Tuesday. The major indices have recovered about half the losses they saw on the lows from february 9th. From february 2 chnd to february 9th a big selloff, but weve seen half of that regained lets look at treasury yields. Yesterday the tenyear was sitting at 2. 837 . Once again this morning, tenyear at 2. 84 . 30year at 3. 124 . Overnight in asia, the nikkei was off by 0. 4 . Big gains for the hang seng. Up by 2. 27 . The shanghai was up as well. Check out whats happening in the early trading this morning in europe. Youll see green arrows across the board. The cac, the dax, and the ftse all showing gains of better than half a percentage point. Stocks are higher in italy and spain. Check out the dollar, which set a new low, 15month low against the yen yesterday. You can see that continuing. The dollar down once again, 10 7. 45, the dollar against the yen. Oil prices are actually below 59 this morning wti sitting at 58. 72 brent is above 60, 62. 43 those prices continue to drop. Couple big stories were watching january Consumer Price index comes out at 8 30 ooeeastern tie this report is important as it is the first read on inflation since the rise in treasury yields sparked that selloff in stocks before things rebounded ubers loss narrowing in the Fourth Quarter following cost cutting measures by Dara Khosrowshahi and twitters jack dorsey downplaying comments that the company could be a takeover target he says he seeing value in twitter remaining independent and that if twitter were connected to a larger company, they would not be able to do as much rumors about a potential deal were reignited last week sort of a switzerland argument, if you will. I guess i guess. All right among the top stocks to watch, chipotle shares soaring after the company tapped taco bells chief to be its new ceo. Interesting, i think, because for years, kate rogers, chipotle had this aura of no, were not taco bell, were fresh, were that now its come over and help us i love both. I do love taco bell. If i cant get doritos on top of my taco, its not as good. What else is there to life . They have stuff they merge its not even no one in mexico has seen any of this stuff they serve at taco bell. They merge things, the words go together like burrotacos, its all good with me its Innovative Marketing an has been successful for brian niccol chipotles search is over with the burrito chain announcing late yesterday that brian niccol will take over for steve ells on march 5th. Niccol has been with taco bell since 2011 and has been ceo since 2015 he made taco bell a lifestyle brand. He launched the breakfast offering as well as mobile order and pay across taco bell in a statement chipotle said ells expertise in digital technologies, Restaurant Operations and branding make him a perfect fit for chipotle a we seek to enchance Customer Experience, drive sales growth and make the brand more relevant yum brands, the parent of taco bell, just invested in grubhub and chipotle hopes to make a greater push into the delivery space in 2018. One downside that analysts did note, chipotle is companyowned, and taco bells are majority franchised, and that could be learning curve for niccol. Others say ells role as founder could make it a challenge for him to step away as ceo and become executive chairman. Chipotle got a pop of 12 yesterday. Hes been there through some important years for taco bell. Certainly breakfast mobile order and pay. He was there when they moved into clothing with forever21 making this an important thing for millennials. Does the core product at chipotle change at all and move more towards i dont know what you refer to taco bell mexican food as. Its different than baja fresh menu innovation theyre not scared to experiment i dont think youll see doritos at chipotle. Theyre all about the fresh food but are in dire need of somebody coming in and setting things up, centralized planning all the stuff they had problems with because they are locally source the food. They need centralized control over some of these things. My own experience, i dont think they have a great taco offering at chipotle thats true the bottom line taco bell taco, if they say were out of everything else, thats all i can get, its like 79 cents. Still good with you thats fine you think a taco is key to the turnaround more key than a burr reit to. For chipotle . I dont know if hell do that i dont know if i want a taco at chipotle. They are known for their burritos rice. Eh beans. What about a soft taco theyre okay. But what about you know the fufu taco . They got cilantro in them. I dont know theres something about that 79 cent if i have to get it. Then they sort of make ginned up version of those the supreme taco supreme i do know what youre talking about. Then the fire sauce, kate the fire sauce theyre not cheap with it there. Theres big vats of the sauce. Some places they give you one thing. I could help, kate i can help i had know idea you were such a big taco bell fan. They should have tapped you for chipotle mexican food. I could each rancheros for breakfast. Probably not good for anybody here other stocks thanks, kate shares in baidu rose after an increase in quarterly revenues the Chinese Company announced it was planning to list its video platform in the u. S. Fossil reported better than expected Fourth Quarter results. Fossil had an increase in samestore sales during the holidays the company had a market cap of under 500 million at the close yesterday. Metlife says internal failures that resulted in not making payments to thousands of pension recipients go back 25 years. That problem which was revealed in december, has prompted some investigations and a 70 million charge in the Fourth Quarter that charge along with the hit from the u. S. Tax law changes dragged down metlifes Fourth Quarter earnings by more than a third. 25 years . Goes back 25 years. Wow amazing inflation Data Taking Center Stage today. The details of which could rattle equity markets all over again. For more on that were joined by Jim Osullivan and covering the equity angle, david leibovitz. Welcome to both of you jim, lets talk up the cpi number we expect the consensus is for a gain of 0. 4 versus 0. 1 gain we saw in december the focus is more the core. Thats the real key here 0. 2 . Yes that seems reasonable. Over the last year thats up 1. 8 , and give or take a tenth theres a lot of focus on this number and pressure on this number the core is the key here lets explain why this is important. The core is the number without food and energy wrapped into it. Inflation concerns are sparked some of the issues that we saw starting at the beginning of this movrnth where people thougt my gosh, inflation is coming faster than expected if we see a 0. 3 read on that core number instead of 0. 2 it will feed into that. Would that affect you youre right, were talking about tenths of a percentage point, but do you think well see that hatch it is likely to go in march any way. At the end of the day onetenth will not make or break a trend could it be 0. 3, 0. 2 today it wont dramatically change my view of where were going. If core inflation is up it makes a huge difference to what the fed is doing may not change jims mind about where the economy is headed, will it affect equities traders . I think if the print is higher than expected, we see core inflation rise, it will destabilize the equity market. What has happened over the past week or so is that the bond market has begun to price the stock markets outlook the stock market has been focused on healthy mick growecoc growth, solid profit growth, the bond market is on structurally lower growth i think a hotter than expected inflation print would destable i equitie equities we have now seen stocks make up about half of the losses. Yes that they took through that time how do you value where we stand right now an where you think prices are fair or not i think that prices are prices around the world in asset markets are elevated given where we are in the broader kochb text of the economic cycle. On a relative basis, equities are looking attractive against fixed income i think theres room for stock prices to rise the yearend targets are still viable ones as we look to the end of 2018. What yearend targets ive seen numbers around 3,000. Thats a consensus for the s p 500 yes we think even if the multiple doesnt do that much, you can get close to those numbers based purely on Earnings Growth. Jim, lets talk about where we see bond prices as a reflection of what economy looks like david laid out a good case for the bond market saying we see what the stock market sees, we see strong Economic Growth is that what you think is happening . If the fed keeps tightening, bond yields keep rising. I have the fed tightening four times this year. Thats thats aggressive ultimately bond yields go up as well. So tenyear treasury yields i have alt 3. 20 at the end of the year youre on the high end of a lot of those estimates yes theres a lot of debate on how sustainable is growth it looks like growth is picking up. Im expecting 3 growth for the year, but the key is sustainability if thats associated with an Unemployment Rate that flattens out, its sustainable. If it is because unemployment continues to fall and were down to 4. 1 , the message to the fed is that this is too much relative to the economys potential growth rate. Ultimately thats key because the Unemployment Rate keeps falling. In association with that do we see more upward pressure on Inflation Numbers. If unemployment is flat, inflation is doing nothing, the fed could do two moves all year. If wages are drifting up, they go every quarter. David, if you look at your valuations for the stock market being a reflection of what you get there versus the bond market f youre looking at 3. 2 for the tenyear what does that mean for equity valuations . I think the pace at which rates rise is going to be the most important thing to watch over the course of this year we got evidence of that last week when rates moved aggressively if we get to 3. 20 on the tenyear, well have investors thinking about their Asset Allocation to us, the magic number is 3. 5. If you assume the fed hits their 2 inflation target, rates around 3. 25, 3. 5, thats a real return of 1. 25 and 1. 5 with a volatility of 3 or 4 from fixed income, versus 2 to 3 from equities with a volatility of 15 plus once fixed income starts paying you again, the calculus changes on what portfolios should look like if we get to 3. 5 , would be taking money off the table in stocks and putting it into bonds . Yes, as fixed income moves north of 3 , it begins to look more attractive. Were late cycle this is not a market to be a hero this is the time to rely on Asset Allocation you need balanced portfolios i have a 3 dividend, youre going to wait a year to get 3 i still like equities relative to fixed income but for the average investor dont you remember historically where yields were even 6 , if you have core inflation, you need a return stocks typically even if it was tax free the issue is youve seen investors going through a period where zero bonds. Bonds paid you nothing. So its not about the lkt heongm its about where we are today and the relative valuation of those two. Im staying in stocks were staying in stocks as well is that your valentines tie . Did you think about that i did andrew s that your offering this is mine. Its a red thing. Because of red roses. Jim, youve been unlucky in love it was lastminute i was called on to the set do you have a valentine . I do, my wife you sure . Im in purple its okay. It wasnt intentional that you just blew it off blue is a cold color. Very cold unlucky, thats a song i have like 8 valentines you have at least 5. I have kids, i have parents parents shes probably not watching, i should have done this yesterday. I have a grandmother who turned 99 years old happy birthday a day late. We talked on the phone yesterday. I wanted to do that yesterday. You didnt do that yesterday . I didnt. She turned 99 years old we love her. She lives in merrick, long island happy birthday. Thats great coming up, when we return, are investor s fa eor s fallinge with safe havens u. S. Equity futures at this hour, we are in the green. Dow looking up about 145 points. 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. 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. Its valentines day we have flowers here we have beautiful flowers. We have viewers who own a flower store. They sent over roses for much of the staff here thank you for that thats the good news nice. Heres the bad news. The dollar this is a business show, transition yeah. It hasnt gotten much love in the past year yeah. Theres some arguments, if youre an exporter, thats not bad news if youre exporting roses. You know theyre importing these they are from ecuadoecuador. Theyre importing these. Maybe well hand out roses as the show goes on the dollar index down more than 11 in the past 12 months. Now tax reform may have some moves in the offing for the greenback. Joining us is david woo from bank of America Merrill lynch. Always great to see you. You have been generally bullish, happily so for the most part its been a great call this past week or two shaking any of your faith . Not really. Honestly ive never been this bullish about the u. S. Economy in ten years dollar that been going down for most of the last year. I can only assume the market does not see the economy the way i do i think because people see the tax reform as glass half empty as opposed to half full. Some conversation ive been having across the country, i must have met with 200 s p 500 companies. One cfo told me that that they produce in 40 odd countries, he said it cost the same to build a factory in thailand as in illinois he said with this tax cut, the next factory they build will probably be here in the United States across the country, what im hearing from companies themselves is that with this tax reform finally u. S. Companies will be able to compete on a level Playing Field with the rest of the world. From that point of view i cannot be more ecstatic of course the Financial Market does not see it that way they see it as a fiscal still plus that will cause the economy to overheat, cause the fed to tighten. I dont think 9 markthe marks seen it like that. It saw this coming, went up 45 , now its a simple consolidation. Joe, i would love to believe you, but if the stock market has been trading tax reform, small cap stocks would be destroying tech stocks. Small cap stocks, most of the earnings in the u. S. , the effective tax rate into the 30s, as opposed to microsoft, intel, most of the money comes from outside the United States. The optimism youre expressing is being felt by business owners, Small Business owners across the board, consumers. If you do polls on the outlook on the economy, people have not been this bullish. Lets stipulate and say all of that is true. Are you worried about the other side of that what the market has been worried about the last week and a half, this idea of inflation this idea of what the fed will do to maybe slow it down marginally im very bullish on growth. Im not sure to what extent inflation is going to todays number, anybodys guess. I think inflation will to the have as much upside and growth will have upside on 29th street there are three residential buildings, each of them 50 stories tall and going up in my neighborhood, vacancy rates are going up holding down the rent m al rates are tenyear yeel yooeyear yie with 3 Growth Growth in other places has been strongeranticipate. We still have higher Interest Rates than any of those other countries. This is why i believe the dollar deserves to be higher what youre seeing in terms of rates is repricing of the u. S. Growth prospect and then that is leading to a oneoff configuration of pricing for stocks, for basic credit an everything else. Once we move to higher growth, higher rates, that has to gb for t good for the u. S. Dollar the onus is on the bears at this point to prove the pullback is anything but a garden variety correction in a bull market. If they prove it, they do. At this point its tough to point your finger to the underlying negative that would cause a 20 bear market in stocks it looks like a retrenchment from a market what has been going since the election until it proves its more than a 10 garden variety correction, i dont know whether we need to youre right. Maybe it will maybe im too complacent i cant figure out where the fly in the ointment is now for things but that said, one thing ill bullish on the economy, bullish on the stock market is Something Else in 198 we had 6 we had an amazi reform and then the year later the stock market crashed and we had an incredible 90s i hope youre right are you sure . You never want to bet against america, joe that means trump it successful we want this country to be successful weve got that on tape. Cameras are rolling. Coming up, the top stories doesnt mean you have to agree with everything the man says chipotle has a new boss, will he bring a decent taco to that veoraro chain . Insts e cheering the news. Stay tuned youre watching squawk box on cnbc today, the new new york is ready for takeoff. Were invested in creating the worlds first stateoftheart drone testing facility in Central New York and the mohawk valley, which marks the start of our nations first 50mile unmanned flight corridor. And allows us to attract the worlds top drone 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 thyou never got the brakes looked at . L. 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. Welcome back youre watching squawk box live from the Nasdaq Market site in times square. Good morning happy valentines day. A look at u. S. Equity futures this hour, not in the red, but we are in the green. Thats good news dow up about 140 points higher in the premarket s p looking to open up a little over 11 points chipotle has named a new ceo to help lead its turnaround efforts. The burrito chain struggled to recover from food safety issues. Chipotletapping the ce o of taco bell i cant find a taco at chipotle i would almost move next to a taco bell. He may have to move next to a chipotle now hes known for launching mobile ordering and new menu items at taco bell its time for the squawk planner. Theres a trio of economic reports on the wall street agenda this morning we have the january cpi. Retail sales out at 8 30 a. M. Eastern time followed up by December Business inventories at 10 00 a. M. Hilton, tripadvisor, marriott, hyatt all reporting results today. And its valentines day, guess who is joining thus morning. Incredible. He has some of the most syrupy sweet love songs hes a crooner. Thats maroon five. We need some dancing on the ceiling. No, once, twice, three times a lady he will sing for us thats coming up at 8 20 a. M. Eastern today. Two weeks into february now, but its already been a busy month for our next guest first he retired from the biotech giant celgene after two decade theres, and yesterday he announced hes seeking the republican nomination to become the next u. S. Senator from new jersey joining us is bob hugin. Were joined by our own meg tirrell. You were chairman still at sell jean at celgene executive chairman. Did you do the math on the split numbers on celgene it farmed into a Pharmaceutical Company from a start up. When you joined what was the adjusted stock around 60 cents now way round 100 dollars, not cents. Past performances no guarantee, but you did a good job. Things have worked out great. Most importantly for paptients and shareholders. What is market cap at celgene . About 82 billion. Thats like a Pharmaceutical Company, right i think the prospects for the company are bright even though im not involved in the company we called you a politician. You sat there and took it. I hope you will talk to me about being a senator, a public servant. Yes youre going after menendezs seat, right . Absolutely. Would that be a i should recuse myself. That might do a favor to the entire state its serious on a couple fronts i grew up in union city. I was the first in my family to go to college. We grew up in the same town. We grew up in the same town. Its a tale of two bobs its more serious than the embarrassment of what hes done. How can other representatives of new jersey be taken seriously when this guy has done the things hes done that bring such disrepute to new jersey. And the Business Community, how do you not think, if youre not from new jersey that every politician is not corrupt in new jersey it embarrasses and disgraces people trying to do the right thing for new jersey new jersey is a tough place. A highcost state. We need every advantage. The other reason im running, not just because he embarrassed the state, he failed to deliver for the state. New jersey is 50 out of 50 in what we get back from the federal government its not a wealthy state its a high cost state hes failed to deliver for the people of new jersey how would you go about delivering a couple things strike me i have two sons that are marine officers my nephews are in the armmy. You were a marine, too. I was proud to serve my country. In california, there was a posttraumatic stress Disorder Institute in california. Why not in new jersey . Why does the irs have a big headquarters in ohio i was joking with the va secretary, i said lets move the va headquarter the to new jersey if you want to take away a local tax subsidy, bring in an army division, do Something Else. The cdc is in atlanta. Government has to recognize new jersey deserves more and we have to get more from the fed the people of new jersey deserve better how do you affectuate that . What do you have to trade away for that you have to trade your vote for something for that, if you get into this position thats how this whole game works. I think you have to lead. You have to convince people the logic and rash flal tional of it new jersey should be first on the list, not last on the list like it is today you cant have these people who have so partisan on one side saying everything trump does is bad. You have to say there are some good things and you have to negotiate with people. You need business oriented solutions. We need solutions. We need problem solvers, not just people squawking at each other. What is your take of President Trump . I think he went there as a disruptor, washington was stagnant we got disfufrg shysfunction no solutions. Im an independent i want to bring a fresh view if any democrat has a good idea for new jersey, ill support them if President Trump has a bad idea for new jersey, ill oppose him. New jersey is a purple state. No, its not. Its as blue as it can be. Christie won a couple times. We have had good republican governors. Kain. But it seems blue. Hillary won by 25 points ill have to really kick butt and do a great job so people know the story historically republicans have been relatively fiscally conservative, against debt and adding to deficits and you could make the argument that President Trumps budget plan even this week would add 7 trillion to the debt theres been a conversation about infrastructure, what the tax cuts meant where would you land on those issues government has to be more efficient. New jersey needs better infrastructure you dont have to drive on many roads. I drove out to Warren County last night to be endorsed by the Warren County chairman, its like, my god, i hit a pothole, i didnt think i would get there we need infrastructure in new jersey it will help the economy. We have to spend money in the right place. How does your experience at celgene influence what youre planning in the race especially since drug prices are a bic issue on both sides. At celgene theres been some focus on the big cancer drug price increase how will you address those price increases . I cant speak for celgene anymore, but the drug is a valuable drug for patients its such an important break through therapy. Its more important and more beneficial to patients today than its ever been. Celgene invested hundreds of millions if not billions to increase the usefulness of the drug, and still is investing in expanding label indications. More patients benefit from it today than ever before lets remember, this is a competitive space. You may hear these stories about this and that what are people talking about . Celge celgenes most widely scribed drug had a 30 net price reduction. Because of the discounts in the system yes i did an oped here to cnbc, we need reform of the Healthcare System we deliver healthcare in America Today like its 1960, with the hospital the center of the care. We have to innovate. I was with jamie dimon last week, what theyre doing, amazon and berkshire is a great thing we need to experiment, innovate and try new things we need to break this system down and fix it. I will go to walk and im craft specificposals to reform healthcare were moving were going to change the whole Healthcare System but we need leadership i will help provide that who is on the republican side in your way here one of the candidates just last friday endorsed me before i announced my candidacy theres still one or two people in there im focused on you think youll get the nomination ill be on the ballot in november 6th this is all about november this is getting a senator we can be proud of for new jersey and somebody who will get things done for the people of new jersey november is the date that matters. 265 days from today well have a change new jersey, whether youre democrat or republican they are unifying around me i think it will be a lot of momentum were in a good position, we have a lot of work to do well demonstrate that im the picture of the American Dream you are calling yourself a fiscal conservative. Unlike the republican more in line with the Democratic Party that andrew talks about for years has been known as the party of fiscal responsibility they always have been there. Theyve always been there. The whom cle conversation ab debt has turned around completely thats theyre calling card these labels are nonsense the last republican senator elected in new jersey was the first year i voted, 72, casey, he was a civil rights activist republicans foigt f fought for l rights woe have to get rid of the labels youre telling me lincoln was a republican thats not true. A historic evening in south korea. Shaun white taking home usas 100th alltime olympic gold medal. Well have Carl Quintanilla in a few moments. And Lionel Richie will join us live this valentines day we got the music this time i will be dancing on the ceiling. Later, inflation is the name of the game today stay tuned, youre watching squawk box on cnbc tomorrow, its a day filled with promise and new beginnings, challenges and opportunities. At ameriprise financial, we cant predict what tomorrow will bring. But our comprehensive approach to Financial Planning can help make sure youre prepared for whats expected and even whats not. And that kind of Financial Confidence can help you sleep better at night. With the right Financial Advisor, life can be brilliant. On the only bed that adjusts on both sides to your ideal comfort, your sleep number setting. And snoring . Does your bed do that . Right now during the ultimate sleep number event, save 50 on the ultimate limited edition bed with adjustable comfort on both sides. Ends soon. Visit sleepnumber. Com for a store near you. Welcome back to squawk box. Last night shaun white reclaiming his title as king of the halfpipe it was an emotional moment for white after winning gold for the third time in his career his win takes a special place in u. S. Olympic history it marks americas 100th gold medal in olympics history. It was something to watch. You have to see some of this air he will take dont know if we will see it all. Look at that hes coming back, he thinks unbelievable. May do it again in four years. Had a great first run, but another guy was ahead. So everyone was on pins and needles for the third run. The second run, there was wasnt perfect or something. Best two out of three so one and three. Okay the olympic park super store is not just for buying souvenirs, its also another opportunity for sponsors to show off their involvement. Carl quintanilla took a quick trip around the store to see whats available welcome to the super store. Of all the companies that sponsor the olympic games, no one has a physical presence here that has more to do with the core business than visa. You can buy anything olympic related here a lot of mascots the dollar can add up. This store in rio did 15 million at the physical site alone. Theres even a store within a store. North face has an entire corner here where they sell overall olympic branning north face name here, the pyeongchang slogan here. Pyeongchang sweet potato sticks, tofu snacks, pyeongchang lollip lollipops, pyeongchang chocola e chocolate. Not Everyone Needs a stuffed curling stone, but Everyone Needs some hand warmers. Theres only one way do it coming up, cutting the red tape how President Trump hopes cutting the time it takes to start an infrastructure project, the permitting, maybe that could help awes ll jump start Economic Growth well be back. You might take something for your heart. Or joints. But do you take something for your brain. With an ingredient originally found in jellyfish, prevagen is the number one selling brainhealth supplement in drug stores nationwide. Prevagen. The name to remember. 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. And the nx hybrid with a class beating 31 mpg combined estimate. Lease the 2018 nx 300 for 339 a month for 36 months. Experience amazing at your lexus dealer. All right. Welcome back to squawk box, everybody. The white houses infrastructure plan seeks to shorten the process from ten years to two years for permitting Kayla Tausche joins us with more on those efforts to cut the red tape shes in bayone, new jersey, this morning i have a suspicion about why you are there, that bridge behind you. Good morning. Good morning, becky this 1. 6 billion project, the raising of the bayone bridge will have taken nearly a decade by the time its completed in the middle of next year. The white paper that inspired the white houses plan, called two years not ten years, points to this project as a poster child for red tape saying that a faster Environmental Review and fewer federal agencies involved would have hastened the progress its changes like those that ed mortimer of the chamber of commerce would get more business involved listen we believe that you can do this without changing environmental law or changing the public input in the planning and approval projects but the bottom line is right now its taking too long and its not getting 20 of the costs of a project are now in the planning and approval process and not in the infrastructure itself. Unfortunately its not that simple in practice the permitting process for the bayone bridge actually only took two years. Thats the white houses ideal time frame it was led by one federal agency, the coast guard. Its actually the engineering of the bayone bridge that has taken six years raising a nearly 100yearold structure amid a few severe winters and extremely heavy commuter traffic Amy Goldschmidt is the new york director forclean water, she says a project like this you have to take time and evaluate all of the impacts on all of the stakeholders including the community. They made it happen pretty fast and they did it with total disregard of the communities we think that the laws should be more permissive of the state and the community to be involved in coming up with, you know, solutions that also raises the bridge. So there will be many stakeholders who will want a say in this process. There will be detractors on both sides but the Economic Impact is clear. Since the bridge in june of 2017 started letting bigger ships under it, cargo volumes have reached a record for the back half of the year weve been seeing some of those ships coming by throughout the morning. We were hoping there would be one coming through when we came to you guys live, but well have to wait a little bit longer. We didnt quite nail the timing but, kayla, thank you that lays out perfectly exactly what washington is facing right now. Kayla tausche who is in bayone maybe well catch a ship then. When we come back this morning, were going to be getting ready for the trading day ahead. Futures this morning are indicated higher three days in a row of gains so far. Right now you see green arrows with the dow futures up by 141 points, s p up by 11 and nasdaq by 34. Were going to be talking about banking on higher rates as well. Financial rates poised to run in ons. Coming mth Chris Wayland will join us well be right back. When this bell rings. It starts a chain reaction. Thats heard throughout the connected business world. 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To grow your business with us in new york state, visit esd. Ny. Gov love is in the air stocks posting a threeday winning street as the correction comeback continues a look at whats driving the market is straight ahead. Was wall streets fear gauge manipulated . A whistleblower writing a letter to the sec about potential manipulation and the blowup of the vix last week. Former cftc commissioner will join us to talk about the claims and live from the beating heart of business, new york city this is squawk box. Happy valentines day, everybody. Good morning welcome to squawk box right here on cnbc live from the Nasdaq Market site in times square im Andrew Ross Sorkin and becky quick and joe kernen well explain the music. Lets show you whats going on do have a little bit of green so a little bit of happy news to tell you about dow up about 135 points looking to open that way nasdaq opening 35 points higher and s p 500 looking to open 12 points higher. Headlines for you as well. As we mentioned, futures are higher but whether they remain that way may depend a lot on this mornings Economic DataEconomic Data out this morning looking for an increase of. 4 of a percent. January retail sales will be out. Other big news, warren buffet Berkshire Hathaway is selling shares of phillips 66 but this is important, not because its bearish on the stocks prospects. Berkshire selling 35 million shares back to phillips so the holding amounts to less than 10 of the company that will free it from regulatory requirements that come from owning a stake of 10 or more. Theyve run into this little dilemma before, about a year or two ago with wells fargo, it had to sell some shares. Some of those original sales were based on the 10 regulatory mix at that time cleveland fed president Loretta Mester being considered for the Vice President job its vacant with the position of Jerome Powell to fed chair they say the choice isnt necessarily imminent. We dont need to explain the music. Its valentines what do you mean, well explain the music later . No, i thought we were going to maybe whitney houston. And who we have later. Lionel ritchie. We dont have whitney. No. That would be something. Yeah. That would be a booking. Hello there we go. Is it me youre looking for becky knows every word. Joes looking up the lyrics i sing along because i know them. Lionel ritchie, 8 40 a. M. Hes got like come on. All night long par all night that i dont dance on the ceiling. No. Go back to the commodores. I didnt realize he was brickhouse. I dont think its his voice sipping on it. Right hes gotothers say you say me, say it forever thats the way it should be stocks posting a threeday winning streak as the major averages continue to recover from the correction levels reached last week. Mike santoli, got nothing for valentines day on. It was more important to match becky. Thank you thats nice. Shes married, as you know. So is he. So are you so yeah. I dont get that. Just aesthetics yes stocks hit this threeday rebound. I actually think that thats why we should do a report card on them and rate this rebound and see where were at what happens from here for it to be a little more convincing that last week might have had the lows obviously we have about 45 , little bit less than half the total losses experienced from the january 26 high back to last fridays interday lows thats pretty good i think people feel as if thats a decent little cushion. Not dispositive at this point. Sector leadership is encouraging. Consumer discretionary has out performed before and after so it looks like the cyclical story is still intact based on the message of the markets the credit markets have stayed firm they did not get at all upset about the equity Market Correction so thats all encouraging that theres not a big bad economic message. What is it we need to see for it to be a little bit more convincing a lot of folks are technically looking for another percent up side get past last wednesdays highs. Another 2 in the s p. You want to see the vix bleed further down its been sticky high after all of those months being sticky at low levels observe the next bond move whether its yields going up or down, see how stocks respond to that. Good news is good news or bad news is bad news. Cpi number. Thats what i was going to say. If the cpi number comes in high, if the market turns down as a result where does that put us . Right this is one question another one is has the inflation story line run far ahead of inflation and reality . And are bond yields due for a rest and a pull back i think if you look at positioning in bond futures, things like that, it looks like theres not a lot more up side immediately to treasury yields would that refresh stocks . I dont know. 2. 84 was the tick on the ten year thats kind of setting things up weve come back off of a little. Its marginal. I think maybe this number decides where that toggle is. All right thanks, mike joining us, joao matteae amato y zeren, chief u. S. Equity strategist for ubs Wealth Management americas. Jeremy, you had an s p yearend target already on the books. What was it . What is it we estimated that the s p will end the year between 2850 and 2950. We havent changed that. From the highs thats a fairly muted advance. Yes from the highs its muted. From current levels its roughly a 10 total return the way we think of it, last year was the perfect year for stocks because we got 12 growth and inflation under shot expectations we came into the year thinking the market wasnt going to be able to keep up with Earnings Growth so we pegged Earnings Growth at 16 and assumed some multiple contraction based on the fact that inflation was likely to be more in line or slightly above expectations. That would ultimately start to hurt valuations. Certainly we didnt expect to see the valuation contraction that we saw over such a compressed time period over the last few weeks this is indicative of whats going to happen this year where its going to be an earnings driven market. Earnings are a solid trajectory. 16 this year, but the investors are going to wrestling with what multiple do you pay for stocks in an environment where growth looks pretty good but were late cycle and starting to see budding inflationary pressures. As the year started out, joe, we probably we were asking people, okay, are you at plus five are you at plus ten . Are you at plus 15 are you at plus 20 and now were i really think we need to ask are you at down five or down ten that would be a statement its happened its happened before is that factored in to what you think is possible now . Certainly youve seen in past years strong Earnings Growth yet the market is not necessarily responding if you think back to even 1987 you had 25 Earnings Growth and the market ended up low to mid single digits, but we think this volatility that weve seen over the course of the first eight weeks of the year, six weeks of the year has been in the backdrop a strong fundamental. Youve had strong Economic Growth in 2017 thats rolled into 2018. The Earnings Growth thats following through from that should support the market, but yo youre also in a period where youre adjusting to what looks like a bit of a regime change in inflation and rates. During those periods the market should have more volatility. We think equity prices will grind higher and its an opportunity. If you had rates move and you had multiples contract, earnings could go up but stock prices could go down. I was looking back at other years where you had very strong Earnings Growth but the market didnt really do a lot 94 was one and rates were going through the roof you had this huge macro scares and that was a lot of the stuff with the european sovereign debt and the debt ceiling and all of that it happens but you have to i think have Something Else pushing down. Do you know anyone, mike, on the street that has a negative s p number i think the only one that stands out is not really the street but jeffrey dunlop. Said the stocks will be down. From them to get down where he said they would be down would have to come a long way. Its tough to tease out. How do you keep doing that . Now i really think theyre going down well, now now now theyre really going down. Google it. He called the election. I know but since then hes got it. Look, im not google it. Almost nobody is saying that the market is should be down because the inputs dont point you in that direction. Right so, youve got parts of the market that will be that will, you know, participate more if it goes up and maybe even be resistant if it goes down . Is Technology Good or bad at this Point Technology is good. You still have secular growth stories and the market isnt paying an exorbitant multiple. Its trading at roughly a 5 to 7 premium and you get superior growth we like tech i think on a rebound here you want to have more of a pro cyclical tilt over defensives. If were right and markets stabilize and head higher over the next 6 to 12 months i think youre going to see financials lead the market higher, especially if the fed follows through. We get three Interest Rate hikes this year. I think the one contrarian sector tilt that we continue to advocate for is Energy Energy looks very, very expensive and i think the market is pricing in Lower Oil Prices forever and i think that ultimately were seeing tightening in the energy markets. Supply and demand should lead Energy Stocks higher timing is difficult, but i think that over time theres very good value in energy. Finances have moved havent they in a big way already, joe would you stay in those . Financials are one of those pro cyclical sectors that you should benefit from a step up in rates and the tilt of the curve will affect them in terms of their funding costs and overall Earnings Growth prospects. We certainly like the financial sector. That was and we know that in bull markets you get these sharp corrections, but lets say there really was some underlying something amiss that we just dont know about. What would it be could it be that the fed is unsuccessful in extricating them this was unprecedented what the fed i think this could they screw this up . Theres an Inflection Point in central bank support. If you look back to 2016, 17, you had 1 billion inflection it is an Inflection Point in terms of that level of central bank support again, the market is wrestling with that regime change. Youll still have continued expansion in europe and japan but the u. S. , its going to be meaningfully lower in terms of the balance sheet. Anything that were just not did we know about the housing crisis in 06 . I think people were concerned about what are we concerned is there anything now the bond Market Worldwide is like over bought. There doesnt seem to be any, you know, area of the economy, either u. S. Or global, thats over heating. Not even not Interest Rates at zero for so long . I think Interest Rates are low and likely to normalize over time theres no part of the real economy thats over heating. When you have recession risks its because you have a cooling down of the major segment of the economy that rolls over. Its hard to identify in this cycle because growth has been so low. I always like to say whenever you go looking for something to worry about, china is there. People looking at the liquidity measures in china. Lunar new year. Throw in north korea. Nearby. Yeah. Its the force majeure clause. Something could happen or china in trade. All of these things are your standard disclaimers because its not easy to find that macro trend. The markets are obviously ignoring. I agree with joe, at the end of the day the biggest risk isnt the economic trajectory, its the policy. If Central Banks over tighten and raise rates too quickly, that could ultimately stunt growth its a relatively low growth theres not an inflation problem. Inflation is running low that is the key risk to watch out for this year. Gentlemen, thanks jeremy, joe, thanks. When we come back, guess what its valentines day so what stocks can be heartthrobs or heart breakers dom chu will take a look at those after the break. Speaking of love, bank stocks bouncing back after latz weeks dip. Well take a look at the sector orngthe moves this mni stay tuned, you are watching squawk box right here on cnbc. Welcome back to squawk box on this valentines day. Want to find some hearthrobs and heart breakers of the stock market thats a little too over raught. Dom chu making the love connection. Youve got to sell it, andrew love is in the air where are our flowers dom . Im wearing red im hoping some other people are wearing red. Im trying to get into the theme of valentines day. See, here here this is i see them. I see them theyre not for you so give them back. What hokie thing did they assign to you today . What are we seeing joe, the hokie thing were talking about, what andrew just alluded to its valentines day which stocks have been heart throbs or heart breakers its thematic. Were trying to keep with the theme. I think you would expect to see more valentines day related programming throughout the course of our stock specials during the course of the day lets see if that happens. Simplistically put the s p 500 has had some great performers year to date despite the current Market Conditions and some pretty bad ones as well. Some of them are fairly interesting. The heart throbs investors have loved these names because they are among the best performers year to date in the s p 500. Netflix stock, maybe netflix and chill, theme for love and chill. Thats up 34 so far amazon up about 20 . Kohls, 15 . Trip adviser 15 , under armour 15 . That was largely off earnings just the other way some of the heart throbs in the market battleground stocks for a lot of these bulls out there. Lets talk about the heartbreakers because l brands, its down 19 overall. Forward motor is down 15 . Expedia on the travel side down 15 as well. Newell brands down 13 signet jewelers, down about 13 as well. Those are some of the names we talk about in terms of heart throbs and heartbreakers the next iteration will be trying to figure out what the heartthrobs and heartbreakers that the analysts find are it comes to mind that Delta Airlines have 100 of the analysts having buy ratings and some other stocks on the other end. Ill take a look at that back over to you. Happy valentines day, dom. Happy valentines day. Pfinancials feeling the love. Chris whalen is here as the chairman of whalen Global Advisers youre wearing a red tie. Of course happy valentines day. Are you loving the financials the big ones im always lukewarm on as you know, but theyll go back up they have injected so much into this market. The Central Banks have injected so much inflation what do you mean they own 1 3 of all securities its not assets. Theyre going to start online. Yeah, but its going to last for years. The europeans are still buying, the japanese are still buying, the swiss. Before we sort of just land on the financials and banks themselves, youre a former fed man yourself. Uhhuh. Explain what you think is going on inside the fed right now. What is the conversation that theyre having especially when it comes to where you think rates are going to go because that ultimately is going to affect the rest of this. Well, i think chairman powell has a problem that was left by chair yellen as she went out the door, which is that they did too much they should have stopped after qe2 and then we wouldnt be looking at this market up 30, 40 on an economy thats cruising along at 2 or 3 . You know, the industry, banking, doesnt grow this fast when you see zombies running at 35, 40 year over year gains, that tells you something you should start running yourself you know, seriously. Bank america was the best performing large bank in the country last year and it was because of cost cutting and a lot of other changes that made it far more attractive you know, after seven years okay. They have a lot of work to do. Oh, yeah. Theyve done some pretty remarkable things. Yes but the point is that the growth underlying that business is in no way supporting that kind of gain in the stock. Powell is going to do what . Lets talk about what thats going to mean for the banking world. Powell, as you said, back in 2012, has to unwind the short volatility position. You just said the Central Banks are not going to unwind or they are but it will take a long time. The fed wont sell. Do you Notice Congress confiscated the capital. They will not take a loss so theyll let it run on. This is going to take a lot longer than the fed thinks they they theyre going to have 20 billion every month but i think its going to take longer. The Mortgage Backed securities are going to prepay much slower than they think so its going to take 2024, 2025. Let me ask you a separate question you were one of the early folks sort of screaming before the last crisis and you talk a lot about debt and leverage in the system is the debt and leverage in the system what were not focused on right now . Yes you have a lot of infewer i dont remember companies able to raise money at Investment Grade spreads. As spreads widen well start to see loss rates go up it wont be a catastrophe but it will certainly be a drag on earnings the plus right now is lower expenses, regulatory costs are going down, a little bit of up side from Interest Rates and Net Interest Margin but theres no real top line growth here. None of these large banks are growing. If you look at the different loan categories, theyre pretty pedestrian compared to two years ago. Who do you like and who wont you touch . The best is wells selfinflicted wounds. The best performer of the group. More mess warren buffets good question they offer an instructive example of how boards should not act, which is they did nothing they sat there, becky, and did nothing. Are they out of the woods at this point i think so. You do . Look. Can he keep his job good question what is wrong with the culture at that place . What is in the water there i dont know. They were not responsive the one thing weve learned from the crisis is when the regulators call, you respond you dont sit there and stare at them thats what they did they made a mistake. Were going to leave who dont you love so Everybody Knows . Everybody is banging the drum on citi. Ive never been a fan of that franchise. Not much left. What about jpmorgan its well valued. Wells should be at 2. Great to see you. Happy valentines day. Coming up, the vix investigativexed. Bart chilton joins us to talk about claims of manipulation and market confidence. Check out the futures up triple digits this morning. 156 on the dow squawk box returns after a quick break. Time now for todays aflac trivia question. What car did elon musk share with his brother and the company intern during their first startup . The answer when cnbc squawk box continues 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 male vo raging wildfires continue to scorch parts; male vo allegations of misconduct; oh, why you look so sad, the tears are in your eyes, mvo how hard is it just to take some time out of your day to give him a ride to school and show him you support him. And dont be ashamed to cry, let me see you through, cause ive seen the dark side too. When the night falls on you, you dont know what to do, mvo when disaster strikes to one, we all get together and support each other. Thats the nature of humanity. Ill stand by you, wont let nobody hurt you. Ill stand by you, so if youre mad, get mad, dont hold it all inside, come on and talk to me now. Hey, what you got to hide . Mvo its a calling to the nation of how great we are and how great we can be. Im alive like you. When youre standing at the cross roads, and dont know which path to choose, let me come along, cause even if youre wrong ill stand by you. Ill stand by you. Wont let nobody hurt you. Ill stand by you. Even in your darkest hour, and i will never desert you. Ill stand by you. Now the answer to todays aflac trivia question. What car did elon musk share with his brother, and the company intern, during their first startup . The answer, a bmw 320i the 1978 car, purchased in 1994, lost a wheel when he lent it to an intern. Weve been preparing for this day. Over the years, paul and i have met regularly with our ameriprise advisor. We plan for everything from retirement to college savings. Giving us the ability to add on for an important member of our family. Welcome home mom. With the right Financial Advisor, life can be brilliant. Good morning, everybody. Welcome back to squawk box here on cnbc we are live from the Nasdaq Market site in times square. Among the stories that are front and center this morning, we are just an hour away from the january inflation data this is the cpi, the consumer inflation. That could be a key to todays market action. The Consumer Price index is expected to be up by. 4 of a percent. The core inflation number is the one well be watching. Its expected to be up by. 2 of a percent. Checking on some of this mornings earnings, molson coors earning 62 cents revenue for the beer brewer essentially in line with the forecast it was pleased with the 2017 performance amid some challenging Market Conditions and the stock is up by 1. 7 . Hilton worldwide beating bottom estimates beating the street expectations by 9 cents earned 54 cents a share. The results were driven by an increase in bookings and higher hotel room prices. The stock is off just slightly. Weekly Mortgage Applications data is out. Diana olick joins us with that good morning. Reporter good morning, andrew stock jitters and higher Interest Rates were in play last week they hit mortgage demand which fell 4. 1 seasonally adjusted. It was 3. 5 from one year ago. Home buyers drove the drop with applications 6 . 4 annually. Potential buyers are facing a market with record low homes for sale which in turn is causing prices to rise far faster than they should. Mortgage applications to refinance a home loan were lower falling 2 for the week. 2. 8 higher than the same week one year ago refinances are most sensitive to moves in Interest Rates. The average rate for the popular 30 year fixed rose to 4. 75 from 4. 50 from 80 ltd loans while Mortgage Applications have been weaker those to purchase a newly built home jumped sharply. Mortgage rates have been rising since the start of this year and the bond market may be in for yet another shock in a little less than an hour when we get the latest read on the Consumer Price index. Again, rates the highest in just over four years. Back to you guys. Diana, thank you. Diana olick. In the meantime, the recent market swings drawing some attention from the regulators. The Financial Industry Regulatory Authority is reportedly looking into the s p 500 options trading to try and see if there were orders placed to try and influence the cboes information. The allegations of manipulation and market confidence. For more on all of this, well bring in bart chilton. Bart, thank you for being here today. Good to be with you happy valentines day, becky. Happy valentines day, bart lets talk about the allegations because they are incredibly serious. Whistleblower saying that they had some insights into market manipulation, traders manipulating the volatility index which sparked the entire selloff that we saw this month what do you think about those allegations . Well, and the important thing about it, its certainly the vix, the fear gauge, which is an important thing, but its the related financial products, too, becky. So many things are based upon the vix, other products that theres contagion really quickly. Cboe, Chicago Board Options Exchange generally does a good job. The vix has been suspect for at least seven years, people have been concerned about prices being pushed around, although theres never been, you know, any hard evidence. Theres been a couple of traders. Last year there was two traders that were buying bass of violations related to trying to push prices around with the vix, but it rings true to me, you know, i dont have the details like i did back in the day, but ive had traders contact me also, becky, and tell me theyve lost money they think prices are being pushed around. So it doesnt surprise me what were seeing and im glad that regulators are looking at it theyll never say they are, at least its unlikely theyll say theyre looking at it, the regulators, but i would bet that all of them, not just finra, but the sec itself, my old agency the cftc and perhaps the National Futures industry which is the parallel to finra in the futures world. Bart, yesterday the cboe put out a statement saying they didnt believe the voracity of the charges from this whistleblower they saw some inconsistencies in the statement and so, therefore, they were questioning all of the information that was in it but if this is true, if the whistleblower is right and the traders were allowed to put these prices up,move things that they never actually had trades that went through on, i mean, how difficult is it for the regulators to look at it and say, this is a way that you manipulate futures how do we stop this . How do we make sure this is not going to impact billions of dollars of trading well, theres a couple of things there to unpack, becky. One is that, you know, this whistleblower is talking about a glitch in the system that would allow the High Frequency traders, the guys i used to call cheetahs, who do provide important cheetahs or cheaters . Cheetahs. Not cheaters cheetahs so fast, in and out of markets micro dollars in milliseconds. They provide importantly quit at this what this whistleblower is contending is that they were able to put buds and offers out there without actually being hit and that that alone putting the bids and offers out there, which we know can work, we call it spoofing in the trading world, and that actually wasnt illegal until dodd frank i worked on crafting the regulation on that so theres spoofing is one thing, but then theres the outright manipulation, which weve talked about it in the past its really difficult to prove you have to prove that you had the ability to manipulate markets, that you had the intent, so youve got to find an email or a wire tap or something, and then you have to show that they took a trading action and that that action resulted in an artificial price. So its like a four hurdle that the regulators have to go through. So its a really difficult thing to proof that said, im sure theyre looking at it. Again, this has been something thats been in the wind for a long time. It wouldnt surprise me if we dont see something coming out of it this time. And literally ive been contacted by four or five traders who tell me, look, this time it was real i know one fellow who lost 750,000 in this, in one of the products, not just on the vix, in one of these inverse etps. Right that gets sort of crazy. Etps or etns. They trade off of the volatility thing. The cboe has a vested interest in continuing to trade these products by some estimates this is 25 of their volume what should regulators do . Should they allow the trading to continue you pointed out how difficult it is to track it are the people who lost money going to have any recourse how does this play out i dont think they should shut down the vix. I think they need more monitoring. What about those things that trade off of that . The etps . There needs to at the very least, becky, be additional disclosure look additional disclosure that says what, you might get cheated, you might lose your money, beware investor if you can lose 2 to 3 times your investment and the etps are compounded daily. Commodities. I think a lot about cvss back in the day you just pointed out. Its secure. I wanted the regulators. Its dangerous. Some of these risks. With the inverts the Exchange Traded funds. Great financial product. We certainly need at the very different classification. They think there are valid reasons for concern. Whether thats functional, i dont know you have to meet these standards. At this point it would be unfair for me to say. It has been for a number of years on these products. Even more now i think it definitely deserves a strong look see by the regulators. Bart, great it was great to see you. Hope to see you soon. Thanks, becky. When we come back. The medal count from the winter olympics. Chipotle has a new chief investors scooping up shares well have more on the move and what taco bell brings to the table. Squawk box will be right back. Lets build a better world for investing. Lets create jobs, build bridges, insure prosperity. As Investment Management professionals, lets measure up. Cfa institute. Thwho hold themselveshe to a higher standard. They are called cfa charterholders. Demand the best. Demand a cfa charterholder. Cfa institute. All right. Welcome back, everybody. Lets get a quick check on the latest medal count in the pyeongchang games. Take a look at whats been happening. Right now we can tell you that the United States now has seven medals total, four of them gold. Netherlands leading the way with 5 gold, 11 total norway with 3 gold, 11 total germany and canada u. S. A. At the bottom of the board. Seven total. Cacau is the south korean app. And its mow gis are taking it by storm kakao. Reporter its an app thats more popular than facebook in south korea. Kakao. 97 of phones have this app downloaded many in the u. S. May know it as a messaging app to send texts or animated emojis, but it provides a social networking service, a taxi service that has better reach than uber and lyft the wide reach has recently caught jack mas attention they invested 2 million in kakau. Translator when i went to china i met jack ma to talk business china is so big in size. The way they think is different, which i like. Reporter this 8 billion internet giant has nearly 50 million global monthly active users and its the first profitable messenger in the world. Thats because its mow gi business is also booming its no longer about buying and sending emojis, its characters and franchises continue to grow with emoji stores around south korea selling clothes, stationery, even kakao themed cupcakes im Carl Quintanilla in pyeongchang. A lot more from south korea. Coming up in the meantime, chipotle stock getting some love this valentines day after a bad breakup. You can see all of the puns. Investors with more than a year. Will a change at the helm turn things around. Check out shares in europe right now. Squawk box returns in just a moment thanks man. 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 on the only bed that adjusts on both sides to your ideal comfort, your sleep number setting. Does your bed do that . Right now, our queen c2 mattress is only 699, save 200. Ends soon. Visit sleepnumber. Com for a store near you. In the 2018 lexus es and es hybrid. Lease the 2018 es 350 for 339 a month for 36 months. Experience amazing at your lexus dealer. Swho live within five miles of custyour business . 54, like these two. And that guy. Or maybe you want to reach women, ages 18 to 34, who are interested in fitness. Namaste. Whichever audience youre looking for, well find them were the finders. We work here at comcast spotlight, and we have the best tools for getting your advertising message out there. Anywhere, any way your audience watches. Consider them found. Shares of chipotle surging on news that it has hired taco bell chief brian niccol as the new ceo. The stock right now indicated up 12 . Joining us to talk about the big move, r. J. Hadave, a senior restaurant and retail analyst at morningstar. Uconn kur with the Market Reaction that youd be hardpressed to find anyone better than this to go to chipotle right now, r. J. Why . I think its a home run for this company i think if you look at what hes accomplished at taco bell, if you look back at the last couple of years, some of the big product and marketing news that the company has had, some of the real Success Stories in the restaurant space, he understands the Technology Side and how mobile ordering works. More importantly, in an organization like young brands where you had to deal with a ceo of the entire organization, active investors, i think hes a good fit for chipotle and how its going to be structured. Obviously with bill ackman part of the group i think all counts its a great hire for the company. Theyre different, just in terms of what you get there on the menu. Yes. You say that i understand the mobile ordering stuff, youve got to be a digital genius, i understand that. I think the most important thing is menu innovation which i think dhi poll tai needs its just me to be perfectly honest, when ive been in there, what do you sort of make your own stuff. Theyve got the meats taco bell makes it easy i know i like a lot of the stuff that they have do you expect chipotle to resemble taco bell more after this or will it still be hell just use the way chipotle is right now and just improve that what do you think . Yeah, i think there are limitations. I dont think they can exactly steal taco bells playbook i dont think what worked for taco bell will work for chipotle i think a lot of consumers have moved past the food safety issues but the experience and menu innovation havent been there. I think thats what brian can bring to the table i think youll see new things added to the table, things like na chose, alcohol, platforms maybe Something Like breakfast. How about a taco . Thats what im getting at why cant i buy a taco at chipotle i know. Soft taco. I want a choice ill get a soft taco and hard taco thats part of it the Customer Experience and bringing things that we havent seen before to chipotle. Thats what we need. Obviously chipotle has been known for its simplicity i think thats gotten them to where they are today i think they need that innovation very short Attention Span among consumers today. They need Something Like you see, some of the innovations weve seen at taco bell to get things going and get people excited about the brand. Still some hangover from the problems taco bell is selling clothes hes this guy knows how to extend a brand, right . Really does really does. Is it possible to extend a chipotle brand when what you think about sometimes, maybe you see it as theyve had all of these problems its not going to happen overnight, but i think theres an opportunity to do that. I think it starts with the innovation if you get people excited about the product, the experience, something you enjoy, youre proud of the brand, then you can certainly move into those other channels it will take time to fully repair the brand but i think this is the right step in the right direction. Have we talked about what happens at taco bell should we worry about personally now should i worry about taco bell . Are they you know, they had a like what are those things called theyre like a taquito half taquito and half taco. A wrap with a different label . Yeah. Then they stopped making it. Heres my question, do you want chipotle going in the direction of taco bell, either both in terms of price or in terms of adding the these partn partnerships with doritos . If they start doing a deal with doritos or something, does that make sense with them i dont think theyll do any deals with outside brands at least in the near term i think its more coming up with Creative Ideas that we havent seen on the menu before. Things, hey, maybe ill go try that out in the consumers eyes. I dont think were going to see that to the same extreme level like a doritos locos taco. There are still people who wont go in a chipotle given the headlines over the past two years. Yeah. What do they have to do to change that perception well, i think the first step right now, and youre absolutely right, when the food 15i69 at this safety issues came out, you certainly lost a segment of your consumers you have another group going less frequently and another group that doesnt care. I think the first and foremost is getting that group coming back, maybe get them back in the stores more often. Once they do, once people start seeing that theres a lot of new things on the menu, the experience is great, i think thats what leads you back to that group that has maybe given up on them and will maybe give chipotle a second look. For me im looking at the replacements a couple of people are replacing niccol it sounds pretty good. Julie fellsman president of taco bell north america. Liz williams, president of Taco Bell International both going to assume some leadership im more interested in things not changing too much at taco bell seems okay seems okay. I think theyre in good shape there. Both of those all right both executives are great strong team. Any difference between like Company Owned versus franchise will that make a difference . Yeah, thats going to be interesting to see if we ever see a push towards franchising i dont see it in the near term for chipotle brian does have experience in operating in a large Franchise Organization i dont see that happening overnight. I think first and foremost getting the menu, getting experience down, making sure the lines are working right. I think thats his First Priority but maybe down the road a hard look at the ownership structure. Were done. Whats the salsa offering at chipotle is it in like a vat and you put it in a little thing or something . Is it green . Is it remember, they put it on for you. They do chipotle . Yeah. I dont know you cant get it and you cant make your own . Sure. You can ask for it on the side natural, cilantro. I like the stuff, fire, who tho, come in packets. You go down the line with the buyer reto people. Have you ever been ive only been once im not a fan. They ask you what you want. R. J. , i like the packets. I take extra packets i use it on other i put it on scrambled eggs, my fire sauce. You take it home with you i do. Thats what i was saying, theyre not cheap with it. Vat do you also take the little shampoos at the hotels you take those depends depends. Depends whether i get really some of it makes my hair too dry and i dont even want to take it i have a specific kind i use, very expensive that i use for my and its you know, you can work on colored hair kidding, r. J its a joke. Its not true. I dont. I swear. Only my hairdresser knows. Anyway, thank you. Thanks. Coming up, legendary love song lyricist. Wow, thats a lot of ls. Talk about his new found love, Venture Capital investing. I wish he was in studio but hes not. Hes in l. A. , but were still excited. Futures at this hour indicated up about 140 squawk box will be right back with another big hour, including the inflation data image center, new york state is now a leader in optics, photonics and imaging. Fueled by strong university partnerships, providing the worlds best talent. And supported with Workforce Development to create even more opportunities. 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. Its abor it isnt. Ence in wi30,000 precision parts. Its inspected by mercedesbenz factorytrained technicians. Or it isnt. Its backed by an unlimited mileage warranty, or it isnt. For those who never settle, its either mercedesbenz certified preowned, or it isnt. The mercedesbenz certified preowned sales event. Now through february 28th. Only at your authorized mercedesbenz dealer. 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 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. Get ready, because were helping leading companies see it and see it throughwith digital. Breaking news this hour. Were minutes away from a big economic report. The first read on inflation since investors fell a little out of love with the stock market the numbers and the instant reaction coming up. Plus, why Lionel Ritchie is looking for love in Venture Capital. Hello, is it me youre lookin for music legend will join us live as the final hour of squawk box begins right now. Hello, is it me youre lookin for live from the most powerful city in the world, new york. This is squawk box. Youre all ive ever wanted good morning. Welcome back to squawk box here on cnbc live from the Nasdaq Market site in times square. Im joe kernen along with beck quick and Andrew Ross Sorkin our guest host is david wetzel, huge, huge Lionel Ritchie fan. You cut yourself shaving. I got hit by an inflation you have a beard but you shave. You do the shave its tight. The trimming. Part of the appeal of having a beard is you dont have to shave. So you have a beard which the soup gets stuck in, the eggs, then you still shave. First youre giving food advice and now youre on to cosmetics. Fashion advice. This is like diversification of the cnbc franchise. Im worried that you had some kind of procedure. Yes. We get to our age. Selfinflicted. Selfinflicted. Okay ive had a couple of things that, you know i read when stars when it happens to stars, they call it a cancer cell basal cell thats not a cancer cell it is. Anyway, the futures we digress. Futures indicated up about 140 points quick look 135. 135. 5. 31, 32 on nasdaq indicated up 10 on the s p lets take a quick look at europe which yesterday was sort of trading off of what was happening. Nothing up a percent all green. We dont want red because its valentines day. Well take the green treasury yields have moderated in recent sessions that could all change when the inflation data is the inflation data today 8 30. Coors anticipated to be 0. 2 the other 0. 4 well see. We have Lionel Ritchie. Lets tell you about some stocks to watch as well. Hilton out with earnings the Hotel Operator reporting an adjusted profit of 54 cents a share. Revenue beat expectations up 24 on greater booking volume and higher prices, too stock is up by 2. 1 . Shares of soda stream, the maker of carbonated beverages, citing household penetration of its machines and that stock is up by 6. 5 then check out shares of avis which is under pressure. Goldman downgraded them and cut the price target to 33 a share from 37 avis joins rival hertz as sell rated. Both under quite a bit of pressure avis down 4. 8 and hurts off 5. 2. Cleveland fed president Loretta Mester is being considered for the vice chair slot according to multiple reports. Other candidates have been interviewed as well. The reports say a choice isnt necessarily imminent counting down to key inflation data in 30 minutes Steve Liesman joins us. Many calling this the most watched inflation data report after Inflation Fears were sparked and a raise in bond yields and a sharp selloff in stocks Stephen Stanley writes, the january cpi will confirm the notion that inflation has begun to girl, but he goes on to say, however, i suspect that Market Participants have worked themselves into such a frenzy on inflation the release could yield a bit of relief. Fueling the inflation fierce, rising wages, tight job market, weak dollar, and strong government stimulus. On the other hand, which by the way, is a professional economics term, the professional inflation term has been how low its been. They say they cant hit the 2 inflation targets. They wonder out loud if globalization is keeping inflation prices down. It is a world where prices at the corner store face prices on the other side of the country and even the world core inflation has averaged 1. 8 the past year and the past decade economists looking for a strong 0. 4 but only 0. 2 in the core rate so, folks, investors out there, take your pick are the forces of globalization and technology should have kept prices low about to give way to tight job markets and over heated economy that will spark a new era of inflation were going to get a read on that in a few minutes. We had someone making the point earlier a one month read over the long haul you wont put much into this market but others will i used to work with david wetzel and put my nose down. Now hes on television. It turns out that the long term has made a whole lot of little short terms when the market reacts to Something Like this, that reaction stays and remains its important what im trying to say is theres a lot of forces that go with inflation tens of thousands of prices and how they are affected by all of the global and local forces at work i think from an investment thesis you have to take a step back, look at it, process it, put it into your evaluation. I think this remains very powerful and you might have a cyclical uptick in what i think is a sector down trends. With unemployment headed to 3. 5 , most history suggests that inflation will pick up i think what the markets are wondering about is how will jay powell and the fed respond to this. Proper introduction, dave wetzel is here from brookings. What do you think a proper response is . From the fed . Yeah. Im in favor of patient if inflation starts to pick up, they have to ensure people they are on the case. Theyre not locked into three rate increases this year as the numbers get stronger, especially with all of the fiscal stimulus. The big change with the fed, they knew the tax bill when they sat down they didnt expect 300 billion in additional spending over the next couple of years i think they will be on top of it as steve said, theres no reason to rush. I tried to explain the inflation dynamic to my family the other night when there was a piece of steak on the table and i was really . Its true its true. My family asks me these questions and it always ends badly. What an exciting dinner conversation. My younger son is very interested in this stuff anyway, the problem is that i cant conceive of a world of supply constraints where that piece of meat is the only piece of meat available and so people bid up the price of it because it cant come from argentina or brazil or wherever else we may impo import in this world, i dont think weve even tried or stretched our supply chains. Has anybody ever gone to vietnam and said, you know what, youre doing it really cheaply. Do it more cheaply. I hadnt thought of this until you brought it up. What about the idea where we are talking about unwinding some of our trade packs and the impact that that could potentially have i think there is potential upward pressure from trade, although i have to say i believe the Trump Administration has been more bark than bite i think the president has more notions on the trade they speak to possible discontent in areas of the country that have been left behind. When it comes to doing things, he has been very moderate in that thats been my experience so far. I dont expect the massive change to the price structure because of trade, at least not without huge changes to our trade relations. Yeah, i agree with that i think that there was a lot of anticipation that the president would be even more aggressive than he has been but this drip, drip, drip of tariffs, we know what direction that pushes prices and its not down. If you get retaliation, thats a bigger issue. Thats a year or two you think thats theres like an immediate no, i agree by the way, the wage rise in the february jobs report, that would not show up in the january Inflation Report thats another thing that takes time to show up in the Inflation Numbers. Weve been through a large period of below target inflation and the economy is getting closer to full employment. We have a huge fiscal stimulus and huge tax cut coming through the pike it seems like for the first time theres going to be upward pressure on prices the question is, what does the fed do if its forecast shows that inflation will rise a little bit above 2 . When they say symmetrical, does that mean they fight down as well as up do they say after a long period of below target answer your own question. What do you think they should do and what will they do . I think they should let it go above 2 i dont think they will. Do you agree with that . I need to hear more from jay powell no complaints. Hes only just taken office. Right we dont know a lot about what we call the reaction function, how he inputs data and then outputs policy from that, about how he thinks about this hes talking in a limited way about his views on the economy, about his views on policy. My guess is hes going to be patient. What i keep saying is that before you get to 4, and im quoting monty python, thou must proceedeth to 3. I think hes going to take it a day at a time, a meeting at a time do the one in march, check it out. Watch the Inflation Numbers and do another one in june probably or maybe september and then move on so i dont i know everybody wants the i dont think jay powell has in his mind yet is it 3 or 4 i think he has a base case of 3 with a swing factor of 2 or 4. While we have you here since youre a washington watcher, trump out with the infrastructure and budget plan this week. Dead on arrival . Not dead on arrival . Dead before arrival. Dead before a sfliefl. By the way, if any element of those were to get implemented you would also be adding to theres pretty interesting issues that could come. Basically congress has already decided what theyre going to spend in fiscal 18 and fiscal 19 the president comes up with a budget that the congress has already moved beyond that. The infrastructure thing is butkus theres 20 billion a year at best and they have this grandiose scheme that somehow its going to be leveraged to 1. 5 trillion over ten years. I dont think any of that will show up in the near term thats okay. Infrastructure is a longterm project. I think whats important is to watch the congress, not the president. There is no appetite for doing anything about the debtor the deficit. In fact, just the opposite the more that the debt and the deficit projections worsen, the less concern there seems to be in congress. Therefore, when does the market get concerned about that . I have no idea. The bond vigilantes we were worried about going to discipline zboft spending . Where are they they must all be in the hampt s hamptons. Dips dont matter until they do thats been the story for a long time you can see how the markets wake up to information thats been out there. Suddenly they freak out about it for the past six or eight months ive been coming on the air to talk about the feds plans to reduce the marketplace maybe it was me as joe might suggest. It seemed completely unconcerned with the information and now you hear all of this talk about, well, you have all of the large deficits and the fed reducing the balance sheet. Suddenly the information thats been out there is suddenly relevant i think we need to understand how the treasury is going to place what is now new information which is somewhere along the lines of 1. 2 trillion if youre adding in what the fed is doing and youre adding whats happening to the deficit spending side. You think like a nebulous market itself gets distracted . Even the overall markets i think that that game candy cane or whatever it is. Candy crush. That they were playing there are two or three guys listening and they tend to mix the money. Thats okay. Steve, thank you. My pleasure, becky. David is going to be with us. Stick around. We have a big hour still ahead. Heres whats still to come. At 8 30 eastern time well get that key inflation data that weve been talking about the number and the instant Market Reaction is less than 30 minutes away you have to slow down for this music. Plus, five stocks that five star fund manager bill nygren is falling in love with 8 40 eastern time. Your heart might break if you miss this interview. Lionel ritchie will join us live the legendary lyricist is courting another industry venture catapil. He will explain. Stay tuned you are watching squawk box right here on cnbc some moments can change everything. 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. 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. You know whats not awesome . Gigspeed internet. When only certain people can get it. Lets fix that. Lets give this guy gig really . And these kids, and these guys, him, ah. Oh hello. That lady, these houses yes, yes and yes. And dont forget about them. Uh huh, sure. Still yes xfinity delivers gig speed to more homes than anyone. Now you can get it, too. Welcome to the party. Welcome back to squawk box. Check out the futures that were witnessing this morning. Up 142 after a turn around day yesterday. Triple digit losses in the morning. Ended up 30 or so, 35, Something Like that. Today indicated up 132 the dow jones. S p indicated up 11. Nasdaq up 35 twitter Ceo Jack Dorsey is downplaying recent speculation by analysts that the company could be a takeover target speaking at the Goldman SachsInternet Convention dorsey says he sees value in twitter remaining independent. Rumors about a potential deal were reignited after twitter reported its first ever quarterly profit. Ryan murphy inniking a deal with netflix its a five year, ready for this, 300 million deal. Murphys new deal begins on july 1st when his current deal with twentyth century fox expires take a look at shares of netflix. He said up until a couple of months ago he thought he was going to be buried on the fox lot. Theres a huge element of this transaction with disney that actually impacted, he says, his thinking about where he wanted his about where he wanted to be i think there was this safety i have thought about the impact on creative with deals that are hanging out there. Exactly in fact, i think iger and others have made a play on saying, stay here it is a big loss having said that, theres a number of programs obviously that are on fx that hes still going to be involved in for a very long time. Hes not an hes not a ryan philippe, ryan gosling, hes a the brains behind all right because ryan is a good actor, new age actor type name, isnt it i get them confused. All the ryans yeah, reynolds i dont get them confused, no anyway, im trying to stay woken. Youre going to see here, trying to stay frosty our producers working with me up next, what better way to celebrate love than with Lionel Ritchie, the legendary musician has a new bay. I like that. Bae systems. No, its before anyone else. Bae ive heard it before. Im woke. Im woke im going to stay woke hes going to join us right after the break. 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. Trust 1 doctor recommended dulcolax. Use dulcolax tablets for gentle dependable relief. Suppositories for relief in minutes. And dulcoease for comfortable relief of hard stools. Dulcolax. Designed for dependable relief. Legendary love song lyricist, Lionel Ritchie is with us this valentines day to discuss his new found love investment singer, songwriter, newly minted Venture Capital investor joins us now can you promise this could be the beginning of a beautiful relationship, mr. Ritchie. If you do ever get back here we thought you were going to be on set for a while and the excitement was palpable. Im dancing on the ceiling. Next time youre here, will you come in . Thats a promise. Im so happy thats an absolute promise joe, andrew, becky, let me tell you, im so happy to hear that you are having sleep problems over there im thinking you all do this every day in the morning this is not rock and roll time, you do know that, right . Unless unless as we have said many times, unless youre still up. Thats the only time. Thats exactly right. Thats the only time maybe that it works. What a career, obviously. Some of the most iconic you look i looked through a list just to get them all its like, oh, my god. I forget some of them. There are so many that we know that its just what a career. Fantastic. Now Venture Capital and i think weve had nick on. You did. We had nick here before. You had nick on. What an idea. And if you could go into, you know, your background, how you were raised and i remember, too, those little cases that the gp would bring when he showed up at your house unheard of maybe possible to do it again. It was the easiest pitch ever in life to come into they said, lionel, what do you think of this . I want to run the idea by you and tell me what you think of it a doctor comes to your house he actually will be there in about an hour or less for 99, you can actually covers insurance. A doctor will come to your home to deliver medical services. And i said, thats the new idea . And the guy said, yeah what do you think . I said, i grew up with that idea thats not the idea, that was how it was and so we can now do this instantaneously. We have the app. You are completely in control with the doctor. The doctor knows all of your vitals you develop a relationship with your doctor. Thats the new old thing and of course when nick presented it to me i was on immediately. I said, thats the solution to health care because so many people find it so difficult to actually get to the doctor, to have a relationship with a doctor if you can have that personal attention in your own home, thats the beginning of great health care. Yeah. The internet obviously with the promise of the internet, we try to figure out the way it drives this. Thats the only way its possible to make it affordable with people, you know, worth while for the doctor, you know, we know that, you know, these guys spend a long time in school and theyre pretty well compensated. It seems like it would be prohibitively expensive to get doctors to do it only possible because of the internet and having the right application. Also what they have available now, which is a new app, you actually have all of your vitals. Right, already there. Already there for the doctor to read. All you do is put your finger in the little apparatus they have and the doctors talking to you in real time, real medicine. Lionel, while we have you, we all saw you on the Super Bowl Ad for t. D. Ameritrade. All night long 24 hour trading the reason you were doing it at the end it had a little tag about bitcoin. I was curious, are you trading any bitcoin . Buying any bitcoin do you know what, i missed bitcoin. Bitcoin at the time was something that floated past my table. I kept thinking, ill get back to that. You know what, i missed bitcoin, but it looks like its going to be very popular. Im still i still have my eye on it but its one of those things that at the time it came across my desk i wasnt that keen on it, but its going to looks like its going to take off and get interesting. Now that youre a t. D. Ameritrade man, are you playing the markets every day . I am now asking more questions than ever. Now that i have my folks around me and once they said the commercial, i said, guys, i want to get in. I want to play with this now they are playing with me im loving it. I must tell you. Its a new pastime which is great. I cant believe we dont have more time. You have some guys advising you. Uri millner and others you ought to come back and every platinum record you have you should pick a different vc investment and follow it that way. Weve got to go. Next time youre in new york for whatever it is, will you stop in de studio we appreciate it. I promise i promise ill be there without a doubt. We love you. Take care, you guys. Thank you today, the new new york is sparking innovation. You see it in the Southern Tier with companies that are developing powerful batteries that make everything from cell phones to rail cars more efficient. Which helps improve every aspect of advanced rail technology. All with support from a highlyeducated workforce and vocational job training. 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 we worked with pg eof to save energy because wenie. Wanted to help the school. They would put these signs on the door to let the teacher know you didnt cut off the light. The teachers, they would call us the energy patrol. So they would be like, here they come, turn off your lights those three young ladies were teaching the whole school about energy efficiency. We actually saved 50,000. And thats just one school, two semesters, three girls. Together, were building a better california. Welcome back to squawk box. Im here in chicago. We have a lot of data coming out. The cpi numbers came out and it was higher than expected cpi month over month is plus. 5. We were expecting plus. 3. Last month it was a little bit higher it was very important because remember the stock market hated a little bit of inflation when we saw it came with Employment Data the stock market went from plus 13 on the day to down 12 on the day. So its a pretty big move in the stock market the rest of the data, cpix, food, energy, plus. 3, higher than expected. Year over year, 2. 1 expecting 1. 9. All the data in cpi is significantly higher than expected retail Sales Numbers came out, too. Retail Sales Numbers month over month down. 3, expected. 2 retail Sales Numbers weaker. Aut autexauto steady. Negative. 2. We were expecting plus. 3. Retail numbers coming in weaker than expected. The cpi numbers came in significantly higher than expected and the stock market is suffering a little bit because of it. The ten year was 2. 82 going into it and its already almost 2. 87. So pretty big reaction to this number back to you, joe. All right for all of these people that wanted red arrows today for valentines day, i hope youre happy. Oh, thats terrible. Matches the flowers. Yeah, exactly lets check the futures. Right red across the board it was all green earlier so i hope youre satisfied, liesman. I did not want that did you say its weird its not necessarily where you would expect it. Why apparel . Apparel was up apparels been down a bunch and a bunch of guys are saying it had to turn around. Whats concerning in the number then . I think whats concerning is the number of 2s and 3s that i see going down the line here. Such as you know, rent. 0. 3. New cars, 0. 2. Sorry, new cars minus 0. 1. Gasoline up a big 5. 7 . Thats not part ofcore. Not part of core. Commodities up a full 1 working its way down through the system theres only four aces, one of them being andrews Favorite Airlines down 0. 6. They warned me not to start that its been a big surprise given how much we import minus 0. 7 year over year gasoline up 8. 5 . Take a look at the futures. Down 260 we were up 150. Big change. Lost 400 points in the last three minutes. The market is focused on the probability of nearterm inflation. Im looking at yields. It might be worth while to throw out the ten year which looks like its up three basis points just in the past few minutes here what ill do is also check the fed probabilities which we went in under 50 . Up 6 no, i take that back. I take that back i can check again. The two year looked like it went up as well its a real shame not to have rick flailing his arms at movements like this as he would be very excited up 2. 145 on the twoyear note here then i think the disappointment in retail sales also means you dont get the other side of this you have a little more inflation, a little more growth but it looks like you want to always be careful with the january retail number because youve got a huge seasonal adjustment coming off of december but it would have been theres the two year right there. You can see thats a sharp spike. Then obviously youre going to put up the in yields. The futures and what youll see is it reacted the opposite way. Were back to that concern about inflation. The year over year, 2. 1 and 1. 8 is still not that concerning. Again, look, the market had to this point before we saw the futures this morning made up about half of the losses that it suffered between february 2nd and february 9th right. People knew this number was going to be a tricky one. Right. If we saw stronger than anticipated inflation that would mean the fed could potentially raise rates quicker. I know its hard to say here. You should not read the numbers the first 15 minutes of trading. The people are poised to believe that inflation is going to get worse and when you get these little symptoms of it, it reinforces their view that were now finally after all of these years trying to get inflation up, that its going to pick up i think its truly important what you just said, david. In the first ten minutes of a big release, the first five minutes, i dont think a human has touched a button all algos. People should know the algos read the headlines and they trade according to preprogrammed trading commands and so whats happened is right. The biggest part is then you have algos on top of that look at whats happening right now. The dow the futures made a bump up as and i think what happens is i think you have an initial algorithmic trade around fed policy statements, around big numbers like this and then the humans take over and they adjust. Well see if that we have four minutes. Lets see. We want to bring in cnbc contributor and net texas. Chief economist joe lavournia here its worse than expected. To davids point, its 1. 8 on the core cpi its supposed to increase production capacity. Thats disinflationary now theyre turning the other way. Do you think investors are over shooting i do. I do a rational mind by the end of today should be thinking what . That the fed is now going to move more than 2 were going to go back to 3 and maybe 4 hikes, which i think is stupid, but thats what were going to do. My view to the fed would be take rates to neutral which is 2 and lets see what the quantitative tightening is i actually wrote the article for cnbc and just wait and see what happens. I mean, we just havent had an inflation problem in a long time. Steve, you added the stupid line. I think its important what joe is saying, what are we talking about here in terms of the up side risk from the Federal Reserve . Are you telling me youre going to reverse your whole investment thesis about tax cuts, better profits and better growth because the fed might do an extra quarter point that, it could be 4 instead of 3 . I find it very difficult to think if you tell me the delta is 50 basis points or 100 basis points, then im worried. You guys are both right, david and steve. Look they tell us longer term and we are at that moment in markets where we need any hints. The market is trying to get out ahead of the potential i think theres a lot of pressure on powell to show that he wont be weak on inflation. So you dont really know whether he has the ability to be as restrained and patient as yellen would have been. By the way i disagree. Hes going to be tested. I think the pressure is the other side i think a guy comes in like this, appointed by a republican with a guy like Marvin Goodfriend if he ever gets through the senate. Not going to happen. Not going to happen turns out if you want to put little strips in dollar bills to reduce their value, you annoy just enough republican right wingers not to get it. Anyway, i think theres going to be a more hawkish board or the perception of a more hawkish board. The pressure will be on them at the rate theyre filling jobs the hawkish board will come in 2025. Yeah, thats right. Probably true. One last question for you, when you think about where were when we get these right. Forget about this month the question is what you think directionally is going to happen over the next three, four, five months and what does it say to you today . Anything youre saying no. David and steve is right the trends are soft after having under shot for a long, long time davids orrect, youre not supposed to look at one month. To me if we get a cap exboom, which is certainly possible this year, that will increase productive capacity, increase productivity wages will rise but theyll be rising for the good reasons. Powell is supposed to fight against that, andrew. Right im really worried, steves buddies, phillips curve, cost pull people i have a different question yesterday or the day before we talked about the wealth effect and what the market was doing. Yeah, it was yesterday. I asked you a question about what does volatility do to the wealth effect. Im curious what you think volatility unto itself, all of this stuff now, what does it do to the quote, unquote, wealth effect, what does it do to catch ta capital investment. I think people take a break its a very small effect. A lot of decisions at the margin that are made, do you go up to that suite when youre going on vacation or do you go to two rooms with the kids im not talking about that. Three weeks ago when we were in davos these guys were ready to spend money like it was going out of style my question is has that changed at all no, it hasnt changed because the outlook is still good and some volatility over a short period of time wont change things in terms of the wealth effect to me its overrated. People who have the money have a lot of say in things this has been the only Business Cycle where consumption has 4 despite high wealth. Yeah, i agree we know the direction of the wealth effect, i just dont think its very big. I think the question is does business still have confidence that if something does go crazy in the markets, that this administration can handle it and i think thats why theres a lot of pressure on powell, because i dont think they have confidence in the president or in the treasury. Okay. What do you think could be going crazy in the markets if something more than market moves, it spills over into some kind of financial instability thing. Theres some surprising weakness. You think they had confidence in jack lu. More than steve mnuchin. Gary cohn you dont think we needed some confidence to go up 45 in the stock market i think that the question now is from your side of things, david, this has been the rap since november 9th, that theres no confidence in this administration unfortunately the market did exactly the opposite of what that viewpoint no. The question is is the confidence that the Business Community has that things are going to get better shaken. The flip side, the data are excellent. One of the great crisis watchers and historians of our time, let me ask you a different question one of the other conversations that has come up in the past two weeks is all of a sudden a sort of newfound respect for deb and deficits and what that means. So my question, is there some element in the market right now that you say to yourself, this is scary is there anything in the world right now that you go, theres Something Like a little wrong here well, i think im not looking for it. I think one of the reasons that im confident that the economy can withstand this market turmoil is i dont see a lot of imbalances out there. I worry about the geopolitical risks. The debt and deficit is a problem. Its a problem in the long run okay. We are going to leave the conversation there. Although we should point out very quickly we should talk about the futures in a moment. We have seen a sell off, i move of 400 points based on the numbers that were slightly hotter than expected all happened in the last 12 minutes. Up from 148 to down 200 plus in the futures. Well talk more about that in a moment. Developing story that were watching, the fbi, the police and local Law Enforcement officials are responding to an incident that took place earlier this morning at nsa headquarters nsa spokesperson says the disturbance took place at one of the security vehicle entry gates. The situation said to be under control and that there are no ongoing security or safety concerns at this point up next, we will get back to the markets. Again, take a look at the points now. The quarter may be more important. It was up 0. 3 versus up 0. 2 . That was expected. That came as a huge shock to the markets. Little hotter than expected. People suddenly worrying that the fed is going to raise faster than anticipated as a result the dow futures went up close to 150 points to down 200 points very quickly a 350 point swing to the down side on this you also saw this play out with the s p futures now down it spiked as well. 2. 875 getting up towards 2. 9 like we saw earlier this week. Joining us earlier, harris associates, u. S. Equities cio bill nygren. Portfolio manager of the oak mark funds this move people were thinking we were maybe out of the woods now the hot jer than ever cpi numbers saying, we have to look at inflation again is this the right kneejerk reaction at oak mark we arent trying to out guess the market the statistic of the day were trying to think about how do Business Values change over the next five to seven years and if were thinking about buying when we buy stocks were thinking of buying businesses and over the next five to seven years these giggles of a tenth of a point inflation being higher or lower just dont even matter when it comes to trying to estimate what businesses are. Fair point. Lets not talk about the last 15 minutes then lets talk about the last two weeks because this is about trying to reassess our longterm view of the markets and the economy. What do you think is the implication . Are we at some sort of a sea change where youre worried about inflation and the fed raising rates a little faster than anticipated how does that play into your thinking we dont try to time the market weve got a basic belief that if youre a longterm investor youre going to make a lot more money owning the business than lending to the business or lending to a government. So we encourage people to have Asset Allocations that are heavy in equities and then to use volatility, both up side and down side, to rebalance their portfolios. What should we be doing in terms of rebalancing since we have sold off 10 , back up half of that. What does this mean . And i get it that youre not looking at quick moves in the market, but obviously Interest Rates are gravity on stock prices so if Interest Rates are going up, that does have to make you rethink how you value individual pieces of companies too. Well, a couple things there i think, you know, what you do in rebalancing depends on how recently you last rebalanced markets up a lot over the last couple of years, if you were fully invested in equities, you probably have too much in equities and should be trimming. And putting that money wherein stead . Into treasuries . Into cash . Cash or bonds again, back to your target allocation between equities, bonds and cash but if you had the appropriate amount in equities in mid january and the markets down 10 since then, thats an opportunity to reinvest and get back up to your targets. I think, you know, through most of this recovery in the past decade investors have been beneath their target allocations. Even though you would expect market increases to be Market Opportunities for them to sell, because they never got reinvested back in in 2008. Most investors still dont have as much equities as they should. What would lead you to change your advice . I guess i would have to have a basic belief that owning business is no longer an attractive opportunity owning the s p 500 has made something 14 times your initial investment and it is certainly not like the past 25 years has been a panesia, a lot has gone wrong. This is been a hotly traded industry at this point, what makes you like those three stocks well, stocks like citi and bank of America Sells twelve times earnings, which is a sharp discount of s p, and we think because of that they have the opportunity to grow per share earnings everyone if Economic Growth remains on the side we dont think they deserve to sell it such a large discount to the market with ally you got another issue of their primary asset is autoloans and there is a lot of concerns of the autocycle. Because of that, you are can buy allies of nine times earnings. Dont see the autocycle as being as scary as some others do great, bill, thank you for your time today, good to see you. Thanks becki. When we come back, jim cramer, here is the futures right now, down under 200. Ked s like we went to bed an wo up again. Down over 200 points well be right back. Obvious. Sometimes, they just drop in. Cme group can help you navigate risks and capture opportunities. We enable you to reach Global Markets and drive forward with broader possibilities. Cme group how the world advances. Jim cramer is joining us now. If we were looking at the markets the past couple of weeks, we know it is inflation worries, right jim this number is too high, you dont need me to tell you that i dont think all the different lines are bed. It does put more pressure on jay pal and see what hes going to say. I dont think january is not an important month for a lot of things we can get ten guys who say i dont invest in years term, i invest in longterm. I love bill nygren, when you say in invest in longterm, i guess thats fine, too not a great situation when you have Something Like apple thats up two and now down two of the Largest Company in the world jim, just to add to your point. Apparels fall positive because retail selling season is so great. Dont read too much into this. So i mean we can sit there and sweat the program or go to amazon and buy all the clothes a lot cheaper than people think. I respect the markets to be complete wrong and the vix being in control today the vix is a great product and so are all the doubles and triples and i am glad they are vetted there, thats the message brought to you by who ever there, i did it all right, jim. No one paid me to say it. Happy valentines day oh, same. Love ya good hoops tonight, jim most etfs only track a benchmark. Flexshares etfs are built around the Way Investors think. 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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. Thanks to our guest host, david wexel. I love the tie want me to get you one . I love double vs i do you cannot buy it you have to be nice to me and maybe i will get you one oh, thats going to be a problem. Can you wish him a happy valentines day . Anyway, it is time to go. We are down to one more look 250. Oh, it is 160. Wait until 4 00 to make any determinations 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 along with jim cramer and parol quintanilcarl h korea with the olympics, Carl Quintanilla. The numbers at least if you are long this market, it looks a lot worse. Futures already coming back lets take a look and see how the markets in that part of th