplier and most recently right back in late january. And Small Business confidence rose to near record levels in january. The monthly index on the National Federation of independent business rose to 106. 9 last month thats the third highest reading in the history of the survey the two point increase was spurred by a jump in economic confidence. And cryptocurrency trading is becoming more popular, but apparently telling the irs is not. Personal finance Company Credit karma says of the 250,000 people who have filed their tax returns with its service, less than 100 reported any cryptocurrencyrelated transactions, however, separate survey of 2,000 americans saw 27 saying that they had realized gains from cryptocurrency transactions. The irs regards that cryptocurrency is like any other investment, subject to the usual rules on Capital Gains and losses this sounds like swimming pools in greece. No one has one. No, unless you take an ariel view. Yes. Then you recognize just how many people do. Folks, blue apron out with Quarterly Results that were better than wall street expected we should mention this is a very small market cap company, even smaller since youve seen since the ipo. I guess we follow this because it is one of these new companies, were kind of seeing how some of these ipos go. Aditi roy joins us from san francisco. Aditi, its been a tough road for this company, but some good news thats out this morning yeah. Definitely, becky. The Earnings Call is just went underway right now. Shares in the premarket right now are up 10 after the company beat on the top and the bottom line this is the first Quarterly Earnings call with the new ceo Brad Dickerson q revenue beat the expected. Thats a 3 decrease year over year they were looking for a loss of 27 cents but they got a loss of 20 cents the company is decreasing the expenses as it ramps up the new Fulfillment Center leading to a 15 cent decrease the company reaccelerated efforts in the final week as operations continue to stabilize. And average revenue per customer increase of 248, thats 2 up from a year ago. Analysts are also looking at operating expenses which is a priority for dickerson the cost of goods sold as a percentage of net revenue, that decreased 20 from the third quarter, primarily because of operational improvements. On the call well be looking to get an update on the new Fulfillment Center and forecast in the coming quarter. Becky, back to you. Aditi, thank you very much. Meantime, looking at the broader markets, a lot of people wondering if the correction has run its course or how quickly were going to see Interest Rates rising joining us for her take on the selloff shakeout is kathy jones. She covers fixed income. Shes the chief fixed income strategist at Charles Schwab kathy, thanks for being here today. We saw yesterday the ten year moved through 2. 9 this morning back at 2. 83 whats really happening with rates . Was that the real froth and fury last week or do you expect to see us continue to push higher i think it will continue to grind higher theres a structural change taking place with the fed pulling backand the other Central Banks pulling back with the quantitative easing and market stimulus. The market has to absorb more supply that brings back volatility and higher rates were rounding up a pretty hot economy relative to potential and adding stimulus at the same time we think rates will continue to move up. Theres two stories weve been going back and forth about this over the last week or so the good news is the economies continue to push higher and that should push rates higher the bad news is youre seeing Central Banks go higher. Which is the dominant story . What would you be telling people rates are moving higher for the right reasons or rates are moving higher for alarming reasons . Im not sure the Central Banks pulling back is alarming. Its a structural change. People point to deficits and say thats the bad news. That is the bad news. This is a tough time to be adding stimulus when youre already running above potential. Overall you think this is a normalization and one we should be saying, of course. Yeah. I think the hard part is people have not had volatility for so long one of the things qe did is not only hold down yields but hold down volatility. Now its back and back in a big way and a sudden way i think thats what people have to adjust to. Theres been this story out there that volatility can be manipulated. Theres apparently a whistleblower talking to the sec and that traders found a way to kind of manipulate the system when it comes to the vix we know volatility is back did it surprise you with how big of a surge we saw last week . Yeah. I think we were surprised. I didnt know there were so many leverage bats against the vix. Every time we have a turning point in the market, theres always Something Like this whether its longterm Capital Management or Something Else this time the fire wasnt in the sfi fixed income market, it was in the equity market. Nonetheless, theres always some moment when the leveraged bets come unwound. Do you think it was a mistake to stimulate the economy well, i think its bad timing. We should get 2 a year and thats what we should be content with that, say thats where we are are we assuming the stimulus is going to stimulate Economic Growth or just inflation i think thats the question. Are we adding to what do you think the stock market was indicating when it went up 45 . I think they liked the tax cuts a lot. Right why did they like the tax cuts, because its going to be inflationary that wouldnt make sense. No, they like the tax cuts because it puts more money on the bottom line. Thats good and investment is good but it should be productive invest rather than youre saying its not going to be . I dont know. I dont know. Youre doubtful youre skeptical im skeptical. Time will tell. We have a couple of 3s and a 2. 6 so far are you optimistic we just saw bruce kazman go to 3. Our potential is low and productivity is low and Labor Force Growth is low. If its growing at half of 1 and productivity is not even 2. Thats what they say. Then its hard to get a sustainable 3 without inflation. What do you tell people to do right now when it comes to investing in fixed income . So weve been pretty cautious because we thought that the risk premium that you get in the markets has been too low to make a lot of things attractive were actually looking at this as an opportunity be at this if we see credit spreads start to widen, well probably shift to a little bit more aggressive stance were keeping duration low and weve been a little bit cautious on the credit side. Do you think the global Interest Rate environment indicates an over heating Global Economy at zero . No, i dont think Global Economy is over heating. Its doing well for the first time in a decade which is terrific. Right you dont think it could be stimulated when were basically zero around the world . Thats the wrong timing for stimulation . Be worse at 14 , right i think for the u. S. The price will pay as higher Interest Rates above the 2. 8 that we have now on the ten year . Yeah. Yeah. Does 2. 8 seem historically like no, of course not. What would you consider historically high . What im saying is when you add stimulus at a point when the economy is already running above potential does a two point ten year indicate the economy is running above potential. Yeah. 2. 8 does . I dont know, it seems like based on inflation, isnt it i think it can go higher. Kathy, want to thank you for joining us thanks for coming on. Thank you. All right. When we come back, were going to take you live to the olympics Carl Quintanilla is there. Whats coming up today more sports probably. Yosef, were going to bring you up to speed on the competition. Big day for u. S. Snowboarding and well tell you which company, one of the biggest in the world, is now a new olympic sponsor. Well be back from pyeongchang where can investors seek predictable income in an uncertain world . Pgim sees alpha in real assets. Like agriculture to feed the world. And energy to fuel its growth. Real estate such as ecommerce warehouses. And private debt to finance transportation and infrastructure. Building blocks of strategies to pursue consistent returns over time from over one hundred fifty billion dollars in real assets. Partner with pgim. The Global Investment management businesses of prudential. Lets get to south korea were going to go there remotely, i assume Carl Quintanilla is live at the olympics we sent him and hes only too glad to go hey, carl. You get to see all of this youve got a good gig. Youre smart it is a good its a great gig, joe one of the reasons we love covering it is the olympics are a great Cross Section of business and sport the list of global sponsors kind of reads like the dow. Ge, intel, proctor, mcdonalds, Companies Like that. Now a new entrant, alibaba is the First Chinese company to commit to the beijing games in 2022 we took a look at the multimillion dollar game of olympic marketing. Top olympic sponsors contribute nearly 20 of revenue to the ioc. Tech companies are lining up to make their mark on the games the 13 companies in the olympics top sponsor program pay an estimated 100 million per olympic cycle forex inclusive marketing rights in park activations like cokes digital vending machine or samsungs vr packed olympic showcase have fans lined up outside. Intel which is rolling out 5g and Drone Technology choreographed a drone olympic display during opening ceremony. New sponsor alibaba which kicks off a ten year sponsorship deal plans to digitize the olympics and the revenue stream. We want to make every Olympic Games that people can make more money, not only the athlete, the government, the cities, but also the fans this is something the ecosystem we need to build up and this is what we think new technology can help. Longtime sponsor mcdonalds abruptly ended in 2017 three years earlier than expected. Mcdonalds is still a local partner of the Olympic Games but has only domestic rights its smaller than what we saw in london and rio its focusing marketing dollars on different priorities. Sponsor pay over 1 billion to the ioc for what may be the worlds biggest marketing opportunity. And certainly youre seeing that on a daily basis here in our coverage still a lot more to come, guys, as we keep our eye on the medal count and well bring you chloe kim later on this morning who is obviously in the news having taken gold for the womens halfpi halfpipe guys when do you sleep, carl not much. Were done here about 2 00 a. M. Local and then up around, what, guys, i guess around 9 00 a. M. Local, ba being to work, start shooting believe me, when you come with me to tokyo in two years, youll see what this is all like. I want you i want andrew to have to do thatthis year, and thats going to happen, isnt it, on thursday or friday . It is it is. Were going to have a little bit of handoff. Are you going to do 9 00 a. M. To 2 00 a. M. Im following his footsteps whatever carl does, im going to have to do carls in pretty good shape i know he is. Two man luge. Joe friday night. Friday night carl were going a night on the town. Friday night were going to okay. You guys be careful you know that its a new world. New world. Certainly is. Thanks, carl. See ya, joe catchall theolympic curling competition. This is our thing on cnbc. And curling is pretty fascinating when you watch it, and its competitive and everything else. Canadians are really the leaders. Into it. When it comes to it. Yeah. Thats at 5 00 p. M. Eastern on cnbc. Okay when we return, jim cramer joining us from the New York Stock Exchange we will get his take on this mornings market action. In the meantime, take a look at futures right now. We are in the red. Lets show you whats going on its getting marginally better dow looks like it will open off about 97 points. Well be right back in just a moment alerts wouldnt you like one from the market when it might be time to buy or sell . With fidelitys realtime analytics, youll get clear, actionable alerts about potential Investment Opportunities in real time. Fidelity. Open an account today. Fidelity. Today, youre recognizing two promotions. Mom hey, kids, im home. What do you want for dinner . Hers to manager and yours to grownup. With blue apron, any night is a chance to see what cooking can do. Check out the shares of henry schein and patterson companies. The ftc filing a complaint against the two dental supply companies and privately held binco dental supply. The companies broke an antitrust law, interested in this conspiring to refuse to serve or give discounts to dental buying groups the three Companies Sell more than 85 of the products that dentists of dentist purchased this year. A statement henry schein denied the allegations. Making headlines vix index, wall street fear gauge. A Law Enforcement representing that person told the sec that they discovered the market manipulation scheme that takes advantage of a widespread flaw in the index the Law Firm Says the liquidation of vix exchanged rated funds last week of their words of ramped manipulation lets get gown to the Stock Exchange jim cramer is joining us now before this was out, you suspected as much. Sure, it was clear it was manipulated. The forces that are involved and doing it have immediately denied it the denials came before the manipulation charges well, i didnt know it thats the way it works and theyre going to stick by that because the fees are big and theyre making so much money so there is doubt and i wish the sec would close the products because so many Retail Investors are losing money to look out for retailers, what are you look like some sort of sonograp softy. It is nice to see the truth comes out. If i have subpoena power, i would take it all down i wish the government would not use their subpoena follow up on this anonymous whistle blower. Jim, looking it is february, looking towards the end o f tf the year, we are hav some serious moves he here, we moving hundreds of points on a daily basis. Is that going continue will there be an upward bias or unchanged bias what do you think we are in this year Interest Rates dropping down to 2 pant. 5 or 2. 6 this year. We forgot all the good things thats happening with business and all successes and all the great things ceos are doing. We just forgot about it. What we are focused now that something you and i both know is very small the tax package is fabulous. We have repealed everything that happens since september. Its got to go under beneath. You and i both know. Remember the tax reform, how did that get just completely off the agenda, was that political i was going to ask you, jim is the latest narrative and there is a lot of people that have a vested interest of whether things work or not was it stimulus at a time . I dont know if we should have been happy to say yeah, well do 2 and thats all well get. I would try some Growth Initiatives to try to get above 2 thank you before this, what happens lets say you took the 1963 jfk strategies what you would say is at last workers are making some money and democrats would rally behind it somehow the whole narrative got corrupted. I think it is bragreat that we o for 4 and workers get bigger wages. I wish we are back like democrats be like jfk. You can argue it is lbj, this is kind of the democratics platform and i dont understand how it got corrupted for years we can count on growth of 2 and europe is stuck at 2 . Our citizens benefit from it i dont know, i want to get back to it. This is the way for workers to make money, joe right now ceos are making a ton of money i do think this has been great for the workers and it should embrace as such. Pepsico just gave everybody a thousand you would be on the same side as you know i am a jfk, devoter this came out from the cboe, this is a quote we take our regulatory responsibilities and over sight of our markets seriously. This letter is replete with inaccurate statements, and misconceptions and including fundamental minute understanding of the relationship between the vix index. Thats just a wrap i love it. Someone google what you are supposed to say. It is in the dictionary i love it i am so old, it is like i am so old. It is fabulous to see the same central comments coming out. I love these guys talk about something important. It is not inaccurate to say it is a chance i know what i am talking about i know, it is in cincinnati what is it . Whats your restaurant i may come up there. Okay. 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Big thinking in the finger lakes is pushing the new new york forward. Were the number one dairy and apple producers in the eastern United States supported by innovative packaging that extends the shelf life of foods and infrastructure upgrades that help us share our produce with the world. All across new york state, were building the new new york. To grow your business with us in new york state, visit esd. Ny. Gov welcome back to squawk box, we have been talking about the recent market volatility i venture out to times square and we are about to find out what do you think is going on with the stock market right now, are you worried . No, i am not terribly worried. The past couple of months it is take on a kind of corruption in terms of whats happening with the 10yr bond and of the way Interest Rates going up. Stock markets are always up and down and you have to look at the economy more longterm and not what happens this week or the other week words of wisdom, i should say the first guy we interviewed was an accountant so he knew what hes talking about what a clued in millennial. He bought a therom you must have been shocked. He seems more clued in. I told him he should be a guest on the show. Or maybe an an kchor make sure you join us tomorrow, squawk on the street is next. Good morning and welcome to squawk on the street, i am david faber and jim cramer, we are live at the Stock Market Exchange Carl Quintanilla is live in pyeongchang. We are looking like we are opening a nega